TIDMMANA
RNS Number : 4967R
Mano River Resources Inc
30 April 2009
30 April 2008
MANO RIVER RESOURCES INC
("Mano River" or the "Company")
PUBLICATION OF YEAR END 2008 ACCOUNTS
The Board of Mano River Resources Inc. (TSX-V: MNO; AIM: MANA) is pleased to
release the Accounts of the Company for the financial year ended December 31st
2008, together with the Management Discussion & Analysis.
On behalf of the Board of Mano River Resources Inc.
Luis da Silva
President and CEO
For further information on Mano River Resources and its exploration programme,
you are invited to visit the Company's website at www.manoriver.com or contact
one of the following:
Mano River Resources Inc.
Mano River Resources Inc
Luis da Silva, CEO +44 (0) 20 7299 4212
Bevan Metcalf
Evolution Securities Limited
Simon Edwards / Chris Sim / Neil Elliot+44 (0) 20 7071 4300
Pelham PR
Charles Vivian / James MacFarlane +44 (0) 20 7337 1527
MANO RIVER RESOURCES INC
Management's Discussion and Analysis
For the year ended December 31, 2008
The following discussion is management's assessment and analysis of the results
and financial condition of Mano River Resources Inc. (the "Company" or "Mano")
based upon Canadian Generally Accepted Accounting Principles ("GAAP") and should
be read in conjunction with the accompanying audited consolidated financial
statements and related notes for the year ended December 31, 2008. This
management discussion and analysis has been prepared based on information
available to Mano as at April 23, 2009. Unless otherwise indicated all amounts
are in US dollars.
Additional information relating to the Company is available on SEDAR at
www.sedar.com or on the Company's website at www.manoriver.com.
1. OVERVIEW
(a) DESCRIPTION OF BUSINESS
Mano is an exploration and development company with an attractive portfolio of
gold and diamond projects and an investment in the Putu iron ore project in West
Africa. Its fundamental strategy is to unlock the value of its exploration
assets and increase shareholder value, by fast tracking these assets towards
production. Through its subsidiaries, Mano holds interests in mineral properties
in Liberia, Sierra Leone, Guinea and the Democratic Republic of Congo
(DRC). Mano is listed on the TSX Venture Exchange (TSX-V) and the Alternative
Investment Market (AIM) of the London Stock Exchange.
(b) COMPANY HISTORY
Mano was formed in 1998 by a reverse takeover
involving the sale of the interests of Mano River Resources Ltd into Zicor
Mining Inc. and a subsequent change of name to Mano River Resources Inc.
Mano River Resources Ltd, a BVI registered company, was founded in 1996
by Guy Pas. Mano and its subsidiaries, at the time of the reverse takeover, had
spent over $2.4M in establishing the in-country presence, acquiring, evaluating
and exploring the properties.
Mano River Resources Ltd itself acquired
upon its establishment in July 1996 the pre-existing assets of Golden Limbo Rock
Resources Ltd in Guinea, of Golden Leo Resources Ltd in Sierra Leone, and
exploration permits and extensive research in Liberia, for a total value of $5M
paid in shares.
Golden Limbo Rock Resources Ltd had been actively
exploring in Guinea since late 1994,and Golden Leo Resources Ltd researched
Sierra Leone's potential in the course of 1995, subsequently applying for
licences immediately following the election of 1996.
Licences were also
obtained in Liberia where, in Monrovia, a Liberian geologist started assessing
the geology in 1995.
(c) ON-GOING PROJECTS
Detailed below is a
summary of the main on-going projects and their status:
+----------+---------+-----------+---------------+-------------+------------+------------+
| Country | Project | Commodity | Current | Future | Joint | Financial |
| | | | Status | Plans | Venture | Statements |
| | | | | | Partner | |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Liberia | Putu | Iron ore | Drilling in | MDA - | Severstal | Associate |
| | | | 2009 | 2009 | 55.67% | |
| | | | | | control | |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Liberia | NLGM | Gold | Drilling in | Feasibility | No partner | Subsidiary |
| | | | 2009 | study 2010 | | |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Liberia | Weaju | Gold | Drilling in | Further | No partner | Subsidiary |
| | | | 2009 | exploration | | |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Sierra | Sonfon | Gold | Care & | GSR | GSR near | Subsidiary |
| Leone | | | Maintenance** | reviewing | to earning | |
| | | | | options | 51% | |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Sierra | Kono | Diamonds | Trial | Full | Petra 51% | Mano 59.6% |
| Leone | | | production | production | | interest* |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Guinea | Mandala | Diamonds | Trial | Full | No partner | Mano 59.6% |
| | | | production | production | | interest* |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Sierra | Tongo | Diamonds | Care & | Further | No partner | Mano 59.6% |
| Leonne | | | Maintenance | exploration | | interest* |
+----------+---------+-----------+---------------+-------------+------------+------------+
| Guinea | Bouro | Diamonds | Care & | Further | No partner | Mano 59.6% |
| | | | Maintenance | exploration | | interest* |
+----------+---------+-----------+---------------+-------------+------------+------------+
* in Stellar Diamonds Ltd which is accounted for as a subsidiary
** GSR have
advised us that they intend to drill in the second half of 2009
2. EXPLORATION PROJECTS
(a) IRON ORE
The Company is targeting a potential iron ore resource of more than 900M
tonnes, which is in line with an independent technical report prepared by SRK
Consulting (UK) Ltd, at its 44.33% owned Putu Iron Ore Project (Putu) in
southeastern Liberia. Putu is located in the centre of a 425 square kilometre
exploration licence in Grand Gedeh County of eastern Liberia. The Putu project
consists of two prominent ridges, namely Mt. Jideh and Mt. Ghi. Mt Jideh is the
priority target and has a strike length of approximately 13km based on mapping,
surface sampling and airborne magnetic data. In October 2008 the Government of
Liberia granted the Company a two year extension to the Putu exploration
licence, extending it to September 30, 2010.
The Company signed certain financing and development agreements with OAO
SeverStal Resources (Severstal) on the 22 May 2008 and subsequently completed
the transaction on 10 December 2008. On completion Severstal agreed to pay Mano
a total consideration of $12.5M for a 25% share in African Iron Ore Group
(renamed Severstal Liberia Iron Ore Ltd - SLIO) valuing the project at $50M.
Severstal paid Mano $8.3M in December 2008, with the balance of $4.2M deferred
until December 2010. Upon payment of the balance owing Mano's interest in SLIO
will reduce to 38.5%. Severstal have committed to invest a further $30M in order
to advance the project towards a definitive feasibility study.
A 3,960m drilling programme for geological characterisation was completed at
Putu in December 2008. Assays from nine out of eleven holes completed included a
best intersection in haematite mineralisation of 63m at an average grade of
63.5% iron and a best intersection in fresh magnetite mineralisation of 367m at
an average grade of 39% iron. The drill results displayed excellent grade
characteristics and indicate that the Putu project has significant iron ore
potential.
SLIO is currently preparing regional development and social programmes with
the following initiatives already being implemented for the local community:
* Rehabilitation / replacement of drinking water pumps in 6 local villages
* Reconstruction of 18km of road linking local administrative centres
* Preparation for construction of a health post in the village where the
exploration camp is located
The key priority is to substantially advance the resource drilling programme and
metallurgical testing at Putu. The process to receive a 25 year Mineral
Development Agreement is on-going with talks scheduled to start shortly with the
Liberian authorities. The immediate operational objectives include an airborne
magnetic survey and the first phase construction of the camp. The Putu project
now has the financial and technical resources to take the project forward to
feasibility.
Despite the current depressed commodity prices the outlook for iron ore is
gradually improving. Management of the Company look forward to a very different
market environment by late 2012, by which time Putu should
be looking for development funding in advance of production targeted for 2015.
Mano's interest in SLIO is recorded in the financial statements as an investment
whereas prior to the completion of the Severstal transaction on December 10,
2008 it was treated as a subsidiary of the Company.
(b) GOLD
NLGM, Liberia
The key asset in the Gold division is the 100%
owned New Liberty Gold Mine (NLGM) property, a feasibility stage project
situated some 90km north of the capital city Monrovia in Liberia, where Mano has
a NI43-101 compliant gold resource of 1.38M contained ounces (13.533M tonnes of
measured and indicated resources grading 3.18 g/t gold). The most recent drill
programme which was completed in quarter two, 2008 brings the total number of
holes drilled at NLGM to 130, totaling 15,313m. The results received from the
2008 drill programme confirm that there is potential to expand the current
resource through delineation of further resources at depth.
In September 2008 Mano received feedback from AMC Consultants (UK) Ltd, who
undertook a conceptual mining study on the potential of NLGM for an underground
mining operation. The consultants concluded that although there appeared
potential for underground exploitation additional infill drilling work is
required to depths of up to 300 metres to re-evaluate the resource
potential.
Mano plans to aggressively accelerate the development of NLGM
and will now recruit a mining engineer as project manager responsible for
overseeing the project. More drilling is planned for 2009 and a revised
feasibility study for an underground mine, targeting 100,000 oz pa, is scheduled
to be completed in the second half of 2010.
Weaju, Liberia
The other main gold asset in Liberia is Weaju which is
situated 30km to the east north east of NLGM and is part of the Bea Mountains
Mineral Development Agreement (MDA). Mineralisation is concentrated in shear
zones, along a contact zone between granite and schist-belt lithologies, into
which quartz-tourmaline veins and pegmatites have been intruded. A soil
geochemical grid and geological mapping demonstrated a strike length of 1.5 km
in an east north east trend for the mineralisation, open to the east and
west. Artisanal workings have confirmed the continuity of mineralisation and
previous drilling intersections have included 19.63 g/t gold over 6m from 18m
and 27.72 g/t gold over 6m from 47m. A resource definition drill programme will
commence in the second half of 2009.
Sonfon, Sierra Leone
The Sonfon project is under joint venture with Golden
Star Resources (GSR) and Minerva Resources PLC (formerly
Golden Prospect). Sonfon is considered to be Mano's most significant and highest
potential gold prospect in Sierra Leone. GSR Mano's joint venture partner on the
Sonfon Project has advised the Company that they are nearing the completion of
stage three of the agreement. Within 120 days of completing stage three GSR may
elect to proceed to a feasibility study. Mano then has the right to elect
to contribute pro-rata to the feasibility study to retain a 49% interest. If
Mano decides not to elect to contribute GSR may sole fund the feasibility study
to earn a further 14% interest, thereby taking its equity to 65%.
Upon completion of a positive feasibility study on Sonfon GSR may elect to
proceed to mine development. Mano has the right to contribute pro rata to any
mine development to retain its 49% interest or dilute to either a 15% or 29%
free carried interest depending on its earlier elections to co-fund the
feasibility study and mine construction. Mano will also retain a 2% net smelter
return royalty on production in excess of the first 1M ounces of gold from each
project.
Under a separate agreement dated May 2002, the Sonfon licence was joint
ventured by the Company and its partner Minerva Resources PLC on a 50:50 joint
venture basis. Minerva retains a 50% interest in Mano's share of the project.
GSR are operators and completed a diamond and Rotary Air Blast (RAB) drilling
programme in the second half of 2008 which intersected zones of sulfides with
good grades. The project is currently on care and maintenance while GSR review
their options. A decision will be made by the parties on the future of the
project during 2009.
(c) DIAMONDS
In 2007, the Company transferred its diamonds properties which had a book value
of $8,276,081 to Stellar in exchange for 19,239,541 shares of Stellar. The
exchange was recorded at book value as it was a transaction between companies
under common control. In 2007, Stellar completed two private placements in order
to raise funds to finance the development of its diamond interests. In the first
placement 1,211,890 shares were issued at an effective price of GBP0.87 pence
per share. 918,484 of those shares were issued for cash consideration, raising
proceeds of GBP800,000 (US$1,571,438), while the remaining 293,406 shares were
issued to the subscribers in consideration for forfeiture of certain benefits as
a result of the diamond reorganisation. In the second placement 4,822,044 shares
were issued at a price of GBP0.871 pence per share for proceeds of GBP4,200,000
(US$8,611,361). In addition, Stellar issued in 2007 2,411,022 warrants with a
two year term and an exercise price of GBP1.20 per share as well as 260,390
adviser's options with a two year term and an exercise price of GBP0.871 pence
per share. As a result of these shares issues by Stellar, the Company recorded a
dilution gain of $6,207,005 in the year ended December 31, 2007.
On March
31, 2008 Stellar issued 2,375,000 shares at a price of GBP1 per share for gross
proceeds of GBP2,375,000 ($4,724,571). On December 19 2008, Stellar issued a
further 15,567,675 shares at a price of GBP0.20 pence per share for gross
proceeds of GBP3,113,535 ($4,802,208). Mano purchased 6,920,000 of these shares
for GBP1,384,044 ($2,134,701). At the same time Stellar settled debt of
GBP622,356 ($1,194,766) owing to Mano through the issue of 3,111,781 shares at a
price of GBP0.20 pence per share. As a result of these share issues, the Company
recorded a dilution gain of $1,231,793.
The intention of Mano was to list Stellar on AIM but due to the dramatic changes
in the financial markets this has been postponed. During 2008 Mano's interest in
Stellar reduced from 68.51% to 59.6%, as a result of a number of private equity
financings identified above. The immediate priority is to fast track Stellar's
two near-term production projects, at Kono with joint venture partner Petra
Diamonds in Sierra Leone and at the Mandala alluvial diamond project in Guinea,
to production and cash flow.
Kono Project, Sierra Leone
On September 10, 2004, the Company and Petra
Diamonds ("Petra") entered into a joint venture for the production of diamonds
from the underground mining of diamond-bearing kimberlite dykes defined within
Mano's three contiguous licence areas (Yengema, Njaiama and Nimini South) in the
Kono diamond district in east Sierra Leone. This is in the heart of the renowned
Kono diamond fields that has yielded some spectacular diamonds, including the
third largest diamond found, the 972-carat Star of Sierra Leone. Under the terms
of the agreement Petra have earned a 51% interest in Mano's 100% owned
subsidiary, Basama Diamonds Ltd., by spending $3M over three years.
During 2008 underground trial mining and bulk sampling continued on the Pol-K
and Bardu kimberlite fissures. This has produced a total of 3,800-carats of
diamonds to the end of March 2009, with the three largest stones recovered being
11.95, 11.45 and 10.55 carats in weight.
At the Pol-K shaft trial stope mining is ongoing between 34m to 64m depth, being
designated Level 1. The kimberlite is on average 60cm in diameter with an
in-situ grade of approximately 65 carats per hundred tons ("cpht"). The shaft at
Pol-K is currently at 84m depth and once it reaches a depth of 98m stope mining
will commence on Level 2 between the depths of 68m and 98m. This is expected to
be achieved in August 2009 and will lead to an increase in tonnage being
delivered to the processing plant.
At the Bardu shaft bulk sampling along development drives at a depth of 45m is
continuing. The kimberlite averages 100cm in width, but has widened to between
300cm and 150cm at a distance of 100m to the south west of the shaft. The
in-situ grade of Bardu averages 54cpht, but the wide zone of the
fissure reported a higher grade of 137cpht, though further blasting and
processing of this zone is required to determine this grade with more
confidence. Subject to results of the current bulk sampling the shaft at Bardu
will be deepened and to where Level 1 will be opened to stope mining.
In September 2008 it was decided to sell a small parcel of Pol-K and Bardu
diamonds in order to test the market conditions. Some 811-carats of Pol-K
diamonds were sold for an average of $152 per carat, whereas a parcel of 253
carats from Bardu realised an average value of $54 per carat. Neither of these
parcels were considered to be representative of what could be the future run of
mine product. More recently, a slightly larger parcel, comprising 2,185 carats
from Pol-K and 538 carats from Bardu was exported to Antwerp and is currently
awaiting sale. Considering the poor state of the rough diamond market, Stellar
expects lower average prices to be realised for this parcel.
In January 2009 Stellar reached agreement with Petra Diamonds to assume
management control of the Kono project for the duration of the year. Stellar
will sole fund the project and in December 2009 Petra will have the right to
either reimburse Stellar 51% of the expenditure, or dilute its equity in the
project.
Stellar takes a long term view on Kono and follows the strategy of
developing the project to be Sierra Leone's first underground diamond
mine. However, if weak prices persist in the rough diamond market then the Kono
project may be placed under temporary care and maintenance until rough diamond
prices recover.
Mandala Project, Guinea
The Mandala alluvial diamond project is 100%
owned by Stellar Diamonds and comprises two alluvial mining concessions in the
south east of Guinea.
The Mandala project has an independently verified
indicated diamond resource of 536,000 carats (NI43-101 compliant). The in-situ
grade of the gravel resource is high at 38cpht and before the recent downturn in
the diamond market the diamond value was expected to be in excess of $65 per
carat. However, even at half this diamond value Stellar expects the project to
be cash positive due to forecast lower operating costs. This
project is
expected to be fundamental to Stellar and the ability for the Company to
self-finance itself in the
second half of 2009. The new 100 ton per hour
DMS processing plant has been constructed and commissioned during April 2009.
Processing during commissing yielded 1,649 carats of diamonds from 2,067 cubic
metres of gravel for an average grade of 0.8 carats per cubic metre. Mandala is
forecast to produce on average 10,000 carats of diamonds per month for the
period May to December 2009.
Other Diamond Projects
Stellar's Board has deemed it prudent to
fully impair its deferred exploration expenditure in Liberia, at the 100% owned
MCA project and at the Kpo project where it has a 50:50 joint venture with Trans
Hex Group. In February 2009 the Kpo project was reviewed in detail and the
partners agreed to terminate the joint venture and relinquish the ground. This
will not affect Mano's gold and iron ore development plans in Liberia. Other
exploration projects including Tongo and Bouro in Guinea have been placed on
care and maintenance until Stellar is generating cash revenues and is
self-financed.
3. SUMMARY OF PERFORMANCE
The prior year figures have been restated to
reflect the stock-based compensation granted in Stellar during the eleven months
ended December 31, 2007 that was not included in the consolidated financial
statements for that period.The prior year restatement is explained in more
detail in section 3d (x).
(a) SUMMARY OF SELECTED ANNUAL FINANCIAL
INFORMATION
The following table provides a summary of the annual audited
consolidated financial information for the three most recently completed
financial years as derived from the audited consolidated financial statements
and is prepared in accordance with Canadian Generally Accepted Accounting
Principles ("GAAP").
+---------------------------------+-------------+-------------+-------------+
| US Dollars | Year ended | 11 months | Year ended |
| | December 31 | ended | January 31 |
| | | December | |
| | 2008 | 31 | 2007 |
| | | 2007 | |
| | | RESTATED | |
+---------------------------------+-------------+-------------+-------------+
| Interest income | 74,484 | 148,041 | 53,181 |
+---------------------------------+-------------+-------------+-------------+
| Administrative and office | 1,044,292 | 63,236 | 8,747 |
| expenses | | | |
+---------------------------------+-------------+-------------+-------------+
| Project Impairment | 11,250,591 | - | - |
+---------------------------------+-------------+-------------+-------------+
| Professional fees | 1,938,650 | 958,629 | 408,080 |
+---------------------------------+-------------+-------------+-------------+
| Dilution gain | 7,157,964 | 6,207,005 | - |
+---------------------------------+-------------+-------------+-------------+
| Stock option compensation | 1,455,625 | 2,053,887 | 513,361 |
| expense | | | |
+---------------------------------+-------------+-------------+-------------+
| Gain on disposal of assets | 7,762,899 | - | - |
+---------------------------------+-------------+-------------+-------------+
| Net income/(loss) | 1,841,014 | 2,740,695 | (959,609) |
+---------------------------------+-------------+-------------+-------------+
| Basic and diluted income/(loss) | 0.006 | 0.009 | (0.004) |
| per share | | | |
+---------------------------------+-------------+-------------+-------------+
| Working capital | 6,939,955 | 2,868,877 | 428,368 |
+---------------------------------+-------------+-------------+-------------+
| Total assets | 54,749,687 | 45,501,911 | 28,866,715 |
+---------------------------------+-------------+-------------+-------------+
| Exploration expenditure in the | 10,402,580 | 6,526,656 | 8,443,801 |
| year | | | |
+---------------------------------+-------------+-------------+-------------+
| Deferred exploration costs | 27,316,442 | 29,918,050 | 23,391,394 |
+---------------------------------+-------------+-------------+-------------+
| Long term liabilities - | 2,048,638 | 2,260,738 | - |
| convertible debentures | | | |
+---------------------------------+-------------+-------------+-------------+
(b) SUMMARY OF SELECTED QUARTERLY FINANCIAL INFORMATION
The following
is the selected financial information of the Company for the last eight
quarters: (unaudited)
+----------------------------------+-------------+-------------+------------+-------------+
| US Dollars | December | September | June 30 | March 31 |
| | 31 | 30 | 2008 | 2008 |
| | 2008 | 2008 | | |
+----------------------------------+-------------+-------------+------------+-------------+
| Interest income | 2,168 | 21,415 | 32,676 | 18,225 |
+----------------------------------+-------------+-------------+------------+-------------+
| Dilution gain | 5,327,344 | - | 442,840 | 1,387,780 |
+----------------------------------+-------------+-------------+------------+-------------+
| Net income/(loss) | 8,944,998 | (5,362,222) | (996,109) | (745,653) |
+----------------------------------+-------------+-------------+------------+-------------+
| Basic and diluted income/(loss) | 0.028 | (0.017) | (0.003) | (0.002) |
| per share | | | | |
+----------------------------------+-------------+-------------+------------+-------------+
| Total assets | 54,749,687 | 47,082,223 | 51,393,067 | 48,617,142 |
+----------------------------------+-------------+-------------+------------+-------------+
| US Dollars | December 31 | October 31 | July 31 | April 30 |
| | 2007 | 2007 | 2007 | 2007 |
| | RESTATED | | | |
| | | | | |
+----------------------------------+-------------+-------------+------------+-------------+
| Interest income | 79,784 | 55,272 | 5,213 | 7,772 |
+----------------------------------+-------------+-------------+------------+-------------+
| Dilution gain | 6,207,005 | - | - | - |
+----------------------------------+-------------+-------------+------------+-------------+
| Net income/(loss) | 3,980,931 | (466,135) | (496,668) | (277,433) |
+----------------------------------+-------------+-------------+------------+-------------+
| Basic income/(loss) per share | 0.013 | (0.002) | (0.002) | (0.001) |
+----------------------------------+-------------+-------------+------------+-------------+
| Diluted income/(loss) per share | 0.012 | (0.002) | (0.002) | (0.001) |
+----------------------------------+-------------+-------------+------------+-------------+
| Total assets | 45,501,911 | 46,105,356 | 46,672,577 | 29,813,909 |
+----------------------------------+-------------+-------------+------------+-------------+
Mano's performance is not affected by seasonal trends. The Company is
currently not a producer and therefore does not generate a positive cash flow
from operating activities. As an explorer it has historically incurred losses,
however, in the quarters ended December 31, 2007 and December 31, 2008 it
recorded an income of $3,980,931and $8,944,998 respectively. The income in these
two quarters arose as a result of one-off transactions. In the quarter ending
December 31, 2007 the main reason for the income was the dilution gain recorded
on consolidation of Stellar of $6,207,005. In the quarter ending December 31,
2008 there were several one-off transactions which affected the income. These
are outlined in detail in section c (i) below but in summary the main one-off
transactions were: the dilution gains on Stellar and SLIO; the gain on the sale
of shares in SLIO; and the higher impairment charge.
