monterrico metals plc 
annu al repo rt 2007
building fir m foundations 
for growth monterrico metals plc annu al repo rt 2007
monterrico metals plc 
corporate head o ffice 
suite 1608 west t ower
shun t ak centre
168  200 connaught road central
sheung wan
hong kong
t el  852 2803 2195
fax  852 2803 0878 
email infomonterricocom 
wwwmonterricocom
monterrico metals plc
copper in peru
“with the copper you benefit
everyone benefits  
peru benefits”
“rio blanco project health for you health for 
ayabaca and huancabamba”  monterrico metals plc annual report 2007
monterrico metals plc “monterrico” or the “company” is  
a londonbased resource development company which 
operates mainly in peru the company is majority owned by 
the zijin consortium composed of three chinese companies 
led by the zijin mining group monterrico is incorporated in the 
uk and its shares are quoted on aim ticker code – mnal
monterrico’s principal asset is the rio blanco copper
molybdenum deposit in northern peru this is one of the 
largest undeveloped copper resources in the world and is 
wholly owned by the company monterrico plans to develop 
rio blanco as a conventional open pit mine producing copper 
and molybdenum concentrates at planned production rates 
rio blanco will be amongst the 20 largest copper mines in  
the world 
monterrico is dedicated to creating long term wealth for 
stakeholders through responsible development of the rio 
blanco project in its work the company is also committed to 
its responsibilities to the local communities and to sustainable 
development of the area of influence of this project for the 
benefit of the local inhabitants and the economy of peru as  
a whole
contents
1 highlights 20078
2 key facts
3 chairman’s statement
4 report from the ceo
7 o perations report
8 t he rio blanco project
 8 background
 9 detailed feasibility study dfs
 11 review of the dfs
12 o ther projects
13 corporate social responsibility and 
sustainable development
 14 protecting the environment
 16  o ur social programme 
20 board of directors
21 profile of the zijin consortium
23 finance director’s review of  
financial o perations
24 directors’ report
28 report of the independent auditor
30 consolidated income statement
31 consolidated balance sheet
32 company balance sheet
33 statement of changes in shareholders’ 
equity
34 consolidated cash flow statement
35 company cash flow statement
36 notes to the financial statements
59 notice of the annual general meeting
bic corporate information
co rpo rate info rmatio n
directors
richard ralph non executive chairman
xiaodong huang chief executive o fficer
shan shan susan l i finance director 
guobin hu t echnical director
raymond angus non executive director
wenzhou huang non executive director
harry cooper non executive director
company secretary 
shan shan susan l i
corporate head office
monterrico metals plc 
suite 1608 west t ower
shun t ak centre
168  200 connaught road central
sheung wan
hong kong
t el  852 2803 2195
fax  852 2803 0878 
head office in peru
rio blanco copper sa
av san borja sur no 143
san borja
l ima 41
peru
t el 511 226 3322 
fax 511 226 3320
nominated adviser and broker
ambrian partners limited
o ld change house 
128 queen victoria street
ec4v 4bj
reporting accountants and auditors
grant thornton uk llp
registered auditors
grant t hornton house 
melton street
euston square
l ondon n w1 2ep
solicitors to the company
lawrence graham llp
4 more l ondon riverside 
l ondon se1 2au
registrars
capita irg plc
bourne house
34 beckenham road 
beckenham
kent br3 4tu
share capital as at 8 april 2008
issued and outstanding 26306068
fully diluted 26771068
registered office
monterrico metals plc
10 foster l ane 
l ondon ec2v 6hr
t el 44 20 7776 2900
fax 44 20 7776 2909
email infomonterricocom 
website wwwmonterricocom
t he picture on the back cover is an example of a cartoon leaflet 
which we use for briefing the local people about the benefits of 
the rio blanco project
bic  back inside cover 01 monterrico metals plc  annual report 2007
hig hlig hts 20078
	 zijin	consortium	successfully	concludes	takeover	of	monterrico	in	april	2007
	 	the	consortium	acquires	899	shareholding	for	350p	per	share	and	 maintains	aim	listing
	 new	board	of	directors	appointed	on	1	june	2007
	 	management	in	peru	strengthened	board	of	directors	formally	appointed	at	 monterrico’s	peruvian	subsidiary
	 	new	management	commences	review	of	rio	blanco	detailed	feasibility	 study	dfs	work	on	the	environmental	and	social	impact	assessment	 esia	continues
	 stability 	 agreement	 obtained	 from	 peruvian	 government	 in	 august	 2007	 this
	 °	 provides	formal	registration	of	the	company’s	investments	in	peru
	 °	 	guarantees	no	change	to	tax	and	labour	conditions	for	10	year	term
	 °	 	permits	free	transferability	of	foreign	currency	and	unrestricted	trade	of	 mineral	p roducts
	 	ls	nikko	the	major	korean	copper	smelting	company	buys	10	stake	in	 monterrico	as	the	first	part	of	a	planned	sell	down	by	the	consortium	thus	 reducing	the	consortium’s	holding	to	799	sale	concluded	in	september	 2007	ls	nikko	paid	370pshare	which	was	at	a	premium	to	the	prevailing	 market	price	and	the	takeover	offer	of	350pshare	in	april	2007
	 	 	 trust	funds	of	us80	million	offered	in	august	2007	to	communities	in	area	 of	influence	of	the	rio	blanco	project
	 	review	of	the	detailed	feasibility	study	dfs	completed	a	tradeoff	study	 to	evaluate	the	alternative	technical	options	for	the	development	of	rio	 blanco	will	be	conducted	to	maximise	value	from	the	total	resource	1257mt	 and	optimise	the	economics	of	the	project	whilst	improving	environmental	 and	social	aspects
	 	company	strengthens	its	social	programme	and	expands	and	improves	 communications	with	local	and	regional	communities
	 plc	head	office	to	be	moved	to	hong	kong
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● 02 monterrico metals plc  annual report 2007
key facts
where we operate – peru
politically  stable  economy  is  one  of  the  best  performers  in  latin  america  a  country  rich  in  minerals  mining  is  a  major  component  of  the  economy  most  of  the  world’s  largest  mining  companies  operate  in  peru
peru  is  the  second  largest  producer  of  copper  in  the  world  based  on  mine  production  in  2007
the  garcia  government  promotes  mining  and  strongly  supports  the  development    of  rio  blanco  our principal asset – the rio blanco project 
wholly  owned  by  monterrico  through  our  peruvian  subsidiary  rio  blanco  copper  sa
one  of  the  largest  undeveloped  copper  resources  in  the  world
  –   1257  million  tonnes  at  057  copper  and  228  ppm  molybdenum
  –   contained  copper  7  million  tonnes  ie  155  billion  pounds  plus    byproduct  molybdenum
excellent  potential  for  expanding  the  resource  still  further
conventional  open  pit  mine  planned  producing  copper  and  molybdenum  concentrates
concentrates  will  be  free  of  penalty  elements  and  highly  desirable
average  annual  production  at  rio  blanco  for  the  first  five  years  of  operation  –  according    to  the  recent  detailed  feasibility  study  –  would  be  191000  tonnes  of  copper  and  2180  tonnes  of  molybdenum  •
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◆   operating  mine  ●   significant  prospect
     operating  company  sole  or  majority  owners  mines  and  prospects  in  southern  peru  not  shown
coppergold belt of northern peru
showing  major  mines  and  significant  prospects
     jorc  compliant  resource  at  a  cut  off  grade  of  04  copper
  03 monterrico metals plc  annual report 2007
prime objectives
the  three  prime  objectives  on  which  we  have  been  focusing  are  to  build  up  the  company  transforming  it  from  junior  exploration  company  to  a  large  mining  company  reappraise  the  company’s  assets  in  peru  particularly  the  massive  rio  blanco  coppermolybdenum  project  secure  the  understanding  and  support  of  local  communities  around  the  rio  blanco  project
on  the  first  i  am  glad  to  report  that  the  restructuring  has  made  great  strides  a  new  and  wellbalanced  board  is  in  place  an  experienced  new  management  team  has  taken  firm  control  and  a  clear  vision  ethos  and  set  of  objectives  have  been  developed  the  company  is  now  in  good  shape  to  go  forward  on  the  second  the  new  management  with  the  benefit  of  its  previous  strong  experience  of  major  mining  projects  has  been  reviewing  and  reevaluating  the  technical  design  for  the  development  of  our  largest  single  asset  the  rio  blanco  coppermolybdenum  project  as  we  announced  in  march  a  new  tradeoff  study  is  being  commissioned  which  will  allow  the  most  favourable  option  to  be  taken  to  full  feasibility  inevitably  this  will  cause  some  delay  in  the  timeline  but  the  end  result  should  be  a  major  increase  in  the  exploitable  resource  and  therefore  a  significant  increase  in  value  the  company  will  naturally  do  everything  possible  to  bring  rio  blanco  on  stream  as  quickly  as  possible  mr  xiaodong  huang  our  ceo  discusses  this  in  more  detail  in  his  statement  which  follows
on  the  third  we  –  in  common  with  many  other  mining  companies  in  peru  –  have  had  to  contend  with  opposition  from  antimining  campaigners  this  has  caused  some  difficult  moments  however  lessons  have  been  learned  we  are  now  in  a  position  to  devote  significantly  greater  effort  and  resource  to  our  social  programme  than  •
•
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before  the  takeover  and  we  enjoy  the  strong  strategic  backing  of  the  peruvian  government  the  government  is  committed  to  free  market  policies  and  greatly  values  peru’s  economic  and  political  relations  with  the  united  states  eu  and  china  it  is  promining  and  wants  to  see  the  rio  blanco  project  developed  as  soon  as  possible  the  result  of  all  these  factors  is  that  we  are  beginning  to  see  positive  results  on  the  ground
environmental and social 
responsibility
it  is  worth  reiterating  here  that  the  company  and  our  peruvian  subsidiary  are  very  firmly  committed  to  observing  the  highest  international  standards  of  environmental  and  social  responsibility  we  particularly  want  to  play  our  part  in  alleviating  poverty  in  this  isolated  and  disadvantaged  part  of  peru  developing the company
besides  pressing  forward  with  the  rio  blanco  project  –  our  most  important  asset  –  the  company  is  also  bent  on  expanding  through  the  development  of  other  projects  in  latin  america  and  by  making  further  acquisitions  this  is  an  area  on  which  shareholders  can  expect  to  hear  more  during  the  coming  year
financing
during  the  past  year  the  company  has  been  able  to  rely  on  loans  from  its  major  shareholder  to  cover  our  operating  costs  however  other  options  are  under  consideration  to  finance  further  phases  of  the  rio  blanco  project  and  the  expansion  of  the  company  watch  this  space
conclusions
to  conclude  although  the  past  year  has  been  largely  one  of  internal  reorganisation  and  reevaluation  by  the  new  management  resulting  in  a  limited  news  flow  this  phase  is  nearly  complete  and  the  company  poised  to  move  purposefully  forward  as  part  of  the  reorganisation  it  has  been  decided  to  relocate  the  plc  head  office  to  hong  kong  i  look  to  the  future  with  optimism  i  believe  that  shareholders  can  do  likewise  richard ralph
chairman
8  april  2008
ch airman’s statement
twelve	 months	 after	 the	 zijin	 consortium	 completed	 its	 acquisition	 of	 a	 majority	 shareholding	 in	 monterrico	 metals	 plc	 i	 can	 report	 that	 this	 has	 been	 a	 period	 of	 intense	 even	 if	 not	 very	 newsworthy	 activity	 for	 the	 company	 04 monterrico metals plc  annual report 2007
since  the  zijin  consortium  formally  took  over  the  management  of  monterrico  on    1  june  2007  monterrico  has  been  reorganised  and  restructured  in  peru  we  have  established  a  new  board  of  directors  for  our  wholly  owned  subsidiary  rio  blanco  copper  sa  formerly  minera  majaz  sa  which  operates  the  rio  blanco  project  we  have  retained  most  key  members  of  staff  within  this  subsidiary  and  have  developed  a  new  vision  and  operational  philosophy  which  has  now  been  adopted  throughout  the  company  in  so  doing  i  believe  monterrico  is  well  on  the  way  to  making  a  harmonious  transition  from  a  junior  exploration  company  into  a  large  mining  corporation  through  the  successful  development  of  rio  blanco  in  keeping  with  this  transition  we  are  developing  the  company’s  corporate  governance  and  corporate  culture  based  on  the  principles  of  corporate  responsibility  and  transparency
i  would  like  to  take  this  opportunity  to  thank  all  directors  and  staff  both  of  monterrico  and  rio  blanco  copper  sa    for  their  contribution  to  the  company
review of the rio blanco detailed 
feasibility study dfs
the  focus  of  our  technical  work  since  the  acquisition  has  been  to  review  the  detailed  feasibility  study  dfs  for  the  rio  blanco  project  as  reported  previously  the  dfs  considers  an  operation  treating  25mt  of  ore  per  year  over  a  20  year  period  this  study  was  submitted  in  late  2006  and  results  were  in  part  released  to  the  market  in  february  2007  over  the  past  months  this  study  has  been  reviewed  both  internally  by  the  new  management  and  in  conjunction  with  the  principal  consultants  involved  in  its  preparation  from  this  review  we  have  concluded  that  aspects  of  the  dfs  have  a  number  of  deficiencies  and  that  the  current  design  does  not  represent  the  optimum  plan  for  the  long  term  development  of  this  resource  one  of  the  main  reasons  is  that  the  dfs  considered  the  development  of  only  40  of  the  defined  resource  of  1257  mt  and  our  concern  is  that  the  dfs  plan  may  constrain  development  of  the  full  resource  and  the  upside  potential  of  rio  blanco  in  the  future  secondly  the  rising  cost  of  capital  items  over  the  past  year  even  without  the  inclusion  of  the  preferred  pipeline  option  makes  it  prudent  to  consider  a  wider  range  of  scales  of  operation  in  order  to  optimise  the  economic  return  of  the  project  thirdly  we  feel  that  certain  elements  of  the  project  notably  the  design  and  location  of  the  tailings  storage  facility  tsf  require  further  evaluation  to  ensure  the  design  is  suitable  for  long  term  use  and  that  all  aspects  meet  international  environmental  standards  as  a  result  we  have  decided  to  commission  a  tradeoff  study  to  evaluate  the  alternative  technical  options  for  the  development  of  rio  blanco  the  objective  of  this  study  is  to  arrive  at  a  design    which  will  maximise  value  from  the  total  resource  1257mt  optimise  the  economics  of  the  project  whilst    improving  environmental  and  social  aspects  the  study  will  seek  to  build  on  the  work  to  date  as  much  as  possible  additional  drilling  at  rio  blanco  will  also  be  conducted  to  increase  the  global  resource  and  define  the  upside  potential  for  planning  purposes  we  firmly  believe  this  step  is  necessary  in  order  to  be  able  to  realise  the  full  potential  of  this  important  deposit  it	 is	 now	 10	 months	 since	 i	 was	 appointed	 as	 ceo	 and	 i	 am	 delighted	 to	 report	 on	 monterrico’s	 operations	 since	 the	 last	 annual	 report	 r eport from t he ch ief executive o fficer 05 monterrico metals plc  annual report 2007
impact on project timeline 
the  decision  to  embark  on  a  tradeoff  study  with  a  very  probable  change  in  project  design  will  have  a  significant  impact  on  the  project  timetable  it  is  anticipated  that  the  tradeoff  study  will  be  completed  in  the  second  half  of  2008  when  a  revised  timetable  for  the  project  will  be  announced  however  in  the  meantime  this  is  broadly  the  time  line  we  expect  following  conclusion  of  the  tradeoff  study  we  anticipate  it  will  take  approximately    12  months  to  mid  to  late  2009  to  take    the  new  engineering  designs  to  feasibility  level  with  cost  estimates  of  10    whilst  this  work  is  being  undertaken  the  environmental  and  social  baseline  work  will  be  updated  as  necessary  to  complete  the  esia  in  accordance  with  the  new  project  design  assuming  that  we  have  all  necessary  community  permits  for  land  access  this  would  allow  us  to  submit  the  esia  in  mid  to  late  2009  with  approvals  following  after  six  months  and  then  to  commence  construction
the  social  situation  remains  the  key  factor  in  controlling  this  timetable  and  the  company  is  working  hard  to  consolidate  relationships  with  local  communities  and  is  working  closely  with  central  regional  and  local  governments  social issues and our social 
programme 
in  peru  like  the  rest  of  south  america  community  issues  are  common  in  the  mining  industry  as  they  are  in  much  of  the  world  virtually  all  mining  companies  face  some  community  problems  rio  blanco  is  no  exception
in  2007  following  the  takeover  by  the  new  management  we  have  strengthened  and  reorganised  the  company’s  social  programme  we  have  extended  the  network  of  community  relations  offices  in  the  area  of  influence  of  the  rio  blanco  project  enlarged  our  teams  of  community  relations  personnel  and  initiated  a  major  new  communications  programme  in  keeping  new  management’s  commitment  to  transparency  communications
the  communications  programme  is  designed  to  promote  understanding  of  the  rio  blanco  project  and  dispel  fears  and  misrepresentation  promulgated  by  the  antimining  movement  under  this  programme  we  have  opened  two  new  information  centres  devoted  to  the  rio  blanco  project  and  mining  in  general  these  are  the  first  of  their  kind  in  peru  in  the  first  two  months  of  operation  the  first  centre  in  the  regional  capital  of  piura  received  over  15000  registered  visitors  a  second  centre  has  been  opened  recently  and  plans  are  underway  to  open  more  centres  in  key  towns  throughout  northern  peru  we  have  also  expanded  the  circulation  of  our  information  newsletters  and  are  making  extensive  use  of  radio  to  reach  the  more  remote  areas  our  spanish  language  website  has  been  redesigned  to  provide  more  information  about  the  project  and  our  social  programme  in  particular  trust funds for the communities
to  address  the  very  common  concern  that  local  communities  tend  not  to  benefit  sufficiently  from  mining  we  announced  in  august  2007  our  offer  to  establish  voluntary  trust  funds  totalling  us80  million  for  the  two  communities  closest  to  the  rio  blanco  site  these  funds  are  to  be  used  by  them  for  community  development  projects  of  their  choice  the  funds  will  be  accumulated  over  the  mine  life  and  will  be  in  addition  to  the  share  of  revenues  that  these  communities  will  receive  from  taxes  and  royalties  remitted  to  them  by  the  state  once  rio  blanco  enters  production  strengthening relationships with 
communities
whilst  the  tradeoff  study  and  additional  engineering  work  are  underway  we  will  use  our  time  productively  on  the  social  programme  our  aims  are  to  strengthen  relationships  with  the  local  people  communicate  details  of  the  updates  to    the  project  plans  and  endorse  or  renew  land  access  agreements  with  the  relevant  neighbourhoods  we  will  also  continue    to  prepare  the  local  people  for  the  development  of  the  project  and  the  opportunities  that  it  will  offer  them  and  integrate  the  project  into  relevant  regional  development  plans
xiaodong  huang  ceo  discussing  rio  blanco  project  infrastructure  routes  with  colleagues  in  peru
a  vein  of  molybdenite  molybdenum  sulphide  seen  in  the  chelo  adit  tunnel  at  rio  blanco  richard  ralph  chairman  in  the  chelo  adit  one  of  two  adits  at    rio  blanco 06 monterrico metals plc  annual report 2007
r eport from t he ch ief executive o fficer
visitors  at  the  company’s  new  information  centre  in  the  city  of  piura  the  centre  has  a  3d  model  of  the  department  of  piura  shown  in  the  picture  on  the  left  showing  planned  infrastructure  for  the  rio  blanco  project  the  centre  also  has  various  interactive  displays  rio  blanco  will  be  the  first  major  metal  mine  in  this  department  of  peru  and  will  provide  it  with  an  important  source  of  revenue  strategy going forward
going  into  2008  i  am  confident  that  the  company  will  achieve  greater  social  support  for  the  development  of  rio  blanco  our  objectives  and  strategies  for  the  next  12  months  are
philosophy  continue  to  develop  monterrico  into  an  international  mining  company  seeking  to  achieve  harmonious  codevelopment  with  our  stakeholders  all  the  while  maintaining  our  total  commitment  to  safeguarding  society  and  the  environment  technical revise  the  project  design  to  make  best  use  of  the  potential  of  the  rio  blanco  resource  maximise  economic  returns  and  improve  environmental  and  social  aspects  of  the  project  the  technical  team  will  concentrate  on  finalising  the  new  tradeoff  study  and  depending  on  the  results  will  extend  the  baseline  studies  for  the  esia  and  begin  taking  the  new  project  design  through  to  detailed  feasibility  level  social work  to  obtain  social  licence  we  will  focus  particularly  on  the  local  farming  communities  with  the  aim  of  obtaining  their  understanding  and  acceptance  for  the  development  of  rio  blanco
company growth  mineral  resources  are  the  future  of  any  mining  company  and  monterrico  will  continue  to  pursue  new  project  development  opportunities  and  exploration  in  latin  america
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conclusions
rio  blanco  is  a  magnificent  project  the  delay  in  its  construction  is  to  maximise  the  value  of  this  important  resource  and  to  achieve  the  necessary  social  support  for  harmonious  long  term  operations  i  am  confident  that  these  changes  will  strengthen  the  foundations  of  this  very  significant  project  and  represent  a  better  opportunity  to  create  value  for  shareholders  local  communities  and  peru  as  a  whole
huang xiaodong 
chief executive officer
8  april  2008 07
o perations report
monterrico metals plc  annual report 2007 07 r io blanco p roject
henry’s	hill
exploration	camp
rio blanco
project
paciﬁc ocean
department
of piura
lima
ecuador
columbia
brasil
peru
chile
08 monterrico metals plc  annual report 2007
rio  blanco  is  a  large  undeveloped  copper
molybdenum  deposit  situated  in  the  department  of  piura  northern  peru  close  to  the  border  with  ecuador  the rio blanco concessions
the  company’s  rights  to  the  property  are  held  through  its  wholly  owned  peruvian  registered  subsidiary  rio  blanco  copper  sa  formerly  minera  majaz  sa  which  holds  title  to  eight  mineral  concessions  covering  a  total  area  of  6475  hectares  the  project  lies  in  the  lower  andes  2200
