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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sirius Minerals Plc | LSE:SXX | London | Ordinary Share | GB00B0DG3H29 | ORD 0.25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 5.49 | 5.485 | 5.49 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSXX
RNS Number : 7638G
Sirius Minerals plc
06 March 2018
6 March 2018
Sirius Minerals Plc
2017 Preliminary results announcement
A year of substantial progress for the world's leading polyhalite company
Sirius Minerals Plc ("Sirius" or the "Company") announces the results for Sirius and its subsidiaries ("the Group") for the year ended 31 December 2017.
Sirius Minerals Plc CEO Chris Fraser commented:
"Our world class project based in North Yorkshire has the potential to disrupt the global fertilizer market and contribute substantially to the UK economy.
We achieved a number of important performance milestones in 2017, with commencement of construction, incremental supply agreements signed, bringing the total to 4.4 million tonnes per annum, a move to the London Stock Exchanges's Main Market and inclusion in the FTSE250 amongst the highlights.
We continue to innovate and work hard on all aspects of our project to secure value for shareholders and are focused on ensuring 2018 will be another year of significant progress on all fronts, as demonstrated by our recent shaft sinking contract."
Business highlights
Construction
-- Enablement works completed for the Woodsmith Mine and the formal commencement of development notice was issued by the local planning authority.
-- Site preparation and establishment works at the Woodsmith Mine site and Lockwood Beck complete.
-- Optimisation of shaft construction and design has resulted in a simpler design and construction methodology and reduced surface footprint.
-- Shaft sinking activities commenced, diaphragm walling activities are progressing smoothly with three rigs operating on the service shaft foreshaft.
Sales and Marketing
-- Expanded breadth and depth of global agronomy programme, the Company has initiated 80 new agronomy trials. The overall programme now encompasses over 260 trials on 32 crops in 17 different countries, demonstrating POLY4 delivers greater nutrient uptake and increases both yield and quality.
-- Binding take-or-pay supply agreement signed with Wilmar International, one of the largest and most established fertilizer buyers and distributors in South East Asia, for the use and resale of POLY4 exclusively in South East Asia.
Corporate and commercial
-- The Company secured admission to trading on the London Stock Exchange ("LSE") Main Market with a Premium Listing and inclusion in the FTSE 250 index.
-- More than doubled the number of employees and established new Corporate Headquarters in North Yorkshire as we ramp up construction and development.
Financial Highlights
-- Cash resources at the end of December 2017 were GBP468.5 million, comprising bank deposits and cash equivalents of GBP394.0 million and restricted cash of GBP74.5 million compared to GBP665.3 million at the end of December 2016.
-- Due to IFRS fair valuation requirements relating to elements of the stage 1 financing, the 22% increase in the Company's share price over the course of the year has caused a total loss of GBP78.9m being recorded for the year. The fair valuation adjustments driving the loss are non-cash in nature. Further detail relating to the fair valuation adjustments can be found within the financial review.
-- Total funds deployed in developing the project during 2017 before financing costs were GBP197.3 million.
Safety
Safety is paramount to the success of our business. Our culture places safety at the forefront of everything we do and we are continuously engaged with our contractors and consultants to ensure they adopt our safety culture and company values. Two recordable incidents have occurred during the first year of construction and we are constantly working to improve our processes and find safer ways of working in order to ensure that we all return home to our families at the end of the day.
Outlook for 2018
2017 was a year of meaningful progress on the ground in North Yorkshire and in the global fertilizer markets. 2018 will be another year of significant progress on all fronts, ultimately culminating in the successful completion of the stage 2 financing.
Construction
-- Complete main service shaft foreshaft construction and excavation.
-- Complete the installation of the main production shaft foreshaft and commence foreshaft excavation.
-- Commence Mineral Transport System (MTS) access shaft construction at the Woodsmith Mine site.
-- Largely complete construction of MTS portal at Wilton. -- Commence shaft sinking at Lockwood Beck intermediate shaft site. -- Commence early works for the Materials Handling Facility. -- Finalise Harbour facility strategy and complete procurement.
R&D, sales & marketing
-- Expand global agronomy programme and establish 80 new trials. -- Execute 2 Mtpa incremental supply agreements.
Corporate & commercial
-- Substantially complete project procurement. -- Draw down the stage 1 financing royalty instrument. -- Execute stage 2 financing.
Post-balance sheet events
On 14 February 2018 we announced that we have entered into a design and build contract with one of the world's leading shaft sinking and mining contractors, the Canadian headquartered, DMC Mining Services (DMC), for the construction of the four shafts required for our polyhalite project in North Yorkshire. DMC will utilise proven shaft boring roadheader (SBR) technology to sink the main shafts at the Woodsmith Mine site. Adopting the SBR opens opportunities to accelerate first polyhalite production by up to six months.
Annual report and accounts
The annual report and accounts for the year ended 31 December 2017 will be published on the Company's website (siriusminerals.com) and posted to shareholders in due course together with the Notice of 2018 Annual General Meeting.
The Company's 2018 Annual General Meeting will be held at 1.00pm on Thursday 31 May 2018 at The Events Centre, The Principal York, Station Road, York, YO24 1AA
Investor conference call
Sirius Minerals' Chief Financial Officer, Thomas Staley, will host a conference call for investors and analysts at 9.30 am today. Any analysts wishing to ask questions on the call can receive dial in details by emailing ir@siriusminerals.com.