(c) RESULTS OF
OPERATIONS
(i) INCOME STATEMENT
Review of three months ended December
31, 2008 (unaudited) compared to the two month period ended December 31, 2007
(unaudited).
The net income for quarter four, 2008 of $8,944,998 is
$4,964,067 or 225% above last year. The increase in income can be attributed to
a number of factors including: the gain on disposal of shares in SLIO to
Severstal ($7,762,899); a higher adjustment for the non-controlling interest in
Stellar ($2,430,383) and a lower
stock compensation charge ($1,742,361). These favourable variances were partly
off-set by a higher impairment charge ($6,089,258), increased interest on the
convertible debenture ($614,569) and a lower dilution gain ($879,661).
The
gain on the sale of shares in SLIO is the result of Severstal investing in a 25%
stake for $12.5M, of which $8.3M was paid in December 2008. The remaining
balance of the acquisition price has been deferred until December 2010, at which
point the Company expects to receive $4.2M from Severstal. The Company has not
recognised the deferred portion of the transaction as it is subject to Severstal
continuing with the Putu project at that time.
The impairment charge in
quarter four, 2008 of $6,089,258 is in addition to the charge of $5,161,333 made
in quarter three and is mainly arising from write-downs on Stellar's Liberia
diamond projects which were deemed uneconomic. There was no charge for
impairment in quarter four, 2007.
Review of the twelve months ended December 31, 2008 compared to the eleven month
period ended December 31, 2007.
During the twelve months ended December 31,
2008 the Company recorded an income of $1,841,014 compared with an income of
$2,740,695 for the eleven month period ended December 31, 2007. The reduction in
net income of $899,681 or 33% is attributable to a number of factors which are
listed below:
(1) Higher administrative and office expenses in 2008
(increase of $981,056) - the new London office was utilised for a full twelve
months in 2008 versus only three months in 2007. There were also additional
staff costs in 2008 associated with the London office. The main cost items
included in this category are: travel ($362,190); public relations ($158,162);
staff costs ($251,668); and office related expenses
($209,568).
(2) Directors fees and Management fees in 2008 of $297,409 and
$658,314 respectively are in total $549,181 higher than in 2007 reflecting the
additional cost of the separate Stellar Board of Directors and the recruitment
of key personnel in quarter four 2007 and quarter one 2008.
(3) There was
no project impairment charge in the income statement in 2007. The charge in 2008
is $11,250,591 (Diamond projects: $6,401,746; Gold projects: $4,802,345; Other
projects: $46,500). Major projects written off in 2008 included Kpo and MCA
diamond projects in Liberia and Missamana/Gueliban gold project in
Guinea.
(4) Professional fees for the year at $1,938,650 is $980,021
greater than 2007. The significant proportion of the fees incurred relate to the
unsuccessful attempt to list Stellar, a subsidiary of Mano on AIM.
(5)
Interest on the convertible debentures of $983,242 is $801,946 above 2007. The
charge for 2008 included the actual interest charge based on an interest rate of
9% plus an "effective interest charge" of 44% which builds up the financial
liability over the life of the instrument to the total value of the
consideration received. In 2007 the actual interest charge was based on four
months from the date the proceeds were received and there was no "effective
interest charge" recognised.
(6) A foreign exchange loss in 2008 of
$304,215 is $77,347 higher than 2007 and is due to unfavourable fluctuations in
the UK pound-US dollar exchange rates off-set as per (3) below.
The
unfavourable variances described above have been partly off-set by:
(1) A
gain on sale of shares in SLIO to Severstal of $7,762,899.
(2) Lower
stock based compensation in 2008. The charge in 2008 of $1,455,625 is $598,262
below the level in
2007 due to fewer share options being granted to Stellar
employees.
(3) An unrealised currency exchange gain on the convertible
debentures of $831,873 arose in 2008 due to a weakening of the UK pound exchange
rate versus the US dollar. A loss of $168,130 was recorded in 2007 giving rise
to a favourable movement of $1,000,003 over the 2007 level.
(4) Dilution
gains on Mano's holdings in Stellar and SLIO amounted to $7,157,964 in 2008 an
increase of
$950,959 over 2007. Although Mano's interest in these two
companies was reduced, the net assets representing Mano's shareholdings
increased as a result of the cash injections into the companies. The gain on
SLIO is $5,926,171 and on Stellar is $1,231,793.
(ii) BALANCE SHEET,
LIQUIDITY AND CAPITAL RESOURCES
Current assets amounted to $9,112,445 at December 31, 2008, $4,603,386 above
last year. The increase in current assets, and particularly cash and cash
equivalents is mainly due to the investment by Severstal into Mano and into SLIO
during 2008. Cash and cash equivalents increased by $4,777,719 over 2007.
Investments of $8,093,775 increased by $7,909,685 over 2007, due to the
increased value of Mano's investment in SLIO due to a change in treatment from
consolidation to equity accounting.
Property, plant and equipment increased by US$1,894,813 over 2007 to
US$3,896,933. The majority of the expenditure relates to the diamond processing
plant for the Mandala project in Guinea.
Resource properties were valued at $6,330,092 in 2008 which was a
reduction of $2,558,500 over 2007, as a result of write downs in the carrying
values of Kpo (diamonds-Liberia), Pampana (gold-Sierra Leone) and
Missamana/Gueliban (gold-Guinea). Deferred exploration expenditure of
$27,316,442 in 2008 declined by $2,601,608 over the 2007 level. Deferred
expenditure incurred in 2008 totaled $10,402,580 which was off set by an
impairment charge of $8,692,091 and the reclassification of Putu iron ore
expenditure of $4,312,097 following the completion of the Severstal transaction.
Non current assets of $45,637,242 increased by $4,644,390 over 2007. Total
assets of $54,749,687 at the end of December 2008 increased by $9,247,776 or 20%
over the 2007 level.
At December 31, 2008 there were no commitments for
capital expenditure.
Current liabilities of $2,172,490 at December 31, 2008 is $532,308 above
the December 2007 level reflecting the increased amount owed to joint venture
partners. The amount owing to Petra Diamonds is $717,640 as at December 31,
2008. Working capital of $6,939,955 at the end of 2008 is $4,071,078 above the
2007 level and reflects the increased cash holding at the end of 2008.
At
December 31, 2008 the Company has determined the amortised cost of the debt
component of the convertible debentures to be $2,048,638 representing the
present value of the loan liability.
The non-controlling interest in
Stellar of $9,011,297 represents an equity of 40.4% and is based on a carrying
value of net equity of $22,361,888.
Shareholders' equity of $41,517,262 at December 31, 2008 increased by
$7,063,588 over 2007. Share capital increased by $3,367,010 following the
successful private placement with Severstal in May 2008. The increase in the
contributed surplus of $1,307,564 related to stock based compensation as a
result of the award of share options to Mano Directors and employees. The
cumulative deficit of $4,098,885 at December 31, 2008 is $1,841,014 lower than
the 2007 level due to the income in 2008.
Cash outflow from operating activities during the twelve months ended December
31, 2008 is $1,444,109 (2007: $2,038,842) after adjusting for non-cash
activities. Cash outflow on investing activities amounted to $3,985,042 in 2008
and included deferred exploration expenditure of $10,402,580 and $1,990,279 on
the purchase of capital assets principally for the diamond processing plant for
the Mandala project. The net proceeds from the sale of shares in SLIO to
Severstal amounted to $8,333,333. The comparative figure spent on investing
activities during the eleven month period to December 31, 2007 was $9,260,793.
Cash in-flow from financing activities in 2008 amounted to $10,121,363
compared to $14,214,302 for the eleven months ended December 31, 2007. Net
proceeds raised in the private placement with Severstal amounted to $3,915,010
versus $437,836 raised in equity in 2007. In 2007 $4,641,860 was raised from an
issue of convertible debentures.
The net cash inflow during 2008 is $4,777,719, some $1,863,052 higher than in
2007.
(d) OTHER INFORMATION
(i) Outstanding share data
The Company is authorised to issue an unlimited number of common shares without
par value. As at April 23, 2009 there were 317,810,818 common shares
outstanding.
Outstanding share options in the Company at December 31, 2008 are outlined
below. This includes 9,045,000 share options granted in 2008.
+---------------------------------------+--------------------+--------------+
| Number of | Exercise price | Expiry date |
| Common Shares | Per share | |
| | (Cdn$) | |
+---------------------------------------+--------------------+--------------+
| 2,720,000 | 0.240 | March 23, |
| | | 2009 |
+---------------------------------------+--------------------+--------------+
| 2,620,000 | 0.215 | July 25, |
| | | 2010 |
+---------------------------------------+--------------------+--------------+
| 2,755,000 | 0.230 | July 31, |
| | | 2011 |
+---------------------------------------+--------------------+--------------+
| 600,000 | 0.230 | March 6, |
| | | 2012 |
+---------------------------------------+--------------------+--------------+
| 300,000 | 0.230 | May 31, 2012 |
+---------------------------------------+--------------------+--------------+
| 9,045,000 | 0.200 | Jan 23, 2013 |
+---------------------------------------+--------------------+--------------+
| 18,040,000 | | |
+---------------------------------------+--------------------+--------------+
Outstanding share options in Stellar at December 31, 2008 are outlined below:
+---------------------------------------+----------+--------------------+----------+--------------+
| Number of | | Exercise price | | |
| Common Shares | | | | |
+---------------------------------------+----------+--------------------+----------+--------------+
| | | Per share | | Expiry date |
+---------------------------------------+----------+--------------------+----------+--------------+
| | | GBPGBP | | |
+---------------------------------------+----------+--------------------+----------+--------------+
| 2,600,000 | | 0.87 | | March 26, |
| | | | | 2013 |
+---------------------------------------+----------+--------------------+----------+--------------+
| 400,000 | | 1.00 | | April 21, |
| | | | | 2013 |
+---------------------------------------+----------+--------------------+----------+--------------+
| 3,000,000 | | | | |
+---------------------------------------+----------+--------------------+----------+--------------+
As at December 31, 2008, 20,000,000 share purchase warrants were outstanding in
the the Company at an exercise price of GBP0.14 pence per share with an expiry
date of November 29, 2009. These warrants were issued to Severstal as part of
the private placement completed on May 29, 2008. 18,679,456 warrants were
granted by Stellar on December 19 2008 at an exercise price of GBP0.25 pence,
which are outstanding and exercisable at any time over a period of 18 months.
(ii) Convertible debentures
On September 27, 2007 the Company issued unsecured convertible debentures to
raise GBP2.3M. The convertible debentures are repayable on August 1, 2010 and
bear interest at 9% per annum. The principal amount is convertible by the
holders into common shares of the Company (16,428,571) at a conversion price of
GBP0.14 pence per share at any time prior to maturity. If prior to the maturity
date, the daily volume weighted average trading price of the Company's common
shares on AIM, or such other stock exchange where the majority of the Company's
trading volume occurs, is greater than GBP0.182 pence per share (or equivalent),
for any period of 21 consecutive trading days, the Company shall have the right
at its sole option to provide notice to the holder and thereafter the debentures
will automatically be converted to common shares.
As the debentures are convertible into common shares at the option of the
holder, they have been accounted for in their component parts. The fair value of
the conversion option was based on using the Black-Scholes pricing model with
the following assumptions: no dividends will be paid, a weighted average
volatility of the Company's share price of 172%, a weighted average annual risk
free rate of 4.64% and an expected life of three years. The residual was
allocated to the debt component and subsequently carried at amortised cost using
the effective interest rate of 44.1% to accrete the liability to the value of
the consideration received.
During the year ended December 31, 2008, the Company incurred interest expense
relating to the convertible debentures of $983,242 including the accretion of
the loan to its future value. Interest has been paid up to November 1, 2008 and
therefore an accrual of $49,928 is included at the year end. Included in the
income statement is $831,873 recognised as an unrealised foreign currency
exchange rate gain in the year to December 31, 2008, ($168,130 loss in 2007).
(iii) Off balance sheet arrangements
The Company does not have any off-balance sheet arrangements and does not
contemplate having any in the foreseeable future.
(iv) Related party transactions
During the twelve months ended December 31, 2008 the Company incurred related
party transactions of $1,305,979 (2007:$403,542) for management fees, directors
fees and professional services. The increase over 2007 is principally due to the
formation of the Stellar Board of Directors which has been treated as a related
party for purposes of the consolidation, as well as higher management and
director fees. All transactions with related parties have occurred in the normal
course of operations. As at December 31, 2008 the amount due to related parties
totaled $142,004 (2007:$174,367). These balances have no fixed terms of
repayment and have arisen from the provision of services. The following table
summarises the Company's related party transactions for the period:
+---------------------------------------+--+---------------+----------------+
| | | December 31, | December 31, |
+---------------------------------------+--+---------------+----------------+
| | | 2008 | 2007 |
+---------------------------------------+--+---------------+----------------+
| | | $ | $ |
+---------------------------------------+--+---------------+----------------+
| Incurred management service fees with | | 150,000 | 95,000 |
| a company related by a director in | | | |
| common | | | |
+---------------------------------------+--+---------------+----------------+
| Incurred management fees by directors | | 774,805 | 188,753 |
+---------------------------------------+--+---------------+----------------+
| Incurred directors fees | | 297,356 | 119,789 |
+---------------------------------------+--+---------------+----------------+
| Incurred professional fees and | | 83,818 | - |
| consultancy services by a director | | | |
+---------------------------------------+--+---------------+----------------+
| | | 1,305,979 | 403,542 |
+---------------------------------------+--+---------------+----------------+
These transactions have ocurred in the normal course of business and are payable
on demand. At the end of 2008, the amounts due to related entities are as
follows:
+---------------------------------------+--+---------------+----------------+
| | | December 31, | December 31, |
+---------------------------------------+--+---------------+----------------+
| | | 2008 | 2007 |
+---------------------------------------+--+---------------+----------------+
| | | $ | $ |
+---------------------------------------+--+---------------+----------------+
| Director's companies | | - | 154,414 |
+---------------------------------------+--+---------------+----------------+
| Various directors | | 142,004 | 19,953 |
+---------------------------------------+--+---------------+----------------+
| | | 142,004 | 174,367 |
+---------------------------------------+--+---------------+----------------+
(v) Impairment
The Company reviews the carrying values of its mineral
property interests whenever events or changes in circumstances indicate that the
carrying value of the assets may exceed the estimated net recoverable amounts.
An asset's carrying value is written down when the carrying value is not
recoverable and exceeds its fair value. Impairment reviews for deferred
exploration and acquisition costs are carried out on a project by project basis,
with each project representing a potential single cash generating unit. An
impairment review is undertaken when indicators of impairment arise but
typically when one of the following circumstances apply:
(i) title to the asset is compromised;
(ii) variations in metal prices that render the project uneconomic; and
(iii) unexpected geological occurrences that render the resource uneconomic.
Where estimates of future cash flows are not available and where other factors
suggest impairment, management assesses if the carrying value is recoverable and
records an impairment if so indicated. The
impairment review undertaken
during the year identified certain projects that were considered uneconomic
and were written off and those projects where there was a reasonable
probability that the carrying value of the project exceeded its fair value. The
total impairment charge recorded in the Income/(Loss) Statement during 2008 is
$11,250,591. This relates to the following projects:
+-----------------------+----------+------------+--------------+--------------+---------------+
| Project Name | Project |Geographic | Acquisition | Deferred | Total |
| | Type | Segment | Costs | Exploration | |
| | | | Impaired | Expenditure | |
| | | | | Impaired | |
+-----------------------+----------+------------+--------------+--------------+---------------+
| | | | $ | $ | $ |
+-----------------------+----------+------------+--------------+--------------+---------------+
| MCA | Diamond | Liberia | | 3,625,594 | 3,625,594 |
| | | | - | | |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Laboratory | Diamond | Liberia | | 314,401 | 314,401 |
| | | | - | | |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Kpo | Diamond | Liberia | 110,000 | 2,822,916 | 2,932,916 |
+-----------------------+----------+------------+--------------+--------------+---------------+
| AAR | Diamond | Liberia | - | 429,072 | 429,072 |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Pampana Gold | Gold | Sierra | 508,500 | 361,661 | 870,161 |
| | | Leone | | | |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Zimmi - Gorahun | Diamond | Sierra | - | 105,756 | 105,756 |
| | | Leone | | | |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Missamana/Gueliban | Gold | Guinea | 1,940,000 | 1,992,184 | 3,932,184 |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Guinea Iron Ore | Iron Ore | Guinea | - | 46,500 | 46,500 |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Socerdemi | Diamond | DRC | - | 78,832 | 78,832 |
+-----------------------+----------+------------+--------------+--------------+---------------+
| Recovery relating to sale of | | | (1,084,825) | (1,084,825) |
| Stellar mineral property | | | | |
+----------------------------------+------------+--------------+--------------+---------------+
| | | | 2,558,500 | 8,692,091 | 11,250,591 |
+-----------------------+----------+------------+--------------+--------------+---------------+
Some of the projects that remain and have not been impaired are early stage
speculative mining projects, the
carrying value of these is not supported by
future estimated cash flows but management do not believe there to be any
indication of impairment.
(vi) Acquisition and deferred exploration costs
+----------------------------------+-+--------------------+----+----------------+
| | | Dec. 31, 2008 | | Dec. 31, |
| | | $ | | 2007 |
| | | | | $ |
+----------------------------------+-+--------------------+----+----------------+
| Acquisition costs: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Liberia, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Bea | | 210,000 | | 210,000 |
+----------------------------------+-+--------------------+----+----------------+
| Kpo | | - | | 110,000 |
+----------------------------------+-+--------------------+----+----------------+
| Sierra Leone, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Pampana, Sonfon | | 1,186,500 | | 1,695,000 |
| and Nimini South | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Guinea, West Africa | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Missamana/Gueliban | | - | | 1,940,000 |
+----------------------------------+-+--------------------+----+----------------+
| Mandala | | 4,933,592 | | 4,933,592 |
+----------------------------------+-+--------------------+----+----------------+
| | | 6,330,092 | | 8,888,592 |
+----------------------------------+-+--------------------+----+----------------+
| Deferred exploration costs: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Liberia, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Bea - KGL | | 13,756,539 | | 12,624,484 |
+----------------------------------+-+--------------------+----+----------------+
| MCA | | - | | 3,665,227 |
+----------------------------------+-+--------------------+----+----------------+
| Weaju | | 742,268 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Gondoja | | 34,348 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Kpo | | - | | 2,223,124 |
+----------------------------------+-+--------------------+----+----------------+
| Putu | | - | | 1,730,026 |
+----------------------------------+-+--------------------+----+----------------+
| AAR | | - | | 388,741 |
+----------------------------------+-+--------------------+----+----------------+
| MEA | | 60,545 | | 60,545 |
+----------------------------------+-+--------------------+----+----------------+
| | | 14,593,700 | | 20,692,147 |
+----------------------------------+-+--------------------+----+----------------+
| Sierra Leone, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Kono/Nimini | | 7,979,870 | | 5,232,308 |
| Central | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Sonfon | | 1,190,080 | | 1,524,975 |
+----------------------------------+-+--------------------+----+----------------+
| Nimini South | | 134,574 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Tongo/Gola | | 682,836 | | 323,640 |
+----------------------------------+-+--------------------+----+----------------+
| Zimmi/Gorahun | | - | | 99,906 |
+----------------------------------+-+--------------------+----+----------------+
| | | 9,987,360 | | 7,180,829 |
+----------------------------------+-+--------------------+----+----------------+
| Guinea, West Africa | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Missamana/Gueliban | | - | | 1,874,833 |
+----------------------------------+-+--------------------+----+----------------+
| Guinea Iron Ore | | - | | 46,500 |
+----------------------------------+-+--------------------+----+----------------+
| Bouro | | 180,995 | | 1,028,442 |
+----------------------------------+-+--------------------+----+----------------+
| Druzhba and ex De | | 159,289 | | 30,136 |
| Beers | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Mandala | | 1,959,539 | | 69,164 |
+----------------------------------+-+--------------------+----+----------------+
| Ouria | | 5,532 | | - |
+----------------------------------+-+--------------------+----+----------------+
| | | 2,305,355 | | 3,049,075 |
+----------------------------------+-+--------------------+----+----------------+
| Democratic Republic of Congo | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Socerdami/REMEC | | 430,027 | | 80,824 |
+----------------------------------+-+--------------------+----+----------------+
| Recovery relating to the sale of | | - | | (1,084,825) |
| mineral property on | | | | |
| consolidation of Stellar | | | | |
+----------------------------------+-+--------------------+----+----------------+
| | | 27,316,442 | | |
| Closing balance | | | | 29,918,050 |
| | | | | |
+----------------------------------+-+--------------------+----+----------------+
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Acquisition | Bea | MCA | KPO | Putu | AAR | Mandala | Kono/ | REPL | Other | Total |
| costs | | | | | | | Nimini | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Feb | 210,000 | - | 110,000 | - | - | - | - | - | 3,635,000 | 3,955,000 |
| 1, 2007 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Additions | - | - | - | - | - | 4,933,592 | - | - | - | 4,933,592 |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Dec | 210,000 | - | 110,000 | - | - | 4,933,592 | - | - | 3,635,000 | 8,888,592 |
| 31, 2007 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Impairment | - | - | (110,000) | - | - | - | - | - | (2,448,500) | (2,558,500) |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Dec | 210,000 | - | - | - | - | 4,953,592 | - | - | 1,186,500 | 6,330,092 |
| 31, 2008 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Deferred | Bea | MCA | KPO | Putu | AAR | Mandala | Kono/ | REPL | Other | Total |
| exploration | | | | | | | Nimini | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| expenditure | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Feb | 11,373,310 | 2,676,519 | 1,759,011 | 477,143 | 238,672 | 293,063 | 3,048,075 | 31,743 | 3,493,858 | 23,391,394 |
| 1, 2007 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Additions | 1,251,174 | 988,708 | 464,113 | 1,252,883 | 150,069 | 627,642 | 2,184,233 | 291,897 | (684,063) | 6,526,656 |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Dec | 12,624,484 | 3,665,227 | 2,223,124 | 1,730,026 | 388,741 | 920,705 | 5,232,308 | 323,640 | 2,809,795 | 29,918,050 |
| 31, 2007 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Additions | 1,132,055 | 274,769 | 599,792 | 2,582,071 | 40,331 | 1,038,834 | 2,747,562 | 359,196 | 1,627,970 | 10,402,580 |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Expenditures | - | - | - | (4,312,097) | - | - | - | - | - | (4,312,097) |
| removed on non | | | | | | | | | | |
| consolidation of | | | | | | | | | | |
| SLIO (note 5) | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Impairment | - | (3,939,996) | (2,822,916) | - | (429,072) | - | - | - | (1,500,107) | (8,692,091) |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Dec | 13,756,539 | - | - | - | - | 1,959,589 | 7,979,870 | 682,836 | 2,937,658 | 27,316,442 |
| 31, 2008 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
(vii) Going Concern
The Company has prepared its consolidated financial statements on a going
concern basis which assumes that the Company will be able to realise assets and
discharge liabilities in the normal course of business. The Company's ability to
continue on a going concern basis depends on its ability to successfully raise
additional finance in the future. If the Company cannot obtain additional
finance in the future it may be forced to realise its assets at amounts
significantly lower than the current carrying value. At December 31, 2008 the
Company had cash and cash equivalents of $8,877,906 sufficient to finance its
planned exploration activities. In addition when the business combination with
African Aura is completed it will significantly strengthen the Company's
financial position with the addition of Cdn$5.9M (as at 30 March 2009). With
Putu now financed up to and including the feasibility stage, Mano can now focus
its resources on those projects that will add most to the value of the Company.
