Annual Report • Sep 1, 2010
Annual Report
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IGE Resources AB (Publ)
WWW.IGE.SE
| IGE Resources AB (Publ) | 4 |
|---|---|
| The Group Structure | 6 |
| A Message from the Chief Executive Officer | 8 |
| Snapshot of 2009 Results | 9 |
| Five Year Summary – Group | 10 |
| The acquisition of the activities of Pangea DiamondFeilds | 12 |
| IGE Diamond AB | 16 |
| IGE Nordic | 20 |
| IGE Africa | 24 |
| Table of key projects within the IGE Group | 26 |
| Commodity Outlook | 28 |
| Diamonds | 29 |
| Nickel | 31 |
| Gold | 32 |
| The operations in brief | 34 |
| Corporate Governance | 38 |
| Environment | 42 |
| Corporate Social Responsibility | 43 |
| The Share | 44 |
|---|---|
| Administration's report | 47 |
| Income statement - Group | 52 |
| Statement of comprehensive income - Group | 52 |
| Balance sheet - Group | 53 |
| Changes in Equity - Group | 54 |
| Cash flow statement - Group | 55 |
| Income statement – Parent company | 56 |
| Balance sheet – Parent company | 57 |
| Changes in Equity – Parent Company | 58 |
| Cash flow statement – Parent company | 59 |
| Notes | 60 |
| Auditors report | 82 |
| Board of Directors | 84 |
| Group Management | 86 |
| Glossary | 88 |
| Contact info | 89 |
IGE Resources AB ("IGE" or the "Group" or the "Company") is a Swedish exploration and mining group with activities in Angola, Sweden and Kenya. Its main activities revolve around diamonds, but gold and nickel are also a part of IGE's strategic assets. The Group has a portfolio of licences with development potential for base and/or precious metals and diamonds.
IGE's headquarters are located in Stockholm. Its shares are listed on the Oslo Stock Exchange.
Our vision is to reinvest the returns from responsible, smallscale mining into great discoveries with reward potential.
IGE is an exploration and mining company focusing on diamonds in Africa. In order to balance the risk, the Group maintains a diversified portfolio of minerals, including nickel in Scandinavia. The business model aims to combine moderate risk with considerable upside potential.
Diamonds are IGE's core area. Our business model is based on cautious step-by-step exploration ending in small scale production, or partnerships as larger projects mature. IGE is a small, flexible company, able to profit from resources not financially viable for major producers. Through diligent risk management, expertise, and efficient operations, IGE maintains a competitive edge.
IGE Resources AB
The Parent Company within the IGE Group
While IGE Nordic AB ("IGE Nordic") has interests in nickel, gold, copper and zinc, its main focus is the Rönnbäcken nickel project.
The legal entity of IGE Resources AB was founded in 1983 in Sweden, and since 1988, the company has been active in the exploration for mineral resources. In 1989, the Company changed its name to International Gold Exploration IGE AB. Operations initially consisted of small scale exploration. Shares were listed on the Oslo Stock Exchange in 1997 under the symbol "IGE". The listing in Norway was a natural choice given the country's solid and long lasting history with mining. Growing interest and profitability in global exploration and mining created interest in IGE from the Swedish venture capital market. In the spring of 2005, IGE Resources AB listed its shares on the NGM Stockholm Stock Exchange in Sweden under the symbol "IGE". However, low trading activity in NGM equity, in combination with the burden of work and costs related to maintaining a parallel listing on two regulated market places, prompted the Board of IGE to delist from NGM during the spring of 2009, with the last trading day being the 5th of June 2009.
IGE Resources AB is a Swedish public limited liability company registered with the Swedish Companies Registration Office under the identification number 556227-8043. The Company is regulated by the Swedish Limited Companies Act. IGE Resources AB's head office is located at Kungsgatan 44, SE-111 35 Stock-
Corporate identity number: 556227-8043 Founded: 1983 Domicile: Stockholm Listing: Oslo Stock Exchange Ticker: IGE Number of shares outstanding: 795,709,953 Nominal capital: 39,785,498 SEK ISIN-code (the share): SE0000378119 Number of shareholders (appr 091231): 6,800 Year end price 2009 Oslo: 0,56 NOK Market Capitalisation (091231): 445 MNOK Total balance sheet (091231): 327.3 MSEK Countries of activities: Angola, Sweden, Kenya and Norway. Web site: www.ige.se E-mail address: [email protected]
Annual General Meeting: 6th of May 2010, Stockholm IGE will report results during 2010 according to the following financial calendar.
Financial information can be ordered from:
IGE Resources AB Kungsgatan 44, 7th floor 111 35 Stockholm Telephone: +46 8-402 28 00, fax: +46 8-402 28 01
The information can also be downloaded from the company's web site: www.ige.se
holm, Sweden, with telephone +46 (0)8 402 28 00 and facsimile +46 (0)8 402 28 01.
Following, is a summary of important events in the history of the Company:
2003: International Gold Exploration issued an option to Minmet Plc, giving the right to acquire International Gold Exploration's share of Björkdalgruvan. The strike price was 18 million shares in MinMet Plc. MinMet exercised the option and bought the Björkdal-
gruvan mine from International Gold Exploration. 2004: International Gold Exploration issued a dividend of its
remaining holdings in MinMet and Lappland Goldminers AB to its shareholders. 2005: International Gold Exploration was listed on the NGM.
2006: International Gold Exploration entered into joint venture
negotiations with Angolan state-owned diamond company, Endiama, for the exploration of diamonds in Lacage, Angola.
2007: International Gold Exploration was granted two licenses in Burundi, pertaining to gold and vanadium. International Gold Exploration was granted its first
diamond license in Angola.
International Gold Exploration transferred its mineral licenses in Sweden and Norway to its wholly owned subsidiary, IGE Nordic. In connection with this transaction, International Gold Exploration sold 25.4 percent of the company and listed it on the Oslo Axess exchange. Management was recruited to manage the Group's activities in Scandinavia, through IGE Nordic. International Gold Exploration entered in a joint venture with the South African mining company, Goldplat Plc, under the intent of developing seven targets in South Western Kenya, having the potential of containing high grades of gold.
2008: Preparatory work was undertaken for start-up of diamond production in Luxinge, Angola in the autumn of 2008.
International Gold Exploration announced a voluntary offer to acquire all outstanding shares in IGE Nordic. International Gold Exploration acquired 99 percent (including 74.6 percent already owned by the company) of all outstanding shares in IGE Nordic. On the 12th of February 2009, the EGM of IGE Nordic decided to de-list IGE Nordic from Oslo Axess.
Exploration of the Rönnbäcken Nickel project in northern Sweden continued. Positive results from more than 16 000 metres of drilling within the licence area indicated greater potential for the project, than International Gold Exploration initially projected.
2009: International Gold Exploration implemented cost reduction measures through workforce cuts at its subsidiaries IGE Nordic AB and IGE Burundi SA. In Burundi, the Company continued to search for large-scale nickel opportunities, while all other operations were put on hold. In January International Gold Exploration started an alluvial diamond production in Luxinge, Angola, and Gold Production in Lolgorien, Kenya.
In April, IGE Nordic announced an independent NI
43-101 compliant mineral resource estimate for the Rönnbäcken nickel project, prepared by Scott Wilson Roscoe Postle Associates Inc. Canada.
International Gold Exploration de-listed its shares from the NGM. The last day of trading was the 5th of June, 2009.
In line with the increased cost reduction measures taken by the Group, International Gold Exploration closed down the operations in Burundi.
In September, International Gold Exploration completed the sale of its 50 percent share in the small-scale gold producer Kilimapesa Gold to Goldplat (Pty) Limited for USD 2.7 million. USD 1.2 million was paid, with the balance payable in six (6) monthly instalments of USD 250,000, upon Kilimapesa Gold receiving its mining licence from Kenyan authorities.
In November, IGE Nordic released Preliminary Assessmentfor the Rönnbäcken nickel project, prepared by Scott Wilson Roscoe Postle Associates Inc. Canada. Indicated NPV at the time of the announcement was USD 142 million.
2010: IGE announces that the Company has entered into a sales and purchase agreement whereby IGE acquires all activities of Pangea DiamondFields plc through its subsidiary Efidium Ltd. Merging the two companies' businesses creates a significant diamond exploration and production company with resources spread across three Southern African countries. In consideration, Pangea DiamondFields shareholders receive approximately 495 million new IGE shares.
An EGM in March decided to change the name from International Gold Exploration IGE AB to IGE Resources AB.
2009 and the first months of 2010 was a period of fundamental changes for IGE. A new Board of Directors elected in July set out a new course for the Company, resulting in IGE moving towards becoming a significant diamonds exploration and production company in Southern Africa through the acquisition of Pangea DiamondFields' assets
and operations. Also, the first independent assessment of our nickel resources in Sweden gave cause for optimism.
Junior exploration companies suffer from pressured commodity prices (with gold being an exception) and limited access to capital. Despite scarce resources, IGE managed to take two major steps in fulfilling our strategy and thereby taking the company into a new phase of its history. The advancements in our Rönnbäcken nickel project, where a Preliminary Assessment was presented in November 2009, and the acquisition of Pangea Diamondfields' assets and operations concluded in March 2010, have taken IGE to an entuirely new league of companies. However, our financial results for the year reflect our current status as an exploration and developing company.
During the year, IGE raised equity twice in order to support its development activities. In March, IGE raised 25 MSEK through a convertible loan that was fully converted by the end of the year. And in September 2009, IGE successfully completed a private placement with a gross proceed of 72,5 MNOK (TA I SEK) including conversion of 20 MSEK in debt. At the end of the year, IGE had 40,8 MSEK in cash.
IGE has decided to focus on diamonds as its core area, with nickel and gold rounding out the portfolio. For the diamond business, IGE had until the Pangea acquisition four concessions in Angola. The most important objective in Angola is to secure government authorisation for mining and sale of diamonds from the lead project, Luxinge. After commencing bulk sampling in early 2009 and recovering top gem quality diamonds, the development of the project has been delayed. IGE replaced its local management team in Angola during the second quarter of the year. Also the Angolan state owned diamond company Endiama and the Ministry of Geology and Mines have undergone organisational changes over the recent months, resulting in delays. However, Angolan authorities remain highly supportive and cooperate closely with IGE in order to get the mine up and running. We expect Luxinge to be in commercial oeprations in the near future.
In order to further strengthen our position as a diamond exploration and production company, IGE in 2009 initiated a search for potential potential acquisition and partnership candidates. This process led to a major milestone for the company, when we at the end of the first quarter 2010 acquired the assets and operations of Pangea DiamondFields in order to reach sufficient critical mass. By this deal, IGE strengthened the Company's diamond exploration and mining expertise, increased our diamond asset portfolio and resource base by 8,4 million carats and secured a fast track to revenue generation.
Another key objective in 2009 was to increase the value of the Rönnbäcken nickel project in Sweden. Starting 2009 with an exploration target of 130 to 170 million tonnes grading at 0,10 to 0,15% nickel in sulphide, the new target in April 2010 has been increased to 400 to 450 million tonnes. A major milestone was reached in November, when the Preliminary Assessment (PA) was completed, confirming the viability of the project. It provides an independent evaluation of the project with a net present value estimated at US\$142 million. According to the PA, the project has potential to outline additional mineral resources and improve project economics. In the continued exploration at
Rönnbäcken, IGE has also discovered a new area of nickel mineralization and further good prospects to improve the potential of the project.
In our gold portfolio, IGE agreed in June 2009 to sell our 50% interest in Kilimapesa Gold, Kenya to Goldplat PLC for US\$ 2,7 million. With limited financial resources, and the decision to focus primarily on building value on its diamond and nickel assets, IGE has progressed with small scale exploration on its Kenyan assets, showing positive results and potential for further exploration.
IGE's corporate and social responsibilities are an integral part of all business activities in all countries, and all our projects take into account the dialogue and successful development for the local region and communities.
In closing, I would like to extend my sincerest thanks to our employees and warmly welcome the team of Pangea Diamond-Fields, Board and shareholders for their continued support and confidence.
Tomas Fellbom CEO, IGE Resources AB
| (TSEK, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|
| Other revenues | 15,169 | 49,916 | - | - | 293 |
| Operating result | -66,859 | -49,800 | -66,023 | -29,393 | -23,245 |
| Net result | -65,782 | -56,787 | -62,529 | -36,404 | -23,207 |
| Investments | 35,463 | 159,096 | 62,770 | 19,701 | 15,656 |
| Cash at the end of the period | 40,807 | 39,639 | 127,827 | 136,674 | 54,807 |
| Balance sheet total | 327,276 | 287,561 | 263,699 | 223,450 | 130,776 |
| Interest bearing loans at the end of the period |
12,065 | 24,929 | - | - | - |
| Basic earnings per share | -0.12 | -0.16 | -0.18 | -0.12 | -0.09 |
IGE Resources AB – Group
• The Preliminary Assessment (PA) for the Rönnbäcken Nickel Project was completed, confirming the viability of the project. The NI 43-101 Technical Report on the Preliminary Assessment of the Rönnbäcken Nickel Project in northern Sweden provided an independent evaluation and estimated the net present value of the project to be USD142 million.
According to the PA, the project has the potential to outline additional mineral resources and the company has set a target for increasing the current resource size by 100 to 150 million tonnes grading 0.10 to 0.15 percent nickel in sulphide. Based on these estimates and the potential to raise nickel recovery rates, IGE believes there is scope to further improve project economics.
• IGE confirmed the discovery of a new area of nickel mineralization and good prospects to improve the potential for increasing the current resource. Based on positive assay results from its 2009 summer geological mapping and sampling program, new drill targets were generated in untested areas near current resources. The program also resulted in the discovery of a new area with nickel mineralization, Sundsberget, for which an exploration license was granted.
The acquisition of the activities of Pangea DiamondFields plc
IGE announced on the 22nd of March 2010, after the expiration of the period for this annual report, that it had entered into a sales and purchase agreement whereby IGE acquired all activities of Pangea DiamondFields plc through its subsidiary Efidium Ltd. The consideration amounted to 495 million new IGE shares. Below follows a brief description of the activities of Pangea Diamondfields Plc, the deal and the rationale behind it.
IGE Resources AB has defined diamond exploration and production as its core business, and the Company currently operates four projects in Angola. Authorization from the Angolan authorities for the sale of diamonds from IGE Resources AB's project Luxinge is expected in the near future.
Pangea, through Efidium, is currently engaged in five diamond projects, of which one is in commercial operation in Angola, only 50 kilometres from IGE's Luxinge project. With a monthly output of 2,000 carats and it is poised to grow rapidly. The company has a verified resource base of 8.4 million carats.
The acquisition of Pangea's activities represents a milestone in IGE Resources development towards becoming a significant diamond exploration and production mining company. Diamonds represent a core business for IGE Resources. The transaction provides IGE Resources AB with the following:
The current operations of IGE Resources AB in Angola will be merged with Pangea's operations to form the subsidiary IGE Diamonds. This business unit will be headed by Pangea's existing management.
"Pangea represents extensive diamond exploration and mining experience and a well-established presence in Africa. The merger of the two companies creates a considerable resource base and a growing cash flow from diamond mining. Within the next twelve months we expect three diamond projects to generate revenue" said IGE Resources' CEO, Tomas Fellbom.
"IGE and Pangea are an excellent fit. The combined company will have a well balanced project portfolio, highly experienced exploration and operational staff, and sufficient critical mass to be an important player in African diamond mining going forward. In particular, combining our respective operations in Southern Africa creates opportunities to maximize the efficiency and reach of the merged organisation" stated Pangea's CEO, Boris Kamstra.
Pangea was officially established in its current format in 2005 through the merger of the diamond assets of Efidium and Dorado. Pangea and its principals, have more than twenty years experience in exploration and mine development throughout Africa, including titanium and gold in Mozambique, gold in Tanzania and gold, diamonds and vanadium in South Africa. Exploration and selected administrative services are performed for the group under the direction of the Pangea board.
Pangea's diamond assets are at various stages of exploration development, ranging from early exploration, through bulk sampling, to an operating mine situated in Angola. Pangea's projects are held through Efidium and Efidium's subsidiaries, and are all located within highly prospective diamond-bearing geological environments. Whilst alluvial deposits constitute the primary focus of the company; a number of the target areas are also located within regions of kimberlite potential. This potential will be evaluated later, on an opportunistic basis. The Group is managed primarily from its head office in Johannesburg in South Africa. Pangea also has offices in Luanda, Angola and Kinshasa, DR Congo.
The founding shareholders, executives and affiliates of Pangea have, over the last twenty years, established a successful track record for the creation of shareholder value in mineral exploration and mine development throughout the African Continent. The recent financial crisis affected the short term demand and price for rough diamonds, however, Pangea believes the future supply/demand fundamentals of diamonds are favourable, and foresees a positive medium to longer term prognosis for the industry. Over the next several years, diamond jewellery demand is predicted to grow at a healthy rate in line with the real GDP growth for the major diamond consuming countries and new emerging diamond markets. At the same time, world rough diamond production is expected to remain unchanged or even diminish. The resultant supply/demand deficit should ensure that rough prices continue to increase in the medium to longer term.
The African continent is responsible for over 65 percent of global diamond production. Geologically, highly prospective countries for diamond exploration such as Angola, the DR Congo and South Africa have recently undergone significant positive political, social and fiscal changes. Pangea, as a consequence, is concentrating its diamond exploration efforts within Africa, and specifically within these countries. Since 2003, and prior to the IPO of Pangea, Pangea has raised approximately USD 20 million, comprising initial seed capital from its founders and subsequent capital raisings from prominent international resource and private equity funds.
Pangea's short-term mission has been to develop the two most
advanced projects in its portfolio to cash flow positive positions by mid 2010, and to reduce any unnecessary expenditure throughout the Pangea group of companies. The strategy to achieve this mission is summarised as follows:
Below are brief descriptions of the diamond projects. The figures in parenthesis describe IGE Resources AB's ownership percentage in the respective project after completion of the acquisition.
Project Status: Operating
Exploration Stage: Pilot Mining -> Commercial Scale Location: Lunda Norte Province, far north eastern Angola Project Areas: Cabuaquece, Cale, Cachoque, Cassanguidi South Licence Area: 112.50 km²
Cassanguidi is an advanced project in the pilot mining phase. The rights to exploit this project are held by Marsanto-Pesca e Sua Industrializacao i Exportacao Lda ("Marsanto"). It is currently extracting diamondiferous gravels from river terraces and hill-wash deposits using conventional open pit methods. The project is running with a production of about 2,500 carats per month at present, and will be ramping up to about 5,500 carats per month in mid-summer 2010, after strengthening of the assembly of machinery.
The Cassanguidi Project is situated approximately 80 kilometres east of Dundo and 30 kilometres north of Nzaji in Lunda Norte Province. The licence area, within which the project is located, is intersected by the northward-flowing Luembe River. It lies within 2 kilometres of the Cassanguidi Township. Access to the project from both Dundo and Nzaji is via narrow tarmac covered roads.
Marsanto holds the mining licence over the area. The licence, in the form of an operating contract with Endiama, was signed under the PROESDA system in 1997. This system allows Angolan companies, where permitted, to explore and mine a concession free of any kind of equity participation obligation.
South Africa (74%) Project Status: Operating Exploration Stage: Pilot Mining Orientation: Approximately 250km west of Johannesburg Location: Situated within the Lichtenburg Diamond Fields Project Areas: Patsema area Licence Area: 168.74 km² (additional 188km² pending approval)
The Bakerville Project is located within the Lichtenburg Diamond Fields. The Lichtenburg section of the diamond fields was "officially" discovered in 1926, although it is thought that diamonds were being recovered from the area for at least two years prior to this. Total recorded production from these Transvaal alluvial diamond fields, up to 1989, was 10.8 million carats, of which 7.5 million carats (70 percent) came from the Lichtenburg field. Of the Lichtenburg production, 6.9 million carats (92 percent) came from the Grasfontein-Welverdiend runs and potholes.
Production in the region reached a peak around 1931, and has gradually tailed off since then. In the late 1970's, approximately 30 small-scale diggers were recovering about 650 carats per year. By the early 1980's, interest in the area was renewed with the release of a government survey report indicating the possible occurrence of undiscovered diamondiferous gravels beneath sand cover within sinkholes and channels outside of the known major runs. This period saw the arrival of local and foreign exploration companies to the area.
South Africa (74%) Project Status: On Hold Exploration Stage: Bulk Sampling Location: Between Vryburgand Warrenton Project Areas: Brussels Development Status: Bulk Sampling (Brussels) Licence Area: 239.91 km²
The Harts River Project comprises a contiguous block of farms situated in the Northern Cape Province of South Africa, between Vryburg and Warrenton, known as the Brussels Block. The Harts River Project is based on a conceptual model of potentially diamondiferous gravels being present in the Dry Harts River and its tributaries. The drainages of this system are now small and ephemeral, but were of much greater significance in the past.
Sporadic small-scale quarrying on large-boulder Rooikoppietype gravels is found to the north of the area. These are presumed to have yielded diamonds, but no records of recoveries can be found. There is no record or evidence of any exploration having previously been done on any of the farms comprising the Harts River Project.
southwestern DR Congo (100%) Project Status: On Hold Exploration Stage: Advanced Exploration Location: West of Tshikapa, southwestern DRC Project Areas: Mvula Milenge, Dier, Yusufu, Ikulu Licence Area: 127 km²
Efidium has eleven exploration and small mine permits in the Tshikapa Diamond Field of the Kasai Occidental Province. Six of these are located on the Tshikapa River. The project is located near the town of Tshikapa in southwestern DR Congo. The Tshikapa Diamond Field is situated within the West Kasai Region of the DR Congo in the Kasai-Occidental Province, within the DR Congo-Angola diamond province. The Tshikapa Diamond Field lies directly downstream of the alluvial diamond fields of the Lucapa Graben in northeastern Angola.