The call can be listened to live by clicking on the link below. A replay will be available on the Company's website in due course.
http://event.onlineseminarsolutions.com/wcc/r/1625596-1/F288855DAED084A154533A7F24A17B43?partnerref=rss-events
For further information, please contact:
Hot Features
Premium
Sirius Minerals Tristan Pottas Tel: +44 845 524
Plc Email: ir@siriusminerals.com 0247
Investor Relations
Manager
-------------------- ----------------------------------- -------------------
Media enquiries Alex Simmons Tel: +44 7970
Edelman Ed Brown 174 353
Email: siriusminerals@edelman.com +44 7540 412
298
-------------------- ------------------------------------- -----------------
About Sirius Minerals Plc
Sirius Minerals Plc is focused on the development of the Woodsmith Mine, which will access the world's largest and highest grade polyhalite deposit located in North Yorkshire, United Kingdom. Polyhalite is a unique multi-nutrient fertilizer, which can be used to increase balanced fertilization around the world. Sirius Minerals' shares are traded on the Premium List of the London Stock Exchange. Its shares are also traded in the United States on the OTCQX through a sponsored ADR facility. Further information on the Company can be found at: www.siriusminerals.com.
Chairman's statement
It is with considerable pride that I share with you the notable achievements that have been key to the continued success of our polyhalite Project in 2017.
First and foremost, the commencement of construction, in a safe and secure environment, has seen us take major strides towards our goal of first production in 2021. The impressive construction progress over the last 12 months sits alongside several other key achievements which are all contributing towards the successful fulfilment of our ultimate vision - to become a world-class fertilizer business.
Local
At full production over 1,000 high skilled jobs will be created with an additional 1,500 jobs created in the supply chain. The high-skilled jobs we will create will also be highly productive and well-paid. As the largest private sector capital investment in the North, we are sending a clear message that the region is open for business and has the necessary skills and ability to deliver major infrastructure projects.
In addition to the employment opportunities created, the Company expects that, at full production, it will make around GBP85 million in local payments each year and will deliver approximately GBP13 million in annual contributions to the Sirius Minerals Foundation, as well as being a catalyst for regeneration with the potential to create new economic clusters in the region.
National
Beyond the North East, our project will also bring major economic benefits to the UK as a whole. At full-scale production we are forecast to generate significant tax revenues to the national exchequer, strengthening the UK's fiscal position and supporting public services. The Woodsmith Mine and associated infrastructure will enable us to produce and sell up to 20 million tonnes per annum of our primary product, POLY4.
Having been associated with significant mining projects for a large part of my career, I take great comfort that this expected success of our business goes well beyond the investment proposition. The efforts of our team and supporters are already creating positive, tangible economic change in the UK and, we look forward to doing so for many years to come.
Global
For me, it is very important that POLY4 can contribute to easing the challenge of global food security. Fertilizers are fundamental to improving agricultural yields and helping to address the forecasted imbalance between food supply and demand. Global population is growing at a rapid rate, and with it, the requirement for more food. Unless more effective, more efficient and sustainable practices are adopted, farmers and food producers will struggle to bridge the gap between supply and demand. Our global research and development programme is demonstrating that POLY4 delivers greater nutrient uptake and improves both yield and quality on multiple crops in varying geographic conditions across the world.
Sirius' team has already demonstrated their ability to deliver successful outcomes in the face of challenges others have considered overwhelming. In order to achieve our vision and ensure the potential benefits for all stakeholders come to fruition, the tenacity and determination which has defined our Company to date, will continue to stand us in good stead as we progress further into this current phase of developing our world class mining operation.
2017 Construction commences
After 5 years of exploration, preparation, obtaining planning approval and having delivered many significant project milestones, I am pleased to report that the construction of our North Yorkshire polyhalite project is well underway.
At the Woodsmith Mine site all initial site works to enable the construction of the key infrastructure components are complete. The working platforms for the main mine shaft and MTS shaft were completed early to ensure shaft related activities could commence as soon as possible.
At Lockwood Beck, Initial site works are now complete, including the upgrade and repositioning of the existing road junction. The new junction provides safe entry to the site and has also greatly improved the access to the existing road infrastructure. The shaft sinking platform and associated drainage has been installed and the site is ready for shaft sinking activities to get underway in 2018.
Supply agreements
Market acceptance of POLY4 in the form of long term supply agreements as evidenced through our partnership with leading agri-business Wilmar reinforces and validates that POLY4 will earn its place in the global fertilizer market. Our partnership with Wilmar enables access to key markets with huge prospects for POLY4 across South East Asia. Wilmar is the latest addition to our existing group of industry leading customers with whom we expect to help drive further global demand for POLY4.
Our People
People are critical to the success of our business and I am particularly pleased with the expanding team of highly motivated, diverse and experienced individuals who have joined the business in 2017. The last year has seen our team more than double in size and the successful move in late 2017 to Resolution House, our new office headquarters in Scarborough, has provided the space, technology and environment to support our workforce.
I am particularly pleased with the overall quality of people who have joined us from the local area. To date, the majority of our head office team in Yorkshire has been sourced from the local labour market. I also take great satisfaction from the fact that many of our younger team members who joined us as apprentices are now integral members of the team. Our strong values of responsibility, ownership, belief and urgency, based on the solid foundations of safety and teamwork has propelled the team to achieve more than many people thought would ever be possible.
