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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Strategic Minerals Plc | LSE:SML | London | Ordinary Share | GB00B4W8PD74 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.225 | 0.20 | 0.25 | 0.225 | 0.225 | 0.225 | 762,814 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Iron Ores | 2.46M | 84k | 0.0000 | N/A | 4.44M |
From May 2019 to May 2024
TIDMSML
RNS Number : 2746G
Strategic Minerals PLC
26 May 2017
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.
26 May 2017
Strategic Minerals plc
("Strategic Minerals" or the "Company" or "SML")
Final Results for the Year Ended 31 December 2016
Maiden profit before tax achieved
Strategic Minerals PLC (AIM: SML; USOTC; SMCDY), the diversified mineral production and development company, is pleased to announce the publication of its 2016 annual financial results today.
The full annual report can be found on the Company's website: http://www.strategicminerals.net/
Financial Highlights
-- Maiden profit from operations of $0.351m (2015: loss of $0.880m) -- Two successful capital raises, the latter being 300% oversubscribed -- Unrestricted cash position of the Group as at 31 December 2016 was $1.105m (2015: $0.946m)
Operational Highlights
-- Marketing strategies at Cobre resulted in record domestic sales of $1,552,000 (2015: $1,252,000)
-- Successful conclusion to rail claim resulting in a $675,000 settlement being reached
-- Acquisition of 50% of Central Australian Rare Earth Pty Ltd ("CARE") prospective for cobalt, gold, nickel and rare earths
-- Drilling programme conducted at CARE's tenements at Hans Camp, Western Australia resulting in findings for both cobalt and nickel sulphide
-- Acquisition of 16.4% of Cornwall Resources Limited ("CRL"), a brownfields tin/tungsten project in the historic tin mining region of Cornwall, United Kingdom. Following the year end the Company exercised its option to increase its interest to 50%
-- Involvement in the Tatu Project ceased in February 2016 due to a failure to satisfy our investment criteria
-- The Company changed its strategy and undertook an operating strategy aimed at maintaining overheads within the profitability arising from Cobre and adopting a three-pronged investment strategy across minerals addressing Coal and Bulk Minerals; Advanced Materials; and Metals
Commenting, John Peters, Managing Director of Strategic Minerals, said:
"The results mark the Company's maiden profit before tax of US $351,000, an increase of $1,231,000 versus the full year to 2015. Continued record performance at Cobre in the first quarter of 2017, coupled with a substantial new contract, due to commence orders on 1(st) June 2017, augurs well for a profitable 2017 and beyond. With overheads being closely controlled and net profit margins on incremental sales at Cobre being 50%+, much of this performance goes straight to the bottom line. Added to this profitable outlook is the potential increase in resource lodes associated with our 2017 drilling programme.
"The Board looks to 2017 with much confidence."
For further information, please contact:
Strategic Minerals plc John Peters Managing Director www.strategicminerals.net Follow Strategic Minerals on: Twitter: @SML_Minerals LinkedIn: www.linkedin.com/company/strategic-minerals-plc Facebook: https://www.facebook.com/Strategic-Minerals-PLC-296612634111414/ +61 (0) 414 727 965 SP Angel Corporate Finance LLP Nominated Adviser and Joint Broker Ewan Leggat +44 (0)20 3470 0470 Optiva Securities Limited Joint Broker Graeme Dickson +44 (0)20 3411 1880 Yellow Jersey PR Financial PR Felicity Winkles Alistair de Kare-Silver Joe Burgess +44 (0)7825 916 715
Notes to Editors
Strategic Minerals Plc is an AIM-quoted, diversified mineral development and production company with projects in the United States of America, the UK and Australia. The Company is focused on acquiring and developing cash generative, high quality projects which meet local market demand for commodities and utilising this cash flow to undertake value added exploration.
In September 2011, Strategic Minerals purchased its first cash generating asset; the Cobre magnetite tailings dam project in New Mexico, USA which it brought into production in 2012 and which continues to provide a revenue stream for the Company. The portfolio was expanded in January 2016 with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia and the Northern Territory that are prospective for cobalt, gold, nickel sulphides and rare earths. In May 2016, an additional exploration asset was acquired when the company entered into an agreement with New Age Exploration Limited to acquire up to 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. This 50% acquisition has now been completed and drilling at the project has commenced.
Chairman's statement
I am pleased to present Strategic Minerals Plc's Annual Report for the year ended 31 December 2016. It was a watershed year for the Group with it recording its maiden profit. This reflected the Board and Management's hard work during the year which repositioned the Company both in an operational and strategic sense. These efforts, combined with a substantial new customer signed for Cobre, place the Company in a good position for 2017. Early indications are that 2017 is likely to see an increase in profitability, solid cash flows, self-funded drilling programmes in both CARE and Cornwall Resources and the Company continuing to review several potential projects.
The Group made a total comprehensive profit of $212,000 as compared to a comprehensive loss in 2015 of $1,016,000, a $1,228,000 turnaround. This profit reflected the agreed settlement of the company's rail dispute of $675,000. Costs incurred in 2016, directly related to securing the rail settlement, were in the order of $148,000. Accordingly, the 2016 year saw an operating improvement of around $700,000. The Group had unrestricted cash of $1.105m as at 31 December 2016 (2015: $0.946m).
Throughout 2016, the Company completed two corporate agreements, buying into both CARE and Cornwall Resources Limited. As it now appears that 2016 may have been the bottom of the commodity cycle, the timing has been superb. Additionally, the preferred selection of cobalt, gold, nickel sulphide and tin has outperformed the broader commodity market.
To help fund acquisitions, the Company undertook two capital raisings during the year. The first, in June 2016, raised GBP429,000 while the second, in October 2016, raised GBP600,000. As a sign of the market's belief in the Company's future, the later raising was oversubscribed by 300%. The Board and Management minimised dilution to shareholders by placing only sufficient funds to ensure cashflow was available to settle its equity subscription in Cornwall Resources and any planned 2017 drilling programmes at CARE. This strategy has benefited all shareholders by minimising dilution with the share price having increased substantially from the issue price in October 2016 of 0.40p to over 2.4p by the end of April 2017.
Our re-focused Cobre operations are now very cash generative and increased sales volumes in the second half of 2016 (up 50% on the previous period in 2015) have been continued, and improved upon, into the first quarter of 2017. The signing of a new client in March 2017 is likely to see these increased levels doubled without a reduction in the Cobre net profit margin of between 40% to 45% of sales revenue.
As previously reported, conditions relating to the Tatu project deteriorated at the end of 2015 and the Board moved quickly to cease the Company's involvement in this project, preferring to safeguard funds for other projects more likely to produce better results.
The Company negotiated, conducted due diligence on and acquired 50% of Central Australian Rare Earth ("CARE") which focuses on cobalt, gold, nickel sulphide and rare earths. The funds provided by way of the Company's equity subscription were primarily used to undertake a three-hole drilling programme at CARE's Hanns Camp tenements in Western Australia. This programme successfully identified both cobalt and nickel sulphide traces and CARE has plans in 2017 to more clearly define the resource potential at Hanns Camp and in its Mount Weld tenement, which is considered prospective for gold and rare earths.
In January 2016, the Board refocused the Company's strategy with an aim to keeping overheads within the operating cash flows from the Cobre mine in New Mexico, USA and has adopted a three-pronged approach to investments centred around;
a) Projects with off take arrangements for Bulk Material Minerals;
b) Advanced Materials (rare Earths, Lithium and Graphite etc) with demand upside; and
c) Metals expecting significant price improvement over three to five years (nickel, gold, tin etc).
The stronger position the Company has found itself at the end of 2016 reflected its lower overheads and the Company continues to be one of the few AIM listed mining companies with an underlying cash flow. This, when coupled with the potentially substantial upside from the Company's investments in Western Australia and Cornwall in the UK, augurs well for shareholder value.
The addition of Peter Wale, a substantial shareholder of the Company, to the Board during 2016 has strengthened the Board's balance of minerals experience, financial acumen and shareholder representation. This, coupled with the Company's proven management performance, is encouraging for the Company's future.
I look forward to working with my fellow Directors and the staff of the Company to ensure that the 2017 financial year is one of both operating and project growth for the Company.
