NEVSUN RESOURCES LTD.
Interim Consolidated Financial Statements
June 30, 2004
(Expressed in United States Dollars)
Unaudited – Prepared by Management
Not Reviewed by an Independent Auditor
NEVSUN RESOURCES LTD.
Interim Consolidated Balance Sheets | |||||||
(Expressed in United States Dollars) | |||||||
June 30, 2004 and December 31, 2003 | |||||||
June 30 | December 31 | ||||||
2004 | 2003 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,742,892 | $ | 14,519,209 | |||
Short-term investments | 45,671,031 | 47,166,703 | |||||
Accounts receivable and prepaids | 391,719 | 186,199 | |||||
48,805,642 | 61,872,111 | ||||||
Property, plant & equipment (note 2) | 66,181,609 | 51,536,768 | |||||
$ | 114,987,251 | $ | 113,408,879 | ||||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable and accrued liabilities | $ | 1,816,445 | $ | 1,178,781 | |||
Current portion of long-term debt (note 7) | - | 1,000,000 | |||||
1,816,445 | 2,178,781 | ||||||
Long-term debt (note 7) | 2,271,214 | 1,087,797 | |||||
Shareholders’ equity: | |||||||
Share capital (note 3) | 135,227,112 | 134,296,307 | |||||
Shares to be issued (note 7) | 2,352,941 | 2,352,941 | |||||
Contributed surplus (note 4) | 3,636,471 | 1,903,403 | |||||
Deficit | (30,316,932) | (28,410,350) | |||||
110,899,592 | 110,142,301 | ||||||
$ | 114,987,251 | $ | 113,408,879 |
Commitments (note 3)
Subsequent event (note 7)
See accompanying notes to interim consolidated financial statements.
Approved on behalf of the Board:
“John A. Clarke”
Director
“Robert J. Gayton”
Director
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NEVSUN RESOURCES LTD.
Interim Consolidated Statements of Operations and Deficit
Unaudited
(Expressed in United States Dollars)
Three months ended June 30 | Six months ended June 30 | ||||||||||||
2004 | 2003(Restatednote 1) | 2004 | 2003(Restatednote 1) | ||||||||||
Expenses: | |||||||||||||
Accounting and audit | $ | 12,456 | $ | 8,499 | $ | 35,878 | $ | 21,859 | |||||
Amortization | 6,840 | 4,596 | 12,532 | 8,829 | |||||||||
Consulting | 4,030 | 26,959 | 25,987 | 40,873 | |||||||||
Investor relations | 89,436 | 55,325 | 155,260 | 131,188 | |||||||||
Legal fees | 16,570 | 3,240 | 27,906 | 12,776 | |||||||||
Office | 83,297 | 68,888 | 170,303 | 96,475 | |||||||||
Remuneration | 116,852 | 85,170 | 241,138 | 175,818 | |||||||||
Stock-based compensation (note 3(c)) | 496,113 | 364,038 | 1,339,494 | 565,377 | |||||||||
Transfer, listing and filing fees | 25,896 | 7,283 | 51,506 | 34,902 | |||||||||
Travel | - | 11,711 | 52,931 | 30,642 | |||||||||
851,490 | 635,709 | 2,112,935 | 1,118,739 | ||||||||||
Loss before the undernoted | (851,490) | (635,709) | (2,112,935) | (1,118,739) | |||||||||
Foreign exchange gain (loss) | (1,131) | 82,873 | (7,193) | 434,267 | |||||||||
Investment income (loss) (note 6) | (160,188) | 68,446 | 213,546 | 78,170 | |||||||||
Loss for the period | (1,012,809) | (484,390) | (1,906,582) | (606,302) | |||||||||
Deficit, beginning of period | (29,304,123) | (26,533,783) | (28,410,350) | (26,411,871) | |||||||||
Deficit, end of period | $ | (30,316,932) | $ | (27,018,173) | $ | (30,316,932) | $ | (27,018,173) | |||||
Basic and diluted loss per share | $ | (0.02) | $ | (0.01) | $ | (0.03) | $ | (0.01) | |||||
Weighted average shares outstanding | 74,273,291 | 56,323,299 | 74,161,873 | 53,500,062 |
See accompanying notes to interim consolidated financial statements.
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NEVSUN RESOURCES LTD.