(viii) Recent accounting pronouncements
(a) Section 1400, General Standards of Financial Statement Presentation
In June 2007, the CICA amended Section 1400 to include requirements to assess an
entity's ability to continue as a going concern and disclose any material
uncertainties that cast doubt on its ability to continue as a going concern.
This new requirement is effective January 1, 2008. The new disclosures resulting
from this requirement are set out in note 2 of the Financial Statements.
(b) Financial instrument disclosures
As of January 1, 2008, the Company was required to adopt two new CICA standards,
Section 3862, Financial Instruments - Disclosures, and Section 3863, Financial
Instruments - Presentation, which replaced Section 3861, Financial Instruments -
Disclosure and Presentation. The new disclosure standard increases the emphasis
on the risks associated with both recognised and unrecognised financial
instruments and how those risks are managed. The new presentation standard
carries forward the former presentation requirements. The new financial
instruments presentation and disclosure requirements were issued in December
2006. The new disclosures resulting from this requirement are set out in note 18
of the Financial Statements.
(c) Capital disclosures
As of January 1, 2008, the Company was required to
adopt CICA Section 1535, Capital Disclosures, which requires companies to
disclose their objectives, policies and processes for managing capital. In
addition, disclosures include whether companies have complied with externally
imposed capital requirements. The new capital disclosure requirements were
issued in December 2006. The new disclosures resulting from this requirement are
set out in note 19 of the Financial Statements.
(d) Goodwill and intangible assets
In February 2008, the CICA issued
Section 3064, Goodwill and Intangible Assets, replacing Section 3062, Goodwill
and Other Intangible Assets, and Section 3450, Research and Development Costs.
The new pronouncement establishes standards for the recognition, measurement,
presentation, and disclosure of goodwill subsequent to its initial recognition
and of intangible assets by profit-oriented enterprises. Standards concerning
goodwill are unchanged from the standards included in the previous Section 3062.
This Section is effective in the first quarter of 2009, and the Company is
currently evaluating the impact of the adoption of this new Section on its
consolidated financial statements.
(e) Business Combination, Consolidated Financial Statements and
non-controlling interest
On January 2009, the CICA issued Handbook Sections
1582 - Business Combinations, 1601 - Consolidated Financial Statements and 1602
- Non-controlling Interests which replace CICA Handbook Sections 1581 - Business
Combinations and 1600 - Consolidated Financial Statements. Section 1582
establishes standards for the accounting for business combinations that is
equivalent to the business combination accounting standard under International
Financial Reporting Standards. Section 1582 is applicable for the Company's
business combinations with acquisition dates on or after January 1, 2011. Early
adoption of this Section is permitted. Section 1601 together with Section 1602
establishes standards for the preparation of consolidated financial statements.
Section 1601 is applicable for the Company's interim and annual consolidated
financial statements for its fiscal year beginning January 1, 2011. Early
adoption of this Section is permitted. If the Company chooses to early adopt any
one of these Sections, the other two sections must also be adopted at the same
time.
(ix) International Financial Reporting Standards (IFRS)
In February 2008, the CICA Accounting Standards Board ("AcSB") confirmed that
Canadian GAAP for publicly accountable enterprises will be converged with IFRS
effective in calendar year 2011, with early adoption allowed starting in
calendar year 2009. The conversion to IFRS will be required for the Company, for
interim and annual financial statements beginning on January 1, 2011. IFRS uses
a conceptual framework similar to Canadian GAAP, but there are significant
differences in recognition, measurement and disclosures. In the period leading
up to the conversion, the AcSB will continue to issue accounting standards that
are converged with IFRS such as IAS 2, Inventories, and IAS 38, Intangible
assets, thus mitigating the impact of adopting IFRS at the mandatory transition
date.
The Company is currently evaluating the impact of the adoption of IFRS on its
consolidated financial statements. In the transition to IFRS, the Company must
apply "IFRS 1 - First Time Adoption of IFRS" which sets out the rules for first
time adoption. In general, IFRS 1 requires an entity to comply with each IFRS
effective at the reporting date for the entity's first IFRS financial
statements. This requires that an entity apply IFRS to its opening IFRS balance
sheet as at January 1, 2010 (i.e. the balance sheet prepared at the beginning of
the earliest comparative period presented in the entity's first IFRS financial
statements).
Within IFRS 1 there are exemptions, some of which are mandatory and some of
which are elective. The exemptions provide relief for companies from certain
requirements in specified areas when the cost of complying with the requirements
is likely to exceed the resulting benefit to users of financial statements. IFRS
1 generally requires retrospective application of IFRSs on first-time adoptions,
but prohibits such application in some areas, particularly when retrospective
application would require judgments by management about past conditions after
the outcome of a particular transaction is already known.
On transition, management must apply the mandatory exemptions and make the
determination as to which elective exemptions will be made under IFRS 1.
Management is currently preparing its timetable for transition and will
undertake a high level analysis of the financial statement areas to determine
which elections will be taken. After this high level analysis is completed Mano
will be in a better position to assess the impact IFRS will have on the
financial statements.
Management continues to assess the impact that IFRS will have on the aspects of
the business including accounting policy, financial reporting, information
technology and communications perspective. Given that the Company is currently
in the development phase, accounting policy determinations that will be made
leading in the Company's production phase, such as revenue recognition, deferred
stripping and diamond inventory costing to name a few examples, will be made
during or post transition to IFRS. Management is also currently reviewing
accounting systems and assessing the changes that will be required and the
strategies that will be employed. Communication and training strategies are also
being developed by management.
(x) Prior Year Restatement
The prior year figures for the eleven months ended December 31, 2007 have been
restated to reflect the stock-based compensation resulting from 2,600,000 share
options being granted to Stellar Directors and key employees. These options were
valued using the Black-Scholes model at $1,863,884. The restatement has had the
following impact on the figures for the period ending December 31, 2007:
+--------------------------------------------------+---+--+--------------+
| | | | $ |
+--------------------------------------------------+---+--+--------------+
| Consolidated Statement of Income and | | | |
| Comprehensive Income | | | |
+--------------------------------------------------+---+--+--------------+
| Stock-based compensation | | | (1,863,884) |
+--------------------------------------------------+---+--+--------------+
| Non-controlling interest | | | 587,123 |
+--------------------------------------------------+---+--+--------------+
| Income and comprehensive income | | | (1,276,761) |
+--------------------------------------------------+---+--+--------------+
| | | | |
+--------------------------------------------------+---+--+--------------+
| Consolidated Balance Sheet | | | |
+--------------------------------------------------+---+--+--------------+
| Contributed surplus | | | 1,276,761 |
+--------------------------------------------------+---+--+--------------+
| Retained earnings | | | (1,276,761) |
+--------------------------------------------------+---+--+--------------+
| | | | |
+--------------------------------------------------+---+--+--------------+
(xi) Financial instruments and financial risk management
The Company's financial assets and liabilities are cash, amounts receivable,
accounts payable and accrued liabilities, due to related parties and convertible
debenture. The fair values of these financial instruments are estimated to
approximate their carrying values due to their immediate or short-term nature.
Due to the nature of the Company's operations, there is no significant credit or
interest rate risk.
The carrying amounts for the financial instruments are as follows:
+--------------------------------------------+--+--------------+--------------+
| | | December 31, | December 31, |
+--------------------------------------------+--+--------------+--------------+
| | | 2008 | 2007 |
+--------------------------------------------+--+--------------+--------------+
| | | $ | $ |
+--------------------------------------------+--+--------------+--------------+
| Financial Assets: | | | |
+--------------------------------------------+--+--------------+--------------+
| Loans and receivables, measured at | | | |
| amortised cost | | | |
+--------------------------------------------+--+--------------+--------------+
| Cash | | 8,887,906 | 4,100,187 |
+--------------------------------------------+--+--------------+--------------+
| Amounts receivable | | 207,044 | 296,591 |
+--------------------------------------------+--+--------------+--------------+
| | | | |
+--------------------------------------------+--+--------------+--------------+
| Financial Liabilities: | | | |
+--------------------------------------------+--+--------------+--------------+
| Other liabilities, measured at amortised | | | |
| cost | | | |
+--------------------------------------------+--+--------------+--------------+
| Accounts payable and accrued liabilities | | 1,148,659 | 1,010,169 |
+--------------------------------------------+--+--------------+--------------+
| Due to related parties | | 149,660 | 174,367 |
+--------------------------------------------+--+--------------+--------------+
| Convertible debenture | | 2,048,638 | 2,260,738 |
+--------------------------------------------+--+--------------+--------------+
| | | 3,346,957 | 3,445,274 |
+--------------------------------------------+--+--------------+--------------+
| | | | |
+--------------------------------------------+--+--------------+--------------+
In the normal course of its operations, the Company is exposed to
currency, interest rate, liquidity and credit risks.
Foreign currency risk
In the normal course of business, the Company enters into transactions
denominated in foreign currencies (primarily Pound Sterling, Canadian Dollars
and Euros). As a result, it is subject to exposure from fluctuations in foreign
currency exchange rates. In general, the Comapny does not enter into derivatives
to manage these currency risks. The group attempts to reduce its exposure to
currency risk by entering into contracts denominated in US Dollars whenever
possible. In 2009, the Board decided to enter into currency forward contracts to
hedge part of its exposure to the UK pound.
+----------------------------------------------+--------------+--------------+
| | December 31, | December 31, |
+----------------------------------------------+--------------+--------------+
| Carrying value of foreign currency balances | 2008 | 2007 |
+----------------------------------------------+--------------+--------------+
| | $ | $ |
+----------------------------------------------+--------------+--------------+
| Cash and cash equivalents, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 1,236,356 | 3,715,232 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 15,233 | 5,821 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Amounts receivable, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 194,498 | 27,730 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 5,871 | 9.480 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Amounts payable and accrued liabilities, | | |
| include balance denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 498,147 | 85,273 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 54,277 | 147,873 |
+----------------------------------------------+--------------+--------------+
| Euro (EUR) | 15,752 | - |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Convertible debenture, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 2,048,638 | 2,260,738 |
+----------------------------------------------+--------------+--------------+
+--------------------------------------------+--+--------------+---------------+
| | | Closing | Effect on |
| | | Exchange | net assets |
| | | Rate | of USD |
| | | | strengthening |
| | | | 10% |
+--------------------------------------------+--+--------------+---------------+
| | | | $ |
+--------------------------------------------+--+--------------+---------------+
| At December 31, 2008 | | | |
+--------------------------------------------+--+--------------+---------------+
| Pound Sterling (GBP) | | 0.6910 | 111,593 |
+--------------------------------------------+--+--------------+---------------+
| Canadian Dollar (CAD) | | 1.2228 | 3,317 |
+--------------------------------------------+--+--------------+---------------+
| Euro (EUR) | | 0.7095 | 1,575 |
+--------------------------------------------+--+--------------+---------------+
| | | | |
+--------------------------------------------+--+--------------+---------------+
| At December 31, 2007 | | | |
+--------------------------------------------+--+--------------+---------------+
| Pound Sterling (GBP) | | 0.5009 | (139,695) |
+--------------------------------------------+--+--------------+---------------+
| Canadian Dollar (CAD) | | 0.9820 | 13,257 |
+--------------------------------------------+--+--------------+---------------+
| Euro (EUR) | | 0.6794 | - |
+--------------------------------------------+--+--------------+---------------+
| | | | |
+--------------------------------------------+--+--------------+---------------+
The sensitivities above are based on financial assets and liabilities held at 31
December 2008 where balances were not denominated in the functional currency of
the Company. The sensitivities do not take into account the Company's income and
expenses and the results of these sensitivities could change due to other
factors such as changes in the value of financial assets and liabilities as a
result of non-foreign exchange influenced factors.
Interest rate and liquidity risk
Fluctuations in interest rates impact on the value of short term cash
investments and interest payable on financing activities (including long term
loans), giving rise to interest rate risk. The Company has in the past been able
to actively source financing through public offerings, corporate dealings or
issuing fixed rate convertible debentures. This cash is managed to ensure
surplus funds are invested in a manner to achieve maximum returns while
minimising risks. In the ordinary course of business, Mano is required to fund
working capital and capital expenditure requirements. Mano typically holds
financial assets with a maturity of less than 30 days to ensure adequate
liquidity and flexibility.
Due to the short maturity of the financial assets and the fixed rate of interest
on the convertible debenture, if interest rates were to double, it would have an
insignificant impact on the Company's financial performance.
Mano ensures that its liquidity risk is mitigated by placing financial assets on
short term maturity, thus all financial liabilities are met as they become due:
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| | | Within | 30 | 6 | 1 |
| | | | days | months | year |
| | | | - | - | - |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| | | 30 | 6 | 1 | 5 |
| | | days | months | year | years |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| | | $ | $ | $ | $ |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Cash and cash | | 8,877,906 | - | - | - |
| equivalents | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Accounts | | 207,044 | - | - | - |
| receivable | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Accounts | | (1,148,659) | - | - | - |
| payable and | | | | | |
| accrued | | | | | |
| liabilities | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Due to | | (149,660) | - | - | - |
| related | | | | | |
| parties | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Due to joint | | (106,603) | - | (717,640) | - |
| venture | | | | | |
| partners | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Convertible | | - | (149,783) | (149,783) | (3,553,183) |
| debentures | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| Net Liquidity | | 7,680,028 | (149,783) | (867,423) | (3,553,183) |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
| | | | | | |
+---------------------------+--+-------------------------+-----------------------+-----------------------+-------------------------+
The Company anticipates the completion of the SPSA with Severstal in December
2010, which would result in $4.2M cash received which is not reflected in the
above table.
Credit risk
The Company's credit risk exposure is solely in connection with the cash and
cash equivalents held with financial institutions. The Company manages its risk
by holding surplus funds in high credit worthy financial institution and
maintains minimum balances with financial institutions in remote locations.
+------------------------------------------+--+-----------------------+-----------------------+
| | | December | December |
| | | 31, | 31, |
+------------------------------------------+--+-----------------------+-----------------------+
| | | 2008 | 2007 |
+------------------------------------------+--+-----------------------+-----------------------+
| | | $ | $ |
+------------------------------------------+--+-----------------------+-----------------------+
| Financial institution with | | 8,743,602 | 3,729,700 |
| S&P AA- rating or higher | | | |
+------------------------------------------+--+-----------------------+-----------------------+
| Financial institutions | | 134,304 | 370,487 |
| un-rated or unknown rating | | | |
+------------------------------------------+--+-----------------------+-----------------------+
| | | 8,877,906 | 4,100,187 |
+------------------------------------------+--+-----------------------+-----------------------+
(xii) Subsequent Events
On January 19, 2009, the Company granted incentive stock options to certain
directors, employees and consultants to purchase up to an aggregate of 5,200,000
common shares in the chase capital of the Company exercisable for a period of
five years at a price of Cdn$0.035c per share.
On April 15, 2009 Mano announced it had entered into a legally binding Letter of
Intent ("LOI") to conclude a broader agreement to merge with TSX-V listed
African Aura Resources Ltd (Africa Aura) pursuant to which Mano will offer 1.57
Mano shares for every one African Aura share outstanding, in order to acquire
the entire issued share capital of African Aura. The obligation of Mano and
African Aura to enter into the broader agreement is subject to certain
conditions being met, including the approval of the TSX-V and satisfactory
completion of due diligence. African Aura shareholders approval will be required
for the merger. The merger will significantly strengthen Mano's position in west
Africa, creating a well capitalised iron ore, gold and diamond exploration and
development company.
Highlights of the Agreement:
* All share transaction whereby African Aura shareholders will receive 1.57 Mano
shares for each African Aura share held, representing a premium of 18.7% to
African Aura's 60 day volume weighted average share price at market close on 14
April 2009, based on Mano's 14 April 2009 closing AIM price and an exchange rate
of Cdn$1.80 to GBP1.
* Merged entity to be renamed African Aura Mining Inc. which, at completion, will
be owned 75% by Mano shareholders and 25% by African Aura shareholders.
* Proposed board of directors:
*
* David Netherway - Non-Executive Chairman
* David Evans, Guy Pas and Steven Poulton - Non-Executive Directors
* Kirill Zimin, who was previously nominated by Severstal Resources to be its
representative on Mano's Board after their investment in the Putu Range project,
is expected to be appointed as a Non-Executive Director in the coming weeks and
will remain post-merger in light of Severstal's strategic investment.
* A proposed 1 for 6 Mano share consolidation (one new post-consolidation share
for every 6 pre-consolidation shares), as previously approved by Mano's
shareholders, is expected to take place concurrently with the completion of the
proposed merger.
Strategic Rationale for the Merger:
* Strong operational synergies with prospective iron ore and gold assets in west
Africa which will considerably enhance Mano's presence in the region with the
addition of the following projects wholly-owned by African Aura:
* 12km long Nkout iron deposit in southern Cameroon. Reconnaissance sampling along
a 5km section returned an average grade of 54% iron.
* Batouri gold project in western Cameroon. Intersections to date include 132g/t
gold over 1.0m and 49g/t gold over 1.5m.
* Significantly strengthens Mano's financial position with the addition of
Cdn$5.9M held by African Aura (as at 30 March 2009).
* Geographic diversification and risk reduction by stepping out of Mano's
traditional operating countries.
* The proposed Board of Directors of the combined company will be strengthened by
drawing on the skills and expertise of the African Aura management team.
4. FORWARD-LOOKING STATEMENTS
Certain information included in this document may constitute
forward-looking statements. Forward-looking statements are based on current
expectations and entail various risks and uncertainties. These risks and
uncertainties could cause or contribute to actual results that are materially
different from those expressed or implied. Factors that could cause actual
results or events to differ materially from current expectations include but are
not limited to: the grade and recovery of ore which is mined varying from
estimates; estimates of future production, mine development costs, timing of
commencement of operations; changes in exchange rates; access to capital;
fluctuations in commodity prices; and adverse political and economic
developments in the countries in which we operate. Any forward-looking statement
speaks only as of the date on which it is made and, except as may be required by
applicable securities laws, the Company disclaims any intent or obligation to
update any forward-looking statement, whether as a result of new information,
future events or results or otherwise. Although the Company believes that the
assumptions inherent in the forward-looking statements are reasonable,
forward-looking statements are not guarantees of future performance and
accordingly undue reliance should not be put on such statements due to the
inherent uncertainty therein.
5. TRENDS
The current world financial crisis has seen demand for commodities fall and in
turn a significant fall in commodity prices has taken place. With access to
capital more difficult, fewer companies are now listing on stock markets. The
Company's majority owned subsidiary Stellar has decided to postpone its listing
on London's AIM stock exchange due to the difficult market conditions for
raising finance. However, Stellar has still been able to access finance to
progress its most advanced projects. Although there is limited funding
available, companies with highly prospective projects can still attract
investment. Mano was able to attract investment from Severstal for the Putu iron
ore project in Liberia, concluding agreements in December 2008. The financial
crisis has negatively impacted the market value of exploration and mining
companies on world markets. Many companies have reacted to the shortage of
finance by placing projects on care and maintenance and reducing wherever
possible their operating costs and capital expenditure. This does mean there are
attractive opportunities at both company and project level for companies with
available cash.
6. RISKS AND UNCERTAINTIES
The Company is subject to a number of risk factors due to the fundamental
nature of the exploration business in which it is engaged, the countries in
which it primarily operates and not least adverse movements in commodity prices.
In recent months the fall in commodity prices has affected the economics of both
existing and potential mines. Mano seeks to counter exploration risk as far as
possible by selecting exploration areas on the basis of their recognised
geological potential to host high grade gold, diamond and iron ore deposits. The
under-explored Archaean terrain on which the Company focuses in west Africa is
also subject to a second significant risk, namely, political. While the region
has suffered serious civil unrest and armed conflict in the past (which is the
basic reason why it remained under-explored), conditions have improved markedly
in recent years. The following risk factors should be given special
consideration when evaluating an investment in the Company's
shares:
(a) Exploration, development and operating risk
The Company is engaged in the exploration of mineral properties, an inherently
risky business, and there is no assurance that an economic mineral deposit will
be discovered. In fact most exploration projects do not result in the discovery
of commercially mineable ore deposits. The focus of the Company is on areas in
which the geological setting is well understood by management. The technological
tools employed by the Company are regularly updated to better focus our
exploration efforts.