Move to the Main Market and Premium Listing
Following the completion of Stage 1 financing, we announced our intention to apply for admission to listing on the premium listing segment of the Official List of the UK Listing Authority ("Premium Listing") and admission to trading on the main market of the London Stock Exchange (the "Main Market"). While AIM has provided us with an excellent platform to progress the Company through the various approval phases of the Project, the Company directors believe that a Premium Listing better supports the long-term strategy and potential of the Company by providing us with a more appropriate platform for growth, access to broader international investor audiences and deeper pools of investment capital that reflects the world class nature of the Project and Sirius' long term potential as a global supplier of multi-nutrient fertilizer. This important milestone was accomplished in April 2017 and Sirius finished 2017 as a FTSE 250 constituent.
Executive Director and Senior Non-Executive Director appointments
Early in 2017 we announced the appointment of Thomas Staley to the Board as Finance Director. Thomas played an instrumental role in securing the stage 1 financing and he will play a pivotal role in a successful execution of the stage 2 debt raising. Thomas' appointment adds to an already very strong complement of Board members who have the credentials and experience required to lead the Company through the next phase of development.
We also announced the elevation of one of our very experienced Non-Executive Board members, Noel Harwerth, to the role of Senior Independent Director. Noel has a wide array of Board experiences across several industries, including mining and finance. Over the last few years she has provided us with wise counsel on a regular basis, and I am very pleased she has agreed to add this expanded role to her duties.
Outlook
2018 will be a pivotal year for us as we seek the remaining financing required to complete this transformational project. The construction of the first new fertilizer mine in the UK for a generation is an opportunity to create thousands of jobs and bring significant economic benefits to both national and local economies. In order to fully realise this transformational opportunity for the UK, a partnership with the UK Government, in the form of a Treasury Guarantee under the Infrastructure Project Authority's scheme, is essential.
Securing this guarantee and our stage 2 financing will be our core focus for the year ahead and I am comforted by our excellent progress made to date. With preparations well underway to secure commitments for financing, we are confident in our ability to deliver these goals and look forward to taking on the challenges which lie ahead.
The short, medium and long-term benefits from our project are significant and will not be diminished by Britain's decision to leave the EU. I believe that our ongoing success is a clear demonstration of the growing local and national public and political support for realising the full potential of the Woodsmith Mine.
I would l like to thank all our shareholders and supporters and suppliers for their ongoing support.
Kind regards
Russell Scrimshaw
Chairman
CEO Statement
2017 was a milestone year for us, with commencement of construction, incremental supply agreements signed, bringing the total to 4.4 million tonnes per annum, a move to the main market of the London Stock Exchange and inclusion in the FTSE 250 among the highlights. Our numerous successes along the development journey drive us to approach this next phase of development with the same ownership, belief and urgency which are some of the key values which define who we are. For those who have supported us over the years I hope the commencement of construction provides further validation of our commitment to succeed.
Safety
Safety is paramount to the success of our business. Our culture places safety at the forefront of everything we do and we are continuously engaged with our contractors and consultants to ensure they adopt our safety culture and company values. Two recordable incidents have occurred during the first year of construction and we are constantly working to improve our processes and find safer ways of working in order to ensure that we all return home to our families at the end of each day.
Our strategy
The Company has a clear and robust strategy and is focused on executing this strategy successfully.
Our strategy is to:
- Build a world-class, long-life, low-cost production facility; - Develop an industry leading product; - Penetrate existing markets & drive long term value; and - Execute a financing plan that delivers returns for shareholders.
Along our journey we have made strategic decisions within this framework, whether it be switching to a more efficient, low impact transport system or even the nature of our product. Optimisation through evolution will always be at the heart of strategic decision-making process. Through this process, we believe that the Sirius value proposition continues to grow and be further enhanced.
Build a world class, long-life, low-cost production facility
It has always been our intention to construct a production facility which enables us to maximise the potential of our unique polyhalite resource. The scale, thickness and quality of the deposit means highly efficient, bulk mining methods can be employed to maximise output over hundreds of years and these considerations are at the forefront of our approach to mine design and construction. We believe the asset we are constructing will be among the most cost-competitive multi-nutrient fertilizer producers globally.
For those of you who have driven past the Woodsmith Mine site over the past 12 months you will be impressed with its transformation. Formal commencement of construction started officially on 4 May 2017 and the work completed over the course of the year is the first step in executing on this part of our strategy.
Develop an industry leading product
POLY4 is a natural, low chloride, multi-nutrient fertilizer, the likes of which has never been widely available in the major growing regions of the world. Our ever-expanding global agronomy programme provides partners and potential customers with an independently validated dataset which demonstrates the efficacy of POLY4 on a wide range of different crops in varying geographic and climatic conditions. Leading industry participants and potential customers are excited by the prospects of POLY4 and are enthusiastic about introducing it into their product portfolios.
During 2017 we articulated the four cornerstones of POLY4 - Effectiveness, Efficiency, Flexibility and Sustainability. The cornerstones describe POLY4's unique value proposition and are proving to be an effective marketing tool. I encourage you to visit the POLY4.com website to learn more about the product.
Penetrate existing markets and drive long term value
We have a three-step approach to our marketing strategy:
-- Substitution - utilising POLY4 as a substitute for other existing fertilizers which include one or more of the same primary nutrients contained in polyhalite. This disruptive approach will ensure POLY4 is widely available in all markets.
-- Market growth - today there is an unmet demand for lower chloride potassium sources, and making POLY4 widely available at a commercial price point will unlock new sources of demand and opportunities to adopt "greener" and more sustainable agricultural practices.
-- Performance - our successful extensive crop trial programme consistently demonstrates strong performance from POLY4 and we believe this performance will underpin premium pricing for the product over the long term.