Finally, I would like to acknowledge the support of our shareholders, suppliers and other stakeholders and I look forward to your continued support during 2017 and beyond.
Alan Broome AM
Chairman
26 May 2017
Strategic Report for the year ended 31 December 2016
The Directors of the Company and its subsidiary undertaking (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2016.
Financial Performance
The Company and Group's reporting currency is US dollars as the Group's revenues, expenses, assets and liabilities are predominately in US currency.
The Group made an operating profit before tax for the financial year of $0.351m (2015: Loss of $0.880m) which, after making allowance for exchange rate movements, produced a total comprehensive profit of $0.212m (2015: Loss $1.106m). The profit in 2016 was largely attributable to the $0.675m settlement of our rail claim which, after allowing for direct costs associated with achieving this settlement, contributed around $0.527m to the period's profit.
During the year, the Company entered two new investments and ceased its involvement in the Tatu project. Adjustments relating to expensing costs associated with the Tatu project were principally made in the 2015 financial year although some minor costs are included in the 2016 profit and loss. A further $41,000 non-cash allowance was made in the period for the allocation of options to the Board and Management during this period.
The Board and management continued to keep a tight rein on overheads and administration costs. Head office expenses fell by 17% from $0.809m in 2015 to $0.670m in 2016. Overheads in the Company's subsidiary Southern Minerals Group LLC ("SMG") after deducting intercompany management fees rose from $0.423m in 2015 to $0.732m in 2016. This included $0.148m in one-off legal costs to negotiate and settle the rail claim in 2016. There was a one-off reversal of a payable in the 2015 year which reduced overheads by $0.141m. After excluding these one-off adjustments our subsidiary's adjusted overheads increased modestly from $0.564m in 2015 to $0.584m in 2016.
In line with the Company's adoption of the highly probable rule in valuing deferred tax credits and liabilities, no adjustment for taxation has been made in this financial year. No tax liability existed at 31 December 2016 and the Company has substantial tax losses carried forward.
Project review and activities
Cobre Performance
2016 proved to be a record year for domestic sales at Cobre. During the year, 23,385 short wet tons of magnetite were sold for $1,552,000 compared to the 2015 year when 18,454 short wet tons were sold for $1,252,000. Operations at the mine continue to be closely managed while still ensuring adequate service to customers and safe operating conditions.
The increase in sales for 2016 reflected the addition of a large client in the second half of 2016. Not only has this client continued consistent demand for the Cobre magnetite, but in 2017 another substantial client has been sourced and sales for 2017 are expected to be appreciably higher than in 2016. Capacity exists to service all existing clients including the major new client.
During 2016, the Company's operating subsidiary at Cobre, Southern Minerals Group LLC ("SMG"), applied cash flow from operations to repay existing debts. It is now external debt free. Accordingly, excess cash is now being applied to acquire machinery for operations and to the repayment of intercompany balances accumulated when SMG was exporting product overseas.
SMG's formal access to the Cobre mine magnetite stockpile was extended in 2016 until March 2017. Subsequently, this has now been "rolled over" to March 2018. The Company continues an on-going dialogue with the mine owner and hopes to secure a more permanent, mutually beneficial arrangement for future operations at Cobre.
In July 2016, management from SML and SMG negotiated a rail settlement of $675,000 with South Western Rail Road in relation to works they had undertaken on SMG's behalf for rail access to the Cobre mine. The settlement called for an immediate payment of $100,000 to be followed with a payment of $400,000 in January 2017 and a final payment of $175,000 in June 2017. Costs associated with obtaining the agreement were circa $148,000. The January payment has been received and only the $175,000 which is expected in June is required to finalise arrangements.
Central Australia Rare Earth Pty Ltd ("CARE") Tenements
In January 2016, the Company negotiated and conducted due diligence relating to the acquisition of 50% of CARE from its owner Rarus Limited (Rarus). On 1 February 2016, the Company took an initial subscription of 25.5% of CARE for AUD $130,000 and subsequently acquired an additional 24.5% interest through a second subscription for AUD $250,000 taking the Company's total investment in CARE to $278,000 (AUD $380,000). Funds from the second subscription were primarily applied to a drilling programme undertaken by CARE in the first half of 2016.
CARE has ownership rights on twenty tenements. Four of these tenements, known as the Laverton Project, are subject to a farm-in joint venture with ASX-listed Focus Minerals Limited ("Focus") that grants CARE the right to explore Focus' tenements near the Western Australian Goldfields town of Laverton for 90% ownership of, nickel and other commodities discovered in the tenements excluding gold, copper (where it is the dominant commodity present) and silver to which Focus maintains 100% ownership rights.
The AUD $250,000 from the second subscription was primarily used to fund a nickel sulphide exploration drilling programme at the highly prospective Hanns Camp Prospect located within CARE's Laverton Project. Further details on the geology of the site can be found on the Company's website (www.strategicminerals.net). This programme consisted of three drill holes and was undertaken in the second quarter of 2016. Initial handheld XRF results indicated strong nickel sulphide readings. However, laboratory results were less strong, indicating the existence of nickel sulphide but suggesting more drilling to better define the resource.
The laboratory results did also indicate heightened levels for platinum and palladium and this encouraged management to have the core samples from the drilling re-examined for a broader mineral range. As a result, a high reading for cobalt was identified and this has now become the primary focus for exploration in this area.
On 5th May 2017, the company agreed to purchase the remaining 50% of CARE for GBP522,500 to be provided by Rarus subscribing for 19,000,000 new shares in Strategic Minerals plc issued at GBP0.0275 per share. The transaction is to be completed prior to 1 June 2017 and will take the Company's total interest in CARE to 100%.
Cornwall Resources Limited ("CRL") - Redmoor Tin/Tungsten Project
In the first half of 2016, SML negotiated, and entered an agreement, to acquire up to a 50% interest in Cornwall Resources Limited ("CRL") - formerly known as NAE Resources (UK) Limited - which was a wholly owned subsidiary of the Australian (ASX) listed company New Age Exploration Limited ("NAE"). This company holds an exploration licence and option over 23km(2) in the Cornish tin-tungsten-copper mining district in the UK which had previously operated as the Redmoor Tin Mine.
The Company acquired 16.4% of CRL for $0.285m (GBP206,698) during the period. In, February 2017, the Company exercised its option to increase its ownership of CRL to 50% for cash (GBP843,649). As part of the acquisition, SML entered into a Shareholders' Agreement with NAE which ensures that CRL and the Redmoor project will be operated as a 50:50 joint venture.
In October 2012, CRL acquired the rights, through an exploration licence and mining lease option arrangement, over a 23km(2) area surrounding the Redmoor deposit in the Cornish tin-tungsten-copper mining district in the UK. The exploration licence provides the rights to explore over the entire licence area for a period of 15 years and the mining lease option provides the right for Redmoor to enter into a 25-year mining lease (renewable for a further 25 years) over any part of the licence area. During the exploration licence period, a modest annual licence fee is payable to the vendor which reverts to a 3% net smelter return vendor royalty on mining commencement. The licence area had previously supported a number of historic tin-tungsten-copper mines and there are a number of operating open cut mines (china clay and tungsten) located in the region.
There is excellent local infrastructure for roads and ports and it is less than 40km by road to the recently commissioned Drakelands tungsten mine and processing plant.
In December 2015, CRL undertook, in conjunction with SRK Consulting (UK) Limited ("SRK"), a detailed review of the historical drilling, mining and geological data. This resulted in the:
1) Definition of an updated Mineral Resource, as defined by the JORC code, of 13.3Mt @ 0.37% tungsten equivalent (WO3Eq) (0.56% tin equivalent (SnEq)).
2) Identification of a number of high grade lodes at Redmoor and definition of a high grade sub-set of the above Inferred Mineral Resource of 2.3Mt @ 0.80% WO3Eq (1.19% SnEq).
3) Identification of an additional high grade Exploration Target, also defined by the JORC code, of 4Mt to 6Mt with an estimated grade of between 0.6% and 1.0% WO3Eq (0.9% to 1.5% SnEq) - two to three times the size of the above High Grade Resource noted in 2) above (at a similar expected grade).
It should be noted that the above Exploration Target is conceptual in nature and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource.
In March 2016, CRL completed a preliminary mining study which showed encouraging results for both bulk mining and high grade mining options for mining Redmoor via a bench stoping and backfill underground mining method.