Interim Consolidated Statements of Cash Flows
Unaudited
(Expressed in United States Dollars)
Three months ended June 30 | Six months ended June 30 | ||||||||||||||
2004 | 2003 | 2004 | 2003 | ||||||||||||
Cash provided by (used for): | |||||||||||||||
Operations: | |||||||||||||||
Loss for the period | $ | (1,012,809) | $ | (484,390) | $ | (1,906,582) | $ | (606,302) | |||||||
Items not involving cash: | |||||||||||||||
Amortization | 6,840 | 4,596 | 12,532 | 8,829 | |||||||||||
Stock-based compensation | 496,113 | 364,038 | 1,339,494 | 565,377 | |||||||||||
Changes in non-cash working capital: | |||||||||||||||
Accounts receivable andprepaids | 22,154 | (251,515) | (205,520) | (301,756) | |||||||||||
Accounts payable andaccrued liabilities | 513,779 | 431,876 | 637,664 | 177,392 | |||||||||||
26,077 | 64,605 | (122,412) | (156,460) | ||||||||||||
Investments: | |||||||||||||||
Property, plant and equipment | (10,382,262) | (3,138,076) | (13,898,886) | (4,781,415) | |||||||||||
Short-term investments` | 10,288,896 | (2,898,161) | 1,495,672 | (7,570,377) | |||||||||||
(93,366) | (6,036,237) | (12,403,214) | (12,351,792) | ||||||||||||
Financing: | |||||||||||||||
Proceeds on issuance of shares | 625,759 | 1,371,443 | 752,314 | 13,996,119 | |||||||||||
Decrease in long term debt | 1,612 | – | (3,005) | – | |||||||||||
627,371 | 1,371,443 | 749,309 | 13,996,119 | ||||||||||||
Increase (decrease) in cash andcash equivalents | 560,082 | (4,600,189) | (11,776,317) | 1,487,867 | |||||||||||
Cash and cash equivalentsbeginning of period | 2,182,810 | 8,835,533 | 14,519,209 | 2,747,477 | |||||||||||
Cash and cash equivalents end of period | $ | 2,742,892 | $ | 4,235,344 | $ | 2,742,892 | $ | 4,235,344 | |||||||
Supplementary information: | |||||||||||||||
Income taxes paid | $ | – | $ | – | $ | – | $ | – | |||||||
Interest paid | $ | – | $ | – | $ | – | $ | – | |||||||
Non-cash investing and financingtransactions: | |||||||||||||||
Interest capitalized onaccretion of debt | $ | 24,407 | $ | 34,041 | $ | 47,651 | $ | 68,083 | |||||||
Stock-based compensation capitalized to mineral properties | $ | 289,489 | $ | 112,331 | $ | 572,065 | $ | 142,914 | |||||||
Contribution by Government ofMali capitalized to mineralproperties and long-term debt | $ | – | $ | – | $ | 138,771 | $ | – |
See accompanying notes to interim consolidated financial statements.
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NEVSUN RESOURCES LTD.
Notes to Interim Consolidated Financial Statements
Unaudited
(Expressed in United States Dollars)
Second Quarter Ended June 30, 2004
1.
Basis of presentation:
These interim consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter company balances and transactions have been eliminated. The interim statements should be read in conjunction with the annual audited financial statements for the company’s most recently completed fiscal year ended December 31, 2003, as these interim financial statements do not include all disclosures required for annual financial statements.
The preparation of interim financial statements to conform with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the interim financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of estimates relate to the determination of impairment of mineral properties, and assumptions used determining stock-based compensation. Actual results could differ from those estimates.
The same accounting policies are used in these interim financial statements as for the most recent audited annual financial statements.
The comparative figures for the 2003 quarters have been restated in the presentation of these interim statements of operations and deficit and cash flows so as to reflect the change in accounting implemented during the fourth quarter of 2003 for stock-based compensation, as detailed in the annual audited financial statements for the year ended December 31, 2003.
2.
Property, plant and equipment:
June 30 | December 31 | ||||||||
2004 | 2003 | ||||||||
Property under development - Tabakoto, Mali: | |||||||||
Historic exploration costs | $ | 28,878,166 | $ | 27,301,053 | |||||
Plant construction in progress, including progress payments of $6,178,814 on a lump sum turnkey construction contract | 8,126,774 | - | |||||||
37,004,940 | 27,301,053 | ||||||||
Exploration mineral properties: | |||||||||
Details per schedule below | 28,022,676 | 23,316,250 | |||||||
Equipment: | |||||||||
Cost less accumulated amortization | |||||||||
$ 117,698 (2003 - $105,166) | 1,153,993 | 919,465 | |||||||
$ | 66,181,609$ | 51,536,768 |
During the second quarter the Company announced the commencement of construction of the Tabakoto mine in Mali. In connection with a $25.5 million construction contract, Nevsun Resources Ltd. has guaranteed payment by its Malian subsidiary, Tambaoura Mining Company SA.