The Company continues to work hard at building its customer base and I was pleased to welcome Wilmar International as a customer during 2017. They are the leading agri-business in South East Asia and will be a strong partner for the Company.
Execute a financing plan that delivers returns for shareholders
The Company has taken a rigorous, phased approach to executing the financing plan. At each stage of development, appropriate capital has been raised to deliver the next development milestone. 2016 saw the first successful completion of the stage 1 financing, which provided the equity and equity linked capital components of the construction financing plan.
In 2017 the Company obtained a Premium Listing on the Main Market and was included in the FTSE 250. Behind the scenes, work was underway to prepare for the execution of the Company's stage 2 financing in late 2018. It is intended that this financing will be 100% debt in nature and ultimately provide all of the capital required to complete the construction component of the Company's strategy.
The year ahead
2017 has been a year of meaningful progress on the ground in North Yorkshire and in the global fertilizer markets. 2018 will be another year of significant progress on all fronts, with that progress ultimately culminating in the successful completion of the stage 2 financing.
There is a lot more work to do in order to successfully execute on the Company's strategy but I am confident our team has the necessary expertise to deliver. The culture we have throughout the organisation is reflected in our corporate values. These values embody why we have succeeded in achieving a number of challenging milestones but also how we will continue to deliver on what we set out to achieve. It is our shared belief in achieving our goals and our unwavering drive to succeed that will see us successfully through the next phase of development.
Thank you all for your ongoing support.
Chris Fraser
Managing Director and CEO
FINANCIAL REVIEW
The Group's operating loss for 2017 was GBP24.0m compared to GBP16.9m in 2016, with the increased loss being driven by an increase in activity following the completion of stage 1 financing. The Group has historically made a loss which has been largely reflective of the Group's prudent approach to expensing all indirect and overhead costs through the development phase and this practice has continued since construction commenced. Furthermore, the Group's operating costs in 2017 have contained a number of one-off corporate costs which are not reflective of the underlying level of overhead spend, with the key such items being as follows:
GBPm 2017 -------------------------------- ------ Reported operating costs 24.0 -------------------------------- ------ Sirius Minerals Foundation donation (2.0) AIM-to-LSE and stage 2 adviser costs (3.6) Non-corporate labour costs (2.4) -------------------------------- ------ Underlying operating costs 16.0 -------------------------------- ------
During 2017 the Group made a total loss of GBP78.9m compared to a loss of GBP23.0m in 2016. The following table sets out the main drivers of the Group's loss for the period.
GBPm 2017 2016
---------------------------------------- ------- -------
Operating loss (24.0) (16.9)
---------------------------------------- ------- -------
Net interest expense (0.8) (2.4)
Fair value loss on derivative
instruments (53.6) (4.7)
Attributable to convertible
note (42.5) (5.7)
Attributable to royalty
financing (11.1) 1.0
Foreign exchange losses
on net debt (0.9) 0.5
Taxation 0.4 0.5
---------------------------------------- ------- -------
Loss for the financial
period (78.9) (23.0)
---------------------------------------- ------- -------
As can be seen from the table, the main driver of the loss is the fair value re-measurement of the derivatives associated with the convertible note and, to a lesser extent, the royalty financing. These derivative liabilities increase in size as the share price of the Company increases. With the share price increasing by more than 20% over the period, the size of the loss attributable to the derivatives has increased materially. As the convertible notes are converted and the royalty financing is drawn, these derivative liabilities will be reclassified from liabilities to equity and require no cash settlement by the Group.
The Company has deployed GBP233.7m during 2017 for the purposes of developing the Project. The table below breaks out the key items:
GBPm 2017 ----------------------------- ------ Operating costs 24.0 Capital expenditure 118.2 Incurred but unpaid capital expenditure 19.9 Local authorities' security requirements 35.2 Financing costs 36.4 ----------------------------- ------ Total project use of funds 233.7 ----------------------------- ------
Total capital expenditure incurred for the period was GBP138.1m with a significant portion of that unpaid as at the balance sheet date. In addition to this, numerous financial commitments for items such as the permanent winders and D-walling activities have been made and these items are not reflected in the financial statements. The local authorities' security requirements reflect a combination of providing reinstatement security for construction works and the security requirements of the Section 106 agreement.
Total funds at the end of December 2017 were GBP468.5m, comprising bank deposits and cash equivalents of GBP394.0m and restricted cash of GBP74.5m. The following table provides a breakdown of movements through the period in total funds, split between available cash (comprising cash and cash equivalents and bank deposits) and restricted cash:
Available Restricted Total
GBPm cash cash funds
-------------------------- ---------- ----------- --------
Opening balance 582.4 82.9 665.3
Operating costs (24.0) - (24.0)
Capital expenditure
(paid only) (118.2) - (118.2)
Local authorities'
commitments (35.2) 35.2 -
Net financing costs 0.3 (32.9) (32.6)
Redemption of restricted
cash 4.9 (4.9) -
Working capital and
other 1.5 - 1.5
FX revaluation (17.7) (5.8) (23.5)
-------------------------- ---------- ----------- --------
Closing balance 394.0 74.5 468.5
-------------------------- ---------- ----------- --------
A number of convertible bond conversion notices were received during the period resulting in 22% of the initial notes being converted. Because of these conversions, 291m shares were issued during the period. 1,552 bonds remain outstanding with an aggregate face value of US$310m.
