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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sunrise Resources Plc | LSE:SRES | London | Ordinary Share | GB00B075Z681 | ORD 0.001P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.0475 | 0.045 | 0.05 | 0.0475 | 0.0475 | 0.0475 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Misc Nonmtl Minrls, Ex Fuels | 0 | -391k | -0.0001 | -5.00 | 2.05M |
From Apr 2019 to Apr 2024
TIDMSRES
RNS Number : 2793Z
Sunrise Resources Plc
13 December 2017
SUNRISE RESOURCES PLC
("Sunrise" or "the Group" or "the Company")
13 December 2017
Audited Results for the year to 30 September 2017
The Board of Sunrise Resources plc, the AIM-traded company focusing on the development of its CS Pozzolan-Perlite Project in Nevada, USA, is pleased to announce audited results for the year ended 30 September 2017.
Highlights for 2017
Ø Strategic decision to focus on development of the CS Pozzolan-Perlite Project in Nevada, USA and progressively valorise the Company's diverse portfolio of precious and base metal and industrial minerals projects.
Ø Market for natural pozzolan as a "green" replacement for Portland cement in cement and concrete mixes is growing as alternative coal fly ash pozzolan supplies shrink in the USA due to the continuing closure of coal fired power stations, over 50% of which have closed or announced closure plans since 2012.
Ø Market for perlite also growing with horticultural market segment growth driven by increased legalisation of cannabis in the USA.
Ø Positive Concept Study completed by Company for development of the CS Project for production of both pozzolan and perlite:
-- Open-pit mining and simple production process envisaged.
-- Preliminary modelling shows attractive financial returns based on low capital and operating cost estimates.
-- Permitting study suggests a more expeditious Environmental Assessment process rather than full Environmental Impact Statement process.
Ø Successful maiden drill programme confirms thick intervals of pozzolan and perlite in Main Zone and Tuff Zone.
Phase 2 programme approved for additional drill sites to define open-pit mine areas.
Ø Sale of Junction Gold Project to TSX-V listed VR Resources Ltd for initial cash and share consideration with further shares due on reaching certain exploration milestones. The Company retains a 3% production royalty interest.
Ø Active work programme planned for CS Project in 2018 targeting production in the first half of 2019.
Commenting on today's results, Patrick Cheetham, Executive Chairman, said: "I am pleased to report on the evolution and delivery of our strategic plan in 2017 as we advance our CS Project towards potential production. We have achieved a number of project milestones during the year and have an active work programme planned for 2018 aimed at a start to mining operations in the first half of 2019. I look forward to reporting further progress and to meeting shareholders at our upcoming AGM."
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014.
Further information
Sunrise Resources plc Patrick Cheetham, Executive Chairman Tel: +44 (0)1625 838 884 Northland Capital Partners Limited Nominated Adviser & Broker Edward Hutton/David Hignell John Howes/Rob Rees Tel: +44 (0)20 3861 6625 Beaufort Securities Limited Joint Broker Jon Belliss Tel: +44 (0)20 7382 8300
Chairman's Statement
I am pleased to present the Company's Annual Report and Financial Statements for the year ended 30 September 2017 and to report on a year of important developments in the realisation and evolution of our strategic plan. More discussion of this can be found in the Strategic Report.
In the early part of the year, work on our CS Project in Nevada, USA, newly staked this time last year, was successful in identifying large areas of natural pozzolan, a "green" substitute for Portland cement which is responsible for 5% of global carbon emissions. It is a pivotal time in the cement and concrete industries as traditional supplies of coal fly ash pozzolan dry up as coal-fired power stations close across the USA. Natural pozzolan can replace fly ash pozzolan and this is our opportunity.
The CS Project natural pozzolan is in the form of volcanic tuff and tephra deposits and also perlite. Perlite is a valuable rock in its own right. It pops like popcorn when heated to a lightweight material with a number of industrial and horticultural applications. Favourable test results for both pozzolan and perlite led to the completion of a positive concept study for a combined production operation and a Board decision to focus on the development of the CS Project and valorise other projects held by the Company through sale or other arrangements.
Subsequent exploration during the year included trenching and a maiden drill programme and identified large areas and significant thicknesses of perlite and pozzolan in three zones. The samples from this work have been extensively tested and results confirm that the pozzolan is a high quality pozzolan, competitive with materials currently on the market and that the perlite is suitable for a range of applications.
Whilst the discovery of new and large deposits of pozzolan and perlite is exciting, it does mean that testing has been necessarily more extensive and time consuming than originally expected, as we work to correctly identify the best areas to start open-pit mining for both products, either together or separately. The pit and plant areas need to be tightly constrained to reduce the cost of permitting studies. We also need to ensure that mine plant and facilities are not built on top of future reserves.
We believe that the CS Project pozzolan and perlite deposits could support tens of years of mining. A further phase of drilling is planned to take place shortly and will form the basis for an initial mine design for a 5-10 year starter pit. We anticipate environmental permit baseline studies will start in earnest early in February 2018, targeting initial production in the first half of 2019. Marketing and customer testing has started and is expected to continue throughout 2018. Much work lies ahead but it is pleasing that so much progress has been made and we expect strong news flow from the CS Project in 2018.
The sale of non-core projects is an ongoing process but we have made a good start with the sale of the Junction Project in Nevada to Canadian TSX-V listed VR Resources Ltd. As a result of the sale, we now have a small shareholding which will increase if certain exploration milestones are met. We have also retained a royalty on production from this project and so have ongoing exposure to exploration success. VR Resources has recently reported high grade copper-silver-gold mineralisation over a 6km strike length and anticipates drill testing in 2018. We hope that this will be the first such project disposal following the evolution of our strategic focus.
We are also a small shareholder in Block Energy plc, originally Goldcrest Resources plc. Block Energy is expanding its Georgian oil interests and is planning to dual list on AIM as well as the NEX Exchange Growth Market and we are following this investment with interest.
Our largest shareholder, Tertiary Minerals plc, continues to provide management services at cost and to take shares in lieu of payment in cash from time to time. This allows us to reduce the cash impact of administration costs and the directors continue to be paid their modest fees in shares. I thank them and our Company Secretary for their contributions.
We have taken the opportunity to better reflect our strategy and focus in a re-launch of our website incorporating a new logo and to make better use of social media. We have seen a significant increase in investor interest with substantially improved share trading liquidity in 2017.
Our work programmes at the CS Pozzolan-Perlite Project have delivered excellent results throughout the year and we will maintain this momentum as we advance the CS Project towards potential production. We are expecting strong news flow in 2018 and look forward to reporting on future progress.
Our Annual General Meeting for the year ended 30 September 2017 will be held in London on Wednesday 31 January 2018 at 10.30 a.m. and I hope that shareholders will attend.
Patrick Cheetham
Executive Chairman
13 December 2017
Strategic Plan On Track
KEY AIMS from our STRATEGY & BUSINESS PLAN for 2016 and 2017 are summarised here to show how our strategy has evolved and progressed in 2017. Our targets for 2018 are also set out below:
Hot Features
Premium
AIMS AIMS IN 2017 & TARGETS FOR 2018
IN PROGRESS MADE
2016
----------------- ------------------------------------------------------------------- -----------------------------------------------------------------------
Target advanced Develop the CS Continue advancing
projects which Project towards CS Project towards
have the production: production:
potential
to generate a * Positive Concept Study. * Open pit definition drilling on the Main Zone & Tuff
sustaining cash Zone.
flow.
* Discovery of Tuff & Northeast Zones.
* Resource definition.
* Drill testing of Main Zone & Tuff Zone - thick zones
of pozzolan and perlite demonstrated. * Mine, plant and pit design.
* Pozzolan testing confirms high quality of natural * Permitting.
pozzolan.
* Logistic studies.
* Perlite testing shows potential in a number of
industrial applications.
* Marketing.
* Feasibility studies.
----------------- ------------------------------------------------------------------- -----------------------------------------------------------------------
Target advance Having secured To maintain existing
drill stage a valuable portfolio projects at minimum
projects of projects - to costs.
where there is seek progressive
potential for valorisation of Sell or otherwise
significant the Company's existing valorise additional
mineral precious metal projects maintaining
discovery. and other industrial exposure to future
minerals projects value creation and
and unlock the production where
inherent value possible.
in the Company:
* Junction Project sold for cash, shares and contingent
share consideration. Royalty interest retained.
----------------- ------------------------------------------------------------------- -----------------------------------------------------------------------
To run the To run the Company Continue cost sharing
Company with low overheads and strive for exploration
with low and be a low cost cost efficiencies.
overheads explorer:
and be a low
cost explorer. * Corporate overheads shared with Tertiary Minerals
plc.
* Directors' fees continue to be taken in shares.
* Tertiary Minerals plc has taken part payment byway of
shares in lieu of cash for management charges.
----------------- ------------------------------------------------------------------- -----------------------------------------------------------------------
Our Strategic Plan is on Track
A review of the AIMS and STRATEGY set out in our 2016 Annual Report highlights the advance and evolution of our strategic plan in 2017.
Our long-stated AIM has been to develop profitable mining operations to sustain the Company's wider exploration efforts and create value for shareholders through the discovery of world-class mineral deposits.
OUR STRATEGY includes the targeting of advanced projects, in particular industrial minerals projects which the company believes offer a faster route to cash flow than conventional precious or base metals projects due to lower permitting thresholds. Our strategy also targets near-drill stage projects where there is a potential for significant mineral discovery.
The strategic plan is on track. Our CS industrial mineral project, targeting the production of natural pozzolan and perlite, has quickly risen to become the key focus for the Company in delivering on that strategy and the Company is now focused on developing that project through to production, targeting a mine start up in the first half of 2019.
Over the past few years the Company has established a valuable portfolio of drill-ready precious metal, base metal and industrial mineral projects and our strategy with respect to those projects has evolved following a decision to focus on development of the CS Project. We will now seek to valorise those projects through sale or other arrangements seeking, wherever possible, free-carried exposure to increases in value and production from the projects. Our agreement to sell the Junction Project to VR Resources Ltd. is an early example of success in implementing this evolved strategy.