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NEVSUN RESOURCES LTD.
Notes to Interim Consolidated Financial Statements
Unaudited
(Expressed in United States Dollars)
Second quarter ended June 30, 2004
2.
Property, plant and equipment (continued):
Schedule of exploration mineral property expenditures during the first two quarters of 2004:
Segala | Bisha | Augaro/AK | Kubi | |||||||||||
Mali | Eritrea | Eritrea | Ghana | Total | ||||||||||
Deferred December 31, 2003 | $ | 12,784,025 | $ | 5,561,403 | $ | 630,879 | $ | 4,339,943 | $ 23,316,250 | |||||
Acquisition costs incurred | 23,244 | - | - | - | 23,244 | |||||||||
Exploration and development: | ||||||||||||||
Assays | - | 121,377 | - | - | 121,377 | |||||||||
Consulting engineers and personnel | 3,546 | 271,900 | 5,656 | 858 | 281,960 | |||||||||
Drilling and geophysics | - | 1,024,196 | - | - | 1,024,360 | |||||||||
Equipment | - | 29,331 | - | - | 29,331 | |||||||||
Line cutting and surveying | - | 42,988 | 1,929 | - | 44,917 | |||||||||
Stock-based compensation | - | 128,780 | - | 6,754 | 135,534 | |||||||||
Transportation and field | - | 463,009 | 1,493 | 25 | 464,527 | |||||||||
Administration | 5,478 | 188,944 | 1,896 | 13,515 | 473,900 | |||||||||
Diamond permit | 23,232 | - | - | - | 23,232 | |||||||||
Incurred during the period | 55,500 | 2,270,525 | 10,974 | 21,152 | 2,358,151 | |||||||||
Balance , March 31, 2004 | 12,839,525 | 7,831,928 | 641,853 | 4,361,095 | 25,674,401 | |||||||||
Acquisition costs incurred | 23,244 | 17,500 | 17,500 | - | 58,244 | |||||||||
Exploration and development: | ||||||||||||||
Assays | - | 205,583 | - | - | 205,583 | |||||||||
Consulting engineers and personnel | 19,973 | 465,238 | 4,101 | 3,587 | 492,899 | |||||||||
Drilling and geophysics | - | 1,170,475 | 136 | - | 1,170,611 | |||||||||
Equipment | - | 210,870 | - | - | 210,870 | |||||||||
Line cutting and surveying | - | 8,432 | 3,722 | - | 12,154 | |||||||||
Stock-based compensation | - | 124,824 | - | 10,131 | 134,955 | |||||||||
Transportation and field | - | 169,715 | - | 17 | 169,732 | |||||||||
Administration | 4,122 | 258,230 | 204 | 19,950 | 282,506 | |||||||||
Cost recovery | - | - | - | (410,000) | (410,000) | |||||||||
Diamond permit | 20,721 | - | - | - | 20,721 | |||||||||
Incurred during the period | 68,060 | 2,630,867 | 25,663 | (376,315) | 2,348,275 | |||||||||
Balance, June 30, 2004 | $ | 12,907,585 | $ | 10,462,795 | $ | 667,516 | $ | 3,984,780 | $ 28,022,676 |
During the second quarter the Company received $410,000 in cash recoveries of costs on its properties in Ghana.
3.
Share capital:
(a)
Authorized: 250,000,000 common shares without par value.
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NEVSUN RESOURCES LTD.
Notes to Interim Consolidated Financial Statements
Unaudited
(Expressed in United States Dollars)
Second quarter ended June 30, 2004
3.
Share capital (continued):
(b)
Issued:
Numberof Shares | ShareAmount | ||||
Balance, December 31, 2003 | 73,824,322 | $ | 134,296,307 | ||
Exercise of warrants | 202,500 | 55,106 | |||
Exercise of stock options | 117,700 | 71,449 | |||
Allocation from contributed surplus upon exercise of stock options | - | 34,317 | |||
Balance, March 31, 2004 | 74,144,522 | 134,457,179 | |||
Exercise of warrants | 62,500 | 57,542 | |||
Exercise of stock options | 763,300 | 568,217 | |||
Allocation from contributed surplus upon exercise of stock options | - | 144,174 | |||
Balance, June 30, 2004 | 74,970,322 | $ | 135,227,112 |
(c)
Stock options:
Numberof options | Weighted averageexerciseprice (CDN$) | ||||
Outstanding, December 31, 2003 | 4,472,000 | $ | 1.62 | ||
Granted to employees, directors, officers | 1,100,000 | 4.81 | |||
Granted to non-employees | 75,000 | 4.81 | |||
Exercised | (117,700) | 0.81 | |||
Outstanding, March 31, 2004 | 5,529,300 | $ | 2.32 | ||
Granted to employees, directors, officers | 50,000 | 4.81 | |||
Granted to non-employees | 12,000 | 4.81 | |||
Exercised | (763,300) | 1.01 | |||
Expired | (80,000) | 4.81 | |||
Outstanding, June 30, 2004 | 4,748,000 | $ | 2.52 |
Stock options at June 30, 2004 expire at various dates from February 8, 2005 to February 22, 2011.