2800  masl  on  the  atlantic  side  of  the  drainage  divide  the  site  is  uninhabited  and  due  to  its  ruggedness  and  isolation  has  neither  been  used  for  agriculture  nor  for  grazing  there  is  currently  no  road  access  to  the  project  and  the  nearest  village  is  8km  from  site
history of the project
the  rio  blanco  deposit  was  discovered  in  1994  by  newcrest  mining  of  australia  during  a  regional  exploration  programme  monterrico  acquired  an  option  on  the  property  in  2001  and  after  the  success  of  the  initial  drilling  programme  the  company  negotiated  the  acquisition  of  100  of  the  project  in  2003  the  company  has  carried  out  extensive  exploration  work  on  these  concessions  drilling  55652  metres  of  core  in  184  diamond  drill  holes  in  the  course  of  this  work  the  company  has  identified  several  targets  the  most  advanced  is  at  henry’s  hill  in  2003  monterrico  undertook  a  pre
feasibility  study  for  a  10  million  tonne  per  annum  operation  at  henry’s  hill  encouraged  by  the  results  of  the  study  the  company  commissioned  a  detailed  the  rio  blanco  project  is  centred  on  henry’s  hill
feasibility  study  dfs  in  2004  the  scope  of  the  project  was  altered  during  the  study  in  response  to  the  continuing  success  of  the  exploration  programme  and  to  improve  various  technical  elements  of  the  project  the  dfs  was  completed  and  submitted  to  the  board  in  late  2006  and  a  summary  of  the  results  were  announced  to  the  market  in  february  2007   geology 
rio  blanco  is  a  porphyry  copper  deposit  which  lies  at  the  northern  end  of  the  coppergold  belt  of  northern  peru  this  trend  is  defined  by  a  number  of  important  mines  and  prospects  many  of  which  are  operated  by  major  international  mining  companies  see  map  on  page  2  rio  blanco  is  hosted  by  a  multiphased  intrusive  porphyry  complex  dated  at  about  11  million  years  at  least  three  generations  of  intrusive  and  mineralising  events  have  been  identified  at  rio  blanco  and  the  complex  exhibits  classic  patterns  of  hydrothermal  alteration  associated  with  this  type  of  mineral  deposit  in  the  primary  hypogene  ore  which  constitutes  the  bulk  of  the  deposit  copper  and  molybdenum  mineralisation  occurs  as  chalcopyrite  and  molybdenite  in  stockwork  veins  and  disseminations  above  the  primary  ore  and  beneath  a  leached  cap  there  is  an  enriched  zone  with  higher  copper  values  the  supergene  blanket  the  supergene  blanket  varies  in  thickness  from  a  few  metres  to  240m  the  copper  minerals    are  principally  chalcocite  and  covellite  present  in  the  ratio  of  approximately    12  molybdenum  is  not  enriched  in  the  supergene  zone  the  leached  cap  which  is  devoid  of  mineralisation  overlies  the  supergene  blanket  and  extends  down  from  surface  typically  to  between  50  and  150  metres  in  depth  the geological resource and  
upside potential 
the  geological  resource  for  rio  blanco  which  is  centred  on  the  mineralisation  at  henry’s  hill  has  been  estimated  to  be  1257mt  at  057  copper  and  228  ppm  molybdenum  as  shown  in  table  1  this  estimate  was  made  in  march  2006  in  an  independent  study  by  the  snowden  group  which  was  commissioned  by  the  company  the  estimate  complies  with  the  australian  code  for  reporting  of  mineral  resources  and  ore  reserves  the  jorc  code  2004  and  is  based  on  more  than  50000m  of  diamond  drilling  from  157  diamond  drill  holes  and  samples  from    two  adits  in  addition  to  these  resources  several  other  targets  have  been  identified  within  the  area  of  the  concession  these  targets  have  been  explored  to  varying  degrees  and  only  some  have  been  drilled  the  most  promising  of  these  targets  is  soho  which  lies  adjacent  to  the  henry’s  hill  deposit  exploration  drilling  at  soho  in  2005  intersected  good  copper  grades  including  650m  at  059  copper  open    at  depth  in  one  drill  hole
there  are  also  indications  that  the  ore  body  continues  across  the  border  into  ecuador  the  company  has  therefore  secured  the  mining  tenements  in  ecuador  opposite  henry’s  hill  th e r io blanco p roject
background
rio  blanco  lies  in  the  department  of  piura  in  northern  peru  the  city  of  piura  is  its  regional  capital talara
sullana
ecuador
dept of
tumbes
dept of
lambayeque
paciﬁc ocean
ayabaca
paita
morropon
huancabamba
sechura
piura
rio blanco
project
bayovar
national roads
road improvement
new road
power line
pipeline option
pipeline option
09 monterrico metals plc  annual report 2007
th e r io blanco p roject
r io blanco detailed f easibility study dfs 
the  dfs  was  prepared  for  the  previous  management  of  monterrico  by  a  team    of  independent  mining  consultancy  companies  led  by  hatch  ingenieros  y  consultores  ltda  hatch  hatch  was    the  overall  author  of  the  dfs  with  responsibility  for  the  collation  of  the    data  prepared  by  the  other  technical  consultants  and  production  of  the    final  report  plan  was  drawn  up  to  focus  on  extracting  the  higher  grade  supergene  ore  first  in  order  to  accelerate  cash  flow  during  the  early  years  and  facilitate  pay  back  the  reserves  defined  by  the  mine  planning  exercise  are  set  forward  in  table  2
table 2 mine reserve for initial  
20 year mine life
  tonnes	 copper	 molybdenum
class	 mt	 	 ppm
proven  133  074  232
probable  365  059  210
t otal 498 063 216
         the  dfs  calculates  that  the  average  grade  of  ore  processed  during  the  first  five  years  of  operation  will  be  087  copper  and    the  average  production  of  metals  in  concentrates  during  this  period  will  be  about  191000  tonnes  of  copper  and  2180  tonnes  of  molybdenum  per  annum  a  summary  of  the  project  statistics  as  outlined  by  the  dfs  is  presented  in  table  3  project layout 
the  dfs  planned  that  the  ore  would    be  processed  on  site  and  that  the  concentrate  product  would  be  transported  to  a  purpose  built  port  on  the  pacific  coast  at  bayovar  approximately  300km  from    the  project  where  it  would  be  stored  for  shipment  overseas  during  the  design  process  the  decision  was  taken  to  minimise  the  footprint  of  the  operation  at  the  mine  site  as  the  previous  management  thought  this  would  facilitate  permitting  and  reduce  costs  accordingly  the  plant  waste  rock  dump  and  tailings  storage  facility  were  sited  close  to  the  project outline
the  dfs  presents  a  study  for  an  open    pit  mining  operation  using  conventional  flotation  technology  to  produce  separate  copper  and  molybdenum  concentrates  the  study  considers  an  operation  treating  25mt  per  annum  over  an  initial  twenty    year  mine  life  utilising  reserves  of  approximately  500mt  of  ore  the  mine  outline  of  the  planned  infrastructure  for  the  rio  blanco  project  as  defined  by  the  dfs  shown  on  a  map  of  the  department  of  piura
copper  mineralisation  mainly  chalcopyrite  –  metallic  yellow  seen  in  an  adit  at  henry’s  hill
table 1 rio blanco resources estimate
	 	 tonnes	 copper	 molybdenum
zones	 classification	 mt	 	 ppm
supergene	 measured	 71	 088	 150
	 indicated	 197	 067	 138
	 inferred	 90	 057	 113
	 sub total 358 069 134
hypogene	 measured	 75	 057	 317
	 indicated	 473	 052	 274
	 inferred	 351	 051	 242
	 sub total 899 052 265
total	 measured	 146	 073	 235
	 indicated	 670	 056	 234
	 inferred	 441	 052	 216
	 t otal 1257 057 228
resources	 at	 a	 cut	 off	 grade	 of	 04	 copper	 estimate	 prepared	 by	 snowden	 march	 2006	 to	 comply	 with	 jorc	 2004	 standards	 ppm	 	 parts	 per	 million 10 monterrico metals plc  annual report 2007
open  pit  after  considering  a  number  of  alternatives  for  disposing  of  the  tailings  from  the  process  plant  the  dfs  selected  a  method  of  filtered  tailings  deposition    as  this  would  allow  the  tailings  from    the  process  plant  to  be  dewatered  to  approximately  20  moisture  and  dry  stacked  in  the  valley  immediately    adjacent  to  the  plant  and  mine  the    dfs  recognised  that  further  work  was    required  on  the  tsf  and  detailed  engineering  design  and  optimisation    of  the  tfs  design  continued  after  the  submission  of  the  dfs  infrastructure 
due  to  its  remote  location  the  dfs  outlined  that  the  project  would  require    25  km  of  new  road  and  the  upgrading  of  176  km  of  existing  road  the  construction  of  a  220  kv  power  line  from  the  town  of  piura  to  link  the  project  into  the  national  grid  as  well  as  storage  and  loading  facilities  at  the  port  of  bayovar  the  dfs  investigated  a  number  of  options  for  transporting  the  concentrates  to  the  port  although  a  study  for  a  concentrate  pipeline  was  developed  to  full  feasibility  stage  the  dfs  was  finally  costed  on  the  basis  of  trucking  the  concentrates  to  the  coast  by  a  haulage  contractor  in  order  to  minimise  the  initial  capital  cost  of  the  project  however  the  plans  for  the  concentrate  pipeline  were  retained  and  presented  as  an  option  for  development  at  a  later  stage  when  the  mine  was  in  operation  project economics – capital and  
operating costs
the  dfs  estimated  the  capital  cost  for    the  project  including  contingencies  to  be  us144  billion  with  an  intended  level  of  accuracy  of  515  this  figure  was  finalised  in  february  2007  and  does    not  include  any  allowance  for  escalation    in  prices  or  fluctuations  in  currency  exchange  rates  as  stated  previously    the  capital  cost  is  based  on  trucking  the  concentrates  to  port  and  does  not  include  the  cost  of  the  concentrate  pipeline  the  operating  costs  and  payback  period  were  calculated  using  longterm  copper  price  forecasts  provided  by  bloomsbury  minerals  economics  ltd  it  was  estimated  that  during  the  first  five  years  of  operation  operating  costs  would  be  41  clb  copper  net  of  byproduct  credits  and  that  pay  back  would  be  achieved  in  four  years  bayovar  on  the  pacific  coast  which  was  selected  by  the  dfs  as  the  port  from  which  rio  blanco  concentrates  would  be  shipped  overseas  bayovar  already  has  a  crude  oil  terminal  so  the  purpose
built  port  facilities  will  not  impact  a  virgin  area
guobin  hu  technical  director  with  colleagues  at  bayovar  the  new  management  favours  the  pipeline  option  for  transporting  the  concentrates  to  the  port  this  method  of  transport  would  have  very  low  environmental  and  social  impact
  ore   treatment  rate  25mtpa
  average   ore  grades
  copper  087
  molybdenum  208  ppm
  recoveries   average
  copper  87
  molybdenum  51
  concentrate   grades
  copper  in  concentrates  26–30
  molybdenum  in  concentrates  35
  average   annual  prodution
  copper  tonnes  191000
  molybdenum  tonnes  2180
table 3 summary of dfs operating parameters
th e r io blanco p roject
r io blanco detailed f easibility study dfs  continued
   first  five  years
  over  20  year  mine  life soho
henry’s hill
quebrada 
del cobre
colina
ecuador
pit plan 10 year outline
other targets
11 monterrico metals plc  annual report 2007
outline  of  the  10  year  pit  plan  at  henry’s  hill  and  additional  exploration  targets  these  targets  have  been  explored  to  varying  degrees  and  only  some  have  been  drilled  however  there  are  reasonably  promising  indications  that  these  could  provide  additional  resources  to  increase  the  production  rate  at  rio  blanco  from  the  25mtpa  predicated  by  the  dfs  andor  extend  the  mine  life
picture  of  the  soho  prospect  taken  from  henry’s  hill  soho  is  a  very    promising  target  drilling  results  in  2005  intersected  significant  mineralisation  in  several  holes  the  best  being  650m  at  059  copper  it  is  thought  that    this  could  be  an  extension  of  the  mineralisation  at  henry’s  hill  rather  than  being  a  separate  body
th e r io blanco p roject
r eview of the dfs
over  the  past  months  the  dfs  has  been  reviewed  both  internally  by  the  new  management  and  in  conjunction  with    the  principal  consultants  involved  in  its  preparation  from  this  review  it  was  concluded  that  aspects  of  the  dfs  have    a  number  of  deficiencies  as  outlined  in  the  ceo’s  statement  the  main  concerns  are  that  the  current  design  does  not  represent  the  optimum  plan  for  long  term  development  as  the  dfs  considered  the  development  of  only  40  of  the  defined  resource  of  1257mt  of  principal  concern  is  that  the  site  layout  plan  which  was  designed  to  minimise  the  footprint  of  the  operation  may  in  the  long  term  constrain  access  to  the  total  resource  and  the  likely  upside  potential
the  rapid  worldwide  increase  in  the  cost  of  capital  items  over  the  past  year  even  without  the  inclusion  of  the  preferred  pipeline  option  makes  it  prudent  to  revisit  the  costs  and  consider  a  wider  range  of  scales  of  operation  in  order  to  optimise  the  economic  return  of  the  project  certain  elements  of  the  project  notably  of  the  design  of  the  tailings  storage  facility  tsf  require  further  evaluation  to  ensure  the  design  is  suitable  for  long  •
•
•
term  use  and  that  all  aspects  meet  international  environmental  standards  measures  to  reduce  capital  costs  such  as  the  decision  not  to  use  a  concentrate  pipeline  introduce  social  and  environmental  impacts  which  the  new  management  consider  to  be  unacceptable  as  a  result  the  board  has  decided  on  two  actions  first  to  initiate  further  exploration  drilling  to  fully  define  the  contiguous  resources  within  the  rio  blanco  concessions  for  planning  purposes  second  to  commission  a  tradeoff  study  to  evaluate  alternative  technical  options    for  the  development  of  rio  blanco  the  tradeoff  study  will  evaluate
a  number  of  alternatives  for  moving  the  tailings  and  other  infrastructure  away  from  the  mine  to  allow  for  maximum  future  expansion  of  the  open  pit
increasing  the  throughput  design  rate  to  make  more  timely  use  of  the  resource  and  boost  the  economic  return  of  the  project
alternative  methods  of  tailings  disposal  suitable  for  long  term  use    and  with  improved  environmental  performance
•
•
•
•
other  options  for  improving  the  environmental  and  social  performance  of  the  project
the  objective  in  so  doing  is  to  arrive  at  a  design  which  will  maximise  value  from  the  total  resource  1257mt  and  improve  environmental  protection  as  well  as  social  acceptance  of  the  project  in  undertaking  this  change  of  vision  for    the  final  development  option  of  rio  blanco  monterrico  is  aiming  to  construct  a  realistic  mining  operation  that    maximises  the  potential  of  the  defined  mineral  resources  which  will  benefit    all  stakeholders
it  is  anticipated  that  the  tradeoff  study  will  be  completed  by  mid  2008  when    a  revised  timetable  for  the  project  will    be  announced  • brazil
peru
bolivia
colombia
ecuador
paciﬁc ocean
rio blanco
mamaniña
carisla
antaymarca
conaviri
pico machay
12 monterrico metals plc  annual report 2007
ot her projects
monterrico  has  a  portfolio  of  exploration  properties  in  peru  those  properties  where  the  company  holds  a  100  interest  are  as  follows
mamaniña copper
skarnporphyry  mineralisation  on    same  trend  as  the  antamina  mine    drill  intersections  include  25  metres    165  cu
antaymarca silvergold
two  goldsilver  anomalies  associated  with  an  alteration  zone  which  has  a  strike  length  of  500700m  rock  chip  samples  grade  up  to  33ozt  ag    034gt  au  conaviri gold–silver 
an  alteration  zone  with  indications  of  gold  mineralisation  the  prospect  was  drilled  by  newmont  in  2005
carisla goldcopper
evidence  of  gold  copper  mineralisation  in  altered  tertiary  volcanics
development  of  these  noncore  assets  remains  a  lower  priority  for  monterrico  as  it  is  focused  on  the  development  of  the  rio  blanco  project  pico machay
the  company  also  has  an  interest  in    the  pico  machay  gold  prospect  which    is  currently  being  explored  by  absolut  resources  txsabs  under  a  farmout  agreement  with  monterrico  the  terms  of  the  agreement  are  that  absolut  has  an  option  to  acquire  up  to  75  of  pico  machay  from  monterrico  conditional  upon  a  minimum  investment  of  us4000000  the  current  status  of  absolut’s  share  in  the  prospect  is  currently  under  discussion  between  the  two  companies  to  date  absolut  has  undertaken  a  series  of  phased  exploration  and  drilling  campaigns  and  a  prefeasibility  study  these  indicate  that  pico  machay  has  a  preliminary  inferred  resource  of  580000  ounces  of  gold  and  would  support  a  modest  heap  leach  operation
location  of  monterrico’s  exploration  properties  in  peru
picture  of  the  pico  machay  gold  property  which  is  currently  being  explored  by  absolut  resources  under  the  terms  of  a  farmout  agreement  with  monterrico
ecuador
the  company  has  also  secured  the  mining  concessions  in  ecuador  opposite  rio  blanco  as  there  are  good  indications  of  further  mineralisation  across  the  border  pictures  on  page  13  clockwise  from  top  left  i  xiaodong  huang  ceo  meeting  villagers  at  the  site  of  a  replanting  scheme  this  is  a  project  which  the  company  initiated  with  the  local  community    it  is  designed  to  help  the  villagers  make  productive  use  of  land  which  had  previously  been  cleared  and  is  at  risk  of  degradation  through  soil  erosion  ii  an  important  part  of  the  company’s  social  programme  is  explaining  the  rio  blanco  project  to  the  local  community  listening  to  any  concerns  they  may  have  and  preparing  them  for  the  opportunities  that  the  project  will  bring  iii  through  its  social  programme  monterrico  sponsors  doctors  dentists  and  health  workers  to  hold  clinics  throughout  the  area  of  influence  of  the  rio  blanco  project  over  6300  patients  were  treated  in  the  clinics  sponsored  by  the  company  during  2007  iv  as  part  of  its  commitment  to  sustainable  development  the  company  helps  and  encourages  small  businesses  which  will  benefit  from  better  access  to  markets  this  picture  shows  the  company  providing  assistance  to  a  project  for  growing  passion  fruit corporate social r esponsi bility an d sustaina ble development
monterrico metals plc  annual report 2007 13
monterrico	 is	 committed	 to	 responsible	 development	 of	 the	 rio	 blanco	 project	 and	 aspires	 to	 the	 highest	 international	 environmental	 and	 social	 standards	 	 it	 recognises	 its	 responsibilities	 to	 the	 communities	 in	 the	 area	 of	 influence	 of	 the	 rio	 blanco	 project	 and	 is	 committed	 to	 protecting	 the	 environment	 and	 complying	 with	 national	 and	 international	 laws	 and	 guidelines	 including	 those	 of	 the	 oecd	 world	 bank	 and	 the	 equator	 principles	 it	 also	 supports	 the	 uk	 government’s	 extractive	 industries	 transparency	 initiative 14 monterrico metals plc  annual report 2007
protecting the environment
the  management  of  monterrico  is  committed  to  ensuring  that  the  rio  blanco  project  is  designed  to  meet  the  highest  international  environmental  standards  and  to  operate  within  sound  environmental  limits  using  proven  science  and  technology  one  of  the  purposes  of  the  tradeoff  study  which  will  be  undertaken  in  the  next  few  months  will  be  to  look  at  the  options  for  enhancing  all  aspects  of  the  project  including  opportunities  for  effecting  further  environmental  and  social  improvements  monterrico  has  employed  and  continues  to  employ  highly  respected  independent  consultancy  companies    to  work  with  the  company  to  achieve  these  aims  environmental and social impact 
assessment esia
the  environmental  and  social  impact  assessment  esia  for  the  rio  blanco  project  is  being  undertaken  by  the  peruvian  office  of  knight  piésold  knight  piésold  consultores  sa  this  is  an  independent  impartial  study  as  required  by  peruvian  law  and  in  compliance  with  internationally  recognised  standards  work  on  the  esia  undertaken  to  date    is  based  on  the  dfs  project  design  including  the  pipeline  alternative  this  work  was  virtually  completed  in  2007  and  is  now  awaiting  the  results  of  the  tradeoff  study  after  which  the  esia  will  be  updated  to  reflect  any  modifications  to    the  project  design  in  their  work  so  far  knight  piésold  have  been  assisted  by  professionals  from  the  canadian  consulting  group  ecometrix  inc  ecometrix  the  chilean  consulting  group  control  acústico  and  the  consulting  group  ih  asesores  y  especialistas  of  the  museum  of  natural  history  of  the  san  marcos  national  university  in  total  this  comprised  a  group  of  more  than  50  professionals  outline of the esia
the  purpose  of  the  esia  is  to  identify  the  environmental  and  social  impacts  of  the  project  and  to  establish  policies  and  plans  to  manage  each  issue  effectively  and  to  the  general  satisfaction  of  the  community  and  other  stakeholders
the  esia  is  multidisciplinary  in  nature  and  as  is  standard  practice  is  constructed    in  three  stages  the  baseline  study  is  undertaken  to  collect  records  which  characterise  the  environmental  and  social  conditions  of  the  area  prior  to  construction  and  operation  of  the  mine  the  assessment  study  assesses  the  impacts  the  project  will  have  on  the  area  both  during  construction  and  operation  of  the  mine  and  on  and  after  mine  closure    the  management  and  mitigation  study  determines  the  optimum  means  by  which  negative  impacts  can  be  minimised  and  draws  up  appropriate  plans
the  esia  has  been  prepared  as  separate  studies  for  each  of  the  three  areas  of  influence  defined  by  the  dfs  these  are  the  mine  area  including  the  open  pit  process  plant  tailings  stack  and  mined  waste  stockpile  the  access  corridor  including  the  access  roads  associated  infrastructure  and  the  route  of  the  concentrate  pipeline  and  the  port  area  the  environmental  baseline  study  involved  the  collection  and  sampling  of  a  wide  range  of  physical  and  biological  data  to  provide  a  comprehensive  record  of  the  area  the  aspects  covered  include  geomorphology  climate  and  meteorology  air  quality  and  emissions  noise  and  vibration  levels  geology  and  seismicity  soil  characteristics  water  quality  hydrology  water  demand  hydrogeology  terrestrial  fauna  and  flora  aquatic  life  land  use  landscape  road  traffic  and  archaeology  the  mine  study  also  includes  a  water  balance  prediction  of  the  water  quality  of  the  open  pit  potential  for  generation  of  acidic  water    and  mitigation  measures  the  baseline  information  for  the  port  also  includes  a  record  of  marine  sediments  marine  water  corporate social r esponsi bility an d sustaina ble development