Strategic Report
The Directors of the Company and its subsidiary undertakings (which together comprise "the Group") present their Strategic Report for the year ended 30 September 2017.
Principal Activities
The Company's objective is to develop profitable mining operations at the CS Pozzolan-Perlite Project in Nevada and unlock the value inherent in our diverse portfolio of industrial minerals, precious metals and base metal projects.
Organisation Overview
The Group's business is directed by the Board and is managed by the Executive Chairman. The Company has a Management Services Agreement with Tertiary Minerals plc ("Tertiary") which is a significant shareholder in the Company (as defined under the AIM Rules). Under this cost sharing agreement Tertiary provides all of the Company's administration and technical services, including the services of the Executive Chairman, at cost. Day-to-day activities are managed from Tertiary's offices in Macclesfield in the United Kingdom, but the Group operates in three other countries. The corporate structure of the Group reflects the historical pattern of acquisition by the Group and the need, where appropriate, for fiscal and other reasons, to have incorporated entities in particular territories.
The Group's exploration activity in Nevada, USA, is undertaken through two local subsidiaries, SR Minerals Inc. and Westgold Inc.
In Australia the Company operates through an Australian subsidiary, Sunrise Minerals Australia Pty Ltd. The Company maintains a branch in Finland as a result of historical exploration activities in Finland and its mineral project in Ireland is held by the Group Parent company, Sunrise Resources plc.
The Board of Directors comprises two non-executive directors and the Executive Chairman. The Executive Chairman is also Chairman of Tertiary Minerals plc, but otherwise the Board is independent of Tertiary.
Financial & Performance Review
The Group is not yet producing minerals and so has no income other than a small amount of bank interest. Consequently, the Group is not expected to report profits until it disposes of or is able to profitably develop or otherwise turn to account its exploration and development projects.
The Group reports a loss of GBP311,046 for the year (2016: GBP369,587) after administration costs of GBP276,568 (2016: GBP285,092) and after crediting interest receivable of GBP70 (2016: GBP532). The loss includes expensed pre-licence and reconnaissance exploration costs of GBP21,161 (2016: GBP45,316), impairment of deferred costs of GBP3,077 (2016: GBP39,711) and impairment of available for sale investment of GBP13,338 (2016: GBPNil). Administration costs include an amount of GBP1,507 (2016: GBP4,323) as non-cash costs for the value of certain share warrants held by employees, as required by IFRS 2. Cash administration costs are therefore GBP275,061 (2016: GBP280,769). The sale of the Junction Project rights, produced a surplus on disposal of GBP3,028.
The Financial Statements show that, at 30 September 2017, the Group had net current assets of GBP183,422 (2016: GBP94,748). This represents the cash position after allowing for receivables and trade and other payables. These amounts are shown in the Consolidated and Company Statements of Financial Position and are also components of the Net Assets of the Group. Net assets also include various "intangible" assets of the Company. As the name suggests, these intangible assets are not cash assets but include some of this year's and previous years' expenditure on mineral projects where that expenditure meets the criteria in Note 1(d) of the accounting policies. The intangible assets total GBP1,302,404 (2016: GBP1,072,571) and a breakdown by project is shown in Note 2 to the financial statements.
Details of intangible assets, property, plant and equipment and investments are also set out in Notes 8, 9 and 10 of the financial statements.
As shown in Note 8, an additional Group investment was acquired in the reporting period, being shares in VR Resources Ltd valued at GBP8,021, as part consideration for the sale of the Junction Project in Nevada.
For the Interim Accounts for the six month period to 31 March 2017 an impairment review was undertaken by the Directors to ascertain whether the decline in fair value of the investment in Block Energy plc could be considered to be significant or prolonged, as required under IAS 39. It was decided that, by comparison to the small amount of the initial investment of GBP25,000, the decline in fair value of Block Energy plc was likely to be deemed significant under IAS 39; therefore an amount of GBP13,338 was impaired and charged to the Consolidated Income Statement, thereby increasing the loss for that period (see Note 1(k) in the Notes to the Financial Statements.
An amount of GBP10,795 has been recognised in the Available for Sale Investment Reserve in Equity comprising a GBP10,962 increase in the fair value of the shareholding in Block Energy in the following six month period to 30 September 2017, and a decrease of GBP167 in the fair value of the VR Resources Ltd. shares.
Expenditures which do not meet the criteria in Note 1(d), such as pre-licence and reconnaissance costs, are expensed and add to the Company's loss. The loss reported in any year can also include expenditure for specific projects carried forward in previous reporting periods as an intangible asset but which the Board determines is "impaired" in this reporting period.
It is a consequence of the Company's business model that there will be regular impairments of unsuccessful exploration projects. The extent to which expenditure is carried forward as intangible assets is a measure of the extent to which the value of the Company's expenditure is preserved.
The intangible asset value of a project should not be confused with the realisable or market value of a particular project which will, in the Directors' opinion, be at least equal in value and often considerably higher. Hence the Company's market capitalisation on the AIM Market is usually in excess of the net asset value of the Group.
The Company finances its activities through periodic capital raisings, via share placings and, in the past, through other innovative equity based financial instruments. As the Company's projects become more advanced there may be strategic opportunities to obtain funding for some projects from future customers, via production sharing, royalty and other marketing arrangements. The Company's agreement with VR Resources Ltd is such an example.
Key Performance Indicators
The financial statements of a mineral exploration company can provide a moment in time snapshot of the financial health of the Company but do not provide a reliable guide to the performance of the Company or its Board.
The usual financial key performance indicators ("KPIs") are neither applicable nor appropriate to measurement of the value creation of a company which is involved in mineral exploration and which currently has no turnover. The Directors consider that the detailed information in the Operating Review is the best guide to the Group's progress and performance during the year.
In addition, the Directors highlight the following KPIs and expect that further KPIs will be reported as the Company progresses through development:
Health & The Group has not lost any man-days through
Safety injury and there have been no Health and
Safety incidents or reportable accidents
during the year.
Environment No Group company has had or been notified
of any instance of non-compliance with environmental
legislation in any of the countries in which
they work.
Fundraising The Company raised GBP635,580 before expenses
through the Placing and Subscription of
shares in the reporting period and issued
equity to the value of GBP15,736 in consideration
of fees payable to Directors and to the
value of GBP52,735 to Tertiary Minerals
plc in consideration of at-cost management
fees.
------------ ------------------------------------------------------
In exploring for valuable mineral deposits, we accept that not all our exploration will be successful but also that the rewards for success can be high. We therefore expect that our shareholders will be invested for the potential for capital growth taking a long-term view of management's good track record in mineral discovery and development.
Fundraising
The Directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Company's cash position at year end (GBP234,181), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company's and Group's overheads and planned discretionary project expenditures and to maintain the Company and the Group as going concerns. The Company raised GBP500,000 before expenses on 6 December 2017.
Impairment
A bi-annual review is carried out by the Directors as to whether there are any indications of impairment. The bi-annual impairment indication reviews were conducted in March 2017 and October 2017 and the directors do not consider that there are any indications of impairment in the intangible assets.
Operating Review
Following early exploration success at the CS Project and the completion of a positive Concept Study by the Company for development of the project, the Board carried out a strategic review of the Company's projects and a decision was made to focus management time and expenditure on advancement of the CS Project towards production and to seek value for the Company's other projects through sale or joint venture.
The CS Project is held in the Company's 100% owned subsidiary, SR Minerals Inc.
The Company's other Nevada projects are held through SR Minerals Inc. and Westgold Inc. The Company's Australian projects are held through an Australian subsidiary Sunrise Minerals Australia Pty Ltd. The Company's Derryginagh Barite Project is held directly in the name of Sunrise Resources plc.
SR MINERALS INC.
POZZ PROJECT
CS Pozzolan-Perlite Project, Nevada, USA
The CS Project is located near Tonopah, in Nevada, USA, and has developed out of the Company's broader Pozz Project, an umbrella initiative to search for and acquire, at low-cost, deposits having potential for the production of natural pozzolan. The Pozz Project also includes the Pozz Ash Project and the newly discovered NewPerl Project. Natural pozzolans are seeing increased use in cements and concrete as a "greenhouse gas friendly" substitute for Portland cement.
The CS Project contains deposits of both natural pozzolan and perlite and further details on the Company's opportunity in these two commodities are set out in the boxes below.
At the CS Project three main zones of interest have been defined. In the Main Zone thick deposits of perlite have formed on the rapidly cooled margins of crystalline rhyolite lava flows in the inner parts of a volcanic complex. Further out from the core, on the margins of the Main Zone and in the Northeast Zone, deposits zones of "tephra" (semi-consolidated fragmental material ejected from the volcano) formed as air fall deposits, possibly in water courses and marginal lakes (Lahar). Still further away from the core of the volcano, finer grained pyroclastic material fell to the ground to form volcanic tuffs in the Tuff Zone.
The Main Zone is being evaluated for both pozzolan and perlite whereas the Northeast and Tuff Zones are being tested primarily as pozzolan.
Concept Study
After a positive initial testwork programme in January 2017, the Company initiated an internal concept study to scope out the potential for commercial development of the project. It was prepared primarily for internal management purposes and, in particular, to help inform a decision as to whether to commit the Company to the next stages of exploration and development for the CS Project.
This was completed in April 2017 and included a preliminary evaluation of the markets and market opportunities for the Company in both perlite and pozzolan and identified a low capital and operating cost strategy for market entry as well as future opportunities to grow the business. Simple financial modelling of a preliminary development plan suggests the potential for a very low capital and operating costs project with attractive financial returns and it also identified potential to grow with the markets and to make step changes in the value of the business through downstream processing.
The Concept Study also set out a road map for development of the project and includes an initial evaluation of the requirements and broad timelines for permitting the project with the various regulatory authorities. An extract from the Concept Study is available on the Company's website.
Trenching & Drilling
Following the completion of a positive concept study the Company carried out trenching and a maiden drill programme in July 2017.
