Share Name Share Symbol Market Type Share ISIN Share Description
Sirius Minerals LSE:SXX London Ordinary Share GB00B0DG3H29 ORD 0.25P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.48p -1.45% 32.68p 32.75p 32.90p 33.07p 32.30p 32.74p 16,563,029 16:35:27
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Mining 0.0 -23.4 -0.9 - 1,432.15

Sirius Minerals Plc Financial results 2016

28/03/2017 7:00am

UK Regulatory (RNS & others)


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Sirius Minerals Plc

28 March 2017

28 March 2017

Sirius Minerals Plc

Financial results 2016

Sirius Minerals Plc (AIM: SXX, OTCQX: SRUXY) ("Sirius" or the "Company") announces the results for Sirius and its subsidiaries ("the Group") for the year ended 31 December 2016.

Key highlights

-- Completion of Stage 1 Financing by securing funding of US$1.2 billion required to begin the construction of the Company's polyhalite project in North Yorkshire.

-- Progressing Stage 2 Financing through mandating a group of six financial institutions ("MLAs").

-- The receipt of the final major planning approval for the Company's North Yorkshire polyhalite project - a development consent order for the harbour facilities.

-- Increase of the Company's polyhalite probable reserve to 280 million tonnes of polyhalite at an average grade of 88.4%.

   --     Completion of the definitive feasibility study and the publication of its material findings. 

-- Selection of preferred contractors for the Woodsmith Mine and mineral transport system works.

-- Ongoing progress with customer engagement regarding product sales and further positive crop study results for the Company's POLY4 product.

Post-balance sheet events

   --     Commencement of construction enabling works in the vicinity of the Woodsmith Mine. 

-- Appointment of Thomas Staley to the role of Finance Director and Executive Board Director in February 2017.

Financials

Cash resources at the end of December 2016 were GBP665.3 million (liquid funds including investments and restricted cash) compared to GBP29.1 million as at 31 December 2015.

During the financial year ended 31 December 2016 the Group made a consolidated loss of GBP23.0 million compared to a loss of GBP7.0 million for the nine-month period to 31 December 2015.

The Group's net assets at 31 December 2016 were GBP496.3 million compared to GBP165.2 million at 31 December 2015.

Annual report and accounts

The annual report and accounts for the year ended 31 December 2016 have now been published on the Company's website: www.siriusminerals.com. The hard copy of the annual report and accounts will also be posted to shareholders shortly.

The Company's annual general meeting will be held at 1.00pm on Thursday 29 June 2017 at the Royal York Hotel, Station Road, York, YO24 1AA. The Notice of Meeting will be issued to shareholders in due course.

Investor conference call

Sirius Minerals' Chief Financial Officer, Thomas Staley, will host a conference call for investors and analysts at 9.00 am today. Any analysts wishing to ask questions on the call can receive dial in details by emailing sirius@tavistock.co.uk.

The call can be listened to live at: http://event.onlineseminarsolutions.com/wcc/r/1391936-1/6AA91F73112E78BB991EE5447D8D1B10?partnerref=rss-events and a replay will be available on the Company's website in due course.

For further information, please contact:

 
 Sirius Minerals Plc        Tristan Pottas 
  Investor Relations         Email: ir@siriusminerals.com     Tel: +44 845 
  Manager                                                         524 0247 
-------------------------  ------------------------------  --------------- 
 Joint Brokers 
  Liberum Capital Limited     Neil Elliot,                     Tel: +44 20 
  (NOMAD)                     Clayton Bush,                      3100 2222 
                              Jill Li 
 J.P. Morgan Cazenove       Ben Davies, Jamie                  Tel: +44 20 
                             Riddell                             7742 4000 
 WH Ireland                 Adrian Hadden                      Tel: +44 20 
                                                                 7220 1666 
-------------------------  ------------------------------  --------------- 
 Media Enquiries            Jos Simson, Mike                   Tel: +44 20 
  Tavistock                  Bartlett,                           7920 3150 
                             Emily Fenton 
-------------------------  ------------------------------  --------------- 
 

About Sirius Minerals Plc

Sirius Minerals Plc is the fertilizer development company focused on the construction and development of its North Yorkshire polyhalite project in the United Kingdom. It believes the Project represents the world's largest high-grade known deposit of polyhalite, a multi-nutrient form of potash containing potassium, sulphur, magnesium and calcium. Incorporated in 2003, Sirius Minerals' shares are traded on the London Stock Exchange's AIM market (AIM: SXX). Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility. Further information on the Company can be found at: www.siriusminerals.com.