-- The bulk mining option was based on the Redmoor Inferred Mineral Resource defined by SRK after the application of a 0.40% SnEq cut-off grade, targeting 8.1Mt at 0.67% SnEq before stope optimisation and application of mining dilution and recovery factors. The bulk option has an average stope width of 6 metres.
-- The high-grade mining option was based on the Redmoor Inferred Mineral Resource defined by SRK after the application of a 0.50% SnEq cut-off grade, targeting 3.5Mt at 0.99% SnEq before stope optimisation and application of mining dilution and recovery factors. The high-grade option has an average stope width of 3 metres.
An initial drilling programme was confirmed in 2016, aimed primarily at converting the significant Exploration Target to an Inferred Resource and also at upgrading a portion of the resource from Inferred to Indicated Mineral Resource status. Funding, from the cash investment into CRL, is being utilised to commence a two phase drilling programme which began at Redmoor in March 2017. Preparations for this drilling programme began in the second half of 2016 with the appointment of a Community Advisor and, in early 2017, an Exploration Manager.
Safety
The Company is pleased to report that, during 2016, across its operations in United States and Australia that the Company had zero safety incidents and incurred no environmental, regulatory, or operation violations.
Board and Management Changes
In July 2016, Mr Lyle Hobbs resigned as a Non-Executive Director, due to increased personal business responsibilities. Mr Hobbs' role was replaced by Mr Peter Wale, one of the Company's largest shareholders.
Key Performance Indicators
The Board monitors the activities and performance of the Group on a regular basis. The principal KPI's monitored by the Company are domestic sales of product from Cobre, the cash position of the Group and the health, safety and environmental incidents of the Group. The sales of domestic product at Cobre increased by 26% during the year to 23,385 short wet tons. The unrestricted cash position of the group as at 31 December 2016 was $1.105m and there were no health, safety and environmental incidents reported in the year.
Strategy
In early 2016, the Company adopted a strategy emphasising both an operating and investment strategy.
The Operating Strategy is centred on maintaining and improving cash flows from the Company's magnetite stockpile at the Cobre mine in New Mexico, USA, whilst also limiting corporate overheads in line with this profitability, thus ensuring operating self-sufficiency.
The Investment Strategy is built around a three pronged approach which features bulk commodities with offtake arrangements, advanced materials with expected improvement in demand (Rare Earths, Cobalt, Graphite etc) and metals with expected pricing improvements over the next three to five years (Nickel Sulphide, Gold, Lithium etc).
The Company is well positioned with a sound cash flow foundation, self-funded drilling programmes and is examining a number of potential investments involving both existing and new projects.
Outlook and Prospects
The Company continues to maintain controls on its overheads, is focused on expanding Cobre's profitable domestic sales, is undertaking further drilling of the CARE tenements, has commenced the Redmoor drilling programme and is examining potential expansionary projects.
The Board is confident that the outlook for the Company is encouraging as it now has lower overheads, a strong cash flow stream from Cobre and the potential upside from drilling programmes in Western Australia and in Cornwall, England.
The Strategic Report was approved and authorised for issue by the Board of Directors and was signed on its behalf by:
John Peters
Managing Director
26 May 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
Hot Features
Premium
Year to Year to
31 December 31 December
Note 2016 2015
$'000 $'000
Revenue 4 1,552 1,252
Raw materials and consumables (337) (246)
Used ________ ________
Gross profit/(loss) 1,215 1,006
Other Income 5 691 -
Administration expenses 6 (1,555) (1,882)
________ ________
Profit/(loss) from operations 351 (876)
Finance expense 8 - (4)
________ ________
Profit/(loss) before taxation 351 (880)
Income tax charge/(credit) 9 - -
________ ________
Profit/(loss) for the
period attributable to
the owners of the parent 351 (880)
Other comprehensive income
Items that may be reclassified
subsequently to profit
or loss:
Exchange gain/(loss) arising
on translation of foreign
operations (139) (136)
________ ________
Total comprehensive income/(loss)
attributable to the owners
of the parent 212 (1,016)
________ ________
Profit/(loss) per share attributable to the ordinary equity holders of the parent:
Basic 10 $0.00034 ($0.0013) Diluted $0.00033 ($0.0013)
The accompanying accounting policies and notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
2016 2015
Notes $'000 $'000
Assets
Non-current assets
Investments - equity accounted 12 563 -
Property, plant and equipment 13 141 190
Restricted cash 17 100 103
________ ________
804 293
________ ________
Current assets
Inventories 14 13 4
Trade and other receivables 15 922 418
Cash and cash equivalents 16 1,105 946
________ ________
2,040 1,368
________ ________
Total Assets 2,844 1,661
________ ________
Equity and liabilities
Share capital 21 1,873 1,430
Share premium reserve 21 43,865 42,883
Merger reserve 20,240 20,240
Foreign exchange reserve (415) (276)
Share options reserve 22 138 97
Other reserves (23,023) (23,023)
Retained earnings (39,976) (40,327)
________ ________
Total Equity 2,702 1,024
________ ________
Liabilities
Current liabilities
Loans and borrowings 17 - 85
Trade and other payables 18 142 552
________ ________
142 637
________ ________
Total Liabilities 142 637
________ ________
Total Equity and Liabilities 2,844 1,661
________ ________
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
Notes 2016 2015
$'000 $'000
Assets
Non-current assets
Investments - equity accounted 12 563 -
Property, plant and equipment 13 - -
Receivables 15 -
________ ________
563 -
________ ________
Current assets
Trade and other receivables 15 1,524 509
Cash and cash equivalents 16 685 782
________ ________
2,209 1,291
________ ________
Total Assets 2,772 1,291
________ ________
Equity and liabilities
Share capital 21 1,873 1,430
Share premium reserve 21 43,865 42,883
Merger reserve 20,240 20,240
Foreign exchange reserve (142) 62
Share options reserve 22 138 97
Retained earnings (63,272) (63,713)
________ ________
Total Equity 2,702 999
________ ________
Liabilities
Current liabilities
Trade and other payables 19 70 292
________ ________
Total Liabilities 70 292
________ ________
Total Equity and Liabilities 2,772 1,291
________ ________
As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements. The parent Company's profit for the year was $441,000 (2015: loss $1,238,000).