(b) Reserve and resource estimates
The estimation of mineral resources and reserves is in part an interpretive
process and the accuracy of any such estimates is a function of the quality of
available data, and of engineering and geological interpretation and judgement.
No assurances can be given that the volume and grade of reserves recovered, and
rates of production achieved, will not be less than anticipated. The Company
contracts the services of independent professional experts to prepare resource
and reserve estimates.
(c) Political and country risks
The political risk in sub-Saharan Africa is significant due to prolonged periods
of economic and political instability in the area. However, in recent years
there has been considerable progress in rebuilding the government institutions
and economy in the three key countries in which we operate, namely Liberia,
Guinea and Sierra Leone. These countries will continue to need the support of
the international community for security and economic assistance to ensure they
are successful in creating a prosperous future for their citizens.
(d) Mineral prices
The price of gold is affected by numerous factors totally beyond the control of
the Company, including central bank sales, producer hedging activities, the
exchange rate of the U.S. dollar relative to other major currencies, demand,
political and economic conditions and production levels. In addition, the price
of gold has been volatile over short periods of time due to speculative
activities. The prices of diamonds, iron ore and other minerals that the Company
may explore for, also have the same or similar price risk factors.
(e) Cash flows and additional funding requirements
Mano currently has no revenues from operations although revenues from diamond
production are expected to be recognised in 2009 when the 49% owned Kono diamond
project in Sierra Leone and the 100% owned Mandala project in Guinea enter
production. The Company has historically entered into joint venture agreements
with partners to share the risks and the associated costs of exploration. In
addition the Company has raised finance through the sale of equity capital and
the placement of unsecured convertible debentures. Although Mano has been
successful in the past in obtaining finance, there is no assurance that it will
be able to obtain adequate finance in the future or that such finance will be on
terms advantageous to the Company. As noted above the Company successfully
raised $3.9M through a private placement with Severstal in May 2008 and a
further $8.3M in December 2008 when it sold its majority shareholding in SLIO to
Severstal. Severstal have committed to invest a further $30M in order to advance
the project towards a definitive feasibility study. A further $4.2M is expected
to be paid by Severstal in December 2010 as part of the transaction completed in
December 2008.
(f) Exchange rate fluctuations
Fluctuations in currency exchange rates can significantly impact cash flows. The
U.S. dollar exchange rate in particular has varied substantially over time. The
U.S. dollar has strengthened considerably vis-à-vis the UK pound during the
second half of 2008. While the Company has historically raised a large
proportion of its equity financing in UK pounds most of the Company's
exploration costs, are denominated in U.S. dollars. Fluctuations in exchange
rates may give rise to foreign currency exposure, either favourable or
unfavourable, which may impact financial results. Mano did not engage in
currency hedging to offset the risk of exchange rate fluctuation during 2008.
However, the Board has decided to enter into currency forward contracts in 2009
to hedge part of its exposure to the UK pound.
(g) Environmental
Mano's exploration and development activities are subject to extensive laws and
regulations governing environmental protection. The Company is also subject to
various reclamation-related requirements. The Company takes extremely seriously
its commitment towards the local communities and the environment in which it
operates. The Company's policy is to meet all applicable environmental
regulations. A failure to comply may result in enforcement actions causing
operations to cease or be curtailed, the imposition of fines and penalties, and
may include corrective measures requiring significant capital expenditures. In
addition, certain types of operations require the submission and approval of
environmental impact assessments. As far as the Company is aware it has complied
with all environmental regulations in relation to the licences it holds.
(h) Laws and regulations
Mano's exploration activities are subject to local laws and regulations
governing prospecting, development, production, exports, taxes, labour
standards, occupational health and safety, mine safety and other matters. Such
laws and regulations are subject to change and can become more stringent, and
compliance can therefore become more costly. The Company applies the expertise
of its management, its advisors, its employees and contractors to ensure
compliance with current laws.
(i) Title to mineral properties
While the Company has undertaken all the customary due diligence in the
verification of title to its mineral properties, this should not be construed as
a guarantee of title. The properties may be subject to prior unregistered
agreements or transfers and title may be affected by undetected defects.
(j) Competition
There is constant competition from other mineral exploration companies, with
operations similar to those of the Company. Many of the mining companies with
which the Company competes have operations and financial resources substantially
greater than those of Mano.
(k) Dependence on management
Mano relies heavily on the business and technical expertise of its management
team and there is little possibility that this dependence will decrease in the
near term. In 2008 the financial management of the Company has been strengthened
with the appointment of a CFO for Mano, a Finance Director for Stellar and a
Group Financial Controller. It should be noted that Mano has no key-man
insurance.
(l) Economic environment
As discussed under section 5 above the current
financial crisis has seen the demand for commodities fall and in turn a
significant fall in commodity prices. This has created a lot of uncertaininty in
the financial markets leading to a fall in the share prices of many companies.
Obtaining debt and equity finance has become more difficult leading to an
increase in company failures. Mano is confident it has the projects and
resources at its disposal to increase the value of the business to its
shareholders.
7. MANAGEMENTS RESPONSIBILITY FOR FINANCIAL REPORTING AND CONTROLS
The audited consolidated financial statements of the Company for the twelve
months ended December 31, 2008 have been prepared by management in accordance
with Canadian Generally Accepted Accounting Principles (GAAP) and have been
approved by the Company's Board of Directors.
Management is responsible for establishing and maintaining a system of controls
and procedures over the public disclosure of financial and non-financial
information regarding the Company. Management is also responsible for the design
and maintenance of effective internal control over financial reporting to
provide reasonable assurance regarding the integrity and reliability of the
Company's financial information and the preparation of its financial statements
in accordance with Canadian GAAP.
Management maintains appropriate
information systems, procedures and controls to ensure the integrity of the
financial statements and that information used internally and disclosed
externally is complete and reliable.
Management of the Company, including our Chief Executive Officer and Chief
Financial Officer, do not expect that our disclosure controls and internal
control procedures will prevent all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within Mano have been detected.
However, given the nature of the business and geographical displacement,
management is committed to continuously mitigate any risks and systematically
improve operating controls where and when possible in a cost effective manner.
Management recognises the limitation of segregation of duties due to the
size of the organisation and is committed to mitigating such risks by
introducing compensatory controls.
The Board is responsible for ensuring that management fulfils its
responsibilities for financial reporting and internal control. The Board carries
out this responsibility principally through its Audit Committee. The Audit
Committee is appointed by the Board and meets periodically with management and
the external auditor to discuss internal controls over the financial reporting
process, auditing matters and financial reporting issues, to satisfy itself that
each party is properly discharging its duties and responsibilities and to review
the Consolidated Financial Statements.
On March 9, 2009 Mano appointed BDO Stoy Hayward LLP, Chartered Accountants
as its auditors. There was no reservation in any former auditors' report, no
qualified opinion or denial of opinion in connection with the audit of the
Company for the two most recently completed fiscal years or for any subsequent
period.
There was no reportable event cited by the former auditors and the Company is
not aware of any reportable events and is of the opinion that none exists. The
resignation of the former auditors as auditors of the Company and the
appointment of the successor auditors has been approved by the Company's audit
committee and its board of directors.
8. OUTLOOK
The outlook for the Company in 2009 is very promising despite the difficult
trading conditions in the financial markets. Putu is now financed through to the
feasibility stage and the immediate priorities are to secure a Mineral
Development Agreement (MDA) and significantly increase the resource drilling
programme with 27,000m of core drilling. The gold focus is on strengthening
Mano's portfolio of properties and expanding the Company's gold resources. The
drill programme planned at NLGM in 2009 is another step towards completing a
feasibility study on the project during 2010. Despite difficult trading
conditions in the diamond market, Stellar is focused on delivering cash flow at
its Kono and Mandala operations in 2009. The key operational priorities for
Mano in 2009 are summarised below:
(a) Advance the resource drilling programme and metallurgical testing at Putu;
(b) Secure a 25 year MDA for Putu;
(c) Infill core drilling programme at NLGM;
(d) Resource definition drill programme at Weaju;
(e) Close the recently announced business combination with African Aura; and
(f) Deliver positive cash flow from Stellar Diamonds to enable them to become
self sufficient and autonomous
On Behalf of the Board,
MANO RIVER RESOURCES INC.
(Signed)LUIS G. CABRITA da SILVA
LUIS G. CABRITA da SILVA President and CEO
Consolidated Financial Statements
Mano River Resources Inc.
For Year Ended December 31, 2008
(Stated in U.S. Dollars)
Statement of directors' responsibilities
and approval of the annual financial statements
Management's Responsibility for Consolidated Financial Statements
The accompanying consolidated financial statements of Mano River Resources Inc
are the responsibility of management and have been approved by the Board of
Directors of the Company. The consolidated financial statements include some
amounts that are based on management's best estimate using reasonable judgment.
The consolidated financial statements have been prepared by management in
accordance with Canadian generally accepted accounting principles.
Management maintains an appropriate system of internal controls to provide
reasonable assurance that transactions are authorised, assets safeguarded and
proper records are maintained.
The Audit Committee of the Board of Directors has met with the Company's
external auditors to review the scope and results of the annual audit and to
review the consolidated financial statements and related financial reporting
matters prior to submitting the consolidated financial statements to the Board
of Directors for approval.
The consolidated financial statements have been audited by BDO Stoy Hayward LLP,
Chartered Accountants, and their report follows.
+----------------------------------------------+--+--------------+--+--------------+
| | | | | |
+----------------------------------------------+--+--------------+--+--------------+
| (Signed) LUIS G. CABRITA da SILVA,DIRECTOR | | | | |
+----------------------------------------------+--+--------------+--+--------------+
| Luis G. Cabrita da Silva | | | | |
+----------------------------------------------+--+--------------+--+--------------+
| | | | | |
+----------------------------------------------+--+--------------+--+--------------+
| (Signed) DAVID B. EVANS, DIRECTOR | | | | |
+----------------------------------------------+--+--------------+--+--------------+
| David B. Evans | | | | |
+----------------------------------------------+--+--------------+--+--------------+
Report of the independent auditors
to the Shareholders of Mano River Resources Inc
Auditors' Report to the Shareholders of Mano River Resources Inc
We have audited the consolidated balance sheet of Mano River Resources Inc as at
31 December 2008 and the consolidated statement of income and other
comprehensive income, shareholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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 these consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these consolidated 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 31 December 2008
and the results of its operations and its cash flows for the year then ended in
accordance with Canadian generally accepted accounting principles.
The consolidated financial statements as at 31 December 2007 and for the eleven
month period then ended were audited by other auditors, who expressed an opinion
without reservation on those statements in their report dated 29 April 2008.
BDO Stoy Hayward LLP
Chartered Accountants
London, UK
29 April 2009
Mano River Resources Inc.
Consolidated Balance Sheet
As at December 31, 2008
(Stated in U.S. dollars)
+----------------------------------------------+--+--------------+--+---------------+
| | | Year | | Restated |
| | | ended | | (Note 2) |
| | | December 31 | | Year ended |
| | | 2008 | | December 31 |
| | | $ | | 2007 |
| | | | | $ |
+----------------------------------------------+--+--------------+--+---------------+
| Assets | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Current assets | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Cash and cash equivalents | | 8,877,906 | | 4,100,187 |
+----------------------------------------------+--+--------------+--+---------------+
| Amounts receivable | | 207,044 | | 296,591 |
+----------------------------------------------+--+--------------+--+---------------+
| Due from joint venture partners (Note 6) | | 27,495 | | 112,281 |
+----------------------------------------------+--+--------------+--+---------------+
| | | 9,112,445 | | 4,509,059 |
+----------------------------------------------+--+--------------+--+---------------+
| Non Current Assets | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Investments (Note 5 and 7) | | 8,093,775 | | 184,090 |
+----------------------------------------------+--+--------------+--+---------------+
| Property, plant and equipment (Note 8) | | 3,896,933 | | 2,002,120 |
+----------------------------------------------+--+--------------+--+---------------+
| Resource properties (Note 9) | | 6,330,092 | | 8,888,592 |
+----------------------------------------------+--+--------------+--+---------------+
| Deferred exploration costs (Note 9) | | 27,316,442 | | 29,918,050 |
+----------------------------------------------+--+--------------+--+---------------+
| Total Assets | | 54,749,687 | | 45,501,911 |
+----------------------------------------------+--+--------------+--+---------------+
| | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Liabilities | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Current liabilities | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Accounts payable and accrued liabilities | | 1,148,659 | | 1,010,169 |
+----------------------------------------------+--+--------------+--+---------------+
| Interest payable on convertible debenture | | 49,928 | | 181,296 |
| (Note 11) | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Due to related parties (Note 14) | | 149,660 | | 174,367 |
+----------------------------------------------+--+--------------+--+---------------+
| Due to joint venture partners (Note 6) | | 824,243 | | 274,350 |
+----------------------------------------------+--+--------------+--+---------------+
| | | 2,172,490 | | 1,640,182 |
+----------------------------------------------+--+--------------+--+---------------+
| Convertible debenture (Note 11) | | 2,048,638 | | 2,260,738 |
+----------------------------------------------+--+--------------+--+---------------+
| Total Liabilities | | 4,221,128 | | 3,900,920 |
+----------------------------------------------+--+--------------+--+---------------+
| | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Non-controlling interest (Note 15) | | 9,011,297 | | 7,147,317 |
+----------------------------------------------+--+--------------+--+---------------+
| | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Shareholders' equity | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Share capital (Note 12) | | 37,963,124 | | 34,596,114 |
+----------------------------------------------+--+--------------+--+---------------+
| Equity component of convertible debenture | | 2,637,802 | | 2,637,802 |
| (Note 11) | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Warrant reserve | | 548,000 | | - |
+----------------------------------------------+--+--------------+--+---------------+
| Contributed surplus | | 4,488,976 | | 3,181,412 |
+----------------------------------------------+--+--------------+--+---------------+
| Accumulated other comprehensive loss | | (21,755) | | (21,755) |
+----------------------------------------------+--+--------------+--+---------------+
| Deficit accumulated during development stage | | (4,098,885) | | (5,939,899) |
+----------------------------------------------+--+--------------+--+---------------+
| Total shareholders' equity | | 41,517,262 | | 34,453,674 |
+----------------------------------------------+--+--------------+--+---------------+
| Total Liabilities, non-controlling interest | | 54,749,687 | | 45,501,911 |
| and shareholders' equity | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Nature of operations and continuation of business (Note 1) | | |
+----------------------------------------------------------------+--+---------------+
| Approved by the Board | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| (Signed) LUIS G. CABRITA da SILVA,DIRECTOR | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| Luis G. Cabrita da Silva | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| (Signed) DAVID B. EVANS, DIRECTOR | | | | |
+----------------------------------------------+--+--------------+--+---------------+
| David B. Evans | | | | |
+----------------------------------------------+--+--------------+--+---------------+
The accompanying notes are in integral part of these consolidated financial
statements
Mano River Resources Inc.
Consolidated Balance Sheet
As at December 31, 2008
(Stated in U.S. dollars)
+--------------------------------------+--------+------------+-------------+-------------+
| | | | Year | Restated |
| | | | ended | (Note 2) |
| | | | Dec. 31, | Eleven |
| | | | 2008 | months |
| | | | $ | ended |
| | | | | Dec. 31, |
| | | | | 2007 |
| | | | | $ |
+--------------------------------------+--------+------------+-------------+-------------+
| Expenses | | | | |
| | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
| Administrative and office expenses | | | 1,044,292 | 63,236 |
+--------------------------------------+--------+------------+-------------+-------------+
| Directors' fees | | | 297,409 | 122,789 |
+--------------------------------------+--------+------------+-------------+-------------+
| Foreign exchange loss | | | 304,215 | 226,868 |
+--------------------------------------+--------+------------+-------------+-------------+
| Management fees | | | 658,314 | 283,753 |
+--------------------------------------+--------+------------+-------------+-------------+
| Interest on convertible debenture | | | 983,242 | 181,296 |
| (Note 11) | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
| Professional fees | | | 1,938,650 | 958,629 |
+--------------------------------------+--------+------------+-------------+-------------+
| Stock-based compensation | | | 1,455,625 | 2,053,887 |
+--------------------------------------+--------+------------+-------------+-------------+
| Transfer agent and filing fees | | | 79,229 | 99,560 |
+--------------------------------------+--------+------------+-------------+-------------+
| Project impairment (Note 16) | | | 11,250,591 | - |
+--------------------------------------+--------+------------+-------------+-------------+
| Depreciation | | | 44,289 | 353,315 |
+--------------------------------------+--------+------------+-------------+-------------+
| | | | 18,055,856 | 4,343,333 |
+--------------------------------------+--------+------------+-------------+-------------+
| Dilution gain on shares issued by | | | (7,157,964) | (6,207,005) |
| controlled company (Note 15) | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
| Gain on disposal of assets (Note 5) | | | (7,762,899) | - |
+--------------------------------------+--------+------------+-------------+-------------+
| Unrealised foreign exchange | | | (831,873) | 168,130 |
| (gain)/loss on convertible debenture | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
| Interest Income | | | (74,484) | (148,041) |
+--------------------------------------+--------+------------+-------------+-------------+
| (Loss)/Income before non-controlling | | | (2,228,636) | 1,843,583 |
| interest | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
| Non-controlling interest | | | 4,069,650 | 897,112 |
+--------------------------------------+--------+------------+-------------+-------------+
| Income and comprehensive income | | | 1,841,014 | 2,740,695 |
+--------------------------------------+--------+------------+-------------+-------------+
| Basic and diluted income per share | | | 0.006 | 0.009 |
+--------------------------------------+--------+------------+-------------+-------------+
| Weighted average number of shares | | | 309,668,741 | 297,256,188 |
| outstanding | | | | |
+--------------------------------------+--------+------------+-------------+-------------+
The accompanying notes are in integral part of these consolidated financial
statement
Mano River Resources Inc.
Consolidated Statements of Cash Flow
For the year ended December 31, 2008
(Stated in U.S. dollars)
+------------------------------------+----+---------+-----------------+----------------+
| | | Year | Restated (note |
| | | ended | 2) |
| | | Dec. 31, | Eleven |
| | | 2008 | months |
| | | | ended Dec. 31, |
| | | | 2007 |
+-----------------------------------------+---------+-----------------+----------------+
| | | $ | $ |
+-----------------------------------------+---------+-----------------+----------------+
| Operating Activities | | | |
+-----------------------------------------+---------+-----------------+----------------+
| Income and comprehensive income | | | 1,841,014 | 2,740,695 |
+------------------------------------+----+---------+-----------------+----------------+
| Items not involving cash: | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Dilution gain on shares issued by | | | (7,157,964) | (6,207,005) |
| controlled company | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Non-controlling interest | | | (4,069,650) | (897,112) |
+------------------------------------+----+---------+-----------------+----------------+
| Gain on sale of assets | | | (7,762,899) | - |
+------------------------------------+----+---------+-----------------+----------------+
| Stock-based compensation | | | 1,455,625 | 2,053,887 |
+------------------------------------+----+---------+-----------------+----------------+
| Interest income | | | (74,484) | - |
+------------------------------------+----+---------+-----------------+----------------+
| Interest on convertible debentures | | | 983,242 | 181,296 |
+------------------------------------+----+---------+-----------------+----------------+
| Unrealised foreign exchange | | | (831,873) | 190,003 |
| (gain)/loss on convertible debt | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Unrealised foreign exchange | | | (90,730) | - |
| (gain)/loss | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Project impairment (Note 16) | | | 11,250,591 | - |
+------------------------------------+----+---------+-----------------+----------------+
| Depreciation of fixed assets | | | 44,289 | 353,315 |
+------------------------------------+----+---------+-----------------+----------------+
| Changes in Working Capital: | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Amounts receivable and prepaid | | | 174,333 | (207,727) |
| expenses | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Due to joint venture partners | | | - | (353,259) |
+------------------------------------+----+---------+-----------------+----------------+
| Accounts payable and accrued | | | 2,794,397 | 107,065 |
| liabilities | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| | | | (1,444,109) | (2,038,842) |
+------------------------------------+----+---------+-----------------+----------------+
| Investing Activities | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Deferred exploration expenditures | | | (10,402,580) | (7,611,481) |
+------------------------------------+----+---------+-----------------+----------------+
| Interest income | | | 74,484 | - |
+------------------------------------+----+---------+-----------------+----------------+
| Net proceeds on sale of assets | | | 8,333,333 | - |
+------------------------------------+----+---------+-----------------+----------------+
| Purchase of capital assets | | | (1,990,279) | (1,649,312) |
+------------------------------------+----+---------+-----------------+----------------+
| | | | (3,985,042) | (9,260,793) |
+------------------------------------+----+---------+-----------------+----------------+
| Financing Activities | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Issuance of share capital (net of | | | 3,915,010 | 437,836 |
| costs) | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Convertible debentures | | | - | 4,641,860 |
+------------------------------------+----+---------+-----------------+----------------+
| Cash (disposed of) /acquired on | | | (585,768) | 1,571,438 |
| consolidation of subsidiary | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Proceeds from issue of shares of | | | 7,311,665 | 7,522,508 |
| subsidiary | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Interest paid on convertible | | | (494,837) | - |
| debenture | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Due to related parties | | | (24,707) | 40,660 |
+------------------------------------+----+---------+-----------------+----------------+
| | | | 10,121.363 | 14,214,302 |
+------------------------------------+----+---------+-----------------+----------------+
| | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Impact of foreign exchange on cash | | | 85,507 | - |
| balance | | | | |
+------------------------------------+----+---------+-----------------+----------------+
| Net cash inflow | | | 4,777,719 | 2,914,667 |
+------------------------------------+----+---------+-----------------+----------------+
| Cash, Beginning of Period | | | 4,100,187 | 1,185,520 |
+------------------------------------+----+---------+-----------------+----------------+
| Cash, End of Period | | | 8,877,906 | 4,100,187 |
+------------------------------------+----+---------+-----------------+----------------+
The accompanying notes are in integral part of these consolidated financial
statements.
Mano River Resources Inc.
