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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Strategic Minerals Plc | AQSE:SML.GB | Aquis Stock Exchange | Ordinary Share | GB00B4W8PD74 | Ordinary shares |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.25 | 0.20 | 0.30 | 0.25 | 0.25 | 0.25 | 0.00 | 07:01:06 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMSML
RNS Number : 8682N
Strategic Minerals PLC
28 September 2023
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
28 September 2023
Strategic Minerals plc
("Strategic Minerals", "SML", the "Group" or the "Company")
Interim Results
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing mineral company actively developing critical minerals focused projects, is pleased to announce its unaudited interim profit for the half year ended 30 June 2023.
Financial Highlights
-- Maintained operating profitability with interim six-month pre-tax profit of US$54,000 (H1 2022: US$248,000) despite reduced sales in the period.
-- Continued after tax profit for the interim six months of US$38,000 (H1 2022: US$127,000) consistent with the drop in sales and tight control of overheads being maintained.
-- Through its wholly owned subsidiary, Cornwall Resources Limited ("CRL"), the Company lodged claims with the Deep Digital Cornwall project for US$114,000, with US$45,000 received in the first week of July.
-- US$347,000 invested in development projects during the period - Leigh Creek Copper Mine ("LCCM") US$188,000 and Redmoor Tin and Tungsten Mine ("Redmoor") US$159,000.
-- Unrestricted cash at 30 June 2023 was US$129,000 (31 Dec 2022: US$341,000), prior to the receipt of the US$45,000 DDC claim in the first week of July.
Corporate Highlights
In light of the reduced income from Cobre, management and Directors' cash remunerations have continued to be adjusted to ensure maintenance of cash balances at prudent operating levels. Currently, cash balances at the end of September are expected to be in line with the 30 June 2023 balance but to ensure these balances remain at reasonable operating levels for the remainder of the year, the Board is in advanced discussions with at least one supportive counterparty to provide a short-term working capital facility.
During the quarter, Shipleys LLP assumed the role of the Company's auditor after Jeffreys Henry vacated the position, due to staffing losses. This situation impacted a number of our AIM peers. However, the Company, with a highly organised and professional effort from Shipleys, was able to complete the audit before 30 June and meet the standard regulatory deadline.
As reported in the last quarterly RNS, Jeff Harrison, Non-Executive Board member, retired as a Board member at the end of April 2023 with no replacement appointed yet.
June Quarter Cobre Sales
In line with the "Update on Projects" released on 14 July 2023, there will be no June Quarter report this year, or in the future. However, to maintain reporting to shareholders on the sales at Cobre, s ales comparisons on quarterly and annual periods to 30 June 2023, along with associated volume details, are shown in the table below:
Tonnage Sales (US$'000) --- Year 3 months to June 12 months to 3 months to 12 months to June June June 2023 4,162 23,856 367 1,898 2022 10,711 38,825 666 2,429 2021 12,130 48,964 740 2,890
Commenting, John Peters, Managing Director of Strategic Minerals, said:
"The Company continues to respond to the impact on Cobre sales from the dip in US economic growth. In line with this, the Company has maintained a tight control on overheads and is looking to source short term funding to ensure adequate cash balances are available for planned operations, thus avoiding unnecessary dilution.
" The recent significant investment secured by Cornish Lithium ("CL") has focused attention on the revival in Cornish mining and helps to highlight the underlying value of the Redmoor project. CRL continues to work together with CL on the Deep Digital Cornwall project, we congratulate them and look forward to continuing collaborations with them.
"Despite the disappointment of not achieving grant funding on the first attempt, the CRL team made a significant, credible submission which has provided valuable experience for its subsequent application. Engagement continues with both Cornwall Council and other local stakeholders. Recent encouraging discussions with various parties leave us confident of progress.
"The sterling effort of our auditors, Shipleys, and of our CFO, Karen Williams, in masterfully executing the Company's audit, despite substantial time constraints, should be applauded.
"The Board looks forward to a more active period of news flow during the final quarter of 2023."