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
Year to Year to
31 December 31 December
2016 2015
$'000 $'000
Cash flows from operating activities
Profit/(loss) before tax 351 (880)
Adjustments for:
Depreciation of property, plant
and equipment 48 10
Impairment to intangible assets - 1,149
Impairment of loans to associates
and joint arrangements - 222
Write back of provision on mining
royalties - (831)
Loss on disposal of property,
plant and equipment - 2
(Increase)/ decrease in inventory (9) 13
(Increase) / decrease in trade
and other receivables (553) (174)
Increase / (decrease) in trade
and other payables (411) (268)
(Increase)/ decrease in prepayments 38 -
Share based payment expense 41 70
________ ________
Net cash used in operating activities (495) (687)
________ ________
Investing activities
Acquisition of intangible fixed
assets - (231)
Acquisition of property, plant
and equipment - (200)
Loans to associates and joint
arrangements - (222)
Investments in associates and
joint arrangements (563) (100)
________ ________
Net cash used in investing activities (563) (753)
________ ________
Financing activities
Net proceeds from issue of equity
share capital 1,425 1,463
Net proceeds/(repayment) of borrowings (85) 85
________ ________
Net cash from financing activities 1,340 1,548
________ ________
Net increase in cash and cash 282 108
equivalents
Cash and cash equivalents at beginning
of year 946 846
Effects of exchange rate changes
on the balance of cash
held in foreign currencies (123) (8)
________ ________
Cash and cash equivalents at end
of year 16 1,105 946
________ ________
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2016
Year to Year to
31 December 31 December
2016 2015
$'000 $'000
Cash flows from operating activities
Profit/(loss) before tax 441 (1,238)
Adjustments for:
(Writeback)/Impairment of receivables
from subsidiary undertakings (976) 60
Impairment of investment in subsidiary - 487
Depreciation - -
(Increase) / decrease in trade
and other receivables (236) 232
Increase / (decrease) in trade
and other payables (222) 103
(Increase)/ decrease in prepayments 38 -
Share based payment expense 41 70
________ ________
Net cash used in operating activities (914) (286)
________ ________
Investing activities
Loans to associates and joint
arrangements - (453)
Investments in associates and
joint arrangements (563) (100)
Receipts from / (advances to)
subsidiary undertakings 81 49
________ ________
Net cash used in investing activities (482) (504)
________ _______
Financing activities
Net proceeds from issue of equity
share capital 1,425 1,463
Net (repayment) / proceeds of - -
borrowings
________ ________
Net cash from financing activities 1,425 1,463
________ ________
Net increase in cash and cash
equivalents 29 673
Cash and cash equivalents at beginning
of year 782 114
Effects of exchange rate changes
on the balance of cash held in
foreign currencies (126) (5)
________ ________
Cash and cash equivalents at end
of year 16 685 782
________ ________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share Foreign
Share premium Merger options Other exchange Retained Total
capital reserve reserve reserve Reserves reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January
2015 1,169 41,707 20,240 - (23,023) (140) (39.447)) 506
Loss for the
year - - - - - - (880) (880)
Foreign exchange
translation - - - - - (136) - (136)
_______ _______ _______ _______ _______ _______ _______ _______
Total comprehensive
income for
the year - - - - - (136) (880) (1,016)
Share based
payments - - - 97 - - - 97
Shares issued
in the year 261 1,309 - - - - - 1,570
Shares issued
costs - (133) - - - - - (133)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2015 1,430 42,883 20,240 97 (23,023) (276) (40,327) 1,024
_______ _______ _______ _______ _______ _______ _______ _______
Profit/(Loss)
for the year - - - - - - 351 351
Foreign exchange
translation - - - - - (139) - (139)
_______ _______ _______ _______ _______ _______ _______ _______
Total comprehensive
income for
the year - - - - - (139) 351 212
Share based
payments - - - 41 - - - 41
Shares issued
in the year 443 1,069 - - - - - 1,512
Share issue
costs - (87) - - - - - (87)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2016 1,873 43,865 20,240 138 (23,023) (415) (39,976) 2,702
_______ _______ _______ _______ _______ _______ _______ _______
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share
Share premium Merger Options Foreign Retained Total
capital reserve reserve Reserve exchange earnings equity
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January 2015 1,169 41,707 20,240 - 156 (62,475) 797
Loss for the
year - - - - - (1,238) (1,238)
Foreign exchange
translation - - - - (94) - (94)
_______ _______ _______
Total comprehensive
income (94) (1,238) (1,332)
for the year
Share based
payments - - - 97 - - 97
Shares issued
in the year 261 1,309 - - - - 1,570
Share issue
costs - (133) - - - - (133)
_______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2015 1,430 42,883 20,240 97 62 (63,713) 999
_______ _______ _______ _______ _______ _______ _______
Profit/((Loss)
for the year - - - - - 441 441
Foreign exchange
translation - - - - (204) - (204)
Total comprehensive _______ _______ _______
income
for the year (204) 441 237
Share based
payments - - - 41 - - 41
Shares issued
in the year 443 1,069 - - - - 1,512
Share issue
costs - (87) - - - - (87)
_______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2016 1,873 43,865 20,240 138 (142) (63,272) 2,702
_______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the parent Company.
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1. 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 Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").
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.
Going concern basis
These financial statements have been prepared on the assumption that the Group is a going concern.
When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to 30 June 2018 being the period for which projections have been prepared and the minimum period the Directors are required to consider.
The Directors have reviewed the Group's current cash resources, funding requirements, ongoing trading of the operations and sales contracts in place in the Southern Minerals subsidiary. As a result of the review, the going concern basis has been adopted in preparing the Financial Statements and the Directors have no reason to believe that the Group will not be a going concern in the foreseeable future based on forecasts and available cash resources.
Adoption of standards effective in 2016
There were no new standards effective for the first time for periods beginning on or after 1 January 2016 that had a significant impact on the group.
Issued IFRS that are not yet effective
Any standards and interpretations that have been issued but are not yet effective, and that are available for early application, have not been applied by the Group in these financial statements.
International Financial Reporting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 31 December 2016:
IFRS 15 Revenue from Contracts with Customers
IFRS 15 is intended to clarify the principles of revenue recognition and establish a single framework for revenue recognition. The core principle is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard is effective for periods beginning on or after 1 January 2018.
IFRS 15 is intended to introduce a single framework for revenue recognition and clarify principles of revenue recognition. The Group does not anticipate any material impact to the recognition of revenue upon adoption of this standard based on the existing arrangements.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement in its entirety. This standard is effective for periods beginning on or after 1 January 2018 with retrospective application.
IFRS 9 introduces significant changes to the classification and measurement requirements for financial instruments. The Group does not anticipate any material impact upon adoption of this standard.
IFRS 16 Leases
IFRS 16 introduces a single lease accounting model, in which leases are capitalised as assets with an associated lease liability with the exception of certain low value leases and leases with a term under 12 months. This standard is effective for periods beginning on or after 1 January 2019. IFRS 16 is not yet endorsed by the EU. The Group does not anticipate any material impact upon adoption of this standard.
The Group does not expect other pronouncements to have a material impact upon the Group's primary statements and disclosure.
Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:
- The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights,
- substantive potential voting rights held by the company and by other parties, - other contractual arrangements and - historic patterns in voting attendance.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Investment in Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates 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 associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate.
Any premium paid for an associate 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 associate. Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
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 (including any other contractual arrangements).
The Group accounts for its interests in joint ventures in the same manner as investments in Associates (i.e. using the equity method - refer above).
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 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.
Impairment of non-financial assets (excluding inventories)
Impairment tests of intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows: its cash generating units ('CGUs').
Impairment charges are included in the statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).
The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
Exploration and evaluation assets
The Group has continued to apply the 'successful efforts' method of accounting for Exploration and Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 'Exploration for the Evaluation of Mineral Resources'.
The successful efforts method means that only the costs which relate directly to the discovery and development of specific mineral reserves are capitalised. Such costs may include costs of license acquisition, technical services and studies; exploration drilling and testing but do not include costs incurred prior to having obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is general in nature is charged directly to the statement of comprehensive income and that which relates to unsuccessful exploration operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate directly to the discovery and development of specific commercial mineral reserves will remain capitalised and to be depreciated over the lives of these reserves. Exploration and evaluation costs are capitalised within intangible assets. Costs incurred prior to obtaining legal rights to explore are expensed immediately to the statement of comprehensive income.
All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the Directors consider to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets as 'Developed mineral assets' following an impairment review and depreciated accordingly. Where properties are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in which the determination is made.
Costs are amortised on a Tenement by Tenement unit of production method based on commercial proven and probable reserves.
Contractual relationship
The contractual relationship recognised as a result of the acquisition of Ebony Iron Pty Limited has been valued using estimated discounted cash flow and is being amortised over the term of the contract at a rate to match the sale of magnetite.
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.
Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:
-- Office equipment - 3 years straight line -- Plant and machinery - on a unit of production basis -- Rail infrastructure - on a per ton basis for inventory transported by rail in the year
The carrying value of property, plant and equipment assets is assessed annually and any impairment is charged to the statement of comprehensive income.
Leased assets
Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss. A leased asset is depreciated over the useful life of the asset.
Investments in subsidiaries - company only
Investments in subsidiaries are stated at cost less provision for any impairment in value.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call with banks. Restricted cash is not available for use by the Group and therefore is not considered highly liquid.
Revenue
Revenue from the sale of magnetite is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer, being the point of leaving the mine gate for domestic sales to the US market.
Inventories
Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.
Taxation
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the same income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.
Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:
-- the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and
-- investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.
Fair values
The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the Group at the statement of financial position date approximated their fair values, due to the relatively short term nature of these financial instruments.
Share-based compensation
The fair value of the employee and suppliers' services received in exchange for the grant of options and warrants is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options and warrants granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options and warrants that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options and warrants that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options and warrants are exercised.
The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model, which takes into account 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, and exercise restrictions. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.
Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transactions costs.
A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.
Financial assets
The Group classifies its financial assets as loans and receivables.
These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (eg trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to tier acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Financial liabilities
The Group classifies its financial liabilities as other financial liabilities at amortised cost.