Consolidated Statements of Shareholders' Equity
For the year ended December 31, 2008
(Stated in U.S. dollars)
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| | Common shares |Contributed | Warrant | Share | Equity | Deficit | Accumulated | Total |
| | | surplus | Reserve |subscriptions | component | accumulated | other |shareholders |
| | | | | | of | in the |comprehensive | equity |
| | | | | |convertible | development | deficit | |
| | | | | | debenture | stage | | |
+------------------------+---------------------------+ + + + + + + +
| | Number | | | | | | | | Amount |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| | | $ | $ | $ | $ | $ | $ | $ | $ |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Balance as at January | 293,120,818 | 34,158,278 | 1,714,462 | - | 788,461 | - | (8,680,594) | (21,755) | 27,958,852 |
| 31, 2007 | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Net income for the | - | - | - | - | - | - | 4,017,642 | - | 4,017,642 |
| period | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Cash transactions: | - | - | - | - | - | 2,637,802 | - | - | 2,637,802 |
| Equity component of | | | | | | | | | |
| convertible | | | | | | | | | |
| debenture | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Exercise of options | 4,690,000 | 437,836 | - | - | - | - | - | - | 437,836 |
| at $0.093 | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| | 4,690,000 | 437,836 | - | - | - | 2,637,802 | - | - | 3,075,638 |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Non-cash | - | - | - | - | (788,461) | - | - | - | (788,461) |
| transactions: | | | | | | | | | |
| Share subscription | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Stock-based | - | - | 190,003 | - | - | - | - | - | 190,003 |
| compensation | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Balance at December | 297,810,818 | 34,596,114 | 1,904,465 | - | - | 2,637,802 | (4,662,952) | (21,755) | 34,453,674 |
| 31, 2007 | | | | | | | | | |
| as originally stated | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Restatement of | - | - | 1,863,884 | - | - | - | (1,863,884) | - | - |
| stock-based | | | | | | | | | |
| compensation | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Non-controlling | - | - | (586,937) | - | - | - | 586,937 | - | - |
| interest in stock- | | | | | | | | | |
| based compensation | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Balance at December | 297,810,818 | 34,596,114 | 3,181,412 | - | - | 2,637,802 | (5,939,899) | (21,755) | 34,453,674 |
| 31, 2007 | | | | | | | | | |
| as revised (note 2) | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Income for the year | - | - | - | - | - | - | 1,841,014 | - | 1,841,014 |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Shares issued on | 20,000,000 | 3,367,010 | - | 548,000 | - | - | - | - | 3,915,010 |
| private placement | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Stock-based | - | - | 1,455,625 | - | - | - | - | - | 1,455,625 |
| compensation | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Non-controlling | - | - | (148,061) | - | - | - | - | - | (148,061) |
| interest in stock- | | | | | | | | | |
| based compensation | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
| Balance at December | 317,810,818 | 37,963,124 | 4,488,976 | 548,000 | - | 2,637,802 | (4,098,885) | (21,755) | 41,517,262 |
| 31, 2008 | | | | | | | | | |
+------------------------+-------------+-------------+-------------+---------------+---------------+-------------+---------------+---------------+--------------+
Mano River Resources Inc.
Notes to the Consolidated Financial Statements
For the year ended December 31, 2008
(Stated in U.S. dollars)
1. Nature of operations
Mano River Resources Inc. ("Mano River" or "the Company") commenced operations
on July 10, 1996 and is engaged in the acquisition, exploration and development
of gold, iron ore and diamond properties. The Company is in the development
stage and has no source of cash flows other than loans from related parties,
convertible debentures or equity offerings.
The Company has proven reserves in respect on one of the gold projects and
anticipates further operating losses as exploration continues across its
property portfolio.
2.Basis of preparation
These financial statements have been prepared in accordance with generally
accepted accounting principles in Canada.
These consolidated financial statements are prepared on a going concern basis
which assumes that the Company will be able to realise assets and discharge
liabilities in the normal course of business. The Company's ability to continue
on a going concern basis depends on its ability to successfully raise additional
financing. If the Company cannot obtain additional financing it may be forced to
realise its assets at amounts significantly lower than the current carrying
value.
Uncertainty also exists with respect to the recoverability of the carrying value
of certain resource properties. The ability of the Company to realise its
investment in resource properties is contingent upon resolution of the
uncertainties and continuing confirmation of the Company's title to the resource
properties.
In August 2007, the Company changed its fiscal year end from January 31, to
December 31, effective as of December 31, 2007. Therefore the prior period
presented is for the eleven months ended December 31, 2007.
Prior year adjustment
The prior year figures have been restated to reflect the stock-based
compensation granted in Stellar Diamonds Ltd, a subsidiary of the company,
during the eleven months ended December 31, 2007 that was not included in the
consolidated financial statements for that period. The stock-based compensation
is the result of 2,600,000 share options granted by Stellar to Directors and key
employees (see note 12(d)). These options were valued using the Black-Scholes
model at $1,863,884. The restatement has had the following impact on the figures
for the period ending December 31, 2007;
+--------------------------------------------------+---+--+--------------+
| | | | $ |
+--------------------------------------------------+---+--+--------------+
| Consolidated Statement of Income and | | | |
| Comprehensive Income | | | |
+--------------------------------------------------+---+--+--------------+
| Stock-based compensation | | | (1,863,884) |
+--------------------------------------------------+---+--+--------------+
| Non-controlling interest | | | 587,123 |
+--------------------------------------------------+---+--+--------------+
| Income and comprehensive income | | | (1,276,761) |
+--------------------------------------------------+---+--+--------------+
| | | | |
+--------------------------------------------------+---+--+--------------+
| Consolidated Balance Sheet | | | |
+--------------------------------------------------+---+--+--------------+
| Contributed surplus | | | 1,276,761 |
+--------------------------------------------------+---+--+--------------+
| Retained earnings | | | (1,276,761) |
+--------------------------------------------------+---+--+--------------+
| | | | |
+--------------------------------------------------+---+--+--------------+
The effect of this restatement was to reduce the earnings per share for the
eleven month period ending December 31, 2007 from the previously reported $0.014
to the revised $0.009.
3. Significant accounting policies
(a)Principles of consolidation
These financial statements include the accounts of Mano River Resources Inc. and
its principal subsidiaries, Mano Gold Investments Ltd. (formerly Mano River
Resources Ltd.) including sub-group Mano River Iron Ore Holdings Ltd.
("MARIOH"), and Mano Diamonds Ltd.
+----------------------------------------+---------------------+------------+
| Company | Place of | Percentage |
| | incorporation | ownership |
+----------------------------------------+---------------------+------------+
| Mano Gold Investments Limited | British Virgin | 100.0% |
| (formerly Mano River | Islands | |
| Resources Limited) and its | | |
| subsidiaries: | | |
+----------------------------------------+---------------------+------------+
| Golden Limbo Rock Resources Limited | Tortola, British | 93. 5% |
| and its | Virgin Islands | |
| subsidiary: | | |
+----------------------------------------+---------------------+------------+
| Golden Limbo Rock Resources SA | Conakry, Guinea | 100.0% |
+----------------------------------------+---------------------+------------+
| Golden Leo Resources Limited and its | Tortola, British | 98.8% |
| branch: | Virgin Islands | |
+----------------------------------------+---------------------+------------+
| Golden Leo Resources Limited (Sierra | Freetown, Sierra | 100.0% |
| Leone Branch) | Leone | |
+----------------------------------------+---------------------+------------+
| North West Minerals Ltd. | Mahe, Republic of | 100.0% |
| | Seychelles | |
+----------------------------------------+---------------------+------------+
| Mano Gold (Liberia) Ltd. (formerly | Tortola, British | 100.0% |
| Lofa Goldiam, Inc.) | Virgin Islands | |
| and its subsidiary: | | |
+----------------------------------------+---------------------+------------+
| Bea Mountain Mining Corporation | Monrovia, Liberia | 100.0% |
+----------------------------------------+---------------------+------------+
| Mano Diamonds Limited and its | Tortola, British | 100.0% |
| subsidiaries: | Virgin Islands | |
+----------------------------------------+---------------------+------------+
| Friendship Diamonds Guinée S.A. | Conakry, Guinea | 70.0% |
+----------------------------------------+---------------------+------------+
| Stellar Diamonds Limited and its | Guernsey | 59.6% |
| subsidiaries: | | |
+----------------------------------------+---------------------+------------+
| Diamants du Congo Oriental Ltd. | Tortola, British | 100.0% |
| | Virgin Islands | |
+----------------------------------------+---------------------+------------+
| Western Mineral Resources Corporation | Tortola, British | 100.0% |
| Inc. and its | Virgin Islands | |
| subsidiary: | | |
+----------------------------------------+---------------------+------------+
| Western Mineral Resources Corp. | Monrovia, Liberia | 100.0% |
| (Liberia) | | |
+----------------------------------------+---------------------+------------+
| Alpha Minerals Inc. | Monrovia, Liberia | 100.0% |
+----------------------------------------+---------------------+------------+
| Weasua Diamonds Ltd and its | Mahe, Republic of | 50.0% |
| subsidiary: | Seychelles | |
+----------------------------------------+---------------------+------------+
| Kpo Resources Inc. | Monrovia, Liberia | 100.0% |
+----------------------------------------+---------------------+------------+
| Mano Diamonds (Liberia) Inc. | Monrovia, Liberia | 100.0% |
+----------------------------------------+---------------------+------------+
| Basama Diamonds Ltd and its branch: | Mahe, Republic of | 49.0% |
| | Seychelles | |
+----------------------------------------+---------------------+------------+
| Basama Diamond Ltd Sierra Leone Branch | Freetown, Sierra | 100.0% |
| | Leone | |
+----------------------------------------+---------------------+------------+
| Sierra Diamonds Limited and its | Tortola, British | 100.0% |
| branch: | Virgin Islands | |
+----------------------------------------+---------------------+------------+
| Sierra Leone Diamonds Limited Sierra | Freetown, Sierra | 100.0% |
| Leone Branch | Leone | |
+----------------------------------------+---------------------+------------+
| Mano Diamonds Sierra Leone Ltd. | Freetown, Sierra | 100.0% |
| | Leone | |
+----------------------------------------+---------------------+------------+
| Guinean Diamond Corporation Ltd. and | Mahe, Republic of | 100.0% |
| its subsidiaries | Seychelles | |
+----------------------------------------+---------------------+------------+
| Mano River Diamants Guinee S.A. | Conakry, Guinea | 100.0% |
+----------------------------------------+---------------------+------------+
| Resources Mandala Guinée S.A. R.L. | Conakry, Guinea | 100.0% |
+----------------------------------------+---------------------+------------+
| East Sierra Diamonds Ltd and its | Mahe, Republic of | 100.0% |
| branch: | Seychelles | |
+----------------------------------------+---------------------+------------+
| East Sierra Diamonds Ltd. Sierra Leone | Freetown, Sierra | 100.0% |
| Branch | Leone | |
+----------------------------------------+---------------------+------------+
| Mano River Iron Ore Holdings Ltd. and | | 100.0% |
| its subsidiary: | | |
+----------------------------------------+---------------------+------------+
| Severstal Liberia Iron Ore Ltd. and | Tortola, British | 44.3% |
| its subsidiaries: | Virgin Islands | |
+----------------------------------------+---------------------+------------+
| Mano River Resources Inc. (UK Branch) | United Kingdom | 100.0% |
+----------------------------------------+---------------------+------------+
The shares not legally owned by the Company in its subsidiaries:
Golden Limbo Rock Resources Limited - 6.5%;
Friendship Diamonds Guinée S.A.- 30.0%;
are held by a third party company. This third party has no beneficial interest
in the shares and is holding the shares for the Company's benefit until the
Company and the third party agree on their ultimate distribution. As the Company
retains the beneficial interest in these shares no non-controlling interest
exists at December 31, 2008 in respect of these shares.
Business acquisitions are accounted for under the purchase method and the
results of the operations of these businesses are included in these consolidated
financial statements from the acquisition date until the date of disposal or
loss of control.
Severstal Liberia Iron Ore Ltd. (SLIO) previously African Iron Ore Group Ltd.
was 80% owned by MARIOH. One-half of the remaining 20% was held by Eastbound
Resources Ltd., a company controlled by G Pas, a director of the Company. During
the year MARIOH reduced its holding in SLIO to 44.3% (see note 5). SLIO is
consolidated until the date of the reduction in the Company's shareholding and
subsequently accounted for using the equity method of accounting and included in
investments in the balance sheet.
Investments in associates are accounted for using the equity method of
accounting and are initially recognised at cost. The Company's share of its
associates' post-acquisition profits or losses is recognised in the consolidated
statement of income. Cumulative post-acquisition movements are adjusted against
the carrying amount of investment. When the Company's share of losses in an
associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Company does not recognise further losses, unless it
has unsecured obligations or made payments on behalf of the associate.
The financial statements of entities which are controlled by the Company through
voting equity interests, referred to as subsidiaries, are consolidated. Variable
interest entities ("VIEs"), which include, but are not limited to, special
purpose entities, trusts, partnerships, and other legal structures, as defined
by the Accounting Standards Board in Accounting Guideline ("AcG") 15,
Consolidation of Variable Interest Entities ("AcG 15"), are entities in which
equity investors do not have the characteristics of a "controlling financial
interest" or there is not sufficient equity at risk for the entity to finance
its activities without additional subordinated financial support. VIEs are
subject to consolidation by the primary beneficiary who will absorb the majority
of the entities' expected losses and/or expected residual returns. As of
December 31, 2008, the Company does not hold an interest in any VIEs.
All intercompany balances and transactions have been eliminated upon
consolidation.
(b)Non-controlling interests
Non-controlling interests exist in less than wholly-owned subsidiaries of the
Company and represent the outside interest's share of the carrying values of the
subsidiaries. When the subsidiary company issues its own shares to outside
interests, a dilution gain or loss arises as a result of the difference between
the Company's share of the proceeds and the carrying value of the underlying
equity.
(c)Cash
Cash and cash equivalents include cash, and those short-term money market
instruments that are readily convertible to cash with an original term of less
than 90 days.
(d)Property, plant and equipment
Property, plant and equipment is comprised of office furniture, automobiles and
various equipment used in the field, that are initially recorded at cost and
depreciated at 30% per annum on a declining balance basis. Property, plant and
equipment in the course of construction are not depreciated until it is
commissioned and available for use.
(e)Long-term investments
Investments are recorded at cost, subject to a provision for any impairment that
is determined to be other than temporary.
(f)Resource properties and deferred exploration costs
The Company follows the method of accounting for its mineral properties whereby
all costs related to acquisition, exploration and development are capitalised by
property. The carrying value of pre-production and exploration properties is
reviewed periodically and either written off when it is determined that the
expenditures will not result in the discovery of economically recoverable
mineral reserves or transferred to producing mining property, plant and
equipment when commercial development commences and amortised on a unit of
production basis over the life of the related ore reserves.
The recoverability of amounts shown for pre-production and exploration
properties is dependent
upon the discovery of economically recoverable mineral reserves, confirmation of
the Company's interest in the underlying mineral claims, the ability of the
Company to finance the development of the properties and on the future
profitable production or proceeds from the disposition thereof. Management
reviews these factors and considers whether any other events or circumstances
indicate that the carrying amount of an asset may not be recoverable. If there
is an indication that the carrying amount may not be recoverable future cash
flows expected to result from the use of the asset and its disposition must be
estimated. If the undiscounted estimated future cash flow is less than the
carrying amount of the asset, impairment is recognised and charged to the
consolidated income statement.
The success and ultimate recovery of the Company's exploration costs of its
mineral exploration properties is influenced by significant financial risks,
legal and political risks, commodity prices, and the ability of the Company to
discover economically recoverable mineral reserves and to bring such reserves
into future profitable production.
(g)Measurement uncertainty
The preparation of financial statements in conformity with Canadian generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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 balances and transactions affected by management
estimates include the valuation of investments, resource properties, deferred
exploration costs, asset retirement obligations, future income tax, stock-based
compensation as well as the recovery of assets, fair value of convertible debt
and the allocation of proceeds between share capital and warrants. Actual
results could differ from those estimates.
The amounts used to estimate fair values of stock options and warrants issued
are based on estimates of future volatility of the Company's share price,
expected lives of the options, expected dividends to be paid by the Company and
other relevant assumptions.
By their nature, these estimates are subject to measurement uncertainty and the
effect of changes in such estimates on the consolidated financial statements of
future periods could be significant.
In February 2008, the CICA issued Section 1000. The standard intends to reduce
the differences with International Financial Reporting Standards ('IFRS') in the
accounting for intangible assets and results in closer alignment with US GAAP.
Under current Canadian standards, more items are recognised as assets than under
IFRS or US GAAP. This standard will be effective for fiscal years beginning on
or after 1 October 2008
(h)Income/(Loss) per share
The basic income/(loss) per share is computed by dividing the income/(loss) and
comprehensive income/(loss) by the weighted average number of common shares
outstanding during the year. The diluted income/(loss) per share reflects the
potential dilution by including other common share equivalents, such as
outstanding stock options and share purchase warrants, in the weighted average
number of common shares outstanding during the year.
(i)Foreign currency translation
The functional currency of the Company and all subsidiaries is US Dollars with
the exception of the UK branch which has a functional currency of Pounds
Sterling.
Monetary assets and liabilities denominated in foreign currencies are translated
at the exchange rate in effect at the balance sheet date. Non-monetary assets
and liabilities and revenue and expenses arising from foreign currency
transactions are translated at the exchange rate in effect at the date of the
transaction. Exchange gains or losses arising upon translation are included in
the consolidated income statement.
Integrated foreign subsidiaries and associates are accounted for under the
temporal method. Under this method, monetary assets and liabilities are
translated at the exchange rate in effect at the balance sheet date.
Non-monetary assets and liabilities are translated at historical rates. Revenue
and expenses are translated at actual or average rates for the period. Exchange
gains or losses arising from the translation are included in the consolidated
income statement.
(j)Stock-based compensation
The Company follows Canadian Institute of Chartered Accountants Handbook Section
3870, Stock-Based Compensation, which requires that all stock-based awards made
to non-employees and employees be measured and recognised using a fair value
based method. Accordingly, the fair value of options at the date of grant is
accrued and charged to the consolidated income statement, with an offsetting
credit to contributed surplus, on a straight-line basis over the vesting period.
(k)Joint ventures
The Company has entered into certain agreements with third parties to develop
exploration projects that are commonly referred to as joint ventures but do not
necessarily meet the requirements to apply joint venture accounting. Where this
is the case the Company recognises its share of the expenditure on the project
and any liabilities arising in respect of the project. Joint venture agreements
that do meet the definition of a joint venture under section 3055 are
proportionally consolidated.
(l)Income taxes
The Company accounts for income taxes whereby future income tax assets and
liabilities are computed based on differences between the carrying amount of
assets and liabilities on the balance sheet and their corresponding tax values
using the enacted income tax rates at each balance sheet date. Future income tax
assets also result from unused loss carryforwards and other deductions. The
valuation of future income tax assets is reviewed annually and adjusted, if
necessary, by use of a valuation allowance to reflect the estimated realisable
amount. Future income tax assets are not recognised to the extent the
recoverability of such assets is not considered more likely than not.
(m)Comprehensive income
Section 1530, Comprehensive Income, is the change in the Company's net assets
that results from transactions, events and circumstances from sources other than
the Company's shareholders and includes items that would not normally be
included in net loss such as unrealised gains or losses on available-for-sale
investments, gains or losses on certain derivative instruments and foreign
currency gains or losses related to self-sustaining operations. The Company's
comprehensive income, components of other comprehensive income, and accumulated
other comprehensive income are presented in the statements of comprehensive
income and the statements of shareholders' equity. Amounts previously recorded
in "cumulative translation adjustment" have been reclassified to "accumulated
other comprehensive income".
(n)Asset retirement obligations
The fair value of the liability of an asset retirement obligation is recorded
when it is legally incurred and the corresponding increase to the mineral
property is depreciated over the life of the mineral property. The liability is
adjusted over time to reflect an accretion element considered in the initial
measurement at fair value and revisions to the timing or amount of original
estimates and for draw-downs as asset retirement expenditures are incurred. As
at 31 December 2008 and 2007, the Company has not recognised any asset
retirement obligations.
(o)Financial instruments
The Company's cash and cash equivalents have been classified as held for trading
and are recorded at fair value. All other financial instruments will be recorded
at cost or amortised cost, subject to impairment reviews. Other financial
instruments include amounts receivable, amounts payable, amounts due to related
parties and convertible debentures.
(p)Adoption of new accounting standards and accounting pronouncements
Section 3855, Financial Instruments - Recognition and Measurement, establishes
standards for classification, recognition, measurement, presentation and
disclosure of financial instruments (including derivatives) and non-financial
derivatives in the financial statements. This standard requires the Company to
classify all financial instruments as either held-to-maturity,
available-for-sale, held-for-trading, loans and receivables or other financial
liabilities. Financial assets and liabilities held-for-trading will be measured
at fair value with gains and losses recognised in net income. Financial assets
held-to-maturity, loans and receivables and financial liabilities other than
those held-for-trading will be measured at amortized cost. Available-for-sale
investments are measured at fair value with unrealised gains and losses
recognised in other comprehensive income. The standard also permits the
designation of any financial instrument as held-for-trading upon initial
recognition.
The Company has implemented the following classification of its financial assets
and financial liabilities:
* Cash is classified as held-for-trading;
* Amounts receivables, due from joint venture partners are classified as "loans
and receivables" and are measured at amortized cost using the effective interest
rate method. At December 31, 2008 and 2007, the recorded amount approximates
fair value;
* Long-term investments are classified as "available-for-sale"; and
* Short-term and long-term liabilities, accounts payable and due to joint venture
partners are classified as "other financial liabilities" and are measured at
amortized cost using the effective interest rate method. At December 31, 2008
and 2007, the recorded amount approximates fair value.
Transaction costs directly attributable to the acquisition or issue of a
financial asset or financial liability are included in the carrying amount of
the financial asset or financial liability, and are amortized to income using
the effective interest rate method.
Derivatives may be embedded in other financial instruments (host instruments).
Embedded derivatives are treated as separate derivatives when their economic
characteristics and risks are not closely related to those of the host
instrument. The terms of the embedded derivative are the same as those of a
stand-alone derivative, and the combined contract is not classified as held for
trading. These embedded derivatives are measured at fair value on the balance
sheet with subsequent changes in fair value recognised in the consolidated
income statement. The Company adopted the standard, with February 1, 2007 as its
transition date for embedded derivatives due to the change in accounting year
end as disclosed in note 1. The Company has not identified any embedded
derivatives that are required to be accounted for separately from the host
contract.