For further information, please contact: +61 (0) 414 727 Strategic Minerals plc 965 John Peters Managing Director Website: www.strategicminerals.net Email: info@strategicminerals.net Follow Strategic Minerals on: Vox Markets: https://www.voxmarkets.co.uk/company/SML/ Twitter: @SML_Minerals LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc +44 (0) 20 3470 SP Angel Corporate Finance LLP 0470 Nominated Adviser and Broker Matthew Johnson Charlie Bouverat
NOTES TO EDITORS
Strategic Minerals is an AIM-quoted, profitable operating minerals company actively developing projects tailored to materials expected to benefit from strong demand in the future. It has an operation in the United States of America along with development projects in the UK and Australia. The Company is focused on utilising its operating cash flows, along with capital raisings, to develop high quality projects aimed at supplying the metals and minerals likely to be highly demanded in the future.
In September 2011, Strategic Minerals acquired the distribution rights to the Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating asset, which it brought into production in 2012 and which continues to provide a revenue stream for the Company. This operating revenue stream is utilised to cover company overheads and invest in development projects aimed at supplying the metals and minerals likely to be highly demanded in the future.
In May 2016, the Company entered into an agreement with New Age Exploration Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds from the Company's investment were utilised to complete a drilling programme that year. The drilling programme resulted in a significant upgrade of the resource. This was followed in 2018 with a 12-hole 2018 drilling programme has now been completed and the resource update that resulted was announced in February 2019. In March 2019, the Company entered into arrangements to acquire the balance of the Redmoor Tin/Tungsten project which was settled on 24 July 2019 by way of a vendor loan which was fully repaid on 26 September 2020.
In March 2018, the Company completed the acquisition of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and brought the project temporarily into production in April 2019. In July 2021, the project was granted a conditional approval by the South Australian Government for a Program for Environmental Protection and Rehabilitation (PEPR) in relation to mining of its Paltridge North deposit and processing at the Mountain of Light installation. In late September 2022, an updated PEPR, addressing the conditions associated with the July 2021 approval, was approved.
CHAIRMAN'S STATEMENT
It is well documented that 2022 and the first half of 2023 has been a difficult time on AIM. Despite this uncertainty, I am pleased that the Company has been able to maintain profitable trading, despite a significant drop in sales at Cobre. This is a particularly challenging period for markets, and the world, but I have faith that Strategic Minerals is well placed to weather this storm and that the Board and Management will help the Company capitalise on the valuable assets it has secured and developed.
Financial results
The Company continued its underlying profitable performance in the first half of 2023, when many businesses succumbed to cash flow and profitability impacts arising from the pandemic overhang, Ukraine war and evaporation of funding support on the AIM market.
With the drop in sales at Cobre and coupled with a challenging equity market environment, the Company's ability to secure funding to progress its development projects and general development processes have been impacted. Adjustments to operations have been made with the Company successfully reducing overheads by 13% in the first half of the year before allowing for capitalisation of director fees associated with projects.
Unrestricted cash on hand at 30 June 2023 was US$129,000 with a further US$45,000 re-imbursement from the DDC project dropping into the Company's account in the first week of July. However, in acknowledging the need to maintain prudent cash flow, the Company is seeking short-term debt financing. It is considered that this is the least dilutive approach to maintain prudent operating cash levels, at this time.
Strategic Focus
The current drop in sales at Cobre has caused a greater focus on bringing strategic investors (Joint venture/purchasers) to the table in relation to both Redmoor and LCCM. Significant efforts have been made in this area for over a year and more recent interactions have been particularly positive in relation to Redmoor.
Cobre Operations
During the first six months of 2023, sales at Cobre were still profitable despite a significant fall in sales compared to prior periods, due to its major client suspending orders. Adjustments were made in personnel hours and SMG continues to deal with enquiries in relation to its magnetite product, although increased transport costs, caused by higher oil prices, does impact potential new sales.
The first half of the year also saw the receiver for CV Investments making progress towards the first distribution in relation to the Receivership, however, it now appears that any payment to SMG will not be a material amount.
Leigh Creek Copper Mine ("LCCM")
Currently, the Company is working with two unrelated parties who have expressed an interest in the sulphide exploration potential of the project. These parties have signed confidentiality agreements, accessed our data room and have undertaken their own due diligence, although no site visit has been undertaken as yet.
Additionally, we have recently been approached by a party that is proposing an alternative approach to treating the copper oxide and we are currently investigating the feasibility of this approach.
Redmoor Tin-Tungsten Project ("Redmoor")
After feedback received on our comprehensive application for grant funds from the Shared Prosperity Fund ("SPF"), the CRL team, under tight time frame requirements, resubmitted a revised grant application which is currently being assessed, alongside other applications, by Cornwall and Isles of Scilly Council ("CIoS").
