Annual Financial Report

RNS Number : 5007Y

Red Rock Resources plc

23 December 2010

 



Red Rock Resources plc

("Red Rock" or the "Company")

Final Results

for the year ended 30 June 2010

23 December 2010

Chairman's statement

Dear Shareholders

I am pleased to present to shareholders your Company's annual report for the financial year to 30 June 2010. 

We state our objective as being to maximise Shareholder value both by exploring for minerals and by taking strategic stakes in other mineral exploration ventures.  We have made very good progress in these areas and are moving towards production in some of our associated companies.  We have had a good year and expect this progress to continue.  We are looking at the possibility of declaring an interim dividend in early 2011.

In last year's report we said that the collapse in market liquidity and in commodity prices in early 2009 was an opportunity for growth rather than a threat.  Taking positions based on perceptions of future market movements is a dangerous game, as markets are generally more efficient than company managements like to believe.  Very occasionally, under the impact of great events, one's mind is cleared of irrelevant factors and it is possible to perceive clearly, in the extremes of valuation and sentiment that prevail, in which direction the truth lies.

We and our previous joint venture partners at Pallinghurst followed through on our transformative Jupiter Mines Limited ("Jupiter") transaction as if the events in the banking and commodity markets had never happened, and the steadiness and fortitude of our partners at this time is something we will not forget.  It is easy to perceive in retrospect that the Chinese economy would continue to grow, as indeed did the Indian, and that manganese and iron ore demand and prices recovered with remarkable speed, but it was not certain in prospect.

By the time we began the year under review, July 2009 to June 2010, it was already clear that with the completion of the first stage of the Jupiter transaction, and with markets stabilised, we were going to be operating from a position of increasing strength.  The holding of Jupiter shares, a freely tradable asset, gave us stability, and with that stable base we could afford to think strategically and longer term.

We wanted to keep the Jupiter shares to the extent possible, because we had played a large part in creating the new Jupiter, but as long as the market value of Red Rock hardly exceeded the value of its holding in Jupiter, this was difficult.  We sold sufficient Jupiter shares to send the signal that we were willing to unlock the discount, and we also drew attention to the other assets of Red Rock.  Our share price rose, and we now feel comfortable in retaining the bulk of our Jupiter shares as a strategic holding.  Few companies in the market today have more dynamic or proven management, or better prospects for growth and the Jupiter price has already risen to a level at which our holding is today valued at £39m.

After we concluded the Jupiter transaction, our interests in iron ore and manganese were no longer held directly, and this gave us an opportunity to switch our operational focus to new projects.  Given our stronger position, it was appropriate for us to look for assets with existing resource, and if possible near production. 

As shareholders will be aware, we made a strategic decision to concentrate on gold.  There were a number of reasons, but one consideration that was important was that we believed the next stage in our development was to move from being an explorer to an exploration and production model.  Gold is a commodity which can often be brought into production on a relatively small scale, with predictable margins, well-known metallurgy, and few logistical problems.

We invested in a greenstone belt with former mining operations and an NI-4301 compliant 1.172 million ounce Indicated gold Resource in Kenya, and at the end of the year we invested in two gold mines in Columbia, one of which has just begun test production , while the other is about to be brought into production.  We have since taken a strategic stake in a Costa Rican gold producer.

We ended the year with a portfolio of quality investment assets, including a royalty interest and associate company investments, and with operational gold assets that in a rising gold market are of increasing value and potential. 

We now have, as a result of recent developments, interests in three producing gold mines.

In previous years we have summarised in bullet point form the main developments during the year.  This year, the list is a long one; in addition, we describe the major agreements and transactions in Note 22 to the financial statements below.

Summary

Red Rock reports the following developments in the financial year to 30 June 2010:

·     Share price rise from 1 pence to 1.77 pence;

·     £1,674,820 before expenses raised from share placings at prices between 1.3 pence and 2.68 pence;

·     £63,750 raised from exercise of options at prices between 1 pence and 1.25 pence;

·     Completion of sale of Oakover tenements to Jupiter Mines Limited ("Jupiter"), raising Jupiter shares held from 38,948,586 to 93,104,165;

·     Subsequent net sales of 7,370,000 Jupiter shares, raising AUD 1,768,603;

·     Sale of investment in Africa China Mining Corporation, raising USD 1,000,000;

·     Investments in Cue Resources Ltd and Kansai Mining Corporation;

