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Financial Statement

2011

Forest recovered after the mining intervention, Bajo Cauca Antioque単o


Financial statement

2011


1

Management Report


Management report SHAREHOLDERS’ MEETING MARCH 21 OF 2012

Messrs. Shareholders: We are pleased to present to your consideration the results and activities of fiscal year 2011. We wish to express our deep sorrow for the decease last year of Mr. Carlos Pacheco Devia, who for many years chaired the Company’s Board of Directors with his characteristic sense of honesty and courage that guided us through the most difficult days. The management thanks him and his family for the teachings and support offered for so many years.

I - EXTERNAL ISSUES The price of gold showed a positive behavior in 2011; the metal price saw 10.05% advance since the end of year 2010 (1,420.78 USD/troy oz.) and closing of 2011 (1,563.70 USD/troy oz.). The minimum along the year was 1,308.25 USD/troy oz. and the maximum 1,921.25 USD/troy oz. According to experts, this volatility arouse from sovereign debt problems in the Eurozone countries, and the low debt rating of the United States, France, Italy, and other countries.

4

From the supply standpoint, world mining production along 2011 increased 4% with respect to that of 2010, reaching a new historic record of 2,809.50 tons. In turn, demand from jewelry making decreased 2.7%, due to the metal’s high prices, and there were no meaningful changes in the use of gold in technology; as to investment, there was around 5% increase; even though demand of ETFs replicating price behavior fell by 58% (154 tons in 2011), that of physical gold (coins and ingots) saw 23.91% increase (1,486.70 tons in 2011). New supply increases are expected in 2012, due to commissioning of new mining projects, mainly in China and the United States; however, pressure on demand, mainly as an investment asset, is expected to keep on the up side. The current macroeconomic milieu makes 2012 another prospective positive year for gold prices; the Eurozone and the United States will both keep lax monetary policies in order to balance their economies, which will keep gold in high demand, as an investment asset.

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


Ounces

MANAGEMENT REPORT

Output (ounces) and volume m3. Alluvial operation (Thousands)

Year

II - OUTPUT In 2011, the Company produced 3,604 kilos of fine gold, equivalent to 115,868 ounces, including 20,655 ounces from the subterranean operation, 18% up on 2010. Additionally, the company produced 2,419 kilograms of silver. Total volume of alluvial deposits removed was 24,637,587 cubic meters, with 64,607 tons for operation at La Ye Mine.

III - HIGHLIGHTS 1. MINING SECTOR Since the mining-energy sector was listed as one of the country’s economic development powerhouses, it has become a permanent media and State entity issue. Despite the talk of a mining boom, the reality so far is no more than the great interest on the part of foreign companies to consolidate projects in Colombia; due to that, significant investments have been made in various regions of the country, without any new mining project anywhere close to operation start-up phase. Some of the most outstanding projects in terms of potential are

MANAGEMENT REPORT

awaiting environmental and social permits, and are still in exploration phase. This notoriety has spurred interest from diverse sectors who aim to impose higher levies on mining, especially as regards to royalties, which could render many of the current projects inviable. A recently finished study of the Government Take of the mining sector on international standards shows that, in various cases, the sector’s levies in Colombia are on par with, and even higher than, those in Latin American countries vying with Colombia for foreign investment in the area. Another aspect that might affect the future of mining in Colombia is environmental policy instability: it takes a mining project between 6 and 8 years to enter operation if the studies are conducted on basis different from those in force at start-up, which has the potential to render projects inviable. Inasmuch as the country fails to commission a large-scale mining project, we cannot speak of a mining “boom”, since everything is just expectations.

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2. PUBLIC ORDER We are worried to see how the public order situation has been deteriorating in the Company’s operations region. Delinquent actions by outlawed groups had important negative impact on our work time, production results, and repair costs of damage to our power system. This latest item saw expenditure exceeding 3 thousand million pesos. In the same way, and for the same reason, exploration plans have become more difficult and more expensive to implement, due to their location in areas of difficult handling, which calls for all types of precautions to be taken so as to advance in the programs with the least possible risk for our associates.

of accidents in the production units. With this additional reserve, we would reach the sum of $20,700 million.

Support from the authorities has been relentless, and we hope that future improvement of this situation will allow us to operate more efficiently; however, along the current year, incursions against our electric infrastructure have been frequent.

B. Investment of USD2,018,273 was made in the company QUIA RESOURCES, listed in the Toronto Stock Exchange. This company owns assets in the Guamocó region, (Southern Bolívar Province), where an exploration campaign has yielded promising results. MINEROS S.A. has 10.9% stake in it.

5. GROWTH PLAN In development of our future plans, we have embarked in intense search for new projects. The work carried out in 2011 can be summarized thus: A. A total $36,000 million investment was made in exploration, to reach inferred reserves of 1,347,000 tons of mineral and 143,000 ounces of indicated and measured gold reserves.

3. LABOR RELATIONS In May, a new Collective Bargaining Agreement was signed with Sintramienergética, El Bagre chapter, which covers the workers operating for MINEROS S.A.; it will be in force until April 30, 2013. In the second half of the current year, a new negotiation needs to be conducted for Operadora MineraS.A.S., the company in charge of exploitation and processing at the La Ye Mine, given that the current agreement will be expiring October 31, 2012.

6. ASSOCIATED COMPANIES

4. INSURANCE Last year, it was possible to hire coverage for the risks of fire and terrorism for the Company’s dredges; however, reinsurers are demanding a series of conditions with the potential to make insurance continuation inviable, should an agreement fail to be reached.

A. EXPLORADORA MINERA S.A.S. This is the company through which exploration and search of new projects are carried out. Along last year, it conducted regional and local exploration activities in seven projects located in the provinces of Antioquia, Caldas, Tolima and Bolívar. Exploration work was done in various stages: at the regional level, to identify the best zones with geologicalmining potential, reaching definition of 16,000 meters of vein-type structures. At the local level 35,290 meters of drilling and 1,781 meters of exploration tunnels were made, and 7,354 samples were taken for laboratory analysis.

Again, we propose a reserve of $2,400 million as part of the income distribution plans, earmarked for coverage

The company posted income for $145 million, and finished the year with 419 workers in its payroll.

In the field of human resources management, we keep intent on the permanent improvement of our processes, in order to reach daily bettering of our absenteeism levels, accident rate and work climate.

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C. A confidentiality agreement was signed with the American company GOLDSANDS in order to advance a Due Diligence that will allow us to establish the viability of purchasing stake of this company in Peru. An exploration campaign will be conducted to estimate resources.

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


On the other hand, we will make a big effort in 2012 in the area of exploration in order to augment the mine’s reserves, given that the formation has difficult geological features, and that securing reserves in neighboring areas is necessary.

C. PROYECTO SABALETAS S.A.S. Exploitation of the slag of the old El Zancudo mine in Titiribí (Antioquia province) ended in December. This project was profitable for the company, and it is currently in operation closing phase. Its results along the year were: - -

100.4 kilos of gold output $2,782 million net income for the period

D. COMPAÑÍA MINERA DE ATACO S.A.S. Compañía Minera de AtacoS.A.S.is a company created in Tolima province, whose main purpose is gold mining exploration and exploitation through mining concession contracts 4971 and 4974, located in the Municipalities of Ataco and Chaparral in Tolima province. Landowners of the area where operation will be conducted will have 23% shareholding. Along the year, environmental impact studies were conducted in order to obtain environmental licenses; their disclosure to the community and local authorities is still pending, as is definition from the environmental authority.

7. OTHER

MANAGEMENT REPORT

B. OPERADORA MINERA S.A.S LA YE MINE Mina La Ye Mine operation was under the initially estimated levels, due to technical difficulties in the Processing Plant; as we reported in the latest Shareholders’ Meeting. We have devoted a great amount of resources to bring its capacity to 410 daily tons, a figure we expect to reach by mid 2012.

2011 output was 61,428 tons of fruit and net income stood at $7,215 million.

B. CROPS As part of the compensation program being conducted by the Company in the municipalities of Lower Cauca River, we started plantation of 300 additional hectares of rubber in the vicinity of the present plantation. Harvest of the oldest trees is planned to start this year, for which such purpose we will set up a small processing plant. This project will be of special importance for the region, because given the significant area already planted, it could become a collection and processing center for the region’s other growers.

8. SOCIAL RESPONSIBILITY In keeping our commitment to the company’s social responsibility in its area of influence, and seeking the inhabitants’ well-being and the enhancement of the towns’ self-management abilities, we have developed a wide program spanning several fronts. The efforts of our team of experts in these areas are already bearing fruit, especially as regards to housing, health, education, and community management. The Sustainability Report attached shows our endeavors for 2011.

9. FUNDACIÓN MINEROS S.A. Fundación Mineros S.A., created in the year 2010, has as one of its aims the establishing of interinstitutional covenants that will allow incorporation of new resources to develop actions leading to improve the life standards of the communities located in the Company’s mining operation’s zone of influence; for such, in the year 2011, the Foundation allotted resources amounting to $1,200 million for social investment, and through voluntary contribution from the company’s associates and staffers, as well as alliances with other entities, it obtained resources of $2,300 million destined to health, education, basic sanitation, social infrastructure, recreation and entrepreneurship projects.

A. UNIPALMA DE LOS LLANOS S.A. MINEROS S.A. owns 17.4% stake at this corporation. In

MANAGEMENT REPORT

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10. ACKNOWLEDGMENTS In 2011, the Company received the following recognitions for its outstanding work in the social and environmental fields.:

Revenues

- AWARD TO RESPONSIBLE MINING - Granted by the Government of Antioquia Province and Corporaci贸n Calidad.

- AWARD TO ENVIRONMENTAL RESPONSIBILITY 2011 - Silver Seal and Special Mention - Granted by Fundaci贸n Siembra Colombia and the British Embassy. - SEAL FOR EQUITY IN ANTIOQUIA - Granted by Alianza por la Equidad and the Government of Antioquia Province. - POSTULATION: Orbe Award by the French Embassy.

Total Cost and Cash Cost per ounce

Total Cost

8

Cash Cost total

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


Sales, at $339,939 million, were 48.7% higher than in 2010. Total output went to export reaching a net sum of USD 183.9 million. Average price at USD 1,587.30 per ounce equals 30% increase over 2010. In pesos per gram, 26.01% increase was due to the Colombian peso revaluation. - Operating income totaled $172,661 million: 94% up on 2010. - Net income was $115,802 million, 26% up on the period under comparison. - Financial Revenues: At the end of the fiscal year, the company showed an investment portfolio worth $144,235 million, of which 7% corresponds to shares quoted in the Stock Exchange, 4% to investments abroad, and the balance, to fixed-income securities in Colombia. -

Revenues from this activity included $93 million from sale of investments, $572 million from dividends, and $6,905 million from yield of fixed-income securities.

-

As of December 31st 2011, appreciation of shares listed on the Stock Exchange reached $222 million.

-

EBITDA: EBITDA amounted to $210,845 million equivalent to 62.02% of sales.

-

EVA: EVA accumulated for the year stands at $99,840 million, 74.33%.

- Equity: Shareholders’ equity increased 14.72% from $380,534 million to $436,568 million; corresponding book value per share including appreciation is $1,668.28. -

-

-

During the year, the stock of MINEROS S.A. saw 36.75% depreciation vis-à-vis 18.27% drop in the IGBC. Indebtedness: Along the year, the Corporation kept external indebtedness levels at a minimum, using bank credit for routine treasury operations only. Operating margin stands at 51% whereas in 2010 it was 39%.

MANAGEMENT REPORT

MANAGEMENT REPORT

IV - FINANCIAL ANALYSIS

- Net income margin was 34% compared to 41% in 2010. -

Such variation is due essentially to the provision for income tax given that the tax rate during 2011 was 32.93% vs. 24.60% in 2010.

V - VARIOS A. In 2011, commercial operations for $2,172 million related to insurance premiums for the different policies covering the Company were conducted with Compañía de Seguros Colpatria, with which members of the Board of Directors have economic links. Insurance policies were hired with Colpatria under optimal market conditions, upon quote from other insurance companies. B. No other operation with companies in which Board of Directors’ members or the company’s managers have direct or indirect economic interest was carried out along the year 2011. C. In order to comply with Law 603/2000 that amends Article 47 of Law 222 of 1995, it is hereby informed that decision regarding annulment of requirements by DIAN to the corporation for payment of tax on gold corresponding to the March - December of 1998 period, is still pending, as has been reported in past years. D. Production planning for 2012 indicates 3,430 kilograms of fine gold output. Based on gold price outlook, and provided the Peso holds its exchange rate in a stable manner, the Company’s economic results will comply with our shareholders’ expectations. E. The managers and the Board of Directors certify full compliance by the company with all regulation regarding intellectual property and copyrights. F. The Corporation’s legal representative certifies that in 2011, the Management verified the correct operation of the systems for disclosure and control of financial information established in

9


the company, in compliance with paragraph of Article 47 of Law 964 of 2005. G. According to verification conducted by our legal counsels, the Company faces no legal processes that may jeopardize its economic stability. This report contains, as a part of itself, the provisions of article 446 of the Code of Commerce. The books and reports mandated by Law have been made available to the shareholders since convening date of this meeting. The board of directors and the management want to thank the effort and dedication of our employees and workers to achieve the results we are reporting today. Eduardo Pacheco Cortés José Fernando Llano Escandón Santiago Vásquez Haupt Santiago Perdomo Maldonado Miguel Urrutia Montoya Alberto Mejía Hernández Álvaro Escobar Restrepo

Beatriz E. Uribe R. President February 22, 2012

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F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


2

Statutory Auditor’s Report


Statutory auditors’ report To the shareholders of MINEROS S.A.: I have audited the balance sheets of MINEROS S.A. at December 31, 2011 and 2010 and the corresponding statements of income, of changes in shareholders’ equity, of changes in financial position, and of cash flows for the years then ended, as well as the summary of the main accounting policies and other explanatory notes. Management is responsible for the preparation and correct presentation of the financial statements in conformity with the accounting principles generally accepted in Colombia. Such responsibility includes: designing, implementing and maintaining an internal control system adequate for the preparation and presentation of the financial statements, free from significant errors due to fraud or error, selecting and applying appropriate accounting policies, and establishing the accounting estimates that are reasonable under the circumstances. My responsibility is to audit said financial statements and express an opinion thereon based on my audits. I obtained the information necessary to comply with my duties and carry out

12

my work in accordance with auditing standards generally accepted in Colombia. Those standards require that I plan and perform the audit to satisfy myself that the financial statements are free from significant errors. An audit of financial statements includes examining, on a test basis, the evidence supporting the amounts and disclosures included in the financial statements. The audit procedures selected depend on the auditor’s professional judgment, including an evaluation of the risk of significant errors in the financial statements. In evaluating the risk, the statutory auditor considers the Company’s internal control relevant for the preparation and reasonable presentation of the financial statements, in order to design audit procedures appropriate to the circumstances. An audit also includes evaluating the accounting principles used and the significant accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. I consider that my audits provide a reasonable basis for the opinion which I express. In my opinion, the aforementioned financial

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


STATUTORY AUDITOR´S REPORT

statements, taken from the accounting books, present fairly, in every significant aspect, the financial position of MINEROS S.A. as of December 31, 2011 and 2010, the results of its operations, the changes in its equity, the changes in its financial position, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in Colombia, applied on uniform basis. Also, based on the scope of my audit, I report that the Company’s books were kept in conformity with legal requirements and accounting techniques; the transactions recorded in the accounting books and the administrators’ acts complied with the bylaws and the decisions of the Shareholders’ Meeting and the Board of Directors; the correspondence, the accounting vouchers and the minutes books and share register were properly kept and safeguarded; the management report agrees with the basic financial statements; and the Company is not in

S TAT U T O R Y A U D I T O R ´ S R E P O R T

default with the contributions to the Integral Social Security System. My evaluation of the internal control carried out in order to establish the scope of my audit tests did not reveal that the Company had not followed adequate measures with respect to internal control and the preservation and custody of its assets and those of third parties in its possession.

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. February 23, 2012

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14

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


3

Financial Statements


Shareholders’Meeting March 21 of 2012

Certification of Financial Statements

16

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


The undersigned, Legal Representative and Chief Accounting Officer of the company, under whose responsibility the financial statements were prepared, in compliance with the bylaws, hereby declare that they have previously verified the assertions therein contained, which have been faithfully taken from the books.

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Mat. 32758-T

FINANCIAL STATEMENTS

BEATRIZ E.URIBE RESTREPO President

 In my capacity as Legal Representative of MINEROS S.A., and in compliance with Article 46 of Law 964 of 2005, I hereby certify that the general-purpose financial statements of this corporation as on December 31, 2011, and their corresponding notes, do not contain defects, inaccuracies or errors that prevent ascertaining the true financial position and operations of the company.

BEATRIZ E.URIBE RESTREPO President

F I N A N C I A L S TAT E M E N T S

17


MINEROS S.A.

Balance Sheet at December 31, 2011 and 2010 (In thousands of Colombian pesos) ASSETS

2011

2010

Note

CURRENT ASSETS Cash

$

Marketable securities

4

Subtotal - cash and cash equivalents

$

885.109

144.235.010

102.762.113

144.888.370

103.647.222

Accounts receivable

3

43.083.811

18.607.678

Prepaid expenses

5

6.254.154

2.393.209

194.226.335

124.648.109

244.355.157 -125.905.956

223.955.649 -104.749.643

118.449.201

119.206.006

5.139.064 33.259.063 18.179.461 87.156.204

5.584.030 25.220.996 17.094.870 67.789.647

143.733.792

115.689.543

58.209.152

61.015.451

TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT

6

Cost of assets Accumulated depreciation

Long-term accounts receivable Inventories Long-term investments Other assets

RE-APPRAISALS

7 8 9 10

12

TOTAL ASSETS

$

MEMORANDUM ACCOUNTS

BEATRIZ E.URIBE RESTREPO President0

18

653.360

21

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

514.618.480

253.210.802

$

420.559.109

272.984.484

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A.