Production from the diamond field was dominated by the Belgian company Société Internationale Forestière et Minière du Congo ("Forminière') until independence in the early 1960's. Since then, official records of production are sketchy and unreliable as artisanal miners took control of mining in the area. Historical production from the diamond field was primarily sourced from active rivers and alluvial terraces along the river banks, and to a lesser extent, from the Kwango Formation conglomerates.
southwestern DR Congo (100%) Project Status: On Hold - Operations on Care & Maintenance Exploration Stage: Bulk Sampling Location: West of Tshikapa, southwestern DR Congo Project Areas: Mvula Milenge, Dier, Yusufu, Ikulu Licence Area: 127 km²
Efidium also has eleven exploration and small mine permits in the Tshikapa Diamond Field. The Longatshimo River Project comprises three exploitation permits (PEPM) and three prospecting permits (PR). Two of these prospecting permits are in the process of being converted to exploitation permits. All permits straddle the Longatshimo River. The project is located near the town of Kamonia in southwestern DR Congo. The road from Tshikapa to the Longatshimo camp is in good condition and involves a travelling time of three hours.
The chart above shows the organisational structure of the Group immediately following completion of the acquisition of Efidium Ltd.
Before independence, Angola was historically a major producer of diamonds, iron ore, gold and copper. The ensuing civil war disrupted its infrastructure, significantly slowing the pace of exploitation of its metals and minerals base. Following the end of the twenty-seven year conflict in 2002, the Angolan mining industry, along with the economy, has grown rapidly. Angola is globally the fifth largest producer of diamonds by value, supplying 7 to 9 percent of world diamond output. The country hosts large diamond reserves, principally in the provinces of Lunda Norte and Lunda Sul.
The majority of Angola's diamonds comes from alluvial deposits. However, state-owned mining company Endiama is confident that there could be large-scale deposits in shafts of volcanic rock throughout the country. Mining in kimberlite is both expensive and technically difficult, and Endiama has had to partner with global companies, such as South Africa's De Beers and BHP Billiton, which have the necessary expertise. De Beers has invested in a kimberlite concession in northern Angola. Russia's ALROSA also has a partnership with Endiama.
Companies wishing to explore for diamonds in Angola have to do so in partnership with state-owned mining firm Endiama, as required by Angolan law. Moreover, their ownership in any diamond mine is limited to 40 percent. According to the latest reports, the company has around 100 mines throughout the country which are ready for exploration. Indeed, some market watchers claim that less than 50 percent of Angola's diamond potential is currently being realised. Of the 61 concessions currently operating in the country, only 14 are thought to be producing diamonds.
IGE Diamond has been present in Angola since 2006. In a
relatively short period of time, the Company has managed to position itself from a diamond exploration company to a junior diamond producer within the country.
IGE Resources AB's strategy in diamonds is to begin with easy accessible alluvial production which will generate cash flow to support exploration and development activities of the potentially larger and more profitable kimberlite pipes.
IGE Diamond has the third largest licence holding in Angola, a country that is one of the world's largest and most rapidly developing diamond producers. According to Angolan law, ownership is shared between IGE Diamond, Endiama (the stateowned diamond company) and local partners. IGE Diamond is the operator for all projects. All of the diamonds produced are to be sold through Sodiam, a state-owned company, and the only official diamond trading company allowed to operate in Angola. IGE Diamond employs about 130 people. From early on, IGE Diamond, together with Endiama, initiated a training program for Angolan nationals in geology and geophysics (in Sweden, Finland and Angola), and today some of the graduates are working on IGE Diamond projects.
IGE Diamond has four (4) concessions - Luxinge, Lacage, Luanguinga and Cariango. Two of the concessions are strategically located within the Lucapa Graben corridor of Angola, the country's most diamondiferous region. The figures in parenthesis below describe IGE Diamond's ownership percentage in the respective project.
• Luxinge (Alluvial 31.5%/Kimberlite 30.75%) The total alluvial (historical measure) diamond resource stands at about 500,000 carats with an average estimated grade in the tributaries of 0.21 carats per cubic metre and in the Chiumbe River bed of 0.15 carats per cubic metre. The concession has the potential for much more, but only a part of the concession area has been properly explored. The project is poised to begin test mining and sales of the first diamond parcels, given completion of the application process for being granted the full commercial mining licence. The application, EVTE (Estudode Viabilidade Tecnico-Economico, a technical and financial feasibility report) has been submitted and the new President of the Council of Administrators (PCA), Mr Carlos Antonio Sumbula, is supporting IGE in the application process. His team, headed by Dr. Andre Moises, well known to the management of IGE, is currently working on the approval of the Luxinge EVTE. The application process is pending,and IGE estimates that the first parcel of Diamonds from Luxinge will be sold during the second quarter of 2010.
The production of diamonds in the Luxinge area is in progress. IGE is continuously recovering diamonds from a one shift, five days a week, work schedule. Upon approval of the EVTE, enabling IGE to sell the Luxinge diamonds production will run on three shifts, increasing the amount of carats recovered significantly. Logistics is a challenge in these areas. The procurement of spare parts and consumables to the minesite may take several months, and breakdowns and shortages in the supply of fuel and lubricants will impact the production schedule. With the strengthening of the Group's financial situation, and the improved management experience and routines, IGE is better equipped to handle these challenges.
The capital cost to bring the Luxinge alluvial diamond into production was about USD 7 million. Most of the capital was spent on the process plant, earth moving equipment, and a camp for one hundred persons, both management and staff, all of which was installed during July and August 2008. An airborne survey within the concession area for kimberlites was carried out in August to September 2008. Production of alluvial diamonds based on a full commercial mining licence is projected to commence by the end of 2010.
The Cariango concession area is located in the Cuanza Zul region in mid-western Angola. There are strong indications that the area holds gravel beds for diamonds, as well as probably hosting kimberlites. An airborne geophysical survey was completed during the autumn of 2008. IGE Diamond is now in a position to "test" the ground by doing simple soil sampling to determine if there are diamond "indicators" in the specific areas identified by the airborne survey.
At Lacage, airborne geo-surveys during the summer of 2007 discovered over 100 possible kimberlitic structures larger than 7 hectares, 13 of which are larger than 50 hectares. The survey also discovered a possible giant kimberlite structure of 300 hectares. This would make it one of the largest-known kimberlites in the world.
At Luanguinga, airborne geo-surveys have discovered 9 possible kimberlitic structures larger than 7 hectares, of which one is larger than 50 hectares. For both Lacage and Luanguinga, a risk assessment has been completed by the Norwegian People's Aid due to the potential presence of land mines after the civil war. None of the kimberlite targets of the Lacage project are suspected of holding land mines. Nevertheless, safety measures are to be taken as work on the area starts. At Luanguinga, some targets will need to be de-mined before any exploration activity can begin.
IGE Nordic AB (publ) ("IGE Nordic") is a 99.6 percent-owned subsidiary of IGE Resources AB.
IGE Nordic is an exploration and development company with assets encompassing nickel, gold, copper and zinc. Its long-term objective is to become a leading exploration and mining company in the Nordic countries delivering value to its shareholders and the communities where it operates. The Nordic countries are considered to have well established economic and political systems and well developed legal frameworks. Currently, IGE Nordic has a diverse portfolio of projects based in Sweden.
At Rönnbäcken, IGE Nordic is evaluating the possibility of a large tonnage, low-strip ratio, open pit nickel sulphide mine that could potentially produce a high grade nickel concentrate. IGE Nordic's activities during the second and third quarter of 2009 centred on the completion of a NI 43-101 Technical Report on the Preliminary Assessment (PA) of its 100 percent owned Rönnbäcken nickel project. The study was prepared by the independent mining consultant Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson RPA"), Canada, and was issued in November of 2009.
The PA conducted by Scott Wilson RPA is a milestone in the development of the Rönnbäcken Nickel Project, and provides an independent evaluation of the project in accordance with NI 43-101. Base-case NPV of the project is estimated at USD 142 million using a long-term nickel price of USD 9.00 per pound (USD19841 per tonne). The PA is based on an initial thirteen year mining plan with mill throughput of 20 million tonnes of ore per annum, and a projected recovery of 74.5 percent of nickel in sulphides. The resultant concentrate, averaging 28 percent nickel content, is expected to supply 17,000 tonnes of
nickel in concentrate annually.
The PA follows upon receipt in April of an independent NI 43-101 compliant mineral resource estimate for the Rönnbäcken Nickel Project, prepared by Scott Wilson Roscoe Postle Associates Inc. ("Scott Wilson RPA"). The current resource of 248 million tonnes encompasses an indicated resource estimate of 54.9 million tonnes with an average total nickel content of 0.187 percent, and an inferred resource estimate of 192.9 million tonnes with an average total nickel content of 0.178 percent.
According to the PA, the project has the potential to outline additional mineral resources. The 2009 summer field program generated new drill targets in the areas around the two main deposits of Vinberget and Rönnbäcksnäset. In addition, a new area with mineralization, Sundsberget, was discovered to the north of Rönnbäcksnäset and north of the lake, for which an exploration license was granted. Based on positive assay results from sampling carried out in the field program, the company believes there is potential for increasing the current resource further. There are large areas of exposed serpentinite with nickel mineralization, which remain untested nearby at the Vinberget and Rönnbäcksnäset deposits. Following upon completion of the 2009 winter drill program based on drill targets generated from the summer field program, the company has established a new target size for the resource of 400 to 450 million tonnes grading 0.10 to 0.15 percent nickel in sulphide.
In addition to the drilling activity, IGE Nordic engaged Outotec Minerals Oy to conduct further process optimization test work aimed at raising nickel in sulphide recoveries from 74.5 percent to 80 percent, as well as reducing operating and/or capital costs. A comprehensive optimisation test program commenced at the Outotec Research Center in Finland in October 2009, focused on improving the nickel recovery, as well as the process economy, by carrying out a systematic test of key parameters. Mini-pilot testwork is planned upon completion of the lab optimisation testwork, in order to more accurately assess steady-state closed circuit performance.
Drilling and optimisation work currently underway is intended to progress into a full pre-feasibility study. The company plans to formally launch work on a pre-feasibility study in 2010. The pre-feasibility study is targeted for completion in 2011. Applications for Exploitation Concessions, including Environmental Impact Assessments were submitted to the Mining Inspectorate of Sweden ("Bergsstaten") on the 12th of February 2010. The application process is estimated to take three to six months. The Exploitation Concessions grant the right to carry out mineral exploitation for a twenty-five year period.
Norra Norrliden Zinc-Copper Project (10%) In May 2008, Gold-Ore Resources Limited ("Gold Ore") bought Lundin Mining Corporation's 90 percent share of the Norra-Norrliden project, in Sweden. The model for developing Norrliden relies on transporting the ore to a nearby processing plant, negating the need for building a plant at the site, thus reducing the potential capital costs. There is excellent infrastructure available, including roads and hydropower.
Gold-Ore engineers are reviewing a previous work plan developed by Lundin Mining Corp. There is a measured and indicated resource of 1.48 million tonnes grading 0.63 grams per tonne gold, 50.8 grams per tonne silver, 0.74 percent copper and 3.54 percent zinc and an inferred resource of 0.87 million tonnes grading 0.40 grams per tonne gold, 30.9 grams per tonne silver, 0.72 percent copper and 1.87 percent zinc. A test mining permit has been granted for extraction of 63,000 tonnes of ore.
The Solvik gold-copper project in Sweden is 50 percent owned by IGE Nordic and 50 percent by Archelon Mineral AB. The 2008 drilling program confirmed a continuation of the gold zone to the south-east, and that it is open along strike and at depth. In addition, two new gold structures have been identified from boulders. Samples of soil were taken to delineate the gold anomaly, while samples of bedrock were taken to assay for gold in the quartz vein system found in outcrops. The field program, together with earlier work, indicated several areas of gold mineralization in a 17 kilometres long zone. Furthermore, gold mineralization at the Egenäs zone is more extensive than expected.
For non-core metals, IGE Nordic has created jointly-owned entities with partners. The objective is to maximize the development potential of the combined assets (IGE Nordic's and the partners') to provide the best opportunity for discovery.
Norrsken Energy Limited (UK) is a joint venture company formed between Energy Ventures ("EVE") and IGE Nordic to evaluate early stage uranium exploration targets in Sweden. EVE is the manager of the joint venture and committed SEK 5 million (approximately USD 870,000) to fund initial exploration programs. In 2009, EVE raised USD 1.1 million to advance exploration on its Swedish assets; and a portion of the funds will be utilised to advance exploration of Norrsken Energy uranium projects. The consolidated Norrsken Energy project portfolio comprises 100 percent ownership of 13 exploration permits that encompass a range of uranium exploration opportunities, from drill-ready targets with known occurrences of bedrock uranium mineralisation, through to greenfield exploration targets.
IGE Nordic, Archelon Mineral AB and Kopparberg Mineral AB formed an iron ore exploration company focused on twelve exploration licence areas within Sweden. Each partner has approximately a one-third interest in the company, with Kopparberg Mineral AB managing the exploration activities.
Alcaston Exploration AB (10%) (Gold-Copper) IGE Nordic AB entered into an agreement to sell its 100 percent interest in the exploration licences comprising the Bidjovagge Gold Copper Project in the Finnmark plain in northern Norway to Arctic Gold AB, which will focus on development of the Bidjovagge project. In addition to a cash payment, IGE Nordic would have received common shares of Arctic Gold constituting 20 percent of issued and outstanding shares. Subsequent to this transaction, Arctic Gold was acquired by Alcaston Exploration AB, and IGE Nordic will receive a 10% stake in Alcaston, in exchange for its interest in Arctic Gold.
IGE's activities in Kenya are carried out through its 100 percent owned subsidiary, IGE Kenya Ltd. IGE Kenya's portfolio totals 860 kilometres squared, and includes four special licences, all of which are highly prospective for gold. These licence areas are located in the Greenstone Belts of southwest Kenya, and in northwest Kenya's Mozambique Belt terrains. The Company is well established with a head office in Lavington, Nairobi, and several field camps.
IGE Kenya holds three special licences:
IGE Kenya's activities in 2009 for the most part involved supporting Kilimapesa Gold (Pty) Ltd's application for a mining license, and the continuance of low-cost exploration activities on the South-West Kenya licenses, using IGE Kenya's own drilling and trenching equipment. Significant progress was made towards obtaining the mining license for Kilimapesa Gold (Pty) Ltd. In addition, the National Environmental and Management Agency issued a license for the Environmental Impact Assessment, with the result that the local authority has set aside the land for mining purposes.
Exploration results from both the Akala and Atieli licenses were encouraging and warrant further work. Both licenses are in close proximity to each other (about 40 minutes drive) and have good access to water, electricity and road infrastructure.
Assay results were received from the 417 metres trenching program on the Atieli target, undertaken during the third quarter. These were announced in a press release on the 8th of January 2010. Results are promising as they indicate the presence of a gold-mineralized system including both high-grade narrow mineralization and low-grade wider mineralization. These include 12 metres at 0.64 grams per tonne, 9 metres at 2.10 grams per tonne and 5 metres at 1.23 grams per tonne. Individual one-metre intervals reach up to 6.94 grams per tonne. The area is mainly underlaid by sandstones, and gold grades have been encountered in quartz veins, quartz stock works, and silicified shear zones. The brittle and porous nature of the sandstones is thought to be favourable to gold deposition. The mineralized system covers an area of about 500 by 200 metres, but saprolite sampling results suggest that it could have a significantly bigger extension. The prospect warrants further exploration. One thousand meters of trenching and 300 metres of core drilling are planned for the first quarter of 2010.
A core drilling program was started at the Kogumbo target (Akala license). The Kogumbo target consists of a set of several quartz veins hosted in basalts. By the end of the 2009, four holes had been completed for a total of 306 metres. Several mineralized zones have been intersected, with grades up to 1.89 grams per tonne over 2.1 metres. This information, combined with results from earlier trenching received only recently (including an interval of 1 metres at 5.98 grams per tonne on trench KT07), confirm the presence of a set of quartz veins extending along a strike length of 600 metres. An update on this target will be published once all assay results have been received.
Additional results from the trenching program done at the School House target (Akala license) were received. Trench SHT04 proved the most interesting, with intervals of 2 metres at 5.19 grams per tonne, 5 metres at 1.55 grams per tonne and 2 metres at 2.07 grams per tonne. These results are encouraging, but more exploration work is required to assess the actual extent of the mineralization.
During 2009, the company continued its strategic review of possible opportunities for short-term gold mine development in Africa. Several projects in Tanzania and Ghana were reviewed in detail, but did not meet IGE's selection criteria. This review of opportunities has continued during the beginning of 2010.
| Project | Ownership (%) | Resources | Historical Resources |
|---|---|---|---|
| IGE Diamond | Alluvial/Kimberlite | ||
| Luxinge (diamond) | 31.5% / 30.75% | n/a | Alluvial: Indicated resources: 249,151 carats/inferred: 759,000 carats |
| Cariango (diamond) | 40% / 43% | n/a | |
| Luanguinga (diamond) | 35% / 43% | n/a | |
| Lacage (diamond) | 40% / 43% | n/a | |
| IGE Africa | |||
| North western Kenya | 100% | n/a | 5M tonnes @ 1% Ni |
| South western Kenya | 100% | n/a | |
| IGE Nordic | |||
| Rönnbäcken (Ni) | 100% | An indicated resource of 54.9 Mt at a grade of 0.187% Ni, of which 0.137% is Ni in sulphides, plus an inferred resource of 192.9 Mt at a grade of 0.178% Ni, of which 0.107% is nickel in sulphides. |
|
| Bidjovagge (Au-Cu) | 20% (Arctic Gold AB 80%) | n/a | 1.16 Mt grading 1.09% copper and 3.72 g/t gold |
| Stekenjokk (Zn-Cu) | 100% | Measured and Indicated resource of 7.4 Mt at a grade of 1.17% Cu, 3.01% Zn, 0.45% Pb and 47 g/t Ag, plus Inferred resources of 2.7 million tonnes grading 0.94% copper, 2.95% zinc, 0.39% Pb and 43 g/t Ag |
|
| Norra Norrliden (Zn-Cu) | 10% (Gold-Ore Resources Ltd. 90%) |
Measured and Indicated resource of 1.48 Mt grading 0.63 g/t Au, 50.8 g/t Ag, 0.74% Cu and 3.54% Zn and inferred resources of 0.87 Mt grading 0.40 g/t Au, 30.9 |
After completion of the purchase of the assets of Pangea DiamondFields, the portfolio also includes the following projects (through Efidium):
| Country | Project | Interest | Resources *) | Stat us |
|---|---|---|---|---|
| Angola | Cassanguidi | 65% | 902 00 carats | Current output of 2,000 carats per month – to be ramped |
| DR of Congo | Longatshimo | 100% | 3,567 000 carats | Bulk sampling completed, ready for pilot mining |
| Tshikapa River | 100% | 3,353 000 carats | Advanced evaluation completed | |
| South Africa | Bakerville | 74% | 455 000 carats | Pilot mining completed, preparations for commercial mining |
| Harts River | 74% | 78 000 carats | Bulk sampling completed |
Resources are independently verified according to SAMREC standards
Final products will be sold through regulated commodity exchanges if such market places exist for the different commodities. With respect to the most common base and precious metals, such as gold, copper and nickel there are existing regulated terminal markets. The situation for diamonds is different. In Angola, where the Company has all of its diamond exploration licences, the law requires that all diamonds extracted within Angola are sold to the state owned diamond trading company, Sodiam. Current legislation concerning the diamond industry and the selling process for diamonds in Angola is being reviewed. Pending the outcome of this process, a diamond producer's options to sell diamonds to other buyers might improve. IGE will continue to monitor the situation in order to ensure that it is selling its products at the most favourable price under prevailing market conditions
Diamonds are formed as pure crystals of carbon deep within the earth under conditions of extreme heat and pressure. Some of these crystals are then brought to the surface in a rising magma which solidifies into igneous rock, forming the primary deposits of diamonds. Today, there are over 6,000 of these magma deposits in the world, known as kimberlites, of which 850 contain diamonds. Only 50 of these are economic in terms of diamond mining. The African continent has proven very interesting in terms of providing diamondiferous kimberlites. South Africa and Botswana host several of the largest deposits. Angola, which is still relatively unexplored due to its long history of civil war, hosts the fourth largest diamond mine in the world. Angola, according to experts, is thought to be the next largescale producer of diamonds in the world. The size of diamonds is measured in carats (ct); a carat is a unit of mass for gemstones equal to 0.2 grams.
There are several variables that affect the price of a rough diamond. The prices for one carat vary to a large extent, depending on the quality of the diamond and market conditions. The price of one carat can differ from a couple of USD per carat to more than one million USD per carat. Diamonds are available in varying colours, sizes and qualities. They naturally occur in colours ranging from very clear fine whites to pinks, bright yellows, greens and browns. The majority of diamonds used in jewellery are white diamonds.
