Interim Results

RNS Number : 3753A

Keras Resources PLC

29 May 2019

 

Keras Resources plc / Index: AIM / Epic: KRS / Sector: Mining

29 May 2019

 Keras Resources plc

("Keras" or the "Company")

Interim Results

Keras Resources plc, the AIM listed mineral resource company, is pleased to announce its interim results for the six months ended 31 March 2019.

Highlights

·    Primary focus is the development of the Nayega manganese project in Togo into a profitable mine

·    Mine and processing plant constructed, currently configured to produce c. 75,000 tons per annum

·    Proved up concept of profitable production at Nayega and efficient shipment to market

o  Bulk sample of 10,000 tons of 35%+ manganese concentrate delivered to end user and testing commenced

o  Assays demonstrated that the manganese content in the sample substantially exceeds the minimum requirement

·    On receipt of exploitation licence, currently awaiting ministerial approval, plan to expand/improve plant to increase production to be financed in conjunction with an offtake agreement

·    Intention to distribute holding of shares in Calidus Resources Limited to Keras shareholders when the ASX escrow period ends and Performance Shares and converted to ordinary shares; expected by end July 2019

·    Appointed Graham Stacey as COO post period end to ensure a seamless transition into commercial production at Nayega

Chairman's Statement

Once more I am pleased to be able to report on the progress Keras has made towards becoming a profitable producer of manganese in Africa.

Manganese production / Togo

The primary focus of Keras is the development of the Nayega manganese project in Togo into a profitable mine.  The period under review saw the construction of the mine and processing plant, the production of some 10,000 tons of 35%+ manganese concentrate, the successful trucking of the material to Lomé and loading onto a vessel for shipment to the end user.  The concept of profitable production at Nayega and efficient shipment to market has been conclusively proved.  Much credit for this success is due to our mining contractor Carriere Mines Travaux Public, with whom we have established an excellent relationship.

The plant as currently configured is capable of producing some 75,000 tons per annum, which would result in a substantial profit for Keras.  However, on receipt of the exploitation licence we would expect to expand and improve the plant to add more value as well as increasing production.  We intend this to be financed in conjunction with an offtake agreement, and do not expect to require further equity funding.

The key to this expansion is to obtain the exploitation licence.  All the terms of the licence and the protocols associated with it have been agreed with the Government of Togo, and all that remains is the confirmation of the Council of Ministers.  As part of the process we will convert our 85% owned Societe General de Mine SARL to a public company, Societe General de Mine SA, in which the Government of Togo will have a carried interest of 10%.  This will reduce our current 85% ownership to 76.5%.  Our extra capital requirement will be satisfied by the capitalisation of existing loans, but our minority partners will need to provide further capital, either by paying cash or by forgoing income.

The bulk sample has now been delivered to the end user, and testing has commenced.  Assays have demonstrated that the manganese content in the sample substantially exceeds the minimum requirement.

As part of our commitment to mining in Togo, in 2017 we also obtained five exploration licences, covering 854.3 square kilometres of ground in Togo that cover previously discovered cobalt and nickel mineralisation.  Initial exploration on the licences has been undertaken, and, when the exploitation licence for Nayega is finalised, we will seek ways to take these licences forward.

Calidus Resources Limited

Keras intends to distribute its holding of shares in Calidus Resources Limited ("Calidus") to Keras shareholders when the ASX escrow period ends, which is on 22 June 2019, and all Calidus performance shares have been converted to ordinary shares, which is expected in July 2019 following the completion of Calidus' Pre-Feasibility Study at its Warrawoona Gold Project.  Keras will own 723,750,000 Calidus Shares at that time.

Having sought advice from our lawyers and our tax advisers, the Directors are currently of the opinion that the distribution is likely to be best achieved by a Capital Reduction Scheme.  Before a final decision is made, we will be seeking Counsel's opinion on the taxation issues, as no tax clearance procedure is available.  Such a scheme will require the approval of the Court as well as a resolution of shareholders.  While the Directors expect to proceed as soon as the Performance share conversion is complete, they have recently been made aware of certain tax issues in Australia resulting from the mining tenements owned by Calidus potentially being treated as real estate property in Australia rather than business assets, and which require clearance from the Australian tax authorities before the Capital Reduction scheme can be proposed.

