Squeaky bum time for Pathfinder Minerals

I try to stay away from chat rooms for day traders as they tend be full of conspiracy theories that are impossible to stand up (for journalists) and lose long-term investors money. But as we slip into the quiet period of the summer I thought I would cast my eye over some of the forums - and low and behold it would appear one reader has actually stumbled across a genuine story.

The tale involves Pathfinder Minerals, the Mozambique-based mining company at the centre of a bitter row between a local general and the company's management team.

Well, somebody on the LSE forum has just spotted some rather worrying piece of prose in the company's latest annual report.

Here is the link to the thread - http://www.lse.co.uk/SharePrice.asp?shareprice=PFP - and I will paste the relevant paragraphs below:

"EVENTS SINCE THE END OF THE YEAR

These financial statements do not make provision for a claim from HMRC, received by the Company in April this year, for the return of all the VAT recovered by the Company since HMRC accepted the Company’s VAT registration in October 2013. With the addition of interest, this claim amounts to approximately £1.1 million. Professional advice on the claim obtained by the Directors is that it has been based on incorrect assumptions about the Company’s business plan and consequently is flawed. The Company is therefore challenging the claim.

Pending resolution of this matter, material uncertainties therefore exist about the ability of the Company to continue as a going concern. The Directors believe that the going concern basis of accounting nevertheless remains appropriate and so these financial statements have been prepared on the presumption that the Company remains a going concern. In their report the auditors refer to the Board’s decision to account in this manner but do not qualify their report on these financial statements."

And within the Annual Report the company auditors, Chapman Davis, go on to write:

"Emphasis of matter – going concern
In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosures made in the note 2 to the financial statements and in the Directors’ Report concerning the Company’s ability to continue as a going concern when taking into account the contingent liability in relation to the ongoing VAT enquiry disclosed in note 16.

10

Report of the Independent Auditors to the Members of
Pathfinder Minerals Plc – continued
The existence and materiality of the contingent liability in relation to VAT repayable cast significant doubt about the Company’s ability to continue as a going concern in the absence of further funding. Uncertainty therefore exists concerning whether the Company will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial statements. The financial statements do not include the adjustments that would result if the Company was unable to continue as a going concern." 

So, whilst it's great to see a genuine scoopette revealed in a chat room by day traders, I guess it's a shame (for them) the news may actually result in them losing a packet!

A spokesperson for Pathfinder Minerals declined to comment.