Balance Sheet at December 31, 2011 and 2010 (In thousands of Colombian pesos) LIABILITIES AND EQUITY

2011

2010

Note

CURRENT LIABILITIES Financial liabilities Suppliers Accounts payable Taxes, liens and duties Labor liabilities Dividends payable

13

$

145.654 3.762.222 12.317.753 40.814.283 3.513.009 7.647.494

14 15 16 17 18

TOTAL CURRENT LIABILITIES

87.173 3.540.602 9.565.023 16.098.923 3.276.791 6.768.958

68.200.415

39.337.470

9.139.537 710.273

687.418

78.050.225

40.024.888

158.953 1.551.099 16.912.520 58.209.152 11.191.283 -5.611.007 238.353.860 115.802.395

158.953 1.551.099 35.191.596 61.015.451 11.191.283 -5.611.007 185.166.909 91.869.937

$

436.568.255

$ 380.534.221

$

514.618.480

$ 420.559.109

$

253.210.802

$ 272.984.484

16 19

TOTAL LIABILITIES

FINANCIAL STATEMENTS

Equity tax payable Retirement pensions

$

SHAREHOLDERS' EQUITY Capital stock Additional paid-in capital Equity revaluation Revaluation surplus Reserve for repurchase of shares Treasury stock Other appropriated reserves Year's income

20 20 20 12 20 20

TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY MEMORANDUM ACCOUNTS

21

The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

F I N A N C I A L S TAT E M E N T S

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

19


MINEROS S.A

Income Statement

For the years ended December 31, 2011 and 2010 (In thousands of Colombian Pesos, except net income per share)

2011

2010

Note

PRECIOUS METALS PRODUCTION

22

$ 339.939.249

PRODUCTION COSTS

129.860.271

10.192.939

9.929.259

-----------------------

-------------------------

172.661.243

88.825.157

-12.043

33.012.452

172.649.200

121.837.609

-56.846.805

-29.967.672

115.802.395

91.869.937

Operating income

23

Income before income tax provision INCOME TAX PROVISION

16

YEAR'S NET INCOME

NET INCOME PER SHARE

228.614.687

157.085.067

ADMINISTRATION EXPENSES

NON-OPERATING REVENUES (EXPENDITURES), NET

$

$

442,52

$

351,07

The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

20

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


December 31, 2011

$ 158.953

-

-

-

Year's income

Year's decrease

Balances at

-

-

Equity tax

-

$ 1.551.099

-

-

-

-

Transfer of income

$ 1.551.099

-

Gift

December 31, 2010

$ 158.953

-

-

-

Year's income

Year's movements

Balances at

-

-

Equity tax

-

-

-

$ 1.551.099

Transfer of income

$ 158.953

Additional Paid-in capital

Gift

December 31, 2009

Balances at

Capital

$ (5.611.007)

-

-

-

-

-

$ (5.611.007)

-

-

-

-

-

$ (5.611.007)

Treasury Stock

$

$

$

$19.535.253

-

-

-

-

2.400.000

$17.135.253

-

-

-

-

2.400.000

$14.735.253

Reserve for asset protection

$

$

$

-

-

-

-

-

-1.000.000

1.000.000

-

-

-

-1.000.000

1.000.000

-

Reserve for gifts

-

-

-

-

72.546.644

95.405.535

$ 218.739.130

-

-

-

-

50.786.951

$ 167.952.179

$

Reserve available to shareholders' meeting

APPROPRIATED

$ 238.353.860

-

-

-

(1.000.000)

54.186.951

$ 185.166.909

-

-

-

(1.000.000)

75.946.644

$ 110.220.265

Total other reserves

$ 115.802.395

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

-

115.802.395

-

-

-91.869.937

$ 91.869.937

-

91.869.937

-

-

-114.676.380

$ 114.676.380

Year's Income

$ 16.912.520

-

-

(18.279.076)

-

-

$ 35.191.596

-

-

(1.241.369)

-

-

$ 36.432.965

Equity Revaluation

$ 58.209.152

(2.806.299)

-

-

-

-

$ 61.015.451

17.985.703

-

-

-

-

$ 43.029.748

Revaluation Surplus

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

The accompanying notes are an integral part of these financial statements

79.477

-

-

-

-

-

79.477

-

-

-

-

-

79.477

Legal Reserve

BEATRIZ E.URIBE RESTREPO President0

$ 11.191.283

-

-

-

-

-

$ 11.191.283

-

-

-

-

-

$ 11.191.283

Reserve for repurchase of shares

(In thousands of Colombian pesos)

For the years ended December 31, 2011 and 2010

Statement of changes in shareholders’ equity

MINEROS S.A.

FINANCIAL STATEMENTS

F I N A N C I A L S TAT E M E N T S

21

$

$

$

-

-

-

-

-

-

-

(6.904)

-

-

-

-

6.904

Surplus from equity method

$ 436.568.255

(2.806.299)

115.802.395

(18.279.076)

(1.000.000)

(37.682.986)

$ 380.534.221

17.978.799

91.869.937

(1.241.369)

(1.000.000)

(38.729.736)

$ 311.656.590

Total equity


MINEROS S.A.

Statement of changes in financial position For the years ended December 31, 2011 and 2010 (In thousands of Colombian pesos) 2011 Financial resources generated by operations Net income of the period

$

2010

115.802.395

$

91.869.937

Add (less) charges (credits) not affecting working capital Depreciation Inventory amortization Other assets amortization Loss on investment trading Retirement pensions Reimbursement of provisions Income from the sale of fixed assets Income from equity method

21.708.732 2.543.491 13.931.280 22.855 -108.439 -3.909.591

Working capital provided by operations

20.206.054 4.271.431 10.226.520 26.720 80.186 -68.199 -3.688.396 *

149.990.723

Sources of funds Decrease in long-term accounts receivable Increase in long-term investments - net Increase in equity tax payable

122.924.253

444.966 2.824.999 9.139.537

Total Sources of Funds

-197.596 * -

162.400.225

122.726.657

20.843.488 37.682.985 10.581.558 33.297.837 18.279.076 1.000.000

445.940 22.213.171 38.729.735 7.311.043 19.637.743 1.241.369 1.000.000

121.684.944

90.579.001

Use of funds Long-term accounts receivable Addition to property, plant and equipment Dividends declared Increase (decrease) in inventories Increase in other assets Equity tax Gifts Total Uses of Funds $

Increase in working capital

40.715.281

$

32.147.656

CHANGES IN WORKING CAPITAL COMPONENTS:

69.578.226

27.125.903

Prepaid expenses

-231.749 41.472.897 24.476.133 3.860.945

370.244 22.901.339 1.461.111 2.393.209

Decrease (increase) in current liabilities

-28.862.945

5.021.753

-58.481 -221.620 -2.752.730 -24.715.360 -236.218 -878.536 -

-10.495 -920.906 39.210 -2.652.616 -325.165 -767.176 9.658.901

40.715.281

32.147.656

Increase (decrease) in current assets Cash Marketable investments Accounts receivable

Financial liabilities Suppliers Accounts payable Taxes, liens and duties Labor liabilities Dividends payable Other liabilities

INCREASE IN WORKING CAPITAL * Reclassified for comparative effects

The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

22

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion) F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A.

Statement of Cash Flows

For the years ended December 31, 2011 and 2010 (In thousands of Colombian pesos) 2011 CASH FLOWS FROM OPERATION ACTIVITIES Net income Adjustments to reconcile income to net cash provided by operating activities: Depreciation Inventory amortization Amortization of deferred charges Loss on investment trading Retirement pensions Recovery of investment allowance Income from the sale of fixed assets Income from equity method

2010

115.802.395

91.869.937

21.708.732 2.543.491 13.931.280 22.855 -108.439 -3.909.591

20.206.054 4.271.431 10.226.520 26.720 80.186 -68.199 -3.688.396 * 122.924.253

-24.476.133 -3.860.945 -10.581.558

-1.461.111 -2.393.209 -7.311.043

221.620 2.752.730 24.715.360 236.218 878.536 9.139.537

920.906 -39.210 2.652.616 325.165 -8.891.725 -

-974.635

-16.197.611

NET CASH USED BY OPERATION ACTIVITIES

149.016.088

106.726.642

CASH FLOWS FROM INVESTMENT ACTIVITIES Decrease in accounts receivable from associates Increase in long-term investments Acquisition of property, plant and equipment, net Acquisition of other assets, net

444.966 2.824.999 -20.843.488 -33.297.837

-445.940 -197.596 * -22.213.171 -19.637.743

NET CASH USED IN INVESTMENT ACTIVITIES

-50.871.360

-42.494.450

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) in financial liabilities Dividends paid Gifts Equity tax

58.481 -37.682.985 -1.000.000 -18.279.076

10.495 -38.729.735 -1.000.000 -1.241.369

NET CASH USED IN FINANCING ACTIVITIES

-56.903.580

-40.960.609

41.241.148

23.271.583

103.647.222

80.375.639

NET CHANGES IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

$

144.888.370

$

FINANCIAL STATEMENTS

149.990.723 Changes in assets and liabilities (Increase) decrease in: Accounts receivable Deferred charges Inventories Increase (decrease) in: Suppliers Accounts payable Taxes, liens and duties Labor liabilities Other liabilities Long-term liabilities - Equity Tax

103.647.222

* Reclassified for comparative effects. The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

F I N A N C I A L S TAT E M E N T S

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

23


MINEROS S.A.

Financial ratios (In thousands of Colombian pesos) dec-11 Liquidity Ratios

dec-10

Liquidity measures the Company's capacity to pay its short-term liabilities.

Current Ratio

L I Q U I D I T Y

Current Assets Current Liabilities

194.226.335 68.200.415

2,85

124.648.109 39.337.470

3,17

2,12

103.647.223 39.337.470

2,63

6,59

420.559.109 40.024.888

10,51

For each Peso payable of current liabilities, the Company has in short-term current assets, as many Pesos as the value of the current ratio

Acid test

Liquid Assets Current Liabilities

144.888.370 68.200.415 For each Peso payable of current liabilities, the Company has easily realizable assets as many Pesos as the acid-test ratio

Solidity

Total Assets Total Liabilities

514.618.479 78.050.225 Company's capacity to show financial consistency

Working capital

Current assets - Current liabilities

$

126.025.920

$

85.310.639

Remaining current assets after paying all short-term liabilities

Efficacy indices (Return)

Efficacy or return indices assess results of management decisions when administering resources

Gross income margin

1-

Production Cost Operating revenues

157.085.067 339.939.249

53,79%

129.860.271 228.614.687

43,20%

How much can be used to cover operating and non-operating expenses out of each Peso generated

Return on revenues

Net income Net revenue

115.802.395 339.939.249

34,07%

A C T I V I T Y

91.869.937 228.614.687

40,19%

228.614.687 223.955.649

1,02

228.614.687 285.964.836

0,80

0,66

228.614.687 420.559.109

0,54

30,42

1.050.638.116 41.624.530

25,24

115.802.395 514.618.479

22,50%

91.869.937 420.559.109

21,84%

115.802.395 436.568.255

26,53%

91.869.937 380.534.221

24,14%

442,52

91.869.937 261.687

53,79%

98.754.416 228.614.687

43,20%

50,79%

88.825.157 228.614.687

38,85%

34,07%

91.869.937 228.614.687

40,19%

Relation between income after non-operating revenues and expenses and taxes that may diminish the Company’s capacity to generate returns

Sales Gross fixed assets

Fixed assets turnover

339.939.249 244.355.157

1,39

How much can be generated in sales out of each Peso invested in fixed assets

Operating assets turnover

Sales Gross operating assets

339.939.249 331.110.233

1,03

How much can be generated in sales out of each Peso invested in operating assets

Total assets turnover

Total sales Total Assets

339.939.249 514.618.479 Company’s efficiency using assets to generate sales

Suppliers turnover

Average accounts payable X 365 days Term purchases

Return on assets

Net income Assets

735.259.450 24.172.913

Days the company takes to pay accounts to its suppliers

P R O F I T A B I L I T Y

Return on the company investment

Return on equity

Net income Net equity

Income per share

Net income (Pesos) No. of shares or participation rights

Return on shareholder’s or partner’s investment

115.802.395 261.687

$

$ 351,07

Net income per share or participation right

Gross return

Gross income Operating revenues

182.854.182 339.939.249 Gross income percentage generated by the Company’s sales

Operating return

Operating income Total operating revenues

172.661.243 339.939.249 Amount of operating income generated by each Peso of sales

Net Return

Net income Net sales

115.802.395 339.939.249

Net income generated by each Peso of net sales, independent of whether it corresponds to the company’s social purpose or not

24

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A.

Financial ratios (In thousands of Colombian pesos)

Debt ratios Total debt

Participation of funds provided by creditors that partially finance the company's investment

Total liabilities Total assets

78.050.225 514.618.479

15,17%

40.024.888 420.559.109

9,52%

68.200.415 78.050.225

87,38%

39.337.470 40.024.888

98,28%

145.654 194.226.335

0,07%

87.173 124.648.109

0,07%

0,04%

87.173 228.614.687

0,04%

17,88%

40.024.888 380.534.221

10,52%

39.337.470 380.534.221

10,34%

For each Peso invested in assets how much is financed by third parties and guarantees the company offers to them

Short-term debt

Current liabilities Total liabilities Current liabilities for each Peso owed to creditors

Short-term financial debt

DEBT

Total short-term financial liabilities Total current assets

Percentage of current assets that must be used to pay short-term financial liabilities

Financial debt:

Financial liabilities Net sales

145.654 339.939.249 Percentage of sales needed to pay financial liabilities

Leverage

78.050.225 436.568.255

FINANCIAL STATEMENTS

Total liabilities with third parties Equity

Liabilities with third parties for each Peso in equity

Short-term leverage

Total current liabilities Equity

68.200.415 436.568.255

Short-term liabilities for each Peso in equity

Financial leverage

Liabilities with financial entities Equity

145.654 436.568.255

0,03%

87.173 380.534.221

0,02%

436.568.255 514.618.479

84,83

380.534.221 420.559.109

90,48

Financial liabilities for each Peso in equity

Ownership index

Equity Total Assets

For each Peso invested in the company how much corresponds to the owners

SPECIAL DISCLOSURES Total Assets Total liabilities Equity Share par value.

2005

2006

2007

2008

2009

2010

2011

140.808 22.073 118.735 453.753

174.457 32.486 141.970 542,52

209.812 18.845 190.967 729,75

275.847 27.136 248.711 950,41

356.623 44.966 311.657 1.190,95

420.559 40.025 380.534 1.454,16

514.618 78.050 436.568 1.668,28

F I N A N C I A L S TAT E M E N T S

25


Proposition regarding earnings distribution MINEROS S.A. SHAREHOLDERS’ MEETING MARCH 21 OF 2012

CO$ 115,802,395,070

EARNINGS FOR THE YEAR 2011 AMOUNT TO IT IS PROPOSED THAT THEY BE DISTRIBUTED AS FOLLOWS:

YEAR’S NET INCOME

CO $ 115,802,395,070

FOR A MONTHLY DIVIDEND OF $10.00 PER SHARE DURING THE INSTALLMENTS OF $6 EACH IN THE MONTHS OF APRIL, JULY AND OCTOBER OF 2012

31,402,488,240

FOR AN EXTRA DIVIDEND OF $18.00 PER SHARE PAYABLE IN THREE INSTALLMENTS OF $6 EACH IN THE MONTHS OF APRIL, JULY AND OCTOBER OF 2012

4,710,373,236

FOR SOCIAL ACTIONS

1,160,000,000

RESERVE FOR PROTECTION OF ASSETS

2,400,000,000

RESERVE FOR NEW PROJECTS

EQUAL AMOUNTS

76,129,533,594

CO $ 115,802,395,070

CO $ 115,802,395,070

Dividend will be paid between the 10th and the 20th DAY of each month. Shareholders registered in the shareholder register on the ex-dividend period determined in the General Regulations of the Stock Exchange, as provided in article 2 of Decree 4766 of 2011, are entitled to the month’s dividend.

26

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


4

Notes to the Financial Statements


MINEROS S.A.

Notes to the financial statements at december 31 of 2011 and 2010 ( I n t h o u s a n d s o f C o lo m b i a n p e s o s )

NOTE 1. COMPANY OPERATIONS Mineros de Antioquia S.A. is a private corporation established on November 14, 1974 by public deed No 6161 of the 4th Notary Public Office of Medellin for a term of ninetynine (99) years. According to decision of the Regular Shareholders’ Meeting of March 17 of 2004, minutes No. 43, the corporate name was changed to MINEROS S.A. Such decision was formalized through public deed No. 1038 of April 19 of 2004 of the 17th Notary Public Office of Medellín. The Company has as its purpose the conduction of any type of business, activities, endeavors, acts and contracts related to the mining industry in general, of either precious metals, metallic and non-metallic mineral substances or hydrocarbons. To comply with its corporate purpose, the Company’s operation center is located in El Bagre (Antioquia province) and its main administrative offices in Medellín.

28

NOTE 2. ACCOUNTING POLICIES The financial statements of MINEROS S.A. have been prepared and presented according to accounting principles generally accepted in Colombia, for which purpose the Management has to make certain estimates and assumptions in order to determine the valuation of some of the individual entries in the financial statements and to make the required disclosures. Although they may differ in their final effect, Management considers that the estimates and assumptions used were adequate under the circumstances and that they agree with the accounting principles generally accepted in Colombia. Certain accounting principles applied by the Company could disagree with the accounting principles generally accepted in other countries. The main accounting policies used by the Company are:

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


- Accounting system

- Investments are classified as marketable and long-term, according to the intention of realization. Marketable investments are those easy to realize within a term of up to three calendar years, and for which, there is a serious intention of realization. Long-term investments are those which are seriously intended to be held for at least three calendar years.

The Company uses the accrual accounting system, according to which revenues and expenditures are recorded when incurred, regardless of whether payment or collection has been in cash.

- Monetary unit

According to legal provisions, the monetary unit used by the Company for the balance sheet and income statement accounts is the Colombian Peso.

- Investments are classified as fixed-income and variable-income, depending on the return they generate.

- Materiality The Company’s policy for disclosing accounting entries in its financial statements in order to determine their materiality is based on the relative importance of each sub-account with respect to the account group to which it belongs. Accordingly, balance sheet entries at December 31, 2011 representing 5% or more of current assets, other assets, current liabilities, long-term liabilities and equity are disclosed.

- According to control, they are classified as controlling and non-controlling, subject to the provisions of the Colombian Code of Commerce. - Based on the cause or reason motivating the investment, they are voluntary or mandatory.

- Property, Plant and Equipment

- Investments

Investments are accounted at cost, which does not exceed sale value.

Buildings and constructions

Machinery And equipment

Electric plants and networks

Furniture And fixtures

Dredges

Transportation equipment

Computer equipment

5%

10%

10%

10%

15%

20%

20%

NOTES TO THE FINANCIAL STATEMENTS

Based on External Circular Letter 011 of the Securities Superintendency (today Financial Superintendency) of 1998, the Company classifies investments as follows:

These are recorded at cost, which includes inflation adjustments from January 1 of 1992 until December 31 of 2006. Maintenance and repair expenditures that do not increase the useful life of respective assets are recorded as a charge in the income statement, as they are incurred. Depreciation is calculated by the straight-line method, based on the estimated useful life of assets, using the following depreciation annual rates:

Given that the dredges work on a three-shift basis, the accelerated depreciation method provided for in Art. 140 of Tax Law is used. E.T.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

29


resulting from accounts payable and foreigncurrency liabilities used to purchase inventories, deferred charges, and property, plant and equipment are capitalized until the asset is in condition of being used or disposed of. From that moment on, the exchange difference is recorded against the income statement of the period. All other exchange gains and losses are recorded as financial revenue or expense.

-Inventories Inventories correspond to materials and consumables, dredge maintenance materials, and others; they are valued at the lowest between average cost and net sale value. Materials in transit and workshop orders under process are valued at their actual manufacturing or acquisition costs.

- Deferred charges

- Equity tax and surtax

As provided by accounting and fiscal regulations, amortization policies for deferred charges depend on their nature, as follows: A. Mining projects are amortized on the basis of the deposit’s estimated exploitation time, starting on the date when respective revenue starts. When exploration investments result to be fruitless, they are amortized in the same year when the project is determined to be unviable. B. Agricultural projects (rubber plantation and bio-factory) are amortized along the estimated cultivation time, upon conclusion of their nonproductive period. C. All other deferred charges are accounted at cost; amortization is carried out through the straight-line method with periods ranging between one and five years.

- Exchange difference Transactions in foreign currency are recorded at the applicable exchange rate in force on the date of the transaction. Balances receivable, investments abroad, financial liabilities and accounts payable are adjusted monthly. The balances of such accounts at December 31, 2011 and 2010 were translated into Colombian Pesos at the market representative rate for the end of the month certified by the Financial Superintendency ($1,942.70/USD in 2011 and $1,913.98/USD in 2010). Exchange difference

30

Accordance with the Law regulating accounting principles generally accepted in Colombia and considering the alternatives for accounting recording established there, the Company chose to record such tax and its corresponding surtax against the equity revaluation account.

- Taxes, liens and duties Income tax provision is determined on the basis of commercial income, adequately relating the period’s revenue to its corresponding costs and expenses, or, on the basis of presumptive income on taxable equity, in case it exceeds net taxable income.