Sirius Minerals Plc
Summary financial statements for the year ended 31 December 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
2017 2016
Restated*
Note GBP000s GBP000s
--------------------------------------- ----- --------- -----------
Revenue - -
Operating costs (23,981) (16,858)
--------------------------------------- ----- --------- -----------
Operating loss (23,981) (16,858)
Finance costs 4 (55,268) (6,564)
--------------------------------------- ----- --------- -----------
Loss before taxation (79,249) (23,422)
Taxation 362 468
--------------------------------------- ----- --------- -----------
Loss for the year (78,887) (22,954)
--------------------------------------- ----- --------- -----------
Other comprehensive (expense)/income:
Items that may be reclassified
subsequently to profit or loss:
Exchange differences on translating
foreign operations (43) 18
Cash flow hedging movement (910) -
--------------------------------------- ----- --------- -----------
Other comprehensive (expense)/income
for the year (953) 18
--------------------------------------- ----- --------- -----------
Total comprehensive loss for the
year attributable to the owners
of the Company (79,840) (22,936)
--------------------------------------- ----- --------- -----------
Loss per share:
Basic and diluted (pence) 3 (1.82) (0.93)
--------------------------------------- ----- --------- -----------
* Operating costs and finance costs have been restated following the change in accounting policy described in note 1.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2017
2017 2016
ASSETS Note GBP000s GBP000s
--------------------------------- ----- ---------- ----------
Non-current assets
Intangible assets 5 14,710 150,204
Property, plant and equipment 6 306,631 6,138
Restricted cash 54,261 55,283
--------------------------------- ----- ---------- ----------
Total non-current assets 375,602 211,625
--------------------------------- ----- ---------- ----------
Current assets
Derivative financial instrument - 1,041
Restricted cash 20,228 27,641
Other receivables 7,113 840
Bank deposits 158,450 322,188
Cash and cash equivalents 235,532 260,157
--------------------------------- ----- ---------- ----------
Total current assets 421,323 611,867
--------------------------------- ----- ---------- ----------
TOTAL ASSETS 796,925 823,492
--------------------------------- ----- ---------- ----------
EQUITY AND LIABILITIES
Equity
Share capital 11,158 10,412
Share premium account 695,356 590,723
Share-based payment reserve 6,053 6,114
Accumulated losses (207,860) (112,261)
Other reserves 423 1,284
--------------------------------- ----- ---------- ----------
Total equity 505,130 496,272
--------------------------------- ----- ---------- ----------
Non-current liabilities
Provisions 2,753 -
--------------------------------- ----- ---------- ----------
Total non-current liabilities 2,753 -
--------------------------------- ----- ---------- ----------
Current liabilities
Convertible loans 249,325 321,366
Derivative financial instrument 10,033 -
Trade and other payables 29,684 5,854
--------------------------------- ----- ---------- ----------
Total current liabilities 289,042 327,220
--------------------------------- ----- ---------- ----------
TOTAL LIABILITIES 291,795 327,220
--------------------------------- ----- ---------- ----------
TOTAL EQUITY AND LIABILITIES 796,925 823,492
--------------------------------- ----- ---------- ----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2017
Share Share-based
Share premium payment Other Accumulated Total
capital account reserve reserves losses equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
------------------------ --------- --------- ------------ ---------- ------------ ---------
At 1 January 2016 5,737 240,874 7,624 1,266 (90,339) 165,162
Loss for the year - - - - (22,954) (22,954)
Other comprehensive
income - - - 18 - 18
Transactions with
owners:
Share issue 4,629 347,281 - - - 351,910
Share-based payments 32 1,418 (1,510) - 1,032 972
Exercised options 14 1,150 - - - 1,164
------------------------ --------- --------- ------------ ---------- ------------ ---------
At 31 December
2016 10,412 590,723 6,114 1,284 (112,261) 496,272
Loss for the year - - - - (78,887) (78,887)
Other comprehensive
expense - - - (953) - (953)
Transferred to
non-current assets - - - 119 - 119
Transactions with
owners:
Shares issued on
conversion of
convertible bonds 728 104,484 - - (18,670) 86,542
Share-based payments 18 149 (61) (27) 1,958 2,037
------------------------ --------- --------- ------------ ---------- ------------ ---------
At 31 December
2017 11,158 695,356 6,053 423 (207,860) 505,130
------------------------ --------- --------- ------------ ---------- ------------ ---------
Other reserves include the foreign exchange reserve with a surplus of GBP1,241,000 (2016: GBP1,284,000), the cash flow hedge reserve with a deficit of GBP791,000 (2016: nil) and treasury shares with a deficit of GBP27,000 (2016: nil).