During the second half of 2023, the team at Redmoor have/are intending to undertake:
-- Historic relogging and sampling on Redmoor's library of 14,000m of drill core which is expected to add to the understanding of the geology and mineral resource at Redmoor and potentially add to the existing JORC (2012) resource through additional sampling and modelling, without the need for expensive drilling.
-- Follow-up and expansion on work completed as part of Deep Digital Cornwall, with target generation and infill sampling underway.
-- Continued research and negotiation in consolidating and expanding CRL's mineral rights footprint in the highly prospective Cornwall region
-- Collaboration with other parties on agreements which will utilise CRL's expertise and IP
-- To work with an interested party currently accessing the CRL data room, answering further questions and providing requested information.
-- Follow up on the revised grant funding application lodged in early August and prepare for the proposed scope of works, and work to maximise the potential for a positive funding decision.
-- Attendance, by CRL's Project Manager and Senior Geologist, at the Society of Economic Geologists ("SEG") Conference in London and hosting the SEG field trip afterwards to Redmoor, as part of a wider Cornwall field trip of industry professionals.
-- Attendance, by CRL's Project Manager and Senior Geologist, at the Cornish Mining Conference in Falmouth and hosting a related site visit by industry professionals.
-- Hosting, in September 2023, a visit from HM Treasury which is part of a wider south west England visit to UK mining projects. The objective is to feedback to Government a better understanding of the extent of mining activities in the UK, as well as how best the Government can assist in the development of the returning industry.
-- Hosting a local community update event in October 2023.
Safety
The Company has a strong focus on safety issues and continues to maintain a high level of performance when it comes to safety. In the first half of 2023, there was an incident involving an employee receiving a "jolt" from a pothole at the Cobre pit. As a precaution, the employee was sent home for the afternoon and returned to work the next morning.
Again, I would like to take this opportunity to thank my fellow Directors, our management and staff in New Mexico, South Australia and Cornwall, along with our advisers, for their support and hard work on our behalf during the period. Additionally, I would like to thank our clients, contractors, suppliers and partners for their continued backing.
I look forward to further progressing our key strategic goals in 2023 and pushing onto a brighter 2024.
Alan Broome AM
Non-Executive Chairman
28 September 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months to to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Continuing operations Revenue 782 1,329 2,446 Raw materials and consumables used. (137) (256) (494) _________ _________ _________ Gross profit 645 1,073 1,952 Other income 1 - 13 Overhead expenses (457) (637) (1,252) Amortisation (116) (139) (278) Depreciation (8) (16) (16) Share based payment - (12) (12) Foreign exchange gain/(loss) (6) (5) (17) _________ _________ _________ Profit from operations 59 264 390 Finance expense (4) - Lease Interest (5) (12) (18) _________ _________ _________ Profit/ (loss) before taxation 54 248 372 Income tax (expense)/credit (16) (121) (288) _________ _________ _________ _________ _________ _________ Profit for the period attributable to: Owners of the parent 38 127 84 _________ _________ _________ Other comprehensive income Exchange gains/(losses) arising on translation of foreign operations 22 (902) (1,027) _________ _________ _________ _________ _________ _________ Total comprehensive (loss)/income attributable to: Owners of the parent 60 775 (943) _________ _________ _________ Profit/ (loss) per share attributable to the ordinary equity holders of the parent: Continuing activities - Basic c0.02 c0.08 c0.05 - Diluted c0.02 c0.08 c0.05 CONSOLIDATED STATEMENT OF FINANCIAL 6 months 6 months POSITION to to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Assets Non-current assets Intangible Asset 533 553 544 Deferred Exploration and evaluation costs 5,367 4,886 4,983 Other Receivables 133 139 136 Property, plant and equipment 8,203 7,301 8,223 Right of Use Assets 469 568 544 _________ _________ _________ 14,705 13,447 14,470 _________ _________ _________ Current assets Inventories 5 2 5 Trade and other receivables 391 435 319