p rotecting the environment
collecting  data  for  the  baseline  study  of  the  environmental  impact  assessment  eia  the  baseline  study  aims  to  provide  a  comprehensive  record  of  environmental  conditions  prior  to  construction  and  operation  of  the  mine  the  photographs  from  left  to  right  show  i  recording  the  flora  of  the  area    ii  monitoring  groundwater  at  a  borehole  iii  making  a  record  of  the  weather  conditions  at  one  of  the  company’s  weather  stations  this  is  a  relevant  record    of  the  conditions  at  which  the  baseline  data  was  collected  15 monterrico metals plc  annual report 2007
quality  plankton  marine  life  and  fishing  stock  to  ensure  the  baseline  data  was  truly  representative  two  data  sets  representing  the  wet  and  dry  seasons  have  been  collected  for  appropriate  parameters  the  social  impact  assessment  sia  has  involved  the  collection  of  information  on  the  social  economic  demographic  and  cultural  aspects  of  the  area  of  influence    it  has  also  gathered  perceptions  about  the  project  and  sought  to  establish  ongoing  communications  with  local  and  regional  interest  groups  much  of  the  information  for  the  sia  has  been  gathered  by  interview  at  the  end  of  2007  the  sia    had  accumulated  information  from    82  indepth  interviews  within  the  mine  pipeline  port  areas  141  interviews  in  the  access  areas  14  focus  groups  mine  pipeline  port  and  detailed  field  observations  made  in  two  communities    in  the  area  of  influence  of  the  mine
the  conclusions  of  this  work  have  been  accumulated  in  the  assessment  and  management  and  mitigation  reports  these  reports  include  analyses  of  potential  impacts  plans  for  monitoring  and  environmental  management  community  relations  conceptual  closure  as  well  as  a  cost    benefit  analysis  following  the  results  of  the  tradeoff  study  the  esia  will  be  updated  to  reflect  alterations  to  the  project  design  and  when  complete  will  be  put  on  open  file  for  public  scrutiny  extending the esia into ecuador
although  the  project  and  all  related  infrastructure  are  located  entirely  within  peru  the  company  considered  it  prudent  and  good  practice  to  set  up  a  database  of  environmental  information  for  the  adjacent  area  across  the  border  into  ecuador  accordingly  the  company  commissioned  the  ecuadorian  office  of  wayne  dunn    associates  to  complete  an  environmental  and  social  baseline  study  and  assessment  in  the  area  of  influence  identified  in  ecuador  this  study  was  undertaken  in  2006  a  summary  of  the  results  of  this  work  will  be  incorporated  in  the  final  esia  documentation  map  showing  what  the  footprint  of  the  rio  blanco  mine  will  be  after  20  years  of  operation  as  defined  by  the  dfs  and  the  outline  of  the  private  conservation  area  which  the  company  has  proposed  to  create  around  it  the  plan  is  that  the  conservation  area  will  encompass  an  area  of  forest  covering  about  11000  hectares  which  is  over  ten  times  the  footprint  of  the  project  the  rio  blanco  project  is  located  on  the  atlantic  side  of  the  andean  drainage  divide  in  an  area  of  relatively  high  rainfall  and  fairly  plentiful  water  supplies  a  comprehensive  water  management  plan  has  been  drawn  up  as  part  of  the  eia  this  is  designed  to  recycle  as  much  water  as  possible  and  prevent  contamination  of  surface  or  groundwater
conservation area
during  the  year  the  company  continued  work  on  a  study  for  a  proposal  to  create  a  private  conservation  area  around  the  mine  encompassing  an  area  of  forest  covering  approximately  11000  hectares  this  area  represents  over  ten  times  the  size  of  the  footprint  of  the  project  as  defined  by  the  dfs  this  conservation  initiative  is  also  linked  to  a  plan  to  work  with  the  neighbouring  communities  to  attempt  to  halt  and  reverse  the  deforestation  caused  by  land  clearance  through  slashing  and  burning  and  by  illegal  logging  which  has  degraded  and  continues  to  degrade  vast  areas  of  land  around  the  project  area  the  plan  seeks  to  do  this  by  promoting  alternative  and  more  sustainable  livelihoods  including  more  productive  forms  of  agriculture  in  view  of  the  size  and  nature  of  the  conservation  area  the  company  has  also  been  exploring  the  opportunity  that  the  local  communities  could  run  this  conservation  site  to  promote  ecotourism  to  the  region  talara
sullana
ecuador
tumbes
province
lambayeque
province
paciﬁc ocean
ayabaca
paita
morropon
huancabamba
sechura
piura
rio blanco
project
bayovar pipeline option
national roads
road improvement
new road
power line
pipeline option
information 
centre
community
relations ofﬁce
huancabamba
el carmen
ayabaca
tunal
 bigote
16 monterrico metals plc  annual report 2007
monterrico  is  fully  committed  to  its  responsibilities  towards  the  communities  in  the  area  of  its  operations  the  company  has  an  active  social  programme  to  engage  with  the  local  people  and  other  stakeholders  its  aims  are  to  provide  information  on  the  project  and  seek  feedback  build  up  an  atmosphere  of  trust  and  cooperation  and  work  with  the  local  people  and  other  relevant  parties  to  enhance  and  prepare  them  for  the  opportunities  that  the  development  of  rio  blanco  will  bring  by  so  doing  the  company  aims  to  achieve  social  acceptance  for  the  rio  blanco  project  and  to  generate  amicable  and  mutually  productive  working  relationships  since  taking  control  the  new  management  has  strongly  reaffirmed    its  social  commitment  one  of  the  first  steps  of  the  new  management  was  to  offer  us80  million    in  trust  funds  to  the  two  communities  closest  to  the  rio  blanco  site  segunda  y  cajas  and  yanta  to  be  used  by  them  for  community  projects  of  their  choice  this  fund  will  be  accumulated  over  the  mine  life  and  will  be  in  addition  to  the  share  of  funds  that  these  communities  will  receive  from  taxes  and  royalties  once  rio  blanco  begins  production  in  addition  to  this  the  new  management  has  strengthened  reorganised  and  refocused  the  company’s  social  programme
communications 
under  the  new  management  in  2007    the  company  embarked  on  a  major  new  communications  initiative  to  promote  understanding  of  the  rio  blanco  project  more  widely  and  effectively  this  effort  is  designed  to  ensure  the  project  is  fully  understood  throughout  the  area  of  influence  of  the  project  and  through  the  department  of  piura
in  2007  we  expanded  our  network  of  community  relations  offices  by  opening  a  new  office  in  tunal  and  reopening  the  office  in  carmen  bringing  the  total  to  five  offices  this  network  of  offices  is  responsible  for  engaging  with  the  local  communities  and  for  running  the  company’s  sustainable  development  programmes  and  community  workshops  under  a  new  initiative  we  are  in  the  process  of  opening  interactive  information  centres  in  key  towns  throughout  the  province  of  piura  to  date  we  have  opened  two  centres  and  are  planning  at  least  three  more  the  offices  provide  information  about  rio  blanco  and  mining  in  general  they  have  3d  models  of  the  rio  blanco  project  at  a  local  and  regional  scale  printed  information  audiovisual  facilities  and  are  staffed  by  dedicated  communicators  these  information  centres  are  the  first  of  their  kind  in  peru  and  have  attracted  a  great  deal  of  interest  from  the  local  population  as  well  as  from  the  mining  sector  in  general  during  2007  the  company  focused  on  making  better  use  of  the  media  and    has  recently  expanded  use  of  radio  to  reach  the  more  remote  areas  of  the  highlands  the  company’s  spanish  language  website  has  been  developed    to  provide  more  information  about  the  project  and  our  social  programme    see  www rioblancocompe  we    have  increased  the  circulation  of  the  company’s  very  successful  newsletter  “juntos”  together  which  we  use  for  updating  stakeholders  about  the  project  corporate social r esponsi bility an d sustaina ble development
o ur social p rogramme
this  newsletter  is  now  in  its  29th  edition  of  which  eight  were  prepared  during  2007  the  company  has  also  started  a  new  magazine  “chilalos”  named  after  a  local  small  bird  –  ie  “a  little  bird  told  you”  of  which  seven  editions  have  been  produced  to  date  we  have  also  made  significant  advances  in  translating  aspects  of  the    rio  blanco  project  and  social  development  initiatives  into  cartoon  form  see  example  on  the  back  of  this  report  as  a  popular  form  of  communication  particularly  for  use  in  the  field  where  illiteracy  rates  are  high
in  addition  we  continue  to  run  community  information  workshops  to  engage  with  the  local  communities  these  workshops  are  designed  to  brief  the  communities  about  the  project  explain  the  opportunities  which  the  mine  will  offer  and  listen  to  and  address  any  specific  concerns  they  might  have  in  2007  we  organised  62  such  workshops  which  were  attended  by    more  than  2000  people  in  addition  the  company  gave  25  presentations  to  special  interest  groups  in  lima  and  other  main  cities  in  peru    during  2007  we  also  continued  our  highly  successful  programme  of  information  field  trips  these  take  key  members  of  local  communities  to  see  modern  mines  andor  special  projects  which  are  specifically  relevant  to  them  during  the  year  the  company  organised  a  total  of    16  visits  for  over  600  visitors  most  of  the  visits  were  to  the  yanacocha  mine  to  show  members  of  the  community  how  modern  mines  operate  the  controls  that  are  in  place  to  protect  the  environment  and    how  mining  projects  can  assist  with  sustainable  development  map  of  the  department  of  piura  showing  the  location  of  the  company’s  community  relations  offices  and  its  two  new  information  centres
people  from  the  highlands  at  an  information  workshop 17 monterrico metals plc  annual report 2007
the  community  development  programme  aims  to  illustrate  to  the  communities  the  opportunities  which  the  rio  blanco  project  will  offer  and  to  assist  and  encourage  them  to  take  advantage  of  these  benefits  these  include  opportunities  for  employment  improving  living  conditions  and  building  sustainable  livelihoods  and  small  businesses  alongside  the  development  of  the  rio  blanco  project
promoting and assisting small 
businesses
the  development  of  the  rio  blanco  project  will  significantly  improve  road  access  to  this  area  of  the  highlands    and  thereby  give  the  inhabitants  the  chance  to  export  their  products  to  markets  previously  denied  to  them  in  2007  the  community  development  programme  promoted  several  schemes  for  improving  agricultural  productivity  these  are  shown  in  table  7  these  are    all  sustainable  development  initiatives    to  assist  and  encourage  the  local  communities  to  take  advantage  of  better  access  to  market  the  company  also  continued  to  promote  local  crafts  weaving  knitting  and  sewing  it  has  also  set  up  a  local  purchasing    plan  with  the  small  farming  community    in  segunda  y  cajas  to  promote  inclusion  of  community  farmers  into  the  formal  peruvian  economy
health and educational support 
the  company  continues  to  participate  in  campaigns  to  improve  health  and  education  in  the  department  of  piura  during  2007  the  company  sponsored  over  40  medical  campaigns  in  the  peruvian  highlands  and  along  the  pipeline  route  attending  to  over  6300  patients  in  addition  the  community  relations  offices  assist  the  communities    in  medical  emergencies  by  providing  transport  and  coordinating  medical  assistance  with  government  institutions  the  company  also  provided  donations  to  various  medical  institutions  including  the  women’s  aid  association  for  cancer  patients  and  convalescent  centres  in  piura  and  tumbes
  during  2007  the  company  provided  financial  support  to  school  teachers  in  huancabamba  under  an  agreement  with  the  regional  educational  authority  it  also  a  donation  of  books  for  the  new  school  at  lucho a  piped  water  system  for  the  village  of  rosario  alto the  company  provides  training  in  crafts  and  developing  small  businesses
a  new  school  constructed  for  the  village  of  lucho a  new  tower  for  the  church  of  socchabamba 18 monterrico metals plc  annual report 2007
corporate social r esponsi bility an d sustaina ble development
o ur social p rogramme continued
table 4 information workshops in 2007
          number  of          workshops   number  of
influence  area        2007  participants
segunda  y  cajas        35  1500
carmen  de  la  frontera         12  428
ayabaca        15  536
total	 for	 area	 of	 influence	 	 	 	 62	 2464
lima        25  na
total	 	 	 	 	 87	 na
table 5 information visits organised by the company during 2007
    number  of   number  of
visits  groups  groups  participants                   place  of  visit
cattle  farmersopinion  leaders  12  430               yanacocha  mineenvirons
craft  women’s  groups  1  40               craft  groups  in                       monteroayabaca
farmersopinion  leaders  2  150               cattle  farms  coffee                       forestry  and  fish  farming  in                       cataluco  and  lázaro
academics  1   12               rio  blanco  project  site  and                       one  of  nearest  villages  total	 16	 632 	              
table 6 health  educational campaigns in 2007
                                                                         health  campaigns                             educational  campaigns
                                         number  of  patients           educational  kits  provided  books
  campaigns  treated      donated
location      students  schools  tonnes
piura   6  2227  3118  49  huancabamba  7  1109  3389  na  10
ayabaca  16  2098  948  na    segunda  y  cajas  11  884  711  18
total	 40	 6318	 8166	 na	 na
table 7 initiatives for sustainable development in 2007 
  families  schemes  benefiting  location  description
cattle  farming  924  52  small  towns  in  over  6400  cattle    dairy  industry    segunda  y  cajas  treated  for  parasites          a  further  4600  for          vitamin  deficiences
pig  farming  45  segunda  y  cajas  construction  of  a          commercial  piggery  organic  farming  106  segunda  y  cajas   organic  farms         pipeline  area  established  over          10  hectares
agricultural  projects  10  huancabamba   projects  for  passion        ayabaca  fruit  and  potatoes
seedling  nurseries  226  segunda  y  cajas   over  15  nursery      ayabaca  and  the  gardens      pipeline  corridor  fish  farm  4  segunda  y  cajas  regeneration  of          trout  farm
total	 1315
  segunda  y  cajas  huancabamba  ayabaca  and  carmen  de  la  frontera  are  all  regions  of  the  highlands
  a  joint  initiative  with  ngo  ullas  and  the  regional  government  of  murcia  spain
taking  opinion  leaders  to  see  the  yanacocha  mine
a  new  piggery  –  a  project  to  encourage  sustainable  development
schoolgirls  with  educational  kits  provided  by  the  company
a  nursery  growing  coffee  seedlings  the  company  has  encouraged  many  such  projects 19 monterrico metals plc  annual report 2007
working with local regional and  
national government
the  company  is  actively  engaged  in  working  with  a  number  of  district  municipalities  in  formalising  the  presence    of  the  project  and  assisting  with  the  preparation  of  local  economic  development  plans  to  ensure  that  they  reflect  and  incorporate  the  opportunities  offered  by  the  development  of  rio  blanco  this  initiative  is  designed  to  promote  the  creation  of  a  development  corridor  that  takes  advantage  of  future  project  infrastructure  between  rio  blanco  and  the  port  of  bayovar  to  date  10  such  plans  have  been  developed  in  coordination  with  district  municipalities  and  local  authorities  for  districts  between  rio  blanco  and  the  port  of  bayovar
the  company  coordinates  closely  with  regional  and  central  governments  it  also  actively  participated  in  the  dialogue  process  initiated  by  the  prime  minister  following  the  ‘popular  referenda’  in  three  district  municipal  jurisdictions  in  piura    the  company  consults  frequently  with    the  ministry  of  energy  and  mines  mem  about  its  plans  and  coordinates  with  proinversion  the  government  body  which  is  responsible  for  promoting  overseas  investment  in  peru  provided  over  8000  school  stationery  kits  to  school  children  in  the  department  of  piura  and  arranged  donations  of  over    10  tonnes  of  educational  books  organised  into  minilibraries  to  112  schools  via  a  joint  agreement  with  the  ngo  ullas  and  the  regional  government  of  murcia  spain  community projects
the  company  also  assists  local  people    in  developing  a  variety  of  community  projects  until  the  mine  is  in  production  and  generating  revenue  the  scale  of  this  development  work  is  fairly  modest  but  nonetheless  can  effect  a  significant  improvement  in  the  standard  of  living  of  these  communities  one  very  successful  and  popular  project  instigated  in  2007  was  the  provision  of  simple  wood  burning  kitchen  stoves  to  houses  in  the  highlands  these  were  offered  as  an  alternative  to  cooking  over  an  open  wood  fire  without  a  chimney  which  is  common  in  the  mountains  of  piura  these  stoves  were  greatly  favoured  as  they  are  cleaner  healthier  safer  more  effective  and  burn  less  wood  the  company  funded  the  installation  of  more  than  500  of  these  stoves  in  2007  the  scheme  generated  great  goodwill  particularly  with  the  women  of  the  community  and  through  the  participation  of  the  families  in  the  design  organisation  and  execution  of  the  project  other  community  projects  completed  during  the  year  included  the  provision  of  potable  water  supplies  to  two  villages  the  construction  of  two  water  reservoirs  for  irrigation  construction  of  one  new  school  and  repairs  and  enlargement  of  two  existing  schools  improvements  to  local  roads  repairs  and  extensions  to  five  village  halls  and  repairs  to  four  churches  including  a  church  tower  for  the  important  church  at  “virgen  del  carmen”  other activities
promotion of cultural activities sports 
and sponsorships
it  has  become  customary  for  monterrico  to  sponsor  and  promote  a  variety  of  cultural  events  in  2007  the  company’s  christmas  campaign  was  extended  to  include  villages  in  the  area  of  influence    of  the  pipeline  and  in  ayabaca  the  company  also  contributed  to  a  variety    of  traditional  events  like  mothers’  day  fathers’  day  women’s  day  and  various  local  saints’  days  to  promote  and  sustain  local  customs
during  the  year  the  company  also  made  a  number  of  donations  these  included  thirteen  separate  sets  of  uniforms  for  sport  teams  for  schools  and  sport  clubs  the  company  also  sponsored  four  local  sport  champions  to  enable  them  to  participate  in  regional  and  international  events
working with ngosother initiatives
during  the  year  the  company  intensified  its  efforts  to  engage  with  church  officials  ngos  and  other  interested  parties  to  brief  them  about  the  project  solicit  their  feedback  and  allay  any  concerns  that  they  might  have  the  company  also  produced  a  formal  response  to  a  peru  support  group  report  highlighting  a  number  of  inaccuracies  in  a  report  they  had  produced  and  presented  these  results    at  several  meetings  it  also  gave  the    psg  a  written  response  to  put  up  on    their  website  with  the  participation  of  home  owners  and  local  community  groups  the  company  funded  the  installation  of  more  than  500  wood  burning  stoves  and  chimneys  in  houses  like  this  throughout  the  highlands  in  this  region  people  traditionally  cook  indoors  over  an  open  fire  these  stoves  are  very  popular  as  they  are  cleaner  safer  more  effective  and  burn  less  wood
a  local  team  in  football  strip  provided  by  the  company 20 monterrico metals plc  annual report 2007
boar d of directors
xiaodong huang 
chief executive officer aged  53
huang  xiaodong  has  over  30  years  experience  in  business  management  of  international  operations  in  the  metals  industry  he  is  a  graduate  from  china’s  hefei  university  of  technology  and  has  a  mba  from  xiamen  university  in  the  early  part  of  his  career  he  worked  for  the  fujian  commission  of  science    technology  in  china  then  for  fujian  enterprises  holdings  co  ltd  in  hong  kong  and  from  2002  for  chinalco  ruimin  aluminum  fabricated  ltd  where  he  was  vice  president  mr  huang  joined  zijin  mining  group  co  ltd  in  february  2005  as  the  chief  economist  and  in  august  2006  was  appointed  executive  director  and  senior  vice  president  of  the  zijin  mining  group  mr  huang  is  also  a  director  of  zijin  consortium
shan shan susan li
finance director aged  44
susan  li  is  a  mechanical  engineer  with  a  mba  from  the  university  of  victoria  british  columbia  canada  she  was  appointed  as  a  nonexecutive  director  of  monterrico  on  3  may  2007  and  from  1  june  2007  took  the  role  of  finance  director  ms  li  has  over  20  years  experience  in  the  metallurgical  mining  and  mineral  industries  in  china  she  worked  as  the  country  manager  of  a  swedish  mining  and  mineral  technology  manufacturer  and  supplier  in  china  for  8  years  and  in  the  investment  division  of  the  royal  bank  of  canada  based  in  toronto  canada  for  4  years  ms  li  is  a  director  of  the  zijin  consortium  she  is  also  nonexecutive  director  of  ridge  mining  plc  aim  listed  and  of  pinnacle  mines  ltd  a  junior  mining  company  listed  on  the  toronto  stock  exchange  guobin hu
technical director aged  41
mr  hu  is  a  mining  engineer  with  19  years  experience  in  mine  development  and  management  mr  hu  has  a  degree  in  mining  from  china’s  central  south  university  he  worked  first  in  china  at  the  shizishan  copper  mine  for  tongling  nonferrous  metals  group  inc  and  then  in  zambia  as  head  of  planning  at  the  chambishi  copper  mine  for  china’s  nonferrous  metal  industry  –  foreign  engineering  and  construction  co  ltd  in  2001  he  returned  to  china  to  work  for  anhui  tongdu  copper  stock  coltd  where  he  was  manager  of  the  technical  planning  division  at  dongguashan’s  head  office  and  deputy  director  infrastructure  for  the  dongguashan  mine  in  2006  he  was  appointed  general  manager  of  zijin  consortium  richard ralph cmg cvo 