- Labor liabilities Labor liabilities are accounted as provided by legal regulations and binding collective bargaining agreements. Retirement pension liabilities payable by the Company are determined based on actuarial studies as provided by legal regulations. Annual retirement pension provision is adjusted in a rational and systematical way. Pension payments are charged to the results of the year.

- Additional paid-in capital

The excess of placed shares price over their par value is recorded in the capital surplus account, additional paid-in capital.

- Reappraisals These correspond to differences between commercial or cadastral appraisal and net book

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


the city of Medellín. Real estate property was appraised using the comparative or market method and cost or replacement method. In the case of machinery and equipment, quotes for similar machines and equipment were taken into account, their original value was updated translating it into United States Dollars on that date, and loss of value factors due to old age and use were later applied; also their current state was analyzed with technicians. Both assets in depreciation process and fully depreciated assets in use were appraised, with the appreciation of the totally depreciated assets in use recorded under memorandum accounts.

value of real estate property. Such reappraisals are recorded in separate assets and equity accounts as revaluation surplus, which is not distributable. Loss of value of real estate property is recorded through provision charged to the period’s expenses. Reappraisal of investments as of December 31, 2011 and 2010 was conducted as established in circular letter 011 of 1998 of the Securities Superintendency (today, Financial Superintendency) as follows: - For marketable fixed-income investments, the latest cost in books is recorded with a contra entry in the income statement accounts. - Marketable variable-income investments are valued by affecting their latest cost recorded, with a contra entry in the results of the period, recognizing the revenue or expense produced depending on the increase or decline of investment, respectively. - Long-term investments of controlled companies are accounted through the equity method. When the sale value of long-term investments of non-controlled companies is higher than cost, reappraisal for the period is recorded under assets and revaluation surplus under equity. When the sale value is lower than cost, the difference will affect reappraisal and revaluation surplus, without limitation upon the fact that their net balance might be of a contrary nature.

In September of 2009, the Company hired commercial appraisals of Property, Plant and Equipment which were conducted by Francisco Ochoa O. Propiedad Raíz – Avalúos TIN 70.037.897-4, a firm with main offices in

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

At December 31, 2011, commercial appraisals were updated on the basis of CPI for 2011 so as to establish assets’ respective appreciation (loss of value) with respect to net book value.

- Equity revaluation Balances at December 31, 2011 and 2010 correspond to inflation adjustments to equity accounts until December 31, 2006, minus the equity tax and corresponding surtax recorded in compliance with Law 1370 of 2009 and Legislative Decree 4825 of 2010 According to current regulations, this balance cannot be distributed as income until the Company is liquidated or capitalized.

NOTES TO THE FINANCIAL STATEMENTS

-

- Memorandum accounts

Control memorandum accounts record financial information for control, contingencies, and future transactions commitments; fiscal memorandum accounts record differences between accounting values and values for fiscal matters.

- Gifts The Company records donations against fiscal period results or against occasional reserves established for such purpose by the Shareholders’ Meeting.

31


- Net income per share

Net income per share is calculated on the weighted average number of outstanding subscribed shares during each period.

- Statement of cash flows

The statement of cash flows was prepared by the indirect method.

NOTE 3. ACCOUNTS RECEIVABLE At December 31, accounts receivable included: (2) Corresponds to balances in the Company’s favor determined in

ITEM

2011

2010

National customers

$

-

$ 7.902.519

Foreign customers (1)

21.033.519

73.808

Public entities (2)

10.568.950

3.745.168

Related companies (3)

597.225

726.444

Loans to associates

610.199

546.420

Miscellaneous accounts receivable

913.000

Yields receivable (4) Other (5) TOTAL

Argor Heraeus (Suiza) Metalor (Suiza) TOTAL

being processed at December 31, to discountable taxes non subject to VAT reimbursement pending compensation in future periods, and to reimbursement requests of excess payments, as follows:

ITEM

2011

2010

Mar-Apr VAT

$ 1.808.999

290.110

May-Jun VAT

2.068.966

-

6.056.782

3.002.916

Jul-Aug VAT

1.805.907

-

3.304.136

2.320.293

Sep-Oct VAT

1.993.982

1.579.902

$ 43.083.811

$ 18.607.678

Nov-Dec VAT

2.103.134

2.067.184

Discountable taxes to be compensated (exploration activities)

21.739

98.082

Reimbursement request of excess withholding tax *

766.126

-

97

-

$ 10.568.950

$ 3.745.168

(1) Balances owed by the following foreign customers:

INTL Commodities Inc. (USA)

private VAT calculations whose reimbursement requests were

$ 9.627.735

$

-

11.346.101

51.035

59.683

22.773

$ 21.033.519

$ 73.808

Withholding tax TOTAL

$

-

* From this sum, at the date of general-purpose financial statements, through Resolutions 17468 and 17452, served on December 28, 2011, DIAN had approved reimbursement of $635,835.

32

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


(3) Balances owed by the following related companies:

(5) Corresponds to third parties’ balances at December 31 for different items related to the normal development of the Company’s business, as follows:

ITEM Balance payable by Proyecto Sabaletas S.A.S. for administration services rendered in the second half of 2011 (full year 2010).

2011

2010

$80.581

$241.955

Balance payable by Operadora Minera S.A.S. for administration services rendered in the second half of 2011 (full year 2010).

307.984

Balance payable by Exploradora Minera S.A.S. for administration services rendered in the second half of 2011 (full year 2010).

208.660

36.363

$ 597.225

$ 726.444

TOTAL

448.126

ITEM

2011

2010

Advance payments to suppliers

$ 468.342

$ 612.073

Advance payments to contractors

2.328.687

1.496.843

Other smaller accounts receivable

507.107

211.377

$ 3.304.136

$ 2.320.293

TOTAL

- During fiscal year:

(4) Shows financial yields from fixed-income investments and

A. The Company did not deem necessary to establish provisions for doubtful accounts to protect likely loss contingency from commercial accounts receivable. B. In 2011, no accounts receivable were written off.

premiums paid in purchase process of these securities.

C. There are no accounts receivable more than one year overdue.

NOTE 4. MARKETABLE SECURITIES At December 31, marketable securities included:

2011

2010

$ 1.371.073

$ 1.754.338

1.342.562

2.001.091

40.500.000

30.331.162

Public bonds – local currency

9.000.000

10.500.000

Private bonds – local currency

24.126.804

18.571.270

Treasuries – TES

39.476.567

22.862.447

6.933.862

-

15.960.972

9.936.187

Shares in foreign corporations (3)

1.448.782

520.726

Other investments abroad (4)

3.782.383

4.244.593

Other investments (5)

2.285.077

2.173.275

146.228.082

102.895.089

(1.993.072)

-118.458

-

-14.518

$ 144.235.010

$ 102.762.113

Participation in trust estates with trust companies (1) Trust funds administered by brokerage firms (on demand) Certificate of Deposit - CD

Funding operations (Treasuries –TES–) Shares in local corporations (2)

Subtotal Provision for loss of value of investments in shares of local corporations Provision for loss of value of investments in shares of foreign corporations TOTAL N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

NOTES TO THE FINANCIAL STATEMENTS

ITEM

33


(1) Rights held as on December 31, 2011 and 2010 in Trust Estate P195 Grupo Contempo Ltda., Oficinas Oxo - Bogotá in

At December of 31 of 2010, the Company had as marketable securities the following investments in shares in corporations:

Fidubogotá S.A.

In 2011 $383,265 was received as refunded contributions from this Trust Estate (2010: 313,173)

(2) At December of 31 of 2011, the Company had as marketable

ISSUER

No. SHARES (UNITS)

securities the following investments in shares of Colombian corporations:

ISSUER Ecopetrol S.A.

No. SHARES (UNITS)

MARKET PRICES (BOOK VALUE)

MARKET PRICES (BOOK VALUE)

Suramericana de Inversiones S.A.

30.900

$ 1.166.246

Cementos Argos S.A. *

99.900

1.156.314

Grupo Nutresa S.A.

37.679

1.019.334

384.000

1.006.721

ISAGEN S.A. E.S.P

471.200

$ 2.002.416

70.599

1.735.432

ISA S.A E.S.P.

60.300

852.277

ISAGEN S.A. E.S.P.*

539.000

1.360.934

Pacific Rubiales Energy Corp.

11.910

751.866

Bancolombia S.A.

41.000

1.157.515

Ecopetrol S.A.

165.200

672.402

Cementos Argos S.A. *

99.900

1.156.314

Corficolombiana S.A.

15.017

532.049

ISA S.A. E.S.P *

86.300

1.154.927

Bancolombia S.A.

17.000

502.222

Grupo de Inversiones Suramericana S.A.-ADP

30.770

1.011.830

Colinversiones S.A. E.S.P *

74.637

452.385

7.700

446.310

Pacific Rubiales Energy Corporation. *

16.110

991.652

Grupo Aval S.A.

202.061

346.329

Suramericana de Inversiones S.A. *

Fogansa S.A. *

175.000

350.000

26.400

994.369

Helm Bank S.A.

658.000

303.266

154.500

870.461

5.367

202.121

10.000.000

96.800

1.658.000

718.245

Banco Popular S.A.

95.729

57.438

24.500

507.940

Conconcreto S.A.

13.153

22.107

Grupo Aval – ADP *

343.248

446.222

TOTAL

Grupo Aval – Common shares *

195.213

253.777

Fogansa S.A. *

175.000

350.000

Conconcreto S.A. *

145.153

220.763

In compliance with the provisions of Circular Letter 011 of

Cartón de Colombia S.A.

27.200

218.144

1998 of the Securities Superintendency

Canacol Energy Ltd. *

75.000

213.595

Banco de Occidente S.A. *

5.367

202.121

10.600

199.016

10.000.000

99.400

With respect to investments in shares of corporations

95.729

57.437

owned at December 31, the following values corresponding

Corficolombiana S.A. *

654

22.691

Almacenes Éxito S.A.

619

15.771

Grupo Nutresa S.A. *

Colinversiones S.A. E.S.P * Helm Bank S.A. * Banco Davivienda S.A.

Inversiones Argos S.A. * Tablemac S.A. Banco Popular S.A. *

TOTAL

Banco de Bogotá S.A.

Banco de Occidente S.A. Tablemac S.A.

$ 9.936.187

* Recorded at purchase price, because of their loss of value.

(today Financial

Superintendency), the Company recorded the respective appreciation (loss of value) of variable-income investments (national and foreign) affecting the latest investment cost recorded , increasing (decreasing) their amount, with the fiscal year’s results affected as a contra account.

to appreciation (loss of value) were recorded as revenues (expenses).

$ 15.960.972

* Recorded at purchase price, because of their loss of value.

34

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


A. Reappraisals ISSUER

2011

2010

Banco Davivienda S.A.

$

$

Ecopetrol S.A. Cartón de Colombia S.A. Grupo de Inversiones Suramericana S.A. ADP Bancolombia S.A. Tablemac S.A. Almacenes Éxito S.A. Pacific Rubiales Energy Corporation. Corficolombiana S.A. Grupo Nutresa S.A. Banco de Bogotá S.A. ISAGEN S.A. E.S.P. Grupo Aval S.A. ISA S.A. E.S.P. Helm Bank S.A. Banco de Occidente S.A. Conconcreto S.A. Banco Popular S.A. TOTAL

259.879

-

120.005

154.855

21.195 11.805 6.967 2.600 949 $ 423.400

286.403 3.125 203.546 179.612 167.461 102.528 95.475 73.510 24.838 14.699 7.683 4.811 4.603 $ 1.323.149

B. Loss of value ISSUER

2011

Pacific Rubiales Energy Corporation. Colinversiones S.A. E.S.P.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

422.167

$

-

264.761

20.615

223.719 210.797 200.851 171.025 162.220 115.105 75.158 41.111 35.000 20.734 19.795 12.581 10.047 7.658 343 $ 1.993.072

8.157 87.643 2.043 $ 118.458

NOTES TO THE FINANCIAL STATEMENTS

ISAGEN S.A. E.S.P. Helm Bank S.A. Nutresa S.A. ISA S.A. E.S.P. Grupo de Inversiones Suramericana – AO Canacol Energy Ltd. Cementos Argos S.A. Banco de Occidente S.A. Fogansa S.A. Conconcreto S.A. Inversiones Argos S.A. Grupo Aval S.A.- Acciones ordinarias Grupo Aval S.A. – ADP Banco Popular S.A. Corficolombiana S.A. Bancolombia S.A. TOTAL

$

2010

35


To comply with the provisions of the Financial Superintendency regarding disclosures, the following is additionally reported with regard to such investments as on December 31, 2011:

ISSUER

36

PARTICIPATION PERCENTAGE

ECONOMIC ACTIVITY

DIVIDENDS RECEIVED

Ecopetrol S.A.

0.0011%

Hidrocarburos

$ 46.451

Corficolombiana S.A.

0.0001%

Financiera

30.661

ISAGEN S.A. E.S.P

0.0198%

Gener. Energía

27.469

Helm Bank S.A.

0.2909%

Financiera

26.282

Bancolombia S.A.

0.0080%

Financiera

20.561

Grupo Aval S.A. – AO

0.0014%

Financiera

15.268

Grupo Nutresa S.A.

0.0153%

Alimentos

13.665

Cementos Argos S.A.

0.0087%

Cementos

13.064

ISA S.A E.S.P

0.0078%

Trans. Energía

11.238

Conconcreto S.A.

0.0408%

Construcción

11.131

Colinversiones S.A. E.S.P.

0.0215%

Gener. Energía

10.005

Banco de Occidente S.A.

0.0034%

Financiera

6.738

Cartón de Colombia S.A.

0.0253%

Ind.Papelera

6.630

Banco Davivienda S.A.

0.0432%

Financiera

2.640

Banco Popular S.A.

0.0012%

Financiera

2.114

Inversiones Argos S.A.

0.0009%

Financiera

1.590

Tablemac S.A.

0.0394%

Ind. Maderera

1.300

Pacific Rubiales Energy Corporation.

0.0059%

Hidrocarburos

-

Grupo Aval S.A. – ADP

0.0072%

Financiera

-

Grupo de Inversiones uramericana S.A. AO

0.0056%

Inversiones

-

Fogansa S.A.

0.2872%

Ganadería

-

Canacol Energy Ltda.

0.0146%

Hidrocarburos

-

Almacenes Éxito S.A.

0.0001%

Comerc.retail

-

Grupo de Inversiones Suramericana S.A. - ADP

0.0066%

Financiera

-

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


The following was disclosed at December 31 of 2010 regarding marketable securities.

PARTICIPATION PERCENTAGE

ISSUER

ECONOMIC ACTIVITY

DIVIDENDS RECEIVED

Banco de Bogotá S.A.

0.0032%

Financiera

$ 22.308

Corficolombiana S.A.

0.0089%

Financiera

21.564

Grupo Aval S.A.

0.0014%.

Financiera

18.959

Grupo Nutresa S.A.

0.0087%

Alimentos

14.283

ISAGEN S.A. E.S.P

0.0141%

Gener. Enegía

11.875

Suramericana de Inversiones S.A.

0.0067%

Inversiones

11.045

Ecopetrol S.A.

0.0004%

Hidrocarburos

8.190

Cementos Argos S.A.

0.0087%

Cementos

8.128

Helm Bank S.A.

0.1162%

Financiera

7.520

ISA S.A E.S.P

0.0054%

Trans. Energía

3.193

Tablemac S.A.

0.0394%

Ind. Maderera

3.850

Conconcreto S.A.

0.0046%

Construcción

1.161

Banco de Occidente S.A.

0.0039%

Financiera

539

Pacific Rubiales Energy Corporation.

0.0045%

Hidrocarburos

313

Colinversiones S.A. E.S.P.

0.0104%

Gener. Energía

91

Banco Popular S.A.

0.0012%

Financiera

-

Fogansa S.A.

0.3140%

Ganadería

-

Bancolombia S.A.

0.0033%

Financiera

-

At December of 2011, MINEROS S.A. had in its investment portfolio the following investments in shares of foreign corporations:

No. OF SHARES

ISSUER (BOOK VALUE

MARKET VALUE

2.620.000

$ 794.020

Petrominerales Ltd.

6.150

193.396

Compañía de Minas Buenaventura

4.880

363.478

Merrill Lynch & Co. Inc.

2.709

TOTAL

Were purchased in Dollars in different stock exchanges of the United States, and their cost was translated into Colombian Pesos at the Market Representative Rate of December 31 of 2011. Their market-price re-appraisal was based on the closing price at the corresponding stock exchange on the last business day of 2011. Additionally, the following information is disclosed: ISSUER Merrill Lynch & Co. Inc.

ECONOMIC ACTIVITY

DIVIDENDS RECEIVED

Financiera

$ 53.893

Cía de Minas Buenaventura

Minería

3.398

97.888

Quia Resources Inc.

Minería

-

$ 1.448.782

Petrominerales Ltd.

Hidrocarburos

4.517

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

NOTES TO THE FINANCIAL STATEMENTS

- Investments in shares abroad:

(3) Shares in foreign corporations

37


Along the year, the following amounts were charged to the income statement to adjust the value of these investments to market price (loss of value). ISSUER

2011

2010

Quia Resources Inc. (Canadá)

$ 1.174.465

Petrominerales Ltd. (Canadá)

206.278

-

Compañía de Minas Buenaventura (Perú)

26.596

-

Merrill Lynch & Co. Inc. (USA)

19.163

14.518

$ 1.426.502

$ 14.518

TOTALES

$

-

At December of 2010, MINEROS S.A. had in their investment portfolio the following investments in shares of foreign corporations: ISSUER

No. OF SHARES

COST

MARKET VALUE

APPRECIA-TION

(LOSS OF VALUE)

2.769

$ 129.624

$ 115.106

$ (14.518)

Petrominerales Ltd.

6.150

391.102

391.102

-

$ 520.726

$ 506.208

$ (14.518)

TOTAL (4) Other Investments abroad

These are Exchange Traded Funds –ETF– established overseas, that replicate, in general terms, an international financial asset and are traded in stock exchanges as follows:

FUND SPDR S&P 500 ETF TR.

MARKET VALUE (BOOK VALUE)

No. (UNITS) 6.600

$ 1.609.138

17.616

1.298.406

Vanguard INTL Equity Index FD

7.207

555.141

Financial Sector SPDR (XLI)

5.566

140.570

Ishares Xinhua China 25 (FXI)

1.714

116.110

762

63.018

Ishares MSCI Emerging MKT (EEM)

Ishares S& P Latin América 40 (ILF) TOTAL

$ 3.782.383

The cost of the investment in dollars is represented at the Market Representative Rate certified by the Superintendency as on December 31, 2011. Appreciation (loss of value) of investment in each fund is established at month’s closing based on the market quote of each index with a charge (credit) to the results of the period. In 2011, the Company recorded against results $517,609 as adjustment to market value of such investments. In 2010, it recorded $354,730 as appreciation.

38

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


At December 31, 2010, ETF established abroad included: FUND

MARKET VALUE (BOOK VALUE)

No. (UNITS)

SPDR S&P 500 ETF TR.