Income Tax prepaid 13 - 88 Cash and cash equivalents 129 430 341 Prepayments - 1 25 _________ _________ _________ 538 868 779 _________ _________ _________ Total Assets 15,243 14,315 15,248 _________ _________ ____ _____ Equity and liabilities Share capital 2,916 2,916 2,916 Share premium reserve 49,387 49,397 49,387 Share options reserve - - - Merger reserve 21,300 21,300 21,300 Warrant Reserve - 153 - Foreign exchange reserve (1,312) (1,209) (1,334) Other reserves (23,023) (23,023) (23,023) Accumulated loss (36,365) (36,512) (36,403) _________ _________ _________ Total Equity 12,903 13,012 12,843 _________ _________ ____ _____ Liabilities Non-Current Liabilities Lease Liabilities 230 317 305 Provisions 1,166 405 1,191 _________ _________ _________ 1,396 722 1,496 _________ _________ _________ Current liabilities Income Tax Payable 148 6 261 Trade and other payables 580 309 366 Lease Liabilities 216 266 282 _________ _________ _________ 944 581 909 _________ _________ _________ Total Liabilities 2,340 1,303 2,405 _________ _________ ____ _____ Total Equity and Liabilities 15,243 14,315 15,248 _________ _________ ____ _____
CONSOLIDATED STATEMENT OF CASH FLOW
6 months to 6 months to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Cash flows from operating activities Profit/ (loss) after tax 38 127 84 Adjustments for: Depreciation of property, plant, and equipment 8 16 16 Amortisation of Right of Use asset 116 139 278 Finance expense - 4 - Income Tax expense 16 121 288 (Increase) / decrease in inventory - 2 (1) (Increase) / decrease in trade and other receivables (149) 12 212 (Increase) / decrease in prepayments 25 3 (19) Increase / (decrease) in trade and other payables 213 48 (42) Increase /(decrease) in prepaid income tax 75 - (25) Income tax paid (53) (52) (27) Share based payment expense - 12 11 _________ _________ _________ Net cash flows from operating activities 289 432 775 _________ _________ _________ Investing activities Increase in PPE Development Asset (188) (253) (490) Increase in PPE - - - Increase in deferred exploration and evaluation asset (159) (201) (226) _________ _________ _________ Net cash used in investing activities (347) (454) (717) _________ _________ _________ Financing activities Net proceeds from issue of equity share capital - - - Lease Payments (146) (151) (320) _________ _________ _________ Net cash from financing activities (146) (151) (320) _________ _________ _________ Net increase / (decrease) in cash and cash equivalents (204) (173) (262) Cash and cash equivalents at beginning of period 341 611 611 Exchange gains / (losses) on cash and cash equivalents (7) (8) (8) _________ _________ _________ Cash and cash equivalents at end of period 129 430 341 _________ _________ _________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Warrant Share Initial Foreign Share premium Merger Warrant options Re-structure Exch. Retained Total capital reserve Reserve Reserve reserve Reserve reserve earnings equity $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Balance at 1 January 2022 2,916 49,387 21,300 153 97 (23,023) (307) (36,748) 13,775 _______ _______ _______ _______ _______ _______ _______ _______ _______ Profit for the year - - - - - - - 84 84 Foreign exchange translation - - - - - - (1,027) - (1,027) _______ _______ _______ Total comprehensive income/(loss) for the year - - - - - - (1,027) 84 (943) Share based payments - - - - 11 - - - 11 Transfer - - - (153) (108) - - 261 - _______ _______ _______ _______ _______ _______ _______ _______ _______ Balance at 31 December 2022 2,916 49,387 21,300 - - (23,023) (1,334) (36,403) 12,843 Profit for the period - - - - - - - 38 38 Foreign exchange
translation - - - - - - 22 - 22 _______ _______ _______ Total comprehensive income for the year - - - - - - 22 38 60 _______ _______ _______ _______ _______ _______ _______ _______ _______ Balance at 30 June 2023 2,916 49,387 21,300 - - (23,023) (1,312) (36,365) 12,903 _______ _______ _______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the parent Company.
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General Information
Strategic Minerals Plc ("the Company") is a public company incorporated in England and Wales. The consolidated interim financial statements of the Company for the six months ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as the "Group").
2. Significant accounting policies
Basis of preparation
In preparing these financial statements the presentational currency is US dollars. As the entire Group's revenues and majority of its costs, assets and liabilities are denominated in US dollars it is considered appropriate to report in this currency.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.
These financial statements have been prepared in accordance with International Financial Standards and UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.
The financial statements have been prepared on a historical cost basis, except for the acquisition of LCCM and the valuation of certain investments which have been measured at fair value, not historical cost.
Going concern basis
The Directors have given careful consideration to the Group and Parent Company's (together "the Group") ability to continue as a going concern through review of cash flow forecasts prepared by management for the period to 31 March 2025, and a review of the key assumptions on which these are based and sensitivity analysis.