Seven holes were drilled targeting pozzolan and perlite in the Main Zone and two holes tested the pozzolanic tuff in the east end of the Tuff Zone. Thick intervals of pozzolan and perlite were intersected in the Main Zone, comparable to those reported from many commercial deposits currently in production. Drill holes in the Main Zone are currently too widely spaced to confirm correlation between holes but the target zones were intersected in all drill holes with no significant overburden. Drilling on the Tuff Zone encountered thick intervals of the target tuff.
Trenches were excavated in areas covered by colluvium and scree and in most cases exposed bedrock that, on further testing showed perlitic and/or pozzolanic properties. This work suggests that the Main Zone remains open to the south, extends further north and east than previously defined and that the current definition of three main zones may be artificial, representing only specific areas of outcrop surrounded by additional areas of pozzolan and perlite thinly covered with alluvium and colluvium.
The Company has recently received acceptance of an amendment to its Notice level permit to allow drilling at a further 22 drill sites in order to define the boundaries for one or more open-pit mine locations.
Pozzolan Testing
In order to qualify as a natural pozzolan a material has to meet the specifications of ASTM Standard C618 which applies to both natural pozzolans and coal fly ash. This specifies a minimum content of combined silica, alumina and iron oxide which are the reactive compounds and minimum strength requirements for mortars made with partial substitution of Portland cement by natural pozzolan. The relative strength of the mortar is compared to an "index" mortar produced using only Portland Cement after 7 and 28 days.
Chemical analysis of a range of samples shows that all of our materials met the chemical specification of ASTM C618. Over 80 surface samples, composite drill samples and trench samples have been "pre-certification" strength tested by independent laboratory Magmatics Inc. whose principal, Joe Thomas, is an acknowledged expert on the application of natural pozzolans and is a voting member of both the ASTM and ACI pozzolan committees. All but one of these samples passed the strength requirements of ASTM C618 indicating that material from all three zones at the CS Project are quality natural pozzolans competitive with natural pozzolans available on the market today.
Pozzolan testing is now moving on to more extensive testing of three composite samples from areas that are expected to fall within potential starter-pit operations. Not all marketable natural pozzolans command the same selling price and these tests will help determine a number of properties than can affect value. This includes water demand (a low water demand improves concrete workability and negates the need for expensive plasticizers), mitigation of the deleterious alkali silica reaction that occurs in concrete between Portland cement and certain reactive aggregates (a cause of "concrete cancer"), sulphate resistance and long-term strength.
Because the "curing" of concrete takes place over a long period, well after it has set, some of these tests span periods up to 12 months and will take place concurrent with further exploration and mine permitting. ASTM certification testing will also take place at an appropriate independent laboratory to confirm Magmatics' pre-certification testing results.
Perlite Testing
The Company's perlite samples are being tested primarily at independent laboratory In-Mat-Lab in Greece with a number of quality control samples tested at a second independent perlite testing laboratory at the New Mexico Bureau of Geology and Mineral Resources (NMBGMR).
To date over 70 samples from the surface, drill holes and trenches have been subjected to basic testing, mostly from the Main Zone. This has allowed the Company to identify different areas having potential for the production of perlite for different industrial applications. Different applications require different raw material properties and testing has now progressed to application specific testing.
These more advanced stages of perlite testing will allow the Company to better define the target markets for its perlite, provide further information for potential customers and allow the development of a mine plan based on the best performing materials.
Marketing
During the year preliminary meetings have been held with a number of potential customers for perlite and pozzolan in the USA. These discussions have been kept low key whilst testing has been in progress, but will be expanded significantly in 2018.
The potential for new sources of perlite and pozzolan was well received and samples are currently being tested by a number of interested parties in their own laboratories. It is anticipated that customers may want to test larger bulk samples as part of their decision process.
Forward Work Programme
In the remainder of 2017 and in 2018 work on the project is planned to include:
1. Open pit definition drilling on the Main Zone and Tuff Zone 2. Resource definition 3. Mine, plant and pit design 4. Permitting 5. Logistic studies 6. Marketing 7. Financial Modelling
The Company is targeting production in the first half of 2019 but this will depend on the speed at which permitting progresses through the US Bureau of Land Management.
Pozz Ash Deposit
Ongoing testwork on a composite sample from the Pozz Ash Deposit confirmed a marginally acceptable strength value and a higher water demand due to the high clay content. Preliminary clay separation testwork carried out during the year was not successful suggesting that the Pozz ash will require calcining for use as a natural pozzolan. This process route is unlikely to be commercially competitive.
NewPerl Pozzolan-Perlite Project, Nevada, USA
The Company's original discovery of the CS Project was made through the application of a specific proprietary exploration technique. As part of its regional Pozz Project the Company has refined the technique and is now applying it over other geologically prospective areas in Nevada to identify targets of interest.
Over the past few months a number of targets were selected for follow-up sampling and as a result of that work a new pozzolan-perlite occurrence has been discovered and secured with mining claims.
A sample from the deposit has been tested for its perlitic expansion properties with very good results and application specific testing is now underway. Deposits of pozzolan also occur in the same area and are currently being tested.
Bay State Silver Project, Nevada, USA
The historic Bay State Silver Mine is located in the Newark Mining District, 15km east of the town of Eureka in central Nevada.
A second phase of drilling was underway at the start of the year but met with mixed results due to the severe directional deviation of a key drill hole. No additional drilling was carried out as work shifted to the CS Project, but the results from the first two drill programmes, taken together with extensive surface and underground sampling, are highly encouraging and justify further drilling.
Following the decision to focus on the CS Project a partner is now being sought for the Bay State Project. In order to reduce holding costs the Company has negotiated a two-year standstill on lease payments on the leased portions of the property.
County Line Diatomite Project, Nevada, USA
The claims cover a large deposit of the industrial mineral diatomite, an industrial raw material mainly used in filtration, as an industrial filler and in various agricultural and horticultural applications.
At the start of the year this project was under lease to EP Minerals, LLC, a significant diatomite producer, who carried out a programme of trenching in one area of the claim block and subsequently permitted a programme of follow up drill testing. In February 2017 EP Minerals terminated its lease prematurely without completing the proposed drill programme or adequately testing the project.
The Company's 8 sq km licence area is underlain entirely by diatomite and whilst diatomite is widespread throughout the western USA, large and pure deposits are less common and represent an attractive target and so a new partner is being sought.
Junction Copper-Gold Project, Nevada, USA
The Junction Gold (-Copper) Project is located in Humboldt County in northern Nevada.
In line with the Board's decision to focus on the CS Project, the Company sold the project to TSX-V listed VR Resources Ltd ("VR") in August 2017. The Company has received an initial payment US$10,000 and was issued with 50,000 shares. It will be issued with a further 50,000 shares in VR should drilling take place and a further payment of 250,000 shares should VR complete and file a 43-101 compliant report containing a resource estimate for the project. Sunrise has also retained a royalty equal to 3% of the Net Smelter Return, subject to VR's right to buy up to half of the royalty entitlement (1.5%) for US$500,000 per half-percent.
There is no record of modern or systematic exploration on the property, but prospector scale diggings target copper mineralisation in quartz veins and pegmatite dykes in shear zones hosted within Cretaceous age granite. Sunrise had also identified a new gold zone on the property, some 250 m northwest from the historic copper zone.
VR has moved quickly to start exploration on the project and recently announced that mapping, prospecting and soil sampling has resulted in the discovery of high-grade copper-silver-gold mineralisation at surface along a strike length of 6km. VR anticipates completion of a high resolution airborne magnetic/electromagnetic survey in 2018, in order to test along-strike sub-surface continuity of the outcropping mineralisation, and in preparation for a first pass diamond drill program.
Ridge Limestone Project, Nevada, USA
The Ridge Limestone Project, north of Austin, Nevada, was staked to cover a large area of limestone where reconnaissance samples indicated a high purity with industrial potential.
A programme of follow up sampling was completed during the year with mixed results; lower grade limestone having been found interbedded with the purer areas of limestone. A Joint Venture partner is sought to continue the evaluation of the project.
Garfield Gold, Silver & Copper Project, Nevada, USA
The Garfield Project, located near Hawthorne in Nevada, offers the potential for a new copper discovery based on a small trenching programme carried out by the Company.
WESTGOLD INC.
The Company's Westgold subsidiary holds three projects in Nevada, available for joint venture, - Stonewall, Clayton and Newark. No work has been carried out on these projects to date but all have drill-ready targets, for epithermal gold, silver and Carlin style deposits respectively.
SUNRISE MINERALS AUSTRALIA PTY LTD
The Company's tenure over the Cue Diamond Project and the Baker's Gold Project were maintained in 2017 but no work was carried out due to competing priorities.
OTHER PROJECTS
Derryginagh Barite Project, Ireland
The Derryginagh Barite Project in Ireland was renewed in 2015 for a 6 year period but is subject to review by the Irish government every two years.
The current government review is underway but no results have not yet been notified to the Company.
Risks & Uncertainties
The Board regularly reviews the risks to which the Group is exposed and ensures through its meetings and regular reporting that these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its development and in the foreseeable future are detailed below together with risk mitigation strategies employed by the Board.
RISK MITIGATION STRATEGIES
------------------------------------ ------------------------------------------
Exploration Risk
The Group's business is The directors bring many years
mineral exploration and of combined mining and exploration
evaluation which are speculative experience and an established
activities. There is no track record in mineral discovery.
certainty that the Group
will be successful in The Company targets advanced
the definition of economic and drill-ready exploration
mineral deposits, or that projects in order to avoid
it will proceed to the higher risk grass roots exploration.
development of any of
its projects or otherwise
realise their value.
------------------------------------ ------------------------------------------
Resource Risk
All mineral projects have Resources and reserves are
risk associated with defined estimated by independent specialists
grade and continuity. on behalf of the Group in accordance
Mineral Reserves are always with accepted industry standards
subject to uncertainties and codes. The directors are
in the underlying assumptions realistic in the use of metal
which include geological and mineral price forecasts
projection and price assumptions. and impose rigorous practices
in the QA/QC programmes that
support its independent estimates.