6.600

Ishares MSCI Emerging MKT (EEM)

$

1.588.509

16.826

1.534.228

Vanguard INTL Equity

7.207

658.390

Financial Sector SPDR (XLI)

5.566

169.919

Ishares Xinhua China 25 (FXI)

1.714

141.359

Ishares S& P Latin América 40 (ILF)

762

78.552

Market Vectors ETF TR Brazil

667

73.636

TOTAL

$ 4.244.593

(5) Other investments

Other investments include the following: DETAIL

2011

Commercial papers

$ 2.000.000

$ 2.000.000

194.270

95.699

90.807

77.576

$ 2.285.077

$ 2.173.275

Balance of overnight operations in Bancolombia Miami Money market accounts abroad TOTAL

2010

The Company’s management considers that adequate investment portfolio diversification exists in order to reduce financial risk. NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. PREPAID EXPENSES Al 31 de diciembre, esta cuenta se descomponía, así: DETAIL

2011

Pre-operating expenses

2.663.789

$ 2.393.2090

Dredge spare parts

2.511.277

-

Insurance (1)

1.079.088

-

$ 6.254.154

$ 2.393.209

TOTAL

$

2010

(1) Corresponds mainly to fire and terrorism insurance policy for the Company’s dredges.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

39


NOTE 6. PROPERTY, PLANT AND EQUIPMENT At December 31, this account included:

ASSET

2011

2010

Land

$ 2.074.927

$ 1.407.388

2.655.348

2.655.348

Buildings and constructions

14.735.574

12.146.210

Machinery and equipment

148.230.882

145.587.726

56.371.497

48.391.053

Furniture and fixtures

903.851

717.095

Transport equipment

7.119.363

6.636.182

Computer equipment

974.554

959.076

10.970.926

4.063.565

Constructions in progress

160.152

1.391.154

Other

158.083

852

$ 244.355.157

$ 223.955.649

(123.250.608)

(102.094.295)

(2.655.348)

(2.655.348)

$ 118.449.201

$ 119.206.006

Mining properties

Electric plants and networks

Machinery and equipment under assembly

Subtotal Less: Accumulated depreciation Accumulated depletion TOTAL

As on December 31, 2011, no restrictions or encumbrances affect the Company’s abovementioned assets. Assets with their respective adjusted cost, accumulated adjusted depreciation, sale value and associated appreciation and loss of value are detailed as follows:

DICIEMBRE 2011 ASSET Land

$ 8.110.387

2.655.348

2.655.348

N.A.

-

Buildings and constructions

14.735.574

2.861.695

16.553.051

4.679.172

Machinery and equipment

148.230.882

94.232.993

75.849.245

21.851.357

Electric plants and networks

56.371.497

20.384.635

43.587.174

7.600.312

Furniture and fixtures

903.851

276.295

-

-

Transport equipment

7.119.363

4.621.476

3.428.818

930.931

Computer equipment

974.554

860.870

N.A.

-

10.970.926

-

N.A.

-

Constructions in progress

160.152

-

N.A.

-

Other assets

158.083

12.644

N.A.

-0

$244.355.157

$ 125.905.956

TOTAL

$

APPRECIATION (LOSS OF VALUE)

APPRAISAL $10.185.314

Machinery and equipment under assembly

$ 2.074.927

ADJUSTED DEPRECIATION AND/OR DEPLETION -

Mining properties

40

ADJUSTED COST

$43.172.159

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


DECEMBER 2010 ASSET Land

ADJUSTED COST

ADJUSTED DEPRECIATION AND/OR DEPLETION

$ 1.407.388

-

$ 6.134.480

$4.727.092

2.655.348

2.655.348

N.A.

-

Buildings and constructions

12.146.210

2.361.694

13.562.192

3.777.676

Machinery and equipment

145.587.726

79.559.670

100.070.085

34.042.029

Electric plants and networks

48.391.053

14.760.720

39.661.531

6.031.198

Furniture and fixtures

717.095

203.919

N.A.

-

Transport equipment

6.636.182

4.418.178

2.921.085

703.081

Computer equipment

959.076

789.262

N.A.

-

Machinery and equipment under assembly

4.063.565

-

N.A.

-

Constructions in progress

1.391.154

-

N.A.

-

852

852

N.A.

-

$223.955.649

$ 104.749.643

Mining properties

Other assets TOTAL

$

APPRECIATION (LOSS OF VALUE)

APPRAISAL

$ 49.281.076

NOTE 7. LONG-TERM ACCOUNTS RECEIVABLE Balances payable by the Company’s workers from loans granted for periods longer than one year, as follows: ITEM

2011 $ 5.062.772

$ 5.482.647

76.292

101.383

$ 5.139.064

$ 5.584.030

Vehicle loans TOTAL

NOTES TO THE FINANCIAL STATEMENTS

Housing loans

2010

NOTE 8. INVENTORIES At December 31, this account included: ITEM

2011

Materials and consumables

2010

$30.390.450

$19.852.844

Materials in transit

1.128.505

2.948.047

Workshop orders under process

1.260.003

2.198.615

480.105

221.490

$33.259.063

$25.220.996

Other TOTAL

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

41


NOTE 9. LONG-TERM INVESTMENTS At December 31, 2011, long-term investments included: CORPORATION Proyecto Sabaletas S.A.S.

PARTICIPATION %

No. OF SHARES

ADJUSTED COST

SALE VALUE OR BOOK VALUE

APPRE-CIATION (LOSS OF VALUE)

100%

337.000

$ 9.786.281

$ 9.786.281

17,74%

493.214.074

6.213.742

18.983.809

12.770.067

Exploradora Minera S.A.S.

100%

20.000

418.960

418.960

-

Operadora Minera S.A.S.

100%

20.000

1.376.658

1.376.658

-

Compañía Minera de Ataco S.A.S.

100%

20.000

200.000

202.521

2.521

Distrito de Negocio S.A.S.

40%

80.000

80.000

80.000

-

Club de Banqueros (un derecho)

N.A.

N.A.

4.500

4.500

-

18.080.141

30.852.729

12.772.588

99.320

26.248

(73.072)

99.320

26.248

(73.072)

$18.179.461

$30.878.977

$12.699.516

ADJUSTED COST

SALE VALUE OR BOOK VALUE

Unipalma de los Llanos S.A.

Subtotal Promotora de Proyectos S.A.

1,60%

124.399

Subtotal TOTAL

$

-

At December 31, 2010, long-term investments included: CORPORATION Proyecto Sabaletas S.A.S.

PARTICIPATION %

No. OF SHARES

100%

337.000

$ 10.128.208

$ 10.128.208

17.74%

493.214.074

6.213.743

15.684.208

9.470.465

Exploradora Minera S.A.S.

100%

20.000

273.657

273.657

-

Operadora Minera S.A.S.

100%

20.000

394.671

394.671

-

N.A.

N.A.

4.500

N.A.

-

$ 17.014.779

$ 26.480.744

$ 9.470.465

80.091

12.989

(67.102)

$80.091

$ 12.989

$ (67.102)

$ 17.094.870

$ 26.493.733

$ 9.403.363

Unipalma de los Llanos S.A.

Club de Banqueros (right) Subtotal Promotora de Proyectos S.A. Subtotal TOTAL

42

APPRE-CIATION (LOSS OF VALUE)

1.68%

60.302

$

-

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


As provided in Second Title, Chapter I, number 1.8 of External Circular Letter 02 of 1998 of the Securities Superintendency (today, Financial Superintendency), the following is added regarding long-term investments:

CORPORATION Unipalma de Los Llanos S.A.

ECONOMIC ACTIVITY

ACCRUED INCOME 2011

ACCRUED INCOME 2010

Agroindustria

$238.422

$ 650.531

Operadora Minera S.A.S.

Minería

981.987

143.375

Proyecto Sabaleta S.A.S.

Minería

2.782.301

3.471.365

Exploradora Minera S.A.S.

Minería

145.303

73.656

Inversionista

-

-

Minería

-

N.A.

Construcción

-

N.A.

Promotora de Proyectos S.A. Compañía Minera de Ataco S.A.S. Distrito de Negocios S.A.S.

NOTES TO THE FINANCIAL STATEMENTS

The Company does not consider redemption of permanent investments within the three (3) calendar years following the closing date of the financial statements. As provided in Joint Circular Letter 009 of the Superintendency of Corporations and 013 of the Securities Superintendency of December of 1996, in External Circular Letter 001 of January of 1996 of the Securities Superintendency (today Financial Superintendency) and in Regulatory Decree 2649 of 1993, investments in subordinates where the parent company owns over 50% of capital must be recorded through the equity method and their financial statements must be consolidated.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

43


- PROYECTO SABALETAS S.A.S.

any form, of renewable and non-renewable resources.

Proyecto Sabaletas S.A.S. was initially incorporated as one-person company through private document subscribed on January 2 of 2008, filed with the Medellín Chamber of Commerce on January 15 of 2008 under No. 389. The corporation was transformed into a simplified joint stock company (S.A.S.) through private document of April 2 of 2009 filed with the Medellín Chamber of Commerce on May 13 of the same year under No. 6038. IIts corporate purpose is to invest, directly or through contributions to corporations of any nature, in activities of preservation, exploration, exploitation, industrialization or development in any form, of renewable and nonrenewable resources.

The financial situation of the company at December 31 was as follows:

The financial situation of the Sabaletas S.A.S. Project as of December 31 of 2011 and 2010 was as follows:

2011 Assets

2010

$ 11.417.311

$12.586.627

1.631.030

2.458.419

Capital stock

3.370.000

3.370.000

Reserves

3.633.980

3.286.846

Year’s results

2.782.301

3.471.365

Liabilities Equity:

The value of the investment in Proyecto Sabaletas S.A.S., where the Company owns 100% of shares was recorded in the years 2011 and 2010 by the equity method, generating an increase in investment of $2,782,301 ($3,471,365 in 2010) originated in the year’s results; investment decreased as a result of payment of $3,124 as dividends.

2011

2010

$ 3.174.050

$2.146.341

1.797.392

1.751.670

Capital stock

200.000

200.000

Reserves

194.671

51.296

Year’s results

981.987

143.375

Assets Liabilities Equity:

The value of the investment in Operadora Minera S.A.S., where the Company owns 100% of shares was recorded in 2011 and 2010 by the equity method, generating an increase in investment of $981,987 ($143,375 in 2010) originated in the year’s results.

- EXPLORADORA MINERA S.A.S. Exploradora Minera S.A.S. was incorporated through private document on March 15 of 2010, filed with the Medellin Chamber of Commerce on April 6 of same year under No. 5067. Its corporate purpose is to carry out any licit civil or commercial act, especially mining exploration activities. The financial situation of the company as of December 31 was as follows:

DESCRIPCIÓN Assets Liabilities

- OPERADORA MINERA S.A.S. Operadora Minera S.A.S. was incorporated through private document on March 10 of 2009, filed with the Medellin Chamber of Commerce on April 2 of 2009 under No. 4129. Its corporate purpose is to carry out any licit civil or commercial act, especially activities of preservation, exploration, export, industrialization, or development in 44

2011

2010

$1.455.558

$ 481.234

1.036.599

207.578

200.000

200.000

73.656

-

145.303

73.656

Equity: Capital stock Reserves Year’s results

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


The value of the investment in Operadora Minera S.A.S., where the Company owns 100% of shares was recorded in 2011 and 2011 by the equity method, generating an increase in investment of $145,303 ($73,656 in 2010) originated in the year’s results.

Since the company is in the pre-operational stage, earnings recorded until December 31, 2011 were not accounted by the equity method and its financial statements were not taken into account for consolidation of financial statements conducted by MINEROS S.A. as controlling corporation (Financial Superintendency Circular Letter No. 002 of 1998, First Title, Chapter II, No. 5.3 (c)).

- COMPAÑÍA MINERA DE ATACO S.A.S.

The financial situation of Compañía Minera de Ataco S.A.S. as of December 31 of 2011 was as follows:

Compañía Minera de Ataco S.A.S. was incorporated through private document on April 11 of 2011, filed with the Ibagué Chamber of Commerce on April 18 of same year under No. 00043218. Its main corporate purpose is gold mining exploration and exploitation through mining concession contracts 4971 and 4974 located in the municipality of Ataco (Tolima province). Its main offices are located in the city of Ibagué. Until December 31, 2011 the company had not started any exploration or exploitation activities and it has only conducted endeavors leading to obtain from Corporación Autónoma Regional del Tolima – CORTOLIMA the environmental license for the mining project.

DESCRIPCIÓN

2011

Assets

$ 203.510

Liabilities

989

Equity: Capital stock

200.000

Year’s results

2.521

NOTE 10. NOTES TO THE FINANCIAL STATEMENTS

OTHER ASSETS At December 31, this account included:

ASSET TYPE

2011

2010

Financial leasing contracts: Net fixed assets (vehicles) acquired through financial leasing with Leasing Bancolombia

$107.352

$108.488

Amount invested in exploration to determine possible economically exploitable gold deposits. (1)

73.139.920

42.277.150

Balance to be amortized of exploration, development, and pre-operating costs and expenses of the La Ye mine (entered operation in May 2010).

10.126.935

22.644.402

Costs and expenses incurred in rubber plantation and bio-factory projects on the Company’s land.

3.781.997

2.759.607

$87.156.204

$ 67.789.647

Projects:

TOTAL

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

45


(1) At December 31, the amounts invested in mining projects are as follows:

ITEM

2011

El Bagre District

2010

$ 28.350.209

$ 18.096.893

Remedios Project

8.495.435

5.058.721

Nechí Project

8.681.745

4.861.959

Tolima Project

5.476.723

4.221.024

Amalfi Project

6.220.973

2.617.956

Projects in Caldas Province

5.751.819

3.050.715

Santa Elena (Bolivar Province) Project

4.883.221

1.851.954

Join Venture Anglo Gold Guamocó

3.119.315

2.492.124

El Catorce Project (Bolívar Province)

1.760.399

0

Other mining projects

240.066

25.804

Brownfield Exploration

160.015

0

$ 73.139.920

$ 42.277.150

TOTAL

In the year 2011, the Company carried to the period’s results $4,954,463 of economically non-exploitable mining projects ($1,827,910 in 2010)

NOTE 11. TRANSACTIONS WITH RELATED PARTIES At December 31, transactions with related companies included:

Accounts receivable

2011

Balance payable by Operadora Minera S.A.S. (See Note 3.3)

$ 307.984

$ 448.126

Balance payable by Exploradora Minera S.A.S. (See Note 3.3)

208.660

36.363

Balance payable by Proyecto Sabaletas S.A.S. (See Note 3.3)

80.581

241.955

$597.225

$726.444

TOTAL ACCOUNTS RECEIVABLE

ACCOUNTS PAYABLE

2011

Operadora Minera S.A.S. (operation services La Ye Mine - See Note 15) Exploradora Minera S.A.S (mandate contract fees for exploration activities in several mining projects - See Note 15) Exploradora Minera S.A.S (Costs and expenses to be reimbursed under execution of mandate contract - See Note 15) TOTAL CREDITORS

46

2010

$733.471

2010 $

-

69.751

-

1.013.032

-

$1.816.254

$

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .

-


As provided in First Title, Chapter III, number 1 of External Circular Letter 02 of 1998 of the Securities Superintendency (today, Financial Superintendency), it is also disclosed that: A. In the years 2011 and 2010, the following transactions were carried out with related companies and/or subsidiaries:

COMPAÑÍA DE QUIEN SE RECIBIÓ EL INGRESO

CONCEPTO

2011

2010

Proyecto Sabaletas S.A.S.

Revenues from financial returns

$

-

$

V 3.848

Proyecto Sabaletas S.A.S.

Revenues from administration services

171.998

230.434

Operadora Minera S.A.S.

Revenues from administration services

483.183

426.786

Exploradora Minera S.A.S

Revenues from administration services

V339.103

34.632

Proyecto Sabaletas S.A.S.

Purchase of raw materials

131.823

-

Proyecto Sabaletas S.A.S.

Cost of purchase of supplies

216.619

-

Operadora Minera S.A.S.

Cost of operation services for La Ye Mine

15.640.244

12.925.685

Exploradora Minera S.A.S

Cost of exploration services

577.512

1.352.563

B. The previously described operations were conducted under normal market conditions and no differences existed with respect to the general terms applicable to similar operations carried out with third parties. C. Outside commercial operations carried out with corporations where some economic link exists with members of the Company’s Board of Directors, indicated in the management report, no other mercantile operations were carried out with legal representatives or corporations where any of the previously mentioned is the beneficial owner of 10% or more of the total outstanding shares of MINEROS S.A.

NOTE 12. RE-APPRAISALS

C L A S E D E A CT IV O

2011

NOTES TO THE FINANCIAL STATEMENTS

As provided in Decree 2649 of 1993, the Company has recorded the following amounts as re-appraisals in assets and equity accounts:

2010

PROPIEDAD, PLANTA Y EQUIPO Land

$ 8.110.387

$ 4.727.092

4.679.172

3.777.676

21.851.357

34.042.029

River equipment

358.154

176.611

Transportation equipment

572.777

526.470

7.600.312

6.031.198

$ 43.172.159

$49.281.076

2.337.477

2.331.012

12.699.516

9.403.363

15.036.993

11.734.375

$ 58.209.152

$ 61.015.451

Buildings Machinery and equipment

Aqueducts, plants and networks SUBTOTAL Marketable investments Rights in trust estates (Grupo Comtempo Oficinas Oxo Trust Estate) Long-term investments Investments in corporations - Net (See Note 9) SUBTOTAL TOTAL

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

47


NOTE 13. FINANCIAL LIABILITIES

At December 31, financial liabilities included:

ITEM

2011

Credit cards Financial leasing contracts (1) TOTAL

2010

$ 62.912

$ 18.120

82.742

69.053

$145.654

$87.173

(1) At December 31 of 2011, financial leasing contracts No. 103632, 108668 and 121708 with Leasing Bancolombia S.A. for purchase of three vehicles, as follows:

CONTRACT

INSTALLMENTS

BALANCE

MATURITY

IN-STALLMENTS PENDING

PURCHASE OPTION

RATE

ACCRUED INTEREST

103632

52

$ 11,890

January 3/2014

24

$ 849

11.08% E.A.

$ 1,408

108668

60

40,657

March15/2015

39

595

17% E.A.

3,946

121708

60

30,195

March 7/2016

51

350

8.34% E.A.

2,345

TOTAL

$ 82,742

$ 1,794

$7,699

At December 31 of 2010, financial leasing contracts No. 103632 and 108668 with Leasing Bancolombia S.A. for purchase of two vehicles, as follows:

CONTRACT

BALANCE

MATURITY

IN-STALLMENTS PENDING

PURCHASE OPTION

RATE

ACCRUED INTEREST

103632

52

$ 16.977

January 3/2014

36

$ 849

11.08% E.A.

$4.091

108668

60

52.076

March 15/2015

51

595

17% E.A.

3.451

TOTAL

48

INSTALLMENTS

$ 69.053

$ 1.444

$ 7.542

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 14. SUPPLIERS Liabilities from purchase of goods for the development of mining-activity-related operations; at December 31, the main balances in favor of suppliers were as follows:

SUPPLIER Fundiciones Universo S.A.

2011 $ 291.257

2010 $

-

267.903

54.340

Calle Toro Arles

222.875

137.367

Eduardoño S.A.

130.433

100.711

Metalúrgica Esp. de Colombia S.A.

106.674

62.598

Almacenes J.J. S.A.

102.642

-

Estaco S.A.

97.567

-

Empresa Industrial yComercial del Estado

92.956

328.369

Melexa S.A.

78.683

-

Forjas Bolívar S.A.

74.724

88.173

HSC Ingeniería de Sistemas Hidráulicosl S.A.S.

67.412

-

GMP Productos Químcos S.A.

62.153

-

Outsorsing Hidrautic Systems S.A.S.

60.949

-

Distribuidora de Químicos Ind. S.A.

60.887

135.627

Quimtia S.A.S.

60.240

-

Industria Metalmecánica Antioqueña Ltda.

60.069

-

Maquinados y Equipos S.A.S.

59.975

-

Compañía de Servicios S.A.

57.540

-

Industrias EMU S.A.

55.657

-

Ferrocortes GM y Cía S.A.S.

57.565

-

General de Equipos de Colombia S.A.