(q) Recent accounting pronouncements
* Section 1400, General Standards of Financial Statement Presentation In June 2007, the CICA amended Section 1400 to include requirements to assess an
entity's ability to continue as a going concern and disclose any material
uncertainties that cast doubt on its ability to continue as a going concern.
This new requirement is effective January 1, 2008. The new disclosures resulting
from this requirement are set out in note 2.
b. Financial instrument disclosures
As of January 1, 2008, the Company was required to adopt two new CICA standards,
Section 3862, Financial Instruments - Disclosures, and Section 3863, Financial
Instruments - Presentation, which replaced Section 3861, Financial Instruments -
Disclosure and Presentation. The new disclosure standard increases the emphasis
on the risks associated with both recognised and unrecognised financial
instruments and how those risks are managed. The new presentation standard
carries forward the former presentation requirements. The new financial
instruments presentation and disclosure requirements were issued in December
2006. The new disclosures resulting from this requirement are set out in note
18.
c. Capital disclosures
As of January 1, 2008, the Company was required to adopt CICA Section 1535,
Capital Disclosures, which requires companies to disclose their objectives,
policies and processes for managing capital. In addition, disclosures include
whether companies have complied with externally imposed capital requirements.
The new capital disclosure requirements were issued in December 2006. The new
disclosures resulting from this requirement are set out in note 19.
d. Goodwill and intangible assets
In February 2008, the CICA issued Section 3064, Goodwill and Intangible Assets,
replacing Section 3062, Goodwill and Other Intangible Assets, and Section 3450,
Research and Development Costs. The new pronouncement establishes standards for
the recognition, measurement, presentation, and disclosure of goodwill
subsequent to its initial recognition and of intangible assets by
profit-oriented enterprises. Standards concerning goodwill are unchanged from
the standards included in the previous Section 3062. This Section is effective
in the first quarter of 2009, and the Company is currently evaluating the impact
of the adoption of this new Section on its consolidated financial statements.
e. Business Combination, Consolidated Financial Statements and
non-controlling interest
In January 2009, the CICA issued Handbook Sections 1582 - Business Combinations,
1601 - Consolidated Financial Statements and 1602 - Non-controlling Interests
which replace CICA Handbook Sections 1581 - Business Combinations and 1600 -
Consolidated Financial Statements. Section 1582 establishes standards for the
accounting for business combinations that is equivalent to the business
combination accounting standard under International Financial Reporting
Standards. Section 1582 is applicable for the Company's business combinations
with acquisition dates on or after January 1, 2011. Early adoption of this
Section is permitted. Section 1601 together with Section 1602 establishes
standards for the preparation of consolidated financial statements. Section 1601
is applicable for the Company's interim and annual consolidated financial
statements for its fiscal year beginning January 1, 2011. Early adoption of this
Section is permitted. If the Company chooses to early adopt any one of these
Sections, the other two sections must also be adopted at the same time.
f. Convergence with International Financial Reporting Standards
In February 2008, the CICA Accounting Standards Board ("AcSB") confirmed that
Canadian GAAP for publicly accountable enterprises will be converged with IFRS
effective in calendar year 2011, with early adoption allowed starting in
calendar year 2009. The conversion to IFRS will be required, for the Company,
for interim and annual financial statements beginning on January 1, 2011. IFRS
uses a conceptual framework similar to Canadian GAAP, but there are significant
differences in recognition, measurement and disclosures. In the period leading
up to the conversion, the AcSB will continue to issue accounting standards that
are converged with IFRS such as IAS 2, Inventories, and IAS 38, Intangible
assets, thus mitigating the impact of adopting IFRS at the mandatory transition
date.
The Company is currently evaluating the impact of the adoption of IFRS on its
consolidated financial statements. In the transition to IFRS, the Company must
apply "IFRS 1 - First Time Adoption of IFRS" which sets out the rules for first
time adoption. In general, IFRS 1 requires an entity to comply with each IFRS
effective at the reporting date for the entity's first IFRS financial
statements. This requires that an entity apply IFRS to its opening IFRS balance
sheet as at January 1, 2010 (i.e. the balance sheet prepared at the beginning of
the earliest comparative period presented in the entity's first IFRS financial
statements).
Within IFRS 1 there are exemptions, some of which are mandatory and some of
which are elective. The exemptions provide relief for companies from certain
requirements in specified areas when the cost of complying with the requirements
is likely to exceed the resulting benefit to users of financial statements. IFRS
1 generally requires retrospective application of IFRSs on first-time adoptions,
but prohibits such application in some areas, particularly when retrospective
application would require judgments by management about past conditions after
the outcome of a particular transaction is already known.
On transition, management must apply the mandatory exemptions and make the
determination as to which elective exemptions will be made under IFRS 1.
Management is currently preparing its timetable for transition and will
undertake
a high level analysis of the financial statement areas to determine which
elections will be taken. After this high level analysis is completed Mano will
be in a better position to assess the impact IFRS will have on the financial
statements.
Management continues to assess the impact that IFRS will have on the aspects of
the business including accounting policy, financial reporting, information
technology and communications perspective. Given that the Company is currently
in the development phase, accounting policy determinations that will be made
leading in the Company's production phase, such as revenue recognition, deferred
stripping and diamond inventory costing to name a few examples, will be made
during or post transition to IFRS. Management is also currently reviewing
accounting systems and assessing the changes that will be required and the
strategies that will be employed. Communication and training strategies are also
being developed by management.
4. Investments in Stellar Diamonds Limited
During the eleven months ended December 31, 2007 Mano River completed the launch
of a new diamond company, Stellar Diamonds Limited ("Stellar"), to maximize the
value of its diamond properties. In exchange for the diamond properties which
had a book value of $8,276,081, the Company received 19,239,541 new shares in
Stellar. The exchange was recorded at book value as it was a transaction between
companies under common control. The Company also recognised a recovery relating
to the sale of 5.93% of its interest on consolidation of Stellar in the amount
of $1,084,825. In addition, during the period Stellar entered into private
placements with unrelated parties and issued 8,843,762 shares for a total value
of $15,000,029, resulting in a dilution gain in the amount of $6,207,005, which
was recognised in the consolidated statements of income for the eleven months
ended December 31, 2007. The following is a summary of the agreements entered
into:
(a) Pursuant to a share purchase agreement between Stellar Diamonds and Mano
Diamonds Limited ("Mano Diamonds"), a wholly-owned subsidiary of the Company,
Mano Diamonds transferred its diamond interests in Liberia and Sierra Leone
including a 49% interest in the Kono project, to Stellar Diamonds, and in
consideration Stellar Diamonds issued 15,442,021 of its shares to Mano Diamonds;
(b) Pursuant to a second share purchase agreement among Stellar Diamonds, Mano
Diamonds and two arm's length parties, Searchgold Resources Inc.
("Searchgold") and Siafa Koulibaly ("Koulibaly"), Searchgold, Mano Diamonds and
Koulibaly transferred their Guinean diamond interests consisting of a 100%
interest in the Bouro/Mandala alluvial property to Stellar Diamonds, and in
consideration Stellar Diamonds issued 2,672,629 of its shares to Searchgold,
2,678,117 of its shares to Mano Diamonds, and 137,199 of its shares to
Koulibaly. The exchange was recorded at book value as it was a transaction
between companies under common control; and
(c) Pursuant to an assignment agreement between the Company and Stellar
Diamonds, the Company transferred certain contractual rights to a Guinean
diamond exploration database that it had obtained under an agreement with
Societe Debsam Guinee Sarl (a subsidiary of DeBeers) dated September 7, 2007 to
Stellar Diamonds and in consideration Stellar Diamonds issued up to 1,119,403 of
its shares to the Company. The exchange was recorded at book value as it was a
transaction between companies under common control.
During the year ended December 31, 2008, Stellar entered into additional private
placements and issued 21,054,456 shares for a total value of $10,689,492,
resulting in a dilution gain in the amount of $1,231,793, which was recognised
in the consolidated statements of income for the year ended December 31, 2008.
Stellar is a 59.6% owned subsidiary controlled by the Company and the results of
operations and assets and liabilities have been consolidated with the accounts
of the Company with effect from the date of acquisition.
5. Investments in Severstal Liberia Iron Ore ("SLIO")
During the year ended December 31, 2008, Mano River entered into an agreement
(The SPSA) with OAO Severstal Resources, The SPSA provides for the investment by
an indirect wholly-owned subsidiary of Severstal of 25% of the issued and
outstanding shares of SLIO for $12.5M from Mano River Iron Ore Holdings Ltd., a
wholly-owned subsidiary of Mano, and a further 20% of the issued and outstanding
shares of SLIO from the minority interest parties in SLIO, for $10.0M. It also
provides for the subscription by Severstal for new ordinary shares in SLIO for
an aggregate price of $15m. These acquisitions and the subscription will give
the indirectly wholly-owned Severstal subsidiary a 61.5% stake in SLIO on
completion of the SPSA.
During the year Severstal completed the acquisition of 16.67% of the shares from
Mano River Iron Ore Holdings and 13.33% of the shares from the minority
interests as well as completing the $15M subscription for an additional 30% of
SLIO. The remaining third of the acquisition element has been deferred until
December 2010, at which point the Company will receive $4.2M. The Company has
not recorded the disposal of the deferred element of the agreement. At the year
end the Company holds 44.33% of the issued share capital of SLIO and from the
date of the sale of the shares to Severstal, accounted for as an investment in
an associate.
The completion of the SPSA has resulted in a dilution gain in the amount of
$5,926,171, which was recognised in the consolidated statements of income for
the year ended December 31, 2008. On December 10, 2008 AIOG changed its name to
Severstal Liberia Iron Ore Limited.
+----------------------------------+------+------+---------------+---------------+
| | | | $ | |
+----------------------------------+------+------+---------------+---------------+
| Net assets as at December 31, | | | 18,257,984 | |
| 2008 | | | | |
+----------------------------------+------+------+---------------+---------------+
| Interest held in share capital | | | 44.33% | |
+----------------------------------+------+------+---------------+---------------+
| Equity value of investment in | | | 8,093,775 | |
| associate | | | | |
+----------------------------------+------+------+---------------+---------------+
The following gain on disposal has been recognised in the current year:
+----------------------------------+------+-----+---------------+---------------+
| | | | $ | |
+----------------------------------+------+-----+---------------+---------------+
| Investment prior to disposal | | | 2,738,027 | |
+----------------------------------+------+-----+---------------+---------------+
| % disposal | | | 16.667% | |
+----------------------------------+------+-----+---------------+---------------+
| Cost of disposal | | | 570,434 | |
+----------------------------------+------+-----+---------------+---------------+
| Proceeds of disposal | | | 8,333,333 | |
+----------------------------------+------+-----+---------------+---------------+
| Gain on disposal | | | 7,762,899 | |
+----------------------------------+------+-----+---------------+---------------+
| | | | | |
+----------------------------------+------+-----+---------------+---------------+
6. Due to/from joint venture partners
During the year ended December 31, 2008, certain exploration and development
expenditures were carried out by joint venture partners.
The amount owing
to Petra Diamonds, who is the operator of the Kono joint venture diamond project
in Sierra Leone, is $717,640 as at December 31, 2008. The amount owing to Kpo
Resources Inc, the joint venture entity of a diamond project in Liberia, is
$106,603 as at December 31, 2008.
As at December 31, 2008 the amount due
from joint venture partners amounted to $27,495.
7.Investments
+-----------------------------------------+--+-------------+--+--------------+
| | | Dec. | | Dec. 31 |
| | | 31 2008 | | 2007 |
| | | $ | | $ |
+-----------------------------------------+--+-------------+--+--------------+
| | | | | |
+-----------------------------------------+--+-------------+--+--------------+
| SLIO (note 5) | | 8,093,775 | | - |
+-----------------------------------------+--+-------------+--+--------------+
| Mifergui-Nimba | | - | | 184,090 |
+-----------------------------------------+--+-------------+--+--------------+
The valuation is based on the transactions which happened close to the year end
and represents the share of the net assets of the investment in the subsidiary.
+-----------------------------------------+--+-------------+--+--------------+
| | | Dec. 31 | | Dec. 31, |
| | | 2008 | | 2007 |
| | | $ | | $ |
+-----------------------------------------+--+-------------+--+--------------+
| | | | | |
+-----------------------------------------+--+-------------+--+--------------+
| Cost of investment | | 2,167,604 | | 184,090 |
+-----------------------------------------+--+-------------+--+--------------+
| Dilutive gain on disposal | | 5,926,171 | | - |
+-----------------------------------------+--+-------------+--+--------------+
| Carrying value | | 8,093,775 | | 184,090 |
+-----------------------------------------+--+-------------+--+--------------+
8.Property and Equipment
+--------------------+-------------+--------------+--------------+-------------+
| | | Machinery & | Assets | Total |
| | | | Under | |
+--------------------+-------------+--------------+--------------+-------------+
| | | Equipment |Construction | |
| | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| | | $ | $ | $ |
+--------------------+-------------+--------------+--------------+-------------+
| Cost | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| At January 1, 2008 | | 353,315 | 2,002,120 | 2,355,435 |
+--------------------+-------------+--------------+--------------+-------------+
| Additions | | 147,834 | 1,791,268 | 1,939,102 |
+--------------------+-------------+--------------+--------------+-------------+
| At December 31, | | 501,149 | 3,793,388 | 4,294,537 |
| 2008 | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| Depreciation | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| At January 1, 2008 | | 353,315 | - | 353,315 |
+--------------------+-------------+--------------+--------------+-------------+
| Charge for the | | 44,289 | - | 44,289 |
| year | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| At December 31, | | 397,604 | - | 397,604 |
| 2008 | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| Carrying amount | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| At December 31, | | - | 2,002,120 | 2,002,120 |
| 2007 | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| At December 31, | | 103,545 | 3,793,388 | 3,896,933 |
| 2008 | | | | |
+--------------------+-------------+--------------+--------------+-------------+
| | | | | |
+--------------------+-------------+--------------+--------------+-------------+
9. Resource properties and deferred exploration costs
+----------------------------------+-+--------------------+----+----------------+
| | | Dec. 31, 2008 | | Dec. 31, |
| | | $ | | 2007 |
| | | | | $ |
+----------------------------------+-+--------------------+----+----------------+
| | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Acquisition costs: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Liberia, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Bea | | 210,000 | | 210,000 |
+----------------------------------+-+--------------------+----+----------------+
| Kpo | | - | | 110,000 |
+----------------------------------+-+--------------------+----+----------------+
| Sierra Leone, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Pampana, Sonfon | | 1,186,500 | | 1,695,000 |
| and Nimini South | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Guinea, West Africa | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Missamana/Gueliban | | - | | 1,940,000 |
+----------------------------------+-+--------------------+----+----------------+
| Mandala | | 4,933,592 | | 4,933,592 |
+----------------------------------+-+--------------------+----+----------------+
| | | | | 8,888,592 |
| | | 6,330,092 | | |
+----------------------------------+-+--------------------+----+----------------+
| | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Deferred exploration costs: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Liberia, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Bea - KGL | | 13,756,539 | | 12,624,484 |
+----------------------------------+-+--------------------+----+----------------+
| MCA | | - | | 3,665,227 |
+----------------------------------+-+--------------------+----+----------------+
| Weaju | | 742,268 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Gondoja | | 34,348 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Kpo | | - | | 2,223,124 |
+----------------------------------+-+--------------------+----+----------------+
| Putu | | - | | 1,730,026 |
+----------------------------------+-+--------------------+----+----------------+
| AAR | | - | | 388,741 |
+----------------------------------+-+--------------------+----+----------------+
| MEA | | 60,545 | | 60,545 |
+----------------------------------+-+--------------------+----+----------------+
| | | 14,593,700 | | 20,692,147 |
+----------------------------------+-+--------------------+----+----------------+
| Sierra Leone, West Africa: | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Kono/Nimini | | 7,979,870 | | 5,232,308 |
| Central | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Sonfon | | 1,190,080 | | 1,524,975 |
+----------------------------------+-+--------------------+----+----------------+
| Nimini South | | 134,574 | | - |
+----------------------------------+-+--------------------+----+----------------+
| Tongo/Gola | | 682,836 | | 323,640 |
+----------------------------------+-+--------------------+----+----------------+
| Zimmi/Gorahun | | - | | 99,906 |
+----------------------------------+-+--------------------+----+----------------+
| | | 9,987,360 | | 7,180,829 |
+----------------------------------+-+--------------------+----+----------------+
| Guinea, West Africa | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Missamana/Gueliban | | - | | 1,874,833 |
+----------------------------------+-+--------------------+----+----------------+
| Guinea Iron Ore | | - | | 46,500 |
+----------------------------------+-+--------------------+----+----------------+
| Bouro | | 180,995 | | 176,901 |
+----------------------------------+-+--------------------+----+----------------+
| Druzhba and ex De | | 159,289 | | 30,136 |
| Beers | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Mandala | | 1,959,539 | | 920,705 |
+----------------------------------+-+--------------------+----+----------------+
| Ouria | | 5,532 | | - |
+----------------------------------+-+--------------------+----+----------------+
| | | 2,305,355 | | 3,049,075 |
+----------------------------------+-+--------------------+----+----------------+
| Democratic Republic of Congo | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Socerdami/REMEC | | 430,027 | | 80,824 |
+----------------------------------+-+--------------------+----+----------------+
| Recovery relating to the sale of | | - | | (1,084,825) |
| mineral property on | | | | |
| consolidation of Stellar | | | | |
+----------------------------------+-+--------------------+----+----------------+
| Closing balance | | 27,316,442 | | 29,918,050 |
+----------------------------------+-+--------------------+----+----------------+
9. Resource properties and deferred exploration costs (continued)
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Acquisition | Bea | MCA | Kpo | Putu | AAR | Mandala | Kono/ | REPL | Other | Total |
| costs | | | | | | | Nimini | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Feb | 210,000 | - | 110,000 | - | - | - | - | - | 3,635,000 | 3,955,000 |
| 1, 2007 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Additions | - | - | - | - | - | 4,933,592 | - | - | - | 4,933,592 |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Dec | 210,000 | - | 110,000 | - | - | 4,933,592 | - | - | 3,635,000 | 8,888,592 |
| 31, 2007 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Impairment | - | - | (110,000) | - | - | - | - | - | (2,448,500) | (2,558,500) |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| Balance at Dec | 210,000 | - | - | - | - | 4,953,592 | - | - | 1,186,500 | 6,330,092 |
| 31, 2008 | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+----------+----------+-----------+----------+----------+-----------+----------+----------+-------------+-------------+
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Deferred | Bea | MCA | Kpo | Putu | AAR | Mandala | Kono/ | REPL | Other | Total |
| exploration | | | | | | | Nimini | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| expenditure | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Feb | 11,373,310 | 2,676,519 | 1,759,011 | 477,143 | 238,672 | 293,063 | 3,048,075 | 31,743 | 3,493,858 | 23,391,394 |
| 1, 2007 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Additions | 1,251,174 | 988,708 | 464,113 | 1,252,883 | 150,069 | 627,642 | 2,184,233 | 291,897 | (684,063) | 6,526,656 |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Dec | 12,624,484 | 3,665,227 | 2,223,124 | 1,730,026 | 388,741 | 920,705 | 5,232,308 | 323,640 | 2,809,795 | 29,918,050 |
| 31, 2007 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Additions | 1,132,055 | 274,769 | 599,792 | 2,582,071 | 40,331 | 1,038,834 | 2,747,562 | 359,196 | 1,627,970 | 10,402,580 |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Expenditures | - | - | - | (4,312,097) | - | - | - | - | - | (4,312,097) |
| removed on non | | | | | | | | | | |
| consolidation of | | | | | | | | | | |
| SLIO (note 5) | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Impairment | - | (3,939,996) | (2,822,916) | - | (429,072) | - | - | - | (1,500,107) | (8,692,091) |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| Balance at Dec | 13,756,539 | - | - | - | - | 1,959,589 | 7,979,870 | 682,836 | 2,937,658 | 27,316,442 |
| 31, 2008 | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
| | | | | | | | | | | |
+------------------+------------+-------------+-------------+-------------+-----------+-----------+-----------+----------+-------------+-------------+
+-------------------------------+-----+------------+-------------+-------------+
| | | | Year | Eleven |
| | | | ended | months |
| | | | Dec. 31, | ended |
| | | | 2008 | Dec. 31, |
| | | | | 2007 |
+-------------------------------+-----+------------+-------------+-------------+
| | | | $ | $ |
+-------------------------------+-----+------------+-------------+-------------+
| Deferred exploration | | | | |
| expenditures | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Feasibility | | | 51 | 4,992 |
+-------------------------------+-----+------------+-------------+-------------+
| Assays incl. shipment | | | 251,754 | 130,122 |
+-------------------------------+-----+------------+-------------+-------------+
| Communications incl. | | | 120,395 | 37,172 |
| equipment | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Community relations | | | 151,103 | 9,523 |
+-------------------------------+-----+------------+-------------+-------------+
| Consultants and professional | | | 1,393,596 | 722,278 |
| fees | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Data, images, reports and | | | - | 4,340 |
| maps | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Drilling | | | 1,886,828 | 1,017,009 |
+-------------------------------+-----+------------+-------------+-------------+
| Geologists' support | | | - | 122,725 |
+-------------------------------+-----+------------+-------------+-------------+
| Infrastructure incl. roads | | | 86,475 | 157,520 |
| and bridges | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Licenses and permit fees | | | 186,981 | 345,059 |
+-------------------------------+-----+------------+-------------+-------------+
| Metallurgy | | | - | 14,887 |
+-------------------------------+-----+------------+-------------+-------------+
| Project/field office costs, | | | 435,764 | 1,355,254 |
| incl. field equip. | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Reconnaissance and | | | - | 66,963 |
| geochemical | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Salaries and wages | | | 2,450,656 | 860,142 |
+-------------------------------+-----+------------+-------------+-------------+
| Subsistence | | | 168,490 | 86,259 |
+-------------------------------+-----+------------+-------------+-------------+
| Transportation incl. vehicles | | | 438,089 | 341,334 |
| | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Net Trans-Hex JV expenditure | | | 91,658 | 396,228 |
+-------------------------------+-----+------------+-------------+-------------+
| Kono (Petra) joint venture | | | 2,740,740 | 1,939,674 |
+-------------------------------+-----+------------+-------------+-------------+
| | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Net expenditure during the | | | | |
| period | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Recovery relating to the sale | | | 1,084,825 | (1,084,825) |
| of mineral property on | | | | |
| consolidation of Stellar | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Expenditure removed on non | | | (4,312,097) | - |
| consolidation of SLIO (note | | | | |
| 5) | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Write off of project | | | | |
| expenditure & | | | | |
+-------------------------------+-----+------------+-------------+-------------+
| Impairment provision | | | (9,776,916) | - |
+-------------------------------+-----+------------+-------------+-------------+
| Balance, Beginning of period | | | 29,918,050 | 23,391,394 |
+-------------------------------+-----+------------+-------------+-------------+
| Balance, End of period | | | 27,316,442 | 29,918,050 |
+-------------------------------+-----+------------+-------------+-------------+
10. Joint Ventures and Project Agreements
(a)Liberia, West Africa
The Company holds two mineral development agreement ("MDA") licences in Liberia
for gold and diamond development. These MDAs are in Western Liberia and consist
of the Bea Mountains and Kpo Range and are valid for 25 years with an option to
renew for another 25 years. Both these MDAs are dated November 28, 2001 and were
approved on March 14, 2002. The MDAs will allow the Company to conduct
pre-feasibility work and bankable feasibility work including, if required, pilot
mining.