------------------------------------ ------------------------------------------
Development Risk
Delays in permitting, The Company's permitting requirements
financing and commissioning are limited at this stage to
a project may result in its exploration activities,
delays to the Group meeting but to reduce development risk
production targets. Changes in future the directors will
in commodity prices can ensure that its permit and
affect the economic viability financing applications are
of mining projects and robust and thorough and will
affect decisions on continuing seek to position the Company
exploration activity. as a low quartile cost producer.
------------------------------------ ------------------------------------------
Commodity Risk
Changes in commodity prices The Company consistently reviews
can affect the economic commodity prices and trends
viability of mining projects for its key projects throughout
and affect decisions on the development cycle.
continuing exploration
activity.
------------------------------------ ------------------------------------------
Mining and Processing
Technical Risk From the earliest stages of
Notwithstanding the completion exploration the directors look
of metallurgical testwork, to use consultants and contractors
test mining and pilot who are leaders in their field
studies indicating the and in future will seek to
technical viability of strengthen the executive and
a mining operation, variations the Board with additional technical
in mineralogy, mineral and financial skills as the
continuity, ground stability, Company transitions from exploration
groundwater conditions to production.
and other geological conditions
may still render a mining
and processing operation
economically or technically
non-viable.
------------------------------------ ------------------------------------------
Environmental Risk
Exploration and development Mineral exploration carries
of a project can be adversely a lower level of environmental
affected by environmental liability than mining. The
legislation and the unforeseen Company has adopted an Environmental
results of environmental Policy and the directors avoid
studies carried out during the acquisition of projects
evaluation of a project. where liability for legacy
Once a project is in production environmental issues might
unforeseen events can fall upon the Company.
give rise to environmental
liabilities.
------------------------------------ ------------------------------------------
Political Risk
All countries carry political The Company's strategy restricts
risk that can lead to its activities to stable, democratic
interruption of activity. and mining friendly jurisdictions.
Politically stable countries
can have enhanced environmental The Company has adopted a strong
and social permitting Anti-corruption Policy and
risks, risks of strikes Code of Conduct and this is
and changes to taxation, strictly enforced.
whereas less developed
countries can have, in
addition, risks associated
with changes to the legal
framework, civil unrest
and government expropriation
of assets.
------------------------------------ ------------------------------------------
Partner Risk
Whilst there has been The Board's policy is to maintain
no past evidence of this, control of certain key projects
the Group can be adversely so that it can control the
affected if joint venture pace of exploration and reduce
partners are unable or partner risk.
unwilling to perform their
obligations or fund their For projects where other parties
share of future developments. are responsible for critical
payments and expenditures the
Company's agreements legislate
that such payments and expenditures
are met.
------------------------------------ ------------------------------------------
Financing & Liquidity
Risk The Company maintains a good
The Company has an ongoing network of contacts in the
requirement to fund its capital markets that has historically
activities through the met its financing requirements.
equity markets and in The Company's low overheads
future to obtain finance and cost effective exploration
for project development. strategies help reduce its
There is no certainty funding requirements and currently
such funds will be available the directors take their fees
when needed. in shares. Nevertheless further
equity issues will be required
over the next 12 months.
------------------------------------ ------------------------------------------
Financial Instruments
Details of risks associated The directors are responsible
with the Group's Financial for the Group's systems of
Instruments are given internal financial control.
in Note 18 to the financial Although no systems of internal
statements. financial control can provide
absolute assurance against
material misstatement or loss,
the Group's systems are designed
to provide reasonable assurance
that problems are identified
on a timely basis and dealt
with appropriately.
In carrying out their responsibilities,
the directors have put in place
a framework of controls to
ensure as far as possible that
ongoing financial performance
is monitored in a timely manner,
that corrective action is taken
and that risk is identified
as early as practically possible,
and they have reviewed the
effectiveness of internal financial
control.
The Board, subject to delegated
authority, reviews capital
investment, property sales
and purchases, additional borrowing
facilities, guarantees and
insurance arrangements.
------------------------------------ ------------------------------------------
Forward-Looking Statements
This Annual Report contains certain forward-looking statements that have been made by the directors in good faith based on the information available at the time of the approval of the Annual Report. By their nature, such forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements.
This Strategic Report was approved by the Board of Directors on 13 December 2017 and signed on its behalf.
Patrick Cheetham
Executive Chairman
Publication of Statutory Accounts
The financial information set out in this announcement does not constitute the Company's Statutory Accounts for the period ended 30 September 2017 or 2016. The financial information for 2016 is derived from the Statutory Accounts for 2016. Full audited accounts in respect of that financial period have been delivered to the Registrar of Companies. The Statutory Accounts for 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors have reported on the 2017 and 2016 accounts. Neither set of accounts contain a statement under section 498(2) or (3) the Companies Act 2006 and both received an unqualified audit opinion. However, there was an emphasis of matter in relation to a requirement that the Company raise funds in the future to continue as a going concern.
Availability of Financial Statements
The Annual Report containing the full financial statements for the year to 30 September 2017 will be posted to shareholders on or around 21 December 2017, a soft copy of which will then be available to download from the Company's website https://www.sunriseresourcesplc.com.
Consolidated Income Statement
for the year ended 30 September 2017
2017 2016
Notes GBP GBP
-------------------------------------- ------ ----------------------- ------------------
Pre-licence exploration costs 21,161 45,316
Impairment of deferred exploration
cost 9 3,077 39,711
Administrative expenses 276,568 285,092
-------------------------------------- ------ ----------------------- ------------------
Operating loss (300,806) (370,119)
Impairment of available for sale (13,338) -
investment
Gain on disposal of intangible asset 3,028 -
Interest receivable 70 532
-------------------------------------- ------ ----------------------- ------------------
Loss before income tax 3 (311,046) (369,587)
Income tax 7 - -
-------------------------------------- ------ ----------------------- ------------------
Loss for the year attributable to
equity holders of the parent (311,046) (369,587)
-------------------------------------- ------ ----------------------- ------------------
Loss per share - basic and diluted
(pence) 6 (0.02) (0.04)
-------------------------------------- ------ ----------------------- ------------------
All amounts relate to continuing activities.
Consolidated Statement of Comprehensive Income
for the year ended 30 September 2017
2017 2016
GBP GBP
----------------------------------------------- --------- ---------
Loss for the year (311,046) (369,587)
----------------------------------------------- --------- ---------
Items that could be reclassified subsequently
to the income statement:
Foreign exchange translation differences
on foreign currency net investments in
subsidiaries (35,169) 193,942
Fair value movement on available for
sale investment 12,471 (1,676)
----------------------------------------------- --------- ---------
(22,698) 192,266
----------------------------------------------- --------- ---------
Total comprehensive loss for the year
attributable to equity holders of the
parent (333,744) (177,321)
----------------------------------------------- --------- ---------
Consolidated and Company Statements of Financial Position
at 30 September 2017
Company Registration Number: 05363956
Group Company Group Company
2017 2017 2016 2016
Notes GBP GBP GBP GBP
------------------------------- ----- ----------- ----------- ----------- -----------
Non-current assets
Intangible assets 9 1,302,404 - 1,072,571 -
Investment in subsidiaries 8 - 1,601,574 - 1,311,874
Available for sale investment 8 30,478 22,624 23,324 23,324
------------------------------- ----- ----------- ----------- ----------- -----------
1,332,882 1,624,198 1,095,895 1,335,198
Current assets
Receivables 11 62,142 25,079 43,606 27,081
Cash and cash equivalents 12 234,181 215,339 223,268 102,865
------------------------------- ----- ----------- ----------- ----------- -----------
296,323 240,418 266,874 129,946
Current liabilities
Trade and other payables 13 (112,901) (96,829) (172,126) (98,468)
------------------------------- ----- ----------- ----------- ----------- -----------
Net current assets 183,422 143,589 94,748 31,478
------------------------------- ----- ----------- ----------- ----------- -----------
Net assets 1,516,304 1,767,787 1,190,643 1,366,676
------------------------------- ----- ----------- ----------- ----------- -----------
Equity
Called up share capital 14 1,804,016 1,804,016 1,119,910 1,119,910
Share premium account 4,792,790 4,792,790 4,818,998 4,818,998
Share warrant reserve 14 89,248 89,248 119,899 119,899
Available for sale investment
reserve 10,795 10,962 (1,676) (1,676)
Foreign currency reserve 14 19,749 1,359 54,918 1,176
Accumulated losses (5,200,294) (4,930,588) (4,921,406) (4,691,631)
------------------------------- ----- ----------- ----------- ----------- -----------
Equity attributable to
owners of the parent 1,516,304 1,767,787 1,190,643 1,366,676
------------------------------- ----- ----------- ----------- ----------- -----------
The Company reported a loss for the year ended 30 September 2017 of GBP271,115 (2016: 277,151).
These financial statements were approved and authorised for issue by the Board of Directors on 13 December 2017 and were signed on its behalf.