57.231

-

Distracom y Cia. Ltda.

-

684.495

Sait S.A.

-

90.340

Atlas Copco Colombia Ltda.

-

83.620

Organización Terpel S.A.

-

71.312

Sandvik Colombia S.A.S.

-

70.813

Ambientes Elect. Seguros Ing. S.A.S.

-

61.929

Icobandas S.A.

-

58.126

Iberoandina de Químicos S.A.

-

58.137

Eléctricas de Medellín Ltda.

-

57.989

Asteco S.A.

-

56.369

Equielect Ltda.

-

55.217

Grainger Colombia S.A.S.

-

51.438

Shell Colombia S.A.

-

51.506

1.636.830

1.182.126

$3.762.222

$3.540.602

Other suppliers with individual balances of less than $50,000 TOTAL

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

NOTES TO THE FINANCIAL STATEMENTS

Luis A. Manjarrés – Maquinamos

49


NOTE 15. ACCOUNTS PAYABLE Corresponds to short-term liabilities for different items derived from the normal development of the Company’s business, as follows:

ITEM

2011

2010

$1.753.106

$1.727.189

Retenciones y aportes de nómina

1.464.343

1.078.673

Retención en la fuente por pagar

1.210.690

1.645.113

Exploradora Minera S.A.S. ( Reintegro de costos y gastos)

1.013.032

-

Carbovapor S.A.

839.206

-

Compañías Vinculadas(1)

803.222

1.114.500

Delima Marsh S.A.

486.069

213.184

Anglo Gold Ashanti Colombia S.A.

483.517

806.269

Helicentro Ltda.

254.868

-

Security Systems Ltda

197.222

-

Inversiones y Representaciones Casa Blanca S.A.S.

140.527

-

Empresas Públicas de Medellín E.S.P.

133.135

-

Eduardoño S.A.

117.564

-

Simedt S.A.S.

115.382

-

Centro Andino

92.880

-

Mora Martínez William Hernán

83.180

-

Sadelec S.A.

81.354

-

Sodexo Colombia S.A.

77.068

120.247

Ménsula S.A.

74.370

154.047

Industrias Ceno S.A.

72.873

-

ASM Tecnología S.A.S.

72.550

-

S.L.C. Plataforma Logística S.A.S.

70.241

-

Systelematic Ltda

55.923

-

Martínez Menco César Julio

54.404

-

Colombiana de Comercio S.A.

52.900

-

Perfotec S.A.S.

-

208.818

Seguridad de Occidente Ltda.

-

102.434

García G. Luis F.

-

99.000

Seguridad e Higiene Construc. S.A.S.

-

79.954

Construc. Civiles Acabados Portugales S.A.S.

-

78.513

Servicios Ambientales y Geográficos S.A.

-

61.151

Aguado P. Carmen E.

-

60.610

Designe Ltda.

-

56.735

Depositarios

-

49.910

Integral S.A.

-

52.800

2.518.127

1.855.876

$ 12.317.753

$9.565.023

FL Smidth Minerals S.A.C. (2)

Other accounts payable with individual balances of less than $50,000 TOTAL 50

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


(1) Balance in favor of Operadora Minera S.A.S for $733,471 for execution of the contract No. 1100 for provision of mining exploitation services, and in favor of Exploradora Minera S.A.S for $69,751 for fees of delegated administration contract No. 1053.

(2) The final balance of this liability is uncertain given that due to default of contractor in charge of equipment procurement, assembly and commissioning of the La Ye Mine processing plant, MINEROS S.A. is of the opinion that the contractor shall recognize monies in its favor for consequential damages and loss of revenue

NOTE 16. TAXES, LIENS AND DUTIES

The balance of this account included:

ITEM

2011

Income tax (1) Equity tax (2) TOTAL

2010

$36.244.513

$16.098.923

4.569.770

-

$ 40.814.283

$ 16.098.923

(1) Balance payable for income tax was determined as follows:

ITEM

2011

Income tax provision

2010 $29.967.672

17.633.926

13.668.865

3.017.049

689.748

-

54.167

Less - Discount Power Sector Special Contribution

535.417

-

Add - provision of former years

584.100

544.031

$36.244.513

$16.098.923

Less - advance income tax paid Less - withholding tax Less - industrial machinery VAT discount

TOTAL (2) According to Law 1370 of 2009 and Legislative Decree No. 4825

of 2010, the Company calculated equity tax equal to $18,279,076,

NOTES TO THE FINANCIAL STATEMENTS

$56.846.805

The Company is subject to income tax at a nominal rate of 33%, applicable to taxable income

based on taxable equity held on January 1, 2011, and 4.8% rate plus 1.2% surtax. Tax return was filed in May of 2011 and payment will

Effective tax rates stood at 32.9% for the year 2011 and 24.60%

be made in eight equal installments in 2011, 2012, 2013 and 2014.

for the year 2010, due to the permanent differences between

In May and September of 2011, the Company paid equity tax for

commercial income and net taxable income.

$4,569,770.

Below is a summary of the main entries to reconciliate commercial

Balance payable for 2013 and 2014 was classified as long-term

income and net taxable income, as well as per-books equity and

liabilities ($9,139,537).

fiscal equity.

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

51


A. Reconciliation between commercial income and net taxable income

CONCEPTO

2011

2010

$172.649.200

$121.837.609

-

(11.865.591)

(513.545)

(13.245.528)

(3.909.591)

(3.688.396)

Revenues from re-appraisal of shares

(222.156)

(1.677.880)

Deductions for new rubber plantations (Tax Law, Article 157)

(866.676)

-

(1.000.000)

(1.000.000)

2011

2010

Per books pre-tax income Less:

Profit from the sale of shares of Mineros Nacionales S.A. (windfall profit)

Income from the sale of shares Less:

Revenues not constituting income or windfall profit Revenues not earned from equity method

Donations paid against reserve that constitute fiscal deduction

CONCEPTO Plus: Non-deductible expenses:

$

-

$

-

Shares loss of value

3.873.125

432.489

Penalties and default interest DIAN

1.063.873

-

791.456

14.251

-

2.309.969

397.359

274.303

$ 172.263.045

$93.391.226

-

(9.869.633)

$ 172.263.045

$ 83.521.593

56.846.805

27.562.125

-

2.405.547

$ 56.846.805

$29.967.672

2011

2010

$ 436.568.255

$ 380.534.221

584.100

544.031

Land fiscal adjustment

-

744.077

Investments fiscal adjustment

-

2.331.012

(58.209.152)

(61.015.451)

$ 378.943.203

$ 323.137.890

Levy on financial transactions (75% 1,055,275) Fees of sale of Mineros Nacionales S.A. Other non-deductible expenses TAXABLE INCOME Less: Special 30% deduction on investment in real productive fixed assets (Article 8, Law 1111 of 2006) NET TAXABLE INCOME 33% income tax on net taxable income Plus: Tax on windfall profits TOTAL INCOME TAX AND SURTAX PROVISION

B. Reconciliation between per-books equity and fiscal equity

Difference between per-books equity and fiscal equity Per-books shareholders’ equity Plus: Liabilities not fiscally recognized

Less: Appreciation of property, plant and equipment not fiscally recognized FISCAL TAXABLE EQUITY 52

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


The Company’s income tax and surtax returns for fiscal years 2009 and 2010 are still pending revision by tax authorities, who have two (2) years to do so, given that for such fiscal years the Company was not covered by the audit benefit provided for in Article 28 of Law 863 of 2003 since it requested special 40% and 30% deduction, respectively, on investment in real productive fixed assets established in Article 158-3 of Tax Law - fiscal benefit derogated as of 2011 (Law 1430 of 2010).

NOTE 17. LABOR LIABILITIES At December 31, labor liabilities included:

ITEM

2011

2010

$ 2.250.316

$ 2.034.529

Interest on severance payments

254.965

236.087

Vacations

734.945

706.431

Salaries payable

272.783

299.744

$ 3.513.009

$ 3.276.791

2011

2010

$ 7.065.560

$ 6.280.498

581.934

395.036

-

93.424

$ 7.647.494

$ 6.768.958

Severance payments

TOTAL

NOTE 18. DIVIDENDS PAYABLE The balance at December 31 corresponds to:

Regular dividends declared (1) Former periods dividends Accrued dividends payable TOTAL

(1) According to Minutes No. 50 of the Regular Shareholder’s Meeting of March 2 of 2011, the proposal for payment of dividends was approved. Monthly dividend is $9 per share on total 261,687,402 outstanding shares, for a monthly value of $2,355,186,618 for the April 2011-March 2012 period, payable between the 10th and the 20th day of each month. Shareholders registered in the shareholder register on the ex-dividend day of the same period, are entitled to the month’s dividend, under the terms indicated in External

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

NOTES TO THE FINANCIAL STATEMENTS

ITEM

Circular Letter No. 13 of 1998, and Circular Letter No. of 1999 of the Securities Superintendency (today Financial Superintendency). Payment of $36 extra dividend per share payable in July of 2011 was approved in the same Shareholders’ Meeting (Minutes No. 50). Appropriation of earnings of the year 2010 for payment of dividends amounted to $37,682,986. For the current fiscal year, $30,617,426 has been accrued for the periods between April and December.

53


NOTE 19. RETIREMENT PENSIONS The retirement pensions currently under the responsibility of MINEROS S.A. correspond to those workers, who on the date of the ISS transfer Resolution (November of 1997), had expectations to qualify for the special retirement pension agreed in the Collective Bargaining Agreement (18 years of service, 47 years of age), and therefore, the recognition date depended on the worker’s will, or to those workers, who on the date of the same Resolution were not active Company workers, and had retired with the expectation of retirement pension, with only the age requirement pending. Fiscal regulation is used as the basis for recording of retirement pensions. The Company has carried out

actuarial calculations for retirement pensions on the basis of the technical parameters determined in Decree 2498 of 1988. These parameters were modified as of 1998 upon issuance of Regulatory Decree 1517 of 1998 (Paragraph 1, Article 1), by Article 1 of Decree 2783 of December 20 of 2001, by Article 1 of Regulatory Decree 51 of 2003, and recently, by Article 1 of Decree 4565 of December 7 of 2010, distributing the percentage to amortize actuarial calculation up to the year 2029 in a linear form. At December 31 of 2011, the accumulated amortized percentage of the actuarial calculation stands at 59.97% (55.97% at December 31 of 2010). At December 31, retirement pensions included:

ITEM

2011

2010

$1.184.324

$1.228.128

(474.051)

(540.710)

$710.273

$ 687.418

Pension appropriations

$22.855

$80.186

Pension payments

171.220

151.952

$ 194.075

$ 232.138

Pension liabilities according to actuarial estimates Less: Retirement pension provision recorded by the Company RETIREMENT PENSIONS TO BE PROVIDED IN THE NEXT 15 YEARS As of December 31, the value carried to expenses breaks down as follows:

TOTAL

Pension liabilities correspond to seventeen (17) people at December 31, 2011 and 2010.

NOTE 20.

and paid for at December 31 of 2011 and 2010.

EQUITY A. Capital Stock Pubic deed 1030 of April 13 of 2005 of Notary Public Office 17 of Medellin formalized Minutes 44 of the Regular Shareholders’ Meeting of March 18 of 2005, where the authorized capital of $200,000 was divided into 400,000,000 common shares, each with a par value of fifty cents ($0.50). Of these shares, 317,906,252 had been subscribed

54

At December 31 of 2011 and 2010, reserve for repurchase of shares totals $11,191,283. At December 31 of 2011 and 2010, total 56,218,850 repurchased shares stand at $5,611,007 (no repurchase of own shares took place along the years 2011 or 2010). According to Article 396 of the Colombian Code of Commerce, as long as these shares remain the property of the corporation, the

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


rights inherent to them shall be suspended. B. Legal reserve De acuerdo con la Ley Colombiana, la Compañía debe transferir como mínimo el 10% de la utilidad del año a una reserva legal hasta que ésta sea igual al 50% del capital suscrito. Esta reserva no está disponible para ser distribuida, pero puede ser utilizada para absorber pérdidas. A diciembre 31 de 2011y 2010 se tiene un saldo de $79.477 que equivale al 50% del capital suscrito y pagado.

Equity revaluation ($16,912,520) and additional paid-in capital ($1,551,099) cannot be distributed as earnings but are susceptible of tax-free capitalization.

Decline in equity revaluation account with respect to December 31 of 2010 is explained by the equity tax calculated for tax year 2011 (Article 1 of Law 1370 of 2009) for $18,279,076. D. Other reserves The balance of this account includes:

C. Equity revaluation and additional paid-in capital

ITEM

2011

2010

$ 175.470.899

$ 124.683.947

For acquisition or replacement of property, plant and equipment *

19.535.253

17.135.253

Other

43.268.232

43.268.232

$ 238.274.384

$ 185.087.432

For future expansions *

TOTAL OCCASIONAL RESERVES *

Changes in these reserves are the result of appropriations approved by the Shareholders’ Meeting held on March 2, 2011, according to Minutes No. 50.

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. MEMORANDUM ACCOUNTS

Correspond to the following items and amounts:

MEMORANDUM ACCOUNTS

2011

2010

Difference between per-books income and fiscal income

$(386.156)

$38.316.016

Difference between per-books equity and fiscal equity

57.625.052

57.396.331

-

9.869.633

Sub-Total Fiscal Memorandum Accounts (Net)

57.238.896

105.581.980

Infrastructure leasing contracts pending execution (1)

70.000.000

70.000.000

118.969.285

85.654.933

6.762.621

6.762.621

240.000

200.000

-

4.784.950

$ 253.210.802

$ 272.984.484

In 2010, special 30% deduction on investment in real productive fixed assets (Article 8, Law 1111 of 2006)

Appreciation of fully depreciated property, plant and equipment (2) Retirement pensions policy reserve Contingent liabilities for ongoing labor claims. Banco Santander stand-by letter of credit (USD 2,500,000) TOTAL

N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

55


(1) Infrastructure leasing contracts No. 119709 and 119710 subscribed on December 28 of 2010 with Leasing Bancolombia S.A. for expansion of Central Hidroeléctrica Providencia I and construction of Central Hidroeléctrica Providencia III, worth $12,000,000 and $58,000,000,000 respectively, for a duration of 144 months and with interest rate equivalent to DTF T.A., plus 3.25 points for both contracts. At December 31, 2011, Leasing Bancolombia S.A. has disbursed $1,367,019 (contract No. 119709) and $4,520,999 (contract No. 119710) for execution of such contracts. MINEROS S.A. in turn, respectively recorded in 2011 $21,852 and $62,795 for interest on disbursements made by Leasing Bancolombia S.A. as advances. (2) In accordance with the provisions of Communication No. 2010045038-011 of August 13 of 2010 of the Financial Superintendency regarding recording of this kind of appreciations.

NOTE 22. OPERATING REVENUES Amounts received and/or accrued as a result of the activities developed in compliance with its corporate purpose through delivery of goods

FOREIGN CUSTOMER

2011

2010

Argor Heraeus S.A. (Switzerland)

36.63%

24.44%

INTL Commodities Inc. (USA)

33.96%

34.17%

Metalor (USA)

29.34%

22.44%

0.03%

-

C.I.J. Gutiérrez y Cía S.A. (Colombia)

-

14.39%

C.I. Fundición Escobar S.A. (Colombia)

-

4.51%

0.04%

0.05%

100.00%

100.00%

C.I. Goldex S.A. (Colombia)

C.I. Dhows Congo S.A. (Colombia) TOTAL

56

proper to the mining activity. In order to comply with the provisions of Number 2 of Article 117 of Regulatory Decree 2649/93, regarding disclosure of revenue percentages received from main customers from sale of precious metals (gold, silver) exported in its entirety directly or indirectly through SCL, we report the following:

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 23. NON-OPERATING REVENUES AND EXPENDITURES As of December 31, this accounts included:

NON-OPERATING REVENUES

2010

$ 6.735.601

$ 3.659.027

Exchange difference

4.120.174

1.950.972

Income from equity method

3.909.591

3.688.396

Recoveries and realizations

1.116.340

1.206.566

Services

1.017.036

1.190.405

Miscellaneous

995.053

-

Gold price hedge contracts

837.505

5.606.175

Dividends and participations

572.466

11.225.720

Indemnities

403.797

492.781

Revenues from appreciation of shares

222.156

1.677.880

UVR accounts adjustment

152.817

96.565

Income from the sale of fixed assets

108.439

70.504

Income from the sale of investments

92.606

13.518.895

Sale of agricultural products

73.991

52.082

Rentals

62.190

58.717

Sale of miscellaneous materials

17.266

-

Other financial yields

8.858

511.380

Amortized discounts

7.567

-

-

69.199

$20.453.453

$45.075.264

2011

2010

$ 6.955.926

$ 2.573.980

Exchange difference

3.222.619

2.615.312

Investments loss of value

3.873.125

432.489

Taxes assumed (1)

2.339.866

-

Premiums paid in options contracts

656.440

1.318.843

Hedging contracts

630.723

-

Commissions

349.253

496.021

Aids and charities (2)

301.216

480.407

Retirement of property, plant and equipment

253.181

-

Loss in securities trading (3)

215.473

26.338

77.530

23.847

8.186

2.351.719

1.581.958

1.743.856

$ 20.465.496

$ 12.062.812

($12.043)

$33.012.452

Financial yields

Recovery of provisions TOTAL NON-OPERATING REVENUES

Non-operating expenditures Amortization of mining projects

Interest and financial expenses Fees Other expenses TOTAL NON-OPERATING EXPENDITURES

NOTES TO THE FINANCIAL STATEMENTS

2011

TOTAL NON- OPERATING REVENUES AND EXPENDITURES – NET NO OPERACIONALES – NETO N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

57


(1) Corresponds mainly to levy on financial transactions and non-deductible VAT charges. (2) Loss on securities trading

ENTITY Grupo Aval Shares and Securities

2011 $

68.702

2010 $

-

Pacific Rubiales Energy Corporation.

43.977

-

National Treasury Direction

41.469

-

Corficolombiana

32.107

-

Banco de Bogotá

24.590

-

4.628

26.338

$ 215.473

$26.338

2011

2010

Minor balances TOTAL

(3) Aids and charities

Entity Military Forces General Command

$

-

Corp. Santa Fe de Antioquia Film Festival

30.000

30.000

Fundación Incluir Colombia

19.297

-

Fundación para el Progreso de Antioquia

18.748

18.114

Fundación Mi Sangre

10.000

-

Comité Rehabilitación Antioquia

10.000

11.622

7.800

7.500

Antioquia Chess League

-

82.340

Operation Smile Colombia Foundation

-

55.000

Mineros S.A.Foundation

-

50.000

Colombia Humanitaria

-

50.000

Museo de Antioquia

-

50.000

Profamilia

-

42.000

Secretos para Contar Foundation

-

26.610

Nechí Municipality

-

4.800

84.481

52.421

$ 301.216

$480.407

Corporación Excelencia en la Justicia

Other minor TOTAL

58

$ 120.890

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 24. SPECIAL COMMITMENTS – FUTURE OPERATIONS In compliance with Article 115, Number 17 of Regulatory Decree 2649/93, the operations of futures on financial assets executed by the Company with different entities, valid as of December 31 of 2010, are listed below:

ENTITY

TIPO DE OPERACIÓN

VALOR NOMINAL USD

Bancolombia S.A.

Coberturas de Divisas (Operaciones Collars)

USD 24.300.000

Banco de Bogotá S.A.

Coberturas de Divisas (Operaciones Collars)

10.400.000

Banco Colpatria S.A.

Coberturas de Divisas (Operaciones Collars)

2.500.000

Banco de Bogotá S.A.

Forwards de Divisas

925.652

Banco de Occidente S.A.