·     Acquisition of 15% interest in Kenyan gold explorer with 1,172,000 oz Indicated Resource (Mid Migori Mining Limited) for USD 750,000, with farm-in rights to 60%; option on other Kenyan assets;

·     Exploration drilling and trenching programmes at Migori;

·     Relisting of associate Resource Star Limited ("RSL") on the ASX;

·     Funding and Co-operation agreement with Colombian gold producer Mineras Four Points SA ("MFP"), with rights to acquire 51% interest in MFP;

while associates themselves announced:

·     Raising by RSL of AUD 2,499,302 before expenses from share placings;

·     Farm-in agreements between RSL and Globe Metals and Mining Limited ("Globe") on uranium and rare earth properties;

·     Agreement by Jupiter for POSCO to acquire strategic holding of 48 million Jupiter shares;

·     Jupiter exploration of Mt Ida, where Red Rock has a 1½% gross production royalty, results in announcement of conceptual target of 1.1bn to 1.3bn tonnes of high grade magnetite iron ore; and

·     Jupiter intention to acquire 49.9% of Tshipi Kalahari manganese project from Pallinghurst Resources Limited and other investors.

Since the end of the financial year there have been a number of further developments:

·     Share price rise from 1.77 pence to 14.25 pence;

·     £3,057,864 before expenses raised from share placings and exercise of options;

·     Sales of 2,000,000 Jupiter shares, raising AUD 459,069 and leaving Red Rock with a holding of 83,734,165 Jupiter shares;

·     3,495 line km VTEM and Magnetics/Radiometrics flown at Migori;

·     A JORC (2004) compliant Indicated Resource of 1.424 million tonnes at 1.64 grams per tonne announced at Migori tailings;

·     2,000m extendable to 5,000m diamond drill programme with 5,000m-10,000m RC drill programme begins at Migori;

·     US$ 2,950,000 loan advanced to MFP with amounts over US$ 2,000,000 having rights to acquire up to a further 5.5% of MFP;

·     MFP's El Limon mine and plant complete and began limited operation in mid-December;

·     Indicative offer made for assets of Kansai by third party, potentially valuing Red Rock's interest at CAD 10,898,000;

·     Substantial investment in Costa Rican gold producer Ascot Mining plc;

while associates announced:

·     Jupiter's completion of Tshipi transaction, with Jupiter shares in issue rising from approximately 370m to approximately 1,602m, Red Rock's shareholding dropping from 22.64% to 5.23%;

·     Jupiter increases JORC and SAMREC 2007 compliant manganese Resource at Tshipi from 163 million tonnes to 308 million tonnes;

·     Jupiter begins 11,000m drill programme at Mt Ida to prove in excess of 400 million tonnes JORC Resource by January 2011;

·     Jupiter's 2,000m drill programme at Oakover encounters high grade manganese;

·     RSL raises AUD 829,329 before expenses in issues of options and shares by subscription and placing;

·     RSL declares maiden JORC compliant Resource of 4.6 million lbs at 270ppm at Livingstonia uranium project;

·     Globe drills RSL's Machinga rare earth project and confirms significant heavy rare earth discovery;

·     RSL begins new drilling at Livingstonia;

·     Following geophysics RSL begins uranium/REE drill programmes in Northern Territory and soil sampling at Ilomba.

Financial review

The Company made a pre-tax profit of £4,754,557 (2009: loss of £928,525) during the period; no dividends have been paid or proposed but the Company is considering the payment of an interim dividend for the current year.  The profit was primarily as a result of a substantial gain on disposal of assets to Jupiter and this, adjusted for previously unrealised revaluation surpluses less a tax charge of £1,299,187, augmented by the net proceeds of the issuance of new shares during the year, has been the principal reason for the Company's consolidated total equity rising from £5,044,431 to £8,599,527 during the period.

Exploration review

The Company conducted low intensity exploration and initial drilling at Migori.  With licenses covering a 63 km greenstone belt and numerous gold occurrences, and disparate record quality in the results inherited from prior explorers, one priority was to draw this information together in a digital database so that it could be effectively used in a GIS system in planning future activity.  We also drilled out the tailings of the old Macalder VMS copper-gold mine and had a JORC (2004) compliant Indicated Resource calculated by independent consultants CSA Global of 1.424 million tonnes at 1.64 grams Au per tonne, giving a total contained metal content of 75 thousand ounces of gold. Metallurgical testwork so far looks encouraging, and we are hopeful that we can soon justify a production decision.