The Calidus Shares are included in the financial statements at fair value, which comprises the closing mid-market price on the ASX at 31 March 2019, converted to sterling at the prevailing exchange rate, less a discount for uncertainty on the Performance Shares.

Management changes

Since the end of the period Mr. Graham Stacey has been appointed Chief Operating Officer (Non-Board) to ensure a seamless transition into commercial production at Nayega.  Graham was Project Manager at Nayega during the successful production of the bulk sample.  He previously worked with Russell Lamming and me at Chromex Mining PLC, where he was COO and a main board director.

Financial review

The total amount receivable from the end user to cover the cost of the bulk sample was $1.95 million (£1.5 million) which covered all costs including capital expenditure, production, logistics and management costs of the project.  As the ownership of the bulk sample was only transferred on the 25 April when the vessel departed Port Lomé and post period end, the financial effects are not reflected in the Interim Statements but will be recognised in the second half year.  The period shows a loss before and after tax of £439,000 (2018 -£177,000).  The increase reflects the increased activity in Togo, including management and overhead costs not recognised in inventories. It should be noted that the value of stock recognised at 31 March 2019 was only £718,000, and a surplus from the bulk sample will be recognised in the second half year.  To cover the mismatch between the date of payments and receipts, Dave Reeves and I advanced a total of £300,000 to Keras as a short term, interest free, unsecured loan.  Repayment was initially due by the end of March 2019 but has been deferred.

Cash conservation remains a priority until commercial mining produces positive cash flow, and the non-executive directors are continuing to be remunerated at some 50% of their entitlements.  Should future developments require new cash, Keras is in a position to obtain this by borrowing against the security of its holding of Calidus shares or disposing of a small proportion of such shares rather than seeking new equity.

Outlook

The key to moving forward as a producer of manganese in Africa is the grant of the Nayega exploitation licence.  As and when that is approved by the Togo Council of Ministers, Keras will be able to move forward rapidly without the requirement for further equity finance in the near term.  Further projects are in a late stage of negotiation, but the Board is taking the conservative view that it should not enter into new commitments without certainty as to how they will be financed.

The position in which Keras currently finds itself gives me and my colleagues on the Board cause for considerable optimism.

Brian Moritz

Chairman

28 May 2019

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 MARCH 2019

									31-Mar-19 (unaudited) £'000		31-Mar-18 (unaudited) £'000		30-Sep-18 (audited) £'000
Continuing operations
Revenue									-		-		-
Cost of production									721		-		-
Closing stock									(721)		-		-
Gross profit									-		-		-
Administrative and exploration expenses									(436)		(177)		(411)
Loss from operating activities									(436)		(177)		(411)
Finance income									-		-		-
Finance costs									(3)		-		-
Net finance costs									(3)		-		-
Impairment of assets									-		-		-
Loss before taxation									(439)		(177)		(411)
Taxation									-		-		-
Loss from continuing operations									(439)		(177)		(411)
Discontinued operations
(Loss)/profit from discontinued operations, net of tax							7		-		-		(173)
(Loss)/profit									(439)		(177)		(584)
Other comprehensive income - items that may be subsequently reclassified to profit or loss
Exchange translation on foreign operations									4		(5)		10
Change in fair value of available for sale financial assets									(1,665)		(4,534)		(8,852)
Other comprehensive (loss)/income for the period, net of tax									(1,661)		(4,539)		(8,842)
Total comprehensive (loss)/income for the period									(2,100)		(4,716)		(9,426)
(Loss)/profit attributable to:
Owners of the Company									(418)		(174)		(576)
Non-controlling interests									(21)		(3)		(8)
(Loss)/profit for the period									(439)		(177)		(584)
Total comprehensive income/(loss) attributable to:
Owners of the Company									(2,080)		(4,712)		(9,419)
Non-controlling interests									(20)		(4)		(7)
Total comprehensive loss for the period									(2,100)		(4,716)		(9,426)
Earnings per share - continuing  and discontinued operations
Basic and diluted (loss)/earnings per share (pence)									(0.019)		(0.008)		(0.025)
From continuing operations
Basic and diluted loss per share (pence)									(0.019)		(0.008)		(0.018)
From discontinued operations
Basic and diluted earnings/(loss) per share (pence)									0.00		0.00		(0.007)

