Berkeley Mineral Resources PLC 2014 Final Results -16-

On 23 October 2013, the exercise period of the remaining 146,228,253 was extended from 24 October 2013 to 24 January 2014. As a result of this amendment the increase in fair value of the warrants was determined at the date of the amendment using Black Scholes model, using the following inputs:

   Share price at the date of amendment                                             2.2p 

Strike price 2p

Volatility 41%

Expected life 92 days

Risk free rate 1%

The resultant increase of the fair value of the warrants was determined to be GBP424,062, which was recognised in the income statement.

Following the extension of the exercise period between 24 October 2013 and 2 January 2014 a total of 31,621,633 warrants were exercised, raising GBP632,433 before expenses.

On 24 January 2014, the exercise period of the remaining 114,606,620 was extended from 24 January 2014to 24 April 2014. As a result of this amendment the increase in fair value of the warrants was determined at the date of the amendment using Black Scholes model, using the following inputs:

   Share price at the date of amendment                                             2.08p 

Strike price 2p

Volatility 50%

Expected life 90 days

Risk free rate 1%

The resultant increase of the fair value of the warrants was determined to be GBP286,517, which was recognised in the income statement.

Total charge for the year was GBP1,650,828 which had been recognised in the income statement.

Following the extension of the exercise period between 28 January 2014 and 24 April 2014 a total of 103,185,478 warrants were exercised, raising GBP1,305,161 before expenses and 11,421,142 were allowed to lapse. Subsequent to the year end, there were no warrants outstanding; the total warrant reserve of GBP3,938,170 was transferred within the equity.

   20.       WARRANT RESERVE 

Proceeds from the issuance of warrants, net of issue costs, are credited to warrant reserve. Warrant reserve is non-distributable and will be transferred to share premium account upon the exercise of warrants. Balance of warrant reserve in relation to the unexercised warrants at the expiry of the warrants period will be transferred to accumulated profits.

   21.       FINANCIAL INSTRUMENTS 

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern, while maximising the return to shareholders.

The capital resources of the Group comprises issued capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity. The Group's primary objective is to provide a return to its equity shareholders through capital growth. Going forward the Group will seek to maintain a yearly ratio that balances risks and returns of an acceptable level and also to maintain a sufficient funding base to the Group to meet its working capital and strategic investment needs.

Externally imposed capital requirement

The Group is not subject to externally imposed capital requirements.

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the Consolidated Financial Statements.

Categories of financial instruments

 
                                          2014        2013 
                                           GBP         GBP 
 Group 
 Financial assets 
 Cash and cash equivalents             750,695     297,293 
 Other receivables classified 
  as loans and receivables at 
  amortised cost                        70,628     151,029 
                                       821,323     448,322 
                                    ----------  ---------- 
 Financial liabilities classified 
  as held at amortised cost 
 Trade and other payables              706,729     176,850 
                                    ----------  ---------- 
                                       706,729     176,850 
                                    ----------  ---------- 
 
                                          2014        2013 
                                           GBP         GBP 
 Company 
 Financial assets 
  Cash and cash equivalents            685,795     259,808 
 Other receivables classified 
  as loans and receivables at 
  amortised cost                        67,570     136,934 
                                    ----------  ---------- 
                                       753,365     396,742 
                                    ----------  ---------- 
 Financial liabilities classified 
  as held at amortised cost 
  Trade and other payables             704,099     176,850 
                                    ----------  ---------- 
                                       704,099     176,850 
                                    ----------  ---------- 
 

Fair value of financial assets and liabilities

Fair value is the amount at which a financial instrument could be exchanged in an arm's length transaction between informed and willing parties, other than a forced or liquidation sale and excludes accrued interest. Where available, market values have been used to determine fair values.

Financial risk management objectives

Management provides services to the business, co-ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risks reports which analyse exposures by degree and magnitude of risks. These risks include foreign currency risk, credit risk, liquidity risk and cash f low interest rate risk. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

As the Group has no committed borrowings, the Group is not exposed to any risks associated with fluctuations in interest rates on loans. Fluctuation in interest rates applied to cash balances held at the 2012 balance sheet date would have minimal impact on the Group.

Foreign exchange risk and foreign currency risk management

Foreign currency exposures are monitored on a monthly basis. Funds are transferred between the Sterling and US Dollar accounts in order to minimise foreign exchange risk. The Group holds the majority of its funds in Sterling.

The carrying amounts of the Group's and Company's foreign currency denominated financial assets and monetary liabilities at the reporting date are as follows:

 
 Group              Financial Liabilities     Financial assets 
                          2014        2013       2014      2013 
                           GBP         GBP        GBP       GBP 
 
 Zambian Kwacha          2,351           -     37,504    42,090 
 US Dollars                279           -    280,971   265,600 
 
 Company            Financial Liabilities     Financial assets 
                          2014        2013       2014      2013 
                           GBP         GBP        GBP       GBP 
 
 Zambian Kwacha              -           -          -         - 
 US Dollars                  -           -    250,517   262,880 
 
 

Foreign currency sensitivity analysis

The Group is exposed primarily to movements in Sterling against the US Dollar. Sensitivity analyses have been performed to indicate how the profit or loss would have been affected by changes in the exchange rate between the US Dollar and Sterling. The analysis is based on a weakening and strengthening of Sterling by 10 per cent against the US Dollar in which the Group has assets and liabilities at the end of each respective period.

A movement of 10 per cent reflects a reasonably possible sensitivity when compared to historical movements over a three to five year timeframe. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a ten per cent change in foreign currency rates.

A positive number below indicates an increase in profit where the US Dollar strengthens ten per cent. against Sterling. For a ten per cent. weakening of the US Dollar against Sterling, there would be an equal and opposite impact on the profit, and the balance below would be negative.

The following table details the Group's sensitivity to a ten per cent. strengthening in the US Dollar against Sterling

 
 
                                                 2014     2013 
                                                  GBP      GBP 
 (Decrease)/increase in income statement 
  and net assets                            ( 22,373)   11,242 
 

Credit risk management

Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group. The Group does not have any significant credit risk exposure on trade receivables.

The Group makes allowances for impairment of receivables where there is an identified event which, based on previous experience, is evidence of a reduction in the recoverability of cash f lows.