Confirmatory and infill drilling has now started at the areas where a Resource has been delineated at Migori, and will shortly start on new exploration targets, with up to 10,000m of reverse circulation and 5,000m of diamond drilling, plus aircore drilling, planned.  We hope this will enable us to improve the classification and the size of the resource base, as well as increasing our understanding of structure, and testing some geophysical targets of interest.

Three to four holes are also being drilled to test an IOCG (iron oxide copper gold) target at Arthur River in Tasmania.

In Colombia the concentration has been on getting the plant and the El Limón and Machuca mines into production on schedule during December, but some exploration work for parallel veins and strike extensions has begun. Results so far have been encouraging, but not yet conclusive.  El Limon has begun test production.

Personnel

We have welcomed a number of new staff who have joined the Company in the last year, principally on the geological and technical side.  We continue to build our teams, but this report would not be complete without a tribute to members of our existing staff who at a time of rapid growth, where recruitment and training have sometimes had to follow rather than anticipate new developments, have gone that extra mile and given that extra effort to ensure we met our objectives.

During the year we appointed Manoli Yannaghas to the board. Manoli has been with the group since July 2006 and his appointment as executive director reflects his increased contribution over many areas of the group's activities.

The Future

Exploration continues at Migori and Arthur River, where we expect news shortly.  We hope to realise a profit from our holding in Kansai Mining Corporation, our partners at Migori.  Also, we expect to work with Resource Star Limited and Cue Resources Limited to reap the benefits of our investment in uranium and rare earths.

We expect continued progress in steel fields from Jupiter which we expect to be active in exploration, mine development and corporate deal making.  We look forward to the declaration of a JORC Resource at Mt Ida.  We will seek a way to give our Shareholders the ability to measure and trade the market value of our Mt Ida royalty.

We will drive ahead with our gold production in Colombia, looking to add new properties and we will work closely with our colleagues in Costa Rica on new opportunities.  We expect to exercise our option to acquire over 50 per cent of MFP during the Company's current financial year.

The current year will be one of continued progress.  We are aware that achieving the same levels of growth will be harder, but it is achievable, and becoming for the first time a producer with regular cash flow will be an important milestone for us and open up many new opportunities.  We are staffed and equipped for growth.

Andrew Bell

Chairman & chief executive

22 December 2010

Results and dividends 

Red Rock and its subsidiaries (the "Group") made a profit of £3,455,370 (2009: loss £880,772).

The Directors do not recommend the payment of a dividend.

The following financial statements are extracted from the audited financial statements which were approved by the Board of Directors and authorised for issue on 22 December 2010.

Enquiries:

Andrew Bell	0207 402 4580 or 07766 474849	Red Rock Resources plc	Chairman
Sandra Spencer	0207 402 4580 or 07757 660 798	Red Rock Resources plc	Public and Investor Relations
James Pinner/ Ben Jeynes	020 7444 0800	Religare Capital Markets	Nominated Adviser
Nick Emerson	01483 413500	Simple Investments Ltd	Broker

Consolidated statement of financial position

as at 30 June 2010

		30 June 2010		30 June 2009		30 June 2008
		£		£ As restated		£ As restated
ASSETS Non current assets Property plant and equipment Investments in associates Available for sale financial assets Exploration assets		5,100 7,332,533 1,373,680 295,616		- 1,044,853 3,676,909 506,230		- 958,835 2,355,925 567,905
Total non current assets		9,006,929		5,227,992		3,882,665
Current assets Cash and cash equivalents Trade and other receivables		563,198 1,126,897		49,439 274,542		87,599 394,198
Total current asset		1,690,095		323,981		481,797
TOTAL ASSETS		10,697,024		5,551,973		4,364,462

EQUITY AND LIABILITIES Equity attributable to owners of the parent Called up share capital Share premium account Other reserves Retained earnings		583,908 6,347,920 (350,069) 2,017,768		464,843 4,853,650 1,166,545 (1,440,607)		305,481 3,888,736 267,851 (559,835)
Total Equity LIABILITIES Current liabilities Trade and other payables Short term borrowings Current tax liabilities		8,599,527 235,058 760,323 909,030		5,044,431 179,983 -                 -		3,902,233 413,295 - -
Total current liabilities		1,904,411		179,983		413,295
Non current liabilities
Deferred tax liabilities		193,086		327,559		48,934
TOTAL EQUITY AND LIABILITIES		10,697,024		5,551,973		4,364,462