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 MARCH 2019
						Notes		31-Mar-19 (unaudited) £'000		31-Mar-18 (unaudited) £'000		30-Sep-18 (audited) £'000
Assets
Non-current assets
Intangible assets						8		1,176		1,168		1,193
Property, plant and equipment						9		601		5		232
Trade and other receivables						10		-		-		-
Other investments						11		-		15,846		-
								1,777		17,019		1,425
Current assets
Inventory						12		718		-		-
Other investments						11		9,862		-		11,527
Trade and other receivables						10		583		15		16
Cash and cash equivalents								26		122		217
								11,189		137		11,760
Total assets								12,966		17,156		13,185
Equity
Equity attributable to owners of the Company
Share capital						13		7,064		7,037		7,064
Share premium						13		10,358		10,283		10,358
Other reserves								3,540		8,959		5,135
Retained deficit								(10,449)		(9,338)		(10,006)
								10,513		16,941		12,551
Non-controlling interests								(144)		(121)		(124)
Total equity								10,369		16,820		12,427
Liabilities
Current liabilities
Trade and other payables						14		1,451		336		187
Amounts receivable in advance						14		1,146		-		571
								2,597		336		758
Total liabilities								2,597		336		758
Total equity and liabilities								12,966		17,156		13,185

Condensed Consolidated Statement of Changes in Equity For the six months ended 31 March 2018
							Total attributable to owners of the Company
			Share capital £'000		Share premium £'000		Share option/ warrant reserve £'000		Exchange reserve £'000		Available for sale reserve £'000	Retained deficit £'000		Total £'000		Non-controlling interests £'000			Total equity £'000
Balance at 1 October 2017 (audited)			6,970		10,107		66		(202)		13,915		(9,446)		21,410		(117)		21,293
Loss for the period			-		-		-		(288)		-		114		(174)		(3)		(177)
Other comprehensive income			-		-		-		(968)		(3,564)		(6)		(4,538)		(1)		(4,539)
Total comprehensive loss for the period					-		-		(1,256)		(3,564)		108		(4,712)		(4)		(4,716)
Issue of ordinary shares			67		183		-		-		-		-		250		-		250
Issue costs			-		(7)		-		-		-		-		(7)		-		(7)
			67		176		-		-		-		-		243		-		243
Balance at 31 March 2018 (unaudited)			7,037		10,283		66		(1,458)		10,351		(9,338)		16,941		(121)		16,820

Condensed Consolidated Statement of Changes in Equity (continued) For the six months ended 31 March 2018
									Total attributable to owners of the Company
		Share capital £'000		Share premium £'000		Share option/ warrant reserve £'000		Exchange reserve £'000			Available for sale reserve £'000	Retained deficit £'000		Total £'000		Non-controlling interests £'000			Total equity £'000
Balance at 1 April 2018 (unaudited)		7,037		10,283		66		(1,458)			10,351		(9,338)		16,941		(121)		16,820
Loss for the period		-		-		-		288			-		(690)		(402)		(5)		(407)
Other comprehensive income		-		-		-		961			(5,288)		22		(4,305)		2		(4,303)
Total comprehensive income for the period		-		-		-		1,249			(5,288)		(668)		(4,707)		(3)		(4,710)
Issue of ordinary shares		27		75		-		-			-		-		102		-		102
Share based payment transactions		-		-		42		-			-		-		42		-		42
Transfer regarding discontinued activities		-		-		-		173			-		-		173		-		173
		27		75		42		173			-		-		317		-		317
Balance at 30 September 2018 (audited)		7,064		10,358		108		(36)			5,063		(10,006)		12,551		(124)		12,427