Forwards de Divisas

800.540

Banco Colpatria S.A.

Forwards de Divisas

500.000

TOTAL

USD 39.426.192

At December 31 of 2010, these operations included:

ENTIDAD

TIPO DE OPERACIÓN VALOR NOMINAL USD CANTIDAD ONZAS Au Foreign Exchange Hedges (Collars)

USD10.950.000

BBVA S.A.

Foreign Exchange Hedges (Collars)

4.200.000

Banco Colpatria S.A.

Foreign Exchange Hedges (Collars)

6.100.000

INTL Commodities (USA)

Gold price hedges (put options)

-

12.000

INTL Commodities (USA)

Gold price hedges (call options)

-

12.000

USD21.250.000

24.000

TOTAL With respect to these operations of futures, we inform that: A. Foreign exchange hedges (collars) were hired at an average purchase price (call) of $2,030.17/USD and an average sale price (put) of $1,867.34/USD, with average maturity of 61 days.

NOTES TO THE FINANCIAL STATEMENTS

Banco de Bogotá S.A.

C. In accordance with the terms of the respective hedge and forward negotiations, as of December 31 of 2011, the Company had neither rights nor obligations with respect to these contracts, given that operation compliance is agreed upon on different da tes of the year 2012.

B. Foreign exchange forwards were hired at rates ranging between $1,788.29/USD and $2,008.39/ USD, all of them with maturity between February 6 and June 29, 2012. N O T E S T O T H E F I N A N C I A L S TAT E M E N T S

59


NOTE 25. SUBSEQUENT EVENTS 1. In January of 2012, MINEROS S.A. subscribed agreements with foreign companies that were timely reported to the securities market through the relevant information system established by the Financial Superintendency, as follows:

A. With Canadian Quia Resources Inc., to purchase 6,700,000 units for CAD 1,005,000 equivalent to 7.8% participation in this corporation. Each unit includes one common share plus the option to acquire, for CAD 0.30, an additional half common share before January 6, 2014. Upon this acquisition, MINEROS S.A. becomes holder of 9,320,000 common shares, representing approximately 10.9% participation in the capital of the foreign corporation.

RESOLUTION No.

2. After closing of the Company’s general-purpose financial statements at December 31, 2011, DIAN issued the following administrative acts related to approval of reimbursement requests pending:

ITEM

VALUE

1325

February 3, 2012

Mar-Apr 2011 VAT

$ 1.791.935

1326

February 3, 2012

Jul-Aug 2011 VAT

1.800.439

1327

February 3, 2012

Sep-Oct 2011 VAT

1.988.530

1288

February 2, 2012

Excess payment of withholding tax April, 2011

TOTAL

60

DATE

B. With US corporation Goldsands Development Company, to start in February of 2012 due diligence activities on 50 mining titles held by such company in northeastern Peru in order to evaluate the possibility of commencing exploration to define participation, in association with this corporation, in a mining project with 85% ownership in said deeds.

130.291 $ 5.711.195

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


5

Consolidated Financial Statements


Statutory auditors’ report To the shareholders of MINEROS S.A.: I have audited the consolidated balance sheets of MINEROS S.A. and its subsidiaries PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. at December 31, 2011 and 2010 and the corresponding consolidated statements of income, of changes in the shareholders’ equity, of changes in financial position, and of cash flows for the years then ended, as well as the summary of the main accounting policies and other explanatory notes. Management is responsible for the preparation and correct presentation of the financial statements in conformity with the accounting principles generally accepted in Colombia. Such responsibility includes: designing, implementing and maintaining an internal control system adequate for the preparation and presentation of the financial statements, free from significant errors due to fraud or error, selecting and applying appropriate accounting policies, and establishing the accounting estimates that are reasonable under the circumstances. My responsibility is to audit said financial statements

62

and express an opinion thereon based on my audits. I did not audit the financial statements of Proyecto Sabaletas S.A.S., Operadora Minera S.A.S. and Exploradora Minera S.A.S., consolidated subsidiaries whose financial statements show total assets after elimination of reciprocal balances representing 3.11% and 3.32% of consolidated assets at December 31, 2011 and 2010, respectively, and revenues after elimination of reciprocal balances representing 4% and 7% of total consolidated revenues for the year ended on such dates. Such financial statements were audited by other statutory auditors whose reports have been provided to me. The opinion I express herein regarding the consolidated financial statements, in relation to the amounts included of such consolidated subsidiaries, is based solely, on the information provided by the statutory auditors of the subsidiaries. I obtained the information necessary to comply with my duties and carry out my work in accordance with auditing standards generally accepted in Colombia. Those standards require that I plan and perform the audit to satisfy myself that the financial statements are free from significant errors. An audit of financial statements includes examining, on a test basis, the

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

31, 2011 and 2010, the results of their operations, the changes in their equity, the changes in their financial position, and their cash flows for the years then ended, in conformity with accounting principles generally accepted in Colombia, applied on uniform basis.

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. February 27, 2012

CONSOLIDATED FINANCIAL STATEMENTS

evidence supporting the amounts and disclosures included in the financial statements. The audit procedures selected depend on the auditor’s professional judgment, including an evaluation of the risk of significant errors in the financial statements. In evaluating the risk, the statutory auditor considers the Company’s internal control relevant for the preparation and reasonable presentation of the financial statements, in order to design audit procedures appropriate to the circumstances. An audit also includes evaluating the accounting principles used and the significant accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements. I consider that my audits provide a reasonable basis for the opinion which I express. In my opinion, on the basis of my audit and that of other statutory auditors, the aforementioned consolidated financial statements, taken from the accounting books, present fairly, in every significant aspect, the financial position of MINEROS S.A., PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. at December

63


MINEROS S.A. AND SUBSIDIARIES

Consolidated balance sheet At december 31, 2011 and 2010 (In thousands of Colombian pesos) ASSETS

2011

2010

Note

CURRENT ASSETS Cash

$

Marketable securities

4

Subtotal - cash and cash equivalents Accounts receivable

3

Prepaid expenses TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT Cost of assets Accumulated depreciation

934.951

$

1.002.117

152.405.774

109.698.566

153.340.725

110.700.683

44.149.420

19.887.497

6.407.426

2.393.209

203.897.571

132.981.389

249.327.865 -128.297.670

228.928.357 -106.573.881

121.030.195

122.354.476

5.139.064 34.333.729 6.597.563 87.065.849

5.584.030 27.112.504 6.298.334 67.785.795

133.136.205

106.780.663

58.209.152

61.015.451

5

OTHER ASSETS Long-term accounts receivable Inventories Long-term investments Other

RE-APPRAISALS

6 7 8 9

10

TOTAL ASSETS MEMORANDUM ACCOUNTS

BEATRIZ E.URIBE RESTREPO President0

64

18

$

516.273.123

$

423.131.979

$

257.498.249

$

276.776.457

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A. AND SUBSIDIARIES

Consolidated balance sheet At december 31, 2011 and 2010 (In thousands of Colombian pesos) LIABILITIES AND EQUITY

2011

2010

Note

CURRENT LIABILITIES Financial liabilities Suppliers Accounts payable Taxes, liens and duties Labor liabilities Dividends

11

$

12 13 14

TOTAL CURRENT LIABILITIES

Equity tax payable Retirement pensions

145.654 4.007.816 11.675.378 41.580.522 4.888.550 7.647.494

87.173 3.838.820 9.239.033 17.728.804 4.251.404 6.768.958

69.945.414

41.914.192

9.446.081 710.272

687.418

80.101.767

42.601.610

158.953 1.551.099 16.912.520 58.209.152 11.191.283 -5.611.007 238.353.860 115.405.496

158.953 1.551.099 35.191.596 61.015.451 11.191.283 -5.611.007 185.166.909 91.866.085

12 15

TOTAL LIABILITIES

$

SHAREHOLDERS’ EQUITY Capital stock Additional paid-in capital Equity revaluation Revaluation surplus Reserve for repurchase of shares Treasury stock Other appropriated reserves Year's income

16 16 16 10 16 16

$

436.171.356

$

380.530.369

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

516.273.123

$

423.131.979

$

257.498.249

$

276.776.457

MEMORANDUM ACCOUNTS

BEATRIZ E.URIBE RESTREPO President0

17

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

CONSOLIDATED FINANCIAL STATEMENTS

TOTAL SHAREHOLDERS’ EQUITY

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

65


MINEROS S.A. AND SUBSIDIARIES

Consolidated income statement AT DECEMBER 31, 2011 AND 2010 (In thousands of Colombian pesos)

2011

2010

Note

PRECIOUS METALS PRODUCTION

$

Production costs

353.708.677

$

246.350.088

163.891.387

141.548.703

Administration expenses

10.360.435

10.178.080

OPERATING INCOME

179.456.855

94.623.305

-5.075.596

29.046.297

174.381.259

123.669.602

-58.975.763

-31.803.517

NON-OPERATING REVENUES (EXPENDITURES), NET

18

INCOME BEFORE PROVISION FOR INCOME TAX

Provision for income tax

YEAR'S NET INCOME

12

$

115.405.496

$

91.866.085

The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

66

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


BALANCES AT DECEMBER 31, 2011

Transfer of income Gift Equity tax Year's increase Year's income

BALANCES AT DECEMBER 31, 2010

Transfer of income Gift Equity tax Year's increase Year's income

BALANCES AT DECEMBER 31, 2009

-

-

-

-

1.551.099

-

-

158.953

-

-

$

-

-

1.551.099

-

158.953

-

1.551.099

-

$

$

-

158.953

$

$

$

11.191.283

-

-

-

-

-

11.191.283

-

-

-

-

-

11.191.283

Reserve for repurchase of shares

BEATRIZ E.URIBE RESTREPO President0

$

$

$

Capital

Additional Paid -in capital

(In thousands of Colombian pesos)

$

$

$

79.477

-

-

-

-

-

79.477

-

-

-

-

-

79.477

Legal Reserve

$ 19.535.253

-

-

-

-

2.400.000

$ 17.135.253

-

-

-

-

2.400.000

$ 14.735.253

$

$

$

-

-

-

-

-

-

-1.000.000

1.000.000

-

-

-

-1.000.000

1.000.000

Reserve for asset Reserve for protection gifts

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

($5.611.007)

-

-

-

-

-

($5.611.007)

-

-

-

-

-

($5.611.007)

Treasury Stock

APPROPRIATED

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

$

$

$

$ 238.353.860

-

-

-

-1.000.000

54.186.951

$ 185.166.909

-

-

-

-1.000.000

75.946.644

$ 110.220.265

Total other reserves

$ 115.405.496

115.405.496

-

-

-

-91.866.085

91.866.085

91.866.085

-

-

-

-114.611.642

$ 114.611.642

$ 16.912.520

-

-

-18.279.076

-

-

$ 35.191.596

-

-

-1.241.370

-

-

$ 36.432.966

$

$

58.209.152

-

-2.806.299

-

-

-

61.015.451

-

17.978.799

-

-

-

43.036.652

Surplus

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

218.739.130

-

-

-

-

50.786.951

167.952.179

-

-

-

-

72.546.644

95.405.535

Reserve available to shareholders' meeting

Revaluation

Equity Revaluation

Year's Income

Consolidated statement of changes in shareholders’ equity

MINEROS S.A. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

67

91.866.085

17.978.799

-1.241.370

-1.000.000

-38.664.998

311.591.853

$ 436.171.356

115.405.496

-2.806.299

-18.279.076

-1.000.000

-37.679.134

$ 380.530.369

$

Total Equity


MINEROS S.A. AND SUBSIDIARIES

Consolidated statement of changes in financial position FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands of Colombian pesos) 2011

2010

Financial resources generated by operations Net income Add (less) credits (charges) to income not affecting working capital Depreciation Amortization of intangible assets Provision for retirement pensions Amortization of deferred charges Depreciation charged to projects Effect on consolidation other than income statement

$

Working capital provided by operations Total sources of funds Increase in accounts payable Decrease in long-term accounts receivable

115.405.496

$

22.276.207 36.127 22.854 17.575.720 306.061 396.899

20.770.541 26.915 80.186 11.145.034 216.690 64.735

156.019.364

124.170.186

156.019.364

124.170.186

9.446.081 444.966

Total working capital obtained

91.866.085

-

165.910.411

124.170.186

37.682.985 21.257.986 1.000.000 44.805.405 18.279.075

445.940 38.729.736 22.581.132 1.000.000 22.856.128 1.241.369

123.025.451

86.854.304

WORKING CAPITAL USED IN: Increase in long-term accounts receivable Dividends paid Addition to property, plant and equipment, net Gifts Other assets Equity tax Total working capital used INCREASE IN WORKING CAPITAL CHANGES IN WORKING CAPITAL COMPONENTS: Increase (decrease) in current assets

$

42.884.960

$

37.315.881

$

70.916.182

$

33.249.574

0

Cash Marketable securities Accounts receivable Prepaid expenses

-67.166 42.707.208 24.261.923 4.014.217

Decrease (increase) in current liabilities

$

Financial liabilities Suppliers Accounts payable Taxes, liens and duties Labor liabilities Dividends payable Other liabilities

68

$

-58.481 -168.996 -2.436.345 -23.851.718 -637.146 -878.536 $

INCREASE IN WORKING CAPITAL

BEATRIZ E.URIBE RESTREPO President0

-28.031.222

442.626 28.815.123 1.598.616 2.393.209

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

42.884.960

4.066.307 -10.495 -994.045 624.934 -3.594.869 -850.943 -767.176 9.658.900,89

$

37.315.881

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion) F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A. AND SUBSIDIARIES

Statement of cash flows

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 (In thousands of Colombian pesos) 2011 CASH FLOWS FROM OPERATION ACTIVITIES Net income provided by operation activities: Depreciation Amortization of intangible assets Amortization of deferred charges Depreciation charged to projects Retirement pensions Effect on consolidation other than income statement

$

115.405.496

2010 $

91.866.085

22.276.207 36.126 17.575.720 306.061 22.855 396.899

20.770.541 26.915 11.145.034 216.690 80.186 64.735

156.019.364

124.170.186

-23.816.957 -4.014.217

-2.044.556 -2.393.209

168.996 2.436.345 23.851.718 878.536 637.146 9.446.081

994.045 -624.934 3.594.869 767.176 850.943 -9.658.901

9.587.649

-8.514.567

NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES

165.607.013

115.655.619

CASH FLOWS FROM INVESTMENT ACTIVITIES Acquisition of property, plant and equipment, net Acquisition of other assets, net

-21.257.987 -44.805.405

-22.581.132 -22.856.128

NET CASH USED IN INVESTMENT ACTIVITIES

-66.063.392

-45.437.260

CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) in financial liabilities Dividends declared Gifts Equity revaluation

58.481 -37.682.985 -1.000.000 -18.279.075

10.495 -38.729.736 -1.000.000 -1.241.369

NET CASH USED IN FINANCING ACTIVITIES

-56.903.579

-40.960.610

42.640.042 110.700.683

29.257.749 81.442.934

Changes in assets and liabilities (Increase) Decrease in: Accounts receivable Prepaid expenses Increase (Decrease) in: Suppliers Accounts payable Taxes, liens and duties Dividends payable Labor liabilities Other liabilities

CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR NET CHANGES IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD $

153.340.725

$

110.700.683

CONSOLIDATED FINANCIAL STATEMENTS

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD

The accompanying notes are an integral part of these financial statements

BEATRIZ E.URIBE RESTREPO President0

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Professional Card No. 32758-T

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

LINA MARÍA VELÁSQUEZ ÁLVAREZ Statutory Auditor T.P. 61321-T Designated by Deloitte & Touche Ltda. (See attached opinion)

69


Shareholders’ Meeting March 21 of 2012

Certification of Financial Statements The undersigned, Legal Representative and Chief Accounting Officer of the company, under whose responsibility the financial statements were prepared, in compliance with the bylaws, hereby declare that they have previously verified the assertions therein contained, which have been faithfully taken from the books.

BEATRIZ E.URIBE RESTREPO President

70

HÉCTOR TRESPALACIOS T. Chief Accounting Officer Mat. 32758-T

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


MINEROS S.A. Y SUBORDINADAS

Notas a los estados financieros Consolidados a diciembre 31 de 2011 y 2010 (Cifras expresadas en miles de pesos)

NOTE 1. OPERATIONS OF THE CONSOLIDATED COMPANIES

Mineros de Antioquia S.A. is a private corporation established on November 14 of 1974 by public deed No 6161 of the 4th Notary Public Office of Medellin for a term of ninety-nine (99) years. Through public deed No. 1038 of April 19 of 2004, it changed its corporate name to MINEROS S.A.

The Company has as its purpose the conduction of any type of business, activities, endeavors, acts and contracts related to the mining industry in general, of either precious metals, metallic and nonmetallic mineral substances or hydrocarbons. To comply with its corporate purpose, the Company’s operation center is located in El Bagre (Antioquia province) and its headquarters in Medellín.

The financial statements at December 31, 2011 are consolidated among MINEROS S.A., the controlling corporation, and the subsidiaries PROYECTO SABALETAS S.A.S, OPERADORA MINERA S.A.S and EXPLORADORA MINERA S.A.S. In 2010, financial statements consolidation was conducted among the same corporate bodies.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Initially incorporated as one-person company through private document subscribed on January 2 of 2008, filed with the Medellín Chamber of Commerce under No. 389. The corporation was transformed into a simplified joint stock company (S.A.S.) through private document of April 2 of 2009 filed with the Medellín Chamber of Commerce on May 13 of the same year under No. 6038. Its corporate purpose is to invest, directly or through contributions to corporations of any nature, in activities of preservation, exploration, exploitation, industrialization or development in any form, of renewable and non-renewable resources. The corporation has its operation center in the municipality of Titiribi (Antioquia province) and its administrative offices in Medellín. The company processes slag with gold-silver content in Sitio Viejo, municipality of Titiribi (Antioquia province). It also conducts at its own account and risk, exploration in other projects located around the country.

CONSOLIDATED FINANCIAL STATEMENTS

- PROYECTO SABALETAS S.A.S.

71


- OPERADORA MINERA S.A.S. Simplified joint stock company OPERADORA MINERA S.A.S. was incorporated according to Colombian regulation on March 10 of 2009, and its corporate purpose is to carry out all kinds of licit acts, especially in the areas of preservation, exploration, exploitation, industrialization and availing of any form of renewable and nonrenewable resources. The private document related to its incorporation was filed with the mercantile register of the Chamber of Commerce of Medellin City on April 2 of 2009, in book 9, under number 4129. The corporation has its operation center in the municipality of Zaragoza (Antioquia province), Naranjal and Corderito localities, and its administrative offices in MedellĂ­n. The duration of the company is indefinite.

- EXPLORADORA MINERA S.A.S.

Simplified joint stock company Exploradora Minera S.A.S. was incorporated through private document on March 15 of 2010, filed with the Medellin Chamber of Commerce on April 6 of same year under No. 5067. Its corporate purpose is to carry out any licit civil or commercial act, and its economic activity consists of conducting mining exploration works in the different work fronts and projects that MINEROS S.A. has around the country. For such effect, it has subscribed a delegated administration contract with the parent company in exchange for a remuneration.

ITEM Assets Liabilities Equity Income Statement

72

MINEROS S.A.

NOTE 2. ACCOUNTING POLICIES

The consolidated financial statements of MINEROS S.A. and its subsidiaries PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. have been prepared and presented according to accounting principles generally accepted in Colombia. Certain accounting principles applied for matters of consolidation of MINEROS S.A. and its subsidiaries, according to accounting principles generally accepted in Colombia, could disagree with the accounting principles generally accepted in other countries

Although they may differ in their final effect, the Management considers that the estimates and assumptions used were adequate under the circumstances and that they agree with the accounting principles generally accepted in Colombia. The main accounting policies used for the preparation of the consolidated financial statements are: Consolidation basis The attached consolidated financial statements include the financial statements of MINEROS S.A. and its subsidiaries PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. where MINEROS S.A. holds, as of December 31, 2011, 100% of shares. All significant balances and operations between the Companies were deleted during consolidation.