The value of a white diamond is determined by what are commonly referred to as the 4C's. The 4C's are the diamond's Cut, Colour, Clarity and Carat. Each of the 4C's is important; the most valuable diamonds are those that possess the best of all four of the measurements.
Global natural rough diamond production is estimated at around USD 14 billion per year. Rough diamonds fall into the broad groups of quality - gem, near gem and industrial. Gem and near gem diamonds are used in jewellery, whereas industrial diamonds are used principally for cutting and grinding purposes. Gem quality diamonds account for over 80 percent of the value of the world diamond market.
There are no regulated exchanges for diamonds as exist for many other commodities. Sales of diamonds are carried out in auctions, based on price estimates by independent valuators. Approximately 40 percent of all sales of rough diamonds are controlled by De Beers and its subsidiary DTC (Diamond Trading Company). DTC sorts, values and sells the diamonds of the De Beers Group, to a number of authorized sightholders, preferred buyers of their diamond production. The sales process in Angola is a slightly different. All diamonds produced in Angola are required to be sold to Sodiam, the state-owned diamond trading company. Sodiam values the diamonds in collaboration with an independent valuator assigned by the producer, and sells the diamonds on auctions in Luanda about 10 times a year.
Geographically, Antwerp is the world's largest diamond trading centre, with other key centres being Mumbai, Johannesburg and Tel Aviv. It is estimated that approximately 80 percent of the world's annual production of rough diamonds is under the control of the De Beers Group. Other major diamond producers include Rio Tinto, BHP Billiton, and Alrosa.
The following table shows the value refinement chain of diamond production, from rough diamond to jewellery.
| Value increase | |
|---|---|
| Cost/value of Rough Diamond Production |
7,2 |
| 99% | |
| Value of Rough Diamonds produced |
14,3 |
| 8% | |
| Rough sales to cutting centres | 15,5 |
| 19% | |
| Jewellery Manufacturer, value of diamond content in retail sales |
18,4 |
| 253% | |
| Retail sales of diamond jewellery | 64,8 |
Source: IDEX Diamond Pipeline
The value of global diamond production in 2008 was about USD 14 billion, centred mainly in seven countries: Botswana, Russia, Republic of South Africa, Angola, Canada, DRC and Namibia. The industry is dominated by mining giants De Beers, Alrosa, Rio Tinto and BHP Billiton.
The diagram below shows the total number of rough diamond carats produced during the five-year period of 2004 to 2008.
Kimberley Process Certification Scheme
Recent years have been extremely volatile for the diamond industry: we have seen sharply rising rough diamond prices and market speculation, followed by the deepest crisis where the rough supply and manufacturing almost came to a total halt. The credit crunch and the uncertain fates of the banking system paralyzed the financial side of the business, and very few dared to finance transactions within diamonds.
There is very little unanimity as to how hard the crisis hit the diamond industry. There is consensus that the level of discounting at the retail levels has been significant, with some estimating 50 percent or more. Isolated panic and distress-selling fuelled market rumours late 2008/beginning 2009. Some major jewellery retailers went into bankruptcy or applied for protection against creditors, causing a ripple effect upwards into the supply chain. Industry consultant Tacy Ltd estimates that worldwide diamond jewellery sales fell 11.3 percent, from USD 73.08 billion to USD 64.8 billion, similar to market levels market back in 2004 to 2005. The most problematic actions were taken by diamond industry financing institutions making margin calls, demanding the immediate delivery of additional collateral to make up for the perceived shortfall in prices and thus debt security
Historically, the diamond market has been less prone to the cyclical price fluctuations typical of many commodities, due to the retail nature of its product, and the domination of the market by De Beers. De Beers strives to preserve an orderly market for diamonds through adjustments to supply in times of overproduction or economic recession. Since the Second World War, rough diamond prices have demonstrated an overall upward trend, with gem diamonds showing the greatest increase.
Diamonds are foreseen to garner interest as an investment, both from a short-term and the long-term perspective. Rising diamond prices in long term will be fuelled by declining production and a lack of new discoveries of large-scale deposits. There are currently no world-class discoveries to be turned into mines in the next 5 to 7 years. Supply from fresh resources is diminishing, and prices are predicted to increase accordingly. The projected shortfall in production versus demand has created difficult trading conditions in the rough diamond market, resulting in record price increases. Over the last five years, uncut diamond prices have risen by about 50 percent.
Longer-term, retail diamond demand is expected to grow at least 5 percent per annum over the next decade, as new buyers from Asia enter the market purchase diamonds. This translates into the equivalent of USD 500 million of new diamond mine production required to come on-stream every year for the next ten years. It takes eight to ten years to bring a mine into full production, hence, a significant increase in exploration must occur now to meet the increasing demand for diamonds. The projected shortages of supply against growing consumption imply that the future for the diamond industry is likely to continue to surpass expectations.
In the short-term, the industry is expected to continue in its current course of recovery, after being hit severely by the "financial crisis" of recent years. Diamond prices have experienced a strong start in 2010 with the PolishedPrices' Index rising 1.1 percent in February, and at time of writing is standing 3 percent higher than the average in December 2009. Market expert Richard Platt commented that the rate of increase is higher "than we were expecting at the start of the year". Volumes reporting to PolishedPrices, were at their highest level since "before the crash, suggesting the market is comfortable with current price levels and capable of digesting further rises over the coming months."
With stronger demand and improved liquidity at cutting centres, the market for diamonds appears to have entered its recovery phase. During the crisis, many of the major diamond producers either cut output from their mines or began stockpiling diamonds, to prevent supply from flooding the market. The strength of the rough market will become apparent from the next two to three sight sales, as producers such as Alrosa, De Beers and Rio Tinto are targeting higher rates of sales in 2010.
Nickel is mainly used for producing stainless steel, nickel alloys, plating products, foundry steels, and battery materials. Stainless steel is by far the dominant sector accounting for approximately 66 percent of global nickel demand. Applications for stainless steel include process industries, power generation, oil and gas industries and construction. Russia is the world's leading nickel producer, accounting for around 20 percent of global nickel production. Other major nickel producers are Canada, Australia and Indonesia. Some of the industry's most well known producers are MMC Norilsk Nickel, Vale, BHP Billiton, Xstrata plc, Jinchuan Group Limited and Eramet; together they account for over 60 percent of primary nickel production.
The figure below illustrates nickel price from March 2005 to February 2010.
The growth in nickel production in recent years has primarily occurred through brownfield expansions – only one integrated greenfield project came on-stream in the period 2000 to 2007. Established nickel producers expanded production at their refineries incrementally by way of expansions at their own mines, investment in mine projects, and increasingly, through the purchase of custom feeds, creating an active market for intermediate nickel products.
In China, low nickel pig iron emerged in 2006 as a new source of nickel for its burgeoning stainless steel industry. Imported limonite ore from the Philippines, Indonesia and New Caledonia was treated in blast furnaces to generate a crude ferronickel. Initially produced in blast furnaces, the quality of this product was improved with the use of electric furnaces and has successfully been used in the production of nickel-bearing stainless steel. The high nickel prices of the period allowed for the processing of these low grade ores to be economic, and output of low nickel pig iron grew rapidly to over 80,000 tonnes in 2007.
With the global economic slowdown in the latter part of 2008, demand for nickel from end-use markets suffered. Output from the important stainless steel sector fell 7 percent in 2008, according to the International Stainless Steel Forum. The bulk of the decline occurred in the fourth quarter. The collapse in nickel demand and the corresponding dramatic decline in the nickel price prompted a number of nickel producers to implement production cuts to ease supply. The nickel price entered into a period of depressed prices which extended through to the
end of the first quarter of 2009. During his time, nickel prices remained between USD 9,000 to 11,000 per tonne, with only a few days seeing prices above USD11,000 per tonne. The ensuing pressure from these weak prices resulted in a rationalization of higher cost production. A significant number of operating nickel mines struggled to avoid loss making production. Established producers announced cutbacks to output. Development of large greenfield projects were being delayed. Small mining companies experienced financial difficulties and many placed recently commissioned mines on care and maintenance. Low nickel pig iron production was halved from closure of higher cost nickel pig iron producers utilizing blast furnaces or those not integrated with stainless steel production.
Beginning in the second quarter of 2009, higher than expected stainless steel production and a move towards commodities by investors, pushed nickel prices up to over USD 19,800 per tonne in the summer. Prices continued to hover within the range of USD 15,400 to 19,800 per tonne until the end of the year, prompting a number of mines, earlier put on hold, to resume operations. However, what really affected supply in 2009 was the rapid and immediate ramp-up in nickel pig iron (NPI) production in China in line with the rise in nickel prices. An additional 50,000 tonnes of nickel was quickly made available to the Chinese market with this product. The upturn in stainless steel production was mainly based in the Asian region. In addition to a 33 percent increase in Chinese stainless steel production, the neighbouring mills in Japan, South Korea and Taiwan quickly raised production levels to meet China's need for the industrial material. Chinese imports of refined nickel, ferronickel and nickel ore, as well as of stainless steel itself, soared in the first eight months of 2009 to feed their demand for stainless steel. In Europe and the U.S., sales of stainless steel remained sluggish, outside of a period of restocking during the third quarter, and the demand for nickel failed to recover. Overall, global consumption of nickel fell for a third successive year in 2009, and the market sustained a sizeable surplus for the third year in a row.
Demand for nickel metals looks set to improve in 2010 as Asian buying forges on, but the industry remains on tenterhooks to see if European and US demand also recover, where the outlook is less clear. The general belief is that the upward trend will continue after the Chinese New Year in February. But sentiment is capped by concerns that Western demand for primary and secondary material is still subdued. For 2010, nickel consumption is forecast to increase by around 7 percent. At the same time, the overhang of sidelined nickel production, from earlier shutdowns and delays, is poised to restart with the better market conditions, and will keep the market balanced or in a small surplus for the medium-term, while placing downward pressure on the nickel price. As this situation lingers over a couple of years, sidelined production at the higher end of the cost curve will be shuttered permanently. In addition, major integrated projects will undergo even further delays. The historic rate of nickel consumption is expected to continue well into the long-term, as expansions of stainless steel production capacity and the emergence of the newly industrialized Asian economies as consumers, will remain key drivers behind sustained nickel demand for the long-term future. By 2015, a shortage in supply is likely to develop. Those nickel mine projects which currently
are a couple of years away from commissioning are in an enviable position. With the costs for holding a project being lower compared to the costs of running a mine, these projects will be able to weather the subdued prices foreseen for the interim. Moreover, their project start-ups will coincide with the market need for new nickel product. Their ability to move into production quickly will be especially valued by established producers with surplus smelter capacity.
Gold is a precious metal that can easily be processed and which has good qualities, including high thermal / electrical conductivity and perfect resistance to corrosion. Further, gold is a popular material for the making of jewellery, decorations and other items. Gold also acts as a security and a backing asset for central banks and claimants.
Gold is traded in several markets, but the two most important gold markets are London and New York. The figure below illustrates the gold price from March 2005 to March 2010.
The supply of gold to the market comes from two main sources: mine production (approximately 59 percent), existing aboveground stocks of bullion (approximately 7 percent) and recycled fabricated products or scrap (approximately 34 percent).
From a peak in 2000, mine supply declined steadily, reaching a twelve-year low in 2008. In 2009, mine production increased by 6 percent due to higher output in Indonesia, China and Russia. China, the U.S., South Africa and Australia are the main gold producing countries, accounting for 40 percent of mine production. China has surpassed South Africa to become the top gold producing country. In South Africa, mine production has suffered closures due to unsafe mining conditions and power shortages, resulting in lower production. The largest mining companies include Barrick Gold Corp., Anglogold, Newmont Mining Corp., Gold Fields, and Freeport McMoran. In terms of the other sources of supply, a 27 percent increase in the availability of recycled gold, more than offset a significant reduction in official sector sales.
Jewellery has typically accounted for 75 percent of the demand for gold, but by 2009, it had fallen to 52 percent due to the global recession, as unemployment and lower disposable income amongst consumers impacted jewellery sales in the major markets. Following the low in the first quarter of 2009, the
recovery in jewellery demand has been cautious, with the high gold price acting as a damper. Growing demand in China helped partially offset the weaker markets such as India, the Middle East and Turkey.
Investment demand for physical gold has increased considerably in recent years. Since 2003, investment has represented the strongest area of growth in demand. In 2008 alone, investment demand grew about 73 percent as investors turned to gold as a safe-haven investment when the financial crisis began to unfold. This growing trend towards gold amongst investors carried over into 2009, as investment demand grew a further 7 percent in the year.
The gold price rose steadily during 2009, rising from USD 874.50 per oz at the start of the year to reach a record high of USD 1,212.50 per ounce early in December. Subsequent profit-taking pushed the price slightly lower by year-end. Overall, the average gold price was USD 972 per ounce in 2009, an increase of 11.5 percent over the previous year. In the first part of the year, fears over the effects of quantitative easing lead to many investors placing their funds in safe-haven assets such as gold. The weakening of the US dollar and low interest rates lead to record investment demand for gold as investors sought protection against dollar depreciation and possible future inflation. Much of this demand was in the form of physical backing required for exchange-traded securities.
| 2007 | 2008 | 2009 2 | $%$ ch 2009 vs 2008 |
Q1'08 | Q2'08 | Q3'08 | Q4'08 | Q1'09 | Q2'09 | Q3'09 | Q4'09'' | $%$ ch Q4'09 vs Q4'08 |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Supply | |||||||||||||
| Mine production | 2,476 | 2,409 | 2,554 | 6 | 543 | 588 | 632 | 646 | 583 | 633 | 680 | 657 | |
| Net producer hedging | -444 | $-349$ | $-257$ | --- | $-129$ | $-122$ | -53 | -45 | -1 | $-32$ | -99 | $-125$ | $\cdots$ |
| Total mine supply | 2,031 | 2,000 | 2,296 | 11 | 414 | 465 | 579 | 602 | 582 | 601 | 581 | 532 | $-12$ |
| Official sector sales 2 | 484 | 236 | 44 | $-81$ | 77 | 69 | 77 | 13 | 62 | -5 | -9 | -4 | $-11$ |
| Old gold scrap | 956 | 1,217 | 1.549 | 27 | 361 | 277 | 219 | 360 | 584 | 338 | 258 | 370 | |
| Total Supply | 3,471 | 3,513 | 3,890 | 11 | 852 | 811 | 875 | 975 | .228 | 934 | 829 | 898 | 8 |
| Demand Fabrication |
|||||||||||||
| Jewellery | 2,405 | 2.187 | 1.747 | $-20$ | 475 | 532 | 695 | 485 | 349 | 426 | 513 | 450 | -5 |
| Industrial & dental | 462 | 436 | 368 | $-16$ | 116 | 118 | 112 | 90 | 79 | 93 | 95 | 100 | 11 |
| Sub-total above fabrication | 2,866 | 2,622 | 2.115 | $-19$ | 591 | 650 | 807 | 574 | 429 | 519 | 608 | 559 | -3 |
| Bar & coin retail investment 3 | 446 | 649 | 440 | $-32$ | 89 | 143 | 212 | 205 | 52 | 122 | 139 | 127 | $-38$ |
| Other retail investment | $-14$ | 213 | 236 | 11 | ٥ | 5 | 58 | 141 | 93 | 47 | 35 | 61 | $-56$ |
| ETFs & similar | 253 | 321 | 595 | 85 | 73 | 4 | 149 | 95 | 465 | 57 | 41 | 32 | $-67$ |
| Total Demand | 3,552 | 3,806 | 3,386 | $-11$ | 782 | 802 | .227 | 1,015 | .039 | 745 | 824 | 778 | $-23$ |
| "Inferred investment" | $-81$ | $-293$ | 504 | --- | 91 | 9 | $-352$ | $-40$ | 189 | 189 | 6 | 120 | $\cdots$ |
| London PM fix (US\$/oz) | 695.39 | 871.96 | 972.35 | 12 | 924.83 | 896.29 | 871.60 | 794.76 | 908.41 | 922.18 | 960.00 | 1099.6 | 38 |
Source: World Gold Council and GFMS Ltd., March 2010, http://www.research.gold.org/supplydemand/
Data in this table are consistent with those published by GFMS but adapted to the WGC's presentation and take account of the additional demand data now available. The "inferred investment" figure differs from the "implied net (dis)investment" figure in GFMS' supply and demand table as it excludes "ETFs and similar" and "other retail investment". Note that jewellery data refer to fabrication and quarterly data differ from those for consumption in tables 1 and2. 1. Provisional. 2. Excluding any delta hedging of central bank options. 3. Equal to net retail investment from Table 1 less the 'other identified retail investment' category. 4. This is the residual from combining all the other data in the table. It includes institutional investment other than ETFs & similar, stock movements and other elements as well as any residual error. In previous editions of GDT it was referred to as the "balance".
The gold industry is a global industry with a large number of smaller gold companies and a limited number of very large players. In recent years, there has been a strong trend towards consolidation of the industry, as large players have struggled with their reserves replacement rate. While above ground reserves are increasing each year, their growth has been diminishing due to a less than 100 percent production replacement rate. This trend is reversing for the future. Current high prices are encouraging greater exploration activity, with miners pursuing copper-gold and gold-silver projects. The use of gold in jewellery manufacture has suffered, as rising prices and macroeconomic weakness curbed consumer purchases. As the economic recovery progresses, a return should be seen in the demand for gold in jewellery. Import data for India for February 2010 show the country more than tripled its imports from the same period last year. Strong demand from China, now the largest consumer of gold, is expected to continue for both jewellery and industrial applications. The factors that have supported the upward trend in the gold price remain intact. Central banks are likely to continue to be net buyers of gold as emerging economies look to diversify their reserve holdings. Institutional and retail
investment demand for gold should remain amongst concerns about the long term viability of the US dollar as the world's reserve currency, and fears that continued improvement in the US economic situation could lead to accelerated inflation.
The operations of IGE are focused on the production and exploration of highly potential mineral licences. Production is currently related to diamonds within the Angolan licences. The exploration activities are primarily focused on the advancement of the large-scale nickel project in Rönnbäcken.
Below follows a brief description of the current operations that are carried out within the IGE Group:
Alluvial diamonds is the term used to describe diamonds that have been removed by natural erosive action over millions of years from the primary source known as kimberlite. Kimberlite rock formations that contain diamonds are eroded over time by rivers and streams, and can deposit diamonds in the sediments carried by those streams farther downstream from the original source rocks. These deposits are called alluvial diamond deposits. The locations of these alluvial diamond deposits are controlled by the surrounding topography, drainage patterns, and the location of the kimberlites themselves.
Organized alluvial mining is carried out using heavy equipment. In this sort of mining, large quantities of waste materials are removed to expose the diamond-bearing gravels from the old riverbeds and adjacent ground areas. The gravels are removed for washing, sorting and separation. Alluvial mining is quite elementary, but it is based upon thorough geology field work, covering extensive areas of terrain. This necessitates the use of heavy equipment and sophisticated means.
The first phase of the alluvial diamond process is to feed the treatment plant with gravel from the licence area, which is usually done with large earth moving machines. The process to treat the gravel is done by washing the run-of-mine (ROM) ore through a sequence of washers and screens, and then it is fed into the Dense Media Separation plant (DMS-plant, which consists of a centrifuge or "cyclone".
In the DMS plant, the gravel material is mixed with water and ferrosilicon, a dense, fine-grained powder, which effectively increases the density of the process water. The resulting slurry is spun at high speeds, creating a very effective density gradient. The lighter materials rise to the top of the cyclone and are discarded as waste. The higher density indicator minerals, including diamonds, concentrate at the lower levels of the device and leave the cyclone through an opening at the bottom.
The higher density materials, recovered on the "sink" screens are further washed and the ferrosilicon material is removed. The remaining diamond-bearing materials are processed using the unique properties of diamonds as a fundamental means of recovery.
The DMS modules typically produce between 0.5 and 2 percent concentrates from the material fed to them, where the concentrate is diamondiferous, and the balance is mainly rejected to the tailings dump. The concentrates from the DMS modules are pumped to the Recovery Section. The incoming material is dewatered and fed over a sizing screen. The coarse plus 16mm material is fed to a wet X-ray machine, where the luminescent diamonds are recovered along with some transport ore. This gravel is directed to the final hand-sorting operation. Similarly, the minus 16 millimetres plus 1.25 millimetres treatment over the grease tables, the material is lightly milled in a ball mill to remove any possible surface coating.
Exploration is a process, whereby various methods are used to investigate an area of land in order to locate a mineral resource of enough size distribution as to be profitable to extract. A mineral resource is a concentration or occurrence of diamonds, natural solid inorganic material, base and precious metals, coal, and industrial minerals in or on the earth's crust in such form and quantity and of such a grade or quality that there are reasonable prospects for economic extraction. The location, quantity, grade, geological characteristics and continuity of a mineral resource are known, estimated or interpreted from specific geological evidence and knowledge.
The objective of exploration is to gradually increase the level of certainty that the explored area contains the desired mineral in such volumes that it is profitable to extract. This is done by grading the level of certainty according to below scale:
Usually, exploration work often begins with the discovery of mineralization in outcropping rock or boulders, observations of the direction of ice movement, or after confirmation that smallscale mining had historically been carried out in the area.
The methods of exploration work differ to some extent between different types of geological environments, and the different types of minerals. The fundamentals of exploration activities can, however, be outlined as follows:
Exploration is a fundamental part of the operation of all mining and metal companies, since the production of metal is dependent upon the continual addition of new deposits. At the same time, it is the part of the mineral extraction process which carries the highest level of risk, as there isn't a guarantee that the work will result in new profitable deposits.