Other financial liabilities are trade payables and loans and borrowings, consisting of finance lease obligations, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.
Foreign currencies
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation, in which case exchange differences are recognised in other comprehensive income and accumulated in the foreign exchange reserve along with the exchange differences arising on the retranslation of the foreign operation.
On consolidation, the results of overseas operations are translated into US Dollars at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the gain or loss on disposal.
Management of capital
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Group arise in respect of the costs of financing working capital as inventory is built up prior to sale.
The Board receives periodic cash flow projections as well as information on cash balances. The Board will not commit to material expenditure prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes.
2. 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.
Judgements
Refer to Note 12 for judgements made in the current year that would have a material effect on the assets and liabilities of the Company in the next financial year.
Estimates and assumptions
(a) Carrying value of intangible assets
In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held for which further details are given in Note 11.
In assessing the continuing carrying value of the other intangible asset, being the contractual relationship acquired on the acquisition of Ebony Iron Pty Limited, the key estimate and assumption made in the valuation model adopted has been the expected level of product which the Company will be able to sell. The carrying value for this intangible asset is now fully amortised.
The carrying value of exploration and evaluation costs were written off in full at 31 December 2015.
(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. Further details are given in Note 22.
(c) Carrying value of investments and amounts owed by subsidiary undertakings
The loans to subsidiary undertakings have been impaired in previous years as the directors concluded that the net assets of the subsidiaries at reporting date were insufficient to recover the balances. Given the increase in net assets of the subsidiaries in the current year, the provision for impairment has been written back as certain balances previously impaired are now considered recoverable. Further details are given in Note 12.
(d) Investments in associates and joint arrangements
Refer to Note 12 for details of judgements in relation to investments in associates and joint arrangements.
3 Financial instruments - Risk management
The Group is exposed to the following financial risks:
-- Credit risk -- Cash flow interest rate risk -- Foreign exchange risk -- Commodity price risk -- Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from last year unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are:
-- Trade and other receivables -- Cash and cash equivalents -- Trade and other payables
A summary of the financial instruments held by category is provided below:
Financial assets
Loans and receivables
2016 2015
Group $'000 $'000
Cash and cash equivalents 1,105 946
Trade and other receivables 830 372
_______ _______
Total financial assets 1,935 1,318
_______ _______
Financial liabilities
Financial liabilities
at amortised cost
2016 2015
Group $'000 $'000
Trade and other payables 113 501
Loans and borrowings - 85
_______ _______
Total financial liabilities 113 586
_______ _______
Financial assets Loans and receivables
2016 2015
Company $'000 $'000
Cash and cash equivalents 685 782
Trade and other receivables 72 -
Amounts owed by subsidiary undertakings 1,360 465
_______ _______
Total financial assets 2,117 1,247
_______ _______
Financial liabilities
Financial liabilities
at amortised cost
2016 2015
Company $'000 $'000
Trade and other payables 42 241
_______ _______
Total financial liabilities 42 241
_______ _______
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit assessments are taken into account by local business practices.
The loans to subsidiary undertakings have been impaired in previous years as the directors concluded that the net assets of the subsidiaries at reporting date were insufficient to recover the balances. Given the increase in net assets of the subsidiaries in the current year, the provision for impairment has been written back by $0.976m as certain balances previously impaired are now considered recoverable.
A provision for impairment of $3.1m against certain loans to the Australian subsidiaries remains in place as the directors do not consider the increase in net assets of the subsidiaries sufficient to recover all outstanding amounts. These loans were fully impaired in 2015 following the disposal of tenements held in Australia.
Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "A" are accepted.
Further disclosures regarding trade and other receivables, which are neither past due nor impaired other than shown, are provided in Note 15.
At 31 December 2016, the Group had no external borrowings.
Foreign exchange risk
Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their own functional currency (being Pound Sterling, US dollar and Australian dollar) with the cash generated from their own operations where possible in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.
The parent Company maintains US dollar and Pounds sterling bank accounts.
All receivables and payables are settled at the prevailing spot rate; no forward contracts or other hedging instruments are currently entered into. The Board monitors the total foreign exchange risk on a periodic basis but given the major in and out flows of cash are in US dollars there is a natural hedge in place which minimises the overall exposure.
As of 31 December the net exposure to foreign exchange risk was as follows:
Functional currency of individual entity
US dollar Sterling Australian dollar Total
2016 2015 2016 2015 2016 2015 2016 2015
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Group
Net foreign currency financial assets/(liabilities)
US dollar 1,095 166 23 41 - - 1,118 207
Sterling - - 692 640 - - 692 640
Australian
dollar - - (44) 12 25 12 (19)
New Zealand
dollar - - - (96) - - - (96)
_______ _______ _______ _______ _______ _______ _______ _______
Total net
exposure 1,095 166 715 541 12 25 1,822 732
_______ _______ _______ _______ _______ _______ _______ _______
The effect of a 20% strengthening of the Sterling against US Dollar at the reporting date on the Sterling net financial assets carried at that date would, all other variables held constant, have resulted in an increase in the post-tax profit for the year of US$133,000 (2015: US$128,000) and an increase of the net assets of US$133,000. A 20% weakening in the exchange rate would, on the same basis, have decreased post-tax profit and decreased net assets by US$150,000 (2015: US$128,000).
Functional currency of individual entity
Sterling Total
2016 2015 2016 2015
$'000 $'000 $'000 $'000
Company
Net foreign currency financial
assets/(liabilities)
US dollar 1,421 506 1,421 506
Sterling 654 640 654 640
Australian
dollar - (44) - (44)
New Zealand
dollar - (96) - (96)
_______ _______ _______ _______
Total net
exposure 2,075 1,006 2,075 1,006
_______ _______ _______ _______
Commodity price risk
Typically the sale of magnetite to the export market, as opposed to US domestic customers, is priced by reference to the market quoted Platts IODEX 62% Fe CFR China price over which the Group has no influence. There were no exports of product in the 2016 year, hence, there is no exposure to market price risks in the current year.
Liquidity risk
Liquidity risk arises from the Group's management of working capital.
The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 30 days.
The Board receives periodic cash flow projections as well as information regarding cash balances. The Group does not have any overdraft or credit lines in place. The liquidity risk of each Group entity is managed centrally by the finance function.
The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:
Between Between Between
Group Up to 3 and 1 and 2 and Over
3 12 2 5
months months Year years 5 years
At 31 December 2016 $'000 $'000 $'000 $'000 $'000
Trade and other payables 113 - - - -
_______ _______ _______ _______ _______
Total 113 - - - -
_______ _______ _______ _______ _______
Between Between Between
Group Up to 3 and 1 and 2 and Over
3 12 2 5
months months Year years 5 years
At 31 December 2015 $'000 $'000 $'000 $'000 $'000
Trade and other payables 405 96 - - -
Loans and borrowings 43 42 - - -
_______ _______ _______ _______ _______
Total 448 138 - - -
_______ _______ _______ _______ _______
Between Between Between
Company Up to 3 and 1 and 2 and Over
3 12 2 5
months months year years 5 years
At 31 December 2016 $'000 $'000 $'000 $'000 $'000
Trade and other payables 42 - - - -
_______ _______ _______ _______ _______
Total 42 - - - -
_______ _______ _______ _______ _______
Between Between Between
Company Up to 3 and 1 and 2 and Over
3 12 2 5
months months year years 5 years
At 31 December 2015 $'000 $'000 $'000 $'000 $'000
Trade and other payables 241 - - - -
Loans and borrowings - - - - -
_______ _______ _______ _______ _______
Total 241 - - - -
_______ _______ _______ _______ _______
Capital Disclosures
The Group monitors "adjusted capital" which comprises all components of equity (i.e. share capital, share premium, merger reserve, and retained earnings).
The Group's objectives when maintaining capital are:
-- to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
-- to provide an adequate return to shareholders by pricing products with the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
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 certain of these expenses. This segment also holds the company's interest in the CARE project in Australia and the Redmoor project in Cornwall, United Kingdom.
-- Australia - This segment holds the tenements in Australia and incurs all related operating costs however these tenements were disposed of during the financial year.
-- New Zealand - This segment holds the company's previous interest in the Tatu project in New Zealand which was disposed of in February 2016.
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 EU Adopted IFRS but excluding non-cash losses, such as the effects of share-based payments.