Details of outstanding options at June 30, 2004:
Type | Numberof options | Range of exerciseprice (CDN$) | Average remaininglife in years | ||||
Vested | 190,000 | $ | 0.15 | 6.7 years | |||
Vested | 3,278,000 | $ | 0.75 to $7.33 | 2.7 years | |||
Un-vested | 1,280,000 | $ | 4.25 to $7.33 | 4.6 years | |||
Total | 4,748,000 |
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NEVSUN RESOURCES LTD.
Notes to Interim Consolidated Financial Statements
Unaudited
(Expressed in United States Dollars)
Second quarter ended June 30, 2004
3.
Share capital (continued):
(d)
Warrants:
Numberof warrants | Averageexerciseprice ($CDN) | ||||
Outstanding, December 31, 2003 | 5,492,500 | $ | 9.18 | ||
Warrants exercised | (202,500) | 0.36 | |||
Outstanding, March 31, 2004 | 5,290,000 | $ | 9.52 | ||
Warrants exercised | (62,500) | 1.25 | |||
Outstanding, June 30, 2004 | 5,227,500 | $ | 9.62 |
(e)
Shares reserved for issuance (fully diluted shares outstanding):
Number of shares | ||
Issued and outstanding at June 30, 2004 | 74,970,322 | |
Stock options outstanding (note 3(c)) | 4,748,000 | |
Warrants outstanding (note 3(d)) | 5,227,500 | |
Shares to be issued regarding Segala (note 7) | 1,420,000 | |
Shares reserved for issuance (fully diluted shares outstanding) | 86,365,822 |
4. Contributed surplus:
Balance, December 31, 2003 | $ | 1,903,403 |
|
Stock-based compensation expensed | 843,381 | ||
Stock-based compensation capitalized | 282,576 | ||
Exercise of stock options, to share capital | (34,317) | ||
Balance, March 31, 2004 | 2,995,043 | ||
Stock-based compensation expensed | 496,113 | ||
Stock-based compensation capitalized | 289,489 | ||
Exercise of stock options, to share capital | (144,174) | ||
Balance, June 30, 2004 | $ | 3,636,471 |
5. Segmented information
The Company conducts its business as a single operating segment being the investment in and exploration and development of mineral properties. All property, plant and equipment are situated in Africa. Investment revenues were earned from international sources.
6. Investment income
The Company records its short-term investments at the lower of cost and market. As a result the Company has recorded a decline in value as a reduction of investment income.
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NEVSUN RESOURCES LTD.
Notes to Interim Consolidated Financial Statements
Unaudited
(Expressed in United States Dollars)
Second quarter ended June 30, 2004
7. Subsequent event
Subsequent to June 30, 2004 the Company agreed to issue 1,420,000 common shares of the Company so as to settle all of the remaining obligations of debt ($1,944,640 at June 30, 2004) and shares to be issued ($2,352,941) incurred in connection with the 2002 acquisition of the Segala property. The previously classified current portion of long-term debt has been classified long-term at June 30, 2004 because it was subsequently settled through the issuance of shares.
CORPORATE DIRECTORY | TRANSFER AGENT |
DIRECTORS | Computershare Trust Company |
GARY E. GERMAN CHAIRMAN Toronto, Ontario, Canada | |
R. STUART ANGUS | CORPORATE OFFICE |
Suite 800 | |
JOHN A. CLARKE West Vancouver, BC, Canada | |
CLIFF T. DAVIS Vancouver, BC, Canada | |
ROBERT J. GAYTON | SHARES LISTED |
GERARD E. MUNERA | Toronto Stock Exchange |
OFFICERS | |
JOHN A. CLARKE | AUDITORS |
CLIFF T. DAVIS Chief Financial Officer | KPMG LLP Chartered Accountants |
F. WILLIAM NIELSEN | LEGAL COUNSEL |
MAUREEN D. CARSE | Miller Thomson LLP |
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