(Corcoesto, Galicia, 30 October 2014) Edgewater Exploration Ltd. and Mineira de Corcoesto Ltd. are hiding the true extreme of their financial weakness behind a smokescreen.
Ø Mineira de Corcoesto’s accounts for the 2013 financial year show the company's non-compliance with Spanish accounting regulations as they have failed to amortize intangible assets.
Ø The recording of a one-off depreciation of these assets by Mineira de Corcoesto Ltd. would leave the company facing compulsory liquidation under the Companies Act.
The Association for the Defence of Corcoesto and Bergantiños considers Edgewater’s announcement that they are in negotiations with a Spanish business consortium to resume the Corcoesto mining project to be a smokescreen to hide the company's extreme financial weakness and to try to improve their prospects on the stock market. The company's value has been sinking since October 2013, when the President of the Galician Government announced in Parliament the permanent cessation of the project as a consequence of the company breaking the technical and economic guarantees. Even after yesterday's announcement, the Canadian company's stock remains at a historic low. This is an indication that potential investors view this news as lacking credibility.
Furthermore, The Association for the Defence of Corcoesto and Bergantiños considers the idea that Mineira de Corcoesto Ltd. can restart and continue the Corcoesto mining project - whether they find a financial backer or not - to be totally without foundation given that - in the words of the Director General for Industry, Ángel Bernardo Tahoces - the formalities of the mining project have been "concluded". Any attempt to move the project forward would necessarily have to involve the presentation of a new project in accordance with the necessary governmental procedures, including a public consultation period to allow claims to be submitted by citizens and affected parties. Thus, this communiqué is intended to reaffirm the Association's allegation, based on the evidence outlined here, that Edgewater and Mineira de Corcoesto are continuing with a strategy of manipulating, plotting and deceiving the public and their investors alike.
Regarding the financial situation, after analyzing the latest accounts presented and having consulted various experts in this field, the Association opines that Mineira de Corcoesto Ltd. is not complying with Spanish accounting law which stipulates that intangible assets are amortized on the assets side of the balance sheet. As a consequence, the annual accounts do not reflect the company's true economic and financial situation in accordance with the legislation. Specifically, the company stated in the last financial accounts submitted to the commercial register that intangible assets amounted to 11.5 million euros; this corresponds to exploration, evaluation and development costs relating to the Corcoesto mining project. These capitalized costs should be amortized, that is to say that they should have been attributed to the accounts over a five year period. This would mean that Mineira de Corcoesto should have accounted for an expense in excess of two million euros in the 2013 financial year. This would automatically lead the company to have negative equity, bringing about the compulsory dissolution of the company in accordance with article 363.1 e) of Spanish Corporations Law.
The annual accounts also do not show - contrary to expert opinion - any deterioration in the value of intangible assets as a result of the Xunta (Government) of Galicia's negative decision which impedes the operation of the site. Nor does the report make any reference to this as an "act subsequent to the closing of annual accounts" as stipulated by the financial regulations. Their report should indicate the effect that the Xunta de Galicia's negative decision would have on the annual accounts. Accounting of this impairment or the explanation of the effect of the government's decision on the annual accounts would represent - in the opinion of the Association - a marked worsening of the economic and financial situation of both the subsidiary, Minera Corcoesto Ltd., and its parent company, Edgewater.
Another indication of the extreme and difficult financial situation is that the current assets of the company, amounting to 510,099.96 euros, is much less than its current liabilities (short term liquidity) amounting to 12,086,952.55 euros; this is evidence of the fact that the company has no capacity to deal with short-term debt. This constitutes a typical cause of bankruptcy, manifested by an inability to cover debt payment in the short term.
Finally, the Association states that it will be keeping a close eye on any activity by Edgewater and that it will continue to work to stop this foolhardy project from moving forward as it is against the best interests of the public.
Plataforma pola Defensa de Corcoesto e Bergantiños
Contact: Paco García: +34655.389.992 / Bráulio Amaro: +34696.027.745 e-mail plataformacorcoesto(at)gmail.com