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.
SMG Head Australia Intra Total
Office Segment
Elimination
2016 2016 2016 2016 2016
$'000 $'000 $'000 $'000 $'000
Revenues 1,552 - - - 1,552
Cost of sales (337) - - - (337)
_______ _______ _______ -_______ _______
Gross profit 1,215 - - - 1,215
Other income (Note
5) 675 209 - (193) 691
Overhead expenses (732) (669) (31) - (1,432)
Management fee (200) - - 200 -
Share based payments - (41) - - (41)
Depreciation (48) - - - (48)
Write back of
intercompany debt
provisions - 976 - (976) -
Foreign exchange
gain/(loss) - (34) - - (34)
_______ _______ _______ _______ _______
Segment profit
/
(loss) before
taxation 910 441 (31) (969) 351
_______ _______ _______ _______ _______
SMG Head Australia New Intra Total
Office Zealand Segment
Elimination
2015 2015 2015 2015 2015 2015
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,252 200 - - (200) 1,252
Cost of sales (246) - - - - (246)
_______ _______ _______ _______ -_______ _______
Gross profit 1,006 200 - - (200) 1,006
Overhead expenses (423) (809) (19) - - (1,251)
Management fee (200) - - - 200 -
Finance expense (4) - - - - (4)
Share based payments - (70) - - - (70)
Depreciation (10) - - - - (10)
Impairment of
intangible assets - - - (1,149) - (1,149)
Write back of
provisions - - - 831 - 831
Impairment of
loan to joint
operations - - - (222) - (222)
Foreign exchange - (11) - - - (11)
_______ _______ _______ _______ _______ _______
Segment profit
/
(loss) before
taxation 369 (690) (19) (540) - (880)
_______ _______ _______ _______ _______ _______
Head
SMG Office Australia Total
As at 31 December $'000 $'000 $'000 $'000
2016
Additions to non-current
assets (excluding
deferred tax) - 563 - 563
_______ _______ _______ _______
Reportable segment
assets (excluding
deferred tax) 1,469 1,362 13 2,844
_______ _______ _______ _______
Reportable segment
liabilities 71 70 1 142
_______ _______ _______ _______
Deferred tax liabilities -
_______
Total Group liabilities 142
_______
Head New
SMG Office Australia Zealand Total
As at 31 December $'000 $'000 $'000 $'000 $'000
2015
Additions to non-current
assets (excluding
deferred tax) 200 - - 1,149 1,349
_______ _______ _______ _______ _______
Reportable segment
assets (excluding
deferred tax) 793 826 42 - 1,661
_______ _______ _______ _______ _______
Reportable segment
liabilities (327) (292) (18) - (637)
_______ _______ _______ _______ _______
Deferred tax liabilities -
_______
Total Group liabilities (637)
_______
5 Other income
Included in other income is the settlement of a rail dispute for $675,000 with a previous rail operator in relation to works they had undertaken on SMG's behalf for rail access to the Cobre mine. The settlement called for an immediate payment of $100,000 to be followed with a payment of $400,000 in January 2017 and a final payment of $175,000 in June 2017.
6 Operating Profit/(loss)
Group Year to Year to
31 December 31 December
Costs by nature 2016 2015
$'000 $'000
Operating Profit/(loss) is stated
after charging:
Directors' fees and emoluments (Note
7) 262 249
Fees payable to the company's auditor
for the 27 40
audit of the parent company and
consolidated
financial statements
Staff costs (Note 7) 307 290
Equipment rental 147 106
Legal, professional and consultancy
fees 464 321
Travelling and related costs 79 57
Other expenses 146 188
Foreign exchange (gain)/loss 34 11
Impairment to intangible asset (see
note 11) - 1,149
Write back of provision - (831)
Impairment of loan to joint operations - 222
Share based payments charge 41 70
Depreciation 48 10
________ ________
7 Directors and employees
Group Year to Year to
31 December 31 December
Staff costs during the year 2016 2015
$'000 $'000
Directors' remuneration including
consultancy fees 262 249
Wages and salaries including consulting
fees for management 307 290
Share based payments 41 70
________ ________
Total staff costs 610 609
________ ________
The average number of people (including Directors) employed by the Group during the year was:
2016 2015
Number Number
Total 8 8
________ ________
Company Year to Year to
31 December 31 December
Staff costs during the year 2016 2015
$'000 $'000
Directors' remuneration including
consultancy fees 262 249
Wages and salaries 59 96
Social security and other costs - -
Share based payments 41 70
________ ________
Total staff costs 362 415
________ ________
The average number of people (including Directors) employed by the Company during the year was:
2016 2015
Number Number
Total 4 4
________ ________
Remuneration of the Directors and other key management personnel in the period is summarised as follows:
Salary Share
and based
Directors' consultancy Loss of payments
fees fees office Total
2016 2016 2016 2016 2016
$'000 $'000 $'000 $'000 $'000
A Broome 67 - - - 67
J Peters - 144 - 32 176
P Wale 24 - - - 24
Lyle Hobbs 18 - 9 - 27
________ ________ ________ ________ ________
Total 109 144 9 32 294
________ ________ ________ ________ ________
Salary Share
and based
Directors' consultancy Loss of payments
fees fees office Total
2015 2015 2015 2015 2015
$'000 $'000 $'000 $'000 $'000
A Broome 31 - - - 31
J Peters - 150 - 27 177
L Hobbs 33 - - 4 37
J McInally - 111 - 27 138
M Wong 14 - 7 2 23
________ ________ ________ ________ ________
Total 78 261 7 60 406
________ ________ ________ ________ ________
Directors and key management personnel remuneration shown above comprises all of the salaries, Directors' fees, consultancy fees and other benefits and emoluments paid to the Directors and key management personnel.
Each Director is also paid all reasonable expenses incurred wholly, necessarily and exclusively in the proper performance of his duties.
8 Finance expense
Group
Year to Year to
31 December 31 December
2016 2015
$'000 $'000
Loan interest and finance charges - 4
________ ________
9 Taxation
Year to Year to
31 December 31 December
2016 2015
$'000 $'000
Current tax expense - -
Deferred tax credit on amortisation - -
and impairment of intangible
Deferred tax (charge) - -
________ ________
- -
________ ________
Reconciliation of effective tax $'000 $'000
rates
Profit/(Loss) before tax 351 (880)
Tax using UK domestic rates of corporation
tax of 20 % (2015 - 20%) 70 (176)
Effect of:
Expenses not deductible for tax
purposes 8 58
Losses carried forward (214) 118
Difference in overseas tax rates 136 -
________ ________
- -
________ ________
The Group has excess management expenses of $534,000 (2015: $539,000) and unused losses to carry forward of $15,216,000 (2015: $16,286,000). No deferred tax asset has been recognised for losses as their full recovery is not probable in the foreseeable future.
10 Earnings per share
Earnings/Losses per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted average number of shares in issue during the year was basic 1,008,103,186 (2015: 809,995,423). Fully diluted earnings are based on 1,070,436,519 shares and the profit for the financial period was $351,000 (2015: loss $880,000).
11 Intangible Assets
Group
Exploration/ Other
evaluation intangible
costs asset Total
$'000 $'000 $'000
Cost
At 1 January 2015 2,079 25,772 27,851
Additions in the year 1,149 - 1,149
Disposals (2,079) - (2,079)
________ ________ ________
At 31 December 2015 1,149 25,772 26,921
At 1 January 2016 1,149 25,772 26,921
Additions in the year - - -
Disposals (1,149) - (1,149)
________ ________ ________
At 31 December 2016 - 25,772 25,772
________ ________ ________
Amortisation and impairment
At 1 January 2015 2,079 25,772 27,851
Impairment 1,149 - 1,149
Disposal (2,079) - (2,079)
________ ________ ________
At 31 December 2015 1,149 25,772 26,921
At 1 January 2016 1,149 25,772 26,921
Impairment - - -
Disposal (1,149) - (1,149)
________ ________ ________
At 31 December 2016 - 25,772 25,772
________ ________ ________
Net book value
At 31 December 2015 - - -
________ ________ ________
At 31 December 2016 - - -
________ ________ ________
Mining tenements and exploration and evaluation costs
Exploration and evaluation costs were impaired in full at 31 December 2015 and the Company disposed of the Tatu Project in February 2016.