CHAIRMAN'S STATEMENT

Dear Shareholders,

Welcome to 2016 annual report which covers the period from 1 January to 31 December.

Some five years ago, in my first Chairman's overview, I commented that Sirius Minerals is one of the world's most exciting resource development companies. For me nothing has changed in terms of the sentiment, although clearly we have made significant progress towards reaching our goals.

If 2015 was principally about securing key approvals, until that time seen by the market as the major barrier to our progress, then 2016 was the year we cleared the second major hurdle - stage 1 financing. As long-term shareholders will know, the completion of our stage 1 financing in November 2016 was the culmination of much hard work in the preceding years including resource exploration and definition, the signing of several bankable sales contracts and the securing of key planning approvals.

In 2016 we published the key findings of our definitive feasibility study (DFS). The study was essentially prepared over two years, with input from the results of planning approvals and contributions from a wide range of experienced consultancies. The DFS defined a business that has the potential to be a world leader in the fertilizer industry, with expected low operating costs, healthy margins and a very long asset life.

In the period around and immediately after the DFS announcement we had been running competitive tender processes for both the construction of the mine shafts and the mineral transport system, and subsequently we announced our preferred contractors.

This, together with the receipt of the final major planning approval - the harbour facilities - and the update on stage 2 financing progress, provided the ideal spring board that we needed to execute the stage 1 financing. I can assure all shareholders that we undertook a tremendous amount of detailed work with a number of financing and consulting parties in the run up to the announcement of the Royalty Financing Agreement with Hancock British Holdings Ltd in October 2016.

Hancock Prospecting Chairman, Mrs Gina Rinehart, needs no introduction given her extremely successful business track record. We were delighted to partner with her company, particularly given its extensive experience in both the mining industry and with royalty agreements. Hancock's growing agricultural interests also make them an excellent partner for us.

With this part of the stage 1 financing in place, we could execute the remaining elements of the financing package being the convertible bonds and a firm placing and placing and open offer. This meant we were able to secure funding of US$1.2 billion required to begin the construction of our Project.

I believe, after many further successes, people will look back and truly appreciate what a momentous achievement this financing was. A great deal of credit should be attributed to our executive team, led by Chris Fraser, and our Chief Financial Officer, Thomas Staley. But the credit stretches throughout the entire organisation, such is the level of effort needed across the business in preparing for, coordinating and executing such a complex structure - essentially three separate significant finance components.

We have also made other substantial progress this past year including a new, upgraded take-or-pay offtake agreement, an increase to our polyhalite probable reserve and the development of a potential de-icing salt opportunity at our Project. On the governance side in 2016 Louise Hardy replaced Stephen Pycroft on the Sirius Minerals Board as a non-executive director. Louise has brought to our Board additional extensive major project experience in senior roles in the UK construction industry. Her background is already proving most valuable for the Company.

Post-balance sheet events

On 19 January 2017 we set out a schedule for reporting our Project construction updates. Given the levels of interest in our construction from both shareholders and wider stakeholders, we felt it was important to give clarity on when to expect Project progress information to be shared. The first of these updates is scheduled for release alongside the issue of this annual report.

On 2 February 2017 we appointed our Chief Financial Officer, Thomas Staley, to the role of Finance Director and Executive Board Director. Thomas has demonstrated his strong capabilities as Sirius CFO over the last two years and he brings valuable financing and governance experience to the Board.

As always, I thank all shareholders for their support for the Company. We are continually uplifted by the good wishes we receive from our very large number of loyal shareholders. We look forward to our first year of construction as we continue to develop our world-class polyhalite Project.

Kind regards,

Russell Scrimshaw

Chairman

 
 CONSOLIDATED INCOME STATEMENT 
 for the year ended 31 December 2016 
 
                                                 31 December                Nine-month 
                                                        2016                    period 
                                                                        to 31 December 
                                Note                                              2015 
                                                     GBP000s                   GBP000s 
                                      ----------------------  ------------------------ 
 Revenue                                                   -                         - 
 Administrative expenses                            (11,872)                   (7,422) 
-----------------------------  -----  ----------------------  ------------------------ 
 Operating loss                                     (11,872)                   (7,422) 
 Finance income                  2                     1,489                        99 
 Finance costs                   3                  (13,039)                     (186) 
-----------------------------  -----  ----------------------  ------------------------ 
 Loss before taxation                               (23,422)                   (7,509) 
 Taxation                                                468                       550 
-----------------------------  -----  ----------------------  ------------------------ 
 Loss for the financial year                        (22,954)                   (6,959) 
-----------------------------  -----  ----------------------  ------------------------ 
 Loss per share: 
 