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 December 2017
2017 2016
Restated*
GBP000s GBP000s
--------------------------------------- ---------- -----------
Cash flow from operating activities
Operating loss (23,981) (16,858)
Adjustments for:
Depreciation and amortisation 299 57
Share-based payments 822 844
Changes in working capital 353 (407)
---------------------------------------- ---------- -----------
Cash used in continuing operations (22,507) (16,364)
Tax credit received - 468
---------------------------------------- ---------- -----------
Net cash used in operating activities (22,507) (15,896)
---------------------------------------- ---------- -----------
Cash flow from investing activities
Purchase of intangible assets (6,676) (12,108)
Purchase of property, plant and
equipment (111,484) (4,346)
Redemption of bank deposits 241,183 -
Purchase of bank deposits (87,647) (320,187)
Interest received 3,607 441
---------------------------------------- ---------- -----------
Net cash generated from/(used in)
investing activities 38,983 (336,200)
---------------------------------------- ---------- -----------
Cash flow from financing activities
Repayment of borrowings - (748)
Proceeds from convertible loans - 319,923
Purchase of restricted cash (36,381) (81,580)
Redemption of restricted cash 39,070 -
Interest paid (33,034) (19)
Proceeds from issue of shares - 371,445
Share issue costs (925) (18,370)
Convertible loans issue costs (2,419) (9,158)
---------------------------------------- ---------- -----------
Net cash (used in)/generated from
financing activities (33,689) 581,493
---------------------------------------- ---------- -----------
Net (decrease)/increase in cash and cash equivalents (17,213) 229,397 Cash and cash equivalents at the beginning of the period 260,157 29,093 (Loss)/gain from foreign exchange (7,412) 1,667 ---------------------------------------- ---------- ----------- Cash and cash equivalents at end of the period 235,532 260,157 ---------------------------------------- ---------- -----------
* Operating loss has been restated following the change in accounting policy described in note 1.
Notes to the summary financial statements
1. BASIS OF PREPARATION
The financial information set out above does not constitute the Group's statutory financial statements for the years ended 31 December 2017 or 2016, but is derived from those financial statements. Statutory financial statements for 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered following the Company's Annual General Meeting. The auditors have reported on those financial statements; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) Companies Act 2006.
In preparing this financial information, management has used the principal accounting policies that will be detailed in the Group's Annual Report for 2017 and which are unchanged from the prior year, except as detailed below.
Changes in accounting policy
From 1 January 2017 the Group has elected to change its accounting policy in accounting for foreign exchange revaluation gains and losses in relation to cash, restricted cash and bank deposits. Previously these were classified within operating costs but the Group has now chosen to classify these within finance costs. This is on the basis that such gains and losses are more representative of outcomes from the Group's finance hedging strategy rather than a part of underlying operating costs.
The Group has retrospectively made this restatement from 1 January 2016, resulting in an increase in reported operating costs and a reduction in finance costs of GBP4,986,000 for the year ended 31 December 2016 compared to those amounts disclosed in the 2016 financial statements. The effect on the current period has been a decrease in operating costs and increase in finance costs of GBP22,595,000. This change in accounting policy has not led to any change in any balance on the statement of financial position nor statement of changes in equity in any period.
New and amended standards adopted by the Group
There are no new standards, amendments to existing standards or interpretations issued but not effective for the financial year beginning 1 January 2017 that have been early adopted, nor are any expected to have a material impact on the Group when they do become effective.
2. SEGMENTAL ANALYSIS
Management has determined the operating segments by considering the business from both a geographic and activity perspective. The Group is organised into one business division: the UK segment which consists of Project related activities and the corporate operations. This division is the segment for which the Group reports information internally to the board of directors. The Group's operations are predominantly in the UK. As a result of the disclosure requirements required under IFRS 8 Operating Segments, the disclosures are already included in the primary statements.
3. LOSS PER SHARE
Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
For all periods presented, the Group's potentially dilutive ordinary share equivalents (being share options issued under equity-settled share-based payment schemes, the convertible loans, and share options issued to Hancock British Holdings Limited under the royalty financing arrangement) reduce the loss per share and have therefore not been included in determining the total weighted average number of ordinary shares outstanding for the purposes of calculating diluted loss per share.
2017 2016
GBP000s GBP000s
------------------------------------------ ---------- ----------
Loss for the purposes of basic and
diluted earnings per share 78,887 22,954
Weighted average number of ordinary
shares for the purpose of basic and
diluted earnings per share (number
in thousands) 4,322,854 2,472,762
------------------------------------------ ---------- ----------
Basic and diluted loss per share (pence) 1.82 0.93
------------------------------------------ ---------- ----------
4. FINANCE COSTS
2017 2016
restated
GBP000s GBP000s
----------------------------------- --------- ----------
Interest income 3,755 448
Interest income capitalised on (1,942) -
qualifying assets
Interest expense (27,671) (2,858)
Interest expense capitalised on 25,047 -
qualifying assets
Fair value loss on convertible
loans embedded derivative (42,498) (5,744)
Fair value (loss)/gain on royalty
financing derivative (11,074) 1,041
Foreign exchange (losses)/gains
on net debt (885) 549
----------------------------------- --------- ----------
Total finance costs (55,268) (6,564)
----------------------------------- --------- ----------
During January 2017 the Group commenced significant development work at the Project. After this point all interest expense incurred and interest income earned on the temporary investment of borrowings has been capitalised.
The foreign exchange gain line item within 2016's finance costs has been restated following the change in accounting policy described in note 1.