The Group's forward commitments include corporate overhead, which is actively managed in line with cash generated from the Cobre asset and costs associated with keeping exploration licences and mining leases current.
Group forecasts are based on Management's expectations of a recovery in sales, in the second half of 2023 and 2024, to 2021 levels. For the purposes of the consideration of the Group's ability to operate as a going concern, only non-discretionary expenditure on projects is included in the cash flow forecasts.
The Company forecasts that in order to have sufficient funds to meet all operating costs until March 2025, the Group is reliant on cash being generated from the Cobre asset in line with forecast and a funding by way of debt/equity or a combination of both would be required in the last quarter of 2023.
However, the Board considers additional funds will be required to progress the development of the Leigh Creek Copper Mine and Redmoor projects. It is the intention of the group that the LCCM asset will be developed during Q1 2024 and management are actively pursuing such funding and envisage that this will be sourced at the asset level.
These conditions indicate a material uncertainty which may cast significant doubt as to the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.
If further funds are required, the Directors have reasonable expectation based on the ability of the Company to raise funds in the past that the Group will have access to sufficient resources by way of debt or equity markets to meet all non-discretionary expenditure. Consequently, the consolidated financial statements have been prepared on a going concern basis.
The financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern.
New standards, interpretations, and amendments effective 1 July 2023:
There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods and which have not been adopted early.
Investment in joint arrangements
The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.
The group classifies its interests in joint arrangements as either:
-- Joint ventures: where the group has rights to only the net assets of the joint arrangement.
-- Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group considers:
-- The structure of the joint arrangement -- The legal form of joint arrangements structured through a separate vehicle -- The contractual terms of the joint arrangement agreement -- Any other facts and circumstances (in any other contractual arrangements).
The Group accounts for its interests in joint ventures initially at cost in the consolidated statement of financial position. Subsequently joint ventures are accounted for using the equity method where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the joint ventures' profits and losses resulting from these transactions is eliminated against the carrying value of the joint venture.
Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues, and expenses in accordance with its contractually conferred rights and obligations. In accordance with IFRS 11 Joint Arrangements, the Group is required to apply all of the principles of IFRS 3 Business Combinations when it acquires an interest in a joint operation that constitutes a business as defined by IFRS 3.Where there is an increase in the stake of the joint venture entity from an associate to a subsidiary and the acquisition is considered as an asset acquisition and not a business combination in accordance with IFRS3, this step up transaction is accounted for as the purchase of a single asset and the cost of the transaction is allocated in its entirety to that asset with no gain or loss recognised in the income statement. The step-up acquisition of CRL in 2019 has been accounted for as a purchase of a single asset and the cost of the transaction is allocated in its entirety to that balance sheet.
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Estimates
(a) Carrying value of intangible assets
Management assesses the carrying value of the exploration and evaluation assets for indicators of impairment based on the requirements of IFRS 6 which are inherently judgemental. This includes ensuring the Group maintains legal title, assessment regarding the commerciality of reserves and the clear intention to move the asset forward to development.
i) The Redmoor projects are early-stage exploration projects and therefore Management have applied judgement in the period as to whether the results from exploration activity provide sufficient evidence to continue to move the asset forward to development. There are no indicators of impairment for the Redmoor project in the period to 30 June 2023.
(b) Share based payments
The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model after taking into account market-based vesting conditions and conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour based on past experience.
(c) Carrying value of amounts owed by subsidiary undertakings.
IFRS9 requires the parent company to make certain assumptions when implementing the forward- looking expected credit loss model. This model is required to be used to assess the intercompany loan receivables from its subsidiaries for impairment. Arriving at an expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan receivables, the possible credit losses that could arise and probabilities for these scenarios.
The following were considered: the exploration project risk, the future sales potential of product, value of potential reserves and the resulting expected economic outcomes of the project.
(d) Carrying Value of Development Assets
Management assesses the carrying value of development assets for indicators of impairment based on the requirements of IAS36 which are inherently judgemental.
The following are the key assumptions used in this assessment of Carrying value.
i) Mineable reserves over life of project ii) Forecasted Copper pricing iii) Capital and operating cost assumptions to deliver the mining schedule
iv) Foreign exchange rates
v) Discount rate
vi) Estimated project commencement date.
If the carrying amount of the Development asset exceeds the recoverable amount, the asset is impaired. The Group will reduce the carrying amount of the asset to its recoverable amount and recognise an impairment loss. The assessment is carried out twice per year - end of half year reporting period and end of annual reporting period.