Consolidated statement of income

for the year ended 30 June 2010

			Year to  30 June 2010		Year to  30 June 2009
			£		£ As restated
Revenue - Management services Gains/(losses) on sales of investments Gains on sales of exploration assets Profit on transfer of investment to associate			8,956 519,636 3,527,968 2,018,255		3,285 (42,688) - -
Total revenue and net gains from sales			6,074,815		(39,403)
Gain on dilution of interest in associate Impairment of investment in associate Impairment of available for  sale investment Exploration expenses			259,174 (89,601)  (20,090) (197,622)		- - - (160,087)
Administrative expenses			(683,658)		(553,106)
Share of losses of associates Finance costs (net)			(519,220) (69,241)		(170,545) (5,384)
Profit/(loss) for the year before taxation Tax expense			4,754,557 (1,299,187)		(928,525) 47,753
Profit/(loss) for the year attributable to owners of parent			3,455,370		(880,772)
Earnings per share Earnings/(loss) per share - basic Earnings/(loss) per share - diluted			0.65 pence 0.62 pence		(0.23) pence (0.23) pence

All of the operations are considered to be continuing.

Consolidated statement of comprehensive income

for the year ended 30 June 2010

		Year to  30 June 2010		Year to  30 June 2009 As restated
		£		£
Profit/(loss) for the year		3,455,370		(880,772)
(Deficit)/surplus on revaluation of available for sale investment		(140,850)		1,165,635
Deferred tax on available for sale investments		513,641		(326,378)
Gains on revaluation of available for sale investments reclassified to the statement of income		(1,842,117)		-
Group's share of associates' other comprehensive income		(45,933)		-
Deferred tax on associates		10,989		-
Unrealised foreign currency (loss)/gain arising upon retranslation of foreign operations		(9,339)		6,750
Total comprehensive income for the year attributable to owners of parent		1,941,761		(34,765)

Consolidated statement of changes in equity

for the year ended 30 June 2010

The movements in equity during the period were as follows:
	Share capital	Share premium account	Retained earnings	Other reserves	Total equity
	£	£	£	£	£
As at 30 June 2008	305,481	3,888,736	(582,951)	339,901	3,951,167
Retrospective restatement of errors	-	-	23,116	(72,050)	(48,934)
Restated balance	305,481	3,888,736	(559,835)	267,851	3,902,233
Changes in equity for 2009
Total comprehensive Income/(loss) for the year	-	-	(880,772)	846,007	(34,765)
Transactions with owners Issue of shares	159,362	1,085,063	-	-	1,244,425
Share issue and fundraising costs	-	(120,149)	-	-	(120,149)
Share based payments	-	-	-	52,687	52,687
Total transactions with owners	159,362	964,914	-	52,687	1,176,963
As at 30 June 2009	464,843	4,853,650	(1,440,607)	1,166,545	5,044,431
Changes in equity for 2010
Total comprehensive income for the year	-	-	3,455,370	(1,513,609)	1,941,761
Transactions with owners Issue of shares	119,065	1,619,505	-	-	1,738,570
Share issue and fundraising costs	-	(125,235)	-	-	(125,235)
Share based payments	-	-	3,005	(3,005)	-
Total transactions with owners	119,065	1,494,270	3,005	(3,005)	1,613,335
As at 30 June 2010	583,908	6,347,920	2,017,768	(350,069)	8,599,527

	Available for sale trade investments reserve	Associate investments reserve	Foreign currency translation reserve	Share based payment reserve	Total other reserves
	£	£	£	£	£
As at 30 June 2008	384,100	(126,780)	-	82,581	339,901
Retrospective restatement of errors	(102,548)	35,498	-	-	(72,050)
Restated balance	276,552	(91,282)	-	82,581	267,851
Changes in equity for 2009
Total comprehensive income for the year	839,257	-	6,750	-	846,007
Transactions with owners
Share based payments	-	-	-	52,687	52,687
As at 30 June 2009	1,115,809	(91,282)	6,750	135,268	1,166,545
Changes in equity for 2010
Total comprehensive income for the year	(1,469,326)	(34,944)	(9,339)	-	(1,513,609)
Transactions with owners
Share based payments	-	-	-	(3,005)	(3,005)
Total transactions with owners	-	-	-	(3,005)	(3,005)
As at 30 June 2010	(353,517)	(126,226)	(2,589)	132,263	(350,069)