It is of the utmost importance to the Board and management of IGE that the investors and other stakeholders have a high level of confidence in the corporate governance. Open communication, internal controls, and equal treatment of all shareholders, are important parameters in the company's quest for confidence. For this purpose, IGE has formulated the following guidelines for its corporate governance.
IGE's long-term objective is to become a leading exploration and mining company while showing respect for the environment and sustainable development.
In order to achieve its long-term objective, IGE's strategy is:
The following ethical guidelines shall be practiced in the Company, and apply to all employees of the Company. For a complete version of the Company's implemented Code of Conduct, visit www.ige.se:
Personal conduct: All employees and representatives of the Company shall behave with respect and integrity towards all business associates and partners, customers and colleagues. The management of the Company has a particular responsibility to promote openness, loyalty and respect.
Conflict of Interests: The Company's employees and representatives shall avoid situations wherein a conflict between their own personal and/or financial interests and the Company's interests may occur, and where such conflicts are unavoidable, shall inform senior management and/or the board of such conflicts so that they can be properly managed.
Confidential Information: Employees and representatives of the Company possessing confidential information in relation to the Company, shall conduct themselves accordingly safeguarding such information with great care and loyalty, and shall comply with any and all signed confidentiality statements and agreements.
Influence: The Company's employees and representatives shall neither directly nor indirectly offer, promise, request, demand or accept illegal or unjust gifts of money or any other remuneration in order to achieve a benefit.
Competition: The Company shall support fair and open competition. The Company's employees or representatives shall never take part in any activities that may constitute a breach of legislation relating to competition.
The Board aims to maintain an equity ratio in the Company in line with the company's goals, strategy and risk profile.
It is an objective of the Company to generate returns to the shareholders in the form of dividends and capital appreciation, which, at least, are on the same level as other investment possibilities of comparable risk.
The Company has only one class of shares, and there are no voting restrictions. In the cases of rights issues, all shareholders possess equal rights to subscribe to new shares.
Transactions with related parties shall be at arm's length and at fair value which, in the absence of any other pertinent factors shall be at market value. The Company's financial statements shall provide further information about transactions with related parties.
There are no limitations on trading and voting rights in the Company. Each share gives the right to one vote at the Company's Annual General Meeting of shareholders.
The Company summons the shareholders to an Annual General Meeting as soon as possible after the end of the financial year, and no later than 4 weeks prior to the meeting. Transmitted with the summons are documents in sufficient detail for the shareholders to take a position on all of the cases to be considered.
The cut-off for confirmation of attendance is set to be as short as practically possible, and the Board will arrange matters so that the shareholders who are unable to attend in person will be able to vote by proxy.
The Board of directors of IGE will, to the extent it is possible, make sure that the members of the Board of Directors and nomination committee are present at the Annual General Meeting.
The nomination committee shall act under the corporate governance of the IGE organization. The nomination committee is focused on evaluating the board of directors, and on examining the skills and characteristics that are needed among the board candidates.
The nomination committee shall identify suitable candidates for various director positions. Other responsibilities may include reviewing and changing corporate governance policies. The committee can, but is not forced to, be comprised of the
chairman of the board and representatives of the two largest shareholders in the Company. If a more suitable structure on behalf of the shareholders can be identified, the committee can be composed of others than stated above.
In appointing members to the Board, it is emphasised that the Board has the requisite competency to independently evaluate the cases presented by the Management as well as the Company's operations. It is also considered important that the Board can function well as a body of colleagues.
At least two of the Board members elected by shareholders are independent of the company's main shareholder(s).
At least half of the Board members elected by the shareholders are independent of the Company's day-to-day management and its main business relations. The following criteria are applied in order to ensure this:
The Board shall prepare an annual plan for its activities with special emphasis on goals, strategy and implementation.
The Board shall ensure that the Company has good management with clear internal distribution of responsibilities and duties.
The Board is responsible for ensuring that the Company is operated in accordance with the Company's values and ethical guidelines.
Remuneration to Board members shall be reasonable and based on the Board's responsibilities, effort, time invested, and the complexity of the enterprise. The compensation shall be a fixed annual amount. The Chairman of the Board can receive a higher compensation than the other Board members. Work in subcommittees will not be compensated in addition to the remuneration received for Board membership.
The Company's financial statements shall provide further information about the Board's compensation.
The Board decides the salary and other compensation of the
CEO, having reference to market norms and the performance of the individual.
Any performance related remuneration to the Management of the Group shall be formulated in a manner that is not, to any extent, in conflict with the long-term interest of the shareholders. Such performance based remuneration shall be based on the principle that members of the Management shall only be entitled to an increase in their performance based remuneration if the shareholders benefits from a long term sustainable value increase of their shareholdings.
The Company's financial statements provide further information about salary and other compensation to the CEO.
The Board of Directors and the Management of the Company assign considerable importance to providing shareholders and the financial market in general, timely, relevant and current information about the Company and its activities. All communication shall be carried out while maintaining sound commercial judgement, in respect of any information, which if revealed to competitors, could adversely influence the value of the Company's assets, and in accordance with the Stock Market Regulations and the information requirements outlined therein.
Sensitive information will be handled internally in a manner that minimizes the risk of leaks. All contracts to which the Company becomes a party shall contain confidentiality clauses.
The Company has clear routines regarding who is allowed to speak on behalf of the company on different subjects, and who shall be responsible for submitting information to the Oslo Stock Exchange.
Each year, the shareholders shall receive a financial calendar outlining the dates of important events such as the Annual General Meeting, the publishing of financial reports throughout the year, etc. Information to shareholders, investor relations, and the market, shall be available on the Company's web site.
The Company shall conduct open presentations of financial reports at least twice each year. Information to the shareholders is available in English.
The Board must be aware of matters of special importance to the shareholders. The Board must therefore ensure that shareholders are given the opportunity to make known their points of view at, and outside, the shareholders' Annual General Meeting. Continuous publishing of information from the Company shall aid shareholders and other investors in arriving at wellreasoned conclusions regarding the purchase and sale of shares, and in this manner, contribute to correct pricing of the shares. Significant value generators and risk factors shall be described.
The Board shall not, without specific reasons, hinder or exacerbate anyone's attempt to submit a takeover bid for the Company's activities or shares.
In situations of takeover or restructuring, it is the Board's
particular responsibility to ascertain that all shareholders' values and interests are protected.
The Company is committed to the identification, monitoring and management of risks associated with its business activities. Management is ultimately responsible to the Board for the Company's system of internal controls and risk management. The Company's risk management policies and procedures cover regulatory, legal, property, treasury, financial reporting and internal control functions. A clear organizational structure exists that shows lines of authority and control responsibilities. Each business unit is responsible and accountable for implementing procedures and controls in order to manage risks within its business.
At present the operations within each subsidiary, respectively, are financed by loans from the Parent Company (holding company of the Group). The Management of the Parent Company can easily monitor the cash outflow from the subsidiaries, as they apply for funding from the Parent Company on a two-week basis. The Group is working in accordance with a budget accepted by each entity within the Group, and the Parent Company transfers cash according to what's required in the budget. A higher cash outflow is easily noticed and followed up. The deviation has to be carefully explained and evaluated, before additional loans will be granted.
Company Management has established, within its management and reporting systems, a number of risk controls. These include:
Certain risks cannot be mitigated to an acceptable level by internal controls. Such risks are transferred to third parties in the international insurance markets, to the extent considered appropriate.
Each year the appointed auditor shall present to the Board a written confirmation that the audit satisfies established requirements of independence and objectivity. The auditor shall be present at Board meetings where the annual accounts are on the agenda, if the Board considers it to be of use. Whenever necessary, the Board shall meet with the auditor to review his view on the Company's accounting principles, risk areas, internal control routines, etc.
The Board has established, as a guideline, that the auditor may only be used as a financial advisor to the Company provided that such use of the auditor does not have the ability to affect or question the auditor's independence and objectiveness as auditor of the Company. Only the Company's CEO and/or CFO shall have the authority to enter into agreements in respect of such counselling assignments.
In an ordinary shareholders' Annual General Meeting, the Board shall present a review of the auditor's compensation paid for auditory work required by law, and any remuneration associated with other concrete assignments.
In connection with the auditor's presentation to the Board of his annual work plan, the Board should specifically consider if the auditor, to a satisfactory degree, also carries out a control function.
The Board shall arrange for the auditor to attend all Annual General Meetings.
Sustainable development is important to maintain a healthy population and economy. A majority of the population in Africa is self-supporting, and directly dependent on the vegetation and water in the immediate environment. They are therefore particularly sensitive to changes in the environment.
IGE has a strict environmental policy and requires that the environmental impact of our operations is carefully examined. If sufficient environmental legislation is missing in the countries in which we are active, IGE follows Swedish environmental jurisdiction. IGE is committed to full transparency. Our activities are carried out in close consultation with the local authorities, who have complete access to the company's methods.
The attitude towards environmental issues has changed significantly among authorities, companies and investors. Many of the world's largest asset management funds follow the UN regulations for ethical investments (PRI) concerning human right issues, health and work environment and social responsibilities. Environmental issues rank high on mining companies' agendas.
The main environmental impact from IGE's activities is usage of land, energy consumption, and the handling of waste. IGE's environmental policy states that our activity shall have the least possible negative impact on the environment. IGE will strive to use energy, land and material in an efficient and environmentally friendly way.
IGE follows SveMin's ethical guidelines for exploration work, which requires that the operator, in all possible ways, investigate if the area is protected, and if so, obtain a permit for the work.
All drilling contractors working for IGE comply with SveMin's checklist for environmentally safe machinery and workplaces. The checklist includes daily inspections to ensure that there are no leaks, or possibilities for leaks, in oil and chemicals containers, and that a sufficient quantity of oil-absorbing material is available.
An exploration permit usually requires that exploration work is carried out with minimal damage to nature, plant and animal life. Along with the exploration permit, a specification is also issued for how vehicles, drill rigs and other equipment are to be transported within, to and from the work area.
This means: the entrepreneur has to use approved hydraulic oils; rinse water must be removed from previous drill holes or waterways; and the drilling sludge has to be collected and deposited in solid moraine. IGE refrains from using track vehicles in wetlands and outcropping rock, and during mating seasons. Drill sites are continuously cleaned to keep the environmental impact to a minimum.
IGE's commitment to CSR is based on a number of principles, including the upholding of high ethical standards; good corporate governance; working safely and responsibly; the minimization of our environmental footprint; facilitating free and open sharing of opinions, skills and knowledge; and the delivery of benefits to our stakeholders and to society at large.
We conduct our business based on the principles of high ethical standards; good corporate governance; safe and responsible working conditions; minimal environmental footprint; encouraging open dialogue and skill transfer; and of creating value for our shareholders and the communities in which we operate. With operations in Scandinavia and Africa, our CSR activities are varied, but aim to reflect our long-term approach of contributing to local development and skill transfer.
Our CSR strategy includes an overall Code of Conduct for the Group, as well as specific guidelines for individual operations. IGE applies, when relevant, the advanced Nordic legislation and guidelines for the Environment, Health and Safety, including in our African operations. CSR is a vital part of our business culture and thus remains a priority.
For a complete version of the IGE "code of conduct" please visit: www.ige.se
The Company has been listed on the Oslo Stock Exchange SMB list since 1997. One lot of shares corresponds to 2,000 shares on the OSE.
The Company had 795,709,953 outstanding shares of a single type as of the 31st of December 2009. The shares have a nominal value of 0.05 SEK. They are registered at Nordic Central Security Depositary (Euroclear in Sweden and VPS in
Norway, central clearing organizations for stock and financial instruments) under the ISIN code SE0000378119.
The total nominal value of the shares is SEK 39,785,497. All shareholders qualified to vote are given votes according to the total number of shares they hold, without limitations. Each share has equal rights to the profit and assets of the Company.
| 2009 | 2008 | 2007 | 2006 | 2005 | ||
|---|---|---|---|---|---|---|
| Number of outstanding shares at beginning of reporting period |
Number | 418,161,828 | 341,000,000 | 341,000,000 | 311,000,000 | 198,200,000 |
| New share issue | Number | 377,548,125 | 77,161,828 | - | 30,000,000 | 112,800,000 |
| Number of outstanding shares at the end of reporting period |
Number | 795,709,953 | 418,161,828 | 341,000,000 | 341,000,000 | 311,000,000 |
| Average number of shares | Number | 538,509,297 | 364,988,889 | 341,000,000 | 313,000,000 | 266,692,778 |
| Operating result | TSEK | -66,859 | -49,800 | -66,023 | -29,393 | -16,724 |
| Result after tax | TSEK | -65,782 | -56,787 | -62,529 | -36,404 | -23,207 |
| Operating result per share | SEK | -0.124 | -0.136 | -0.194 | -0.094 | -0.063 |
| Result after financial items per share | SEK | -0.122 | -0.156 | -0.181 | -0.116 | -0.087 |
| Result per share after tax | SEK | -0.122 | -0.156 | -0.181 | -0.116 | -0.087 |
| Shareholders equity per share before dilution | SEK | 0.385 | 0.668 | 0.718 | 0.640 | 0.393 |
| Dividend | TSEK | - | - | - | - | 25,308 |
| Price per share at the end of reporting period | SEK | 0.58 | 0.65 | 2.34 | 5.05 | 2.17 |
The equity is SEK 39.8 million, composed by 795,709,953 shares. Each investor is entitled to vote in the company's meetings for the complete quantity of shares without any limit in voting rights. Each share carries the same right to the company's profits and assets.
Listed below are the twenty largest shareholders in IGE according to the VPS register in Norway, and the Euroclear register in Sweden, as of the 1st of March 2009. Please note that this
list also consists of nominee shareholders that hold shares on behalf of their clients.
| Shareholder | Number of Shares | % of total number of shares |
|---|---|---|
| ERIK PENSER FK AB | 34,494,388 | 4.3% |
| SIX SIS AG 25PCT | 14,358,280 | 1.8% |
| AVANZA BANK AB MEGLERKONTO | 12,286,289 | 1.5% |
| FIRST SECURITIES AS EGENHANDELSKONTO | 12,000,000 | 1.5% |
| SILVERCOIN INDUSTRIES AS | 11,350,000 | 1.4% |
| BIUREBORGH LEIF ÅKE | 10,000,000 | 1.3% |
| DANSKE BANK A/S | 9,540,451 | 1.2% |
| NORDNET BANK AB | 8,446,544 | 1.1% |
| THOMASSEN BJØRN ARILD | 7,010,000 | 0.9% |
| SHB STOCKHOLM CLIENTS ACCOUNT | 6,272,373 | 0.8% |
| FLATÅS KARL MARTIN | 6,196,000 | 0.8% |
| EDRO AS | 6,000,000 | 0.8% |
| KNUDSEN ELDRID | 4,980,000 | 0.6% |
| SKANDINAVISKA ENSKILDA BANKEN | 4,908,416 | 0.6% |
| SIX-SEVEN AS | 4,500,000 | 0.6% |
| FISKERSTRAND INGAR | 3,885,000 | 0.5% |
| SIX SIS AG | 3,558,334 | 0.4% |
| BORGUND INVEST AS NIL | 3,100,000 | 0.4% |
| BORG VEKST AS | 3,000,000 | 0.4% |
| ELV INVEST AS | 3,000,000 | 0.4% |
| The 20 largest holdings in total | 168,886,075 | 21.2% |
| Others | 626,823,878 | 78.8% |
| Total | 795,709,953 | 100.0% |
The number of shareholders was about 6,800 as of the 31st of December 2009.
The Board of Directors and the Chief Executive Director of IGE Resources AB (publ), Swedish corporate identification number 556227-8043, domiciled in Stockholm, hereby submit the annual accounts and the Parent Company accounts for the financial year January 1st 2009 to December 31st 2009. The Company changed its name to IGE Resources as of the 8th of April 2010. The former name was International Gold Exploration IGE AB.
IGE's accounts are in thousands of Swedish Crowns (TSEK), unless otherwise specified.
IGE Resources AB (IGE) is a company listed on the Oslo Stock Exchange. Its activities are mineral exploration and mining, the Company holds concessions, shares and parts of other exploration companies. The Parent Company and its subsidiaries are active in Angola, Sweden and Kenya.
| (TSEK, except per share data) | 2009 | 2008 | 2007 | 2006 | 2005 | |
|---|---|---|---|---|---|---|
| Other revenues | 15,169 | 49,916 | - | - | 293 | |
| Operating result | -66,859 | -49,800 | -66,023 | -29,393 | -23,245 | |
| Net result | -65,782 | -56,787 | -62,529 | -36,404 | -23,207 | |
| Investments | 35,463 | 159,096 | 62,770 | 19,701 | 15,656 | |
| Cash at the end of the period | 40,807 | 39,639 | 127,827 | 136,674 | 54,807 | |
| Balance sheet total | 327,276 | 287,561 | 263,699 | 223,450 | 130,776 | |
| the period | Interest bearing loans at the end of | 12,065 | 24,929 | - | - | - |
| Basic earnings per share | -0.12 | -0.16 | -0.18 | -0.12 | -0.09 |
and financial feasibility report) for the Luxinge Diamond project to Endiama, the state diamond mining company of Angola. Once the EVTE is approved it will enable IGE to move forward with the commercialisation of the project, and to initiate sales of diamonds. The approval is pending.
project. The NI 43-101 Technical Report on the Preliminary Assessment of the Rönnbäcken Nickel Project in northern Sweden provided an independent evaluation and estimated the net present value of the project to be USD142 million. According to the PA, the project has the potential to outline additional mineral resources. The company has established a target size for the resource of 400 to 450 million tonnes grading 0.10 to 0.15 percent nickel in sulphide. Based on these estimates and the potential to raise nickel recovery rates, IGE believes there is scope to further improve project economics.
Sales during 2009 amounted to SEK 0 (SEK 0). Results from operations during 2009 amounted to SEK -66.9 million (SEK -49.8 million). Results after financial items amounted to SEK -65.8 million (SEK -56.8 million). Results after taxes during 2009 amounted to SEK -65.8 million (SEK -56.8 million). Net result per share amounted to SEK -0.12 (SEK -0.16). Cash flow was SEK 1.4 million (SEK -88.4 million), and the balance sheet amounted to SEK 327.3 million (SEK 287.6 million) at period end.
IGE carried out a new share cash issue of 235,868,789 shares in 2009 (approx SEK 72 million was received by the Company before deduction of transaction related expenses), corresponding to a dilution of existing shares of about 30%.
The remaining part of the convertible loan that was issued in November 2008 (SEK 5.5 million) has during the reporting period been fully converted to shares. The total amount of the convertible loan was SEK 14 million. This resulted in an additional 11,000,000 shares being issued along with an increase of other capital contributions of SEK 4.9 million. The dilution of the existing shareholders as a result of the conversion amounted to about 3%. during the reporting period.
The convertible loan amounting to SEK 25 million that was is-
sued in March 2009 has during the reporting period been fully converted to shares. This resulted in an additional 50,000,000 shares have been issued during the reporting period along with an increase of other capital contributions amounting to SEK 22.5 million. The dilution of the existing shareholders as a result of the conversion amounted to about 10%.
The Board of IGE decided on, May 27, 2009, to issue a bridge loan totalling SEK 20 million. The loan was given by a restricted number of creditors in Sweden. The maturity date of the loan is December 31, 2009 and the loan runs with a fixed annual interest rate of 12%. As a part of the compensation for lending the money, the creditors received a total of 15,000,000 newly issued warrants to subscribe for new shares in the company.
Of the above warrants, 12,000,000 were exercised on the 6th of July 2009 resulting in an issue of 12,000,000 new shares in IGE. The subscription price amounted to 0.38 SEK per share resulting in the Company receiving MSEK 4.5 in cash.
In total, 3,000,000 of the above warrants are still outstanding. The end date of these warrants is June 30th 2010.
According to an agreement with the creditors the loan was repaid in shares. The repayment of the loan resulted in 68,000,000 new shares being issued at a price per share of SEK 0,29.
IGE made, during the fourth quarter of 2008, a voluntary offer to acquire all outstanding shares in IGE Nordic AB (publ) ("IGE Nordic"). The acquisition was made through an all share offer, giving the shareholders in IGE Nordic four new shares in IGE for each share held in IGE Nordic.
By the end of 2009, IGE owned 99.6 percent of IGE Nordic AB (26,710,291 shares of 26,816,042 in total). The consideration for the additional shares purchased during 2009 amounted to SEK 460 thousand (18 653).
IGE has full ownership of six subsidiaries. These are:
IGE Diamond AB, corp. id no: 556668-1630, domiciled in Stockholm
IGE Ltd, corp. id no: 20034, domiciled in British Virgin Islands IGE Kenya Ltd, corp. id no: 27481, domiciled in Nairobi, Kenya.
In addition IGE has 3 dormant subsidiaries.
IGE has part-ownership of one subsidiary, which is:
IGE Nordic AB, corp. id no: 556493-3199, domiciled in Stockholm (99.6 percent held by IGE)
According to the rules of the Oslo Stock Exchange, the Norwegian code of practice for Corporate Governance ("The Code") must be applied by all companies on the Oslo Stock Market.
IGE aims to comply with the code, and wherever there may be deviations from the company code, IGE will provide regular information regarding such deviations along with explanations for the deviations.