Condensed Consolidated Statement of Changes in Equity (continued) For the six months ended 31 March 2019
								Total attributable to owners of the Company
		Share capital £'000		Share premium £'000		Share option/ warrant reserve £'000		Exchange reserve £'000		Available for sale reserve £'000	Retained deficit £'000		Total £'000		Non- controlling interests £'000			Total equity £'000
Balance at 1 October 2018 (audited)		7,064		10,358		108		(36)		5,063		(10,006)		12,551		(124)		12,427
Loss for the period		-		-		-		-		-		(418)		(418)		(21)		(439)
Total other comprehensive income		-		-		-		28		(1,665)		(25)		(1,662)		1		(1,661)
Total comprehensive loss for the period		-		-		-		28		(1,665)		(443)		(2,080)		(20)		(2,100)
Share based payment transactions		-		-		42		-		-		-		42		-		42
Issue of ordinary shares		-		-		-		-		-		-		-		-		-
Issue costs		-		-		-		-		-		-		-		-		-
		-		-		42		-		-		-		42		-		42
Balance at 31 March 2019  (unaudited)		7,064		10,358		150		(8)		3,398		(10,449)		10,513		(144)		10,369

Condensed Consolidated Statement of Cash Flows For the six months ended 31 March 2019
								31-Mar-19 (unaudited) £'000		31-Mar-18 (unaudited) £'000		30-Sep-18 (audited) £'000
Cash flows from operating activities
Loss from operating activities								(436)		(177)		(411)
Loss from discontinued operating activities								-		-		(173)
Adjustments for:
Depreciation and amortisation								11		4		4
Impairment								-		-		-
Loss on disposal of property, plant and equipment								-		-		-
Foreign exchange differences								39		(3)		174
Equity-settled share-based payment transactions								42		-		42
								(344)		(176)		(364)
Changes in:
- inventories								(718)		-		-
- trade and other receivables								(567)		16		15
- amounts receivable in advance								575		-		571
- trade and other payables								1,264		(11)		(57)
Cash used in operating activities								210		(171)		165
Finance income								-		-		-
Finance cost								(3)		-		-
Taxes paid								-		-		-
Net cash used in operating activities								207		(171)		165
Cash flows from investing activities
Cash disposed of with subsidiary								-		-		-
Acquisition of property, plant and equipment								(385)		(3)		(230)
Proceeds from sale of property, plant and equipment								-		-		-
Exploration and licence expenditure								(13)		(7)		(20)
Net cash used in investing activities								(398)		(10)		(250)
Cash flows from financing activities
Net proceeds from issue of share capital								-		243		242
Proceeds from short term borrowings								-		-		-
Net cash flows from financing activities								-		243		242
Net (decrease)/increase in cash and cash equivalents								(191)		62		157
Cash and cash equivalents at beginning of period								217		60		60
Cash acquired with subsidiary								-		-		-
Effect of foreign exchange rate changes								-		-		-
Cash and cash equivalents at end of period								26		122		217

Notes to the Condensed Consolidated Interim Financial Statements

For the six months ended 31 March 2019

1.            Reporting entity

Keras Resources plc (the "Company") is a company domiciled in England and Wales.  The condensed consolidated interim financial statements of the Company as at and for the six months ended 31 March 2019 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities.  The Group currently operates as an explorer and developer.

2.            Basis of preparation

(a)           Statement of compliance

This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting.  Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial performance and position of the Group since the last annual consolidated financial statements as at and for the year ended 30 September 2018.  This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards.

This condensed consolidated interim financial report was approved by the Board of Directors on 28 May 2019.

(b)           Judgements and estimates

Preparing the interim financial report requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial report, significant judgements made by Management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September 2018.

3.            Significant accounting policies

The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 September 2018.

4.            Financial instruments

Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 30 September 2018.

5.            Segment information

The Group considers that it now operates in one distinct business areas, being that of manganese and cobalt exploration in West Africa.  This business areas form the basis of the Group's operating segments.  For each segment, the Group's Managing Director (the chief operating decision maker) reviews internal management reports on at least a quarterly basis.