Assets, liabilities, equity and results of MINEROS S.A. and its subsidiaries as of December 31, 2011 and for the year ended on that date, are:

PROYECTO SABALETAS S.A.S.

OPERADORA MINERA S.A.S.

EXPLORADORA MINERA S.A.S.

$ 514.618.480

$ 11.417.311

$ 3.174.050

$ 1.455.558

78.050.225

1.631.030

1.797.392

1.036.598

436.568.255

9.786.281

1.376.658

418.960

$ 115.802.395

$ 2.782.301

$ 981.987

$ 145.303

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


Letter 05 of 1998 of the Superintendency of Corporations, in the cases of PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S., and EXPLORADORA MINERA S.A.S., the Companies classify investments as follows:

Methodology According to Article 122 of Regulatory Decree 2649 of 1993, for matters of consolidation, all balances and reciprocal operations among companies as on the closing date of such reports, and for the period mentioned, were deleted.

- Investments are classified as marketable and longterm, according to the intention of realization. Marketable investments are those easy to realize within a term of up to three calendar years, and for which, there is a serious intention of realization. Long-term investments are those which are seriously intended to be held for at least three calendar years.

Accounting system The Companies use the accrual accounting system, according to which revenues and expenditures are recorded when incurred, independently of whether payment or collection has been in cash. Monetary unit According to legal provisions, the monetary unit used by the Company for the balance sheet and income statement accounts is the Colombian Peso.

- Investments are classified as fixed-income and variable-income, depending on the return they generate.

Materiality The Company’s policy for disclosing accounting entries in its consolidated financial statements in order to determine their materiality is based on the relative importance of each sub-account with respect to the account group to which it belongs. Accordingly, balance sheet entries at December 31, 2011 representing 5% or more of current assets, other assets, current liabilities, long-term liabilities and equity are disclosed.

- According to control, they are classified as controlling and non-controlling, subject to the provisions of the Colombian Code of Commerce. - Based on the cause or reason motivating the investment, they are voluntary or mandatory. Property, plant and equipment These are recorded at cost, which includes inflation adjustments from January 1 of 1992 until December 31 of 2006. Maintenance and repair expenditures that do not increase the useful life of respective assets are recorded as a charge in the income statement, as they are incurred.

Investments Investments are recorded at cost or at the inflationadjusted cost until December 31, 2006, as the case may be, and which does not exceed sale value.

Based on External Circular Letter 11 of the Securities Superintendency (today Financial Superintendency) of 1998, in the case of MINEROS S.A., and Circular

Depreciation is calculated by the straight-line method, based on the estimated useful life of assets, using the following depreciation annual rates:

MACHINERY AND EQUIPMENT

ELECTRIC PLANTS AND NETWORKS

FURNITURE AND FIXTURES

DREDGES

TRANSPORTATION EQUIPMENT

COMPUTER EQUIPMENT

5%

10%

10%

10%

15%

20%

20%

CONSOLIDATED FINANCIAL STATEMENTS

BUILDINGS AND CONSTRUCTIONS

Given that the dredges work on a three-shift basis, the accelerated depreciation method provided for in Art. 140 of Tax Law is used.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

73


Inventories Inventories correspond to materials and consumables, dredge maintenance materials, parts and other accessories; they are valued at average cost using a permanent or continuous inventory system. Materials in transit and workshop orders under process are valued at their actual manufacturing or acquisition costs. Deferred charges As provided by accounting and fiscal regulations, amortization policies for deferred charges depend on their nature, as follows: A. Mining projects are amortized on the basis of the deposit’s estimated exploitation time, starting on the date when respective revenue starts. When exploration investments result to be fruitless, they are amortized in the same period when they are so determined. B. Agricultural projects (rubber plantation and biofactory of MINEROS S.A.) are amortized along the estimated cultivation time, once concluded the non-productive period. C. All other deferred charges are accounted at cost; amortization is carried out through the straightline method with periods ranging between one and five years. Exchange difference Transactions in foreign currency are recorded at the applicable exchange rate in force on the date of the transaction. Balances receivable of investments abroad, financial liabilities and accounts payable are adjusted monthly. The balances of such accounts at December 31 were translated into Colombian Pesos at the market representative rate for the end of the year certified by the Financial Superintendency ($1,942.70/USD in 2011 and $1,913.98/USD in 2010). Exchange difference resulting from accounts payable and foreign-currency liabilities used to purchase inventories, deferred charges, and property, plant and equipment is capitalized until the asset is in condition of being used or disposed of. From that moment on, the exchange difference is recorded against the income statement of the period. All other exchange gains and losses are recorded as financial revenue or expense.

74

Equity tax and surtax In accordance with the Law regulating accounting principles generally accepted in Colombia and considering the alternatives for accounting recording established there, the Company chose to record such tax and its corresponding surtax against the equity revaluation account. Taxes, liens and duties Income tax provision is determined on the basis of commercial income, adequately relating the period’s revenue to its corresponding costs and expenses, or, on the basis of presumptive income on taxable equity, in case it exceeds net taxable income. Labor liabilities Labor liabilities are adjusted at year’s closing date as provided by legal regulations and binding collective bargaining agreements. Retirement pension liabilities payable by the Company are determined based on actuarial studies as provided by legal regulations. Annual retirement pension provision is adjusted in a rational and systematical way. Pension payments are charged to the results of the year. Additional paid-in capital The excess of placed shares price over their par value is recorded in the capital surplus account, additional paid-in capital. Reappraisals These correspond to differences between commercial or cadastral appraisal and net book value, adjusted to inflation, of real estate property. Such reappraisals are recorded in separate assets and equity accounts as revaluation surplus, which is not distributable. Loss of value of real estate property is recorded through provision charged to the period’s expenses. Reappraisal of investments as of December 31, 2011 and 2010 was conducted as established in circular letter 011 of 1998 of the Securities Superintendency (today, Financial Superintendency) in the case of MINEROS S.A., and in Circular Letter 05 of 1998 of the Superintendency of Corporations, in the cases of PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. as follows:

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


- In the case of MINEROS S.A., for marketable variable-income investments when their sale value (stock exchange quote or intrinsic value) is higher than their cost, reappraisal affects the investment’s latest cost recorded, by increasing or decreasing its amount with a contra entry in the results of the period, recognizing the revenue or expense produced depending on the increase or decline of investment, respectively. - In the case of the Subsidiaries, for marketable variable-income investments, when their sale value (stock exchange quote or intrinsic value) is higher than cost, reappraisal is recorded for the period under assets and revaluation surplus under equity. When the sale value is lower than cost, the difference will affect reappraisal and revaluation surplus, when it is higher, a provision will be recorded in the income statement. - Long-term investments of controlled companies are accounted through the equity method. - When the sale value of long-term investments of non-controlled companies is higher than cost, reappraisal for the period is recorded under assets and revaluation surplus under equity. When the sale value is lower than cost, the difference will affect reappraisal and revaluation surplus, without limitation upon the fact that their net balance might be of a contrary nature.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

At December 31, 2011, commercial appraisals of MINEROS S.A. were updated on the basis of CPI for 2011 so as to establish assets’ respective appreciation (loss of value) with respect to net book value.

In the case of PROYECTO SABALETAS S.A.S., given the depletion of the slag deposited in Sitio Viejo, Titiribi municipality (Antioquia province) foreseen for the short term, conduction of technical appraisals for property, plant and equipment was not considered appropriate.

As of December 31, 2011, OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. did not own any property, plant and equipment.

Gifts Donations are recorded against fiscal period’s results or against occasional reserves established for such purpose by the Shareholders’ Meeting. Equity revaluation Balances at December 31, 2011 and 2010 correspond to inflation adjustments to equity accounts until December 31, 2006, minus the equity tax and corresponding surtax recorded in compliance with Law 1370 of 2009 and Legislative Decree 4825 of 2010. According to current regulations, this balance cannot be distributed as income until the Company is liquidated or capitalized. Memorandum accounts Control memorandum accounts record financial information for control, contingencies, and future transactions commitments; fiscal memorandum accounts record differences between per-books values and values for fiscal matters. CONSOLIDATED FINANCIAL STATEMENTS

In September of 2009, MINEROS S.A. hired commercial appraisals of property, plant and equipment which were conducted by Francisco Ochoa O. Propiedad Raíz – Avalúos TIN 70.037.897-4, a firm with main offices in the city of Medellín. Real estate property was appraised using the comparative or market method and cost or replacement method. In the case of machinery and equipment, quotes for similar machines and equipment were taken into account, their original value was updated translating it into United States Dollars on that date, and loss of value factors due to old age and use were later applied; also their current state was analyzed with technicians. Both assets under depreciation process and fully depreciated assets in use were appraised, with

the reappraisal of the totally depreciated assets in use recorded under memorandum accounts.

Consolidated net income per share Consolidated net income per share is calculated on the weighted average number of outstanding subscribed shares during each period. Statement of cash flows The statement of cash flows was prepared by the indirect method.

75


NOTE 3. ACCOUNTS RECEIVABLE As of December 31, accounts receivable included:

ITEM

2011

Customers

2010 $ 21.206.574

$ 8.199.142

11.583.628

4.579.175

846.791

812.273

Advance payments to suppliers and contractors

3.858.367

2.790.496

Yields receivable

6.125.518

3.200.599

528.542

305.812

$ 44.149.420

$ 19.887.497

Public entities Loans to associates

Other TOTAL

NOTE 4. MARKETABLE SECURITIES At December 31, marketable securities included:

ITEM

2011

2010

Participation in trust estates with trust companies (1)

$ 1.371.073

$ 1.754.338

Trust funds administered by brokerage firms (on demand)

1.977.106

2.518.903

Certificates of deposit

45.000.000

33.831.162

Government bonds

10.750.000

11.000.000

Private bonds

24.126.804

19.471.270

Treasury bonds

39.476.567

23.362.447

Shares in local corporations (2)

15.960.972

9.936.187

Shares in foreign corporations (3)

1.448.782

520.726

Hedging operations

7.220.082

18.641

Other investments abroad (4)

3.782.383

4.244.593

Other investments (5)

3.285.077

3.173.275

154.398.846

109.831.542

Provision for loss of value of investments in shares of local corporations

(1.993.072)

(118.458)

Provision for loss of value of investments in shares of foreign corporations

-

-14.518

$ 152.405.774

$ 109.698.566

Subtotal

TOTAL

(1) Corresponds to rights owned at December 31, 2011 and 2010 in P195 Grupo Contempo Ltda. (Oficinas Oxo – Bogotá) Trust Estate in Fidubogotá S.A. Along 2011, $383,265 (2010 $313,173) was received from this Trust Estate as refunded contributions.

76

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


(2) At December of 31 of 2011, the Company had as marketable securities the following investments in shares of Colombian corporations:

NÚMERO ACCIONES (UNIDADES)

ISSUER Ecopetrol S.A.

VALOR DE MERCADO (VALOR SEGÚN LIBROS) $ 2.002.416

70.599

1.735.432

ISAGEN S.A. E.S.P. *

539.000

1.360.934

Bancolombia S.A.

41.000

1.157.515

Cementos Argos S.A. *

99.900

1.156.314

ISA S.A. E.S.P. *

86.300

1.154.927

Grupo de Inversiones Suramericana S.A.-ADP

30.770

1.011.830

Pacific Rubiales Energy Corp. *

16.110

991.652

Suramericana de Inversiones S.A. *

26.400

994.369

154.500

870.461

1.658.000

718.245

24.500

507.940

Grupo Aval – ADP *

343.248

446.222

Grupo Aval – Common shares *

195.213

253.777

Fogansa S.A. *

175.000

350.000

Conconcreto S.A. *

145.153

220.763

Cartón de Colombia S.A.

27.200

218.144

Canacol Energy Ltd. *

75.000

213.595

5.367

202.121

10.600

199.016

10.000.000

99.400

95.729

57.437

Corficolombiana S.A. *

654

22.691

Almacenes Éxito S.A.

619

15.771

Grupo Nutresa S.A. *

Colinversiones S.A. E.S.P * Helm Bank S.A. * Banco Davivienda S.A.

Banco de Occidente S.A. * Inversiones Argos S.A. * Tablemac S.A. Banco Popular S.A. *

TOTAL *

CONSOLIDATED FINANCIAL STATEMENTS

471.200

$ 15.960.972

Recorded at purchase price, because of their loss of value.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

77


As on December of 2008, MINEROS S.A. and SUBSIDIARIES had as marketable securities the following investments in shares of Colombian corporations:

ISSUER

NÚMERO ACCIONES (UNIDADES)

VALOR DE MERCADO (VALOR SEGÚN LIBROS)

Suramericana de Inversiones S.A.

30.900

Cementos Argos S.A. *

99.900

1.156.314

Grupo Nutresa S.A.

37.679

1.019.334

384.000

1.006.721

ISA S.A E.S.P.

60.300

852.277

Pacific Rubiales Energy Corp.

11.910

751.866

165.200

672.402

Corficolombiana S.A.

15.017

532.049

Bancolombia S.A.

17.000

502.222

Colinversiones S.A. E.S.P *

74.637

452.385

7.700

446.310

Grupo Aval S.A.

202.061

346.329

Fogansa S.A. *

175.000

350.000

Helm Bank S.A.

658.000

303.266

5.367

202.121

10.000.000

96.800

Banco Popular S.A.

95.729

57.438

Conconcreto S.A.

13.153

22.107

ISAGEN S.A. E.S.P

Ecopetrol S.A.

Banco de Bogotá S.A.

Banco de Occidente S.A. Tablemac S.A.

TOTAL

$

1.166.246

$ 9.936.187

* Recorded at purchase price, because of their loss of value. (3) As on December of 2008, MINEROS S.A. and SUBSIDIARIES had in their investment portfolio the following investments in shares of foreign corporations:

ISSUER

NÚMERO DE ACCIONES

VALOR DE MERCADO (VR. SEGÚN LIBROS)

Quia Resources Inc.

2.620.000

$ 794.020

Petrominerales Ltd.

6.150

193.396

Compañía de Minas Buenaventura

4.880

363.478

Merrill Lynch & Co. Inc.

2.709

97.888

TOTAL

$ 1.448.782

Investments in shares abroad: A. Were purchased in Dollars in the stock exchanges of different cities of the United States, and their cost was translated into Colombian Pesos at December 31 of 2011, at the Market Representative Rate. B. Their market-price re-appraisal was based on the closing price at the corresponding stock exchange on the last business day of 2011. 78

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


C. Additionally, the following information is disclosed: As of December 31 of 2010, MINEROS S.A. and its subsidiaries had in their investment portfolio the following investments in shares of foreign corporations:

ISSUER

No. SHARES

COST

MARKET VALUE

APPRECIATION (LOSS OF VALUE)

Merrill Lynch & Co. Inc.

2.769

$ 129.624

$ 115.106

$ (14.518)

Petrominerales Ltd.

6.150

391.102

391.102

-

$ 520.726

$ 506.208

$ (14.518)

TOTAL (4) Other Investments abroad

These are Exchange Traded Funds –ETF– established overseas, that replicate, in general terms, an international financial asset and are traded in stock exchanges as follows:

FUND

MARKET VALUE (Book value)

No. UNITS

SPDR S&P 500 ETF TR.

6.600

$ 1.609.138

17.616

1.298.406

Vanguard INTL Equity Index FD

7.207

555.141

Financial Sector SPDR (XLI)

5.566

140.570

Ishares Xinhua China 25 (FXI)

1.714

116.110

762

63.018

Ishares MSCI Emerging MKT (EEM)

Ishares S& P Latin América 40 (ILF) TOTAL

$ 3.782.383

Investment cost in dollars is represented at the Market Representative Rate certified by the Financial Superintendency at December 31, 2011. Appreciation (loss of value) of investment in each fund is established at month’s closing on the basis of the respective index market quote, with charge (credit) to the income statement. In 2011, the Company registered against results, as adjustment to market value of these investments, loss of value for $517,609. In 2010, it recorded revenues from appreciation for $354,730. At December 31, 2010, ETF included:

FUND

MARKET VALUE (Book value)

No. UNITS

Ishares MSCI Emerging MKT (EEM)

6.600

$

1.588.509

16.826

1.534.228

Vanguard INTL Equity

7.207

658.390

Financial Sector SPDR (XLI)

5.566

169.919

Ishares Xinhua China 25 (FXI)

1.714

141.359

Ishares S& P Latin América 40 (ILF)

762

78.552

Market Vectors ETF TR Brazil

667

73.636

TOTAL

CONSOLIDATED FINANCIAL STATEMENTS

SPDR S&P 500 ETF TR.

$ 4.244.593 C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

79


(5) Other investments

Other investments include the following:

DETAIL

2011

Commercial papers Balance of overnight operations in Bancolombia Miami Money market accounts abroad. TOTAL

2010

$ 3.000.000

$ 3.000.000

194.270

95.699

90.807

77.576

$ 3.285.077

$ 3.173.275

The Company’s management considers that adequate investment portfolio diversification exists in order to reduce financial risk.

NOTE 5. PROPERTY, PLANT AND EQUIPMENT At December 31, this account included:

ASSET

2011

Land

2010 $ 2.074.927

$ 1.407.388

2.655.348

2.655.348

Buildings and constructions

14.735.574

12.146.210

Constructions in progress and machinery under assembly

11.131.078

5.454.719

152.593.535

149.950.379

56.851.041

48.870.597

903.851

717.095

7.234.797

6.751.616

Computer equipment

989.631

974.153

Other assets

158.083

852

Subtotal

249.327.865

228.928.357

Less: Accumulated depreciation

(125.642.322)

(103.918.533)

(2.655.348)

(2.655.348)

$ 121.030.195

$ 122.354.476

Mining properties

Machinery and equipment Electric plants and networks Furniture and fixtures Transportation equipment

Accumulated depletion TOTAL

NOTE 6. LONG-TERM ACCOUNTS RECEIVABLE Corresponds to balances payable by MINEROS S.A. workers from loans granted for periods longer than one year, whose reclassification as long-term receivables was considered prudent at December 31, as follows:

ITEM Housing loans Vehicle loans TOTAL 80

2011

2010 $ 5.062.772

$ 5.482.647

76.292

101.383

$ 5.139.064

$ 5.584.030

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 7. INVENTORIES At December 31, this account included:

ITEM

2011

Materials and consumables

2010 $ 31.465.116

$ 21.681.231

Materials in transit

1.128.505

3.011.168

Workshop orders under process

1.260.003

2.198.615

480.105

221.490

$ 34.333.729

$ 27.112.504

Other TOTAL

NOTE 8. LONG-TERM INVESTMENTS At December 31, 2011, long-term investments included:

CORPORATION

PARTICIPATION %

Nº OF SHARES

ADJUSTED COST

SALE VALUE OR BOOK VALUE

RE-APPRAISALS (LOSS OF VALUE)

Unipalma de los Llanos S.A.

17.74%

493.214.074

$ 6.213.743

$ 18.983.810

$ 12.770.067

Compañía Minera de Ataco S.A.S.

100%

20.000

200.000

202.521

2.521

Distrito de Negocio S.A.S.

40%

80.000

80.000

80.000

-

Club de Banqueros (un derecho)

N.A.

N.A.

4.500

4.500.