nonexecutive chairman aged  62
richard  ralph  was  british  ambassador  to  peru  from  2003  to  2006  on  his  retirement  from  the  diplomatic  service  he  joined  the  board  of  monterrico  in  august  2006  taking  the  role  of  executive  chairman  until  the  zijin  consortium  acquired  its  majority  shareholding  at  which  point  he  became  nonexecutive  chairman  effective  from  1  june  2007  during  his  career  in  the  diplomatic  service  mr  ralph  served  in  the  foreign    commonwealth  office  in  london  and  in  the  british  embassies  in  laos  portugal  zimbabwe  and  washington  he  also  held  the  appointments  of  ambassador  to  latvia  governor  of  the  falklands  and  ambassador  to  romania  he  has  a  msc  in  social  science  from  edinburgh  university  and  was  awarded  his  cvo  in  1992  and  cmg  in  1997  whilst  he  was  ambassador  to  peru  he  was  a  member  of  the  board  of  the  tintaya  foundation  which  was  set  up  to  promote  sustainable  development  in  the  area  of  influence  of  the  tintaya  copper  mine 21 monterrico metals plc  annual report 2007
raymond j angus 
nonexecutive director aged  43
ray  angus  is  an  economic  geologist  with  over  20  years  international  exploration  experience  he  is  a  cofounder  of  the  company  and  was  chief  operating  officer  since  its  incorporation  in  june  2001  until  becoming  a  nonexecutive  director  on  1  june  2007  mr  angus  has  a  degree  in  applied  science  applied  geology  from  queensland  university  of  technology  mr  angus  has  been  based  in  peru  since  1994  where  he  has  held  various  senior  positions  principally  with  newcrest  mining  and  consulted  to  various  junior  and  major  companies  including  goldfields  limited  and  billiton  plc  mr  angus  is  also  a  nonexecutive  director  of  mariana  resources  ltd  an  aim  listed  exploration  company  which  operates  in  latin  america
wenzhou huang 
nonexecutive director aged  43
huang  wenzhou  is  a  qualified  accountant  with  a  masters  degree  in  finance  from  xiamen  university  mr  huang  started  his  career  in  1985  and  worked  for  ten  years  in  the  financial  division  of  xiamen  cd  co  ltd  where  he  rose  to  the  position  of  financial  manager  in  1991  xiamen  cd  is  a  large  chinese  state  owned  conglomerate  listed  on  the  shanghai  stock  exchange  it  is  one  of  the  largest  companies  in  fujian  province  and  is  engaged  principally  in  international  trade  logistics  real  estate  conventions
exhibitions  property  leasing  and  manufacturing  in  1998  he  was  appointed  deputy  manager  of  the  xiamen  cd  group  and  has  been  general  manager  of  the  xiamen  cd  since  2002  he  is  an  executive  director  of  xiamen  cd  corp  ltd  and  xiamen  cd  inc  and  is  director  of  many  subsidiary  companies  in  the  xiamen  group  harry cooper
nonexecutive director aged  54
harry  cooper  is  a  graduate  with  a  mba  from  manchester  business  school  and  is  a  fellow  of  the  chartered  institute  of  management  accountants  in  the  early  part  of  his  career  he  worked  for  air  products  europe  and  ladbroke  group  plc  in  1996  he  joined  whatman  plc  a  lse  quoted  laboratory  and  medical  filter  manufacturing  group  where  he  was  finance  director  since  2002  he  has  held  a  number  of  appointments  in  privately  owned  logistics  and  healthcare  companies  and  is  currently  parttime  financial  officer  for  a  mental  health  business  he  is  also  a  nonexecutive  director  of  amicus  horizon  group  a  housing  association  our	 philosophy	 to	 develop	 monterrico	 into	 an	 international	 mining	 	 company	 operating	 to	 the	 highest	 standards	 seeking	 to	 achieve	 harmonious	 codevelopment	 with	 our	 stakeholders	 and	 committed	 to	 safeguarding	 	 society	 and	 the	 environment	 22 monterrico metals plc  annual report 2007
45 zijin mining group co ltd 
zijin  is  a  leading  chinese  mining  company  producing  gold  and  base  metals  it  is  listed  on  the  hong  kong  stock  exchange  and  is  one  of  the  largest  gold  producers  in  china  zijin  operates  in  more  than  20  provinces  in  china  and  seven  countries  overseas  zijin  mining  has  successfully  invested  in  a  number  of  overseas  mining  projects  and  is  the  largest  shareholder  in  two  aim  listed  mining  companies  ridge  mining  plc  and  monterrico  metals  plc  35 tongling nonferrous metals group 
holdings co ltd 
tongling  is  an  integrated  chinese  company  focusing  particularly  on  mining  and  production  of  copper  and  copper  products  its  subsidiary  anhui  tongdu  copper  co  ltd  is  listed  on  the  shenzhen  stock  exchange  tongling  is  currently  the  largest  producer  of  refined  copper  in  china  the  company  is  also  involved  in  trade  research  and  equipment  manufacturing  tongling  exports  its  products  throughout  the  world  p rofile of t he zijin c onsortium
the zijin consortium is a partnership of three chinese companies its full name is xiamen zijin tongguan 
investment development co ltd the consortium was formed in 2006 at the instigation of the zijin mining 
group for the purpose of making an offer for monterrico metals plc this acquisition was the first chinese 
takeover of a listed uk company the three companies who form the consortium are as follows 
as  the  majority  shareholder  the  zijin  consortium  brings  important  benefits  to  monterrico  notably  its  expertise  in  large  scale  mine  development  and  operation  a  market  for  monterrico’s  concentrates  as  well  as  the  solid  financial  support  needed  for  the  development  of  the  rio  blanco  project  and  its  associated  infrastructure
20 xiamen construction and 
development co ltd 
xiamen  is  a  chinese  conglomerate  listed  on  the  shanghai  stock  exchange  it  is  engaged  in  a  wide  variety  of  activities  principally  international  trade  logistics  real  estate  conventions  and  exhibitions  property  leasing  and  manufacturing  the  company  is  based  in  xiamen  fujian  province  and  trades  mainly  in  light  industrial  products  textiles  and  clothing  packaging  materials  chemicals  hardware  and  mineral  products  it  has  trading  partners  in  over  70  countries
  23 monterrico metals plc  annual report 2007
after  the  acquisition  by  the  zijin  consortium  the  new  board  was  formed  on  the  1  june  2007  and  one  of  the  objectives  was  to  reduce  the  administration  expenses  from  january  to  may  2007  the  group  incurred  a  total  of  us593  million  of  costs  in  connection  with  the  zijin  consortium  takeover  the  group  capitalised  development  expenditure  in  the  year  of  us9402000  and  at  the  year  end  the  total  capitalised  expenditure  for  the  group  was  us44200000
an  amount  of  us30669038  representing  the  intercompany  loan  between  monterrico  and  its  peruvian  subsidiary  rio  blanco  copper  sa  formerly  minera  majaz  sa  was  capitalised  through  two  stability  agreements  with  the  peruvian  government
the  total  loss  incurred  for  the  group  in  2007  was  us10636000  us4402000  in  2006  including  costs  of  us5930000  directly  associated  with  the  zijin  consortium  takeover
the  group  has  accumulated  the  total  of  us2969000  debtor  of  igv  tax  that  will  be  recovered  after  production  has  commenced  the  total  loan  and  accumulated  interest  owed  to  the  zijin  consortium  as  at  31  december  2007  amounted  to  us12359000
as  at  31  december  2007  the  group  had  cash  reserves  of  us5044000  in  february  2008  monterrico  signed  a  loan  facility  agreement  of  us10000000  with  the  zijin  consortium  to  cover  the  working  capital  requirements  of  the  group  for  2008
shan shan susan li 
finance director
8  april  2008
f inance director’s r eview of f inancial o perations 24 monterrico metals plc  annual report 2007
the  directors  present  their  report  and  the  audited  financial  statements  of  the  group  for  the  year  ended  31  december  2007
principal activities and business review
the  company  was  incorporated  as  a  public  limited  company  on  19  june  2001
the  company’s  principal  activity  is  that  of  a  holding  company  and  together  with  its  subsidiaries  see  note  11  develops  base  and  precious  metal  mining  projects  in  peru
further  details  of  activities  business  developments  and  projects  are  included  within  the  chairman’s  statement  chief  executive  officer’s  report  and  the  operations  report
results and dividends
there  was  a  loss  for  the  year  after  taxation  amounting  to  us10636000  including  costs  of  us  5930000  associated  with  the  zijin  consortium  takeover  2006restated  loss  of  us4402000
the  results  for  the  financial  year  are  set  out  on  page  30  in  the  consolidated  income  statement  the  directors  do  not  recommend  the  payment  of  a  dividend
going concern
based  on  a  review  of  the  group’s  budgets  and  cash  flow  plans  the  directors  are  satisfied  that  the  group  has  sufficient  resources  to  continue  its  operations  and  to  meet  its  commitments  for  the  foreseeable  future  the  accounts  have  therefore  been  prepared  on  a  going  concern  basis
directors and their interests
the  directors  who  held  office  at  the  end  of  the  financial  year  31  december  2007  had  the  following  direct  and  indirect  interests  in  the  ordinary  shares  of  the  company  according  to  the  register  of  directors’  interests
  stock 
  options   shares  shares
  held at   held at  held  at
  31 dec option  31 dec  31  dec
  2007 price p exercise period 2007
1
  2006
richard  ralph  50000 350p 261110 to 251117 nil  nil
raymond  angus  30000 350p 261110 to 251117 nil  1369460
shan  shan  li  50000 350p 261110 to 251117 nil  nil
xiaodong  huang  120000 350p 261110 to 251117 nil  nil
guobin  hu  50000 350p 261110 to 251117 nil  nil
harry  cooper  30000 350p 261110 to 251117 nil  nil
wenzhou  huang  30000 350p 261110 to 251117 nil  nil
1  adjustments  to  directors’  shareholdings  are  attributed  to  acquisitions  and  disposals  during  the  year
on  27  april  2007  ms  shan  shan  li  was  appointed  to  the  board  on  3  may  2007  messrs  haller  and  eager  retired  from  the  board  on  31  may  2007  the  executive  directors  messrs  o’leary  carr  ralph  and  angus  retired  from  the  board  and  on  1  june  2007  messrs  huang  and  hu  were  appointed  as  executive  directors  and  ralph  angus  and  cooper  and  mr  wenzhou  huang  were  appointed  as  nonexecutive  directors
directors indemnity insurance
during  the  year  directors’  and  officers’  liability  insurance  was  maintained  for  the  directors  and  officers  of  the  group  as  permitted  by  the  companies  act  1985
directors’ r eport 25 monterrico metals plc  annual report 2007
substantial shareholdings
as  at  8  april  2008  the  company  was  aware  of  the  following  holdings  of  3  or  more  in  the  company’s  issued  share  capital
                  approximate            number  of  shares  percentage  of  the
          in  monterrico  company’s  issued
          metals  plc  share  capital
1
xiamen  zijin  tongguan  development  co  ltd          21018903  7990
ls  nikko          2630606  100
1  based  on  26306068  shares  issued  and  outstanding  as  at  8  april  2008
corporate governance statement
code of best practice
the  listing  rules  of  the  financial  services  authority  incorporate  the  combined  code  which  sets  out  the  principles  of  good  governance  and  the  code  of  best  practice  for  listed  companies  the  company’s  corporate  governance  procedures  take  due  regard  of  the  principles  of  good  governance  set  out  in  the  combined  code  in  relation  to  the  size  and  the  stage  of  development  of  the  company
the board of directors
at  the  year  end  the  board  of  directors  comprised  seven  members  three  executive  directors  and  four  nonexecutive  directors  the  board  has  a  wealth  of  minerals  exploration  corporate  finance  and  development  experience
the  structure  of  the  board  ensures  that  no  one  individual  or  group  dominates  the  decision  making  process
board meetings
the  board  ordinarily  meets  on  a  bimonthly  basis  providing  effective  leadership  and  overall  management  of  the  group’s  affairs  through  the  schedule  of  matters  reserved  for  its  decision  this  includes  the  approval  of  the  budget  and  business  plan  major  capital  expenditure  acquisitions  and  disposals  risk  management  policies  and  the  approval  of  the  financial  statements  formal  agendas  papers  and  reports  are  sent  to  the  directors  in  a  timely  manner  prior  to  board  meetings  the  board  delegates  certain  of  its  responsibilities  to  the  board  committees  which  have  clearly  defined  terms  of  reference  and  which  are  listed  below
all  directors  have  access  to  the  advice  and  services  of  the  company’s  solicitors  and  the  company  secretary  who  is  responsible  for  ensuring  that  all  board  procedures  are  followed  any  director  may  take  independent  professional  advice  at  the  company’s  expense  in  the  furtherance  of  his  or  her  duties
retirement by rotation
in  accordance  with  the  company’s  articles  of  association  one  third  of  the  nonexecutive  directors  will  retire  and  offer  themselves  for  reelection  at  every  annual  general  meeting  of  the  company  a  retiring  director  may  be  reelected  and  a  director  appointed  by  the  board  may  also  be  elected  though  in  the  latter  case  the  director’s  period  of  prior  appointment  by  the  board  will  not  be  taken  into  account  for  the  purposes  of  rotation  however  in  accordance  with  good  corporate  governance  all  of  the  directors  have  agreed  to  retire  and  being  eligible  offer  themselves  for  reelection  at  the  forthcoming  annual  general  meeting
the audit committee
the  audit  committee  which  meets  not  less  than  twice  a  year  considers  the  group’s  financial  reporting  including  accounting  policies  and  internal  financial  controls  was  chaired  during  the  year  by  mr  wenzhou  huang  the  other  member  being  mr  harry  cooper  the  audit  committee  is  responsible  for  ensuring  that  the  financial  performance  of  the  group  is  properly  monitored  and  reported  on  the  committee  receives  reports  from  management  and  external  auditors 26 monterrico metals plc  annual report 2007
the remuneration committee
the  remuneration  committee  which  meets  at  least  once  a  year  is  responsible  for  making  recommendations  to  the  board  on  directors’  and  senior  executives’  remuneration  was  chaired  by  mr  harry  cooper  and  the  other  member  being  mr  wenzhou  huang  nonexecutive  directors’  remuneration  and  conditions  are  considered  and  agreed  by  the  board  financial  packages  for  executive  directors  are  established  by  reference  to  those  prevailing  in  the  employment  market  for  executives  of  equivalent  status  both  in  terms  of  level  of  responsibility  of  the  position  and  their  achievement  of  recognised  job  qualifications  and  skills  the  committee  will  also  have  regard  to  the  terms  which  may  be  required  to  attract  an  equivalent  experienced  executive  to  join  the  board  from  another  company
internal controls
the  directors  acknowledge  their  responsibility  for  the  company’s  systems  of  internal  controls  and  for  reviewing  their  effectiveness  these  internal  controls  are  designed  to  safeguard  the  assets  of  the  company  and  to  ensure  the  reliability  of  financial  information  for  both  internal  use  and  external  publication
the  effectiveness  of  the  system  of  internal  controls  has  been  reviewed  by  the  directors  and  whilst  they  are  aware  that  no  system  can  provide  absolute  assurance  against  material  misstatement  or  loss  they  are  satisfied  that  the  controls  are  adequate  and  effective  with  regard  to  the  size  of  the  company  and  the  stage  of  its  development
relations with shareholders
the  board  attaches  great  importance  to  maintaining  good  relationships  with  its  shareholders  extensive  information  about  the  company’s  activities  is  included  in  the  annual  report  and  accounts  and  interim  reports  which  are  sent  to  all  shareholders  market  sensitive  information  is  regularly  released  to  all  shareholders  concurrently  in  accordance  with  stock  exchange  rules  the  annual  general  meeting  provides  an  opportunity  for  all  shareholders  to  communicate  with  and  to  question  the  board  on  any  aspect  of  the  group’s  activities  the  company  maintains  a  corporate  website  where  information  on  the  company  is  regularly  updated  and  all  announcements  are  posted  the  company  welcomes  communication  from  both  its  private  and  institutional  shareholders
post balance sheet events
details  of  post  balance  sheet  events  are  provided  in  note  15  of  the  financial  statements
annual general meeting “agm”
the  notice  of  the  company’s  agm  to  be  held  on  2  june  2008  is  set  out  on  page  59  of  this  report  full  details  of  the  resolutions  proposed  at  that  meeting  may  be  found  in  the  notice
international financial reporting standards
the  aim  rules  require  all  aim  listed  companies  to  prepare  accounts  in  accordance  with  international  financial  reporting  standards  ifrs  under  the  aim  rules  monterrico  metals  is  required  to  adopt  ifrs  for  the  year  ended  31  december  2007  comparative  information  for  the  preceding  period  has  been  restated  under  the  provisions  of  ifrs  further  details  are  set  out  in  note  18  to  the  financial  statements
creditor payment policy
it  is  the  company’s  policy  to  settle  the  terms  of  payment  with  suppliers  when  agreeing  the  terms  of  a  transaction  to  ensure  that  suppliers  are  aware  of  these  terms  and  to  abide  by  them  both  the  group  and  the  company  had  no  trade  creditors  at  31  december  2007
financial risk management
the  directors’  financial  risk  management  objective  is  to  maximise  financial  assets  and  minimise  financial  liabilities  whilst  not  engaging  in  speculation  the  financial  risks  faced  by  the  group  include
interest  rates  earned  on  cash  and  shortterm  investments
liquidity  of  investments
foreign  currency  fluctuations
•
•
•
directors’ r eport continued 27 monterrico metals plc  annual report 2007
the  directors  manage  each  of  the  above  mentioned  financial  risks  as  follows
continually  review  shortterm  investments  to  ensure  the  maximum  rates  of  return  are  being  achieved
only  shortterm  investments  are  entered  into
actively  review  and  approve  the  terms  of  and  parties  to  significant  commercial  contracts  where  payment  is  not  anticipated  in  advance  and
hold  cash  and  shortterm  investments  in  the  currencies  of  anticipated  expenditure
auditors
the  directors  propose  that  ernst    young  be  appointed  auditors  of  the  company  in  place  of  grant  thornton  uk  llp  with  effect  from  the  next  annual  general  meeting  ernst    young  have  confirmed  their  willingness  to  be  appointed  auditors  and  a  resolution  concerning  their  appointment  will  be  proposed  at  the  next  annual  general  meeting
statement of directors’ responsibilities
the  directors  are  responsible  for  preparing  the  annual  report  and  the  financial  statements  in  accordance  with  applicable  law  and  regulations  company  law  requires  the  directors  to  prepare  financial  statements  for  each  financial  year  under  that  law  the  directors  have  elected  to  prepare  financial  statements  in  accordance  with  international  financial  reporting  standards  ifrs  the  financial  statements  are  required  by  law  to  give  a  true  and  fair  view  of  the  state  of  affairs  of  the  group  and  company  and  of  the  income  statement  of  the  group  for  that  period  in  preparing  these  financial  statements  the  directors  are  required  to  select  suitable  accounting  policies  and  then  apply  them  consistently  make  judgments  and  estimates  that  are  reasonable  and  prudent  state  whether  applicable  international  financial  reporting  standards  ifrs  have  been  followed  subject  to  any  material  departures  disclosed  and  explained  in  the  financial  statements  prepare  the  financial  statements  on  the  going  concern  basis  unless  it  is  inappropriate  to  presume  that  the  company  will  continue  in  business  the  directors  are  responsible  for  keeping  proper  accounting  records  that  disclose  with  reasonable  accuracy  at  any  time  the  financial  position  of  the  company  and  enable  them  to  ensure  that  the  financial  statements  comply  with  the  companies  act  1985  they  are  also  responsible  for  safeguarding  the  assets  of  the  company  and  hence  for  taking  reasonable  steps  for  the  prevention  and  detection  of  fraud  and  other  irregularities  in  so  far  as  the  directors  are  aware  there  is  no  relevant  audit  information  of  which  the  company’s  auditors  are  unaware  and  the  directors  have  taken  all  steps  that  they  ought  to  have  taken  to  make  themselves  aware  of  any  relevant  audit  information  and  to  establish  that  the  auditors  are  aware  of  that  information  the  directors  are  responsible  for  the  maintenance  and  integrity  of  the  website  and  accordingly  the  auditors  accept  no  responsibility  for  the  information  published  information  published  on  the  website  is  accessible  in  many  countries  and  legislation  in  the  uk  concerning  the  preparation  and  dissemination  of  financial  statements  may  differ  from  legislation  in  other  jurisdictions  by  order  of  the  board
r ralph
chairman
8  april  2008
•
•
•
•
•
•
•
•
•
• 28 monterrico metals plc  annual report 2007
we  have  audited  the  group  and  parent  company  financial  statements  the  “financial  statements”  of  monterrico  metals  plc  for  the  year  ended  31  december  2007  which  comprise  the  significant  accounting  policies  the  consolidated  income  statement  the  consolidated  and  parent  company  balance  sheets  the  consolidated  and  parent  company  cash  flow  statements  the  consolidated  and  parent  company  statements  of  changes  in  members’  equity  and  notes  1  to  18  these  financial  statements  have  been  prepared  under  the  accounting  policies  set  out  therein
this  report  is  made  solely  to  the  company’s  members  as  a  body  in  accordance  with  section  235  of  the  companies  act  1985  our  audit  work  has  been  undertaken  so  that  we  might  state  to  the  company’s  members  those  matters  we  are  required  to  state  to  them  in  an  auditor’s  report  and  for  no  other  purpose  to  the  fullest  extent  permitted  by  law  we  do  not  accept  or  assume  responsibility  to  anyone  other  than  the  company  and  the  company’s  members  as  a  body  for  our  audit  work  for  this  report  or  for  the  opinions  we  have  formed