 Basic and diluted                4                   (0.9p)                    (0.3p) 
-----------------------------  -----  ----------------------  ------------------------ 
 
 
 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 
 for the year ended 31 December 2016 
 
                                                            31 December   Nine-month 
                                                                   2016       period 
                                                                               to 31 
                                                                            December 
                                                                                2015 
                                                                GBP000s      GBP000s 
                                                                         ----------- 
 Loss for the financial year attributable 
  to owners of the parent                                      (22,954)      (6,959) 
---------------------------------------------------------  ------------  ----------- 
 Other comprehensive income/(loss) for the year 
 Exchange differences on translating foreign operations              18        (135) 
 Other comprehensive income/(loss) for the year                      18        (135) 
---------------------------------------------------------  ------------  ----------- 
 Total comprehensive loss for the year                         (22,936)      (7,094) 
---------------------------------------------------------  ------------  ----------- 
 

Total comprehensive loss shown above is fully attributable to equity shareholders of the parent in both years.

 
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
 as at 31 December 2016 
 
                                             31 December 2016   31 December 2015 
                                    Note                                restated 
 ASSETS                                               GBP000s            GBP000s 
---------------------------------  -----  -------------------  ----------------- 
 Non-current assets 
 Property, plant and equipment                          6,138              1,849 
 Intangible assets                   5                150,204            137,970 
 Restricted cash                                       55,283                  - 
---------------------------------  -----  -------------------  ----------------- 
 Total non-current assets                             211,625            139,819 
---------------------------------  -----  -------------------  ----------------- 
 Current assets 
 Derivative financial instrument                        1,041                  - 
 Restricted cash                                       27,641                  - 
 Other receivables                                        840              1,184 
 Bank deposits                                        322,188                  - 
 Cash and cash equivalents                            260,157             29,093 
 Total current assets                                 611,867             30,277 
---------------------------------  -----  -------------------  ----------------- 
 TOTAL ASSETS                                         823,492            170,096 
---------------------------------  -----  -------------------  ----------------- 
 EQUITY AND LIABILITIES 
 Equity 
 Share capital                       6                 10,412              5,737 
 Share premium account                                590,723            240,874 
 Share-based payment reserve                            6,114              7,624 
 Accumulated losses                                 (112,261)           (90,339) 
 Foreign exchange reserve                               1,284              1,266 
 Total equity                                         496,272            165,162 
---------------------------------  -----  -------------------  ----------------- 
 Current liabilities 
 Convertible loan                    7                321,366                  - 
 Loan from third parties                                    -                748 
 Trade and other payables                               5,854              4,186 
---------------------------------  -----  -------------------  ----------------- 
 Total liabilities                                    327,220              4,934 
---------------------------------  -----  -------------------  ----------------- 
 TOTAL EQUITY AND LIABILITIES                         823,492            170,096 
---------------------------------  -----  -------------------  ----------------- 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2016