On April 22, 2004 the Company executed a Mineral Cooperation Agreement with the
Ministry of Lands Mines and Energy granting exploration rights over a licence in
western Liberia.
The Company acquired one Mineral Exploration Agreement ("MEA") licence on May
18, 2005, which is valid for five years over the Putu iron ore prospect in
eastern Liberia. During the year ending December 31, 2008 the licence rights
were extended until September 2010.
(i) Trans-Hex Joint Venture (KPO)
On June 6, 2002, the Company signed a heads of agreement for the creation of a
diamond exploration and development joint venture ("JV") in Liberia with Trans
Hex Group Limited ("THG") of South Africa. The full JV agreement was
subsequently signed on October 12, 2006.
During the year ended December 31, 2008, the decision was made to cease the
exploration JV with THG as it was not seen as an economic production site in the
current market. All deferred exploration costs incurred to date relating to this
project were impaired and charged to the income statement.
(ii)AAR Joint Venture
On March 23, 2005, the Company signed a Joint Venture ("JV") agreement with
African Aura Resources ("AAR") targeting diamonds over an area of 400 square
kilometres held by AAR in western Liberia.
During the year ended December 31, 2008, the decision was made to cease the
exploration JV with AAR as it was not seen as a feasible production site in the
current economic climate.
(b)Sierra Leone, West Africa
The Company holds multiple prospecting licences for diamonds and gold in Sierra
Leone. The licences are located throughout the eastern and northern provinces of
the country.
(i) Petra Diamonds Joint Venture (Kono /Nimini)
On September 10, 2004, the Company and Petra Diamonds ("Petra") entered into a
joint venture for the production of diamonds from the underground mining of
diamond-bearing kimberlite dykes (the "Lion" dykes) defined within Mano's three
contiguous licence areas (Yengema, Njaiama and Nimini South) in the Kono diamond
district ("Kono Licences") of Sierra Leone.
Under the terms of the agreement Petra has earned a 51% interest in Mano's 100%
owned subsidiary, Basama Diamonds Ltd., by spending $3M over three years.
From 1st January 2009 Stellar has elected to sole fund the Kono project for 2009
and will reinvest all diamond sales revenues in the continued development of the
project. At the end of 2009 the Company's joint venture partner Petra Diamonds
will have the option to reimburse Stellar 51% of the project costs to maintain
its 51% equity in the project, or dilute. The current technical team will remain
on the project and Petra will continue to offer technical advice as required.
(ii) Golden Star Joint Venture
On November 24, 2003, the Company signed a comprehensive letter of agreement
("LoA") with Golden Star Resources ("GSR"), which contains all the main terms of
a joint venture covering licence packages in Sierra Leone.
Under the terms of the LoA, GSR can earn a 51% interest in the gold rights of
the licences currently held by Mano through its subsidiary, Golden Leo Resources
Limited subject to GSR meeting set conditions including minimum expenditure
limits.
As at December 31, 2008 GSR have informed the Company they are near to meeting
the minimum expenditure limit required under stage three of the agreement for
the Sonfon Licence, at which point they will earn a 51% interest in the licence.
Within 120 days of completing stage three of the agreement on the Sonfon
licence GSR may elect to proceed to a feasibility study (FS). Mano then has the
right to elect to contribute pro-rata to the FS to retain a 49% interest. If
Mano decides not to elect to contribute GSR may sole fund the FS to earn a
further 14% interest, thereby taking its equity to 65%.
Upon completion of a positive FS on Sonfon GSR may elect to proceed to mine
development. Mano has the right to contribute pro rata to any mine development
to retain its 49% interest or dilute to either a 15% or 29% free carried
interest depending on its earlier elections to co-fund the feasibility study and
mine construction. Mano will also retain a 2% net smelter return royalty on
production in excess of the first 1M ounces of gold from each project.
GSR advised in 2007 that they were terminating both the Nimini and Pampana
licence from the agreement.
Under a separate agreement dated May 2002, the Sonfon licence was joint ventured
by the Company and its partner Minerva Resources PLC (Minerva) in a 50:50 joint
venture basis. Minerva retains a 50% interest in Mano's share of the project.
(c) Guinea, West Africa
The Mandala project is 100% owned by Stellar Diamonds and comprises three
kimberlite and two alluvial mining concessions in the south east of Guinea. The
Mandala alluvial licence comprises a 536,000 carat indicated and 144,000 carat
inferred diamond resource which is scheduled to be brought into production in
early 2009. Stellar has approved a $5.8M capital budget which includes a plant
with a head feed capacity of 100tons per hour and a 30tons per hour DMS diamond
recovery module. At optimum production levels the project could yield between
8,000 and 10,000 carats per month. Based on previous bulk sampling and
independent valuation the diamond value is estimated to be a minimum of $65 per
carat.
(d) Democratic Republic of Congo
BHP Billiton Joint Venture
On December 4, 2007, Stellar Diamonds Ltd. ("Stellar"), the Company's
subsidiary, signed a memorandum of understanding with BHP Billiton over
exploration licences in the north of the Democratic Republic of Congo.
In February 2009, an agreement was reached with BHP Billiton to terminate the
joint venture as it was not seen as a economically viable project.
11. Convertible Debentures
On September 27, 2007 the Company issued unsecured convertible debentures to
raise GBP2.3M ($4.6M). The convertible debentures are repayable on August 1,
2010 and bear interest at 9% per annum. The principal amount is convertible by
the holders into common shares of the Company (16,428,571) at a conversion price
of GBP0.14 pence per share at any time prior to maturity. If prior to the
maturity date, the daily volume weighted average trading price of the Company's
common shares on AIM, or such other stock exchange where the majority of the
Company's trading volume occurs, is greater than GBP0.182 pence per share (or
equivalent), for any period of 21 consecutive trading days, the Company shall
have the right at its sole option to provide notice to the holder and thereafter
the debentures will be automatically converted to common shares.
As the debentures are convertible into common shares at the option of the
holder, they have been accounted for in their component parts. The fair value of
the conversion option was determined to be $2,637,802 based on using the
Black-Scholes option pricing model with the following assumptions: no dividends
were paid, a weighted average volatility of the Company's share price of 172%, a
weighted average annual risk free rate of 4.64% and an expected life of three
years. The residual was allocated to the debt component and subsequently carried
at amortised cost using the effective interest rate of 44.1% to accrete the
liability to the value of the consideration received.
During the year ended December 31, 2008, the Company incurred interest expense
relating to the convertible debentures of $983,242 including the accretion of
the loan to its future value. Interest has been paid up to November 1, 2008 and
therefore an accrual of $49,928 is included at the year end. Included in the
income statement is $831,873 recognised as an unrealised foreign currency
exchange rate gain in the year to December 31, 2008, ($168,130 loss in 2007).
Below is a summary of the debt element of the convertible debenture
+----------------------------------------+--+--------------+--------------+
| | | December 31, | December 31, |
| | | 2008 | 2007 |
+----------------------------------------+--+--------------+--------------+
| | | $ | $ |
+----------------------------------------+--+--------------+--------------+
| | | | |
+----------------------------------------+--+--------------+--------------+
| Opening balance | | 2,260,738 | - |
+----------------------------------------+--+--------------+--------------+
| Subscription | | - | 2,092,608 |
+----------------------------------------+--+--------------+--------------+
| Fair value accretion | | 619,773 | - |
+----------------------------------------+--+--------------+--------------+
| Unrealised foreign currency exchange | | (831,873) | 168,130 |
| (gain)/loss | | | |
+----------------------------------------+--+--------------+--------------+
| Closing balance | | 2,048,638 | 2,260,738 |
+----------------------------------------+--+--------------+--------------+
| | | | |
+----------------------------------------+--+--------------+--------------+
12. Share capital
(a) Authorised
Unlimited number of common shares without par value.
(b) Issued
+----------+------+--+--+--+--+----------------------------+--+----------------+--+---------------+
| | | | | | | | Shares | | Amount |
+-----------------+--+--+--+--+----------------------------+--+----------------+--+---------------+
| | | | | | | | $ | | $ |
+-----------------+--+--+--+--+----------------------------+--+----------------+--+---------------+
| | | | | | | | | | |
+-----------------+--+--+--+--+----------------------------+--+----------------+--+---------------+
| Balance at January 31, 2005 | | 213,405,818 | | 21,461,793 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Shares issued on private placement (net of | | | | |
+----------------------------------------------------------+--+----------------+--+---------------+
| | costs) | | | | 40,000,000 | | 7,180,800 |
+----------+---------------+--+----------------------------+--+----------------+--+---------------+
| Shares issued on exercise of warrants | | 12,500 | | 894 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Balance at January 31, 2006 | | 253,418,318 | | 28,643,487 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Shares issued on private placement (net of | | | | |
+----------------------------------------------------------+--+----------------+--+---------------+
| | share issue costs) | | 39,562,500 | | 5,502,741 |
+----------+-----------------------------------------------+--+----------------+--+---------------+
| Shares issued on exercise of stock options | | 140,000 | | 12,050 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Balance at January 31, 2007 | | 293,120,818 | | 34,158,278 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Shares issued on exercise of stock options | | 4,690,000 | | 437,836 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Balance at December 31, 2007 | | 297,810,818 | | 34,596,114 |
+----------------------------------------------------------+--+----------------+--+---------------+
| Shares issued on private placement (net of share issue | | 20,000,000 | | 3,367,010 |
| costs) on May 29, 2008 | | | | |
+----------------------------------------------------------+--+----------------+--+---------------+
| Balance at December 31, 2008 | | 317,810,818 | | 37,963,124 |
+----------------------------------------------------------+--+----------------+--+---------------+
| | | | | | | | | | |
+----------+------+--+--+--+--+----------------------------+--+----------------+--+---------------+
During the year ended December 31, 2008:
(i) On May 29, 2008 the Company completed a private placement of 20,000,000
common shares with a wholly owned subsidiary of Severstal, a leading Russian
steel and natural resources company, at GBP0.10p ($0.20) each for gross proceeds
of GBP2,000,000 ($4,000,000). Associated costs charged to shareholders equity
amounted to $84,990. In addition, 20,000,000 warrants were granted at an
exercise price of GBP0.14p, which are exercisable at any time over a period of
18 months from the completion of the private placement. Prior to the exercise of
all the warrants, Severstal's holding in Mano is 6.29% and would increase to
11.84% (assuming no further issuances of common shares prior to that time) and
provide the Company with a further GBP2,800,000 in financing (equivalent to
$5.1M) if the warrants were exercised. As required under Canadian generally
accepted accounting principles the consideration received was allocated to share
capital and the warrant reserve. Based on the share price at the date of issue
of GBP0.0863 pence $3,367,010 was allocated to share capital, while the
remaining $548,000 was allocated to a warrant reserve within shareholders'
equity.
During the eleven month period ended December 31, 2007:
(i) The Company issued 2,000,000 common shares on exercise of stock options at
a price of Cdn$0.11 per share and 100,000 common shares at a price of Cdn$0.10
per share. Cash proceeds of $198,276 for exercise of these stock options were
received by the Company on January 31, 2007 and recorded as subscriptions under
shareholders' equity.
(ii) 590,000 stock options were exercised at a price of CDN$0.10 per share
and 15,000 options expired unexercised; and 2,000,000 stock options were
exercised at a price of Cdn$0.11 per share and 1,000,000 options expired
unexercised. Total option exercise proceeds were $239,560.
(c)Issued shares in Stellar Diamonds
On March 31, 2008, 2,375,000 common shares of Stellar Diamonds Ltd. Mano's
majority owned subsidiary, were issued at GBP1 each for gross proceeds of
GBP2,375,000 ($4,724,571). Associated costs charged to shareholders equity
amounted to $34,326. All other professional fees incurred on the postponed AIM
listing of Stellar Diamonds Ltd. during the period, have been charged to the
consolidated statement of income/(loss). On December 19, 2008, 15,567,675 common
shares of Stellar Diamonds Ltd, were issued at GBP0.20 pence each for gross
proceeds of GBP3,113,535 ($4,802,208). In addition Stellar settled debt of
GBP622,356 ($1,194,766) through the issue of 3,111,781 shares at the same price
of 20 pence per share. In addition
18,679,456 warrants were granted by
Stellar on December 19, 2008 at an exercise price of GBP0.25 pence, which are
exercisable at any time over a period of 18 months.
(d) Stock options in Company
A summary of the status of the Company's stock option plan as at December 31,
2008 and December 31, 2007 and changes during the periods then ended are as
follows:
+------------------------+------------+--------------------------------------------+-------------+----------+
| | | Dec. 31, | | Dec.31, |
| | | 2008 | | 2007 |
+------------------------+------------+--------------------------------------------+-------------+----------+
| | Number | Weighted | Number |Weighted |
| | of | average | of | average |
| | options | exercise | options |exercise |
| | | price | | price |
| | | per share | | per |
| | | | | share |
+------------------------+------------+--------------------------------------------+-------------+----------+
| | | Cdn$ | | Cdn$ |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Balance outstanding | 9,900,000 | 0.21 | 14,980,000 | 0.16 |
| and | | | | |
| exercisable, beginning | | | | |
| of period | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Activity | 9,045,000 | 0.20 | 900,000 | 0.23 |
| during the | | | | |
| period | | | | |
| Options | | | | |
| granted | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | - | - | (4,000,000) | 0.11 |
| exercised | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | - | - | (690,000) | 0.10 |
| exercised | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | (905,000) | 0.10 | (1,000,000) | 0.11 |
| expired | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | - | - | (225,000) | 0.23 |
| expired | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | - | - | (50,000) | 0.24 |
| expired | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Options | - | - | (15,000) | 0.10 |
| expired | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
| Balance outstanding | 18,040,000 | 0.21 | 9,900,000 | 0.21 |
| and | | | | |
| exercisable, end of | | | | |
| period | | | | |
+------------------------+------------+--------------------------------------------+-------------+----------+
The fair value of the stock option granted in the year was determined to be
$985,591 based on using the Black-Scholes option pricing model with the
following assumptions: no dividends were paid, a weighted average volatility of
the Company's share price of 73.9% (based on the weighted average volatility
from both AIM and TSX listings), a weighted average annual risk free rate of
3.50% and an expected life of five years. The remainder of the stock option
charge of $1,455,625 arises from stock options issued by Stellar (note 12(e)).
As at December 31, 2008 the following stock options were outstanding:
+-----------------+-+--------------+-+---------------+
| Number of | | | | |
+-----------------+-+--------------+-+---------------+
| stock options | | Exercise | | |
| | | price | | |
+-----------------+-+--------------+-+---------------+
| Outstanding | | per share | | Expiry date |
+-----------------+-+--------------+-+---------------+
| | | Cdn$ | | |
+-----------------+-+--------------+-+---------------+
| 2,720,000 | | 0.240 | | March 23, |
| | | | | 2009 |
+-----------------+-+--------------+-+---------------+
| 2,620,000 | | 0.215 | | July 25, 2010 |
+-----------------+-+--------------+-+---------------+
| 2,755,000 | | 0.230 | | July 31, 2011 |
+-----------------+-+--------------+-+---------------+
| 600,000 | | 0.230 | | March 16,2012 |
+-----------------+-+--------------+-+---------------+
| 300,000 | | 0.230 | | May 20, 2012 |
+-----------------+-+--------------+-+---------------+
| 9,045,000 | | 0.200 | | January 17, |
| | | | | 2013 |
+-----------------+-+--------------+-+---------------+
| 18,040,000 | | | | |
+-----------------+-+--------------+-+---------------+
| | | | | |
+-----------------+-+--------------+-+---------------+
(e) Stock options in subsidiaries
The following is a summary of the stock option plan for the Company's majority
held subsidiary Stellar Diamonds Ltd, as at December 31, 2008 and December 31,
2007 and changes during the periods then ended are as follows:
+------------------------+-----------+----------------------------------------------+-----------+----------+
| | | Dec. 31, | | Dec.31, |
| | | 2008 | | 2007 |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| | Number | Weighted | Number |Weighted |
| | of | average | of | average |
| | options | exercise | options |exercise |
| | | price | | price |
| | | per share | | per |
| | | | | share |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| | | GBPGBP | | GBPGBP |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| Balance outstanding | 2,600,000 | 0.87 | - | - |
| and | | | | |
| exercisable, beginning | | | | |
| of period | | | | |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| Activity during the | | | | |
| period | | | | |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| Options | 400,000 | 1.00 | 2,600,000 | 0.87 |
| granted | | | | |
+------------------------+-----------+----------------------------------------------+-----------+----------+
| Balance outstanding | 3,000,000 | 0.89 | 2,600,000 | 0.87 |
| and | | | | |
| exercisable, end of | | | | |
| period | | | | |
+------------------------+-----------+----------------------------------------------+-----------+----------+
As at December 31, 2008 the following stock options were outstanding:
+-----------------+-+-------------+--+---------------+
| Number of | | | | |
+-----------------+-+-------------+--+---------------+
| stock options | | Exercise | | |
| | | price | | |
+-----------------+-+-------------+--+---------------+
| Outstanding | | per share | | Expiry date |
+-----------------+-+-------------+--+---------------+
| | | GBPGBP | | |
+-----------------+-+-------------+--+---------------+
| 2,600,000 | | 0.87 | | March 26, |
| | | | | 2013 |
+-----------------+-+-------------+--+---------------+
| 400,000 | | 1.00 | | April 21, |
| | | | | 2013 |
+-----------------+-+-------------+--+---------------+
| 3,000,000 | | | | |
+-----------------+-+-------------+--+---------------+
The options issued by Stellar have resulted in a charge to the Income Statement
of $470,035 ($1,863,884 in 2007) based on using the Black-Scholes option pricing
model with the following assumptions: no dividends were paid, a weighted average
volatility of the Company's share price of 76.0% (based on the weighted average
volatility from peer company listings), a weighted average annual risk free rate
of 2.370% and an expected life of five years.
(f)Share purchase warrants
As at December 31, 2008, 20,000,000 warrants were outstanding at an exercise
price of GBP0.14 pence with an expiry date of November 29, 2009. These warrants
were granted to Severstal as part of the private placement completed on May 29,
2008.
13. Income taxes
The provision for income taxes reported differs from the amounts computed by
applying the cumulative Canadian federal and provincial income tax rates to the
loss before tax provision due to the following:
+-----------------------------------------+--+----------------+--------------+
| | | December 31, | December 31, |
+-----------------------------------------+--+----------------+--------------+
| | | 2008 | 2007 |
+-----------------------------------------+--+----------------+--------------+
| | | $ | $ |
+-----------------------------------------+--+----------------+--------------+
| Statutory tax rate | | 31.00% | 34.12% |
+-----------------------------------------+--+----------------+--------------+
| Expected income tax (recovery)/expense | | (690,877) | 629,031 |
+-----------------------------------------+--+----------------+--------------+
| Foreign income taxes at other then CDN | | 2,321,838 | 953,012 |
| statutory rate | | | |
+-----------------------------------------+--+----------------+--------------+
| Non-deductible stock based compensation | | 451,244 | 64,829 |
+-----------------------------------------+--+----------------+--------------+
| Non-deductible interest | | 304,805 | - |
+-----------------------------------------+--+----------------+--------------+
| Non-taxable gain on convertible debt | | (257,881) | 57,366 |
+-----------------------------------------+--+----------------+--------------+
| Non-taxable dilution gain on shares | | (2,218,969) | (2,117,380) |
| issued | | | |
| by subsidiary company | | | |
+-----------------------------------------+--+----------------+--------------+
| Non-taxable portion of gain on sale of | | (1,203,249) | - |
| assets | | | |
+-----------------------------------------+--+----------------+--------------+
| Benefit of previously unrecognized tax | | 1,293,089 | 413,142 |
| pools | | | |
+-----------------------------------------+--+----------------+--------------+
| Tax losses not recognized in the in the | | - | - |
| period the benefit arose | | | |
+-----------------------------------------+--+----------------+--------------+
| | | - | - |
+-----------------------------------------+--+----------------+--------------+
The approximate tax effect of each type of temporary difference that gives rise
to the Company's future tax assets are as follows:
+------------------------------------------+--+---------------+--------------+
| | | December 31, | December 31, |
+------------------------------------------+--+---------------+--------------+
| | | 2008 | 2007 |
+------------------------------------------+--+---------------+--------------+
| | | $ | $ |
+------------------------------------------+--+---------------+--------------+
| Operating loss carryforwards | | 1,920,000 | 1,597,571 |
+------------------------------------------+--+---------------+--------------+
| Non-remitted taxable gain | | (1,203,249) | - |
+------------------------------------------+--+---------------+--------------+
| | | | |
+------------------------------------------+--+---------------+--------------+
| Less: Valuation allowance | | (716,751) | (1,597,571) |
+------------------------------------------+--+---------------+--------------+
The Company evaluates its valuation allowance requirements based on projected
future operations. When circumstances change and this causes a change in
management's judgment about the recoverability of future tax assets, the impact
of the change on the valuation allowance is reflected in current income. As
management of the Corporation does not currently believe that it is more likely
than not that the Corporation will receive the benefit of this asset, a
valuation allowance equal to the future tax asset has been established at both
December 31, 2008 and December 31, 2007.