respective responsibilities of directors and auditors
the  directors’  responsibilities  for  preparing  the  annual  report  and  the  financial  statements  in  accordance  with  applicable  law  and  international  financial  reporting  standards  ifrss  as  adopted  by  the  european  union  are  set  out  in  the  statement  of  directors’  responsibilities
our  responsibility  is  to  audit  the  financial  statements  in  accordance  with  relevant  legal  and  regulatory  requirements  and  international  standards  on  auditing  uk  and  ireland
we  report  to  you  our  opinion  as  to  whether  the  financial  statements  give  a  true  and  fair  view  and  whether  the  financial  statements  have  been  properly  prepared  in  accordance  with  the  companies  act  1985  we  also  report  to  you  whether  in  our  opinion  the  information  given  in  the  directors’  report  is  consistent  with  the  financial  statements
in  addition  we  report  to  you  if  in  our  opinion  the  company  has  not  kept  proper  accounting  records  if  we  have  not  received  all  the  information  and  explanations  we  require  for  our  audit  or  if  information  specified  by  law  regarding  directors’  remuneration  and  other  transactions  is  not  disclosed
we  read  other  information  contained  in  the  annual  report  and  consider  whether  it  is  consistent  with  the  audited  financial  statements  the  other  information  comprises  only  the  directors’  report  the  finance  director’s  review  of  financial  operations  the  chairman’s  statement  the  chief  executive  officer’s  statement  and  the  review  of  operations  we  consider  the  implications  for  our  report  if  we  become  aware  of  any  apparent  misstatements  or  material  inconsistencies  with  the  financial  statements  our  responsibilities  do  not  extend  to  any  other  information
basis of audit opinion
we  conducted  our  audit  in  accordance  with  international  standards  on  auditing  uk  and  ireland  issued  by  the  auditing  practices  board  an  audit  includes  examination  on  a  test  basis  of  evidence  relevant  to  the  amounts  and  disclosures  in  the  financial  statements  it  also  includes  an  assessment  of  the  significant  estimates  and  judgements  made  by  the  directors  in  the  preparation  of  the  financial  statements  and  of  whether  the  accounting  policies  are  appropriate  to  the  group’s  and  company’s  circumstances  consistently  applied  and  adequately  disclosed
we  planned  and  performed  our  audit  so  as  to  obtain  all  the  information  and  explanations  which  we  considered  necessary  in  order  to  provide  us  with  sufficient  evidence  to  give  reasonable  assurance  that  the  financial  statements  are  free  from  material  misstatement  whether  caused  by  fraud  or  other  irregularity  or  error  in  forming  our  opinion  we  also  evaluated  the  overall  adequacy  of  the  presentation  of  information  in  the  financial  statements
r eport of the i n depen dent au ditors to the members of 
m onterrico m et als plc 29 monterrico metals plc  annual report 2007
opinion
in  our  opinion
the  group  financial  statements  give  a  true  and  fair  view  in  accordance  with  ifrss  as  adopted  by  the  european  union  of  the  state  of  the  group’s  affairs  as  at  31  december  2007  and  of  its  loss  for  the  year  then  ended
the  parent  company  financial  statements  give  a  true  and  fair  view  in  accordance  with  ifrss  as  adopted  by  the  european  union  as  applied  in  accordance  with  the  provisions  of  the  companies  act  1985  of  the  state  of  the  parent  company’s  affairs  as  at  31  december  2007
the  financial  statements  have  been  properly  prepared  in  accordance  with  the  companies  act  1985  and
the  information  given  in  the  directors’  report  is  consistent  with  the  financial  statements
grant thornton uk llp
registered  auditor
chartered  accountants
23  april  2008
melton  street
euston  square
london  nw1  2ep
•
•
•
• 30 monterrico metals plc  annual report 2007
          31 december 31  december            2007  2006
        notes  us000  us000
administrative  expenses          3940  4154
non  recurring  administrative  expenses          5930  –
other  operating  income          19  201
exploration  costs  written  off          495  –
operating loss          10346  3953
finance  income        4  464  931
finance  expense        4  754  1380
loss from continuing operations before tax        3  10636 4402
taxation        6  –  –
loss for the year          10636  4402
basic  and  diluted  loss  per  ordinary  share  us  cents        7  404  173
the  accompanying  accounting  policies  and  notes  form  an  integral  part  of  these  financial  statements
c onsoli date d income st atement for the year ended 31 december 2007 31 monterrico metals plc  annual report 2007
          31 december 31  december            2007  2006
        notes  us000  us000
assets
    property   plant  and  equipment        10  283  297
    intangible   assets  –  deferred  exploration  costs        9  44200  35176
    other   receivables        12  2969  2088
total noncurrent assets          47452  37561
    other   receivables  and  prepayments        12  350  497
    cash   and  cash  equivalents          5044  12576
total current assets          5394  13073
total assets          52846  50634
equity
    issued   share  capital        14  4546  4546
    share   premium          50178  50178
    share   option  reserve          38  1092
    foreign   currency  translation  reserve          3213  2391
    retained   losses          18265  9136
total equity          39710  49071
liabilities
    trade   and  other  payables        13  777  1563
    loans         13  12359  –
total current liabilities          13136  1563
total equity and liabilities          52846  50634
the  financial  statements  were  approved  by  the  board  of  directors  on  8  april  2008
r p ralph
chairman
the  accompanying  accounting  policies  and  notes  form  an  integral  part  of  these  financial  statements
c onsoli date d b al ance sheet at 31 december 2007 32 monterrico metals plc  annual report 2007
          31 december 31  december            2007  2006
        notes  us000  us000
assets
    property   plant  and  equipment        10  21  34
    intangible   assets  –  deferred  exploration  costs        9  11150  8987
    investments   in  subsidiaries        11  41288  33142
total noncurrent assets          52459  42163
    other   receivables  and  prepayments        12  136  207
    cash   and  cash  equivalents          4719  12076
total current assets          4855  12283
total assets          57314  54446
equity
    issued   share  capital        14  4546  4546
    share   premium          50178  50178
    share   option  reserve          38  1092
    foreign   currency  translation  reserve          6735  6113
    retained   losses          16918  8565
total equity          44579  53364
liabilities
    trade   and  other  payables        13  376  1082
    loans         13  12359  –
total current liabilities          12735  1082
total equity and liabilities          57314  54446
the  financial  statements  were  approved  by  the  board  of  directors  on  8  april  2008
r p ralph
chairman
the  accompanying  accounting  policies  and  notes  form  an  integral  part  of  these  financial  statements
c omp any b al ance sheet at 31 december 2007 33 monterrico metals plc  annual report 2007
group
      share  option  foreign  currency    share  capital  share  premium  reserve  translation  reserve  retained  loss  total  equity
  us000  us000  us000  us000  us000  us000
at 1 january 2006  3861 32998 350 – 4734 32475
exchange  realignment  –  –  –  2391  –  2391
total  income  recognised  directly  in  equity  –  –  –  2391  –  2391
loss  for  the  year  –  –  –  –  4402  4402
total  recognised  loss  for  the  year  –  –  –  2391  4402  2011
issue  of  share  capital  685  17792  –  –  –  18477
transaction  cost  on  issue  of  shares  –  612  –  –  –  612
credit  arising  on  share  options  –  –  742  –  –  742
at 31 december 2006  4546 50178 1092 2391 9136 49071
at 1 january 2007  4546 50178 1092 2391 9136 49071
exchange  realignment  –  –  –  822  –  822
total  income  recognised  directly  in  equity  –  –  –  822  –  822
loss  for  the  year  –  –  –  –  10636  10636
total  recognised  loss  for  the  year  –  –  –  822  10636  9814
credit  arising  on  share  options  –  –  453  –  –  453
transfer  to  income  statement  on      expired   share  options  –  –  1507  –  1507  –
at 31 december 2007 4546 50178 38 3213 18265 39710
company
      share  option  foreign  currency    share  capital  share  premium  reserve  translation  reserve  retained  loss  total  equity
  us000  us000  us000  us000  us000  us000
at 1 january 2006  3861 32998 350 – 4385 32824
exchange  realignment  –  –  –  6113  –  6113
net  income  recognised  directly  in  equity  –  –  –  6113  –  6113
loss  for  the  year  –  –  –  –  4180  4180
total  recognised  loss  for  the  year  –  –  –  6113  4180  1933
issue  of  share  capital  685  17792  –  –  –  18477
transaction  cost  on  issue  of  shares  –  612  –  –  –  612
credit  arising  on  share  options  –  –  742  –  –  742
at 31 december 2006  4546 50178 1092 6113 8565 53364
at 1 january 2007  4546 50178 1092 6113 8565 53364
exchange  realignment  –  –  –  622  –  622
total  income  recognised  directly  in  equity  –  –  –  622  –  622
loss  for  the  year  –  –  –  –  9860  9860
total  recognised  loss  for  the  year  –  –  –  622  9860  9238
credit  arising  on  share  options  –  –  453  –  –  453
transfer  to  income  statement  on      expired   share  options  –  –  1507  –  1507  –
at 31 december 2007 4546 50178 38 6735 16918 44579
the  accompanying  accounting  policies  and  notes  form  an  integral  part  of  these  financial  statements
c on soli date d st atement of ch anges  
in sh arehol ders’ equity for the year ended 31 december 2007 34 monterrico metals plc  annual report 2007
          31 december 31  december            2007  2006
        notes  us000  us000
cash  flows  from  operating  activities
loss  before  tax  finance  income  and  finance  charges         10346  3953
adjustment  for
    depreciation         3  97  64
    share   based  payment  expense          453  742
    intangible   assets  written  off        3  495  –
          9301  3147
increase  in  other  receivables  and  prepayments          698  568
decreaseincrease  in  trade  and  other  payables          801  469
cash used in operations          10800  3246
interest  received          332  845
net cash outflow from operating activities          10468  2401
cash  flows  from  investing  activities
purchase  of  property  plant  and  equipment          77  129
purchase  of  intangible  assets          9402  12026
net cash outflow from investing activities          9479  12155
cash  flows  from  financing  activities
proceeds  from  the  issue  of  ordinary  share  capital          –  18477
payment  of  issue  costs          –  612
proceeds  from  issue  of  loan          11853  –
net cash inflow from financing activities          11853  17865
net decreaseincrease in cash and cash equivalents     8094  3309
cash  and  cash  equivalents  at  beginning  of  year          12576  9650
exchange  differences          562  383
cash and cash equivalents at end of year          5044  12576
the  accompanying  accounting  policies  and  notes  formal  an  integral  part  of  these  financial  statements
consoli date d c ash flo w st atement for the year ended 31 december 2007 35 monterrico metals plc  annual report 2007
          31 december 31  december            2007  2006
          us000  us000
cash  flows  from  operating  activities
loss  before  tax  finance  income  and  finance  charges         9654  3866
adjustment  for
    depreciation           15  9
    share   based  payment  expense          453  742
          9186  3115
increasedecrease  in  other  receivables  and  prepayments        73  65
decreaseincrease  in  trade  and  other  payables          714  359
cash used in operations          9827  2821
interest  received          332  845
net cash outflow from operating activities          9495  1976
cash  flows  from  investing  activities
purchase  of  property  plant  and  equipment          2  31
purchase  of  intangible  assets          2035  4517
investment  in  subsidiaries          8242  9574
net cash outflow from investing activities          10279  14122
cash  flows  from  financing  activities
proceeds  from  the  issue  of  ordinary  share  capital          –  18477
payment  of  issue  costs          –  612
proceeds  from  issue  of  loan          11853  –
net cash inflow from financing activities          11853  17865
net decreaseincrease in cash and cash equivalents     7921  1767
cash  and  cash  equivalents  at  beginning  of  year          12076  9510
exchange  differences          564  799
cash and cash equivalents at end of period          4719  12076
comp any c ash flo w st atement for the year ended 31 december 2007 36 monterrico metals plc  annual report 2007
n otes to the consoli date d f in anci al st atements for the year ended 31 december 2007
1 significant accounting policies
a basis of preparation 
the  financial  statements  of  monterrico  metals  plc  are  presented  in  us  dollars  and  have  been  prepared  on  the  historical  cost  basis    or  the  fair  value  basis  where  the  fair  valuing  of  relevant  assets  and  liabilities  has  been  applied
prior  to  2007  the  group  prepared  its  audited  financial  statements  under  uk  generally  accepted  accounting  principles  uk  gaap  from  1  january  2007  the  group  is  required  to  prepare  annual  consolidated  financial  statements  in  accordance  with  international  financial  reporting  standards  ‘ifrs’  as  adopted  by  the  european  union  eu  these  policies  are  summarised  below
an  exercise  to  assess  the  full  impact  that  the  change  to  ifrs  has  had  on  the  group’s  reported  equity  reported  losses  and  accounting  policies  has  been  completed  in  preparing  its  opening  ifrs  balance  sheet  the  group  has  adjusted  amounts  reported  previously  in  financial  statements  prepared  in  accordance  with  its  previous  basis  of  accounting  uk  gaap  the  group  has  elected  to  apply  the  following  exemptions  from  full  retrospective  application
a  business  combinations  the  group  has  chosen  not  to  restate  business  combinations  prior  to  1  january  2006  in  accordance  with  ifrs  3  b  cumulative  translation  differences  the  group  has  elected  to  set  the  previously  accumulated  translation  difference  to  zero  at  the  date  of  transition
c  sharebased  payments  the  group  has  elected  to  apply  ifrs  2  to  those  options  that  were  granted  after  7  november  2002
the  adoption  of  these  exemptions  has  not  resulted  in  any  effect  on  the  financial  statements
it  should  be  noted  that
1  the  adoption  of  ias  21  “the  effects  of  changes  in  foreign  exchange  rates”  has  resulted  in  cumulative  translation  differences  arising  since  1  january  2006  to  be  classified  as  a  separate  reserve  within  equity  this  change  in  presentation  does  not  effect  the  total  equity  of  the  group  at  each  balance  sheet  date
2  there  are  no  other  material  differences  between  the  cash  flow  statement  presented  under  ifrss  and  the  cash  flow  statement  presented  under  uk  gaap  other  than  to  reclassify  certain  cash  movements  between  categories  of  cash  flows
in  preparing  these  financial  statements  the  directors  have  decided  to  adopt  us  dollars  as  the  group’s  presentation  currency  being  the  currency  which  the  directors  believe  that  investors  prefer  to  review  the  results  of  the  group  and  accordingly  have  retranslated  the  financial  results  for  prior  years  into  that  currency
b basis of consolidation
i subsidiaries
the  financial  statements  incorporate  the  financial  statements  of  the  company  and  entities  controlled  by  the  company  its  subsidiaries  made  up  to  each  reporting  year  end  control  is  obtained  where  the  company  has  the  power  to  govern  the  financial  and  operating  policies  of  an  investee  entity  so  as  to  obtain  benefits  from  its  activities  the  results  of  subsidiaries  acquired  or  disposed  during  the  year  are  included  in  the  consolidated  income  statement  from  the  effective  date  of  acquisition  or  up  to  the  effective  date  of  disposal  as  appropriate
ii transactions eliminated on consolidation
intragroup  transactions  balances  and  unrealised  gains  on  transactions  between  group  companies  are  eliminated  unrealised  losses  are  eliminated  in  the  same  way  as  unrealised  gains  but  only  to  the  extent  that  there  is  no  evidence  of  impairment  c foreign currency translation
i functional and presentation currency
items  included  in  the  financial  statements  of  each  of  the  group’s  entities  are  measured  using  the  currency  of  the  primary  economic  environment  in  which  the  entity  operates  ‘the  functional  currency’  the  consolidated  financial  statements  are  presented  in  us  dollars  which  is  the  group’s  presentation  currency  the  functional  currency  of  the  parent  company  is  sterling  and  its  reporting  currency  is    us  dollars 37 monterrico metals plc  annual report 2007
1 significant accounting policies continued
ii transactions and balances
foreign  currency  transactions  are  translated  into  the  functional  currency  of  the  entity  using  the  exchange  rates  prevailing  at  the  dates  of  the  transactions  foreign  exchange  gains  and  losses  resulting  from  the  settlement  of  such  transactions  and  from  the  translation  at  yearend  exchange  rates  of  monetary  assets  and  liabilities  denominated  in  foreign  currencies  are  recognised  in  the  income  statement
iii group companies
the  results  and  financial  position  of  all  the  group  entities  none  of  which  has  the  currency  of  a  hyperinflationary  economy  that  have  a  functional  currency  different  from  the  presentation  currency  are  translated  into  the  presentation  currency  as  follows  assets  and  liabilities  for  each  balance  sheet  presented  are  translated  at  the  closing  rate  at  the  date  of  that  balance  sheet
income  and  expenses  for  each  income  statement  are  translated  at  average  exchange  rates  unless  this  average  is  not  a  reasonable  approximation  of  the  cumulative  effect  of  the  rates  prevailing  on  the  transaction  dates  in  which  case  income  and  expenses  are  translated  at  the  dates  of  the  transactions  and
all  resulting  exchange  differences  are  recognised  as  a  separate  component  of  equity
on  consolidation  exchange  differences  arising  from  the  translation  of  the  net  investment  in  foreign  operations  are  taken  to  shareholders’  equity  when  a  foreign  operation  is  sold  cumulative  exchange  differences  that  were  previously  recorded  in  equity  are  recognised  in  the  income  statement  as  part  of  the  gain  or  loss  on  sale  in  accordance  with  the  transitional  provisions  of  ifrs  1  the  cumulative  foreign  currency  gain  or  loss  has  been  deemed  to  be  zero  as  at  the  date  of  transition  being  1  january  2006
d property plant and equipment
all  items  of  property  plant  and  equipment  are  stated  at  historical  cost  less  depreciation  historical  cost  includes  expenditure  that  is  directly  attributable  to  the  acquisition  of  the  items  subsequent  costs  are  included  in  the  asset’s  carrying  amount  or  recognised  as  a  separate  asset  as  appropriate  only  when  it  is  probable  that  future  economic  benefits  associated  with  the  item  will  flow  to  the  group  and  the  cost  of  the  item  can  be  measured  reliably  all  other  costs  are  recognised  in  the  income  statement  during  the  financial  year  in  which  they  are  incurred
depreciation  is  charged  to  the  income  statement  on  a  straightline  basis  over  the  estimated  useful  lives  of  each  item  as  follows
office  equipment  fixtures  and  fittings            3  years
the  assets’  residual  values  and  useful  lives  are  reviewed  and  adjusted  if  appropriate  at  each  balance  sheet  date  gains  and  losses  on  disposals  are  determined  by  comparing  proceeds  with  carrying  amount  and  are  included  in  the  income  statement
e deferred exploration and evaluation costs
all  costs  incurred  prior  to  obtaining  the  legal  right  to  undertake  exploration  and  evaluation  activities  on  a  project  are  writtenoff  as  incurred
exploration  and  evaluation  costs  arising  following  the  acquisition  of  an  exploration  licence  are  capitalised  on  projectbyproject  basis  pending  determination  of  the  technical  feasibility  and  commercial  viability  of  the  project  costs  incurred  include  technical  expenses  and  allocated  administrative  overheads  deferred  exploration  costs  are  carried  at  historical  cost  less  any  impairment  losses  recognised  if  an  exploration  project  is  successful  and  it  is  brought  into  production  the  related  expenditures  are  depleted  on  a  unit  of  production  basis  or  until  the  properties  are  sold  allowed  to  lapse  abandoned  or  determined  not  to  be  economically  viable  at  which  time  they  are  charged  to  the  income  statement
capitalised  deferred  exploration  expenditures  are  reviewed  for  impairment  losses  see  accounting  policy  note  h  below  at  each  balance  sheet  date  in  the  case  of  undeveloped  properties  there  may  be  only  inferred  resources  to  form  a  basis  for  the  impairment  review  the  review  is  based  on  a  status  report  regarding  results  of  exploration  or  evaluation  work  to  date  and  the  group’s  intentions  for  development  of  the  related  property  •
•
• 38 monterrico metals plc  annual report 2007
1 significant accounting policies continued
f other receivables and prepayments
provision  against  other  receivables  is  made  when  there  is  objective  evidence  that  the  group  will  not  be  able  to  collect  all  amounts  due  to  it  in  accordance  with  the  original  terms  of  those  receivables  the  amount  of  the  writedown  is  determined  as  the  difference  between  the  asset’s  carrying  amount  and  the  present  value  of  estimated  future  cash  flows
g cash and cash equivalents
cash  and  cash  equivalents  comprise  cash  on  hand  and  demand  deposits  together  with  other  shortterm  highly  liquid  investments  that  are  readily  convertible  into  known  amounts  of  cash  and  which  are  subject  to  an  insignificant  risk  of  changes  in  value
h impairment 
whenever  events  or  changes  in  circumstance  indicate  that  the  carrying  amount  of  an  asset  may  not  be  recoverable  an  asset  is  reviewed  for  impairment  an  asset’s  carrying  value  is  written  down  to  its  estimated  recoverable  amount  being  the  higher  of  the  fair  value  less  costs  to  sell  and  value  in  use  if  that  is  less  than  the  asset’s  carrying  amount  impairment  reviews  for  deferred  exploration  and  evaluation  costs  are  carried  out  on  a  project  by  project  basis  with  each  project  representing  a  potential  single  cash  generating  unit  an  impairment  review  is  undertaken  when  indicators  of  impairment  arise  but  typically  when  one  of  the  following  circumstances  apply