Other intangible assets
The other intangible asset arises from the contractual relationship entered into by Southern Minerals Group LLC ('SMG'), an entity wholly owned by Ebony Iron Pty Limited, with a third party for the rights to a magnetite stockpile held at that party's Cobre mine in New Mexico, USA. The intangible asset was fully amortised at year end.
12 Investments
Company Investment Loans Shares
in to in
associates subsidiary subsidiary
and
joint undertakings undertakings Total
ventures
$'000 $'000 $'000
Cost
At 1 January 2016 - 6,027 45,752 51,779
Movement in year 563 (81) - 482
_________ ________ ________ ________
At 31 December 2016 563 5,946 45,752 52,261
_________ ________ ________ ________
Impairment
At 1 January 2016 - (5,562) (45,752) (51,314)
Write back/(charge)
for the year - 976 - 976
_________ ________ ________ ________
At 31 December 2016 - (4,586) (45,752) (50,338)
_________ ________ ________ ________
Carrying Value
At 31 December 2015 - 465 - 465
_________ ________ ________ ________
At 31 December 2016 563 1,360 - 1,923
_________ ________ ________ ________
Investment in associates and joint ventures
Group 2016
$'000
Investment in associate - Central Australian Rare Earths Pty Ltd 278
Investment in joint venture - Cornwall Resources Limited 285
________
At 31 December 2016 563
________
Investment in associates and joint ventures (continued)
Central Australian Rare Earths Pty Ltd
The company holds a 50% interest in Central Australia Rare Earths Pty Ltd with the remaining 50% being held by Rarus Limited. The Group has determined that it holds significant influence as under the shareholder agreement:
- a minimum of three (3) Directors must be appointed with each shareholder owning in excess of 20% allowed to appoint one (1) Director. The board must also comprise an independent Director. As at balance date, the board comprised one (1) Director nominated by the company, one (1) Director nominated by Rarus Limited and and one (1) mutually agreed nominee as an independent Director.
- All decisions of the Board or the Shareholders must be made by simple majority vote unless a decision of the Board is made by circular resolution which is in writing and signed by each Director, in which case it must be by unanimous vote.
Based on this the investment is treated as an associate as the company has no joint control but can assert significant influence.
The company had no operating expenses during the year but incurred A$90,878 in deferred exploration expenditure which has been capitalised. The investment is carried at cost of $278,000 (A$380,000) and the Directors consider no impairment is required for the period.
Summarised financial information in relation to the associate is presented below:
2016
$'000
As at 31 December
Current assets 54
Non-current assets 732
Current liabilities 135
Non-current liabilities -
------
Net assets 651
------
Strategic Minerals PLC share of net
assets (50%) 326
Deferred exploration expenditure capitalised (33)
Goodwill relating to associate (15)
Carrying value of investment in consolidated
financial statements 278
Period ended 31 December
Revenues -
Profit from continuing operations -
Other comprehensive income -
Total comprehensive income -
------
Dividends received from associate -
Investment in associates and joint ventures (continued)
Cornwall Resources Limited
On the 26th May 2016, the company entered into a binding term sheet with New Age Exploration Limited (NAEL) to acquire shares in NAE Resources (UK) Limited (NAE-UK) a company incorporated to operate the Redmoor Tin-Tungsten project in Cornwall, UK. The option period was to 31 December 2016.
Under the terms of the agreement the company acquired 30,973 shares in NAE-UK for GBP3.39 each and was granted an option for a further 278,864 shares. As at 31 December 2016, the company held a 16.4% interest in the NAE-UK. During the option period, the agreement specified that the company would be operated as a 50:50 joint venture, with each party being entitled to appoint one Director. Based on this, the Group consider that they have joint control over the arrangement.
Upon full exercise of the option both the company and NAEL would each hold 50% of NAE-UK and thus 50% each of the Redmoor Tin-Tungsten project. Upon exercise of the option the company will continue to be operated as a 50:50 joint venture.
On the 4th September 2016, the binding term sheet was amended to make an immediate further payment of GBP101,700 for 30,000 shares and extending the option period for the acquisition of the balance of 248,864 to 15 February 2017.
Under IFRS 11 this joint arrangement is classified as a joint venture and has been included in the consolidated financial statements using the equity method.
2016
$'000
As at 31 December
Current assets 86
Non-current assets 378
Current liabilities 38
Non-current liabilities -
------
Included in the above amounts are:
Cash and cash equivalents 82
Current financial liabilities (excluding
trade payables) 11
Non-current financial liabilities -
(excluding trade payables)
Net Assets (100%) 426
------
Strategic Minerals PLC share of
net assets (16.4%) 70
------
Goodwill relating to joint venture 215
------
Carrying amount of investment in
consolidated financial statements 285
------
Investment in associates and joint ventures (continued)
2016
$'000
Period ended 31 December
Revenues -
Profit from continuing operations (12)
Other comprehensive income -
Total comprehensive income
(100%) (12)
------
Group share of total comprehensive -
income (16.4%)
------
Included in the above amounts
are:
Depreciation and amortisation -
Interest income -
Interest expense -
Income tax expense -
Shares and loans in subsidiary undertakings
The shares and loans in subsidiary undertakings have been impaired in previous years as the directors concluded that the net assets of the subsidiaries at the reporting date were insufficient to recover the balances. Given the increase in net assets of the subsidiaries in the current year, the provision for impairment has been written back as certain balances previously impaired are now considered recoverable.
In the opinion of the Directors, the aggregate value of the Company's investment in its subsidiary undertakings is not less than the amount included in the statement of financial position.
Holdings of more than 20%
The Company holds more than 20% of the share capital of the following companies:
Subsidiary undertakings Country Principal Class %
of of
Incorporation activity share Owned
Iron Glen Holdings Australia
Pty Limited (iii) Holding Company Ordinary 100%
Australia
Ebony Iron Pty Limited (iii) Holding Company Ordinary 100%
Iron Glen Pty Limited Australia Assets held
(i) (iii) for exploration Ordinary 100%
Southern Minerals
Group LLC (ii) USA (iv) Sale of magnetite Ordinary 100%
Jotanooka Iron Pty Australia Assets held
Limited (i) (iii) for exploration Ordinary 100%
Dragon Rock Minerals Australia Assets held
Pty Limited (i) (iii) for exploration Ordinary 100%
(i) Held by Iron Glen Holdings Pty Limited
(ii) Held by Ebony Iron Pty Limited
(iii) Registered office - Level 5, 9 Beach Road, Surfers Paradise, Qld, Australia, 4217
(iv) Registered office - 303 Fierro Road, Hanover, New Mexico, USA, 88041
13 Property, plant
and equipment
Railway Plant Office
and
infrastructure machinery equipment Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2015 3,498 - 7 3,505
Additions - 200 - 200
Disposals - - (7) (7)
________ ________ ________ ________
At 31 December 2015 3,498 200 - 3,698
At 1 January 2016
Additions - - - -
Disposals - (1) - (1)
________ ________ ________ ________
At 31 December 2016 3,498 199 - 3,697
________ ________ ________ ________
Depreciation
At 1 January 2015 3,498 - 5 3,503
Charge in the year - 10 - 10
Disposals - - (5) (5)
________ ________ ________ ________
At 31 December 2015 3,498 10 - 3,508
At 1 January 2016
Charge in the year - 48 - 48
Disposals - - - -
________ ________ ________ ________
At 31 December 2016 3,498 58 - 3,556
________ ________ ________ ________
Carrying value
At 31 December 2015 - 190 - 190
________ ________ ________ ________
At 31 December 2016 - 141 - 141
________ ________ ________ ________
The property, plant and equipment of the Company relate to office equipment only
14 Inventories
2016 2015
$'000 $'000
Finished goods held for sale 13 4
Less stock provision - -
________ ________
13 4
________ ________
There are no finished goods included at their fair value less cost to sell in 2016 (2015: Nil).
No inventories (2015: Nil) have been written off to profit or loss in the year.