According to the Code, a company's board of directors shall establish an audit committee. IGE's Board of Directors has resolved not to establish an audit committee. Instead, the Board of Directors (excluding the President) shall ensure the quality of financial reporting, maintain regular contacts with auditors, evaluate audit work, assist the nomination committee in preparations pending the election of auditors, ensure that the company has a satisfactory system for internal control and address other related issues which would otherwise be delegated to an audit committee. The decision of the Board of Directors not to establish an audit committee was taken in that these issues are of such significance that they should be addressed by the Board as a whole (excluding the President). In addition, addressing the issues in this way appears appropriate given the size of the accounting department within the Group.
The risk implies that the Group is not able to find venture capital to the extent that it needs, in order to finance the Group's activities. The Group has developed its projects to a point where they are close to being revenue generating. The need for additional venture capital will thereby decrease significantly. The Company may still be in need of an additional capital contribution before it is able to be self-sustainable. Under the current global economic situation, whereby the supply of venture capital has decreased, and the conditions for attracting capital have gradually deteriorated from the Company's point of view, raising additional funds has become more difficult. There is no guarantee that the Company will continue to be able to finance substantial negative cash flows. Nor are there any guarantees that the Company will be able to raise new capital or obtain credit at favourable terms and in the amount required to continue pursuing on-going and future business activities, if such new financing becomes necessary.
IGE and its subsidiaries face a number of potential risks and uncertainties in its areas of operation, which may have a significant impact on the ability to achieve its operational plans for development and production of mineral assets. These risks are further discussed in the Note 2 below.
The number of employees amounted to 151 by the end of 2009, compared with 224 at the beginning of the year. The distribution of the employees is disclosed in Note 4.
The following new guidelines for the remuneration of management personnel were resolved at the Annual General Meeting of IGE 2009:
IGE shall have a level of remuneration and employment benefits necessary to recruit and to retain a management of high competence and sufficient capacity to reach the set goals, and shall also consider the level of competence of the individual manager. Market value, in other words, is the guiding principle in setting pay and other remuneration for management personnel in IGE.
The basic remuneration of management personnel is a fixed pay based on the market, which is determined on an individual basis according to the criteria above and the special skills of the person.
Retirement benefits for management shall be determined based on the market for equivalent positions, and are adjusted according to the special skills of the person. The retirement benefits shall, as near as possible, be based on payment-based retirement solutions.
Non-monetary benefits (for example cell phone and computer) for management personnel shall be of the type that assist in the performance of work, and are consistent with customary benefits in the market.
Termination compensation and severance pay shall in no case exceed twelve months' pay.
Non-fixed pay arrangements shall be available, in addition to fixed-pay arrangements, in applicable situations. This type of compensation shall be clearly related to specific set goals, based on simple and transparent constructions.
In those cases where non-fixed pay is realized, the pay shall be determined based on (a) achieving previously set goals on a group and individual level, which are related to management and production results, as well as the financial development of the Company and (b) taking into consideration the person's personal development.
The non-fixed pay shall always be limited to a certain maximum which is a specified part of the person's annual pay.
All matters relating to share benefit programs shall be decided upon by the Annual General Meeting.
The guidelines shall cover the Managing Director and other positions which are part of the group management.
The Board proposes that the AGM approves that the remuneration guidelines for the 2010 year of activities in substance shall be the same as the guidelines resolved by the Annual General Meeting of 2009. These guidelines shall be in force during the period ending at the AGM of 2011. The Board's proposal can be downloaded on the Company's website: www.ige.se.
During 2009, investments (in gross amounts) in mineral interests, machinery and equipment amounted to SEK 35.5 million (SEK 159.1 million). The investments are mainly related to capitalized exploration and pre production expenditures such as drilling, soil sampling and test mining activities in Luxinge, Angola etc.
Impact Assessment (EIA) to be included in the application. The Exploitation Concession grants the right to carry out mineral exploitation for a twenty-five year period.
The operation of the Parent Company relate to direction and management of the Group's operations.
The following non restricted funds are at the disposal of the Annual General Meeting:
| 196,783,839 | |
|---|---|
| Loss of the period | -23,499,537 |
| Accumulated loss | -95,547,108 |
| Share premium reserve | 315,830,484 |
The Board of Directors and the Chief Executive Officer suggest the following disposition:
Balance brought forward: SEK 196,783,839
| (TSEK) | Note | Jan-Dec 2009 | Jan-Dec 2008 |
|---|---|---|---|
| Revenue from sales | - | - | |
| Other revenues | 3 | 15,169 | 49,916 |
| Other external expenses | 7,8,9 | -51,918 | -31,883 |
| Personnel expenses | 5,6 | -23,110 | -28,225 |
| Other operating expenses | 10 | -1,069 | - |
| Depreciations and writedowns | 11,12 | -5,931 | -39,608 |
| Operating result | -66,859 | -49,800 | |
| Financial revenue | 6,136 | 8,249 | |
| Financial expenses | 15 | -5,059 | -15,236 |
| Total financial items | 15 | 1,077 | -6,987 |
| Result before tax | -65,782 | -56,787 | |
| Income tax | 21 | 0 | 0 |
| Result for the year | -65,782 | -56,787 | |
| Result for the year attributable to: | |||
| Equity holders of the Parent Company | -65,782 | -46,351 | |
| Minority interest | - | -10,436 | |
| Result for the year | -65,782 | -56,787 | |
| Result per share before dilution | 22 | -0.12 | -0.16 |
| Result per share after dilution | 22 | -0.12 | -0.16 |
| TSEK | Jan-Dec 2009 | Jan-Dec 2008 |
|---|---|---|
| Net result for the year | -65,782 | -56,787 |
| Other comprehensive income | ||
| Exchange differences during the year | 6,798 | -8,502 |
| Total other comprehensive income | 6,798 | -8,502 |
| Total comprehensive income for the year | -58,984 | -65,289 |
| Attributable to: | ||
| Equity holders of the Parent Company | -58,984 | -65,289 |
| (TSEK) | Note | 2009-12-31 | 2008-12-31 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Intangible fixed assets | |||
| Mineral interests | 11 | 154,257 | 112,938 |
| Tangible fixed assets | |||
| Plant and machinery | 12 | 47,700 | 52,933 |
| Long-term financial assets | |||
| Share of equity in associated companies | 13 | 25,593 | 25,731 |
| Receivables on associated companies | 26 | - | 3,090 |
| Long-term receivables | 18 | 40,370 | 43,695 |
| Total fixed assets | 267,920 | 238,387 | |
| Current Assets | |||
| Accounts receivable | 27 | 262 | 196 |
| Other receivables | 19 | 17,249 | 4,965 |
| Prepaid expenses and accrued income | 16 | 1,038 | 4,374 |
| Cash and cash equivalents | 23 | 40,807 | 39,639 |
| Total current assets | 59,356 | 49,174 | |
| TOTAL ASSETS | 327,276 | 287,561 | |
| EQUI TY |
25 | ||
| Equity attributable to equity holders of the parent company | |||
| Share capital | 39,785 | 19,600 | |
| Unincorporated share capital | - | 1,308 | |
| Other capital-contribution | 451,041 | 348,277 | |
| Reserves | 845 | -5,954 | |
| Retained earnings and profit for the year | -185,506 | -119,507 | |
| Total equity | 306,165 | 243,724 | |
| LIABILITIES | |||
| Long term liabilities | |||
| Convertible loan | - | 5,500 | |
| Interest bearing long term liabilities | 28 | 11,974 | 19,429 |
| Other long term liabilities | 91 | - | |
| Total long term liabilities | 12,065 | 24,929 | |
| Current liabilities | |||
| Accounts payable | 29 | 2,297 | 10,391 |
| Other liabilities | 30 | 2,386 | 1,372 |
| Accrued expenses and prepaid income | 17 | 4,363 | 7,145 |
| Total current liabilities | 9,046 | 18,908 | |
| TOTAL EQUI TY AND LIABILITIES |
327,276 | 287,561 | |
| Pledged assets | 20 | 710 | 6,670 |
(TSEK)
| 2008 | Share capital |
Other capital contribu tion |
Exchange differences |
Retained earnings and profit for the year |
Total | Minority interest |
Total Equity |
|---|---|---|---|---|---|---|---|
| Balance at 1 January 2008 | 17,050 | 268,102 | 2,548 | -75,685 | 212,015 | 32,884 | 244,899 |
| Net result for the year | -46,351 | -46,351 | -10,436 | -56,787 | |||
| Other total result items | |||||||
| Exchange differences | -8,502 | -8,502 | -8,502 | ||||
| Transactions with shareholders: | |||||||
| New share issue | 2,550 | 62,440 | 64,990 | 64,990 | |||
| Disposal of subsidiary to minority interest company |
0 | 348 | 348 | ||||
| Non registered share issue | 1,308 | 17,345 | 18,653 | 18,653 | |||
| Acquisition of minority interest in subsidiary |
2,529 | 2,529 | -22,796 | -20,267 | |||
| Issued call options | 390 | 390 | 390 | ||||
| Closing balance at 31 December 2008 |
20,908 | 348,277 | -5,954 | -119,507 | 243,724 | 0 | 243,724 |
| Balance at 1 January 2009 | 20,908 | 348,277 | -5,954 | -119,507 | 243,724 | 243,724 | |
| Net result for the year | -65,782 | -65,782 | -65,782 | ||||
| Other total result items | |||||||
| Exchange differences | 6,799 | 6,799 | 6,799 | ||||
| Transactions with shareholders: | |||||||
| New share issue | 18,877 | 108,628 | 127,505 | 127,505 | |||
| Acquisition of minority interest in subsidiary |
-217 | -217 | -217 | ||||
| Issued call options | 120 | 120 | 120 | ||||
| Costs referable to fundraising | -5,984 | -5,984 | -5,984 | ||||
| Closing balance at 31 December 2009 |
39,785 | 451,041 | 845 | -185,506 | 306,165 | 0 | 306,165 |
The total number of shares outstanding amounted to 795,709,953 as of the 31st of December 2009, no dividends had been distributed. Existing reserves refer to exchange differences due to operations in foreign currency. The accumulated exchange difference amounted to SEK 845 (-5,954) thousands.
| (TSEK) | Note | 2009 | 2008 |
|---|---|---|---|
| Cash flow from operations | |||
| Result after financial items | -65,782 | -56,787 | |
| Adjustments for items not included in cash flow* | 11,644 | -15,928 | |
| Income tax paid | - | - | |
| Total cash flow from operations before change in working capital | -54,138 | -72,715 | |
| Change in working capital | |||
| Change in inventories | - | 16 | |
| Change in receivables | 689 | -4,874 | |
| Change in liabilities | -8,098 | -363 | |
| Total cash flow from operations | -61,547 | -77,936 | |
| Cash flow used for investments | |||
| Cash holdings in acquired associated company | - | -1,617 | |
| Sale of associated company | 7,829 | - | |
| Acquisition of intangible assets | 11 | -56,227 | -46,842 |
| Sale of intangible assets | 11 | 2,000 | |
| Acquisition of tangible assets | 12 | -223 | -40,902 |
| Sale of tangible assets | 12 | 226 | - |
| Acquisition of shares in associated companies | - | -4,192 | |
| Acquisition of financial assets | - | -10,812 | |
| Sale of financial assets | - | 6,078 | |
| Total cash flow used for investments | -46,396 | -96,670 | |
| Financial activities | |||
| New share issue | 115,681 | 65,380 | |
| Raised credits | 91 | 20,800 | |
| Amortization of debt | -6,387 | - | |
| Total cash flow from financial activities | 109,385 | 86,180 | |
| Cash flow for the year | 1,443 | -88,426 | |
| Cash and bank at 1 January | 39,639 | 127,827 | |
| Currency exchange difference | -275 | 238 | |
| Cash and bank at the end of reporting period | 40,807 | 39,639 | |
| *Adjustments for items not included in cash flow | |||
| Depreciations and write downs on intangible assets | 4,583 | 22,699 | |
| Depreciations and write downs of tangible assets | 1,480 | 2,024 | |
| Exchange gain | - | -29,732 | |
| Exchange loss | 19,134 | - | |
| Capital gain | -13,843 | - | |
| Change of interest receivable | - | 5,010 | |
| Profit from sale of intangible fixed asset | - | -16,228 | |
| Others | 290 | 299 | |
| Total | 11,644 | -15,928 |
Paid interest amounted to 1,933 (864) TSEK and received interest amounted to 80 (3,609) TSEK.
| (TSEK) | Note | Jan-Dec 2009 | Jan-Dec 2008 |
|---|---|---|---|
| Net turnover | - | - | |
| Revenue | 3 | 10,646 | - |
| Other external expenses | 7,8,9 | -15,182 | -9,137 |
| Personnel expenses | 5,6 | -8,250 | -7,517 |
| Depreciations | 11,12 | -110 | -131 |
| Operating result | -12,896 | -16,785 | |
| Financial revenue | 15 | 1,159 | 2,849 |
| Financial expenses | 15 | -11,825 | -12,907 |
| Total financial items | -10,666 | -10,058 | |
| Result before tax | -23,562 | -26,843 | |
| Income tax | 21 | 62 | 0 |
| Result for the year | -23,500 | -26,843 |
| (TSEK) | Note | 2009-12-31 | 2008-12-31 |
|---|---|---|---|
| ASSETS | |||
| Fixed assets | |||
| Tangible fixed assets | |||
| Plant and machinery | 12 | 112 | 236 |
| Long-term financial assets | |||
| Shares in subsidiaries | 14 | 85,635 | 90,474 |
| Receivables related to subsidiaries | 33 | 276,497 | 190,234 |
| Receivables on associated companies | 26 | - | 5,447 |
| Total fixed assets | 362,244 | 286,391 | |
| Current Assets | |||
| Accounts receivable | 27 | 14 | - |
| Other receivables | 19 | 11,353 | 781 |
| Prepaid expenses and accrued income | 16 | 248 | 314 |
| Cash and cash equivalents | 23 | 1,207 | 5,227 |
| Total current assets | 12,822 | 6,322 | |
| TOTAL ASSETS | 375,066 | 292,713 | |
| SHAREH OLDERS EQUI TY |
25 | ||
| Restricted equity | |||
| Share capital | 39,785 | 19,600 | |
| Non registered share capital | - | 1,308 | |
| Statutory reserve | 111,345 | 111,345 | |
| Total restricted equity | 151,130 | 132,253 | |
| Non restricted equity | |||
| Share premium reserve | 315,830 | 212,891 | |
| Retained earnings and profit for the year | -119,047 | -95,547 | |
| Total non restricted equity | 196,783 | 117,344 | |
| Total shareholders equity | 347,913 | 249,597 | |
| LIABILITIES | |||
| Long term liabilities | |||
| Convertible loan | - | 5,500 | |
| Interest bearing long term liabilities | 28 | 11,974 | 19,429 |
| Long term intercompany liabilities | 33 | 9,678 | 10,000 |
| Total long term liabilities | 21,652 | 34,929 | |
| Current liabilities | |||
| Accounts payable | 29 | 2,063 | 4,749 |
| Other liabilities | 30 | 640 | 95 |
| Accrued expenses and prepaid income | 17 | 2,798 | 3,343 |
| Total current liabilities | 5,501 | 8,187 | |
| TOTAL SHAREH OLDERS EQUI TY AND LIABILITIES |
375,066 | 292,713 | |
| Pledged assets | 20 | 599 | 6,473 |
| (TSEK) | Restricted Equity | Non restricted Equity | ||||
|---|---|---|---|---|---|---|
| 2008 | Share capital |
Statutory reserve | Share premium reserves |
Retained earnings and result for the year |
Total Equity |
|
| Balance as at 1 January 2008 | 17,050 | 111,345 | 132,716 | -68,704 | 192,407 | |
| Result for the year | -26,843 | -26,843 | ||||
| Transaction with shareholders: | ||||||
| Payment of call options | 390 | 390 | ||||
| New share issue | 2,550 | 62,440 | 64,990 | |||
| Non registered share capital | 1,308 | 17,345 | 18,653 | |||
| Closing balance at 31 Dec 2008 | 20,908 | 111,345 | 212,891 | -95,547 | 249,597 | |
| 2009 | ||||||
| Balance as at 1 January 2009 | 20,908 | 111,345 | 212,891 | -95,547 | 249,597 | |
| Result for the year | -23,500 | -23,500 | ||||
| Received Group's contribution | 174 | 174 | ||||
| Transaction with shareholders: | ||||||
| Payment of call options | 120 | 120 | ||||
| Costs related to the capitalisation of the Company |
-5,984 | -5,984 | ||||
| New share issue | 18,877 | 108,629 | 127,506 | |||
| Closing balance at December 31 2009 | 39,785 | 111,345 | 315,830 | -119,047 | 347,913 |
The share capital consisted of 795,709,953 shares with the voting power of one vote per share. Each share has a face value of SEK 0.05.
| (TSEK) | 2009 | 2008 |
|---|---|---|
| Cash flow from operations | ||
| Result after financial items | -23,562 | -26,843 |
| Adjustments for items not included in cash flow* | -1,043 | 5,440 |
| Income tax paid | - | - |
| Total cash flow from operations before change in working capital | -24,605 | -21,403 |
| Change in working capital | ||
| Increase/decrease receivables | -86,037 | -105,325 |
| Increase/decrease in liabilities | -2,686 | -3,315 |
| Total cash flow from operations | -113,328 | -130,043 |
| Cash flow used for investments | ||
| Sale of tangible assets | - | - |
| Acquisition of tangible assets | 14 | -25 |
| Acquisition of financial assets | - | -1,581 |
| Sale of financial assets | - | 6,079 |
| Total cash flow used for investments | 14 | 4,473 |
| Financial activities | ||
| New share issue | 115,681 | 65,380 |
| Raised credits | - | 34,929 |
| Amortization of debt | -6,387 | - |
| Total cash flow from financial activities | 109,294 | 100,309 |
| Cash flow for the year | -4,020 | -25,261 |
| Cash and bank at 1 January | 5,227 | 30,488 |
| Cash and bank at the end of reporting period | 1,207 | 5,227 |
| *Adjustments for items not included in cash flow | ||
| Depreciations and write downs of tangible assets | -1, 280 | 130 |
| Write down short term investment | - | 5,011 |
|---|---|---|
| Capital gain | - | 299 |
| Others | 237 | - |
| Total | -1,043 | 5,440 |
Paid interest amounted to 1 008 (193) TSEK and received interest amounted to 24 TSEK (645).
The Parent Company IGE Resources AB (publ), Swedish corporate identity number 556227-8043 is a joint stock corporation, domiciled in Stockholm. The corporation's activities consist of mining and mineral prospecting. The Annual Report and Parent Company Report for IGE Resources AB (publ) was established by the board on the 21st of April 2009 and will be submitted to the Annual General Meeting for approval on the 6th of May 2010.
The Group's Reports include the Parent Company and its subsidiaries. Subsidiaries are the companies in which the Parent Company has a controlling interest, which involves the possession of more than 50 percent of votes by the Parent Company. The Group's Reports have been compiled in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Boards (IASB), and the interpretation of the International Financial Reporting Interpretations Committee (IFRIC) which was approved by the EU-commission for use within the EU. The Group's Reports and the Parent Company's Annual Report were also established according to the Swedish laws, and apply the "RR 30:05, "Kompletterande redovisningsregler för koncerner", which was published by Redovisningsrådet. This financial Group Report is the third to be based according to IFRS.
The consolidated accounts are based on historical acquisition costs, except for financial instruments, which are accounted for at fair value. All amounts are in Swedish crowns thousands (TSEK), unless otherwise noted.
During the year the Group introduced the following new and amended IASB standards and interpretations from IFRIC with effect from 1 January 2009:
The Parent Company has made its annual report according to
"Årsredovisningslagen (1995:1554)" and the "Rådet för finansiell rapporterings" recommendation, Redovisning för juridiska personer. According to the "Rådet för finansiell rapportering", the Parent Company shall apply all EU approved IFRS statements as far as possible within the framework for the "Årsredovisningslagen", and with consideration given to the relationship between accounting and taxation. The recommendation states, that exceptions and additional conditions shall be done in accordance with the IFRS. There are no existing differences between the accounting of the Parent Company and the rest of the Group.
The following standards, amendments and interpretations of existing standards, not yet approved by the EU, may come into effect in future financial reports of IGE.
IFRS 3R, Business Combinations and IAS 27R, Consolidated and Separate Financial Statements adopted by the EU on 3 June 2009). IFRS 3R introduces a number of changes in the reporting of business combinations that will affect the level of reported goodwill, the reported result in the period in which the combination takes place as well as future reported results. IAS 27R requires changes in shareholdings in a subsidiary whereby the majority shareholder does not lose its control to be recognised in equity. This means that such transactions no longer give rise to goodwill or result in any gains or losses. In addition, IAS 27R changes the reporting of losses arising in subsidiaries and measurement when control of a subsidiary is lost. IGE intends to apply this standard as of 1 January 2010. The revisions to IFRS 3R and IAS 27R will affect the reporting of future acquisitions and divestitures as well as transactions with minority shareholders.
Other standards and interpretationis of existing standards that have come in to effect as from January 1st 2010 are appraised to not have any impact on the accountings of IGE.