i  unexpected  geological  occurrences  that  render  the  resource  uneconomic
ii  title  to  the  asset  is  compromised
iii  variations  in  metal  prices  that  render  the  project  uneconomic  iv  variations  in  the  currency  of  operation  and
v  the  group  determines  that  it  no  longer  wishes  to  continue  to  evaluate  or  develop  the  property
i sharebased payments
certain  group  employees  and  consultants  are  rewarded  with  share  based  instruments
all  sharebased  payment  arrangements  granted  after  7  november  2002  are  recognised  in  the  financial  statements  all  goods  and  services  received  in  exchange  for  the  grant  of  any  sharebased  payment  are  measured  at  their  fair  values  where  employees  are  rewarded  using  sharebased  payments  the  fair  values  of  employees’  services  are  determined  indirectly  by  reference  to  the  fair  value  of  the  instrument  granted  to  the  employee  this  fair  value  is  appraised  at  the  grant  date  and  excludes  the  impact  of  non
market  vesting  conditions  for  example  profitability  and  sales  growth  targets
all  equitysettled  sharebased  payments  are  ultimately  recognised  as  an  expense  in  the  income  statement  with  a  corresponding  credit  to  “other  reserve”
if  vesting  periods  or  other  nonmarket  vesting  conditions  apply  the  expense  is  allocated  over  the  vesting  period  based  on  the  best  available  estimate  of  the  number  of  share  options  expected  to  vest  estimates  are  subsequently  revised  if  there  is  any  indication  that  the  number  of  share  options  expected  to  vest  differs  from  previous  estimates  any  cumulative  adjustment  prior  to  vesting  is  recognised  in  the  current  period  no  adjustment  is  made  to  any  expense  recognised  in  prior  years  if  share  options  ultimately  exercised  are  different  to  that  estimated  on  vesting
upon  exercise  of  share  options  the  proceeds  received  net  of  attributable  transaction  costs  are  credited  to  share  capital  and  where  appropriate  share  premium
j provisions
provisions  are  recognised  when  the  group  has  a  legal  or  constructive  obligation  as  a  result  of  past  events  it  is  more  likely  than  not  that  an  outflow  of  the  resources  will  be  required  to  settle  the  obligation  and  the  amount  can  be  reliably  estimated
when  a  liability  is  initially  recorded  a  corresponding  increase  to  the  carrying  amount  of  the  related  asset  is  recorded  on  an  annual  basis  the  fair  value  of  the  future  liability  for  an  asset  retirement  obligation  is  recognised  in  the  year  in  which  it  is  incurred  with  an  offsetting  amount  being  recognised  as  an  increase  in  the  carrying  amount  of  the  corresponding  asset  this  asset  is  amortised  over  the  estimated  life  of  the  mine  while  the  corresponding  liability  accretes  to  its  future  value  by  the  end  of  the  mine’s  life  ongoing  expenditures  related  to  the  protection  of  the  environment  are  charged  to  earnings  in  the  year  they  are  incurred  n otes to the consoli date d f in anci al st atements continued
for the year ended 31 december 2007 39 monterrico metals plc  annual report 2007
1 significant accounting policies continued
k trade and other payables
financial  liabilities  are  obligations  to  pay  cash  or  other  financial  assets  and  are  recognised  when  the  group  becomes  a  party  to  the  contractual  provisions  of  the  instrument  financial  liabilities  are  recorded  initially  at  fair  value  net  of  direct  issue  costs
l income tax
deferred  income  taxes  are  calculated  using  the  liability  method  on  temporary  differences  deferred  tax  is  generally  provided  on  the  difference  between  the  carrying  amounts  of  assets  and  liabilities  and  their  tax  bases  however  deferred  tax  is  not  provided  on  the  initial  recognition  of  goodwill  nor  on  the  initial  recognition  of  an  asset  or  liability  unless  the  related  transaction  is  a  business  combination  or  affects  tax  or  accounting  profit  deferred  tax  on  temporary  differences  associated  with  shares  in  subsidiaries  and  joint  ventures  is  not  provided  if  reversal  of  these  temporary  differences  can  be  controlled  by  the  group  and  it  is  probable  that  reversal  will  not  occur  in  the  foreseeable  future
in  addition  tax  losses  available  to  be  carried  forward  as  well  as  other  income  tax  credits  to  the  group  are  assessed  for  recognition  as  deferred  tax  assets
deferred  tax  liabilities  are  provided  in  full  with  no  discounting  deferred  tax  assets  are  recognised  to  the  extent  that  it  is  probable  that  the  underlying  deductible  temporary  differences  will  be  able  to  be  offset  against  future  taxable  income  current  and  deferred  tax  assets  and  liabilities  are  calculated  at  tax  rates  that  are  expected  to  apply  to  their  respective  period  of  realisation  provided  they  are  enacted  or  substantively  enacted  at  the  balance  sheet  date
m investment in subsidiaries
investments  in  subsidiaries  are  recognised  at  cost  less  any  provision  for  impairment  n revenue
i interest income
interest  is  recognised  using  the  effective  interest  method  which  calculates  the  amortised  cost  of  a  financial  asset  and  allocates  the  interest  income  over  the  relevant  period  the  effective  interest  rate  is  the  rate  that  exactly  discounts  estimated  future  cash  receipts  through  the  expected  life  of  the  financial  asset  to  the  net  carrying  amount  of  the  financial  asset
o critical accounting estimates and judgements
estimates  and  judgements  are  continually  evaluated  and  are  based  on  historical  experience  and  other  factors  including  expectations  of  future  events  that  are  believed  to  be  reasonable  under  the  circumstances  many  of  the  amounts  included  in  the  financial  statements  involve  the  use  of  judgement  andor  estimation  these  judgements  and  estimates  are  based  on  managements’  best  knowledge  of  the  relevant  facts  and  circumstances  having  regard  to  prior  experience  but  actual  results  may  differ  from  the  amounts  included  in  the  financial  statements  selection of accounting treatment for igv receivable
ias  39  scopes  out  all  items  arising  as  a  result  of  statute  such  as  income  taxes  and  sales  tax  igv  with  reference  to  ias  8  a  judgement  has  been  made  that  although  scoped  out  of  ias  39  the  inputoutputs  of  a  transactional  tax  such  as  igv  could  be  seen  to  resemble  the  advance  and  later  repayment  of  a  loan  and  therefore  ias  39  been  interpreted  to  be  the  most  appropriate  accounting  standard
the  igv  recoverable  asset  is  designated  at  fair  value  through  profit  or  loss  upon  initial  recognition  subsequent  to  initial  recognition  the  igv  recoverable  is  recognised  at  amortised  cost  using  the  effective  interest  rate  method  with  changes  in  fair  value  recognised  in  the  income  statement
where  the  group  revises  its  estimates  of  future  cash  flows  the  carrying  amount  is  recalculated  using  the  original  effective  interest    the  igv  is  recoverable  upon  commencement  of  production  in  peru
fair value other receivables
the  fair  value  of  other  receivables  is  determined  by  using  valuation  techniques  the  group  uses  its  judgement  to  select  a  variety  of  methods  and  make  assumptions  that  are  mainly  based  on  market  conditions  existing  at  each  balance  sheet  date  the  group  has  used  discounted  cash  flow  analysis  for  the  other  receivable  that  is  not  traded  in  active  markets
sharebased payments
the  estimation  of  sharebased  payment  costs  requires  the  selection  of  an  appropriate  valuation  model  and  consideration  as  to  the  inputs  necessary  for  the  valuation  model  chosen  the  group  has  made  estimates  as  to  the  volatility  of  its  own  shares  the  probable  life  of  options  granted  and  the  time  of  exercise  of  those  options  the  model  used  by  the  group  is  the  blackscholes  valuation  model 40 monterrico metals plc  annual report 2007
1 significant accounting policies continued
intangible assets
the  group’s  accounting  policy  leads  to  the  development  of  intangible  asset  where  it  is  considered  likely  that  the  amount  will  be  recoverable  by  future  exploitation  or  sale  or  alternatively  where  the  activities  have  not  reached  a  stage  which  permits  a  reasonable  assessment  of  the  existence  of  reserves  this  requires  management  to  make  estimates  and  assumptions  as  to  the  future  events  and  circumstances  especially  in  relation  to  whether  an  economically  viable  extraction  operation  can  be  established  such  estimates  are  subject  to  change  and  following  initial  capitalisation  should  it  become  apparent  that  recovery  of  the  expenditure  is  unlikely  the  relevant  capitalised  amount  will  be  written  off  to  the  income  statement
impairment assets
the  group  reviews  the  carrying  amounts  of  its  tangible  and  intangible  assets  to  determine  whether  there  is  any  indication  that  those  assets  are  impaired  in  making  the  assessment  for  impairment  assets  that  do  not  generate  independent  cash  flows  are  allocated  to  an  appropriate  cash  generating  unit  cgu
the  recoverable  amount  of  those  assets  or  cgu  is  measured  as  the  higher  of  their  fair  values  less  costs  to  sell  and  value  in  use  management  necessarily  applies  its  judgement  in  allocating  assets  that  do  not  generate  independent  cash  flows  to  appropriate  cgus  and  also  in  estimating  the  timing  and  value  of  underlying  cash  flows  within  the  value  in  use  calculation  subsequent  changes  to  the  cgu  allocation  or  to  the  timing  of  cash  flows  could  impact  the  carying  value  of  the  respective  assets
long term receivables
upon  initial  recognition  the  receivable  is  measured  at  fair  value  after  initial  recognition  these  are  measured  at  amortised  cost  using  the  effective  interest  method  less  provision  for  impairment  any  change  in  their  value  is  recognised  through  the  income  statement
significant  receivables  are  considered  for  impairment  on  a  casebycase  basis  when  they  are  past  due  at  the  balance  sheet  date  or  when  objective  evidence  is  received  that  the  receivable  is  impaired
p standards and interpretations not yet applied
the  directors  together  with  their  advisers  are  in  the  process  of  evaluating  the  impact  of  standards  andor  interpretations  that  have  not  yet  become  effective  listed  below  are  those  standards  andor  interpretations  most  likely  to  impact  the  group  ias  1  presentation  of  financial  statements  revised  2007  effective  1  january  2009
ias  23  borrowing  costs  revised  2007  effective  1  january  2009
ias  27    consolidated  and  separate  financial  statements  revised  2008  effective  1  july  2009
  amendment  to  ifrs  2  sharebased  payment    vesting  conditions  and  cancellations  effective  1  january  2009
ifrs  3  business  combinations  revised  2008  effective  1  july  2009
ifrs  8  operating  segments  effective  1  january  2009
ifric  11  ifrs  2    group  and  treasury  share  transactions  effective  1  march  2007
the  amendment  to  ias  1  financial  statement  presentation  released  in  september  2007  redefines  the  primary  statements  and  expands  on  certain  disclosures  within  these  once  adopted  the  group’s  primary  statements  will  be  amended  to  reflect  the  presentation  required
based  on  the  group’s  current  business  model  and  accounting  policies  it  is  felt  that  the  other  standards  andor  interpretations  are  unlikely  to  have  a  material  impact  on  the  group’s  earnings  or  shareholders  funds  n otes to the consoli date d f in anci al s t atement s continued
for the year ended 31 december 2007 41 monterrico metals plc  annual report 2007
2 segmental analysis
business segments
the  group’s  only  business  segment  is  the  exploration  for  and  development  of  copper  and  associated  metals
geographical segments
the  group  also  reports  by  geographical  segment  based  on  the  geographical  location  of  activity  in  presenting  information  by  geographical  segment  assets  and  the  cost  of  acquiring  them  are  based  on  the  geographical  location  of  the  assets  capital  expenditure  is  the  total  cost  incurred  during  the  period  to  acquire  segement  assets  that  are  expected  to  be  used  for  more  than  one  period
there  was  no  turnover  for  the  group  in  the  year  31  december  2006  usnil
          31 december 31  december
          2007  2006
          us000  us000
total  assets
united  kingdom          16008  21262
cayman  islands          1941  1916
peru          34897  27456
total          52846  50634
capital  expenditure  on  property  plant  and  equipment
united  kingdom          2  31
peru          75  98
total          77  129
capital  expenditure  on  intangible  assets
united  kingdom          2035  4517
peru          7367  7509
total          9402  12026
3 loss before tax
          31 december  31  december            2007  2006
          us000  us000
the  loss  before  tax  is  stated  after
fees  payable  to  the  company’s  auditors  for  the  audit  of  the  company’s  annual  accounts    52  47
fees  payable  to  the  company’s  auditors  and  its  associates  in  respect  of
–  the  auditing  of  accounts  of  associates  of  the  company  pursuant  to  legislation          including   that  of  countries  and  territories  outside  the  united  kingdom      14  7
–  other  services  supplied  pursuant  to  such  legislation         45  30
–  other  services  relating  to  taxation          16  16
depreciation
–  property  plant  and  equipment          97  64
intangible  assets  written  off          495  –
non  recurring  administrative  costs  comprise
–  legal  fees          3982  –
–  professional  fees          1001  –
–  directors’  and  consultants’  termination  fees          947  – 42 monterrico metals plc  annual report 2007
4 finance income  expense
          31 december 31  december
          2007  2006
          us000  us000
finance income
implied  interest  receivable  arising  on  igv          132  86
interest  receivable  on  shortterm  deposits          332  845
interest receivable          464  931
finance expense
exchange  loss  on  foreign  currency  denominated  bank  and  loan  accounts      153  1160
interest  payable  arising  on  igv          217  220
loan  interest  payable          384  –
interest payable          754  1380
5 employee information
staff  costs  for  the  group  during  the  year  were  as  follows
          31 december 31  december
          2007  2006
          us000  us000
wages  and  salaries          3192  2313
social  security  costs          614  270
share  based  payments          453  742
          4259  3325
staff  costs  for  the  company  during  the  year  were  as  follows
          31 december 31  december
          2007  2006
          us000  us000
wages  and  salaries          1451  859
social  security  costs          353  73
share  based  payments          453  742
          2257  1674
the  average  number  of  employees  of  the  group  during  the  year  was
     31 december 31  december
          2007  2006
          number  number
technical          80  130
administration          30  24
          110  154
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 43 monterrico metals plc  annual report 2007
5 employee information continued
the  average  number  of  employees  of  the  company  during  the  year  was
     31 december 31  december
          2007  2006
          number  number
technical          1  –
administration          9  7
          10  7
key  management  comprises  executive  and  nonexecutive  directors  only  their  compensations  are
          31 december 31  december
          2007  2006
          us000  us000
emoluments          1349 1114
no  director  received  any  remuneration  in  respect  of  pension  contributions
directors’  emoluments  for  the  year  ended  31  december  2007  are  represented  below
 share  based annual    housing  termination
  payments  salary  fees  allowance  payments  total
  us000  us000  us000  us000  us000  us000
r  p  ralph  4  52  59  –  63  178
c  j  eager  –  –  47  23  62  132
r  j  angus  2  99  29  16  315  461
f  z  haller  –  –  12  –  83  95
e  carr
1
  –  –  16  –  4  20
j  o’leary
2
  79  –  12  –  4  95
s  li  4  90  4  –  –  98
g  hu  4  57  –  –  –  61
x  huang  9  138  –  –  –  147
w  huang  2  –  29  –  –  31
h  cooper  2  –  29  –  –  31
  106  436  237  39  531  1349
directors’  emoluments  for  the  year  ended  31  december  2006  are  represented  below
  share  based  annual    housing  termination
  payments  salary  fees  allowance  payments  total
  us000  us000  us000  us000  us000  us000
r  p  ralph  –  82  –  –  –  82
c  j  eager  –  221  18  21  –  260
r  j  angus  –  221  –  37  –  258
f  z  haller  –  –  46  –  –  46
m  a  price  105  –  29  –  23  157
e  carr
1
  105  –  46  –  –  151
r  guy  –  –  34  –  55  89
jeff  o’leary
2
  41  –  30  –  –  71
  251  524  203  58  78  1114
1  in  addition  to  her  director’s  fees  ms  carr  was  paid  an  additional  574000  in  respect  of  her  consultancy  services  carried  out  during  the  year  2006us253000
2  in  addition  to  his  director’s  fees  mr  o’leary  was  paid  an  additional  127000  in  respect  of  his  consultancy  services  carried  out  during  the  year  2006us124000 44 monterrico metals plc  annual report 2007
6 taxation
the  tax  chargecredit  represents
          31 december 31  december
          2007  2006
          us000  us000
united  kingdom  corporation  tax  at  30    2006  30         –  –
the  tax  assessed  for  the  year  is  different  than  the  standard  rate  of  corporation  tax  in  the  united  kingdom  of  30    2006  30  the  differences  are  explained  as  follows
          31 december 31  december
          2007  2006
          us000  us000
loss  on  ordinary  activities  before  tax        10636  4402
loss  on  ordinary  activities  multiplied  by  standard  rate  of  corporation  tax      in   the  united  kingdom  of  30    2006  30          3191  1321
effect  of
expenses  not  deductible  for  tax  purposes          1895  188
difference  between  capital  allowances  and  depreciation        4  3
other  temporary  differences  –  tax  losses  carried  forward  not  recognised      1292  1130
          –  –
excess  management  expenses  in  the  united  kingdom  of  us  9916000  2006  us  5657000  remain  available  to  carry  forward  against  future  nontrading  income  of  the  company  a  deferred  tax  asset  of  us  3399000  2006  us  1935000  has  not  been  recognised  on  the  grounds  that  there  is  uncertainty  surrounding  the  timing  of  recoverability  of  the  asset
no  temporary  differences  resulting  from  investments  in  subsidiaries  associates  or  interests  in  joint  ventures  qualified  for  recognition  as  deferred  tax  assets  or  liabilities
7 loss per share
the  calculation  of  the  basic  loss  per  ordinary  share  is  based  on  a  loss  of  us10636000  to  31  december  2007  2006  us  4402000  and  the  weighted  average  number  of  ordinary  shares  outstanding  of  26306068  at  31  december  2007  25445625  at  31  december  2006  in  accordance  with  ias  33  no  diluted  earnings  per  share  is  presented  as  the  effect  on  the  exercise  of  share  options  would  be  to  decrease  the  loss  per  share
details  of  share  options  that  could  potentially  dilute  earnings  per  share  in  future  years  are  set  out  in  note  14
8 loss for the financial year
the  parent  company  has  taken  advantage  of  section  230  of  the  companies  act  1985  and  has  not  included  its  own  income  statement  in  these  financial  statements  the  parent  company’s  loss  for  the  year  was  us9860000  2006  us4180000
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 45 monterrico metals plc  annual report 2007
9 intangible assets
the group
            mining              concessions
            and              preoperating
            costs
            us000
cost
at  1  january  2007            35579
additions            9402
exchange  realignment            126
at  31  december  2007            45107
depreciation
at  1  january  2007            403
write  off  in  the  year            495
exchange  realignment            9
at  31  december  2007            907
net book value at 31 december 2007      44200
net  book  value  at  31  december  2006            35176
            mining              concessions
            and              preoperating
            costs
            us000
cost
at  1  january  2006            22137
additions            12026
exchange  realignment            1416
at  31  december  2006            35579
depreciation
at  1  january  2006            354
exchange  realignment            49
at  31  december  2006            403
net book value at 31 december 2006      35176
net  book  value  at  31  december  2005            21783
intangible  assets  consist  of  acquisition  costs  of  rights  on  mining  concessions  exploration  rights  and  exploration  and  development  costs 46 monterrico metals plc  annual report 2007
9 intangible assets continued
the company
            mining              concessions
            and              preoperating
            costs
            us000
cost
at  1  january  2007            8987
additions            2035
exchange  differences            128
at  31  december  2007            11150
depreciation
at  1  january  2007  and  31  december  2007            –
net book value at 31 december 2007      11150
net  book  value  at  31  december  2006            8987
            mining              concessions
            and              preoperating
            costs
            us000
cost
at  1  january  2006            3663
additions            4517
exchange  differences            807
at  31  december  2006            8987
depreciation
at  1  january  and  31  december  2006            –
net book value at 31 december 2006      8987
net  book  value  at  31  december  2005            3663
intangible  assets  consist  of  exploration  and  development  costs
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 47 monterrico metals plc  annual report 2007
10 property plant and equipment
the group
            us000
cost
at  1  january  2007            493
additions            77
exchange  realignment            2
at  31  december  2007            572
depreciation
at  1  january  2007            196
depreciation  provided  during  the  year            97
exchange  realignment            4
at  31  december  2007            289
net book value at 31 december 2007      283
net  book  value  at  31  december  2006            297
            us000
cost
at  1  january  2006            363
additions            129
disposals            4
exchange  realignment            5
at  31  december  2006            493
depreciation
at  1  january  2006            124