15 Trade and other receivables
2016 2015
Group $'000 $'000
Trade receivables 825 372
Less: provision for impairment of - -
trade receivables
_________ ________
825
372
Prepayments 6 44
Other receivables 91 2
________ ________
922 418
________ ________
Company
Trade receivables 67 -
Amounts owed by subsidiary undertakings 1,360 465
Prepayments 6 44
Other receivables 91 -
________ ________
1,524 509
________ ________
There were no Trade or other receivables that were past due or impaired beyond the charge reflected above. The Trade and other receivables are categorised as loans and other receivables and are not materially different to their carrying values.
16 Cash and cash equivalents
2016 2015
Group $'000 $'000
Bank current accounts - unrestricted 1,105 946
________ ________
Cash and cash equivalents in the
statement of cash flows 1,105 946
________ ________
2016 2015
Company $'000 $'000
Bank current accounts - unrestricted 685 782
________ ________
Cash and cash equivalents in the
statement of cash flows 685 782
________ ________
The Group's balances are held with well-known and highly rated UK, USA and Australian banks.
17 Restricted cash
2016 2015
Group $'000 $'000
Bank - restricted 100 103
________ ________
The restricted cash related to a cash deposit held for a Standby Letter of Credit as security for a supplier.
18 Borrowings
2016 2015
Group $'000 $'000
Loans and borrowings - 85
________ ________
There are no borrowings of the Company as at 31 December 2016.
19 Trade and other payables
2016 2015
Group $'000 $'000
Trade payables 113 501
Other payables - -
Accruals and deferred income 29 51
________ ________
142 552
________ ________
Company $'000 $'000
Trade payables 42 241
Other payables - -
Accruals and deferred income 28 51
________ ________
70 292
________ ________
Book values approximate to fair value at 31 December 2016 and 2015.
20 Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2015: 20%).
The deferred tax liability arose from the fact that the other intangible asset (see Note 11) had no tax base and thus the deferred tax liability represented the total tax credit that would have been available if the amortisation of the intangible asset was tax deductible in an entity. Following the full impairment of the underlying intangible asset the remaining deferred tax liability has been released (2015: Nil). The deferred tax asset arose from tax losses which were expected to be recovered in the foreseeable future.
21 Share Capital and Premium
Number Value
$'000
At 1 January 2015 723,825,560 42,875
Placement on 12 June 2015 82,000,000 772
Placement on 14 July 2015 84,666,667 799
Issue costs on placements - (133)
__________ __________
At 31 December 2015 Ordinary
shares of 1 pence each 890,492,227 44,313
Placement on 8 June 2016 25,000,000 109
Placement on 21 June 2016 143,00,000 631
Placement on 11 July 2016 10,000,000 40
Placement on 27 October
2016 150,000,000 733
Issue Costs on placements (87)
__________ __________
At 31 December 2016 Ordinary
shares of 1 pence each 1,218,492,227 45,739
__________ __________
During the financial year, the Company raised $1,512,553 (GBP1,134,000) by placing 178,000,000 shares at a subscription price of GBP0.003 in three tranches and 150,000,000 shares at a subscription price of GBP0.004.
22 Share based payments
The Group has a share-ownership compensation scheme for senior executives of the Group whereby senior executives may be granted options to purchase ordinary shares in the Company. There were Nil (2015: 62,000,000) options issued to directors and senior executives during the year and 12,421,416 lapsed or were cancelled during the year.
The Group historically issued options and/or warrants to third parties in settlement of liabilities to strategic suppliers. Each share option or warrant converts into one ordinary share of Strategic Minerals Plc upon exercise. No amounts are paid or payable by the recipient of the options or warrants. The options and warrants carry neither rights to dividends nor voting rights at shareholders meetings.
Warrants and Options
Number of outstanding warrants and options at 31 December 2016 and a reconciliation of their movements during the year were:
Date Granted Issued Lapsed/ Granted Exercise Exercise
of at at Period
grant 31.12.15 cancelled 31.12.16 price
From To
30.06.11 8,421,416 - (8,421,416) - 5p 30.06.11 29.06.16
27,000,000
10.04.15 29,000,000 - (2,000,000) (i) 1.0p 10.04.15 30.06.18
27,000,000
10.04.15 29,000,000 - (2,000,000) (ii) 1.0p 10.04.15 30.06.19
14.07.05 8,333,333 - - 8,333,333 0.6p 14.07.15 16.07.18
_________ _________ _________ _________
74,754,749 - (12,421,416) 62,333,333
_________ _________ _________ _________
(i) Market based vesting condition of 1.5p volume weighted average share price over 5 consecutive days and which vested in April 2017
(ii) Market based vesting condition of 3.0p volume weighted average share price over 5 consecutive days and which vested in May 2017
The warrants and options outstanding at 31 December 2016 had an exercise price of between 0.6p and 1.0p, a weighted average exercise price of 0.95p (2015: 1.41p) and a remaining contractual life of 706 days (2015: 979 days). The weighted average exercise price of warrants and option lapsed during the year was 5.0p.
Of the total number of warrants and options outstanding at 31 December 2016, 8,333,333 (2015: 16,754,749) had vested and were exercisable.
The following information is relevant in the determination of the fair value of share based payments by the Group.
April April July
2015 2015 2015
options options options
Share price at date
of grant 0.55p 0.55p 0.40p
Exercise price 1.00p 1.00p 0.60p
Market vesting condition 1.50p 3.00p N/A
Expected volatility 96% 96% 96%
Expected dividend Nil Nil Nil
Contractual life 3 years 4 years 3 years
Risk free rate 0.79% 0.79% 0.79%
Estimated fair value
of each option 0.26p 0.27p 0.21p
Expected volatility was determined based on the historic volatility of the Company's shares and other peer companies. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
23 Commitments (a) Operating lease commitments
At 31 December 2016, there were no non-cancellable operating leases (2015: Nil).
(b) Capital expenditure commitments
At 31 December 2016, no capital commitments existed (2015: Nil).
24 Controlling party
There is no ultimate controlling party of the Group.
25 Related party transactions
Director and key management personnel remuneration has been disclosed in Note 7. There were no other relevant transactions with Directors or other related parties.
26 Events after the reporting period
On the 6(th) January 2017, the Company issued 32,000,000
options to directors and management of the Company
on the following terms:
* 16,000,000 options at an exercise price of 1.0p
expiring on 30/6/2018 which vest on a volume weighted
market price (VWAP) of 1.5p over 5 consecutive
trading days.
* 16,000,000 options at an exercise price of 1.0p
expiring on 30/6/2019 which vest on a volume weighted
market price of 3.0p over 5 consecutive trading days.
On the 6(th) February 2017, the Company exercised
its option to purchase further shares in Cornwall
Resources Limited ("CRL", formerly called "NAE
Resources (UK) Limited"), making a payment of GBP843,649,
and has been issued a further 248,864 shares in
CRL. The company consequently increased its stake
in Cornwall Resources Limited from 16.4% to 50%
as of that date.
On the 8(th) March 2017, an option holder provided
a notice exercising its warrants over 8,333,333
ordinary shares of 0.1p each in the Company at
a price of 0.6p per share. Consequently, the Company
received GBP50,000 and issued 8,333,333 shares
to the option holder.
In April 2017, 27,000,000 options held by the board
and management met the VWAP vesting condition of
1.5p and in May 2017 a further 27,000,000 options
met the VWAP vesting condition of 3.0p.
On the 10(th) April 2017, the Company announced
that its subsidiary Southern Minerals Group ("SMG"),
the operator of the Cobre magnetite stockpile,
entered into a new contract with a private company
for the supply of up to 400,000 tons of magnetite
at a market based price over several years, subject
to availability ("Contract"). The Contract provides
for a minimum purchase of 4,000 tons per month,
which is to commence from 1(st) June 2017. Both
the US$10,000 deposit required by the Contract
and a security deposit of US$250,000 were lodged
into a solicitor's trust account by the 12(th)
April 2017.
On the 5(th) May 2017, the Company announced that
Rarus Limited ("Rarus"), its joint venture partner
in Central Australia Rare Earths Pty Ltd ("CARE"),
had agreed to sell its remaining shares in CARE
to the Company for GBP522,500 to be settled by
the issue of 19,000,000 new shares in Strategic
Minerals plc issued at GBP0.0275 per share. The
transaction is to be completed prior to 1 June
2017 and will take the Company's total interest
in CARE to 100%.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UVRSRBNAVUAR
(END) Dow Jones Newswires
May 26, 2017 02:00 ET (06:00 GMT)
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