5. INTANGIBLE ASSETS
Exploration
costs Other
and rights Goodwill intangibles Total
Year ended 31 December
2017 GBP000s GBP000s GBP000s GBP000s
---------------------------- ------------ --------- ------------- ----------
Net book value
At 1 January 2017 140,443 6,643 3,118 150,204
Additions 2,254 - 4,975 7,229
Amortisation for the
year - - (26) (26)
Transfers to property,
plant and equipment (142,697) - - (142,967)
---------------------------- ------------ --------- ------------- ----------
At 31 December 2017 - 6,643 8,067 14,710
---------------------------- ------------ --------- ------------- ----------
- cost - 6,643 8,097 14,740
- accumulated amortisation - - (30) (30)
Year ended 31 December
2016 GBP000s GBP000s GBP000s GBP000s
---------------------------- ------------ --------- ------------- ----------
Net book value
At 1 January 2016 128,936 6,643 2,191 121,721
Additions 11,307 - 927 12,234
---------------------------- ------------ --------- ------------- ----------
At 31 December 2016 140,443 6,643 3,118 150,204
---------------------------- ------------ --------- ------------- ----------
- cost 140,443 6,643 3,197 150,283
- accumulated amortisation - - (79) (79)
6. PROPERTY, PLANT AND EQUIPMENT
Capital
Freehold Plant works
land and equipment in progress Total
Year ended 31 December
2017 GBP000s GBP000s GBP000s GBP000s
---------------------------- --------- --------------- ------------- --------
Net book value
At 1 January 2017 6,093 45 - 6,138
Additions 23,606 3,145 131,318 158,069
Depreciation for the
year - (273) - (273)
Transfers from intangible
assets - - 142,697 142,697
---------------------------- --------- --------------- ------------- --------
At 31 December 2017 29,699 2,917 274,015 306,631
---------------------------- --------- --------------- ------------- --------
- cost 29,699 3,612 274,015 307,326
- accumulated depreciation - (695) - (695)
Year ended 31 December
2016 GBP000s GBP000s GBP000s GBP000s
---------------------------- --------- --------------- ------------- --------
Net book value
At 1 January 2016 1,765 84 - 1,849
Additions 4,328 18 - 4,346
Depreciation for the
year - (57) - (57)
---------------------------- --------- --------------- ------------- --------
At 31 December 2016 6,093 45 - 6,138 ---------------------------- --------- --------------- ------------- -------- - cost 6,093 766 - 6,859 - accumulated depreciation - (721) - (721)
During January 2017 the Group commenced significant development work at its Project. All exploration costs and rights in relation to the Project previously capitalised by the Group have been transferred from intangible assets to property, plant and equipment from that date since the technical feasibility and commercial viability of the Project had clearly been demonstrated.
At 31 December 2017 the Group had contracted but unrecognised capital expenditure commitments of GBP20,806,000.
7. NET CASH
2017 2016
GBP000s GBP000s
--------------------------------------- ---------- ----------
Opening balance on 1 January 386,336 28,345
Net (decrease)/increase in cash and
cash equivalents (17,213) 229,397
Net cash flows from restricted cash
and bank deposits (156,225) 401,767
New debt issued - (270,909)
Interest expense on convertible loans (27,671) (2,839)
Interest paid on convertible loans 33,034 -
Conversions of convertible loans 51,001 -
Foreign exchange differences (1,650) 575
--------------------------------------- ---------- ----------
Closing balance on 31 December 267,612 386,336
--------------------------------------- ---------- ----------
Net cash is defined by the Group as being the total value of cash and cash equivalents, bank deposits and restricted cash, less all interest-bearing debt. Interest bearing debt includes only the host loan element of the USD 400m convertible loans and not the embedded conversion derivative on the basis that the Group has no obligation to cash-settle the embedded derivative.
During 2017, conversion notices in respect of 22.4% of the USD 400m convertible loans were delivered by convertible loanholders to the Group, leading to the creation of 291,287,368 new ordinary shares in the Company.
As at 31 December 2017 the Group had 4,463,105,303 ordinary shares in public issuance (December 2016: 4,164,514,405).
8. FINANCIAL RISK MANAGEMENT
The main financial risks faced by the Group relate to the availability of funds to meet business needs (liquidity risk) and fluctuations in foreign exchange rates (market risk). The Group's objectives when managing capital are to ensure that it is best placed to further its development of the Project, whilst also safeguarding the Group's ability to continue as a going concern. The Group defines capital as being cash and cash equivalents plus bank deposits. The board of directors monitors the level of capital as compared to the Group's commitments and approves plans to adjust the level of capital accordingly in the best interests of shareholders.
These summary financial statements do not include all financial risk management information; full disclosures will be available in the Group's annual financial statements for the year ended 31 December 2017.
Financial instruments
The carrying value of each class of the Group's financial instruments is detailed below:
Designated
into At fair
cash value Financial
flow through liabilities
hedge Loans profit at amortised
31 December 2017 relationships and receivables and loss cost Total
GBP000s GBP000s GBP000s GBP000s GBP000s
----------------------- --------------- ----------------- ---------- -------------- ----------
Financial assets
Restricted cash - 74,489 - - 74,489
Bank deposits 38,962 119,488 - - 158,450
Cash and cash
equivalents 16,407 - 219,125 - 235,532
----------------------- --------------- ----------------- ---------- -------------- ----------
55,369 193,977 219,125 - 468,471
----------------------- --------------- ----------------- ---------- -------------- ----------
Financial liabilities
Convertible loans - - (48,466) (200,859) (249,325)
Derivative financial
instrument - - (10,033) - (10,033)
Trade and other
payables - - - (29,387) (29,387)
----------------------- --------------- ----------------- ---------- -------------- ----------
- - (58,499) (230,246) (288,745)
----------------------- --------------- ----------------- ---------- -------------- ----------
Net financial
assets/(liabilities) 55,369 193,977 160,626 (230,246) 179,726
----------------------- --------------- ----------------- ---------- -------------- ----------
At fair
value Financial
through liabilities
Loans profit at amortised
31 December 2016 and receivables and loss cost Total
GBP000s GBP000s GBP000s GBP000s
------------------------------------ ----------------- ---------- -------------- ----------
Financial assets
Derivative financial
instrument - 1,041 - 1,041
Restricted cash 82,924 - - 82,924
Bank deposits 322,188 - - 322,188
Cash and cash equivalents 260,157 - - 260,157
------------------------------------ ----------------- ---------- -------------- ----------
665,269 1,041 - 666,310
------------------------------------ ----------------- ---------- -------------- ----------
Financial liabilities
Convertible loans - (42,433) (278,933) (321,366)
Trade and other payables - - (5,854) (5,854)
------------------------------------ ----------------- ---------- -------------- ----------
- (42,433) (284,787) (327,220)
------------------------------------ ----------------- ---------- -------------- ----------
Net financial assets/(liabilities) 665,269 (41,392) (284,787) 339,090
------------------------------------ ----------------- ---------- -------------- ----------
Financial instruments measured at fair value are grouped into one of three levels as set out by IFRS 13 Fair Value based on the lowest level input that is significant to the fair value measurement. These levels are as follows:
-- Level 1 - Quoted prices (unadjusted) based on active markets for identical assets or liabilities;
-- Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, prices) or indirectly (that is, derived from prices);
-- Level 3 - Inputs for the asset or liability that are not based on observable market data.