Group accounting was carried out according to the acquisition method. Acquired subsidiaries are accounted for from the date controlling influence over the subsidiary takes place (time of acquisition). Subsidiaries are the companies in which the Parent Company has a controlling interest, which involves the possession of more than 50 percent of votes by the Parent Company. The balance sheets of the subsidiaries located outside Sweden are converted using the current exchange rates of the last day of the reporting period. The currency rate used in the income statements is the average rate for the entire reporting period. All group transactions and group unsettled matters, and profit and losses for transactions between group
companies that are put into effect, will be eliminated at the consolidation.
A subsidiary's assets and liabilities are included in the Group accountings from the date of the acquisition, which is the day when the Group obtains controlling influence of the Company. The consolidation of a company is done until such controlling influence ceases to exist. Controlling influence is considered to exist when the Group has the right to form the future strategies of a subsidiary, in order to achieve economic advantages.
A minority interest is the part of a subsidiary's result and net assets that is not, directly or indirectly, owned by the parent company. The minority interest's part of the result is included in the consolidated result after tax. The minority interest's part of the equity is included in the consolidated balance sheet of the Group, but is accounted for separately from the equity that is related to the shareholders of the parent company.
Current assets and current liabilities are composed of values that can be regained or paid within twelve months, from the date of the balance sheet. The other assets and liabilities are accounted for as tangible fixed assets and long-term liabilities, respectively.
Companies, that are not considered to be a Group subsidiary, but in which the Group has substantial influence are accounted for as associated companies. The shares in associated companies are accounted for based on its share of equity. Results from associated companies are accounted for as financial revenue or financial cost, respectively.
Interest on loans raised for the purchase of machines and equipment for extraction of minerals is capitalized according to the accounting principle for tangible assets. Capitalization of interest related to such lending is made during the period of construction.
The following currency rates have been used in preparing the annual report.
| 31/12/2009 | Closing day rate | Average rate (period) |
|---|---|---|
| 1 NOK in SEK | 1.24 | 1.22 |
| 1 KES in SEK | 0.10 | 0.10 |
| 1 USD in SEK | 7.19 | 7.65 |
| 1 Euro in SEK | 10.32 | 10.63 |
| 1 BIF in SEK | 0.0059 | 0.0064 |
| 31/12/2008 | ||
| 1 NOK in SEK | 1.10 | 1.17 |
| 1 KES in SEK | 0.11 | 0.10 |
| 1 USD in SEK | 7.77 | 6.59 |
| 1 Euro in SEK | 10.99 | 9.63 |
| 1 BIF in SEK | 0.0065 | 0.0057 |
The financial statements are presented in SEK, which is IGE's functional currency, as well as being the presentation currency. Transactions in foreign currency are accounted for in the functional currency, at the current rate of exchange of the transaction date. Monetary assets and liabilities are converted per the balance sheet date, at the day's current exchange rate. Currency differences which arise during conversion are accounted for in the income statement. Non-monetary assets and liabilities that are accounted for at historical acquisition value are converted using the currency rate at the time of the transaction. Non-monetary assets and liabilities that are accounted for at accrued expenses are converted to the functional currency, using the current rate at the time of the evaluation to a real value. The group's subsidiaries are independent, and their assets and liabilities are valued at the closing currency rates at the end of the reporting period. Income statements are converted to the average of currency rates for the entire reporting period. Exchange differences that may occur will affect the Group's result, in that the overall liability of the Group increases or decreases in line with the currency, in which the debt is accounted, compared to the claim in SEK in the balance sheet of the Parent Company.
Tangible assets consist of machines and furnishings. Machines and furnishings are recorded in the balance sheet using the acquisition price reduced by the accumulated write-down according to plan and possible write downs. Depreciation of tangible assets is done linearly over the use of the assets, which on an individual basis, is estimated to be between five to ten years.
Technical installations and equipment are depreciated systematically over the assets' expected useful life. The estimated useful life is ten years for technical installations and five years for equipment.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified from exploration and evaluation expenditure (intangible) to mine property and development assets (tangible). As of year-end, 2009, the Group had not capitalized any mine properties and development expenditures in the balance sheet. The need to make a provision for possible restoration expenses is continuously being assessed, so that at the end of the reporting period, the need to make such provisions is considered unessential.
The carried amounts of mine properties and development (including initial and any subsequent capital expenditure) are depreciated to their estimated residual value over the estimated useful lives of the specific assets concerned, or the estimated life of the associated mine or mineral lease, if shorter. Provisions for possible restoration expenses are not included in the cost of obtaining the projects as they are currently not in operations.
mineral interests (exploration and evaluation expenditure) External direct expenditures related to exploration and evaluation costs, including the costs of acquiring licences, are capitalized as exploration and evaluation assets on an area of interest basis. Exploration and evaluation assets are only recognised if the rights of the area of interest are current, and either:
All capitalized exploration and evaluation expenditure for pending projects are monitored for indications of impairment on the basis of cash-generating units. The cash generating unit shall not be larger than the area of interest. If sufficient data exists to determine technical feasibility and commercial viability, and facts and circumstances suggest that the carrying amount exceeds the recoverable amount, the capitalized expenditure which is not expected to be recovered is charged to the income statement.
IGE has paid investment guarantees for four licences by the end of the reporting period; Luxinge, Lacage, Luanguinga and Cariango. These receivables are related to deposits that will be refunded when IGE and the Angolan state Diamond Company, Endiama, have agreed that IGE has fulfilled its obligations according to the contracts related to the licences. These receivables are valued at cost of obtainment.
The group's income is accounted for when the essential risks and benefits related to the owning of the inventory have been transferred to the buyer. The right of owning is transferred to the customer when it is probable that the economical benefits will descend to the group, and when the income can be calculated in a reliable way. No income is accounted for based on the current operations of the Group.
In the Group's Annual Report, current and the deferred taxes are accounted for. Current taxes are the taxes that shall be
paid or received relative to the current year, using either the tax rate that was stipulated, or the rate announced on the balance sheet date, applied on the taxable income and with adjustment of current tax referring to earlier periods. Deferred taxes are calculated according to the balance sheet method, based on temporary differences between accounted and taxable values of assets and liabilities. Deferred tax claims regarding deductions on approved temporary differences and deficit deductions are accounted for in cases of taxable surpluses. Deferred tax claims have not been accounted for within deductions of losses, because they are estimated to be barely realizable.
The Board and Management of IGE have identified issues which can affect the appraisal of the Group's income statement and financial balance. These are listed below. Developments within these areas are continuously followed-up on by the Management and the Board.
The group has invested a considerable amount of capital in the refinement of exploration permits. The financial statements include mainly permits for which the Company has carried out advanced operations such as geology, geophysics, drillings, airborne measurements etc. Capitalized expenditures related to the above-stated activities have been capitalized as mineral interests, which amounts to SEK 154.3 million. Depreciation of capitalized expenditures related to mineral interests is done in accordance with the paragraph "intangible assets" above.
estimates and assumptions of mineral resources Accounting for discoveries of a mineral resource is subject to accounting rules which are unique to the exploration and mining industry. The accounting principles and areas requiring the greatest estimation and assumptions when preparing the consolidated accounts are related to exploration and mining accounting, including the estimation and assumption of resources.
The valuation of mineral resources is based on estimates and assumptions of both proven and probable resources at the time of acquisition, or in the case of the identification of a potential deposit, valuation is based on the expected volume of minerals that can be produced on a yearly basis. Estimates and assumptions of proven and probable resources are performed with the help of third-party valuations, and are based on annual adjustments of the resources in relation to the volume of minerals produced, as well as new discoveries made during the year. There will always be uncertainties of the valuations performed. Should there be any new estimates and assumptions reflecting a decrease of resources, or if production does not encounter profitable quantities, there is a significant risk that the recorded assets relative to a specific concession have to be written down. This is evaluated through impairment tests.
Changes in proven resources also affect discounted cash flows, depreciations and write-downs, amortizations and provisions,
and are an important factor of the capital market's assessment of the company and its share. Based on the performed thirdparty valuations, Management is required to assess the results. In those cases where the valuations show a discrepancy between estimated proven and probable resources compared with valuations performed within the Group, Management has to analyze the differences and assess which valuation is the more correct.
The provisions for restoration are based on estimates of expected future obligations, and requirements for dismounting, removal, clearing and like actions, around the drilling sites within the Group's exploration permits. The estimates are based on legal requirements established from the authorities' assessments of mine closure expenses. Due to changes to these factors, future real cash outflow may differ from the provisions for restoration. In order to take any such changes into account, there is a continuous review of the recorded values of the provisions for restorations. When calculating the provisions for future restoration, Management must perform its assessments with regards to future investments and development within the exploration permits of the Group; any changes in the requirements of the local authorities concerning restoration obligations; as well as other factors which may significantly affect the provision.
The Board estimates that it is not possible for deferred taxes to be utilized in the short-term. That is the reason why the Group does not account for these tax deductions. Tax deductions can be utilized during an unlimited period of time, except for deficits arising from operations in Angola. They can be utilized within a period of 3 years from their occurrence.
Within IGE, the primary division of segments is based on the geographical regions which are subject to risks and possibilities that are different from each other. The Group's operations are separated in different segments based on the type of mineral explored or produced. The Group has identified four reportable segments according to IFRS 8: Gold, Diamonds, Nickel and Other.
The reportable segments are reported according to the same accounting principles as the company's chief operating decision maker use to monitor the performance indicator 'result before tax'. The business of all the reporting segments with the exception of Other is the acquisition, development and extraction of minerals, as well as exploration to find new reserves. The business of the segment named Other consists of managing the overall financing of the Group, including raising of capital and borrowing capital from external banks. This segment is also responsible for preparation of the consolidated financial statements and financial reporting to the market.
The reportable segments' revenue, costs, assets and liabilities include items directly assignable to that segment and items which can reasonably and reliably be allocated to the operating segment.
Financial instruments reported as assets in the balance sheet include: Long term receivables, other receivables, prepaid expenses and accrued income, liquid funds, accounts receivable, and short-term investments. The liabilities consist of long term liabilities, other liabilities, accrued expenses and prepaid income and accounts payable. Financial instruments are accounted for as to their real value. A financial asset or financial liability is accounted for in the balance sheet, when the company becomes a party to an agreement regarding the asset or liability. By year-end 2009, the Group held no short-term investments.
Cash and cash equivalents refer to cash in the bank.
There are only fixed-fee retirement plans within the Group. Fixed fee retirement plans comprise plans of which the company's liability in terms of retirement payments are limited to the fees that already have been undertaken. The retirement of the individual employee is dependant on the fees paid to the retirement plan or an insurance company by the employer and the return of capital invested in the retirement insurance. Consequently it is the employee that holds the risk of return (that the return will be lower than expected) and the risk of the investment (the risk that the invested pension provision will not be sufficient to cover expected retirement compensation in the future). The obligations of the Company related to payments of fixed fee retirement plans are expensed in the income statement as they are earned by the employee for services conducted on behalf of the employer during the period.
IGE has historically issued warrants to members of the Board and management. The payment for the warrants has been accounted for as a component within Equity. The fair value of the warrants has been determined at the time of allocation by an external valuation using the Black & Scholes option pricing model. Additional warrants have been issued in connection to a loan that was raised during spring 2009. The real value of these warrants has been accounted for as a financial cost in the Group in accordance with IFRS 39.
A contingent liability, on behalf of IGE, could be for example, damage to the environment, which the company's operations have caused within the concession area. IGE is obligated to restore the environment to its initial condition before returning the permit. This may result in costs that IGE is charged for. Examples of damages are; wheel track in the terrain, lumbered trees, etc. The company considers these contingent liabilities to be negligible, with the result that the balance sheet item regarding contingent liabilities amounts to nil.
Leasing is classified in the Group accounts as either financial or operational. Financial leasing exists when the economic risks and the benefits associated with ownership in all essential points are transferred to the leasing user; all other leasing is
classified as operational leasing. Within the Group, there exists no financial leasing. Leasing fees related to operational leasing are cost accounted linearly over the duration of the lease, beginning from the time of utilization.
Through its activities, IGE is, exposed to risks in its financial items such as liquid means, short-term claims and debts. The risks associated to those instruments are primarily:
How this risk are handled and controlled is governed by the financial policy that the Company has adopted. This policy controls the economic measures, and constitutes the framework within which the Company operates.
Below is a brief description of additional risks which IGE may be exposed to through its activities. The management of the Group is aware of the risks associated with the operations and constantly aims to work under good practice in order to best manage these risks.
Interest rate risk is related to the risk IGE is exposed to from changes on the market's interest rate which can affect the net profit. IGE's risk exposure is small, since the majority of its liquid assets are placed in bank accounts in SEK.
Currency risk refers to the risk that the value of a financial instrument may vary depending on changes in conversion rate of the underlying currencies. IGE's accounts are in Swedish Crowns (SEK). The Company operates in other countries and in other currencies, creating a foreign exchange exposure which may affect the company's result and the amount of liquid assets. IGE:s main currency risk is refereble to the exchange rate between SEK/USD. As per the end of 2009 a change of the exchange rate between SEK/USD corresponding to 10%, results in an increase/decrease of the Group's result of about SEK 20.8 million.
Liquidity risk implies that the Group is not able to find venture capital to the extent that it needs, in order to finance the Group's activities. The Group has developed their projects to a point where they are close to being revenue generating. The need for additional venture capital will thereby decrease significantly. The Company might still be in need of additional capital contribution before it is able to be self-sustainable. Under the current global economic situation, where the supply of venture capital has decreased and the conditions for attracting capital have gradually deteriorated from the Company's point of view, raising additional funds has become more difficult. There is no guarantee that the Company will continue to be able to finance substantial negative cash flows. Nor are there any guarantees that the Company will be able to raise new capital, or be able to obtain credit at favourable terms and in the amount required, in order to continue pursuing on-going and future business
activities, if such new financing becomes necessary.
Political risk is defined as the business risk that may occur as a result of different political decisions. Examples are uncertainty of the validity of the group's agreements, uncertainty of a new political majority or changes in local finance and fiscal policies. Another example may be changes in the legislation concerning the mineral and mining "line of business", in terms of tax rates, environmental fees and changes in the situation concerning the governmental opinions regarding monopoly. These types of risks are more difficult to predict, and consequently, are more difficult to hedge. IGE has therefore decided to carry out active coverage of the political situations within the countries of its operations. IGE also has established close relationships with the governments and decision makers in all relevant markets. The management of IGE considers this risk within each country of activity, to be manageable.
Besides the effects of transaction risks, conversion risk also affects IGE's profit when foreign subsidiaries are consolidated. These effects happen when the profit/loss of the foreign subsidiary is converted to Swedish Crowns (conversion risks in income statement and balance sheet). The result is a risk exposure related to currencies; changes in the currency rate can affect the profit and capital of the Group.
A decline in the price of a metal or diamonds might affect the value of IGE's mineral assets and reserves. The company compensates for this risk by diversifying its operations to include various types of minerals and precious stones.
Other revenues 2009 consist of revenues attributable to the Parent Company's sale of its 50 percent ownership of Kilimapesa Gold Ltd in Kenya.
Other revenues during 2008 consisted of revenues attributable to the subsidiary IGE Nordic AB's sale of exploration permits and currency gain related to inter company balances.
| 2009 | |||||
|---|---|---|---|---|---|
| (TSEK) | Gold | Diamonds | Nickel | Other | Total |
| Other revenues | 15,169 | - | - | - | 15,169 |
| Depreciation of concessions | -614 | - | -1,978 | -1,859 | -4,451 |
| Depreciation according to plan | -302 | -197 | -871 | -110 | -1,480 |
| Operating result | -4,677 | -16,520 | -15,034 | -30,628 | -66,859 |
| Result before tax | -6,869 | -15,164 | -14,211 | -29,538 | -65,782 |
| Fixed assets | 30,005 | 173,684 | 54,428 | 9,802 | 267,920 |
| Current assets | 2,284 | 35,802 | 8,449 | 12,821 | 59,356 |
| Long-term liabilities | 91 | 11,974 | - | - | 12,065 |
| Short-term liabilities | 140 | 2,130 | 1,275 | 5,501 | 9,046 |
| Investments (gross amounts) | 14,607 | 24,013 | -14,141 | 10,984 | 35,463 |
| 2008 | |||||
|---|---|---|---|---|---|
| (TSEK) | Gold | Diamonds | Nickel | Other | Total |
| Other revenues | - | - | - | 49,916 | 49,916 |
| Depreciation of concessions | - | - | - | -37,583 | -37,583 |
| Depreciation according to plan | -632 | -626 | -634 | -132 | -2,024 |
| Operating result | -5,278 | -14,608 | -22,288 | -7,626 | -49,800 |
| Result before tax | -2,749 | -19,391 | -21,060 | -13,587 | -56,787 |
| Fixed assets | 16,314 | 149,868 | 71,418 | 787 | 238,387 |
| Current assets | 5,612 | 2,630 | 36,578 | 4,354 | 49,174 |
| Long-term liabilities | - | 19,429 | - | 5,500 | 24,929 |
| Current liabilities | 1,070 | 1,405 | 8,247 | 8,186 | 18,908 |
| Investments (gross amounts) | 7,028 | 102,660 | 28,067 | 21,341 | 159,096 |
See note 3 for further information regarding other revenues.
| 2009 | 2008 | |||
|---|---|---|---|---|
| (TSEK) | Average number of employees |
Of which men |
Average number of employees |
Of which men |
| Parent Company | 4 | 67% | 3 | 67% |
| Subsidiaries | 140 | 85% | 134 | 85% |
| Group Total | 144 | 85% | 137 | 85% |
| Of which Sweden | 13 | 85% | 14 | 93% |
| Of which Angola | 83 | 87% | 71 | 87% |
| Of which Burundi | 17 | 82% | 20 | 83% |
| Of which Kenya | 31 | 68% | 32 | 81% |
| 2009 | 2009 | ||||||
|---|---|---|---|---|---|---|---|
| Salaries and other compensations |
Of which pension costs |
Of which social contribution costs |
Salaries and other compensations |
Of which pension costs |
Of which social contribution costs |
||
| Parent Company | |||||||
| Sweden | 8,250 | 578 | 1,877 | 7,517 | 447 | 1,527 | |
| Subsidiaries | |||||||
| Sweden | 4,436 | 599 | 1,046 | 10,916 | 919 | 2,144 | |
| Angola | 7,786 | 449 | 105 | 6,126 | - | - | |
| Burundi | 551 | - | 95 | 1,439 | - | 13 | |
| Kenya | 2,087 | 62 | 7 | 2,227 | - | 8 | |
| Total | 23,110 | 1,688 | 3,129 | 28,225 | 1,366 | 3,692 |
The distribution of salaries and other benefits among Directors, CEO and other employees
| 2009 | 2008 | ||||
|---|---|---|---|---|---|
| (TSEK) | Board of Directors and CEO |
Other employees |
Board of Directors and CEO |
Other employees |
|
| Parent Company | |||||
| Sweden* | 5,511 | 2,739 | 2,999 | 4,518 | |
| Subsidiaries | |||||
| Sweden | 2,309 | 2,127 | 2,205 | 8,711 | |
| Angola | 1,627 | 6,159 | - | 6,126 | |
| Burundi | 332 | 219 | - | 1,439 | |
| Kenya | 494 | 1,593 | - | 2,227 | |
| Total | 10,274 | 12,836 | 5,204 | 23,021 |
*Of wich SEK 1,268 thousand (0) is referable to bonus payments
Pension costs and other similar benefits broken down for the Board of Directors and CEO
| 2009 | 2008 | |||
|---|---|---|---|---|
| (TSEK) | Board of Directors |
CEO | Board of Directors |
CEO |
| Parent Company | ||||
| Sweden | - | 379 | - | 335 |
| Subsidiaries | ||||
| Sweden | - | 296 | - | 278 |
| Angola | - | - | - | - |
| Kenya | - | 22 | - | - |
| Burundi | - | - | - | - |
| Total | - | 697 | - | 613 |
No other benefits are paid to the Board or CEO.
Information about absences due to illness based on ÅRL Cap 5 § 18 are not provided.
The Board is composed by five members, of whom 100 percent are men.
AGM's resolution on remuneration guidelines for management personnel
At the 2009 AGM held on the 6th of May 2009, the following resolution was made regarding guidelines for the remuneration of those in management personnel. The below guidelines are in force until the AGM of 2010, that will be held on the 6th of May 2010.
IGE shall have a level of remuneration and employment benefits necessary to recruit and retain a management of high competence and sufficient capacity to reach its set goals, and
shall also consider the level of competence of the individual manager. Market value, in other words, is the guiding principle in setting pay and other remuneration for management personnel in IGE.
The basic remuneration of management personnel is a fixed pay based on the market, which is determined on an individual basis according to the criteria above, and the special skills of the person.
Retirement benefits for management shall be determined based on the market for equivalent positions, and are adjusted according to the special skills of the person. The retirement benefits shall, as near as possible, be based on payment-based retirement solutions.
Non-monetary benefits (for example cell phone and computer) for management personnel shall be of the type that assist in the performance of work, and are consistent with customary benefits in the market.
Termination compensation and severance pay shall in no case exceed twelve months' pay.
Non-fixed pay arrangements shall be available, in addition to fixed-pay arrangements, in applicable situations. This type of compensation shall be clearly related to specific set goals, based on simple and transparent constructions.
In those cases where non-fixed pay is realized, the pay shall be determined based on (a) achieving previously set goals on a group and individual level which are related to management and production results, as well as the financial development of the Company, and (b) taking into consideration the person's personal development.
The non-fixed pay shall always be limited to a certain maximum which is a specified part of the person's annual pay.