P L Cheetham D J Swan
Executive Chairman Director
Consolidated Statement of Changes in Equity
Share Share Available Foreign
Share premium warrant for sale currency Accumulated
capital account reserve reserve reserve losses Total
Group GBP GBP GBP GBP GBP GBP GBP
---------------------- --------- --------- --------- --------- --------- ----------- ---------
At 30 September
2015 691,149 4,761,776 322,820 - (139,024) (4,790,072) 846,649
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Loss for the
year - - - - - (369,587) (369,587)
Change in fair
value - - - (1,676) - - (1,676)
Exchange differences - - - - 193,942 - 193,942
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Total comprehensive
loss for the
year - - - (1,676) 193,942 (369,587) (177,321)
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Share issue 428,761 57,222 31,009 - - - 516,992
Share-based
payments expense - - 4,323 - - - 4,323
Transfer of
expired warrants - - (238,253) - - 238,253 -
---------------------- --------- --------- --------- --------- --------- ----------- ---------
At 30 September
2016 1,119,910 4,818,998 119,899 (1,676) 54,918 (4,921,406) 1,190,643
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Loss for the
year - - - - - (311,046) (311,046)
Change in fair
value - - - 12,471 - - 12,471
Exchange differences - - - - (35,169) - (35,169)
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Total comprehensive
loss for the
year - - - 12,471 (35,169) (311,046) (333,744)
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Share issue 684,106 (26,208) - - - - 657,898
Share-based
payments expense - - 1,507 - - - 1,507
Transfer of
expired warrants - - (32,158) - - 32,158 -
---------------------- --------- --------- --------- --------- --------- ----------- ---------
At 30 September
2017 1,804,016 4,792,790 89,248 10,795 19,749 (5,200,294) 1,516,304
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Company Statement of Changes in Equity
Share Share Available Foreign
Share premium warrant for sale currency Accumulated
capital account reserve reserve reserve losses Total
Company GBP GBP GBP GBP GBP GBP GBP
---------------------- --------- --------- --------- --------- --------- ----------- ---------
At 30 September
2015 691,149 4,761,776 322,820 - - (4,652,733) 1,123,012
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Loss for the
year - - - - - (277,151) (277,151)
Change in fair
value - - - (1,676) - - (1,676)
Exchange differences - - - - 1,176 - 1,176
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Total comprehensive
loss for the
year - - - (1,676) 1,176 (277,151) (277,651)
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Share issue 428,761 57,222 31,009 - - - 516,992
Share-based
payments expense - - 4,323 - - - 4,323
Transfer of
expired warrants - - (238,253) - - 238,253 -
---------------------- --------- --------- --------- --------- --------- ----------- ---------
At 30 September
2016 1,119,910 4,818,998 119,899 (1,676) 1,176 (4,691,631) 1,366,676
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Loss for the
year - - - - - (271,115) (271,115)
Change in fair
value - - - 12,638 - - 12,638
Exchange differences - - - - 183 - 183
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Total comprehensive
loss for the
year - - - 12,638 183 (271,115) (258,294)
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Share issue 684,106 (26,208) - - - - 657,898
Share-based
payments expense - - 1,507 - - - 1,507
Transfer of
expired warrants - - (32,158) - - 32,158 -
At 30 September
2017 1,804,016 4,792,790 89,248 10,962 1,359 (4,930,588) 1,767,787
---------------------- --------- --------- --------- --------- --------- ----------- ---------
Consolidated and Company Statements of Cash Flows
for the year ended 30 September 2017
Group Company Group Company
2017 2017 2016 2016
Notes GBP GBP GBP GBP
--------------------------------- ----- --------- --------- --------- ---------
Operating activity
Operating loss (300,806) (261,797) (370,119) (279,805)
Share-based payment charge 1,507 1,507 4,323 4,323
Shares issued in lieu of
net wages 15,736 15,736 19,720 19,720
Impairment charge - exploration 3,077 - 39,711 -
Accrued income 7,854 - - -
(Increase)/decrease in
receivables 11 (18,536) 2,002 (9,123) (5,702)
Increase/(decrease) in
trade and other payables 13 (59,225) (1,639) 63,475 14,346
--------------------------------- ----- --------- --------- --------- ---------
Net cash outflow from operating
activity (350,393) (244,191) (252,013) (247,118)
--------------------------------- ----- --------- --------- --------- ---------
Investing activity
Interest received 70 4,020 532 2,654
Disposal of development
asset 7,467 - - -
Development expenditures 9 (273,814) - (183,767) -
Loans to subsidiaries - (289,701) - (256,468)
Net cash outflow from investing
activity (266,277) (285,681) (183,235) (253,814)
--------------------------------- ----- --------- --------- --------- ---------
Financing activity
Issue of share capital
(net of expenses) 642,162 642,162 497,272 497,272
--------------------------------- ----- --------- --------- --------- ---------
Net cash inflow from financing
activity 642,162 642,162 497,272 497,272
--------------------------------- ----- --------- --------- --------- ---------
Net increase/(decrease)
in cash and cash equivalents 25,492 112,290 62,024 (3,660)
Cash and cash equivalents
at start of year 223,268 102,865 142,079 105,349
Exchange differences (14,579) 184 19,165 1,176
--------------------------------- ----- --------- --------- --------- ---------
Cash and cash equivalents
at 30 September 12 234,181 215,339 223,268 102,865
--------------------------------- ----- --------- --------- --------- ---------
Notes to the Financial Statements
for the year ended 30 September 2017
Background
Sunrise Resources plc is a public company incorporated and domiciled in England. It is traded on the AIM Market of the London Stock Exchange - EPIC: SRES.
The Company is a holding company (together, "the Group") for one company incorporated in Australia, and two companies incorporated in Nevada, in the United States of America. The Group's financial statements are presented in Pounds Sterling (GBP) which is also the functional currency of the Company.
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements.
1. Accounting policies
(a) Basis of preparation
The financial statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS), as adopted by the European Union. They have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
(b) Going concern
In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches. Further funding is raised as and when required. When any of the Group's projects move to the development stage, specific project financing will be required.
The directors prepare annual budgets and cash flow projections that extend beyond 12 months from the date of this report. Given the Group's cash position at year end (GBP234,181), these projections include the proceeds of future fundraising necessary within the next 12 months to meet the Company's and Group's overheads and planned discretionary project expenditures and to maintain the Company and Group as going concerns. Although the Company has been successful in raising finance in the past, there is no assurance that it will obtain adequate finance in the future. This represents a material uncertainty related to events or conditions which may cast significant doubt on the Group's and Company's ability to continue as going concerns and, therefore, that they may be unable to realise their assets and discharge their liabilities in the normal course of business. However, the directors have a reasonable expectation that they will secure additional funding when required to continue meeting corporate overheads and exploration costs for the foreseeable future and therefore believe that the going concern basis is appropriate for the preparation of the financial statements.
This expectation is strengthened by recent investor interest in the Company, resulting in a successful placing on 6 December 2017, which raised GBP500,000 before expenses.
(c) Basis of consolidation
Investments, including long-term loans, in the subsidiaries are valued at the lower of cost or recoverable amount, with an ongoing review for impairment.
The Group's financial statements consolidate the financial statements of Sunrise Resources plc and its subsidiary undertakings using the acquisition method and eliminate intercompany balances and transactions.
In accordance with section 408 of the Companies Act 2006, Sunrise Resources plc is exempt from the requirement to present its own statement of comprehensive income. The amount of the loss for the financial year recorded within the financial statements of Sunrise Resources plc is GBP271,115 (2016: GBP277,151).
(d) Intangible assets
Exploration and evaluation
Accumulated exploration and evaluation costs incurred in relation to separate areas of interest (which may comprise more than one exploration licence or exploration licence applications) are capitalised and carried forward where:
(1) such costs are expected to be recouped through successful exploration and development of the area, or alternatively by its sale; or
(2) exploration and/or evaluation activities in the area have not yet reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in relation to the areas are continuing.
A bi-annual review is carried out by the directors to consider whether there are any indications of impairment in capitalised exploration and development costs. The bi-annual impairment reviews were conducted in March 2017 and October 2017.
Accumulated costs, where the Group does not yet have an exclusive exploration licence and in respect of areas of interest which have been abandoned, are written off to the income statement in the year in which the pre-licence expense was incurred or in which the area was abandoned.
Development
Exploration, evaluation and development costs are carried at the lower of cost and expected net recoverable amount. On reaching a mining development decision, exploration and evaluation costs are reclassified as development costs and all development costs on a specific area of interest will be amortised over the useful economic life of the projects, once they become income generating and the costs can be recouped.
(e) Trade and other receivables and payables
Trade and other receivables and payables are measured at initial recognition at fair value and subsequently measured at amortised cost.
(f) Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand and short-term bank deposits with a maturity of three months or less.
(g) Deferred taxation
Deferred taxation, if applicable, is provided in full in respect of taxation deferred by temporary differences between the treatment of certain items for taxation and accounting purposes.
Deferred tax assets are recognised to the extent that they are regarded as recoverable.
(h) Foreign currencies
The Group's consolidated financial statements are presented in Pounds Sterling (GBP), being the functional currency of the Company, and the currency of the primary economic environment in which the Company operates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.
For consolidation purposes, the net investment in foreign operations and the assets and liabilities of overseas subsidiaries, associated undertakings and joint arrangements, that have a functional currency different from the Group's presentation currency, are translated at the closing exchange rates. Income statements of overseas subsidiaries, that have a functional currency different from the Group's presentation currency, are translated at exchange rates at the date of transaction. Exchange differences arising on opening reserves are taken to the foreign currency reserve.
(i) Share warrants and share based payments
The Company issues warrants to employees and third parties. The fair value of the warrants is recognised as a charge measured at fair value on the date of grant and determined in accordance with IFRS 2 or IAS 39, adopting the Black-Scholes-Merton model. The fair value is recognised on a straight-line basis over the vesting period, with a corresponding adjustment to equity, based on the management's estimate of shares that will eventually vest. The expected life of the warrants is adjusted, based on management's best estimates, for the effects of non-transferability, exercise restrictions and behavioural considerations. The details are shown in Note 15.
The Company also issues shares in order to settle certain liabilities, including payment of fees to directors. The fair value of shares issued is based on the closing mid-market price of the shares on the AIM Market on the day prior to the date of settlement and it is expensed on the date of settlement with a corresponding increase in equity.
(j) Judgements and estimations in applying accounting policies
In the process of applying the Group's accounting policies above, management has identified the judgemental areas that have the most significant effect on the amounts recognised in the financial statements:
Intangible assets - exploration and evaluation
Capitalisation of exploration and evaluation costs requires that costs be assessed against the likelihood that such costs will be recoverable against future exploitation or sale or alternatively, where activities have not reached a stage which permits a reasonable estimate of the existence of mineral reserves, a judgement that future exploration or evaluation should continue. This requires management to make estimates and judgements and to make certain assumptions, often of a geological nature, and most particularly in relation to whether or not an economically viable mining operation can be established in future. Such estimates, judgements and assumptions are likely to change as new information becomes available. When it becomes apparent that recovery of expenditure is unlikely the relevant capitalised amount is written off to the Income Statement.