 
                   Share       Share          Share-based    Accumulated losses   Foreign        Equity 
                   capital     premium        payments                            exchange       shareholders' funds 
                               account        reserve                             reserve 
                     GBP000s        GBP000s        GBP000s              GBP000s        GBP000s               GBP000s 
---------------   ----------  -------------  -------------  -------------------  -------------  -------------------- 
 At 1 April 2015       5,362        216,586         13,290             (95,630)          7,028               146,636 
 Foreign 
  exchange 
  reserve prior 
  period 
  adjustment               -              -              -                5,627        (5,627)                     - 
----------------  ----------  -------------  -------------  -------------------  -------------  -------------------- 
 At 1 April 
  2015- restated       5,362        216,586         13,290             (90,003)          1,401               146,636 
 Loss for the 
  period                   -              -              -              (6,959)              -               (6,959) 
 Foreign 
  exchange 
  differences on 
  translation of 
  foreign 
  operations               -              -              -                    -          (135)                 (135) 
----------------  ----------  -------------  -------------  -------------------  -------------  -------------------- 
 Total 
  comprehensive 
  loss for the 
  period                   -              -              -              (6,959)          (135)               (7,094) 
 Convertible 
  loan                    43          1,103              -                  258              -                 1,404 
 Share issue 
  costs                    -          (121)              -                    -              -                 (121) 
 Share-based 
  payments                 -              -        (5,666)                6,365              -                   699 
 Exercised 
  options                332         23,306              -                    -              -                23,638 
----------------  ----------  -------------  -------------  -------------------  -------------  -------------------- 
 At 31 December 
  2015- restated       5,737        240,874          7,624             (90,339)          1,266               165,162 
 Loss for the 
  financial 
  period                   -              -              -             (22,954)              -              (22,954) 
 Foreign 
  exchange 
  differences on 
  translation of 
  foreign 
  operations               -              -              -                    -             18                    18 
----------------  ----------  -------------  -------------  -------------------  -------------  -------------------- 
 Total 
  comprehensive 
  loss for the 
  period                   -              -              -             (22,954)             18              (22,936) 
 Share issue           4,629        347,281              -                    -              -               351,910 
 Share-based 
  payments                32          1,418        (1,510)                1,032              -                   972 
 Exercised 
  options                 14          1,150              -                    -              -                 1,164 
 At 31 December 
  2016                10,412        590,723          6,114            (112,261)          1,284               496,272 
----------------  ----------  -------------  -------------  -------------------  -------------  -------------------- 
 
 
The share premium account is used to record the excess proceeds over nominal value on the 
 issue of shares. 
 
The share-based payment reserve is used to record the share-based payments made by the Group. 
 
Foreign exchange reserve records exchange differences which arise on translation of foreign 
 operations with a functional currency other than Sterling. 
 
 
 CONSOLIDATED STATEMENT OF CASH FLOWS 
 for the year ended 31 December 
  2016 
                                               31 December                Nine-month 
                                                      2016                    period 
                                                                      to 31 December 
                                        Note                                    2015 
                                                   GBP000s                   GBP000s 
                                                            ------------------------ 
 Cash outflow from operating 
  activities                             8        (15,896)                   (5,307) 
-------------------------------------  -----  ------------  ------------------------ 
 
 Cash flow from investing activities 
 Purchase of intangible assets                    (12,108)                  (15,533) 
 Purchase of property, plant 
  and equipment                                    (4,346)                       (1) 
 Purchases of bank deposits                      (320,187)                         - 
 Interest received                                     441                        99 
 
 Net cash used in investing 
  activities                                     (336,200)                  (15,435) 
-------------------------------------  -----  ------------  ------------------------ 
 
 Cash flow from financing activities 
 Repayment of borrowings                             (748)                         - 
 Proceeds from convertible                                                         - 
  loan                                             319,923 
 Purchases of restricted cash                     (81,580)                         - 
 Proceeds from issue of shares                     371,445                    23,637 
 Share issue costs                                (18,370)                     (121) 
 Convertible loan issue costs                      (9,158)                         - 
 Interest paid                                        (19)                     (186) 
 
 Net cash generated from financing 
  activities                                       581,493                    23,330 
-------------------------------------  -----  ------------  ------------------------ 
 
 Net (decrease)/increase in 
  cash and cash equivalents                        229,397                     2,588 
 Cash and cash equivalents 
  at the beginning of the year                      29,093                    26,640 
 Gain/(loss) from foreign exchange                   1,667                     (135) 
 
 Cash and cash equivalents 
  at end of the year                               260,157                    29,093 
-------------------------------------  -----  ------------  ------------------------ 
 
 
NOTES TO THE FINANCIAL STATEMENTS 
 
 
1. ACCOUNTING POLICIES 
----------------------------------------------------------------------------------------------------- 
 
BASIS OF PREPARATION 
 
The financial information set out in this announcement does not comprise the Group's statutory 
 accounts for the year ended 31 December 2016 or the nine-month period ended 31 December 2015. 
 
The comparative financial information has been extracted from the statutory accounts of the 
 Group for the nine-month period ended 31 December 2015. The auditors reported on those accounts; 
 their report was unqualified and did not contain a statement under either Section 498 (2) 
 or Section 498 (3) of the Companies Act 2006 but did include references to material uncertainties 
 surrounding the Directors application of the Going Concern assumption. The statutory accounts 
 for the nine-month period 31 December 2015 have been delivered to the Registrar of Companies. 
 