All matters relating to share benefit programs shall be decided upon by the Annual General Meeting.
The guidelines shall cover the Managing Director and other positions which are part of the group management.
The Board has the right to make exceptions to the guidelines in individual cases where there are special reasons to do so.
Incentive programmes – warrants and options A description of the outstanding options within the IGE Group follows.
The EGM resolved to launch a new incentive program consisting of the right to subscribe for 12,000,000 new shares with the following conditions:
Management and key personnel were assigned 8 million of the above 12 million warrants. The remaining 4 million were assigned to the Board of Directors of IGE.
As per the end of 2009 the warrants were allocated according to the table below:
| Holder | Number |
|---|---|
| Tomas Fellbom | 4,500,000 |
| Thomas Carlsson | 1,000,000 |
| Lars Olof Nilsson | 1,000,000 |
| Carl Ameln | 1,000,000 |
| Industriutvikling AS | 1,000,000 |
| Ole Jörgen Fredriksen | 1,000,000 |
| Tota l |
9,500,000 |
The holders of the warrants have paid a market price determined by the Black & Scholes option pricing formula.
As a part of the compensation for providing a bridge loan in May 2009, the creditors received a total of 15,000,000 newly issued warrants to subscribe for new shares in the company. 12,000,000 of the warrants were exercised on the 6th of July 2009 resulting in an issue of 12,000,000 new shares in IGE. The subscription price amounted to 0.38 SEK per share resulting in that the Company was provided with MSEK 4.5 in cash.
A total of 3,000,000 warrants is still outstanding.
At the EGM held on the 28th of May 2008, a resolution was passed to issue 525,000 call options which give the holder the right to buy existing shares in IGE Nordic AB from IGE's holdings at price of SEK 11.36. The holder of the call options has the right to exercise the options during the period between the 1st of October 2011 and the 31st of December 2011.
The Parent Company's shareholdings in subsidiaries are disclosed at the acquisition value of the shares, with deductions of contingent depreciation.
| Director fee (according to resolution |
|||
|---|---|---|---|
| (TSEK) | from general meeting) | Salary | Other Benefits |
| Board | |||
| Tim George | 250 | - | - |
| Tony Arne Saetre | 32 | ||
| John Afseth | 400 | - | - |
| Lars Olof Nilsson | 250 | - | - |
| Magne Aaby | 250 | - | - |
| Ole Jörgen Fredriksen | 250 | - | - |
| Management | |||
| Tomas Fellbom | - | 2,514 | 1,344 |
Board members that are not employees of any of the Group's companies or related companies, receive a fee, resolved by the AGM, of SEK 250 thousand per year. The Chairman of the Board receives SEK 400 thousand, according to a resolution from the AGM.
pany, and six months' notice on behalf of the Chief Executive Officer. No other obligations of the Group, with regard to the CEO contract, exist.
Swedish personnel have pension insurance which gives them the right to receive future pension payments. The latter are dependent on how the amounts contributed have been administrated by the insurance company.
The Managing Director receives a fixed salary. Between the Company and the Managing Director, there is a termination agreement of twelve months' notice on behalf of the Com-
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Exchange differences | -20,449 | - | - | - |
| Rent | -3,682 | -2,473 | -495 | -573 |
| Consulting fees | -3,410 | -3,503 | -3,410 | -1,386 |
| Travel | -2,503 | -4,194 | -1,314 | -997 |
| Listing and admin of shares | -2,276 | -2,654 | -2,131 | -2,138 |
| Legal counselling | -2,184 | -3,038 | -442 | -735 |
| Auditing | -1,217 | -1,425 | -1,038 | -846 |
| Other | -16,197 | -14,597 | -6,352 | -2,463 |
| Total | -51,918 | -31,883 | -15,182 | -9,137 |
Exchange differences are a result of intercompany lending. The lending is accounted for in SEK while the liabilities are accounted for in each subsidiary´s local currency, mainly USD. The value of the liabilities varies in accordance with exchange
rates towards the Swedish currency. The differences between the claims reported in the balance sheet of the lender and the liabilities in the borrowing companies balance sheet affects the income statement of the Group.
| Remuneration to Auditors | Group | Parent Company | ||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Ernst & Young, auditing | 1,151 | 1,261 | 1,017 | 846 |
| Ernst & Young, other assignments | 66 | 164 | 21 | - |
| Total | 1,217 | 1,425 | 1,038 | 846 |
Audit assignments refers to the examination of the annual report and accounting records and of the Board of Directors' and CEO's administration of the company, other tasks incumbent upon the Company's auditor as well as advice and other assistance occasioned by observations made in the course of such examinations or the performance of such other tasks. Other tasks than those are considered to be other assignments.
| (TSEK) | 2009 | 2008 |
|---|---|---|
| Mace AS, related party through its managing director (Magne Aaby) who is a board member of IGE. | 498 | - |
| PA Resources AB, related party through its managing director (Ulrik Jansson) who is a board member of IGE. | - | 15 |
| Total | 498 | 15 |
Mace AS is a related party due to its Managing Director Magne Aaby, who is also a member of the Board of IGE. Mace invoiced IGE the amount of SEK 360 thousand in 2009 for consultancy services related to marketing and the raising of capital. The remaining SEK 138 thousand is related to reimbursements for disbursements
PA Resources AB invoiced IGE the amount of SEK 15 thousand in 2009 related to rent of storage room. PA Resources is a related party due to its Managing Director Ulrik Jansson, who is a member of the board of IGE.
| (TSEK) | Premises |
|---|---|
| Matures 2010 | 3,147 |
| Matures 2011-2013 | 2,169 |
| After 2014 | - |
The Group has leasing agreements for rented premises and vehicles that were made based on normal, market conditions. For 2009, the rental costs were SEK 3,682 thousand. Future
rental costs according to agreed rental contracts are disclosed in the table above.
Other operating expenses are related to a capital loss from sales of an exploration permit in IGE Nordic.
| (TSEK) | Group | Parent | ||
|---|---|---|---|---|
| Mineral interests | 31/12/2009 | 31/12/2008 | 31/12/2009 | 31/12/2008 |
| Acquisition value at opening of period | 119,729 | 92,415 | - | - |
| Acquisition during the report period (year) | 59,778 | 77,774 | - | - |
| Discardment | -11,455 | -44,375 | - | - |
| Disposal during the period | -2,000 | -10,053 | - | - |
| Exchange differences | -4,273 | 3,968 | - | - |
| Book-value at year-end of the existing mineral interests | 161,779 | 119,729 | 0 | 0 |
| Accumulated write downs at beginning of year | -6,791 | - | - | - |
| Write-downs during period | -4,664 | -37,584 | - | - |
| Discardment | 11,455 | 44,375 | - | - |
| Accumulated write downs at year end | -7,522 | -6,791 | - | - |
| Book-value at year-end | 154,257 | 112,938 | 0 | 0 |
| (TSEK) | Group | Parent | ||
|---|---|---|---|---|
| Equipment and furnishings | 31/12/2009 | 31/12/2008 | 31/12/2009 | 31/12/2008 |
| Acquisition value at opening of period | 56,310 | 7,644 | 553 | 545 |
| Acquisition during the report period (year) | 1,689 | 47,662 | - | 25 |
| Discardment | -924 | -17 | -155 | -17 |
| Disposal during the period | -886 | - | -71 | - |
| Exchange differences | -3,886 | 1,021 | - | - |
| Acquisition value at year end of existing equipment | 52,303 | 56,310 | 327 | 553 |
| Accumulated depreciation according to plan at beginning of period | -3,377 | -1,370 | -317 | -203 |
| Discardment | 195 | 17 | 155 | 17 |
| Disposal during the period | 48 | - | 48 | - |
| Depreciation according to plan | -1,469 | -2,024 | -100 | -131 |
| Accumulated depreciation at year end according to plan | -4,603 | -3,377 | -215 | -317 |
| Book value at year-end of equipment and furnishings | 47,700 | 52,933 | 112 | 336 |
| (TSEK) | ||||
|---|---|---|---|---|
| Associated companies to IGE Nordic AB (owned by IGE to 99.6%) |
Ownership | Book value | Equity | Profit/ loss |
| Norrsken Energy LTD (UK), 05488110 | 49% | 24,500 | 28,899 | -493 |
| Nordic Iron Ore AB, 556756-0940 | 32% | 1,881 | 5,422 | -14 |
| Parent Company | 2009 | |||||||
|---|---|---|---|---|---|---|---|---|
| Company | Corporate id no |
Seat | No of shares | Share | Currency | Book value (SEK) |
Equity (SEK) |
Result (SEK) |
| IGE Kenya Ltd | 27481 | Nairobi | 10,000 | 100% | KES | 2,635,900 | neg | -6,868,609 |
| IGE Nordic AB | 556493-3199 | Stockholm | 26,816,042 | 99% | SEK | 82,247,101 | 104,274,906 | -9,765,230 |
| IGE Diamond AB | 556668-1630 | Stockholm | 1,000 | 100% | SEK | 750,000 | 981,070 | 641,256 |
| Tanganyika Exp Ltd | 52,816 | Belize City | 1 | 100% | USD | 720 | 720 | 0 |
| Tanganyika Res Ltd | 52,848 | Belize City | 1 | 100% | USD | 720 | 720 | 0 |
| Tanganyika Min Ltd | 52,849 | Belize City | 1 | 100% | USD | 720 | 720 | 0 |
| Subsidiary to IGE Diamond AB | ||||||||
| IGE Ltd | 20034 | B V I | 3 | 100% | USD | 22 | neg | -12,703,862 |
| (TSEK) | |
|---|---|
| Acquisition value at opening of period | 90,474 |
| Acquisition during the report period (year) | 1,111 |
| Write down on shares in subsidiary | -5,950 |
| Acquisition value at year-end | 85,635 |
The write down of shares is in entirety referable to IGE's holding of shares in a subsidiary in Burundi. The write downs has been made as a result of the closing of the operations in Burundi.
| Financial revenue | Group | Parent Company | ||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Capital gain sale of bonds | - | 75 | - | 75 |
| Received payment for issued share warrants | - | 1,500 | - | 1,500 |
| Calculation of real value MinMet Plc | - | 64 | - | 64 |
| Valuation of other short term investments | - | 283 | - | 284 |
| Interests | 80 | 3,609 | 24 | 645 |
| Exchange gains | 6,056 | 2,718 | 1,135 | 281 |
| Total financial revenue | 6,136 | 8,249 | 1,159 | 2,849 |
| Financial expenses | Group | Parent Company | ||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Valuation of real value Saga Oil AS | - | - | - | -6,922 |
| Valuation of MinMet Plc | - | -5,074 | - | -5,074 |
| Valuation of other short term investments | - | -660 | - | -657 |
| Result from shares in associated companies | - | -987 | - | - |
| Write down of subsidiary claims | - | - | -10,116 | - |
| Interests | -1,932 | -864 | -1,008 | -193 |
| Exchange losses | -3,068 | -7,651 | -701 | -61 |
| Other financial costs | -59 | - | - | - |
| Total financial expenses | -5,059 | -15,236 | -11,825 | -12,907 |
The shares in Minmet are valued according to the its listed value on the London Stock Exchange. As a result of a initiated investigation based on suspicion of economic irregularities the trading of the share has been halted. IGE has, based on the ongoing process, valuated the holding to 0.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Prepaid insurance fees | 295 | 345 | 162 | 141 |
| Prepaid costs* | -6 | 2,852 | -6 | 35 |
| Prepaid rentals | 749 | 912 | 92 | 134 |
| Prepaid leasing fees | - | 3 | - | 3 |
| Prepaid concessions costs | - | 261 | - | - |
| Year-end balance | 1,038 | 4,374 | 248 | 314 |
* Prepaid costs 2008 are mainly attributable to drilling activities in Kenya that have been paid, but have not been incurred due to a dispute with the operator.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Accrued personnel vacations costs | 716 | 773 | 372 | 353 |
| Accrued social security charges | 570 | 402 | 461 | 80 |
| Calculated accrued social security charges | 618 | 753 | 478 | 487 |
| Special remuneration taxes | 436 | 610 | 201 | 342 |
| Accrued salaries | 111 | 553 | - | - |
| Accrued remuneration of the board | 1,375 | 1,750 | 1,275 | 1,150 |
| Accrued consultant fees | - | 304 | - | - |
| Accrued costs related to new share issue IGE Nordic AB | - | 687 | - | 687 |
| Accrued expenses related to SGU education in Angola | - | - | - | - |
| Other accrued costs | 538 | 1,314 | 10 | 245 |
| Year-end balance | 4,363 | 7,145 | 2,798 | 3,343 |
| (TSEK) | 2009 | 2008 |
|---|---|---|
| Investmentguarantee Endiama | 40,259 | 43,498 |
| Deposition Bergsstaten | 111 | 197 |
| Total | 40,370 | 43,695 |
Long-term receivables are attributable to investment guarantees paid to Enidama, the Angolan state diamond company. Each granted diamond licence in Angola is secured by a payment of USD 1.4 million as a long term deposit. The money is deposited until the investing partner has accomplished the minimum framework and plan of investments, in accordance with the "Contract of the Association in Participation". When the investing partner has fulfilled its obligations according to the contract, the guarantee will end, and its value can immediately be considered as investment expenses of the project, in compliance with the presented plan of needs.
IGE has paid investment guarantees for four licences by the end of the reporting period; Lacage, Luanguinga, Cariango and Luxinge.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| V A T receivables | 968 | 2,775 | 216 | 794 |
| Other receivables not subjected to interests* | 16,280 | 2,190 | 11,137 | -13 |
| Total | 17,249 | 4,965 | 11,353 | 781 |
* Other receivables 2009 are mainly attributable the sales of IGE's 50% share of Kilimapesa Gold Ltd in Kenya.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Deposition Bergsstaten | 111 | 197 | - | - |
| Pledged liquid funds related to EKN credit to Angola | 599 | 973 | 599 | 973 |
| Pledged shares in IGE Nordic held by the Parent Company | - | 5,500 | - | 5,500 |
| Total | 710 | 6,670 | 599 | 6,473 |
In connection with exploration activities, the Group has commitments to compensate for damages and infringements that are a consequence of its operations. The value of the estimated costs is not material, and therefore no undertaking was made.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Actual tax | - | - | - | - |
| Adjustment actual taxes earlier years | - | - | - | - |
| Deferred tax claim on Group's contribution | - | - | 62 | - |
| Actual tax reported in the income statement | 0 | 0 | 62 | 0 |
| Profit before tax | -65,782 | -56,787 | -23,562 | -26,843 |
| Adjustment for costs accounted for in equity | -5,984 | - | -5,984 | - |
| Expected tax according to Swedish tax rate 26.3% (28%) | 18,874 | 15,900 | 7,771 | 7,516 |
| Adjustment for tax rates in other countries | 1,698 | 1,494 | - | - |
| Other non-taxable/non-deductible | -5,780 | 2,128 | -2,685 | -1,552 |
| Deferred taxes in theory from earlier losses that has not been used | -14,793 | -19,522 | -5,086 | -5,964 |
| Total tax costs | 0 | 0 | 62 | 0 |
Accumulated tax related deficit of the Group amounts to SEK 200,108 thousand (SEK 156,289 thousand), which gives a deferred tax that can be recuperated of SEK 52,628 thousand (SEK 43,760 thousand). Within the total deficit amount, there is an accumulated deficit deduction of SEK 20,221 thousand (SEK 20,221 thousand), which according to tax laws in effect, is frozen and cannot be used until the accounting year 2010.
Accumulated tax related deficit of the Parent Company amounts to SEK 98 329 thousand (SEK 85,038 thousand) which gives a deferred tax that can be recuperated of SEK 25,861 thousand (SEK 23,811 thousand). Within the total deficit amount, there is an accumulated deficit deduction of SEK 18,518 thousand (SEK 18,518 thousand), which according to tax laws in effect, is frozen and cannot be used until the accounting year 2010.
No current or deferred tax claims or tax liabilities exist within the Group or Parent Company. Deferred tax claims were not accounted as deductions of loss because their realization is difficult to estimate. Deficit deduction can be used without any time limit, except for deficits in Angola, which can be used, during a limited period of three years after their occurrence. The tax deficit related to Angola amounts to SEK 46,198 thousand for the three year period ending 2009.
| 2009 | 2008 | |
|---|---|---|
| Result related to Parent company's shareholders (TSEK) | -65,782 | -46,351 |
| Average number of shares during the reporting period | 538,509,297 | 364,988,889 |
| Result per share | -0.12 | -0.16 |
The profit per share is calculated as the profit related to the Parent Company's shareholders divided by the average number of shares during the current year.
No dilution effects has been considered as they are immaterial.
Liquid assets as at the 31st of December 2009 amounted to SEK 40,807 thousand (SEK 39,639 thousand) and consisted completely of bank deposits. The Parent Company's liquid assets as at the 31st of December 2009 amounted to SEK 1,207 thousand (SEK 5,227 thousand) and consisted completely of bank deposits
An Exploitation Concession is granted if there is a probability for an economic exploitation of the deposit and if the site is considered appropriate from an environmental point of view. The latter requirement calls for an Environmental Impact Assessment (EIA) to be included in the application. The Exploitation Concession grants the right to carry out mineral exploitation for a twenty-five year period.
Share capital amounts to SEK 39,785,498 (SEK 20,908,091) and consists of 795,709,953 (418,161,828) shares.
development of share capital
| Increase of number of |
Increase of | Total number of | Total share | Face value | ||
|---|---|---|---|---|---|---|
| Date | Transaction | shares | share capital | shares | capital | (SEK) |
| 18/04/1983 | Foundation | 500 | 50,000 | 500 | 50,000 | 100 |
| 20/09/1983 | Split 50:1 | 24,500 | - | 25,000 | 50,000 | 2 |
| 22/09/1989 | New share issue | 5,000 | 10,000 | 30,000 | 60,000 | 2 |
| 10/10/1989 | New share issue | 200,000 | 400,000 | 230,000 | 460,000 | 2 |
| 22/11/1989 | New share issue | 560,000 | 1,120,000 | 790,000 | 1,580,000 | 2 |
| 01/01/1997 | Split 40:1 | 30,810,000 | - | 31,600,000 | 1,580,000 | 0.05 |
| 18/11/1997 | New share issue | 25,000,000 | 1,250,000 | 56,600,000 | 2,830,000 | 0.05 |
| 18/07/2000 | New share issue | 21,120,000 | 1,056,000 | 77,720,000 | 3,886,000 | 0.05 |
| 19/11/2001 | New share issue | 77,560,000 | 3,878,000 | 155,280,000 | 7,764,000 | 0.05 |
| 02/10/2002 | New share issue | 37,920,000 | 1,896,000 | 193,200,000 | 9,660,000 | 0.05 |
| 12/05/2004 | New share issue | 5,000,000 | 250,000 | 198,200,000 | 9,910,000 | 0.05 |
| 16/03/2005 | Exercise of warrant | 50,000,000 | 2,500,000 | 248,200,000 | 12,410,000 | 0.05 |
| 24/05/2005 | New share issue | 19,000,000 | 950,000 | 267,200,000 | 13,360,000 | 0.05 |
| 05/07/2005 | New share issue | 25,000,000 | 1,250,000 | 292,200,000 | 14,610,000 | 0.05 |
| 19/10/2005 | New share issue | 18,000,000 | 900,000 | 310,200,000 | 15,510,000 | 0.05 |
| 12/12/2005 | New share issue | 800,000 | 40,000 | 311,000,000 | 15,550,000 | 0.05 |
| 07/12/2006 | New share issue | 30,000,000 | 1,500,000 | 341,000,000 | 17,050,000 | 0.05 |
| 16/04/2008 | New share issue | 34,000,000 | 1,700,000 | 375,000,000 | 18,750,000 | 0.05 |
| 08/12/2008 | Conversion loan | 9,000,000 | 450,000 | 384,000,000 | 19,200,000 | 0.05 |
| 29/12/2008 | Conversion loan | 8,000,000 | 400,000 | 392,000,000 | 19,600,000 | 0.05 |
| 20/01/2009 | Issue in kind | 26,161,828 | 1,308,091 | 418,161,828 | 20,908,091 | 0.05 |
| 11/02/2009 | Conversion loan | 11,000,000 | 550,000 | 429,161,828 | 21,458,091 | 0.05 |
| 31/03/2009 | Issue in kind | 312,000 | 15,600 | 429,473,828 | 21,473,691 | 0.05 |
| 01/04/2009 | Conversion loan | 35,600,000 | 1,780,000 | 465,073,828 | 23,253,691 | 0.05 |
| 03/04/2009 | Conversion loan | 4,400,000 | 220,000 | 469,473,828 | 23,473,691 | 0.05 |
| 16/04/2009 | Conversion loan | 10,000,000 | 500,000 | 479,473,828 | 23,973,691 | 0.05 |
| 06/07/2009 | Exercise of warrant | 12,000,000 | 600,000 | 491,473,828 | 24,573,691 | 0.05 |
| 07/07/2009 | Issue in kind | 367,336 | 18,367 | 491,841,164 | 24,592,058 | 0.05 |
| 09/10/2009 | Conversion of debt | 68,000,000 | 3,400,000 | 559,841,164 | 27,992,058 | 0.05 |
| 09/10/2009 | New share issue | 221,800,000 | 11,090,000 | 781,641,164 | 39,082,058 | 0.05 |
| 26/11/2009 | New share issue | 14,068,789 | 703,439 | 795,709,953 | 39,785,498 | 0.05 |
The suggested dividend of the Group result to the shareholders for the year of 2009 amounted to SEK 0 (SEK 0) per share. The Group plans on reinvesting all profits generated back into
the operations, and for this reason, no dividend payments will be proposed in the coming years. The Group aims to have a low or zero-debt ratio.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Receivables on Kilimapesa Pty Ltd | - | 2,073 | - | 4,624 |
| Receivables on Tanganickel SA | - | 1,017 | - | 823 |
| Total | 0 | 3,090 | 0 | 5,447 |
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Accounts receivable | 262 | 196 | 14 | - |
| Total | 262 | 196 | 14 | 0 |
Reversal of previous write-downs has not been made. The closing balance as per year-end 2008 has been settled during the year. The year-end balance as per 2009 was accrued during
second half of 2009 and consists of costs related to jointly operated projects (initially paid by IGE). No doubtful debts reservation has been made as per the year end 2009 (or 2008).