Impairment
Impairment reviews for deferred exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. The Group will look to evidence produced by its exploration activities to indicate whether the carrying value is impaired. Assessment of the impairment of assets is a judgement based on analysis of the future likely cash flows from the relevant project, including consideration of:
(a) the period for which the entity has the right to explore in the specific area has expired during the period or will expire in the near future, and is not expected to be renewed.
(b) substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor planned.
(c) exploration for and evaluation of mineral resources in the specific area have not led to the discovery of commercially viable quantities of mineral resources and the entity has decided to discontinue such activities in the specific area.
(d) sufficient data exist to indicate that, although a development in the specific area is likely to proceed, the carrying amount of the exploration and evaluation asset is unlikely to be recovered in full from successful development or by sale.
Impairment reviews for investments are carried out on an individual basis. The Group will look to performance indicators of the investment, such as market share price, to indicate whether the carrying value is impaired.
Going concern
The preparation of financial statements requires an assessment of the validity of the going concern assumption. The validity of the going concern assumption is dependent on finance being available for the continuing working capital requirements of the Group. Based on the assumption that such finance will become available, the directors believe that the going concern basis is appropriate for these accounts.
Share warrants and share-based payments
The estimates of costs recognised in connection with the fair value of share warrants requires that management selects an appropriate valuation model and make decisions on various inputs into the model including the volatility of its own share price, the probable life of the warrants before exercise, and behavioural consideration of warrant holders.
(k) Available for sale investments
Available for sale financial assets include non-derivative financial assets that are either designated as such or do not qualify for inclusion in any of the other categories of financial assets. Available for sale investments are initially measured at cost and subsequently at fair value, being the equivalent of market value, with changes in value recognised in equity. Gains and losses arising from available for sale investments are recognised in the income statement when they are sold or impaired.
(l) Standards, amendments and interpretations not yet effective
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some cases have not yet been adopted by the EU.
The directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Group in future periods. Specifically, the adoption of IFRS 9 will have minimal impact for both the measurement and disclosures of existing financial instruments. As the Group does not have any turnover, IFRS 15 will not have any significant impact on revenue recognition and related disclosures. Finally, the adoption of IFRS 16 will not have any impact on the financial statements of the Group as all lease contracts are for periods of less than one year.
2. Segmental analysis
The Chief Operating Decision Maker is the Board of Directors. The Board considers the business has one reportable segment, the management of exploration projects, which is supported by a Head Office function. For the purpose of measuring segmental profits and losses the exploration segment bears only those direct costs incurred by or on behalf of those projects, no Head Office cost allocations are made to this segment. The Head Office function recognises all other costs.
Exploration Head
projects office Total
2017 GBP GBP GBP
----------------------------------------------- ------------ ---------- ----------
Consolidated Income Statement
Impairment of deferred exploration
cost 3,077 - 3,077
Pre-licence exploration costs 21,161 - 21,161
Share-based payments - 1,507 1,507
Other expenses - 275,061 275,061
----------------------------------------------- ------------ ---------- ----------
Operating loss (24,238) (276,568) (300,806)
Impairment of available for sale
investment - (13,338) (13,338)
Disposal of intangible asset 3,028 - 3,028
Interest receivable - 70 70
----------------------------------------------- ------------ ---------- ----------
Loss before income tax (21,210) (289,836) (311,046)
Income tax - - -
----------------------------------------------- ------------ ---------- ----------
Loss for the year attributable
to equity holders of the parent (21,210) (289,836) (311,046)
----------------------------------------------- ------------ ---------- ----------
Non-current assets
Intangible assets:
Deferred exploration costs:
Cue Diamond Project, Australia 480,204 - 480,204
Baker's Gold Project, Australia 53,558 - 53,558
County Line Diatomite Project,
USA 114,525 - 114,525
Garfield Silver-Gold-Copper Project,
USA 25,264 - 25,264
Bay State Silver Project, USA 368,205 - 368,205
Pozz Ash Project, USA 18,088 - 18,088
Ridge Limestone Project, USA 14,523 - 14,523
CS Pozzolan-Perlite Project,
USA 184,926 - 184,926
Clayton Gold Project, USA 12,894 - 12,894
Newark Silver-Gold Project, USA 21,541 - 21,541
Stonewall Gold Project, USA 8,676 - 8,676
----------------------------------------------- ------------ ---------- ----------
1,302,404 - 1,302,404
Available for sale investment - 30,478 30,478
----------------------------------------------- ------------ ---------- ----------
1,302,404 30,478 1,332,882
----------------------------------------------- ------------ ---------- ----------
Current assets
Receivables 26,319 35,823 62,142
Cash and cash equivalents - 234,181 234,181
----------------------------------------------- ------------ ---------- ----------
26,319 270,004 296,323
----------------------------------------------- ------------ ---------- ----------
Current liabilities
Trade and other payables (34,976) (77,925) (112,901)
----------------------------------------------- ------------ ---------- ----------
Net current assets/(liabilities) (8,657) 192,079 183,422
----------------------------------------------- ------------ ---------- ----------
Net assets 1,293,747 222,557 1,516,304
----------------------------------------------- ------------ ---------- ----------
Other data
Deferred exploration additions 273,814 - 273,814
Deferred exploration disposal (20,315) - (20,315)
Exchange rate adjustments to deferred
exploration costs - (20,590) (20,590)
----------------------------------------------- ------------ ---------- ----------
Exploration Head
projects office Total
2016 GBP GBP GBP
----------------------------------------------- ------------ ---------- ----------
Consolidated Income Statement
Impairment of deferred exploration
costs:
Corona Gold Project, Australia (32,930) - (32,930)
Strike Copper-Gold Project, USA (6,781) - (6,781)
----------------------------------------------- ------------ ---------- ----------
(39,711) - (39,711)
Pre-licence exploration costs (45,316) - (45,316)
Share-based payments - (4,323) (4,323)
Other expenses - (280,769) (280,769)
----------------------------------------------- ------------ ---------- ----------
Operating loss (85,027) (285,092) (370,119)
Bank interest received - 532 532
----------------------------------------------- ------------ ---------- ----------
Loss before income tax (85,027) (284,560) (369,587)
Income tax - - -
----------------------------------------------- ------------ ---------- ----------
Loss for the year attributable
to equity holders (85,027) (284,560) (369,587)
----------------------------------------------- ------------ ---------- ----------
Non-current assets
Intangible assets:
Deferred exploration costs:
Cue Diamond Project, Australia 478,348 - 478,348
Baker's Gold Project, Australia 49,040 - 49,040
County Line Diatomite Project,
USA 102,888 - 102,888
Garfield Silver-Gold-Copper Project,
USA 24,691 - 24,691
Bay State Silver Project, USA 362,961 - 362,961
Junction Gold Project, USA 14,189 - 14,189
Pozz Ash Project, USA 12,113 - 12,113
Clayton Gold Project, USA 8,645 - 8,645
Newark Silver-Gold Project, USA 13,427 - 13,427
Stonewall Gold Project, USA 6,269 - 6,269
----------------------------------------------- ------------ ---------- ----------
1,072,571 - 1,072,571
Available for sale investment - 23,324 23,324
----------------------------------------------- ------------ ---------- ----------
1,072,571 23,324 1,095,895
----------------------------------------------- ------------ ---------- ----------
Current assets
Receivables 15,122 28,484 43,606
Cash and cash equivalents - 223,268 223,268
----------------------------------------------- ------------ ---------- ----------
15,122 251,752 266,874
----------------------------------------------- ------------ ---------- ----------
Current liabilities
Trade and other payables (82,062) (90,064) (172,126)
----------------------------------------------- ------------ ---------- ----------
Net current assets/(liabilities) (66,940) 161,688 94,748
----------------------------------------------- ------------ ---------- ----------
Net assets 1,005,631 185,012 1,190,643
----------------------------------------------- ------------ ---------- ----------
Other data
Deferred exploration additions 183,767 - 183,767
Exchange rate adjustments to deferred
exploration costs - 174,777 174,777
----------------------------------------------- ------------ ---------- ----------
3. Loss before income tax
2017 2016
The operating loss is stated after charging: GBP GBP
---------------------------------------------- ----- -----
Fees payable to the Company's auditor
for:
The audit of the Company's annual accounts 6,000 6,000
Other services 1,000 1,000
---------------------------------------------- ----- -----
4. Directors' emoluments
Remuneration in respect of directors 2017 2016
was as follows: GBP GBP
-------------------------------------- ------ ------
P L Cheetham (salary) 12,000 12,000
F P H Johnstone (salary) - 7,295
D J Swan (salary) 12,000 12,000
R D Murphy (salary) 12,000 4,710
-------------------------------------- ------ ------
36,000 36,005
-------------------------------------- ------ ------
The above remuneration amounts do not include non-cash share based payments charged in these financial statements in respect of share warrants issued to the directors amounting to GBPNil (2016: GBP2,223) or Employer's National Insurance Contributions of GBPNil (2016: GBPNil).
Patrick Cheetham is also a director of Tertiary Minerals plc and under the terms of the Management Services Agreement (see Note 5) a total of GBP104,324 was charged to the Company for his services during the year (2016: GBP99,775). These services are provided at cost.
The directors are also the key management personnel. If all benefits are taken into account, the total key management personnel compensation would be GBP36,000 (2016: GBP38,228).
5. Staff costs
Staff costs for the Group and Company, 2017 2016
including directors, were as follows: GBP GBP
---------------------------------------- ------ ------
Wages and salaries 40,128 39,078
Social security costs - -
Share-based payments 390 2,756
---------------------------------------- ------ ------
40,518 41,834
---------------------------------------- ------ ------
The average monthly number of employees employed by the Group and Company during the year was as follows:
The average monthly number of employees 2017 2016
employed by the Group and Company during Number Number
the year was as follows:
------------------------------------------- ------- -------
Directors 3 3
Other Officers 1 1
------------------------------------------- ------- -------
4 4
------------------------------------------- ------- -------
The Company does not employ any staff directly apart from the directors and a company secretary. The services of technical and administrative staff are provided by Tertiary Minerals plc as part of the Management Services Agreement between the two companies (see Note 16). The Company issues share warrants to Tertiary Minerals plc staff from time to time and these non-cash share based payments resulted in a charge within the financial statements of GBP1,117 (2016: GBP1,567).