The statutory accounts for the year ended 31 December 2016 have been finalised on the basis 
 of the financial information presented by the Directors in this preliminary announcement and 
 will be delivered to the Registrar of Companies following the Company's annual general meeting. 
 GOING CONCERN 
 During the year the Group recognised a total comprehensive loss of GBP22,936,000 compared 
 to a loss of GBP7,094,000 for the nine-month period to 31 December 2015. 
 Cash and cash equivalents and bank deposits, which include cash held on deposit, as at 31 
 December 2016 were GBP582,345,000 compared to GBP29,093,000 as at 31 December 2015. Restricted 
 cash, which is held to cover interest payments, as at 31 December 2016 was GBP82,924,000 compared 
 to GBPnil as at 31 December 2015. Net assets have increased by GBP331,110,000 to GBP496,272,000. 
 The increase in cash and cash equivalents and net assets is principally due to the successful 
 completion of the Group's stage 1 financing in late November 2016. As a result of this fund-raising, 
 the Group is now able to commence significant development work on its polyhalite project in 
 North Yorkshire (the 'Project') with latest cash flow forecasts indicating that the Group 
 has sufficient assets to meet its planned liabilities as they fall due until 2019. 
 The Group has publicly announced its intention to conduct stage 2 of fund-raising in 2018 
 in order to raise sufficient further funds to complete development of the Project and reach 
 commercial production which will ultimately allow the Group to generate sufficient cash to 
 sustain itself as a going concern for the foreseeable future. The Directors are confident 
 of a positive outcome to the stage 2 financing negotiations and have mandated a group of six 
 financial institutions on the basis of a non-binding but mutually agreed term sheet. At the 
 same time, the Infrastructure and Projects Authority confirmed its interest in supporting 
 the Stage 2 financing for the Project. 
 Having assessed the principal risks and having regard for the above, the directors consider 
 it appropriate to adopt the going concern basis of accounting in preparing its consolidated 
 financial statements. 
 
 
 2. FINANCE INCOME 
------------------------------------------------------------------  -------------------------------------- 
 
                                                       31 December   Nine-month period to 31 December 2015 
                                                              2016 
                                                           GBP000s                                 GBP000s 
----------------------------------------------------  ------------  -------------------------------------- 
 Bank interest received                                        448                                      99 
 Fair value gain on derivative financial instrument          1,041                                       - 
                                                             1,489                                      99 
----------------------------------------------------  ------------  -------------------------------------- 
 
 
 3. FINANCE COSTS 
-------------------------------------------------  ----------------- 
 
                                      31 December         Nine-month 
                                             2016          period to 
                                                         31 December 
                                                                2015 
                                          GBP000s            GBP000s 
-----------------------------------  ------------  ----------------- 
 Bank interest paid                             1                  - 
 Foreign exchange rate translation                                 - 
  loss on convertible loan                  4,437 
 Fair value loss on embedded                                       - 
  derivative                                5,744 
 Interest on convertible loan               2,839                172 
 Loan interest on loan from 
  third parties                                18                 14 
                                           13,039                186 
-----------------------------------  ------------  ----------------- 
 
 
 4. LOSS PER SHARE 
------------------------------------------------  --------------- 
 
                                     31 December       Nine-month 
                                            2016        period to 
                                                      31 December 
                                                             2015 
                                         GBP000s          GBP000s 
-------------------------------  ---------------  --------------- 
 Loss for the purposes of 
  basic earnings per share 
  being net loss attributable 
  to equity shareholders of 
  the parent                            (22,954)          (6,959) 
 Loss for the purpose of 
  diluted earnings per share            (22,954)          (6,959) 
-------------------------------  ---------------  --------------- 
 
 
                                            2016             2015 
                                  Number (000's)   Number (000's) 
-------------------------------  ---------------  --------------- 
 
 
 
   Number of shares 
 Weighted average number 
  of ordinary shares for the 
  purpose of basic and diluted 
  earnings per share                   2,472,762        2,230,602 
-------------------------------  ---------------  --------------- 
 
 
                                            2016             2015 
                                  Number (000's)   Number (000's) 
-------------------------------  ---------------  --------------- 
 Number of shares 
 Weighted average number 
  of ordinary shares for the 
  purposes of diluted earnings 
  per share                            2,480,858        2,231,795 
-------------------------------  ---------------  --------------- 
 Basic and diluted loss per 
  share                                   (0.9p)           (0.3p) 
-------------------------------  ---------------  --------------- 
 

Diluted loss per share are calculated by dividing the loss attributable to ordinary shareholders by 2,480,858,000 (2015: 2,231,795,000) ordinary shares, being the average number of ordinary shares in issue during the year adjusted by the dilutive effect of employee share schemes and convertible loan options.

