CONSOLIDATED BALANCE SHEET

+  Restated due to change in accounting policy relating to deferred stripping. See note on accounting policies. 

Property, plant and equipment increased significantly year on year, mainly due to the completion of the Loulo capital project and funds being spent on underground equipment and the decline shaft sinking at Loulo.

The increase in long-term stockpiles relates to Morila, where the current life of mine plan envisages a build up of stockpiles until mining of the pit stops in 2009. After this, the lower grade stockpiles will be processed.

Significant balances include advances to the main contractor at Loulo, MDM Ferroman (Pty) Ltd (in liquidation) ("MDM"). MDM was the contractor responsible for construction of the Loulo mine ("MDM Contract"). At the end of 2005, the company determined that MDM was unable to perform its obligations under the MDM Contract, at which time the company enforced a contractual remedy which allowed it to act as its own general contractor and to complete the remaining work on the Loulo project that was required under the MDM Contract. As a result of MDM's failure to perform under the MDM Contract, the company believes that it is entitled to recover from MDM all amounts paid in excess of the lump sum contract. This comprises payments totalling US$32 million, which have been capitalised as part of the cost of the project, US$9 million in respect of damages arising from the delayed completion of the project, and loan agreements signed by MDN of US$12.1 million included in Receivables. As part of the company's efforts to recoup the monies owed to it, MDM was liquidated followed by a South African Companies Act Section 417 investigation into the business activities of MDM. 

Significant uncertainties exit as to the recoverability of the amounts due by MDM to the company. The directors believe that the group will be able to recover in full the US$12.1 million included in Receivables. This is dependent on the amounts which can be recovered from the performance bonds, personal guarantees and other assets provided as security and, if these amounts prove to be insufficient, the outcome of the liquidation of MDN. The aggregate amount which will ultimately be recovered can not presently be determined. The financial statements do not reflect any additional provision that may be required if the US$12.1 million cannot be recovered in full.

Recovery of the other US$41 million is dependent on the extent to which the group's claim is accepted by the liquidator and the outcome of the liquidation of MDN. The ultimate outcome of this claim cannot presently be determined. The financial statements do not reflect any reduction to the cost of the Loulo development that may arise from the claim, any additional income that may arise from the claim for damages, or any charge that may arise from MDN's inability to settle amounts that are determined to be payable by MDN to the group in respect of the Loulo development.

As in the previous year, this significant uncertainty will be the subject of an emphasis of matter in the auditor's report on the financial statements.

Receivables also includes US$20.3 million relating to reimbursable fuel duties and TVA owing by the Government of Mali to Morila and Loulo. A provision of US$1.3 million based on an estimate of the time value of money given the slow-moving nature of these amounts has been raised this year.

Accounts payable has increased significantly in the year due to build up of stores to a normal operating level at Loulo.

The non-current receivables of US$13.7 million are those parts of the MDM and Malian Government receivables which, whilst legally payable immediately, are anticipated to be reimbursed after more than 12 months.