Other operations relate to the group's administrative functions conducted at its head office and by its intermediate holding company together with consolidation adjustments.

Information regarding the results of each reportable segment is included below.  Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Group's Managing Director.  Segment results are used to measure performance as Management believes such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within the exploration industry.

For the six months ended 31 March 2019 (unaudited)

					Discontinued Gold £'000		Discontinued Iron Ore £'000		Manganese £'000		Other Segments £'000		Total £'000
External revenue					-		-		-		-		-
Loss before tax					-		-		(142)		(297)		(439)
Segment assets					-		-		1,308		10,550		11,858
For the six months ended 31 March 2018 (unaudited)
					Discontinued Gold £'000		Discontinued Iron Ore £'000		Manganese £'000		Other Segments £'000		Total £'000
External revenue					-		-		-		-		-
Loss before tax					-		-		(22)		(155)		(177)
Segment assets					-		-		851		16,305		17,156
For the twelve months ended 30 September 2018 (audited)
					Discontinued Gold £'000		Discontinued Iron Ore £'000		Manganese £'000		Other Segments £'000		Total £'000
External revenue					-		-		-		-		-
Loss before tax					(72)		(101)		(52)		(359)		(584)
Segment assets					-		-		870		12,315		13,185
Information about geographical segments:

For the six months ended 31 March 2019 (unaudited)

						Discontinued Australia £'000			Discontinued South Africa £'000			West Africa £'000			Other Segments £'000			Total £'000
External  revenue						-			-			-			-			-
Loss before tax						-			-			(142)			(297)			(439)
Segment assets						-			-			1,308			10,550			11,858
	For the six months ended 31 March 2018 (unaudited)
						Discontinued Australia £'000			Discontinued South Africa £'000			West Africa £'000			Other Segments £'000			Total £'000
External revenue						-			-			-			-			-
Loss before tax						-			-			(22)			(155)			(177)
Segment assets						-			-			851			16,305			17,156
	For the twelve months ended 30 September 2018 (audited)
						Discontinued Australia £'000			Discontinued South Africa £'000			West Africa £'000			Other Segments £'000			Total £'000
External revenue						-			-			-			-			-
Loss before tax						(72)			(101)			(52)			(359)			(584)
Segment assets						-			-			870			12,315			13,185

6.            Seasonality of operations

The Group is not considered to be subject to seasonal fluctuations.

7.            Discontinued operations

In 2018 the discontinued activities relate to the recycling of the exchange reserve in respect of the subsidiary undertakings disposed of during the year. Analysis of the result of discontinued operations is as follows:

Results of discontinued operations

								6 months 31-Mar-19 (unaudited) £'000		6 months  31-Mar-18 (unaudited) £'000		12 months 30-Sep-18 (audited) £'000
Revenue (external)								-		-		-
Expenses								-		-		(173)
Results from operating activities								-		-		(173)
Income tax								-		-		-
Results from operating activities, net of tax								-		-		(173)
Gain on sale of discontinued operation								-		-		-
(Loss)/profit from discontinued operations, net of tax								-		-		(173)

The discontinued operations did not have a tax impact.

8.            Intangible assets

								6 months 31 Mar 19 (unaudited) £'000		6 months 31 Mar 18 (unaudited) £'000		12 months 30 Sep 18 (audited) £'000
Cost
Balance at beginning of period								1,193		1,551		1,551
Additions								13		7		20
Disposals Effect of movement in exchange rates								- (30)		- (3)		(387) 9
Balance at end of period								1,176		1,555		1,193
Impairment losses
Balance at beginning of period								-		387		387
Impairment								-		-		-
Amortisation								-		-		-
Disposals								-		-		(387)
Effect of movement in exchange rates								-		-		-
Balance at end of period								-		387		-

Carrying amounts
Balance at end of period		1,176		1,168		1,193
Balance at beginning of period		1,193		1,164		1,164

Intangible assets comprise the fair value of prospecting and exploration rights.

9.            Property, plant and equipment

Acquisitions and disposals

During the six months ended 31 March 2019 the Group acquired assets with a cost of £385,000 (six months ended 31 March 2018: £3,000, twelve months ended 30 September 2018: £230,000).