For the year ended 31 December 2016, options over 1,343,090,000 shares (2015: 45,450,000) were excluded from this calculation because their effect was anti-dilutive for continuing operations.

 
 5. INTANGIBLE ASSETS 
-------------------------------------------  ------------------  ----------------  --------- 
 
                                Exploration 
                           costs and rights            Goodwill          Software      Total 
 Group                              GBP000s             GBP000s           GBP000s    GBP000s 
---------------------  --------------------  ------------------  ----------------  --------- 
 Cost 
 At 1 April 2015                    173,412               9,079                79    182,570 
 Additions                           16,254                   -                 -     16,254 
---------------------  --------------------  ------------------  ----------------  --------- 
 At 31 December 2015                189,666               9,079                79    198,824 
 Additions                           12,234                   -                 -     12,234 
 At 31 December 2016                201,900               9,079                79    211,058 
---------------------  --------------------  ------------------  ----------------  --------- 
 
 Accumulated provision for permanent 
  diminution in value 
 At 1 April 2015                   (58,339)             (2,436)              (74)   (60,849) 
 Amortisation                             -                   -               (5)        (5) 
---------------------  --------------------  ------------------  ----------------  --------- 
 At 31 December 2015               (58,339)             (2,436)              (79)   (60,854) 
 At 31 December 2016               (58,339)             (2,436)              (79)   (60,854) 
---------------------  --------------------  ------------------  ----------------  --------- 
 
 Net book value 
 At 31 December 2016                143,561               6,643                 -    150,204 
---------------------  --------------------  ------------------  ----------------  --------- 
 At 31 December 2015                131,327               6,643                 -    137,970 
---------------------  --------------------  ------------------  ----------------  --------- 
 At 1 April 2015                    115,073               6,643                 5    121,721 
---------------------  --------------------  ------------------  ----------------  --------- 
 
 
 6. SHARE CAPITAL 
---------------------------------------------------  ------------ 
 
                                        31 December   31 December 
                                               2016          2015 
                                            GBP000s       GBP000s 
-------------------------------------  ------------  ------------ 
 Allotted and called up 
 4,164,514,405 (2015: 2,294,695,991) 
  ordinary shares of 0.25p each              10,412         5,737 
-------------------------------------  ------------  ------------ 
 
 
                                Number of     Ordinary        Share        Total 
                       shares (thousands)       shares      premium    (GBP000s) 
                                             (GBP000s)    (GBP000s) 
-------------------  --------------------  -----------  -----------  ----------- 
 
 At 1 April 2015                2,145,020        5,362      216,586      221,948 
 Issued during the 
  year                            149,676          375       24,288       24,663 
 At 31 December 
  2015                          2,294,696        5,737      240,874      246,611 
 Issued during the 
  year                          1,869,818        4,675      349,849      354,524 
 At 31 December 
  2016                          4,164,514       10,412      590,723      601,135 
-------------------  --------------------  -----------  -----------  ----------- 
 
 
 7. LOANS 
--------- 
 

On 28 November 2016 the Group issued $400m of 7 year, 8.5% quarterly coupon USD-denominated convertible loans at par, receiving gross proceeds of GBP319,923,000 and incurring transaction costs of GBP11,577,000 which have been net off the carrying value of the loan. The key terms of the convertible loans are that at any date subsequent to 8 January 2017 up until maturity a bondholder may convert their bonds into ordinary shares in the Company at a conversion price of $0.31 per share.

Under the terms of the convertible loan, the Group has also been required to set aside an amount in an Escrow bank account in respect of all coupon payments due until 28 November 2019 and so this amount of GBP82,924,000 has been disclosed on the Group's statement of financial position as restricted cash as the Group is not able to use the cash for any purpose other than the payment of quarterly coupons.