(e) Determination of incremental borrowing rate for leases
Under IFRS 16, where the interest rate implicit in the lease cannot be readily determined the incremental borrowing rate is used. The incremental borrowing rate is defined as the rate of interest that a lessee would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the cost of the right-of-use asset in a similar economic environment.
Judgements
(a) Investments in subsidiaries
Investment in subsidiaries comprises of the cost of acquiring the shares in subsidiaries.
If an impairment trigger is identified and investments in subsidiaries are tested for impairment, estimates are used to determine the expected net return on investment. The estimated return on investment takes into account the underlying economic factors in the business of the Company's subsidiaries including estimated recoverable reserves, resources prices, capital investment requirements, and discount rates among other things.
(b) Contingent consideration as part of Asset acquisition
Judgement was required in determining the accounting for the contingent consideration payable as per of the CRL acquisition. The group has an obligation to pay A$1m on net smelter sales arising from CRL production reaching A$50m and a further A$1m on net smelter sales arising from CRL production reaching A$100m.
Whilst a possible obligation exists in relation to the consideration payable, given the early stage of the project it was concluded that at reporting date it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
4. Segment information
The Group has four main segments during the period:
-- Southern Minerals Group LLC (SMG) - This segment is involved in the sale of magnetite to both the US domestic market and historically transported magnetite to port for onward export sale.
-- Head Office - This segment incurs all the administrative costs of central operations and finances the Group's operations. A management fee is charged for completing this service and other certain services and expenses.
-- Development Asset - This segment holds the Leigh Creek Copper Mine Development Asset in Australia and incurs all related operating costs.
-- United Kingdom - The investment in the Redmoor project in Cornwall, United Kingdom is held by this segment.
Factors that management used to identify the Group's reportable segments.
The Group's reportable segments are strategic business units that carry out different functions and operations and operate in different jurisdictions.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the board and management team which includes the Board and the Chief Financial Officer.
Measurement of operating segment profit or loss, assets, and liabilities
The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with International Accounting Standards.
Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Loans and borrowings are allocated to the segments in which the borrowings are held. Details are provided in the reconciliation from segment assets and liabilities to the Group's statement of financial position.
Intra 6 Months to 30 June 2023 Head Segment United Development (Unaudited) SMG Office Kingdom Asset Elimination Total $'000 $'000 $'000 $'000 $'000 $'000 Revenues 782 - - - - 782 _______ _______ _______ _______ _______ _______ Gross profit 782 - - - - 782 Other Income 1 - - - - 1 Raw materials/consumables (137) - - - - (137) Overhead expenses (242) (215) - - - (457) Management fee income/(expense) (200) 197 - 3 - Share based payments - - - - - - Amortisation (116) - - - - (116) Depreciation (8) - - - - (8) Foreign exchange gain/(loss) - 78 - - (84) (6) _______ _______ _______ _______ _______ _______ Segment profit /(loss) from operations 80 60 - - (81) 59 _______ _______ _______ _______ _______ _______ Lease Interest (4) (1) (5) Finance Expense - - - - - - _______ _______ _______ _______ _______ _______ Segment profit /(loss) before taxation 76 60 (1) - (81) 54 _______ _______ _______ _______ _______ _______ Intra 6 Months to 30 June 2022 Head Segment United Development (Unaudited) SMG Office Kingdom Asset Elimination Total $'000 $'000 $'000 $'000 $'000 $'000 Revenues 1,329 - - - - 1,329 _______ _______ _______ _______ _______ _______ Gross profit 1,329 - - - 1,329 Raw materials/consumables (256) - - - - (256) Overhead expenses (281) (380) (6) - 30 (637) Management fee income/(expense) (200) 206 - (6) - Share based payments - (12) - - - (12) Amortisation (139) - - - - (139) Depreciation (16) - - - - (16) Foreign exchange gain/(loss) - 63 - - (68) (5) _______ _______ _______ _______ _______ _______ Segment profit /(loss) from operations 437 (123) (6) - (44) 264 _______ _______ _______ _______ _______ _______ Lease Interest (10) (2) (12) Finance Expense - - - (4) - (4) _______ _______ _______ _______ _______ _______ Segment profit /(loss) before
taxation 427 (123) (8) (4) (44) 248 _______ _______ _______ _______ _______ _______ Intra Year to 31 December 2022 Head Segment United Development (Audited) SMG Office Kingdom Asset Elimination Total $'000 $'000 $'000 $'000 $'000 $'000 Revenues 2,446 - - - - 2,446 _______ _______ _______ _______ _______ _______ Total Revenue 2,446 - - - 2,446 Othe Revenue - - 13 - - 13 Raw Materials/Consumables (494) - - - - (494) Overhead expenses (563) (684) (33) - 29 (1,251) Management fee income/(expense) (250) 253 - (3) - Share based payments - (11) - - - (11) Amortisation- right of use asset (278) - - - - (278) Depreciation (16) - - - - (16) (Loss)/ gain on intercompany loans - (707) - - 707 - Foreign exchange gain/(loss) - (65) - - 46 (19) _______ _______ _______ _______ _______ _______ Segment profit /(loss) from operations 845 (1,214) (20) - 779 390 _______ _______ _______ _______ _______ _______ Lease Interest (16) - (2) - - (18) Finance Expense - - - - - - _______ _______ _______ _______ _______ _______ Segment profit /(loss) before taxation 829 (1,214) (22) - 779 372 _______ _______ _______ _______ _______ _______ As at 30 June 2023 Head (Unaudited) SMG Office United Kingdom Development Asset Total $'000 $'000 $'000 $'000 $'000 Additions to non-current assets - - 159 188 347 _______ _______ _______ ______ _______ Reportable segment assets 901 42 5,517 8,783 15,243 _______ _______ _______ ______ _______ Reportable segment liabilities 690 359 86 1205 2340 _______ _______ _______ _______ _______ As at 30 June 2022 Head (Unaudited) SMG Office United Kingdom Development Asset Total $'000 $'000 $'000 $'000 $'000 Additions to non-current assets - - 201 253 454 _______ _______ _______ ______ _______ Reportable segment assets 1,181 160 5,068 7,906 14,315 _______ _______ _______ ______ _______ Reportable segment liabilities 651 172 31 449 1,303 _______ _______ _______ _______ _______ As at 31 December 2022 Head (Audited) SMG Office United Kingdom Development Asset Total $'000 $'000 $'000 $'000 $'000 Additions to non-current assets - - 226 490 717 _______ _______ _______ _______ _______ Reportable segment assets 1,166 84 5,185 8,813 15,428 _______ _______ _______ _______ _______ Reportable segment liabilities 910 220 41 1,233 2,405 _______ _______ _______ _______ _______ External revenue by Non-current assets location of customers by location of assets 30 June 30 June 30 June 30 June 2023 2022 2023 2022 $'000 $'000 $'000 $'000 United States 782 1,329 535 648 United Kingdom - - 5,387 4,905 Australia - - 8,783 7,894 _______ _______ _______ _______ 782 1,329 14,705 13,447 _______ _______ _______ _______
Revenues from Customer A totalled $273,114 (2022: $188,315), which represented 35% (2022: 14%) of total domestic sales in the United States, Customer B totalled $nil (2022: $506,503) which represented 0% (2022: 38%) and Customer C totalled $417,642 (2022: $ 436,587) which represented 53% (2022: 33%).