6. Loss per share
Loss per share has been calculated using the loss for the year attributable to equity holders of the Parent and the weighted average number of shares in issue during the year.
2017 2016
---------------------------------- ------------- -----------
Loss (GBP) (311,046) (369,587)
Weighted average shares in issue
(No.) 1,418,016,156 869,068,238
---------------------------------- ------------- -----------
Basic and diluted loss per share
(pence) (0.02) (0.04)
---------------------------------- ------------- -----------
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for the basic earnings per ordinary share. This is because the exercise of share warrants would have the effect of reducing the loss per ordinary share and is therefore anti-dilutive.
7. Income tax
No liability to corporation tax arises for the year due to the Group recording a taxable loss (2016: GBPNil).
The tax credit for the period is lower than the credit resulting from the loss before tax at the standard rate of corporation tax in the UK - 19% (2016: 20%). The differences are explained below.
2017 2016
Tax reconciliation GBP GBP
---------------------------------------------- ----------- -----------
Loss before income tax (311,046) (369,587)
---------------------------------------------- ----------- -----------
Tax at hybrid rate 19.5% (2016: 20%) (60,654) (73,917)
---------------------------------------------- ----------- -----------
Pre-trading expenditure no longer deductible
for tax purposes 540,158 214,830
---------------------------------------------- ----------- -----------
Tax effect at 19.5% (2016: 20%) 105,331 42,966
---------------------------------------------- ----------- -----------
Unrelieved tax losses carried forward (44,677) 30,951
---------------------------------------------- ----------- -----------
Tax recognised on loss - -
---------------------------------------------- ----------- -----------
Total losses carried forward for tax
purposes (3,493,492) (3,722,605)
---------------------------------------------- ----------- -----------
Factors that may affect future tax charges
The Group has total losses carried forward of GBP3,493,492 (2016: GBP3,722,605). This amount would be charged to tax, thereby reducing tax liability, if sufficient profits were made in the future. The deferred tax asset has not been recognised as the future recovery is uncertain given the exploration status of the Group. The carried tax loss is adjusted each year for amounts that can no longer be carried forward.
8. Investments
Subsidiary undertakings
Date of Type and percentage
incorporation of shares
Country /registration held at
of 30 September Principal
Company incorporation/registration 2017 activity
----------------- --------------------------- -------------- ------------------- ------------
Sunrise Minerals 7 October
Australia Pty 2009 100% of ordinary Mineral
Ltd Australia shares exploration
Nevada, 12 January 100% of ordinary Mineral
SR Minerals Inc. USA 2014 shares exploration
Nevada, 13 April 100% of ordinary Mineral
Westgold Inc. USA 2016 shares exploration
The registered office of Sunrise Minerals Australia Pty Ltd is Level 4, 35-37 Havelock Street West, Perth, WA 6005.
The registered office of SR Minerals Inc. and Westgold Inc. is 241 Ridge Street, Suite 210, Reno, NV 89501.
Company Company
2017 2016
Investment in subsidiary undertakings GBP GBP
---------------------------------------------- --------- ---------
Ordinary Shares - Sunrise Minerals Australia
Pty Ltd 61 61
Loan - Sunrise Minerals Australia Pty
Ltd 710,374 705,676
Ordinary Shares - SR Minerals Inc. 1 1
Loan - SR Minerals Inc. 809,053 558,392
Ordinary Shares - Westgold Inc. 1 1
Loan - Westgold Inc. 82,084 47,743
---------------------------------------------- --------- ---------
At 30 September 1,601,574 1,311,874
---------------------------------------------- --------- ---------
Available for sale investments
Type and percentage
of shares held
Country of at
incorporation 30 September Principal
Company /registration 2017 activity
------------- --------------- ------------------- -------------------
Block Energy England & Wales 0.44% of ordinary Mineral exploration
plc* shares
------------- --------------- ------------------- -------------------
VR Resources Canada 0.14% of ordinary Mineral exploration
Ltd shares
------------- --------------- ------------------- -------------------
* On 5 May 2017 Goldcrest Resources Plc changed its name to Block Energy plc.
Group Company Group Company
2017 2017 2016 2016
Available for sale investments GBP GBP GBP GBP
-------------------------------- ------ ------- ------- -------
Value at start of year 23,324 23,324 25,000 25,000
Additions to available
for sale investment 8,021 - - -
Movement in valuation of
available for sale investment (867) (700) (1,676) (1,676)
-------------------------------- ------ ------- ------- -------
At 30 September 30,478 22,624 23,324 23,324
-------------------------------- ------ ------- ------- -------
The fair value of each available for sale investment is equal to the market value of its shares at 30 September 2017, based on the closing mid-market price of shares on its equity exchange market.
Shares of Block Energy plc were suspended from trading on 25 September 2017, following its move to 100% working interest in the Norio oil field, deemed to be a reverse takeover. The fair value of Block Energy shares was not considered to be impaired as a result of the acquisition.
These are level one inputs for the purpose of the IFRS 13 fair value hierarchy.
9. Intangible assets
Group Company Group Company
2017 2017 2016 2016
Deferred exploration expenditure GBP GBP GBP GBP
---------------------------------- ----------- ----------- ----------- -----------
Cost
At start of year 3,239,882 2,203,594 3,056,115 2,203,594
Additions 273,814 - 183,767 -
---------------------------------- ----------- ----------- ----------- -----------
At 30 September 3,513,696 2,203,594 3,239,882 2,203,594
---------------------------------- ----------- ----------- ----------- -----------
Disposals
At start of year (2,167,311) (2,203,594) (2,302,377) (2,203,594)
Impairment losses during
year (3,077) - (39,711) -
Disposal during year (20,315) - - -
Foreign currency exchange
adjustments (20,589) - 174,777 -
---------------------------------- ----------- ----------- ----------- -----------
At 30 September (2,211,292) (2,203,594) (2,167,311) (2,203,594)
---------------------------------- ----------- ----------- ----------- -----------
Carrying amounts
At 30 September 1,302,404 - 1,072,571 -
---------------------------------- ----------- ----------- ----------- -----------
At start of year 1,072,571 - 753,738 -
---------------------------------- ----------- ----------- ----------- -----------
During the year the Group carried out an impairment review which resulted in an impairment charge being recognised in the Consolidated Income Statement as part of operating expenses. Refer to accounting policy 1(j) for a description of the assumptions used in the impairment review.
10. Property, plant and equipment
The Group has the use of tangible assets held by Tertiary Minerals plc as part of the Management Services Agreement between the two companies.
11. Receivables
Group Company Group Company
2017 2017 2016 2016
GBP GBP GBP GBP
------------------- ------ ------- ------- -------
Prepayments 14,224 11,348 15,844 14,166
Accrued income 7,854 - - -
Other receivables 40,064 13,731 27,762 12,915
------------------- ------ ------- ------- -------
62,142 25,079 43,606 27,081
------------------- ------ ------- ------- -------
12. Cash and cash equivalents
Group Company Group Company
2017 2017 2016 2016
GBP GBP GBP GBP
-------------------------- ------- ------- ------- -------
Cash at bank and in hand 234,181 215,339 223,268 102,865
-------------------------- ------- ------- ------- -------
13. Trade and other payables
Group Company Group Company
2017 2017 2016 2016
GBP GBP GBP GBP
--------------------------- ------- ------- ------- -------
Amounts owed to Tertiary
Minerals plc 61,275 61,275 64,724 64,724
Trade creditors 13,871 6,247 63,045 8,227
Accruals 19,617 11,169 44,357 25,517
Net pay due in shares 11,065 11,065 - -
Social security and taxes 7,073 7,073 - -
--------------------------- ------- ------- ------- -------
112,901 96,829 172,126 98,468
--------------------------- ------- ------- ------- -------
14. Issued capital and reserves
2017 2017 2016 2016
Number GBP Number GBP
--------------------------- ------------- --------- ------------- ---------
Allotted, called up and
fully paid
Ordinary shares of 0.1p
each
Balance at start of year 1,119,910,379 1,119,910 691,148,682 691,149
Shares issued in the year 684,105,288 684,106 428,761,697 428,761
Balance at 30 September 1,804,015,667 1,804,016 1,119,910,379 1,119,910
--------------------------- ------------- --------- ------------- ---------
During the year to 30 September 2017 the following share issues took place:
An issue of 11,887,558 0.1p ordinary shares at 0.19p per share to Tertiary Minerals plc, for a total consideration of GBP22,587, by way of settlement of an invoice issued to Sunrise Resources plc for management fees (15 November 2016).
An issue of 60,580,000 0.1p ordinary shares at 0.10p per share, by way of placing and subscription, for a total consideration of GBP57,551 net of expenses (24 January 2017).
An issue of 22,332,230 0.1p ordinary shares at 0.135p per share to Tertiary Minerals plc, for a total consideration of GBP30,149, by way of settlement of an invoice issued to Sunrise Resources plc for management fees (1 February 2017).
An issue of 250,000,000 0.1p ordinary shares at 0.10p per share, by way of placing, for a total consideration of GBP231,250 net of expenses (7 March 2017).
An issue of 14,305,500 0.1p ordinary shares at 0.11p per share to three directors, for a total consideration of GBP15,736, in satisfaction of directors' fees (3 April 2017).
An issue of 325,000,000 0.1p ordinary shares at 0.10p per share, by way of placing, for a total consideration of GBP300,625 net of expenses (29 June 2017).
During the year to 30 September 2016 a total of 428,761,697 0.1p ordinary shares were issued, at an average price of 0.125p per share, for a total consideration of GBP516,992 net of expenses.
Nature and purpose of reserves
Foreign currency reserve
Exchange differences relating to the translation of the net assets of the Group's foreign operations, which relate to subsidiaries only, from their functional currency into the Parent's functional currency, being Sterling, are recognised directly in the foreign currency reserve.