depreciation  provided  during  the  year            64
disposals            2
exchange  realignment            10
at  31  december  2006            196
net book value at 31 december 2006      297
net  book  value  at  31  december  2005            239
the company
            us000
cost
at  1  january  2007            61
additions            2
exchange  realignment            1
at  31  december  2007            64
depreciation
at  1  january  2007            27
depreciation  provided  during  the  year            15
exchange  realignment            1
at  31  december  2007            43
net book value at 31 december 2007      21
net  book  value  at  31  december  2006            34 48 monterrico metals plc  annual report 2007
10 property plant and equipment continued
the company
            us000
cost
at  1  january  2006            27
additions            31
disposals            4
exchange  realignment            7
at  31  december  2006            61
depreciation
at  1  january  2006            16
depreciation  provided  during  the  year            9
disposals            2
exchange  realignment            4
at  31  december  2006            27
net book value at 31 december 2006      34
net  book  value  at  31  december  2005            11
11 investments in subsidiaries
the company
          capital   total
        shares  contributions  investments
        us000  us000  us000
cost
at  1  january  2007        753  33039  33792
additions        –  8242  8242
exchange  realignment        9  474  483
at 31 december 2007        762  41755  42517
amounts written off
at  1  january  2007        650  –  650
provision  on  intercompany  balances        –  567  567
foreign  exchange        10  2  12
at 31 december 2007        660  569  1229
net book value at 31 december 2007    102 41186 41288
net  book  value  at  31  december  2006        103  33039  33142
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 49 monterrico metals plc  annual report 2007
11 investments in subsidiaries continued
the company
          capital   total
        shares  contributions  investments
        us000  us000  us000
cost
at  1  january  2006        660  –  660
reclassification  from  current  assets        –  21440  21440
additions        –  9574  9574
exchange  realignment        93  2025  2118
at 31 december 2006        753  33039  33792
amounts written off
at  1  january  2006        571  –  571
exchange  realignment        79  –  79
at 31 december 2006        650  –  650
net book value at 31 december 2006    103 33039 33142
net  book  value  at  31  december  2005        89  –  89
at  31  december  2007  us102000  2006  us103000  represents  the  written  down  value  of  the  intercontinental  resource  inc  group  of  companies  us2  2006  us2  represents  the  shareholding  in  copper  corp  limited  the  company  made  capital  contributions  to  its  subsidiary  undertakings  to  the  value  of  us8242000  2006  us  9574000  the  company  has  furthermore  made  provisions  on  some  of  its  intercompany  balances  to  the  value  of  us567000  giving  rise  to  a  total  capital  contribution  of  us41186000  50 monterrico metals plc  annual report 2007
11 investments in subsidiaries continued
at  31  december  2007  the  principal  subsidiaries  are  as  follows
            profitloss            capital  and  for  the
  country  of  class  of  share  proportion  nature  of  reserves  financial  year
  incorporation  capital  held  held  business  us  us
copper  corp  limited  cayman  islands  common  100  mining  11797  1627      shares
rio  blanco  copper  limited

  cayman  islands  common  100  mining  20009  1867      shares
intercontinental  resources  inc  cayman  islands  common  100  mining  85716  2229      shares
    redeemable  100  mining  –  –      common        shares  pico  machay  cayman  islands  common  100  mining  7071  1606      shares
golden  condor  resources  limited  cayman  islands  ‘a’  common  100  mining  77801  1890      shares
    ‘b’  common  100  mining  –  –      shares  compania  minera  iri  peru  sa  peru  ordinary  –  100  mining  7618  –      beneficial        interests  minera  mamanina  sac  peru  ordinary  –  100  mining  98999  –      beneficial        interest  corporacion  minera  vulcan  sa  peru  common  100  mining  90854  –      shares  rio  blanco  copper  sa

  peru  common  100  mining  30669039  –      shares  minera  monterrico  peru  sac  peru  common  100  mining  570  –      shares  minera  pico  machay    peru  common  100  mining  576  –      shares  compania  minera  mayari  sac  
  peru  common  100  mining  –  –      shares  minera  coripacha  sac  peru  common  100  mining  19  24      shares
asocian  ñari  walac  peru  common  100  mining  1  1      shares
minera  rio  blanco  ecuador  ecuador  ordinary  100  mining  800  –      shares
all  the  principal  subsidiaries  have  a  31  december  year  end
  subsidiaries  owned  directly  by  monterrico  metals  plc
  copper  corp  limited  group  companies
  intercontinental  resources  inc  group  companies
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 51 monterrico metals plc  annual report 2007
12 other receivables and prepayments
 the group the company
      31 december   31  december  31 december  31  december
    2007  2006  2007  2006
      us000  us000  us000  us000
current        vat      18  94  19  93
other  receivables      332  403  117  114
      350  497  136  207
noncurrent
igv  recoverable  at  fair  value      2969  2088  –  –
      2969  2088  –  –
the  fair  values  of  the  igv  recoverable  is  based  on  cash  flows  discounted  using  a  rate  based  on  the  borrowings  rate  of  6  2006  6  the  discount  rate  equals  to  libor  plus  appropriate  credit  rating  peruvian  igv  tax  is  recoverable  on  commencement  of  production  none  of  these  amounts  receivable  have  any  pledged  collateral
13 trade and other payables
 the group the company
      31 december  31  december  31 december  31  december
      2007  2006  2007  2006
      us000  us000  us000 us000
current    
other  payables      430  482  319  1034
accruals  and  deferred  income      347  1081 57 48
      777 1563  376  1082
parent  company  loan      12359  –  12359  –
    12359  –  12359  –
the  company  has  entered  into  two  loan  facility  agreements  with  the  zijin  consortium  the  majority  shareholder  of  the  company  as  follows
an  aggregate  amount  of  up  to  £2  million  at  an  interest  rate  of  not  greater  than  1  percent  above  the  base  rate  from  time  to  time  of  barclays  bank  plc  the  loan  is  repayable  on  30  april  2008
an  aggregate  amount  of  up  to  us8000000  at  an  interest  rate  of  not  greater  than  1  percent  above  the  libor  rate  from  time  to  time  as  published  by  the  british  bankers  association  bba  the  loan  is  repayable  on  29  june  2008
none  of  these  amounts  payable  have  any  pledged  collateral
see  note  15  “post  balance  sheet  events”  for  details  of  additional  loan  finance  secured  since  the  year  end 52 monterrico metals plc  annual report 2007
14 share capital
the group and the company
      31 december  31 december  31  december  31  december
      2007  2007  2006  2006
      number  £  number  £
authorised
ordinary  shares  of  10p  each    100000000  10000000  100000000  10000000
the group and the company
    31 december 31 december  31  december  31  december
      2007 2007  2006  2006
      number us 000  number  us  000
allotted called up and fully paid
ordinary  shares  of  10p  each    26306068 4546  26306068  4546
contingent rights to the allotment of shares
during  the  year  the  company  granted  the  following  options
465000  ordinary  10p  shares  at  350p  per  share  exercisable  between  26  november  2010  and  25  november  2017
cancellations
on  the  25  april  2007  the  company  cancelled  1937550  share  options  that  were  in  the  money  as  a  result  of  the  successful  offer  made  for  the  company  by  the  zijin  consortium  the  difference  between  the  offer  price  and  the  exercise  price  was  paid  to  the  holders  of  the  cancelled  share  options
in  addition  a  further  579950  share  options  that  were  not  in  the  money  at  the  time  the  offer  was  made  by  the  zijin  consortium  had  lapsed  by  the  year  end
share based payments
the  group  issues  share  based  payments  to  certain  individuals  which  are  measured  at  fair  value  at  date  of  grant  the  fair  value  determined  at  the  grant  date  is  expensed  on  a  straight  line  basis  over  the  vesting  period  based  on  the  group’s  estimate  of  shares  that  will  eventually  vest
the  group  has  applied  the  requirement  of  ifrs  2  share  based  payments  and  has  attributed  a  fair  value  to  the  issue  of  the  options
fair  value  is  measured  by  use  of  either  binomial  or  a  blackscholes  valuation  model  whichever  is  more  appropriate  to  the  instrument  granted  the  expected  life  of  the  instruments  used  in  the  model  is  adjusted  based  on  management’s  best  estimate  for  the  effects  of  nontransferability  exercise  restrictions  and  behavioural  considerations  the  group  uses  the  blackscholes  model  to  value  its  share  options
•
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 53 monterrico metals plc  annual report 2007
14 share capital continued
the  following  assumptions  were  made  in  the  calculation  of  fair  value
    2  june  16  december  1  february  5  may  26  june  26  novemberr
    2005  2005  2006  2006  2006  2007
    options  options  options  options  options  options
risk  free  rate    40  425  412  477  45  449
exercise  price    £4325  £4525  £3915  £2550  £2640  £350
volatility    4125  4347  4480  4336  4642  5510
share  price  on  date  of  issue    £4325  £4525  £3915  £2550  £2640  £320
expected  life  of  option  average    3  years  25  years  25  years   2  years  2  years  3  years
the  charge  to  administrative  expenses  in  the  income  statement  for  the  year  ended  31  december  2007  was  us453000  2006  us742000
during  the  year  a  total  of  465000  share  options  were  granted  no  share  options  were  exercised  no  share  options  were  forfeited  1937550  share  options  were  cancelled  and  579950  share  options  lapsed
in  accordance  with  ifrs  2  the  share  options  which  had  been  granted  but  had  not  vested  by  the  year  end  have  been  valued  at  14344p  each
at  the  end  of  the  year  the  number  of  options  remaining  unexercised  was  465000  31  december  2006  2517500  with  an  exercise  price  of  350p  and  are  exercisable  from  26  november  2010  and  25  november  2017
the  vesting  period  is  for  3  years  from  the  date  of  grant  if  options  remain  unexercised  these  options  expire  furthermore  if  an  employee  or  consultant  leaves  the  group  before  their  options  vest  the  option  holders  at  the  discretion  of  the  board  of  directors  are  permitted  to  keep  their  options
if  they  are  not  permitted  to  keep  the  share  options  the  share  options  vest  immediately  which  results  in  an  immediate  charge  to  the  income  statement
15 post balance sheet events
a   on  4  february  2008  the  company  entered  into  a  loan  facility  agreement  with  the  zijin  consortium  the  majority  shareholder  of  the  company      the  loan  facility  is  for  an  aggregate  amount  of  up  to  us10  million  at  an  interest  rate  of  not  greater  than  1  percent  above  libor  as  published  by  the  british  bankers  association  bba  the  loan  is  repayable  on  4  february  2009  at  the  option  of  the  company  the  whole  or  part  of  the  loan  may  be  converted  into  ordinary  shares  in  the  company  “ordinary  shares”  at  a  conversion  price  of  the  lower  of  i  350  pence  per  ordinary  share  and  ii  the  average  midmarket  price  of  an  ordinary  share  over  the  three  business  days  preceding  the  date  of  conversion      the  proceeds  from  the  loan  facility  will  be  used  to  meet  the  working  capital  needs  of  the  group  for  2008
b   the  peruvian  office  has  recently  acquired  a  new  office  building  in  the  peruvian  capital  lima  to  consolidate  its  office  operations    it  cost  us330000  of  which  us210000  was  paid  on  acquisition  and  the  balance  is  to  be  paid  over  12  equal  instalments  16 related party transactions
a   during  the  year  the  company  entered  into  two  loan  agreements  with  the  zijin  consortium  for  £2000000  and  us8000000
b   the  company  has  advanced  to  its  subsidiary  undertakings  us8242149  in  respect  of  capital  contributions  futher  details  are  in  note  11      54 monterrico metals plc  annual report 2007
17 financial instruments – group and company
the  group  and  company  financial  instruments  other  than  derivatives  comprise  cash  and  liquid  resources  and  short  term  debtors  and  creditors  these  all  arise  directly  from  the  group’s  operations  the  main  purpose  of  these  financial  instruments  is  to  raise  finance  for  the  operations
the  company  manages  currency  risks  arising  from  the  group’s  operations  by  purchasing  the  appropriate  amount  of  foreign  currency  in  order  to  finance  estimated  future  expenditure
it  is  and  has  been  throughout  the  year  the  group’s  policy  that  no  other  trading  in  financial  instruments  shall  be  undertaken
the  main  risks  arising  from  the  group’s  financial  instruments  are  liquidity  risk  interest  rate  risk  and  foreign  currency  risk  each  of  which  is  discussed  below  the  board  reviews  and  agrees  policies  for  managing  each  of  these  risks  and  they  are  summarised  below  there  is  no  perceived  credit  risk  as  the  group  has  no  trade  receivables  and  any  investments  are  made  in  liquid  securities  with  counterparties  that  have  a  sound  credit  rating  there  is  also  no  commodity  risk  as  there  were  no  sales  of  metals  in  the  year  these  policies  were  fully  reviewed  by  the  board  during  the  year  and  no  significant  changes  were  required
liquidity risks
to  date  the  group  has  relied  upon  shareholder  funding  and  shortterm  trade  finance  to  finance  its  operations  as  the  group  has  finite  cash  resources  the  management  of  expenditure  and  continued  shareholder  support  is  required  in  order  to  mitigate  liquidity  risk
the  groups  ability  to  raise  future  finance  is  partially  subject  to  the  price  of  copper  from  which  eventual  sales  revenues  are  to  be  derived
interest rate risks
the  group  finances  itself  through  equity  and  shareholder  loans  and  places  its  cash  resources  on  short  term  deposits  to  maximise  interest  earned  the  group  has  not  used  interest  rate  derivatives  in  the  year
foreign currency risks
although  the  company  is  incorporated  in  the  united  kingdom  its  financial  statements  and  those  of  the  group  are  reported  in  us  dollars
share  issues  have  been  priced  solely  in  sterling  expenditure  is  materially  in  us  dollars  and  immaterially  in  sterling  and    peruvian  soles
the  group’s  main  subsidiary  operates  in  peru  with  its  expenditure  being  principally  in  peruvian  soles  and  its  financial  statements  are  maintained  in  that  currency  the  group’s  policy  for  dealing  with  exchange  differences  is  outlined  in  the  statement  of  accounting  policies  under  the  heading  “foreign  currency  translation”
the  group  does  not  presently  utilise  swaps  or  forward  contracts  to  manage  its  currency  exposures  although  such  facilities  are  considered  and  may  be  used  where  appropriate  in  the  future
the  group  seeks  to  minimise  its  exposure  to  currency  risk  by  closely  monitoring  exchange  rates  the  group  considers  book  value  to  equal  fair  value
currency  exposures  at  31  december  2007  and  31  december  2006  are  discussed  below  transactions  of  subsidiaries  are  denominated  in  the  local  currency
fair value of financial instruments
the  fair  value  of  the  group  and  company’s  financial  instruments  at  31  december  2007  does  not  differ  materially  from  their  carrying  values
the  group  and  company  do  not  have  any  long  term  borrowings  in  financial  instruments
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007 55 monterrico metals plc  annual report 2007
17 financial instruments – group and company continued
application of group policy
the  group’s  use  of  financial  instruments  is  explained  below
a exchange risk 
the  table  below  shows  the  group’s  currency  exposures  the  group’s  cash  holdings  at  the  balance  sheet  date  were  held  in  the  following  currencies
          31 december   31  december
          2007  2006
          us000  us000
peruvian  soles          130  45
us  dollar          3899  7359
sterling          1015  5172
          5044  12576
the  intercompany  loans  are  denominated  in  us  dollars
b interest rate profile of financial assets
at  31  december  2007  the  group’s  financial  assets  other  than  short  term  debtors  amounted  to  cash  and  cash  deposits  totalling  us5044000  2006  us12576000
of  this  amount  us4222000  2006  us12052000  was  placed  on  notice  deposits
c financial instrument sensitivities
financial  instruments  affected  by  market  risk  include  borrowings  deposits  derivative  financial  instruments  and  trade  receivables  and  trade  payables  the  analysis  required  by  ifrs  7  is  intended  to  illustrate  the  sensitivity  of  the  group’s  financial  instruments  as  at  year  end  to  changes  in  interest  rates
the  sensitivity  analysis  has  been  prepared  on  the  basis  that  the  components  of  net  debt  the  ratio  of  fixed  to  floating  interest  rates  of  the  debt  and  derivatives  portfolio  and  the  proportion  of  financial  instruments  in  foreign  currencies  are  all  constant  and  on  the  basis  of  the  hedge  designations  in  place  at  the  year  end
the  following  assumptions  were  made  in  calculating  the  sensitivity  analysis
all  income  statement  sensitivities  also  impact  equity
the  majority  of  debt  and  other  deposits  are  carried  at  amortised  cost  and  therefore  carrying  value  does  not  change  as  interest  rates  move
no  sensitivity  is  provided  for  accrued  interest  as  accruals  are  based  on  preagreed  interest  rates  and  therefore  are  not  susceptible  to  further  rate  movements
using  the  above  assumptions  a  reasonably  possible  change  of  50  basis  points  in  interest  rates  would  have  no  material  impact  on  the  group’s  and  company’s  profit  and  equity  for  the  year
•
•
• 56 monterrico metals plc  annual report 2007
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007
18 transition to ifrs
introduction 
the  group  has  adopted  international  financial  reporting  standards  as  adopted  for  use  in  the  european  union  ifrs  with  effect  from  1  january  2007  in  accordance  with  ifrs  1  the  group’s  transition  date  is  1  january  2006  being  the  start  date  for  which  the  group  will  present  full  comparatives  information  in  the  2007  annual  report  and  accounts  an  exercise  to  assess  the  full  impact  that  the  change  to  ifrs  has  had  on  the  group’s  reported  equity  reported  losses  and  accounting  policies  has  been  completed  this  is  explained  in  more  detail  below  basis of transition 
the  accounting  policies  set  out  in  these  financial  statements  have  been  applied  in  preparing  the  restatement  of  the  financial  statements  for  the  year  ended  31  december  2006  and  in  the  preparation  of  an  opening  ifrs  balance  sheet  at  1  january  2006  the  group’s  date  of  transition  in  preparing  its  opening  ifrs  balance  sheet  the  group  has  adjusted  amounts  reported  previously  in  financial  statements  prepared  in  accordance  with  its  previous  basis  of  accounting  uk  gaap  an  explanation  of  how  the  transition  from  uk  gaap  to  ifrs  has  affected  the  group’s  financial  position  financial  performance  and  cash  flows  is  set  out  in  the  following  tables  and  the  notes  that  accompany  the  tables  ifrs 1 exemptions 
the  group  has  elected  to  apply  the  following  exemptions  from  full  retrospective  application
a  business  combinations  the  group  has  chosen  not  to  restate  business  combinations  in  accordance  with  ifrs  3  prior  to  1  january  2006  in  accordance  with  ifrs  3
b  fair  value  or  revaluation  at  deemed  cost  the  group  has  not  elected  to  restate  items  of  property  plant  and  equipment  to  fair  value  at  transition  date  c  cumulative  translation  differences  the  group  has  elected  to  set  the  previously  accumulated  currency  translation  difference  to  zero  at  the  date  of  transition  57 monterrico metals plc  annual report 2007
18 transition to ifrs continued
effects of adopting ifrs on the group’s accounting policies
the  adoption  of  ias  36  ‘impairment  of  assets’  has  resulted  in  a  change  of  accounting  policy  on  the  translation  of  non  current  assets  for  the  group  previously  igv  recoverable  was  disclosed  under  debtors  under  ifrs  all  such  long  term  assets  are  required  to  be  discounted  and  amortised  until  the  time  of  recoverability
reconciliation of loss for the year
          effect  of            transition          uk  gaap  to  ifrs  ifrs
        us000  us000  us000
administrative  expenses        4154  –  4154
other  operating  incomeexpense        201  –  201
operating loss        3953  –  3953
finance  income        845  86  931
finance  expense        1160  220  1380
loss before tax        4268  134  4402
taxation        –  –  –
loss for the year    4268 134 4402
basic  and  diluted  loss  per  ordinary  share  us  cents        168  05  173
assets
    property   plant  and  equipment        297  –  297
    intangible   assets  –  deferred  exploration  costs        35176  –  35176
    other   receivables        3000  912  2088
total noncurrent assets        38473  912  37561
other  receivables  and  prepayments        497  –  497
cash  and  cash  equivalents        12576  –  12576
total current assets        13073  –  13073
total assets    51546 912 50634
equity
    issued   share  capital        4546  –  4546
    share   premium        50178  –  50178
    share   option  reserve        1092  –  1092
    foreign   currency  translation  reserve        2494  103  2391
    retained   losses        8327  809  9136
total equity        49983  912  49071
liabilities
    trade   and  other  payables        1563  –  1563
    loans         –  –  –
total current liabilities        1563  –  1563
total equity and liabilities    51546 912 50634 58 monterrico metals plc  annual report 2007
n otes to the consoli date d f in anci al s t atement continued
for the year ended 31 december 2007
18 transition to ifrs continued
explanation of material adjustments to the cash flow statement
interest  paid  has  been  reclassified  as  part  of  net  cash  outflow  from  operating  activities  where  under  uk  gaap  it  formed  part  of  the  return  on  investments  and  servicing  of  finance  interest  received  has  been  reclassified  under  net  cash  from  operating  activities  where  under  uk  gaap  it  formed  part  of  the  return  on  investments  and  servicing  of  finance  there  are  no  other  material  differences  between  the  cash  flow  statement  presented  under  ifrs  and  the  cash  flow  statement  presented  under  uk  gaap  company 