Due to the conversion terms of the bonds leading to the issuance of a fixed number of ordinary shares in the Company in return for the extinguishment of the bonds whose value is variable in terms of the Company's functional currency of Sterling, the Group has accounted for the bonds as a host loan instrument containing an embedded derivative liability in respect of the conversions features. The split of the convertible loan between the host loan and the embedded derivative is detailed in the table below

 
                                              28                                                           31 December 
                                        November                                                                  2016 
                                            2016 
----------------  ------------------------------  -------------------  ---------------------  ---------- 
                                         Initial                 Fair               Interest     Foreign         Total 
                                     recognition                value                           exchange 
                                                               change                             loss / 
                                                                                                  (gain) 
 GBP000s 
----------------  ------------------------------  -------------------  ---------------------  ----------  ------------ 
 Convertible 
 loan 
 Gross proceeds 
  of Convertible 
  loan issue                             319,923 
 Transaction 
  costs 
  capitalised on 
  host loan 
  instrument                            (11,577) 
  Net proceeds 
   of 
   Convertible 
   loan 
   issue                                 308,346 
----------------  ------------------------------ 
 
 Host loan 
  liability                              271,657                    -               2,839          4,437       278,933 
 Embedded 
  conversion 
  derivative                   36,689                           5,744                      -           -        42,433 
  Convertible 
   loan 
   liability                             308,346                5,744                  2,839       4,437       321,366 
----------------  ------------------------------  -------------------  ---------------------  ----------  ------------ 
 

Fair value estimation

In order to estimate the fair value of the embedded derivative at inception and year-end, the Group estimated the fair value of the cash flows due under the host loan at the prevailing discount rate that would likely apply to any debt issued by the Group which was not convertible. Based on the pricing terms obtained on the convertible bonds, management have estimated a discount rate that for the loan component based on bond yield data of comparable entities with similar credit profiles at the measurement dates.

The effect of using a discount rate that was one percentage point higher/(lower) at 31 December 2016 would have been an increase/(decrease) in the finance cost recognised in the income statement of GBP13,085,000/(GBP13,961,000).

In estimating the fair value at 31 December 2016, the Group incorporated the mid-price of the bonds' quoted market price of 102.9 (28 November 2016: 100.0). Therefore, the fair value of the Group's convertible loan bonds as at 31 December 2016 was GBP334,679,000 compared to the stated carrying value of GBP321,366,000.

 
 8. CASH OUTFLOW FROM OPERATING 
  ACTIVITIES 
-------------------------------------  ---------------------  ------------------------ 
 
                                                 31 December                Nine-month 
                                                        2016                    period 
                                                                        to 31 December 
                                                                                  2015 
 Group                                               GBP000s                   GBP000s 
------------------------------------   ---------------------  ------------------------ 
 
 Loss before tax                                    (23,422)                   (7,509) 
 Amortisation                                              -                         5 
 Depreciation                                             57                        84 
 Exchange differences charged 
  to profit and loss                                 (4,986)                         - 
 Finance expense                                      11,550                        87 
 Loan conversion into shares                               -                       172 
 Share-based payments                                    844                       699 
 Tax credit                                              468                       550 
 
 
 Operating cash flow before changes 
  in working capital                                (15,489)                   (5,912) 
 
 Decrease in receivables                                 344                       229 
 (Decrease)/increase in payables                       (751)                       376 
 
 Net cash outflow from operating 
  activities                                        (15,896)                   (5,307) 
-------------------------------------  ---------------------  ------------------------ 
 
 
 9. ROYALTY FINANCING AGREEMENT 
------------------------------- 
 

On 25 October 2016 the Group entered into a royalty financing agreement with Hancock British Holdings Limited ("Hancock"). Under the agreement Hancock will pay consideration of USD 250 million in return for future royalty payments amounting to 5% of gross revenues on the first 13 million tonnes of product sold in each calendar year and a further 1% of gross revenues on sales in excess of 13 million tonnes, for the life of the Project.

Drawdown of the USD 250 million consideration is subject to certain conditions precedent being met, principally the Group giving notice to Hancock that it has expended USD 630 million of the proceeds of the Group's November 2016 stage 1 financing and that all material permits, commercial arrangements and authorisations for the project remain in place.

The royalty purchase represents a loan commitment and therefore falls outside of the scope of IAS 39 "Financial Instruments: Recognition and Measurement". As such no accounting entries are recognised in the financial statements prior to receipt of the consideration.

ENDS

This information is provided by RNS

The company news service from the London Stock Exchange

END

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March 28, 2017 02:00 ET (06:00 GMT)

1 Year Sirius Minerals Chart

1 Year Sirius Minerals Chart

1 Month Sirius Minerals Chart

1 Month Sirius Minerals Chart
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