5. Operating Loss 6 months 6 months to to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Operating gain/loss is stated after charging/(crediting): Other Income (1) - (13) Directors' fees and emoluments 86 197 276 Equipment rental 2 2 3 Equipment maintenance 13 12 33 Fees payable to the company's auditor for the - - 74 audit of the parent company and consolidated financial statements Non- Audit Services - - 15 Salaries, wages, and other staff related costs 203 248 485 Legal, professional and consultancy fees 82 96 198 Other Expenses 71 82 168 _______ _______ _______ Overhead Expenses 457 637 1,252 _______ _______ _______ Lease Interest 5 12 18 Finance Fee - 4 - Foreign exchange 6 5 18 Amortisation of Right of use assets 116 139 278 Depreciation 8 16 16 Share based payments - 12 11 _______ _______ _______ Total 591 825 1,580 _______ _______ _______ 6. Intangible assets - exploration and evaluation costs 6 months 6 months to to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Cost Opening balance for the period 4,983 5,228 5,228 Additions for the period 236 201 400 Grant Reimbursement (69) (123) (174) Research and development incentive (8) - - Foreign exchange difference 225 (420) (471) _______ _______ _______ Closing balance for period 5,367 4,886 4,983
_______ _______ _______ 7. Property, plant and equipment Development Plant and Asset Machinery Total $'000 $'000 $'000 Group Cost At 1 January 2022 (audited) 7,027 746 7,773 Additions 253 - 253 Foreign exchange difference (403) (18) (421) ________ ________ ________ At 30 June 2022 (unaudited) 6,877 728 7,605 Additions for period 237 - 237 Bond Uplift 797 797 Foreign exchange difference (104) (5) (109) ________ ________ ________ At 31 December 2022 (audited) 7,807 723 8,530 ________ ________ ________ Additions 188 - 188 Foreign exchange difference (193) (7) (200) _______ ________ _______- At 30 June 2023 (Unaudited) 7,802 716 8,518 ________ ________ ________ Depreciation At 1 January 2022 (audited) - (288) (288) Charge for the period - (16) (16) Foreign exchange difference - ________ ________ ________ At 30 June 2022 (unaudited) - (304) (304) Charge for the period - - - Foreign exchange difference - (3) (3) ________ ________ ________ At 31 December 2022 (audited) - (307) (307) ________ ________ ________ Charge for the period - (8) (8) Foreign exchange difference - - - ________ ________ ________ As at 30 June 2023(unaudited) - (315) (315) ________ ________ ________ Carrying Value As at 30 June 2023 (unaudited) 7,802 401 8,203 ________ ________ ________ As at 31 December 2022(audited) 7,807 416 8,223 ________ ________ ________ As at 30 June 2022 (unaudited) 6,877 424 7,301 ________ ________ ________ 8. Leases
The Group has leases for an office, plant and machinery and a vehicle. Each lease is reflected on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent manner to its property, plant and equipment.
Office Lease Plant, Machinery and Vehicles Total $'000 $'000 $'000 Right of Use Assets $'000 $'000 $'000 As at 1 January 2022 (audited) 20 697 717 Additions - - - Amortisation(capitalised) (9) (1) (10) Amortization - (139) (139) ________ ________ ________ As at 30 June 2022 (unaudited) 11 557 568 ________ ________ ________ Additions - 167 167 Amortisation(capitalised) - (2) (2) Amortization (10) (139) (149) ________ ________ ________ As at 31 Dec 2022 (Audited) 1 583 584 ________ ________ ________ Additions - - - Amortisation(capitalised) - - - Amortization (1) (115) (116) ________ ________ ________ As at 30 June 2023 (unaudited) - 469 469 ________ ________ ________ Office Lease Plant, Machinery and Vehicles Total Lease Liabilities As at 1 January 2022 (audited) 22 700 722 Additions - - - Interest Payments 1 11 12 Lease Payments (5) (146) (151) ________ ________ ________ As at 30 June 2022 (unaudited) 18 565 583 ________ ________ ________ Additions - 167 167 Interest Payments 1 6 7 Lease Payments (15) (155) (170) ________ ________ ________ As at 31 Dec 2022 (Audited 4 583 587 ________ ________ ________ Interest Payments - 5 5 Lease Payment (4) (142) (146) ________ ________ ________ As at 30 June 2023 (unaudited) - 446 446 ________ ________ ________ Lease Liability June June December 2023 2022 2022 Current 216 266 282 Non-Current 230 317 305 ________ ________ ________ 446 583 587 ________ ________ ________ 9. Dividends
No dividend is proposed for the period.
10. Earnings per share
Earnings per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year as provided below.
6 months to 6 months to Year to 30 June 30 June 31 December 2023 2022 2022 (Unaudited) (Unaudited) (Audited) $'000 $'000 $'000 Weighted average number of shares - Basic 1,593,558,030 1,593,558,030 1,593,558,030 Weighted average number of shares - Diluted 1,593,558,030 1,593,558,030 1,593,558,030 Earnings for the period $38,000 $127,000 $84,000 Earnings per share in the period - Basic c0.02 c0.08 c0.05 Earnings per share in the period - Diluted c0.02 c0.08 c0.05
11. Share capital and premium
30 June 30 June 30 June 30 June 2023 2023 2022 2022 No $'000 No $'000 Allotted, called up and fully paid Ordinary shares 2,015,964,616 52,303 2,015,964,616 52,303 ____________ ____________ ____________ ____________
Share options and warrants
As at 30 June 2023 all share options and warrants have expired.
Copies of this interim report will be made available on the Company's website, www.strategicminerals.net.
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IR UBAARORUKUAR
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September 28, 2023 02:00 ET (06:00 GMT)
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