Assets with a carrying amount of £nil were disposed of during the six months ended 31 March 2019 (six months ended 31 March 2018: £nil; twelve months ended 30 September 2018: £nil), resulting in a loss on disposal of £nil (six months ended 31 March 2018: £nil; twelve months ended 30 September 2018: £nil), which is included in 'administrative expenses' in the condensed consolidated statement of comprehensive income.

10.          Trade and other receivables

								31-Mar-19 (unaudited) £'000		31-Mar-18 (unaudited) £'000		30-Sep-18 (audited) £'000
Other receivables								583		15		16
Prepayments								-		-		-
								583		15		16

Trade receivables and other receivables are stated at their nominal values less allowances for non recoverability.

11.          Other investments

								31-Mar-19 (unaudited) £'000		31-Mar-18 (unaudited) £'000		30-Sep-18 (audited) £'000
Equity securities - available for sale
Brought forward								11,527		20,379		20,379
Shares acquired on disposal of subsidiary								-		-		-
Gain/(deficit) recognised in equity								(1,665)		(4,533)		(8,852)
								9,862		15,846		11,527

Equity securities represent ordinary and performance shares in Calidus Resources Limited ("Calidus"), a company listed on the Australian Securities Exchange ("ASX"). These shares have been re-measured to fair value through other comprehensive income. Fair value is the mid-market price of Calidus ordinary shares on the ASX, discounted in the case of performance shares to reflect the possibility that the milestones for conversion to ordinary shares will not be achieved. Under ASX rules, these shares are held in escrow until 22 June 2019. Available for sale assets are denominated in Australian dollars.

12.          Inventories

								31-Mar-19 (unaudited)		31-Mar-18 (unaudited)		30-Sep-18 (audited)
								£'000		£'000		£'000
Processed manganese concentrate								718		-		-
								718		-		-

13.          Share capital and reserves

Issue of ordinary shares

No shares were issued during this interim period.

Dividends

No dividends were declared or paid in the six months ended 31 March 2019 (six months ended 31 March 2018: £nil, twelve months ended 30 September 2018: £nil).

14.          Trade and other payables

								31-Mar-19 (unaudited)		31-Mar-18 (unaudited)		30-Sep-18 (audited)
								£'000		£'000		£'000
Trade payables								102		-		66
Accruals Other payables								224 1,125		104 232		40 81
								1,451		336		187
Amounts receivable in advance								1,146		-		571
								2,597		336		758

There is no material difference between the fair value of trade and other payables and their book value. 

Amounts receivable in advance comprise part payment for a bulk sample of manganese concentrate awaiting shipment at 31 March 2019. 

15.          Related parties

During the period, D Reeves and B Moritz advanced £200,000 and £100,000 respectively to the Group.  The total amount due to D Reeves at the period end was £225,900 (six months ended 31 March 2018: £nil, twelve months ended 30 September 2018: £25,900).  The total amount due to B Moritz at the period end was £100,000 (six months ended 31 March 2018: £nil, twelve months ended 30 September 2018: £nil). 

**ENDS**

For further information please visit www.kerasplc.com, follow us on Twitter @kerasplc or contact the following:

Russell Lamming	Keras Resources plc	[e-mail]
Nominated Adviser / Joint Broker Ewan Leggat / Charlie Bouverat	SP Angel Corporate Finance LLP	[phone]
Financial PR Isabel de Salis / Cosima Akerman	St Brides Partners Ltd	[phone]

Notes

Keras Resources plc is focused on building a strategic portfolio of resource assets. The Company provides investors with exposure to a portfolio of development assets, including manganese, cobalt and nickel in Togo, West Africa.  It also has a significant interest in Calidus Resources Limited ('Calidus'), a highly prospective gold exploration and development company in Australia, which is currently undertaking a Pre-Feasibility Study at its Warrawoona gold project.  Keras benefits from a highly skilled management team, which has extensive operational experience in Africa and Australia and proven success in advancing assets up the value curve.

 

END

 

 

IR LLFIEEAITFIA