Share warrant reserve
The share warrant reserve is used to recognise the value of equity-settled share warrants provided to employees, including key management personnel, as part of their remuneration, and to third parties in connection with fundraising. Refer to Note 15 for further details.
15. Share warrants granted
Warrants not exercised at 30 September 2017
Issue Exercise Exercisable Expiry
date price Number dates
Any time before
19/12/12 0.850p 5,750,000 expiry 19/03/18
Any time before
14/01/14 0.550p 5,750,000 expiry 14/01/19
Any time before
05/02/15 0.275p 6,750,000 expiry 05/02/20
Any time before
05/02/15 0.275p 2,625,000 expiry 05/02/20
Any time before
18/02/16 0.160p 750,000 expiry 18/02/21
Any time before
18/02/16 0.160p 2,500,000 expiry 18/02/21
Any time before
10/06/16 0.240p 16,666,667 expiry 10/12/18
Any time before
10/06/16 0.240p 233,333,333 expiry 10/12/18
Any time from
01/02/17 0.135p 750,000 01/02/18 01/02/22
Any time from
01/02/17 0.135p 2,500,000 01/02/18 01/02/22
Share warrants are issued for nil consideration and are exercisable as disclosed above. They are exchangeable on a one for one basis for each ordinary share of 0.1p at the exercise price on the date of conversion.
Share warrant transactions
The Company issues share warrants on varying terms and conditions.
Details of the share warrants outstanding during the year are as follows:
2017 2016
---------------------- -----------------------
Weighted Weighted
Number average average
of exercise Number exercise
share price of share price
warrants (Pence) warrants (Pence)
------------------------- ----------- --------- ------------ ---------
Outstanding at start
of year 279,625,000 0.28 98,708,332 0.79
Granted during the year 3,250,000 0.135 253,250,000 0.239
Forfeited during the - - - -
year
Exercised during the - - - -
year
Expired during the year (5,500,000) 1.25 (72,333,332) 0.84
------------------------- ----------- --------- ------------ ---------
Outstanding at end of
year 277,375,000 0.26 279,625,000 0.28
------------------------- ----------- --------- ------------ ---------
Exercisable at end of
year 274,125,000 0.26 276,375,000 0.28
------------------------- ----------- --------- ------------ ---------
The share warrants outstanding at 30 September 2017 had a weighted average exercise price of 0.26p (2016: 0.28p), a weighted average fair value of 0.03p (2016: 0.05p) and a weighted average remaining contractual life of 1.28 years.
In the year ended 30 September 2017 warrants were granted on 1 February 2017 to an officer of the Company and employees of Tertiary Minerals plc with an aggregate estimated fair value of GBP1,348. Note 5 explains the value recognised in the reporting period in respect of Tertiary Minerals plc.
In the year ended 30 September 2016 warrants were granted on 18 February 2016 to an officer of the Company and employees of Tertiary Minerals plc with an aggregate estimated fair value of GBP1,599.
In the year to 30 September 2017 the Company recognised expenses of GBP1,507 (2016: GBP4,323) related to issuing of share warrants in connection with equity-settled share-based payment transactions. The fair value is charged to administrative expenses on a straight-line basis over the vesting period, together with a corresponding increase in equity, based on the management's estimate of shares that will eventually vest.
In the year ended 30 September 2017 no share warrants were exercised.
The inputs into the Black-Scholes-Merton Pricing Model were as follows:
2017 2016
--------------------------------- -------- --------
Weighted average share price 0.135p 0.12p
Weighted average exercise price 0.135p 0.24p
Expected volatility 70.0% 70.0%
Expected life 4 years 2 years
Risk-free rate 0.62% 0.36%
Expected dividend yield 0% 0%
--------------------------------- -------- --------
Expected volatility was determined by calculating the historical volatility of the Company's share price over the previous 3 years. 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.
16. Related party transactions
Key management personnel
The directors holding office at the year end and their warrants held in the share capital of the Company are:
At 30 September 2017 At 30 September
2016
Share Warrant Warrant Share
Shares warrants exercise expiry Shares warrants
number Number price date number number
--------------- ---------- ---------- --------- -------- ---------- ----------
P L Cheetham* 79,741,326 2,000,000 0.85p 19/03/18 75,776,599 9,000,000
2,000,000 0.55p 14/01/19
3,000,000 0.275p 05/02/20
D J Swan 12,862,863 1,000,000 0.85p 19/03/18 8,710,863 3,500,000
1,000,000 0.55p 14/01/19
1,500,000 0.275p 05/02/20
R D Murphy 23,491,621 16,666,667 0.24p 10/12/18 17,302,848 16,666,667
*Includes 5,500,000 shares held by K E Cheetham, wife of P L Cheetham.
Tertiary Minerals plc
Sunrise Resources plc is treated as an investment in the consolidated accounts of Tertiary Minerals plc, which held 7.56% of the issued share capital on 30 September 2017 (2016: 9.13%).
Tertiary Minerals plc provides management services to Sunrise Resources plc and consequently during the year the Group incurred costs of GBP204,110 (2016: GBP190,124) recharged at cost from Tertiary Minerals being overheads of GBP24,874 (2016: GBP23,488), costs paid on behalf of the Group of GBP4,646 (2016: GBP4,288), Tertiary staff salary costs of GBP69,957 (2016: GBP61,866) and Tertiary directors' salary costs of GBP104,633 (2016: GBP100,482).
At the balance sheet date an amount of GBP61,275 (2016: GBP64,724) was due to Tertiary Minerals plc.
Patrick Cheetham, the Executive Chairman of the Company, is also a director of Tertiary Minerals plc.
At 30 September 2017 and at the date of this report, Donald McAlister, a director of Tertiary Minerals plc, held 550,000 shares in the Company, and at 30 September 2017, David Whitehead, now deceased, formerly a director of Tertiary Minerals plc, held 250,000 shares in the Company.
17. Capital management
The Group's capital requirements are dictated by its project and overhead funding requirements from time to time. Capital requirements are reviewed by the Board on a regular basis.
The Group manages its capital to ensure that entities within the Group will be able to continue as going concerns, to increase the value of the assets of the business and to provide an adequate return to shareholders in the future when exploration assets are taken into production.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its assets. In order to maintain or adjust the capital structure the possibilities open to the Group in future include issuing new shares, consolidating shares, returning capital to shareholders, taking on debt, selling assets and adjusting the amount of dividends paid to the shareholders.
18. Financial instruments
At 30 September 2017, the Group's and Company's financial assets consisted of receivables due within one year, available for sale investments and cash and cash equivalents. At the same date, the Group and Company had no financial liabilities other than trade and other payables due within one year and had no agreed borrowing facilities as at this date. There is no material difference between the carrying and fair values of the Group's and Company's financial assets and liabilities.
The carrying amounts for each category of financial instrument held at 30 September 2017, as defined in IAS 39, are as follows:
Group Company Group Company
2017 2017 2016 2016
GBP GBP GBP GBP
-------------------------------- ------- ------- ------- -------
Loans & receivables 274,245 229,070 251,030 115,780
Available for sale investments 30,478 22,624 23,324 23,324
Financial Liabilities at
amortised cost 94,763 78,691 162,990 89,331
-------------------------------- ------- ------- ------- -------
Risk management
The principal risks faced by the Group and Company resulting from financial instruments are liquidity risk, foreign currency risk and, to a lesser extent, interest rate risk and credit risk. The directors review and agree policies for managing each of these risks as summarised below. The policies have remained unchanged from previous periods as the risks are assessed not to have changed.
Liquidity risk
The Group holds cash balances in Sterling, US Dollars, Australian Dollars, Canadian Dollars and Euros to provide funding for exploration and evaluation activity, whilst the Company holds cash balances in Sterling, US Dollars, Canadian Dollars and Euros.
The Company is dependent on equity fundraising through private placings which the directors regard as the most cost-effective method of fundraising. The directors monitor cash flow in the context of their expectations for the business to ensure sufficient liquidity is available to meet foreseeable needs.
Currency risk
The Group's financial risk management objective is broadly to seek to make neither profit nor loss from exposure to currency or interest rate risks. The Group is exposed to transactional foreign exchange risk and takes profits and losses as they arise as, in the opinion of the directors, the cost of hedging against fluctuations would be greater than the related benefit from doing so. Fluctuations in the exchange rate are not expected to have a material effect on reported loss or equity.
Group Company Group Company
Bank balances were held in 2017 2017 2016 2016
the following denominations: GBP GBP GBP GBP
-------------------------------- ------- ------- ------ -------
United Kingdom Sterling 187,946 187,946 93,749 93,749
Australian Dollar 10,431 - 25,871 -
Canadian Dollar 347 347 5,874 5,874
United States Dollar 34,699 26,288 96,448 1,916
Euro 758 758 1,326 1,326
-------------------------------- ------- ------- ------ -------
Interest rate risk
The Company finances operations through equity fundraising and therefore does not carry borrowings.
Fluctuating interest rates have the potential to affect the loss and equity of the Group and the Company insofar as they affect the interest paid on financial instruments held for the benefit of the Group. The directors do not consider the effects to be material to the reported loss or equity of the Group or the Company presented in the financial statements.
Credit risk
The Company has exposure to credit risk through receivables such as VAT refunds, invoices issued to related parties and its joint arrangements for management charges. The amounts outstanding from time to time are not material other than for VAT refunds which are considered by the directors to be low risk.
The Company has exposure to credit risk in respect of its cash deposits with NatWest bank and this exposure is considered by the directors to be low risk.
19. Events after the balance sheet date
Subsequent to the year end, on 6 December 2017, there was an allotment of 333,333,333 ordinary shares of 0.1p by way of conditional placing at 0.15 pence per share for a total consideration of GBP500,000 before expenses. The issue of the Placing Shares is conditional, inter alia, on their admission to trading on AIM ("Admission"). Application has been made for the Placing Shares to be admitted to trading on AIM and Admission is expected to occur on or around 20 December 2017.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR TJBFTMBBBBBR
(END) Dow Jones Newswires
December 13, 2017 11:22 ET (16:22 GMT)
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