The only assets or liabilities that the Group has which measured at fair value are the derivatives associated with the convertible loans and the royalty financing. These have both been assessed to be a level 2 financial liability since the derivatives themselves are not traded on an active market but their fair values are determined by valuation techniques that are based solely on observable market data. The main inputs to the derivatives' valuations are: the traded price of the Group's convertible loans; the traded price of the Group's shares; forward exchange rates and the debt yields of entities with similar credit profile to the Group.
In order to estimate the fair value of the convertible loans' embedded derivative at any point in time, the Group estimates the fair value of the cash flows due under the host loan at an assumed discount rate that would likely apply to any debt issued by the Group which was not convertible and subtracting this from the market value of the convertible loans (based on the quoted trading price) at the measurement date. In estimating this assumed discount rate, the Group considers publicly quoted bond yield data of comparable entities with similar credit profiles and their prevailing bond yields at the measurement date.
The fair value of the royalty equity investment derivative is estimated as the net present value of the difference between the USD 50m receivable (in Sterling terms) and the 200 million shares to be issued on the royalty drawdown date (whose value is based on their spot price at the measurement date).
The inputs used in the fair valuation estimates of these derivatives exposes the Group to further market risks. Movements in these inputs cause the fair valuation (but not the cash flows) of the derivatives to fluctuate and affect reported finance costs. Increases in the convertible loans' price and share price (which generally move synchronously) would cause an increase in the loss reported from both derivatives while an increase in the discount rate assumed would cause an increase in the loss reported from the convertible loans' embedded derivative. Conversely, a fall in the Group's share price would cause a gain to be reported on these instruments' fair value.
The carrying value of all the Group's financial assets and liabilities is equivalent to their fair value except for the convertible loans (where the host loan element is measured at amortised cost). The fair value of the convertible loans at 31 December 2017 was GBP286,514,000 (2016: GBP334,679,000) compared to the stated carrying value of GBP249,325,000 (2016: GBP321,366,000). The traded market price of the Group's convertible loan at 31 December 2017 was 124.5 (2016: 102.9).
9. RELATED PARTY TRANSACTIONS
The Group has no related party transactions, with the exception of remuneration paid to key management and Directors.
10. ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements requires the exercise of judgement in applying the Group's accounting policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis, with revisions recognised in the period in which the estimates are revised and in any future periods affected. The judgements that carry the most significant risk of an outcome that differs from the amount recognised in the financial statements are as follows:
ACCOUNTING FOR ROYALTY FINANCING AGREEMENT
The Group entered into a royalty financing agreement during 2016. Significant judgment is required in determining how the agreement should be accounted for due to the lack of explicit guidance for these types of arrangements under IFRS. Based on the precise contractual terms of the agreement, the Group has concluded that the agreement should be accounted for as a financial instrument, to be accounted for in accordance with IAS 39 Financial Instruments: Recognition and Measurement. Furthermore, the Group has concluded that prior to drawdown occurring the agreement is analogous to a loan commitment and therefore no recognition of it is necessary in the financial statements until drawdown occurs.
FAIR VALUATION OF DERIVATIVE FINANCIAL INSTRUMENTS
The Group is required to exercise judgment in appropriately estimating the fair value of derivative financial instruments. Derivative financial instruments held by the Group do not have observable market prices and so the Group is required to identify appropriate valuation models in calculating these fair values. In making its estimates, priority is given to inputs based on actual market data and transactions, although these valuations nevertheless require some level of subjective assessment and the use of different valuation assumptions could have a significant impact upon the Group's reported financial performance and position.
11. POST BALANCE SHEET EVENTS
On 14 February 2018 the Group announced that it had signed a design and build contract with DMC Mining Services UK Ltd for the construction for the Project's shafts. The target price of this contract is consistent with the previously announced allocated Project budget.
Responsibility Statement of the Directors on the Annual Report
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the group financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and of the profit or loss of the group for that period. In preparing the financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.
The directors are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's performance, business model and strategy.
Each of the directors, whose names and functions will be detailed in the Group's annual report for 2017, confirm that, to the best of their knowledge:
-- the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the group; and
-- the Directors' Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.
In the case of each director in office at the date the Directors' Report is approved:
-- so far as the director is aware, there is no relevant audit information of which the Group's auditors are unaware; and
-- they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group's auditors are aware of that information.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UVSRRWOAORUR
(END) Dow Jones Newswires
March 06, 2018 02:01 ET (07:01 GMT)
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