-

6.498.243

19.270.831

12.772.588

1.60%

124.399

99.320

26.248

(73.072)

99.320

26.248

(73.072)

$ 6.597.563

$ 19.297.079

$ 12.699.516

Subtotal Promotora de Proyectos S.A. Subtotal TOTAL At December 31, 2010, long-term investments included:

Unipalma de los Llanos S.A. Club de Banqueros (right)

PARTICIPATION %

Nº OF SHARES

SALE VALUE OR BOOK VALUE

RE-APPRAISALS (LOSS OF VALUE)

17.74%

493.214.074

$6.213.743

$ 15.684.208

$ 9.470.465

N.A.

N.A.

4.500

4.500

-

6.218.243

15.688.708

9.470.465

80.091

12.989

(67.102)

80.091

12.989

(67.102)

$ 6.298.334

$ 15.701.697

$ 9.403.363

Subtotal Promotora de Proyectos S.A.

ADJUSTED COST

1.68%

Subtotal TOTAL

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

60.302

CONSOLIDATED FINANCIAL STATEMENTS

CORPORATION

81


As provided in Second Title, Chapter I, number 1.8 of External Circular Letter 02 of 1998 of the Securities Superintendency (today, Financial Superintendency), the following is added regarding long-term investments:

CORPORATION

ECONOMIC ACTIVITY

Unipalma de los Llanos S.A.

Agro-industry

Promotora de Proyectos S.A. Compañía Minera de Ataco S.A.S. Distrito de Negocio S.A.S.

ACCRUED INCOME 2011

ACCRUED INCOME 2010

$ 238.422

$ 650.531

Investor

-

-

Mining

-

-

Construction

-

-

The Company does not consider redemption of permanent investments within the three (3) calendar years following the closing date of the Financial Statements.

NOTE 9. OTHER ASSETS As of December 31, this account included:

CLASE DE ACTIVO

2011

2010

Financial leasing contracts: Net fixed assets (vehicles) acquired through financial leasing with Leasing Bancolombia

$107.352

$108.488

72.743.020 *

42.453.298 *

3.781.997

2.579.607

10.433.480

22.644.402

$ 87.065.849

$ 67.785.795

Projects: Amount invested in exploration to determine possible economically exploitable gold deposits. (Distrito El Bagre, Join Venture Anglogold Ashanti and other projects). Costs and expenses incurred in rubber plantation project on the Company’s land. Deferred charges Balance to be amortized of exploration, development, and pre-operating costs and expenses of the La Ye mine (entered operation in May 2010) TOTAL *

82

Balance after consolidation reciprocal deletions.

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 10. RE-APPRAISALS As on December 31, assets re-appraisals included:

ASSET

2011

2010

PROPERTY, PLANT AND EQUIPMENT Land

$ 8.110.387

$ 4.727.092

4.679.172

3.777.676

Machinery and equipment

21.851.357

34.042.029

Transportation equipment

930.931

703.081

7.600.312

6.031.198

$ 43.172.159

$ 49.281.076

Rights in trust estates Grupo Contempo Oficinas OXO Trust Estate)

2.337.477

2.331.012

Re-appraisal in long-term investments, net (See Note 8)

12.699.516

9.403.363

SUBTOTAL

$ 15.036.993

$ 11.734.375

TOTAL

$ 58.209.152

$ 61.015.451

2011

2010

Buildings

Aqueducts, plants and networks SUBTOTAL SECURITIES

NOTE 11. FINANCIAL LIABILITIES At December 31, financial liabilities included:

ITEM Credit cards Financial leasing contracts (1) TOTAL

$ 62.912

$ 18.120

82.742

69.053

$ 145.654

$ 87.173

(1) At December 31 of 2011, financial leasing contracts No. 103632 , 108668 and 121708 have been subscribed with Leasing Bancolombia S.A. for CONSOLIDATED FINANCIAL STATEMENTS

purchase of three two vehicles, as follows:

CONTRACT

INSTALLME TS PENDING

PURCHASE OPTION

January 3, 2014

24

$ 849

11.08% E.A.

$ 1.408

40.657

March 15, 2010

39

595

17% E.A.

3.946

30.195

March 7, 2016

51

350

8.34% E.A.

2.345

INSTALLMENTS

BALANCE

103632

52

$ 11.890

108668

60

121708

60

TOTAL

MATURITY

$ 82.742

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

$ 1.794

RATE

ACCRUED INTEREST

$ 7.699 83


At December 31 of 2011, financial leasing contracts No. 103632 , 108668 and 121708 have been subscribed with Leasing Bancolombia S.A. for purchase of three two vehicles, as follows:

CONTRACT

INSTALLME TS PENDING

PURCHASE OPTION

January 3, 2014

36

$ 849

11.08% E.A.

$ 4.091

52.076

March 15,

51

595

17% E.A.

3.451

$ 69,053

2010

INSTALLMENTS

BALANCE

103632

52

$ 16.977

108668

60

TOTAL

MATURITY

ACCRUED INTEREST

RATE

$ 1.444

$ 7.542

NOTE 12. TAXES, LIENS AND DUTIES Income tax and surtaxes provision as of December 31 included: MINEROS S.A. Current year income tax

2011

2010

$ 56.846.805

$ 29.967.672

1.535.451

1.726.656

506.155

71.858

87.352

37.331

$ 58.975.763

$ 31.803.517

PROYECTO SABALETAS S.A.S. Current year income tax OPERADORA MINERA S.A.S. Current year income tax EXPLORADORA MINERA S.A.S. Current year income tax TOTAL

The Companies are subject to income tax at a nominal rate of 33%, applicable to taxable income. Current liabilities show the net balance payable by the Companies for income tax, after discounting withholding tax applied to each of them and prepaid taxes, as well as the balance payable of other taxes, as follows: COMPANY

2011

2010

$ 36.244.513

$ 16.098.924

4.569.770

-

Income tax

469.207

1.552.698

Short-term equity tax (1)

153.272

-

120.445

77.182

23.315

-

$ 41.580.522

$ 17.728.804

MINEROS S.A. Income tax Short-term equity tax (1) PROYECTO SABALETAS S.A.S.

OPERADORA MINERA S.A.S. Sales tax Nov-Dec EXPLORADORA MINERA S.A.S. Income tax TOTAL

84

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


(1) The Companies, as provided in Law 1370 of 2009 and Legislative Decree No. 4825 of 2010, determined equity tax taking as basis net fiscal equity held on January 1, 2011 at a tax rate of 4.8% plus 1.2% surtax. Tax returns were filed in May of 2011; payment will be made in eight equal installments in 2011, 2012, 2013 and 2014 MINEROS S.A.’s and Proyecto Sabaletas S.A.S’ balances payable corresponding to 2013 and 2014 for $9,139,536 and $306,545, respectively, were classified as long-term liabilities.

Operadora Minera S.A.S. and Exploradora Minera S.A.S. are not liable for such tax givens that they do not meet the required amount of fiscal equity.

NOTE 13. LABOR LIABILITIES As of December 31, labor liabilities included:

ITEM Severance payments

2011 $ 3.079.274

$ 2.615.317

492.256

299.909

1.034.497

1.022.291

282.523

313.887

$ 4.888.550

$ 4.251.404

Interest on severance payments Vacations Salaries payable TOTAL

2010

NOTE 14. DIVIDENDS PAYABLE The balance at December 31 corresponds to:

ITEM Regular dividends declared (1) Former periods dividends Accrued dividends payable

2010

$ 7.065.560

$ 6.280.498

581.934

395.036

-

93.424

$ 7.647.494

$ 6.768.958

CONSOLIDATED FINANCIAL STATEMENTS

TOTAL

2011

(1) As recorded in Minutes No. 50 of the Shareholders’ Meeting of MINEROS S.A. of March 2 of 2011, the motion for dividend payment was approved. Monthly dividend is $9 per share on total 261,687,402 outstanding shares, for a monthly value of $2,355,186,618 for the April-2011-March-2012 period, payable between the 10th and the 20th day of each month. Shareholders registered in the shareholder register on the ex-dividend day of the same period, are entitled to the month’s dividend, under the terms indicated in External Circular Letter No. 13 of 1998, and External Circular Letter No. 004 of 1999 of the Securities Superintendency (today Financial Superintendency).

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

85


Payment of extra dividend of $36 per share payable in July of 2011 was also approved in such Shareholders’ Meeting (Minutes No. 50). $37,682,986 thousand was appropriated from earnings of the year 2010 for payment of dividends. For the current fiscal year, $30,617,426 thousand has been accrued for the periods between April and December.

As approved in Minutes No. 3 of the Shareholders’ Meeting of PROYECTO SABALETAS S.A.S held on February 24, 2011, from 2010 earnings ($3,471,364), 10% ($347,136) was appropriated for legal reserve; the remaining balance for $3,124,228 was paid as dividends to its single shareholder.

According to Minutes No. 4 of the Shareholders’ Meeting of OPERADORA MINERA S.A.S. held on February 25, 2011, $143,375 was appropriated to establish equity reserves; a similar situation happened with EXPLORADORA MINERA S.A.S. where 2010 earnings for $73,657 were appropriated, as approved by Minutes No. 1 of the Shareholders’ Meeting held on February 25, 2011.

NOTE 15. RETIREMENT PENSIONS RETIREMENT PENSIONS The retirement pensions currently under the responsibility of Mineros S.A. correspond to those workers, who on the date of the ISS transfer Resolution (November of 1997), had expectations to qualify for the special retirement pension agreed in the Collective Bargaining Agreement (18 years of service, 47 years of age), and therefore, the recognition date depended on the worker’s will, or to those workers, who on the date of the same Resolution were not active Company workers, and had retired with the expectation of retirement pension, with only the age requirement pending.

Fiscal regulation is used as the basis for recording of retirement pensions. The Company has carried out actuarial calculations for retirement pensions on the basis of the technical parameters determined in Decree 2498/88. These parameters were modified as of 1998 upon issuance of Regulatory Decree 1517/98 (Paragraph 1, Article 1) and also by Article 1 of Decree No. 2783 of December 20 of 2001, by Article 1 of Regulatory Decree No. 51 of 2003, and, recently, by Article 1 of Decree No. 4565 of December 7 of 2010, distributing the percentage to amortize actuarial calculation until 2029 in linear form. At December 31 of 2011, the accumulated amortized percentage of the actuarial calculation stands at 59.97% (55.97% at December 31 of 2010). At December 31, retirement pensions included:

86

ITEM

2011

2010

Pension liabilities according to actuarial estimates

$ 1.184.324

$ 1.228.128

Less: Retirement pension provision recorded by the Company

(474.052)

(540.710)

RETIREMENT PENSIONS TO BE PROVIDED IN THE NEXT 18 YEARS

$ 710.272

$ 687.418

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


As of December 31, the value carried to expenses breaks down as follows:

ITEM

2011

Pension appropriations Pension payments TOTAL

2010

$ 22.855

$ 80.186

171.220

151.952

$ 194.075

$ 232.138

Pension liabilities correspond to seventeen (17) people at December 31 of 2011 and 2010. PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S. are not liable for pension liabilities since such risk has been assumed by ISS and private pension funds.

NOTE 16. EQUITY A. Capital Pubic deed 1030 of April 13 of 2005 of Notary Public Office 17 of Medellin formalized Minutes 44 of the Regular Shareholders’ Meeting of March 18 of 2005, where the authorized capital of $200,000 was divided into 400,000,000 common shares, each with a par value of fifty cents ($0.50). Of these shares, 317,906,252 had been subscribed and paid for at December 31 of 2011 and 2010. At December 31 of 2011 and 2010, reserve for repurchase of shares totals $11,191,283.

At December 31 of 2011 and 2010, total 56,218,850 repurchased shares stand at $5,611,007 (no repurchase of shares took place along the years 2011 or 2010).

Subscribed and paid-in capital of PROYECTO SABALETAS S.A.S. is represented by 337,000 shares with par value of $10,000 each. Subscribed and paid-in capital of OPERADORA MINERA S.A.S. is represented by 20,000 shares with par value of $10,000 each.

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Subscribed and paid-in capital of EXPLORADORA MINERA S.A.S. is represented by 20,000 shares with par value of $10,000 each.

For matters of consolidation of financial statements, total subscribed and paid-in capital and corresponding equity entries of PROYECTO SABALETAS S.A.S., OPERADORA MINERA S.A.S. and EXPLORADORA MINERA S.A.S., were deleted. B. Legal reserve Colombian law requires the Companies to transfer at least 10% of annual net income to a legal reserve until the balance of the reserve is equal to 50% of subscribed capital. Such reserve cannot be distributed but can be used to absorb losses. C. Equity revaluation and additional paid-in capital Equity revaluation and additional paid-in capital cannot be distributed as earnings but may be capitalized tax-free.

CONSOLIDATED FINANCIAL STATEMENTS

According to the Colombian Code of Commerce (Article 396), as long as these shares remain the property of the corporation, the rights inherent to them shall be suspended.

Decline in equity revaluation account with respect to December 31 of 2010 is explained by the equity tax and corresponding surtax calculated by MINEROS S.A. for year 2011 (Law 1370 of 2009 and Legislative Decree 4825 of 2010).

87


NOTE 17. MEMORANDUM ACCOUNTS Memorandum accounts include fiscal accounts, guarantees granted and disclosure of contingent liabilities and contingent rights as follows

MEMORANDUM ACCOUNTS Difference between per-books income and fiscal income

2011 $

2010 29.685

$

38.354.939

Difference between per-books equity and fiscal equity

57.634.985

57.396.331

Special 40% deduction on investment in real incomeproducing fixed assets - Article 8 of Law 1111 of 2006)

-

9.869.633

$ 57.664.670

$ 105.620.903

70.000.000

70.000.000

240.000

200.000

Retirement pensions policy reserve

6.762.621

6.762.621

Contingent rights for civil work contracts

1.711.673

1.603.050

900.000

900.000

118.969.285

85.654.933

1.250.000

1.250.000

-

4.784.950

$ 257.498.249

$ 276.776.457

Subtotal fiscal memorandum accounts Infrastructure leasing contracts pending execution (1) Contingent labor liabilities

Promissory notes received as collateral Appreciation of fully depreciated property, plant and equipment (2) Pledge on personal property without ownership Stand-by letters of credit TOTAL

(1) Infrastructure leasing contracts Nos. 119709 and 119710 subscribed by MINEROS S.A. on December 28 of 2010 with Leasing Bancolombia S.A. for expansion of Central HidroelĂŠctrica Providencia I and construction of Central HidroelĂŠctrica Providencia III, worth $12,000,000 and $58,000,000,000 respectively, for a duration of 144 months and with interest rate equivalent to DTF T.A., plus 3.25 points for both contracts. At December 31, 2011, Leasing Bancolombia S.A. has disbursed for these contracts $1,367,019 (contract 119709) and $4,520,999 (contract 119710). In 2011, MINEROS S.A. recorded $21,852 and $62,795, respectively, as interest on advance disbursements made by Leasing Bancolombia S.A. (2) In accordance with the provisions of Communication No. 2010045038-011 of August 13 of 2010 of the Financial Superintendency regarding recording of this kind of appreciations.

88

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


NOTE 18. NON-OPERATING REVENUES AND EXPENDITURES As of December 31, non-operating revenues and expenditures included:

NON-OPERATING REVENUES

2011

Financial yields

$

Exchange difference

2010

7.182.759

$

4.358.668

4.120.174

1.950.972

Revenue from gold price hedge contracts

837.505

5.712.660

Dividends

572.466

11.225.720

Revenues from re-appraisal of shares

222.156

1.677.880

Income from the sale of investments

162.172

13.559.203

Insurance indemnities

145.724

289.768

-

268.802

2.862.115

2.253.709

TOTAL

$ 16.105.071

$ 41.297.382

NON-OPERATING REVENUES

2011

2010

Financial yields

$

$

Recoveries and realizations Other

4.954.463

2.388.854

3.873.125

432.489

Revenue from gold price hedge contracts

3.222.619

2.615.313

Dividends

1.544.687

623.576

Revenues from re-appraisal of shares

396.877

1.022.640

Income from the sale of investments

301.216

480.407

Insurance indemnities

216.920

26.338

6.838

300.158

6.663.922

4.361.310

TOTAL

$ 21.180.667

$ 12.251.085

TOTAL NET

$ (5.075.596)

$ 29.046.297

Recoveries and realizations Other

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

CONSOLIDATED FINANCIAL STATEMENTS

Exchange difference

89


NOTE 19. ADDITIONAL DISCLOSURES The effect of consolidation represented in the financial statements as of December 31, 2011 and 2010, and for the years ended on such dates, increase in assets of $1,654,643 for 2011 and of $2,572,870 for 2010; increase in liabilities of $2,051,542 for 2011 and of $2,576,722 for 2010; and a decrease in equity of $396,899 for 2011 and $3,582 for 2010. Personnel and associated expenses:

COMPANY Mineros S.A.

SENIOR LEVEL STAFF

OTHER EMPLOYEES

TOTAL

$ 4.189.886

$ 39.731.413

$ 43.921.299

-

720.519

720.519

Operadora Minera S.A.S

366.599

8.894.202

9.260.801

Exploradora Minera S.A.S

159.743

4.129.258

4.289.001

$ 4.716.228

$ 53.475.392

$ 58.191.620

Proyecto Sabaletas S.A.S.

TOTAL

PERSONNEL EXPENSES

COMPANY Mineros S.A.

SENIOR LEVEL STAFF

OTHER EMPLOYEES

TOTAL

$ 4.189.886

$ 39.731.413

$ 43.921.299

-

720.519

720.519

Operadora Minera S.A.S

366.599

8.894.202

9.260.801

Exploradora Minera S.A.S

159.743

4.129.258

4.289.001

$ 4.716.228

$ 53.475.392

$ 58.191.620

Proyecto Sabaletas S.A.S.

TOTAL

NOTE 20. SUBSEQUENT EVENTS 1. In January of 2012, MINEROS S.A. subscribed agreements with foreign companies that were timely reported to the securities market through the relevant information system established by the Financial Superintendency, as follows:

90

A. With Canadian Quia Resources Inc., to purchase 6,700,000 units for CAD 1,005,000 equivalent to 7.8% participation in this corporation. Each unit includes one common share plus the option to acquire, for CAD 0.30, an additional half common share before January 6, 2014. Upon

F I N A N C I A L S TAT E M E N T 2 0 1 1 - M I N E R O S S . A .


this acquisition MINEROS S.A. becomes owner of 9,320,000 common shares representing close to 10.9% shareholdings in the foreign corporation.

possibility of commencing exploration to define participation, in association with this corporation, in a mining project with 85% ownership in said deeds.

B. With US corporation Goldsands Development Company, to start in February of 2012 due diligence activities on 50 mining titles held by such company in northeastern Peru in order to evaluate the

2. After close of general-purpose financial statements of MINEROS S.A. as of December 31, 2011, DIAN issued the following administrative acts related to ongoing reimbursement requests:

RESOLUTION Nยบ

DATE

ITEM

1325

February 3, 2012

March - April of 2011 VAT

$ 1.791.935

1326

February 3, 2012

July - August of 2011 VAT

1.800.439

1327

February 3, 2012

Sept - October of 2011 VAT

1.988.530

1288

February 2, 2012

Excess tax withholding April of 2011

130.291

TOTAL

VALUE

$ 5.711.195

CONSOLIDATED FINANCIAL STATEMENTS

C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

91


Financial statement 2011

Wetlands created after our mining operations

Teléfono (Phone): +57 4 2665757 Carrera 43 A N° 14 -109, piso 6 Edificio Nova Tempo Medellín, Colombia Teléfono (Phone): +57 4 8372383 Calle 46 N° 46 - 01 El Bagre, Antioquia, Colombia

www.mineros.com.co

Financial Statement 2011  

Mineros 2012

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