At December 31, 2008, the Company had the following estimated loss carry
forwards available for tax purposes:
+------------------------------------------+--+---------------+--------------+
| | | Amount | Expiry |
+------------------------------------------+--+---------------+--------------+
| | | $ | |
+------------------------------------------+--+---------------+--------------+
| | | | |
+------------------------------------------+--+---------------+--------------+
| Canada | | 6,200,000 | 2009-2028 |
+------------------------------------------+--+---------------+--------------+
These consolidated financial statements do not reflect the potential effect on
future income taxes of the application of these losses.
14. Related party transactions
The following table summarises the Company's related party transactions for the
period:
+---------------------------------------+--+---------------+----------------+
| | | December 31, | December 31, |
+---------------------------------------+--+---------------+----------------+
| | | 2008 | 2007 |
+---------------------------------------+--+---------------+----------------+
| | | $ | $ |
+---------------------------------------+--+---------------+----------------+
| Incurred management service fees with | | 150,000 | 95,000 |
| a company related by a director in | | | |
| common | | | |
+---------------------------------------+--+---------------+----------------+
| Incurred management fees by directors | | 774,805 | 188,753 |
+---------------------------------------+--+---------------+----------------+
| Incurred directors fees | | 297,356 | 119,789 |
+---------------------------------------+--+---------------+----------------+
| Incurred professional fees and | | 83,818 | - |
| consultancy services by a director | | | |
+---------------------------------------+--+---------------+----------------+
| | | 1,305,979 | 403,542 |
+---------------------------------------+--+---------------+----------------+
These transactions are in the normal course of operations. A portion of the
management fees have been capitalised within the deferred exploration costs.
At the end of the year, the amounts due to related entities are as follows:
+---------------------------------------+--+---------------+----------------+
| | | December 31, | December 31, |
+---------------------------------------+--+---------------+----------------+
| | | 2008 | 2007 |
+---------------------------------------+--+---------------+----------------+
| | | $ | $ |
+---------------------------------------+--+---------------+----------------+
| Directors' companies | | - | 154,414 |
+---------------------------------------+--+---------------+----------------+
| Various directors | | 142,004 | 19,953 |
+---------------------------------------+--+---------------+----------------+
| | | 142,004 | 174,367 |
+---------------------------------------+--+---------------+----------------+
These balances are payable on demand and have arisen from the provision of
services rendered as set out above.
Amount due to/from related parties are settled through the course of the
operating working capital cycle. Due to the short term nature of the amounts
outstanding the fair value approximates to the carrying amount.
15. Non-controlling interest and dilutive gains
The non-controlling interest held in the Company's subsidiaries are:
+------------------+------------+-------------+-------------+--------------+-----------+
| Stellar Diamonds | Mano | Non | Carrying |December 31, | December |
| Ltd. |Ownership |Controlling | value | 2008 | 31, 2007 |
| African Iron Ore | % | Interest | of net | | |
| Group | | % | equity | $ | $ |
| | 59.6 | | | | |
| | - | 40.4 | $ | 9,011,297 |6,801,312 |
| | | - | | - | 346,005 |
| | | | 22,361,888 | | |
| | | | - | | |
+------------------+------------+-------------+-------------+--------------+-----------+
| | | | | 9,011,297 |7,147,317 |
+------------------+------------+-------------+-------------+--------------+-----------+
In 2007, the Company transferred its diamond properties which had a book value
of $8,276,081 to Stellar in exchange for 19,239,541 shares in Stellar. The
exchange was recorded at book value as it was a transaction between companies
under common control. In 2007, Stellar completed two private placements in order
to raise funds to finance the development of its diamond interests. In the first
placement 1,211,890 shares were issued at an effective price of GBP0.87 pence
per share. 918,484 of those shares were issued for cash consideration, raising
proceeds of GBP800,000 ($1,571,438), while the remaining 293,406 shares were
issued to the subscribers in consideration for forfeiture of certain benefits as
a result of the diamond reorganisation. In the second placement 4,822,044 shares
were issued at a price of GBP0.871 pence per share for proceeds of GBP4,200,000
($8,611,361). In addition, Stellar issued 2,411,022 warrants with a two year
term and an exercise price of GBP1.20 per share as well as 260,390 adviser's
options with a two year term and an exercise price of GBP0.871 pence per share.
As a result of these shares issuances by Stellar, the Company recorded a
dilution gain of $6,207,005 in the year ended December 31, 2007.
On March
31, 2008 Stellar issued 2,375,000 shares at a price of GBP1 per share for gross
proceeds of GBP2,375,000 ($4,724,571). On December 19 2008, Stellar issued a
further 15,567,675 shares at a price of GBP0.20 pence per share for gross
proceeds of GBP3,113,535 ($4,802,208). Mano purchased 6,920,000 of these shares
for GBP1,384,044 ($2,134,701). At the same time Stellar settled debt of
GBP622,356 ($1,194,766) owing to Mano through the issue of 3,111,781 shares at a
price of GBP0.20 pence per share. As a result of these share issues, the Company
recorded a dilution gain of $1,231,793.
Gains on shares issued by
affiliated companies arise when the ownership interest of the Company in a
controlled entity is diluted as a result of shares issuances of the investee
company. The Company does not receive any cash proceeds in these transactions.
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | December 31, | December 31, |
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | 2008 | 2007 |
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | $ | $ |
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | | |
+----------------------------------------+--+--+--+--------------+--------------+
| Dilutive gains on shares issued in | | | | 1,231,793 | 6,207,005 |
| Stellar Diamonds Ltd | | | | | |
+----------------------------------------+--+--+--+--------------+--------------+
| Dilutive gains on shares issued in | | | | 5,926,171 | - |
| Severstal Liberia Iron Ore Ltd | | | | | |
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | 7,157,964 | 6,207,005 |
+----------------------------------------+--+--+--+--------------+--------------+
| | | | | | |
+----------------------------------------+--+--+--+--------------+--------------+
16. Provision for impairment
The Company reviews the carrying values of its mineral property interests
whenever events or changes in circumstances indicate that the carrying value of
the assets may exceed the estimated net recoverable amounts. An asset's carrying
value is written down when the carrying value is not recoverable and exceeds its
fair value. Impairment reviews for deferred exploration and acquisition costs
are carried out on a project by project basis, with each project representing a
potential single cash generating unit. An impairment review is undertaken when
indicators of impairment arise but typically when one of the following
circumstances apply:
(i) title to the asset is compromised;
(ii) variations in metal prices that render the project uneconomic; and
(iii) unexpected geological occurrences that render the resource uneconomic.
Where estimates of future cash flows are not available and where other factors
suggest impairment, management assesses if the carrying value is recoverable and
records an impairment if so indicated. The impairment review undertaken during
the year identified certain projects that were considered uneconomic and were
written off and those projects where there was a reasonable probability that the
carrying value of the project exceeded its fair value. The total impairment
charge recorded in the Income/(Loss) Statement during 2008 is $11,250,591. This
relates to the following projects:
+----------------------+--------------------+--------------------+--------------------+--------------------+
| | Country | Carrying value | Impairment in the | Revised carrying |
| | | | Income Statement | value |
+----------------------+--------------------+--------------------+--------------------+--------------------+
| | | $ | $ | $ |
+----------------------+--------------------+--------------------+--------------------+--------------------+
| Acquisition Costs | Liberia | 320,000 | 110,000 | 210,000 |
+ +--------------------+--------------------+--------------------+--------------------+
| | Sierra Leone | 1,695,000 | 508,500 | 1,186,500 |
+ +----------------------+--------------------+--------------------+--------------------+
| | Guinea | 6,873,592 | 1,940,000 | 4,933,592 |
+ +----------------------+--------------------+--------------------+--------------------+
| | Total | 8,888,592 | 2,558,500 | 6,330,092 |
+----------------------+----------------------+--------------------+--------------------+--------------------+
| | | | | |
+----------------------+--------------------+--------------------+--------------------+--------------------+
| Deferred Exploration | Liberia | 21,785,684 | 7,191,984 | 14,593,700 |
| Costs | | | | |
+ +--------------------+--------------------+--------------------+--------------------+
| | Sierra Leone | 10,454,776 | 467,416 | 9,987,360 |
+ +----------------------+--------------------+--------------------+--------------------+
| | Guinea | 4,344,039 | 2,038,684 | 2,305,355 |
+ +----------------------+--------------------+--------------------+--------------------+
| | DRC | 508,859 | 78,832 | 430,027 |
+ +----------------------+--------------------+--------------------+--------------------+
| | Total | 37,093,358 | 9,776,916 | 27,316,442 |
+----------------------+----------------------+--------------------+--------------------+--------------------+
| | | | | |
+----------------------+--------------------+--------------------+--------------------+--------------------+
| Recovery relating to sale of Stellar | (1,084,825) | (1,084,825) | - |
| mineral property | | | |
+-------------------------------------------+--------------------+--------------------+--------------------+
| | | | | |
+----------------------+--------------------+--------------------+--------------------+--------------------+
| | | 44,897,125 | 11,250,591 | 33,646,534 |
+----------------------+--------------------+--------------------+--------------------+--------------------+
The total impairment charge recorded in the Income/(Loss) Statement is
$11,250,591. This relates to the following projects:
+--------------------+----------+------------+--------------+-------------+---------------+
| Project Name | Project |Geographic | Acquisition | Deferred | Total |
| | Type | Segment | Costs |Exploration | |
| | | | Impaired |Expenditure | |
| | | | | Impaired | |
+--------------------+----------+------------+--------------+-------------+---------------+
| | | | $ | $ | $ |
+--------------------+----------+------------+--------------+-------------+---------------+
| MCA | Diamond | Liberia | - | 3,625,594 | 3,625,594 |
+--------------------+----------+------------+--------------+-------------+---------------+
| Lab | Diamond | Liberia | - | 314,401 | 314,401 |
+--------------------+----------+------------+--------------+-------------+---------------+
| KPO | Diamond | Liberia | 110,000 | 2,822,916 | 2,932,916 |
+--------------------+----------+------------+--------------+-------------+---------------+
| AAR | Diamond | Liberia | - | 429,072 | 429,072 |
+--------------------+----------+------------+--------------+-------------+---------------+
| Pampana Gold | Gold | Sierra | 508,500 | 361,661 | 870,161 |
| | | Leone | | | |
+--------------------+----------+------------+--------------+-------------+---------------+
| Zimmi - Gorahun | Diamond | Sierra | - | 105,756 | 105,756 |
| | | Leone | | | |
+--------------------+----------+------------+--------------+-------------+---------------+
| Missamana/Gueliban | Gold | Guinea | 1,940,000 | 1,992,184 | 3,932,184 |
+--------------------+----------+------------+--------------+-------------+---------------+
| Guinea Iron Ore | Iron Ore | Guinea | - | 46,500 | 46,500 |
+--------------------+----------+------------+--------------+-------------+---------------+
| Socerdemi | Diamond | DRC | - | 78,832 | 78,832 |
+--------------------+----------+------------+--------------+-------------+---------------+
| Recovery relating to sale | | | (1,084,825) | (1,084,825) |
| of Stellar mineral property | | | | |
+-------------------------------+------------+--------------+-------------+---------------+
| | | | 2,558,500 | 8,692,091 | 11,250,591 |
+--------------------+----------+------------+--------------+-------------+---------------+
Some of the projects that remain and have not been impaired are early stage
speculative mining projects, the carrying value of these is not supported by
future estimated cash flows but management do not believe there to be any
indication of impairment.
17. Segmented information
(a) Industry information
The Company operates in one reportable operating segment, being the acquisition
and exploration and development of resource properties.
(b) Geographic information
Revenues from operations in the year ended December 31, 2008 were derived from
interest income of which $408 (December 31, 2007 - $3,951) was earned in Canada
and $74,075 (December 31, 2007 - $144,090) was earned in the United Kingdom.
The Company's non-current assets by geographic location are as follows:
+----------------------------------+-------------------+--------------+
| | December 31, | December 31, |
+----------------------------------+-------------------+--------------+
| | 2008 | 2007 |
+----------------------------------+-------------------+--------------+
| | $ | $ |
+----------------------------------+-------------------+--------------+
| Liberia | 22,909,175 | 21,012,147 |
+----------------------------------+-------------------+--------------+
| Sierra Leone | 11,179,235 | 8,875,829 |
+----------------------------------+-------------------+--------------+
| Guinea | 11,089,990 | 11,024,052 |
+----------------------------------+-------------------+--------------+
| Democratic Republic of Congo | 458,097 | 80,824 |
+----------------------------------+-------------------+--------------+
| United Kingdom | 745 | - |
+----------------------------------+-------------------+--------------+
| | 45,637,242 | 40,992,852 |
+----------------------------------+-------------------+--------------+
Additional geographic information is provided in note 9 and 16
18. Financial instruments and financial risk management
The Company's financial assets and liabilities are cash, amounts receivable,
accounts payable and accrued liabilities, due to related parties and convertible
debenture. The fair values of these financial instruments are estimated to
approximate their carrying values due to their immediate or short-term nature.
Due to the nature of the Company's operations, there is no significant credit or
interest rate risk.
The carrying amounts for the financial instruments are as follows:
+--------------------------------------------+--+--------------+--------------+
| | | December 31, | December 31, |
+--------------------------------------------+--+--------------+--------------+
| | | 2008 | 2007 |
+--------------------------------------------+--+--------------+--------------+
| | | $ | $ |
+--------------------------------------------+--+--------------+--------------+
| Financial Assets: | | | |
+--------------------------------------------+--+--------------+--------------+
| Loans and receivables, measured at | | | |
| amortised cost | | | |
+--------------------------------------------+--+--------------+--------------+
| Cash | | 8,887,906 | 4,100,187 |
+--------------------------------------------+--+--------------+--------------+
| Amounts receivable | | 207,044 | 296,591 |
+--------------------------------------------+--+--------------+--------------+
| | | 9,094,950 | 4,396,778 |
+--------------------------------------------+--+--------------+--------------+
| Financial Liabilities: | | | |
+--------------------------------------------+--+--------------+--------------+
| Other liabilities, measured at amortised | | | |
| cost | | | |
+--------------------------------------------+--+--------------+--------------+
| Accounts payable and accrued | | 1,148,659 | 1,010,169 |
| liabilities | | | |
+--------------------------------------------+--+--------------+--------------+
| Due to related parties | | 149,660 | 174,367 |
+--------------------------------------------+--+--------------+--------------+
| Convertible debenture | | 2,048,638 | 2,260,738 |
+--------------------------------------------+--+--------------+--------------+
| | | 3,346,957 | 3,445,274 |
+--------------------------------------------+--+--------------+--------------+
| | | | |
+--------------------------------------------+--+--------------+--------------+
In the normal course of its operations, the Company is exposed to currency,
interest rate, liquidity and credit risk.
Foreign currency risk
In the normal course of business, the Company enters into transactions
denominated in foreign currencies (primarily Pound Sterling, Canadian Dollars
and Euros). As a result, the Company is subject to exposure from fluctuations in
foreign currency exchange rates. In general, the Company does not enter into
derivatives to manage these currency risks. The Company attempts to reduce its
exposure to currency risk by entering into contracts denominated in US Dollars
whenever possible. The Company has taken no other action to reduce its exposure
to foreign currency risk during 2008. In 2009, the Board decided to enter into
currency forward contracts to hedge part of its exposure to the UK pound.
+----------------------------------------------+--------------+--------------+
| | December 31, | December 31, |
+----------------------------------------------+--------------+--------------+
| Carrying value of foreign currency balances | 2008 | 2007 |
+----------------------------------------------+--------------+--------------+
| | $ | $ |
+----------------------------------------------+--------------+--------------+
| Cash and cash equivalents, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 1,236,356 | 3,715,232 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 15,233 | 5,821 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Amounts receivable, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 194,498 | 27,730 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 5,871 | 9.480 |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Amounts payable and accrued liabilities, | | |
| include balance denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 498,147 | 85,273 |
+----------------------------------------------+--------------+--------------+
| Canadian Dollar (CAD) | 54,277 | 147,873 |
+----------------------------------------------+--------------+--------------+
| Euro (EUR) | 15,752 | - |
+----------------------------------------------+--------------+--------------+
| | | |
+----------------------------------------------+--------------+--------------+
| Convertible debenture, include balance | | |
| denominated in: | | |
+----------------------------------------------+--------------+--------------+
| Pound Sterling (GBP) | 2,048,638 | 2,260,738 |
+----------------------------------------------+--------------+--------------+
+--------------------------------------------+--+--------------+---------------+
| | | Closing | Effect on |
| | | Exchange | net assets |
| | | Rate | of USD |
| | | | strengthening |
| | | | 10% |
+--------------------------------------------+--+--------------+---------------+
| | | | $ |
+--------------------------------------------+--+--------------+---------------+
| At December 31, 2008 | | | |
+--------------------------------------------+--+--------------+---------------+
| Pound Sterling (GBP) | | 0.6910 | 111,593 |
+--------------------------------------------+--+--------------+---------------+
| Canadian Dollar (CAD) | | 1.2228 | 3,317 |
+--------------------------------------------+--+--------------+---------------+
| Euro (EUR) | | 0.7095 | 1,575 |
+--------------------------------------------+--+--------------+---------------+
| | | | |
+--------------------------------------------+--+--------------+---------------+
| At December 31, 2007 | | | |
+--------------------------------------------+--+--------------+---------------+
| Pound Sterling (GBP) | | 0.5009 | (139,695) |
+--------------------------------------------+--+--------------+---------------+
| Canadian Dollar (CAD) | | 0.9820 | 13,257 |
+--------------------------------------------+--+--------------+---------------+
| Euro (EUR) | | 0.6794 | - |
+--------------------------------------------+--+--------------+---------------+
| | | | |
+--------------------------------------------+--+--------------+---------------+
The sensitivities are based on financial assets and liabilities held at 31
December 2008 where balances were not denominated in the functional currency of
the Company. The sensitivities do not take into account the Company's income and
expenses and the results of the sensitivities could change due to other factors
such as changes in the value of financial assets and liabilities as a result of
non-foreign exchange influenced factors.
Interest rate and liquidity risk
Fluctuations in interest rates impact on the value of short term cash
investments and interest payable on financing activities (including long term
loans), giving rise to interest rate risk. The Company has in the past been able
to actively source financing through public offerings, corporate dealings or
issuing fixed rate convertible debentures. This cash is managed to ensure
surplus funds are invested in a manner to achieve maximum returns while
minimising risks. In the ordinary course of business, the Company is required to
fund working capital and capital expenditure requirements. The Company
generally enters into variable interest bearing borrowings. The Company
typically holds financial assets with a maturity of less than 30 days to ensure
adequate liquidity and flexibility. The maturity of the debt instruments has
been set out in note 11.
Due to the short maturity of the financial assets and the fixed rate of interest
on the convertible debenture, if interest rates were to double, it would have an
insignificant impact on the Company's financial performance.
The Company ensures that its liquidity risk is mitigated by placing financial
assets on short term maturity, thus all financial liabilities are met as they
become due:
+---------------------------+--+-------------+------------+------------+-------------+
| | | Within | 30 days - |6 months - | 1 year - |
+---------------------------+--+-------------+------------+------------+-------------+
| | | 30 days | 6 months | 1 year | 5 years |
+---------------------------+--+-------------+------------+------------+-------------+
| | | $ | $ | $ | $ |
+---------------------------+--+-------------+------------+------------+-------------+
| Cash and cash equivalents | | 8,877,906 | - | - | - |
+---------------------------+--+-------------+------------+------------+-------------+
| Accounts receivable | | 207,044 | - | - | - |
+---------------------------+--+-------------+------------+------------+-------------+
| Accounts payable and | | (1,148,659) | - | - | - |
| accrued liabilities | | | | | |
+---------------------------+--+-------------+------------+------------+-------------+
| Due to related parties | | (149,660) | - | - | - |
+---------------------------+--+-------------+------------+------------+-------------+
| Due to joint venture | | (106,603) | - | (717,640) | - |
| partners | | | | | |
+---------------------------+--+-------------+------------+------------+-------------+
| Convertible debenture | | - | (149,783) | (149,783) | (3,553,183) |
+---------------------------+--+-------------+------------+------------+-------------+
| Net Liquidity | | 7,680,028 | (149,783) | (867,423) | (3,553,183) |
+---------------------------+--+-------------+------------+------------+-------------+
| | | | | | |
+---------------------------+--+-------------+------------+------------+-------------+
As disclosed in note 5 the Company anticipates the completion of the SPSA with
Severstal in December 2010, which would result in $4.2M cash received.
Credit risk
The Company's credit risk exposure is solely in connection with the cash and
cash equivalents held with financial institutions. The Company manages its risk
by holding surplus funds in high credit worthy financial institution and
maintains minimum balances with financial institutions in remote locations.
+------------------------------------------+--+--------------+---------------+
| | | December 31, | December 31, |
+------------------------------------------+--+--------------+---------------+
| | | 2008 | 2007 |
+------------------------------------------+--+--------------+---------------+
| | | $ | $ |
+------------------------------------------+--+--------------+---------------+
| Financial institution with S&P AA- | | 8,743,602 | 3,729,700 |
| rating or higher | | | |
+------------------------------------------+--+--------------+---------------+
| Financial institutions un-rated or | | 134,304 | 370,487 |
| unknown rating | | | |
+------------------------------------------+--+--------------+---------------+
| | | 8,877,906 | 4,100,187 |
+------------------------------------------+--+--------------+---------------+
19.Capital risk management
The Company's objectives when managing capital is to maintain its ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to ensure sufficient resources are available
to meet day to day operating requirements.
The Company's Board of Directors takes full responsibility for managing the
Company's capital and does so through board meetings, review of financial
information, and regular communication with Officers and senior management.
In order to maximise ongoing development efforts, the company does not pay out
dividends.
The Company's investment policy is to invest its cash in deposits with high
credit worthy financial institutions with short term maturity.
The Company expects its current capital resources will be sufficient to carry
out its plans and operations through its current operating period.
The Company is not subject to externally imposed capital requirements and there
has been no change in the overall capital risk management as at 31 December
2008.
20. Subsequent Events
On January 19, 2009, the Company granted incentive
stock options to certain directors, employees and consultants to purchase up to
an aggregate of 5,200,000 common shares in the Company exercisable for a period
of five years at a price of Cdn$0.035 per share.
On April 15, 2009, the Company announced a proposed business combination with
African Aura Resources Ltd. Mano will offer 1.57 Mano shares for every one
African Aura share in order to acquire the entire issued share capital of
African Aura. The obligation of Mano and African Aura to enter into the broader
agreement is subject to certain conditions being met, including the approval of
the TSX-V and satisfactory completion of due diligence.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR CKKKBBBKDBQN
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