Long-term liabilities refer to a loan given by Svenska Handelsbanken AB for the purchase of equipment from Volvo. The loan is guaranteed by the Swedish Credit Exports Guarantee Board (EKN), and has duration of three years. The loan was
raised in USD and runs with an interest rate of LIBOR plus 2 percent. Each interest period has a duration of six-month duration.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Account payables | 2,297 | 10,391 | 2,063 | 4,749 |
| Total | 2,297 | 10,391 | 2,063 | 4,749 |
Accounts payable are not interest bearing and normally matures within thirty days. 100 percent of the account payables are in SEK.
| Group | Parent | |||
|---|---|---|---|---|
| (TSEK) | 2009 | 2008 | 2009 | 2008 |
| Personnel related liabilities | 2,386 | 1,011 | 640 | 95 |
| Other short term liabilities | - | 361 | - | - |
| Total | 2,386 | 1,372 | 640 | 95 |
Other short-term liabilities are not interest bearing and normally mature within one year.
A description of the outstanding options within the IGE Group follows.
An incentive program was resolved by the extraordinary general meeting (EGM) of May 28th 2008.
The EGM resolved to launch a new incentive program consisting of the right to subscribe for 12,000,000 new shares on the following conditions:
Management and key personnel were assigned 8 million of the above 12 million warrants. The remaining 4 million were assigned to the Board of Directors of IGE.
As per the end of 2009, the warrants were allocated according to the table below:
| Holder | Number |
|---|---|
| Tomas Fellbom | 4,500,000 |
| Thomas Carlsson | 1,000,000 |
| Lars Olof Nilsson | 1,000,000 |
| Carl Ameln | 1,000,000 |
| Industriutvikling AS | 1,000,000 |
| Ole Jörgen Fredriksen | 1,000,000 |
| Total | 9,500,000 |
The holders of the warrants have paid a market price determined by the Black & Scholes option pricing formula based on the parameters below:
| In data | Assumptions 2008 |
|---|---|
| Exercise price (SEK) | 2.68 |
| Estimated volatility (%) | 30 |
| Estimated duration (years) | 3 |
| Risk free rate (%) | 4.5 |
As part of the compensation for providing a bridge loan raised in May, 2009, these creditors received a total of 15,000,000 newly issued warrants to subscribe for new shares in the company. A total of 12,000,000 of these warrants were exercised in July 2009 resulting in an issue of 12,000,000 new shares in IGE. The subscription price amounted to 0.38 SEK per share resulting in the Company receiving SEK 4.5 million in cash.
A total of 3,000,000 of the above warrants are still outstanding. These warrants expires June 30th 2010.
At the EGM, held on the 28th of May 2008, a resolution was passed to issue 525,000 call options which give the holder the right to buy existing IGE Nordic AB shares from IGE's holdings at price of SEK 11.36. The holder of the call options has the right to exercise the options during the period 1st of October 2011 to 31st of December 2011.
Financial assets within the IGE Group mainly consist of accounts receivable, short-term investments and cash. Financial liabilities are mainly referable to long-term liabilities and
accounts payable. The Group's financial assets and debts are classified according to below table:
| (TSEK) | 2009 | 2008 | ||
|---|---|---|---|---|
| Group | Total | Market value | Total | Market value |
| Long-term financial assets | ||||
| Tangible financial assets | ||||
| Receivables related to lending and other receivables | ||||
| Receivables on associated companies | - | - | 3,090 | 3,090 |
| Long-term receivables | 40,370 | 40,370 | 43,695 | 43,695 |
| Total | 40,370 | 40,370 | 46,785 | 46,785 |
| Current Assets | ||||
| Receivables related to lending and other receivables | ||||
| Account receivables | 262 | 262 | 196 | 196 |
| Other receivables | 17,249 | 17,249 | 4,965 | 4,965 |
| Prepaid expenses and accrued income | 1,038 | 1,038 | 4,374 | 4,374 |
| Cash | 40,807 | 40,807 | 39,639 | 39,639 |
| Total | 59,356 | 59,356 | 49,174 | 49,174 |
Continued on following page
| (TSEK) | 2009 | 2008 | ||
|---|---|---|---|---|
| Group | Total | Market value | Total | Market value |
| Financial liabilities | ||||
| Long term liabilities | ||||
| Other financial liabilities | ||||
| Interest bearing long term liabilities | 12,065 | 12,065 | 24,929 | 24,929 |
| Total | 12,065 | 12,065 | 24,929 | 24,929 |
| Current liabilities | ||||
| Other financial liabilities | ||||
| Account payables | 2,297 | 2,297 | 10,391 | 10,391 |
| Other liabilities | 2,386 | 2,386 | 1,372 | 1,372 |
| Prepaid expenses and accrued income | 4,363 | 4,363 | 7,145 | 7,145 |
| Total | 9,046 | 9,046 | 18,908 | 18,908 |
| (TSEK) | 2009 | 2008 | ||
|---|---|---|---|---|
| Parent Company | Total | Market value | Total | Market value |
| Long-term financial assets | ||||
| Tangible financial assets Receivables related to lending and other receivables |
||||
| Receivables related to subsidiaries | 276,497 | 276,497 | 190,234 | 190,234 |
| Receivables on associated companies | - | - | 5,447 | 5,447 |
| Total | 276,497 | 276,497 | 195,681 | 195,681 |
| Long-term financial assets | ||||
| Current Assets Receivables related to lending and other receivables |
||||
| Account receivables | 14 | 14 | - | - |
| Other receivables | 11,353 | 11,353 | 781 | 781 |
| Prepaid expenses and accrued income | 248 | 248 | 314 | 314 |
| Cash | 1,207 | 1,207 | 5,227 | 5,227 |
| Total | 12,822 | 12,822 | 6,322 | 6,322 |
| Financial liabilities | ||||
| Long term liabilities Other financial liabilities |
||||
| Interest bearing long term liabilities | 21,652 | 21,652 | 34,929 | 34,929 |
| Total | 21,652 | 21,652 | 34,929 | 34,929 |
| Current liabilities Other financial liabilities |
||||
| Account payables | 2,063 | 2,063 | 4,749 | 4,749 |
| Other liabilities | 640 | 640 | 95 | 95 |
| Prepaid expenses and accrued income | 2,798 | 2,798 | 3,443 | 3,443 |
| Total | 5,501 | 5,501 | 8,287 | 8,287 |
| (TSEK) | 2009 | 2008 |
|---|---|---|
| Claim on IGE Angola Ltd by year end | 80,088 | 80,088 |
| Claim on IGE Kenya Ltd by year end | 30,623 | 24,895 |
| Claim on IGE Diamond AB by year end | 165,787 | 81,085 |
| Parent company's liability to IGE Nordic AB | 9,678 | 10,000 |
IGE concluded a purchase of Efidium Ltd after the expiration of the reporting period. The purchase was completed on March 31st 2010. The purchase price amounted to 495,399,057 shares, which corresponds to a value of SEK 429 million as per the last trade on March 31 2010.
Efidium Ltd is a Group with assets and operations within the diamand sector in Angola, South Africa and the DRC (Democratic Republic of Congo). The Directors and management of IGE consider this purchase to be of great value to IGE, it strengthens the position of the Group significantly within the industry of diamond production and exploration. Efidium has got independently verified, SAMREC compliant, diamond resources of about 8.4 million carat. Cost reductions as a result of synergies between the two groups are also considered to be achieved after the merger of the two operations.
Below follows a summary of the effects for IGE that the purchase of Efidium gives rise to as per December 31 2009.
| Tangible fixed assets | 54,838 |
|---|---|
| Current Assets | 8,858 |
| Equity | -366,251 |
| Current liabilities | 6,845 |
| Adjustments related to acquisiton: | |
| Result | -8,000 |
| Surplus value mineral interests | 270,301 |
| Shareholders contribution | 406,328 |
| Current liabilities | 8,000 |
The undersigned assure that, to the best of our knowledge, the Annual Report has been prepared in accordance with generally accepted accounting principles for exchange listed companies, and give a true and fair view of the Parent Company's and Group's financial position and results of operations and nothing of importance is left out that could influence the picture of the company created by the Annual Report.
This assurance does not mean that the Board and the Managing Director take responsibility in addition to the responsibility that is dictated by the Swedish Companies Act.
Stockholm, the 21st of April 2010
John Afseth Timothy George Magne Aaby Lars Olof Nilsson Anton Esterhuizen Rob Still Chairman Director Director Director Director Director
Tomas Fellbom Chief Executive Officer
Our Audit Report was issued in Stockholm, the 21st of April 2010 Ernst & Young AB
Jaan Kubja Authorized auditor
Corporate Identity number 556227-8043
We reviewed the Annual Report, Group Report (page 47– 80) and the Board and Chief Executive Officer's administration of IGE Resources AB (publ) for the year 2009. It is the Board and the Chief Executive Officer who are responsible for accounting records and the administration, and that the Swedish Annual Accounts Act is applied when establishing the Annual Report, and that the accounting standard IFRS, such as was adopted by the EU, as well as the Swedish Annual Accounts Act is applied when establishing the Group's Report. Our responsibility is to comment on the Annual Report, Group Report, and the administration, based on our audit.
The audit was executed in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and execute the audit to a high, but not absolute, assurance that the Annual Report and the Group Report have no essential misstatements. An audit examines the review of a choice of data about amounts and other information about the accounting records. It is also a part of the audit to assess accounting principles used, the Board's and Chief Executive Officer's application of those principles, and the significant estimates that the Board and the Chief Executive Officer made when they prepared the Annual Report and the Group Report. As a basis for our statement about discharge from liability, we examined significant decisions, measures and situations of the Company in order to determine if any of the Board members or the Chief Executive Officer are liable to pay compensation to the Company. We have also checked if any of the Board members or the Chief Executive Officer in any other way acted contrary to the Swedish Companies Act., Annual Report Law, or the Company laws. We consider that our audit gives us reasonable grounds for our statement below.
The Annual Report has been prepared according to the Swedish Annual Accounts Act and gives a true and fair view of the company's financial position and results of operations in accordance with generally accepted accounting principles in Sweden. The Group Report was prepared in accordance with International Financial and Reporting Standards IFRS, as was adopted by the EU and Swedish Annual Accounts Act and gives a true and fair view of the company's financial position and results of operations. The Administration Report is consistent with the Annual Report and the Group Report.
We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and the statement of financial position for the group to be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report and that the members of the board of directors and the managing director be discharged from liability for the financial year.
Stockholm, the 21 st of April 2010 Ernst & Young AB
Jaan Kubja Authorized Auditor
Chairman of the board Director since 2009 Born 1954
Dr. Afseth has worked as the Vice President of Marketing and Business Development of Photocure ASA in Oslo since 1998. Prior to this, he worked as a General Manager at Abbot Laboratories in Denmark, Norway
and Iceland in the period 1995 to 1997. He was the Managing Director of Medinnova in the period from 1992 to 1995. Dr. Afseth began his career, in 1986, as a marketing manager at Dynal AS in Oslo, where he worked until 1992. Before working in industry, Dr. Afseth held the academic position of Associate Professor in Microbiology at the University of Oslo, from where he also obtained his PhD.
Currently Dr. Afseth serves as a board member for Orion Securities AS, Orion Baltics UAB, Orion AS, Fibroline SA, and is a partner in Merchant Venture Investments NV. Dr. Afseth is also Chairman of the board of Carpe Diem AS, Verdispar Baltic Development Property I AS, and is a board member of Verdispar Baltic Development Property II AS, as well of Verdispar Emerging Europe CPAS.
Shareholdings in IGE: 1,000,000 Warrants/call options in IGE: 0
Mr. Nilsson holds a Bachelor of Science degree in Business and Administration from Umeå University. Mr. Nilsson has extensive international experience in business development and finance. He currently serves as Director on the Board of BE Group AB
(publ), PA Resources AB (publ.), AGL Treasury Support AB, AGL Treasury Support FX AB, IGE Nordic AB, Lappland Goldminers AB and Kaptensbacken AB. He is also advisor to Nordic Capital, a group of private equity funds. He was Group Treasurer in Trelleborg AB from 1992 until 2004. In 2002, he assumed responsibility for Group Business Development in Trelleborg AB until 2006. He served as Director of the Board of Boliden Ltd 1997-2000. Shareholdings in the company (through controlled companies): 160,000
Warrants in IGE: 1,000,000
Director since 2009 Born 1965
Mr. George is currently on the Board of iPower Renewable Energy Systems (Pty) Limited, 3 Laws CapitalSouth Africa (Pty) Limited and Oubokskraal Ltd. He has extensive experience in diamond production and the industry in general from
his former employment as CEO and Chairman of the Board of Xceldiam Limited, with operations in Angola and South Africa. Mr. George was responsible for the start-up and investments decision which among others, resulted in that the Company was listed on Alternative Investment Market in London in 2005. He was in charge of the execution of the sale of Xceldiam's assets to Petra Diamonds in 2007. He has also worked as Special Projects Officer within Anglo American and De Beers Corporations, as Divisional Metallurgist within diamond services division at Anglo American Corporations and with business development of Grinaker LTA Limiteds concessions, mining and infrastructure. Mr. George has a degree within B. Eng. (Honours) Mineral Engineering (class II) from University of Leeds, England. Shareholdings in IGE: 0
Warrants/call options in IGE: 0
Director since 2009 Born 1948
Mr. Aaby's educational background is in marketing. He has developed and owned companies within business development, marketing and design in Norway and Sweden. He has professional experience from the media and public relations
sectors, and has acted as Marketing director within manufacturing and commercial trade. Mr. Aaby currently works as an investor and consultant. He has followed the mining sector over several years, and has been a shareholder in IGE for the last five years. He is a board member of Mace Invest AS, Mace Consult AS, Colosseum Eiendom ANS and Inventarum AS. Shareholdings in IGE: 1,500,000
Warrants/call options in IGE: 0
Member of the board Director since 2010 Born 1951 Anton is an experienced geologist with more than 30 years exploration experience. Among his career highlights, he is credited with the discovery and evaluation of the Xstrata Group's high-grade Rhovan
vanadium deposit, the Taaiboschspruit colliery and contributed to the re-evaluation of the large Burnstone gold deposit, all in South Africa. In Tanzania, he was responsible for the discovery of a number of Barrick's gold deposits and his activities attracted major players into that country.
Anton was responsible for the discovery of five titanium-zircon sand deposits including the Corridor Sands deposit in Mozambique and the Kwale deposit in Kenya. He is based in Johannesburg and has managed the exploration activities of Pangea DiamondFields PLC throughout Africa. Anton is a director of Tanzanian Royalty Exploration Corporation (TSE) and of NWT Uranium Corporation (TSE). He was the first recipient of the Des Pretorius Memorial Award for outstanding work in economic geology in Africa and received the Dreyer Award from the Society for Mining and Metallurgy and Exploration Inc (USA) for outstanding achievements in applied economic geology. Anton Esterhuizen is a South African citizen. Shareholdings in IGE: 0
Warrants/call options in IGE: 0
Member of the board Director since 2010 Born 1955 Rob started his career as a chartered accountant, becoming a partner of Ernst & Whinney before leaving in 1986 to co-found the JSE listed exploration and mining company Rhoex Ltd. Since that time Rob
has been involved in both the senior and junior sectors of the mining industry worldwide and has held both executive and non-executive director positions in mining and exploration companies listed in South Africa, Australia, Canada and the UK. Rob has participated in the development of several new mining projects including Rhovan, Ticor Titanium, Pangea Goldfields, Southern Mining (Corridor Sands), Great Basin Gold (Burnstone) and Zimbabwe Platinum Mines Ltd. He is currently chairman of Pangea Exploration, a private company active in exploration, mining project development and mining finance and Metorex Ltd, a copper miner. Rob Still is a South African citizen. Shareholdings in IGE: 0 Warrants/call options in IGE: 0
Chief Executive Officer (CEO) since 2007 Born: 1963
Mr. Fellbom has a Master of Business Administration degree from the Stockholm School of Economics. Mr. Fellbom is currently the CEO of IGE Resources AB. Before he began at IGE in 2007, he worked at the Swedish
Trade Council where he served as Vice President and Head of the Southern Europe, Africa and the Middle East regions. In addition to the Trade Council, Mr. Fellbom was the founder and the CEO of Spray Networks in France. Mr. Fellbom holds dual citizenship in Sweden and France and lives in Stockholm and Paris.
Shareholdings in the company: 873,543 Warrants in IGE: 4,500,000 Call Options in IGE: 4,000,000
Valeria Gomez Economy and Administration Born: 1976 Shareholdings in the company: 0 Options in IGE: 0
Chief Financial Officer/Controller (CFO) since 2006 Born: 1974 Mr. Carlsson holds a Master's Degree in Finance from Stockholm University. He has many years experience in financial services as a manager with ISS Facility Services, Fischer Partners FK AB (Corporate Finance) and
Nordea bank. Mr. Carlsson has extensive experience in corporate financing (public offerings and private placements), listings, controlling auditing and financial reporting for listed companies. Mr. Carlsson is a Swedish citizen.
Shareholdings in the company: 430,000 Warrants in IGE: 1,000,000 Call Options in IGE: 2,000,000
Chief Eexecutive Officer (CEO) since 2007 Born 1966
Mr. Bratt has more than 15 years of international and commercial experience from the mining & metals industry. Mr. Bratt worked over eight years for Falconbridge International in Brussels, initially as Manager
Raw Materials and later as Director Raw Materials, where he was responsible for acquiring nickel, copper, cobalt and PGM bearing raw materials for the smelter in Sudbury, Canada and the Falconbridge Nikkelverk A/S refinery in Kristiansand, Norway. He was previously employed by Boliden over five years as General Manager for the joint Boliden, Trelleborg and Falconbridge office in Moscow. He has held directorships on the board of Falconbridge International Limited, Barbados (1998-2006) and Falconbridge East Limited, Cyprus (1998-2006). Mr. Bratt is Swedish and resides in Stockholm, Sweden. Shareholdings in IGE: 100,000
Exploration Manager since 2005 Born: 1950
A Qualified Person by SveMin (Swedish Mining Association). A geologist by profession, Mr. Mattson has more than 30 years in mineral exploration in a number of different countries. Having worked many years for Boliden Mineral AB in the capacity of
project manager for prospecting and exploration, he has gained experience in industrial minerals, base and precious metals, working on projects in different phases, from preliminary review stages to more advanced projects that have developed to full scale production mines. Mr. Mattson is Swedish citizen and resides in Boliden, Sweden.
Managing Director Born: 1959
Mr. Mason has been involved in Sub-Saharan African Diamonds since 1986, with active production roles in both alluvial and kimberlitic operations. He gained exceptional experience with ITM Mining in Angola within all of their activities. Mr. Mason
left Africa for a brief period to successfully open and manage Machining Centre sales and service company in the UK and Ireland, providing solutions to the automotive and aerospace industries. He then returned to his "roots" in diamond mining in Angola, before leaving to direct operations with Sengamines in the Democratic Republic of Congo. His last role before joining IGE was as Country Manager for Amari Resources in the DRC
Mr. Simonet is a Doctor in Geology and a trained Lean 6 Sigma Black Belt. He has been working in geology and management in the mineral industry for the last 10 years. His professional experience encompasses a variety of minerals including gemstones,
gold, fluorspar and bauxite. At Rockland Kenya Ltd., Mr. Simonet was general manager of the John Saul Ruby Mine. He worked several years with Alcan as mine manager and senior geologist of SOGEREM's fluorspar mines in France, and as a Black Belt at the Gardanne alumina refinery in France. He is a Director of Kilimapesa Gold (Pty) Ltd. He has lived more than 7 years in Kenya. Mr. Simonet is French and resides in Nairobi, Kenya.
.
worldwide. The LME also maintains warehouse stocks of the metals traded.
IGE Resources AB Kungsgatan 44, 7th floor SE-111 35 Stockholm Sweden Telephone: +46 8 402 28 00 Fax: +46 8 402 28 01 E-mail: [email protected] www.ige.se
IGE Angola Ltd Rua Joao De Barros no 32, 1st floor Luanda. Angola E-mail: [email protected] www.ige.se
IGE Nordic AB Kungsgatan 44, 7th floor SE-111 35 Stockholm Sweden Telephone: +46 8 402 28 00 Fax: +46 8 402 28 01 E-mail [email protected] www.igenordic.se
IGE Kenya Ltd PO Box 25492 00603 Lavington Kenya Telephone: +254 20 387 85 75 Cell: +254 728 974 454 E-mail: [email protected] www.ige.se
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