the  adoption  of  ifrs  has  not  materially  affected  the  previously  reported  financial  position  financial  performance  and  cash  flows  of  the  company 59 monterrico metals plc  annual report 2007
monterrico metals plc
notice  is  hereby  given  that  the  annual  general  meeting  “agm”  of  monterrico  metals  plc  “the  company”  will  be  held  at  the  offices  of  lawrence  graham  llp  4  more  london  riverside  london  se1  2au  on  the  2nd  day  of  june  2008  at  1000  am  to  consider  and  vote  on  the  resolutions  below  ordinary business
to  consider  and  if  thought  fit  to  pass  the  following  resolutions  which  will  be  proposed  as  to  resolutions  1  to  3  as  ordinary  resolutions
resolution 1
to  receive  and  adopt  the  directors’  report  and  financial  statements  of  the  company  for  the  period  to  31st  december  2007
resolution 2
1  to  elect  mr  fu  sheng  lan  as  a  director  and  the  chairman  of  the  company
2  to  reelect  mr  xiaodong  huang  as  a  director  of  the  company
3  to  reelect  ms  shan  shan  susan  li  as  a  director  of  the  company
4  to  reelect  mr  guobin  hu  as  a  director  of  the  company
5  to  reelect  mr  harry  cooper  as  a  director  of  the  company  and
6  to  reelect  mr  wenzhou  huang  as  a  director  of  the  company
resolution 3 
to  appoint  ernst    young  as  auditors  of  the  company  to  hold  office  until  the  next  annual  general  meeting  at  which  the  accounts  are  laid  before  the  company  and  to  authorise  the  directors  to  fix  the  auditors’  remuneration
special business
to  consider  and  if  thought  fit  to  pass  the  following  resolutions  which  will  be  proposed  as  to  resolutions  4  and  5  as  ordinary  resolutions  and  as  to  resolution  6  as  a  special  resolution
resolution 4
that  the  directors  be  and  are  hereby  generally  and  unconditionally  authorised  in  substitution  for  any  existing  such  powers  for  the  purposes  of  section  80  of  the  companies  act  1985  “the  act”  to  exercise  all  powers  of  the  company  to  allot  grant  options  over  deal  with  or  dispose  of  any  relevant  securities  as  defined  in  section  802  of  the  act  to  such  persons  at  such  times  and  generally  on  such  terms  and  conditions  as  the  directors  may  determine  up  to  an  aggregate  nominal  amount  of  £789182  or  if  greater  an  aggregate  nominal  amount  equal  to  30  of  the  aggregate  nominal  amount  of  the  issued  share  capital  of  the  company  as  at  the  date  of  this  resolution  provided  that  this  authority  shall  expire  unless  previously  renewed  revoked  or  varied  by  the  company  in  general  meeting  15  months  after  the  passing  of  this  resolution  or  if  earlier  at  the  conclusion  of  the  next  annual  general  meeting  following  the  passing  of  this  resolution  save  that  before  such  expiry  the  company  may  make  any  offer  or  agreement  which  would  or  might  require  relevant  securities  to  be  allotted  after  such  expiry  and  notwithstanding  such  expiry  the  directors  may  allot  relevant  securities  in  pursuance  of  any  such  offer  or  agreement
resolution 5
that  subject  to  the  passing  of  resolution  4  the  directors  be  and  are  hereby  empowered  pursuant  to  section  95  of  the  act  to  allot  equity  securities  as  defined  in  section  942  of  the  act  for  cash  including  a  sale  of  treasury  shares  pursuant  to  the  general  authority  conferred  on  them  by  resolution  4  as  if  section  891  of  the  act  did  not  apply  to  any  such  allotment  provided  that  this  power  shall  be  limited  to  a  the  allotment  of  equity  securities  in  connection  with  an  offer  of  securities  open  for  acceptance  for  a  period  fixed  by  the  directors  to  holders  of  ordinary  shares  on  the  register  on  any  fixed  record  date  in  proportion  to  their  holdings  of  ordinary  shares  subject  to  such  exclusions  or  other  arrangements  as  the  directors  may  deem  necessary  or  expedient  in  relation  to  fractional  entitlements  or  legal  or  practical  problems  arising  under  the  laws  of  or  the  requirements  of  any  regulatory  body  or  any  stock  exchange  in  any  territory  and  b  the  allotment  otherwise  than  pursuant  to  paragraph  a  above  of  securities  up  to  an  aggregate  nominal  amount  of  £263061  or  if  greater  an  amount  equal  to  10  of  the  aggregate  nominal  issued  ordinary  share  capital  of  the  company  as  at  the  date  of  this  resolution  and  shall  expire  unless  previously  renewed  revoked  or  varied  by  the  company  in  general  meeting  at  such  time  as  the  general  authority  conferred  on  the  directors  by  resolution  4  expires  save  that  before  the  expiry  of  this  power  the  company  may  make  any  offer  or  agreement  which  would  or  might  require  equity  securities  to  be  allotted  after  such  expiry  and  notwithstanding  such  expiry  the  directors  may  allot  equity  securities  in  pursuance  of  any  such  offer  or  agreement  n otice of annu al g ener al m eeting 60 monterrico metals plc  annual report 2007
resolution 6
that  pursuant  to  article  6  of  the  company’s  articles  of  association  and  section  166  of  the  act  the  company  be  and  is  hereby  unconditionally  and  generally  authorised  to  make  market  purchases  of  ordinary  shares  of  10p  each  in  the  capital  of  the  company  provided  that
a  the  maximum  number  of  shares  which  may  be  purchased  is  2630606  which  represents  10  of  the  issued  ordinary  share  capital  of  the  company  as  at  the  date  of  this  resolution
b  the  minimum  price  which  may  be  so  paid  is  10p  per  share  exclusive  of  expenses
c  the  maximum  price  which  may  be  so  paid  for  each  share  shall  not  exceed  an  amount  exclusive  of  expenses  equal  to  5  over  the  average  of  the  middle  market  quotations  of  the  ordinary  shares  according  to  the  daily  official  list  of  the  london  stock  exchange  for  the  five  business  days  immediately  preceding  the  date  on  which  the  company  agrees  to  buy  the  shares  concerned
d  this  authority  shall  continue  in  force  until  the  conclusion  of  the  next  agm  of  the  company  or  until  31st  december  2009  whichever  is  the  earlier  and  e  the  company  may  agree  before  the  authority  terminates  under  d  above  to  purchase  ordinary  shares  where  the  purchase  will  or  may  be  executed  after  authority  terminates  either  wholly  or  in  part  the  company  may  complete  such  a  purchase  even  though  the  authority  has  terminated
the  board  unanimously  recommends  shareholders  to  vote  in  favour  of  resolutions  1  –  6  above
by  order  of  the  board  shan shan susan li
company secretary 
2  may  2008
registered  office
10  foster  lane
london
ec2v  6hr
notes
1  pursuant  to  regulation  41  of  the  uncertificated  securities  regulations  2001  the  company  specifies  that  only  those  members  registered  on  the  company’s  register  of  members  at  500  pm  on  30th  may  2008  or  if  this  meeting  is  adjourned  at  500  pm  on  the  day  two  days  prior  to  the  adjourned  meeting  shall  be  entitled  to  attend  and  vote  at  the  meeting  2  if  you  are  a  member  of  the  company  at  the  time  set  out  in  note  1  above  you  are  entitled  to  appoint  a  proxy  to  exercise  all  or  any  of  your  rights  to  attend  speak  and  vote  at  the  meeting  and  you  should  have  received  a  proxy  form  with  this  notice  of  meeting  you  can  only  appoint  a  proxy  using  the  procedures  set  out  in  these  notes  and  the  notes  to  the  proxy  form  3  a  proxy  does  not  need  to  be  a  member  of  the  company  but  must  attend  the  meeting  to  represent  you  details  of  how  to  appoint  the  chairman  of  the  meeting  or  another  person  as  your  proxy  using  the  proxy  form  are  set  out  in  the  notes  to  the  proxy  form  4  you  may  appoint  more  than  one  proxy  provided  each  proxy  is  appointed  to  exercise  rights  attached  to  different  shares  you  may  not  appoint  more  than  one  proxy  to  exercise  rights  attached  to  any  one  share  5  a  vote  withheld  is  not  a  vote  in  law  which  means  that  the  vote  will  not  be  counted  in  the  calculation  of  votes  for  or  against  the  resolution  6  grant  thornton  uk  llp  have  not  sought  reappointment  as  auditors  of  the  company
n otice of annu al g ener al m eeting continued monterrico metals plc annual report 2007
monterrico metals plc “monterrico” or the “company” is  
a londonbased resource development company which 
operates mainly in peru the company is majority owned by 
the zijin consortium composed of three chinese companies 
led by the zijin mining group monterrico is incorporated in the 
uk and its shares are quoted on aim ticker code – mnal
monterrico’s principal asset is the rio blanco copper
molybdenum deposit in northern peru this is one of the 
largest undeveloped copper resources in the world and is 
wholly owned by the company monterrico plans to develop 
rio blanco as a conventional open pit mine producing copper 
and molybdenum concentrates at planned production rates 
rio blanco will be amongst the 20 largest copper mines in  
the world 
monterrico is dedicated to creating long term wealth for 
stakeholders through responsible development of the rio 
blanco project in its work the company is also committed to 
its responsibilities to the local communities and to sustainable 
development of the area of influence of this project for the 
benefit of the local inhabitants and the economy of peru as  
a whole
contents
1 highlights 20078
2 key facts
3 chairman’s statement
4 report from the ceo
7 o perations report
8 t he rio blanco project
 8 background
 9 detailed feasibility study dfs
 11 review of the dfs
12 o ther projects
13 corporate social responsibility and 
sustainable development
 14 protecting the environment
 16  o ur social programme 
20 board of directors
21 profile of the zijin consortium
23 finance director’s review of  
financial o perations
24 directors’ report
28 report of the independent auditor
30 consolidated income statement
31 consolidated balance sheet
32 company balance sheet
33 statement of changes in shareholders’ 
equity
34 consolidated cash flow statement
35 company cash flow statement
36 notes to the financial statements
59 notice of the annual general meeting
bic corporate information
co rpo rate info rmatio n
directors
richard ralph non executive chairman
xiaodong huang chief executive o fficer
shan shan susan l i finance director 
guobin hu t echnical director
raymond angus non executive director
wenzhou huang non executive director
harry cooper non executive director
company secretary 
shan shan susan l i
corporate head office
monterrico metals plc 
suite 1608 west t ower
shun t ak centre
168  200 connaught road central
sheung wan
hong kong
t el  852 2803 2195
fax  852 2803 0878 
head office in peru
rio blanco copper sa
av san borja sur no 143
san borja
l ima 41
peru
t el 511 226 3322 
fax 511 226 3320
nominated adviser and broker
ambrian partners limited
o ld change house 
128 queen victoria street
ec4v 4bj
reporting accountants and auditors
grant thornton uk llp
registered auditors
grant t hornton house 
melton street
euston square
l ondon n w1 2ep
solicitors to the company
lawrence graham llp
4 more l ondon riverside 
l ondon se1 2au
registrars
capita irg plc
bourne house
34 beckenham road 
beckenham
kent br3 4tu
share capital as at 8 april 2008
issued and outstanding 26306068
fully diluted 26771068
registered office
monterrico metals plc
10 foster l ane 
l ondon ec2v 6hr
t el 44 20 7776 2900
fax 44 20 7776 2909
email infomonterricocom 
website wwwmonterricocom
t he picture on the back cover is an example of a cartoon leaflet 
which we use for briefing the local people about the benefits of 
the rio blanco project
bic  back inside cover monterrico metals plc 
annu al repo rt 2007
building fir m foundations 
for growth monterrico metals plc annu al repo rt 2007
monterrico metals plc 
corporate head o ffice 
suite 1608 west t ower
shun t ak centre
168  200 connaught road central
sheung wan
hong kong
t el  852 2803 2195
fax  852 2803 0878 
email infomonterricocom 
wwwmonterricocom
monterrico metals plc
copper in peru
“with the copper you benefit
everyone benefits  
peru benefits”
“rio blanco project health for you health for 
ayabaca and huancabamba” 


Summary:
 04 monterrico metals plc  annual report 2007
since  the  zijin  consortium  formally  took  over  the  management  of  monterrico  on    1  june  2007  monterrico  has  been  reorganised  and  restructured  in  peru  we  have  established  a  new  board  of  directors  for  our  wholly  owned  subsidiary  rio  blanco  copper  sa  formerly  minera  majaz  sa  which  operates  the  rio  blanco  project  we  have  retained  most  key  members  of  staff  within  this  subsidiary  and  have  developed  a  new  vision  and  operational  philosophy  which  has  now  been  adopted  throughout  the  company  in  so  doing  i  believe  monterrico  is  well  on  the  way  to  making  a  harmonious  transition  from  a  junior  exploration  company  into  a  large  mining  corporation  through  the  successful  development  of  rio  blanco  in  keeping  with  this  transition  we  are  developing  the  company’s  corporate  governance  and  corporate  culture  based  on  the  principles  of  corporate  responsibility  and  transparency
i  would  like  to  take  this  opportunity  to  thank  all  directors  and  staff  both  of  monterrico  and  rio  blanco  copper  sa    for  their  contribution  to  the  company
review of the rio blanco detailed 
feasibility study dfs
the  focus  of  our  technical  work  since  the  acquisition  has  been  to  review  the  detailed  feasibility  study  dfs  for  the  rio  blanco  project  as  reported  previously  the  dfs  considers  an  operation  treating  25mt  of  ore  per  year  over  a  20  year  period  this  study  was  submitted  in  late  2006  and  results  were  in  part  released  to  the  market  in  february  2007  over  the  past  months  this  study  has  been  reviewed  both  internally  by  the  new  management  and  in  conjunction  with  the  principal  consultants  involved  in  its  preparation  from  this  review  we  have  concluded  that  aspects  of  the  dfs  have  a  number  of  deficiencies  and  that  the  current  design  does  not  represent  the  optimum  plan  for  the  long  term  development  of  this  resource  one  of  the  main  reasons  is  that  the  dfs  considered  the  development  of  only  40  of  the  defined  resource  of  1257  mt  and  our  concern  is  that  the  dfs  plan  may  constrain  development  of  the  full  resource  and  the  upside  potential  of  rio  blanco  in  the  future  secondly  the  rising  cost  of  capital  items  over  the  past  year  even  without  the  inclusion  of  the  preferred  pipeline  option  makes  it  prudent  to  consider  a  wider  range  of  scales  of  operation  in  order  to  optimise  the  economic  return  of  the  project  thirdly  we  feel  that  certain  elements  of  the  project  notably  the  design  and  location  of  the  tailings  storage  facility  tsf  require  further  evaluation  to  ensure  the  design  is  suitable  for  long  term  use  and  that  all  aspects  meet  international  environmental  standards  as  a  result  we  have  decided  to  commission  a  tradeoff  study  to  evaluate  the  alternative  technical  options  for  the  development  of  rio  blanco  the  objective  of  this  study  is  to  arrive  at  a  design    which  will  maximise  value  from  the  total  resource  1257mt  optimise  the  economics  of  the  project  whilst    improving  environmental  and  social  aspects  the  study  will  seek  to  build  on  the  work  to  date  as  much  as  possible  additional  drilling  at  rio  blanco  will  also  be  conducted  to  increase  the  global  resource  and  define  the  upside  potential  for  planning  purposes  we  firmly  believe  this  step  is  necessary  in  order  to  be  able  to  realise  the  full  potential  of  this  important  deposit  it	 is	 now	 10	 months	 since	 i	 was	 appointed	 as	 ceo	 and	 i	 am	 delighted	 to	 report	 on	 monterrico’s	 operations	 since	 the	 last	 annual	 report	 r eport from t he ch ief executive o fficer 05 monterrico metals plc  annual report 2007
impact on project timeline 
the  decision  to  embark  on  a  tradeoff  study  with  a  very  probable  change  in  project  design  will  have  a  significant  impact  on  the  project  timetable  it  is  anticipated  that  the  tradeoff  study  will  be  completed  in  the  second  half  of  2008  when  a  revised  timetable  for  the  project  will  be  announced  however  in  the  meantime  this  is  broadly  the  time  line  we  expect  following  conclusion  of  the  tradeoff  study  we  anticipate  it  will  take  approximately    12  months  to  mid  to  late  2009  to  take    the  new  engineering  designs  to  feasibility  level  with  cost  estimates  of  10    whilst  this  work  is  being  undertaken  the  environmental  and  social  baseline  work  will  be  updated  as  necessary  to  complete  the  esia  in  accordance  with  the  new  project  design  assuming  that  we  have  all  necessary  community  permits  for  land  access  this  would  allow  us  to  submit  the  esia  in  mid  to  late  2009  with  approvals  following  after  six  months  and  then  to  commence  construction
the  social  situation  remains  the  key  factor  in  controlling  this  timetable  and  the  company  is  working  hard  to  consolidate  relationships  with  local  communities  and  is  working  closely  with  central  regional  and  local  governments  social issues and our social 
programme 
in  peru  like  the  rest  of  south  america  community  issues  are  common  in  the  mining  industry  as  they  are  in  much  of  the  world  virtually  all  mining  companies  face  some  community  problems  rio  blanco  is  no  exception
in  2007  following  the  takeover  by  the  new  management  we  have  strengthened  and  reorganised  the  company’s  social  programme  we  have  extended  the  network  of  community  relations  offices  in  the  area  of  influence  of  the  rio  blanco  project  enlarged  our  teams  of  community  relations  personnel  and  initiated  a  major  new  communications  programme  in  keeping  new  management’s  commitment  to  transparency  communications
the  communications  programme  is  designed  to  promote  understanding  of  the  rio  blanco  project  and  dispel  fears  and  misrepresentation  promulgated  by  the  antimining  movement  under  this  programme  we  have  opened  two  new  information  centres  devoted  to  the  rio  blanco  project  and  mining  in  general  these  are  the  first  of  their  kind  in  peru  in  the  first  two  months  of  operation  the  first  centre  in  the  regional  capital  of  piura  received  over  15000  registered  visitors  a  second  centre  has  been  opened  recently  and  plans  are  underway  to  open  more  centres  in  key  towns  throughout  northern  peru  we  have  also  expanded  the  circulation  of  our  information  newsletters  and  are  making  extensive  use  of  radio  to  reach  the  more  remote  areas  our  spanish  language  website  has  been  redesigned  to  provide  more  information  about  the  project  and  our  social  programme  in  particular  trust funds for the communities
to  address  the  very  common  concern  that  local  communities  tend  not  to  benefit  sufficiently  from  mining  we  announced  in  august  2007  our  offer  to  establish  voluntary  trust  funds  totalling  us80  million  for  the  two  communities  closest  to  the  rio  blanco  site  these  funds  are  to  be  used  by  them  for  community  development  projects  of  their  choice  the  funds  will  be  accumulated  over  the  mine  life  and  will  be  in  addition  to  the  share  of  revenues  that  these  communities  will  receive  from  taxes  and  royalties  remitted  to  them  by  the  state  once  rio  blanco  enters  production  strengthening relationships with 
communities
whilst  the  tradeoff  study  and  additional  engineering  work  are  underway  we  will  use  our  time  productively  on  the  social  programme  our  aims  are  to  strengthen  relationships  with  the  local  people  communicate  details  of  the  updates  to    the  project  plans  and  endorse  or  renew  land  access  agreements  with  the  relevant  neighbourhoods  we  will  also  continue    to  prepare  the  local  people  for  the  development  of  the  project  and  the  opportunities  that  it  will  offer  them  and  integrate  the  project  into  relevant  regional  development  plans
xiaodong  huang  ceo  discussing  rio  blanco  project  infrastructure  routes  with  colleagues  in  peru
a  vein  of  molybdenite  molybdenum  sulphide  seen  in  the  chelo  adit  tunnel  at  rio  blanco  richard  ralph  chairman  in  the  chelo  adit  one  of  two  adits  at    rio  blanco 06 monterrico metals plc  annual report 2007
r eport from t he ch ief executive o fficer
visitors  at  the  company’s  new  information  centre  in  the  city  of  piura  the  centre  has  a  3d  model  of  the  department  of  piura  shown  in  the  picture  on  the  left  showing  planned  infrastructure  for  the  rio  blanco  project  the  centre  also  has  various  interactive  displays  rio  blanco  will  be  the  first  major  metal  mine  in  this  department  of  peru  and  will  provide  it  with  an  important  source  of  revenue  strategy going forward
going  into  2008  i  am  confident  that  the  company  will  achieve  greater  social  support  for  the  development  of  rio  blanco  our  objectives  and  strategies  for  the  next  12  months  are
philosophy  continue  to  develop  monterrico  into  an  international  mining  company  seeking  to  achieve  harmonious  codevelopment  with  our  stakeholders  all  the  while  maintaining  our  total  commitment  to  safeguarding  society  and  the  environment  technical revise  the  project  design  to  make  best  use  of  the  potential  of  the  rio  blanco  resource  maximise  economic  returns  and  improve  environmental  and  social  aspects  of  the  project  the  technical  team  will  concentrate  on  finalising  the  new  tradeoff  study  and  depending  on  the  results  will  extend  the  baseline  studies  for  the  esia  and  begin  taking  the  new  project  design  through  to  detailed  feasibility  level  social work  to  obtain  social  licence  we  will  focus  particularly  on  the  local  farming  communities  with  the  aim  of  obtaining  their  understanding  and  acceptance  for  the  development  of  rio  blanco
company growth  mineral  resources  are  the  future  of  any  mining  company  and  monterrico  will  continue  to  pursue  new  project  development  opportunities  and  exploration  in  latin  america
•
•
•
•
conclusions
rio  blanco  is  a  magnificent  project  the  delay  in  its  construction  is  to  maximise  the  value  of  this  important  resource  and  to  achieve  the  necessary  social  support  for  harmonious  long  term  operations  i  am  confident  that  these  changes  will  strengthen  the  foundations  of  this  very  significant  project  and  represent  a  better  opportunity  to  create  value  for  shareholders  local  communities  and  peru  as  a  whole
huang xiaodong 
chief executive officer
8  april  2008