Consolidated statement of cash flows

for the year ended 30 June 2010

		Year to  30 June 2010		Year to  30 June 2009
		£		£
Cash flows from operating activities
Profit/(loss) before taxation (Increase)/decrease in receivables Increase/(decrease) in payables Share of losses in associates Interest receivable Interest payable Finance costs Impairment of exploration properties Exploration expenses Share based payments Currency adjustments Impairment of associate Impairment of available for sale investment Gain on dilution of interest in associates Profit on sale of investments Profit on transfer of available for sale investment to associate Depreciation Profit on disposal of exploration properties		4,754,557 (852,355) 55,075 519,221 (7,336) 17,843 58,734                                - 197,622 - (14,852) 89,601 20,090 (259,174) (519,636) (2,018,255) 2,345 (3,527,968)		(928,525) 119,656 (233,312) 170,545 (3,618) 9,002 - 24,154 160,087 52,687 8,637 - - - - - - -
Net cash outflow from operations		(1,484,488)		(620,687)
Cash flows from investing activities Interest received Proceeds from sale of subsidiary Cash disposed of on sale of subsidiary Proceeds of sale of investments Payments to acquire associate company investments Payments to acquire available for sale investments Exploration expenditure Payments to acquire property plant and equipment Net proceeds of exploration assets disposed of		7,336 - - 1,700,629 (354,284) (1,502,165) (142,905)  (7,445) -		3,618 482 (2,169) 107,557 (198,762) (309,079 (344,532) - 221,964
Net cash outflow from investing activities		(298,834)		(520,921)

Cash flows from financing activities Proceeds from issue of shares Transaction costs of issue of shares Interest paid Finance costs Proceeds of new borrowings		1,738,570 (125,235) (17,843) (111,874) 813,463		1,147,725 (35,275) (9,002) - -
Net cash flows from financing activities		2,297,081		1,103,448
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period		513,759 49,439		(38,160) 87,599
Cash and cash equivalents at end of period		563,198		49,439

 Notes

1

Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as endorsed by the EU ("IFRS") and the requirements of the Companies Act applicable to companies reporting under IFRS. The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.  The principal accounting policies adopted are set out below. Company Statement of Comprehensive Income As permitted by section 408 Companies Act 2006, the Company has not presented its own Income Statement or Statement of Comprehensive Income.  The Company's profit for the financial year was £3,677,013 (2009: Loss £742,018). The Company's other comprehensive income for the financial year was (£1,469,326) (2009: £839,257). Amendments to published standards effective for the year ended 30 June 2010 The following standards have been adopted during the year: ·              IAS 1 (Revised) "Presentation of Financial Statements"; ·              IAS 23 "Borrowing Costs"; ·              IAS 27 (Revised) "Consolidated and Separate Financial Statements"; ·              IFRS 2 "Share-Based Payment"; ·              IFRS 3 (Revised) "Business Combinations; ·              IFRS 7 "Financial Instruments: Disclosures" amendments; and ·              IFRS 8 "Operating Segments". Changes have been made with regards to the presentation of the key financial statement components and segmental information. On adoption of IAS 1 (Revised) the consolidated income statement and statement of recognised income and expense have been re-presented as a single statement of comprehensive income. The 'Balance Sheet' has been re-named 'Statement of Financial Position' and the 'Cash Flow Statement' has been re-named 'Statement of Cash Flows'. On adoption of IAS 27 (Revised) and IFRS 3 (Revised), previous references to minority interest now refer to non-controlling interests.  Under the transitional provisions, assets and liabilities arising from business combinations that occurred before the application of IFRS 3 (Revised) have not been restated. Following adoption of the amendments to IFRS 7, the Group has presented a fair value hierarchy and additional liquidity disclosures (see note 21). Under the transitional provisions of IFRS 8, the Group has re-presented its comparative disclosures for operating segments.  In previous years, in accordance with IAS 14 'Segment Reporting', segmental analysis was provided on a product and geographical basis (see note 2). Standards adopted early by the Group The Group has not adopted any standards or interpretations early in either the current or the preceding financial year. Adoption of standards and interpretations As at the date of authorisation of these financial statements, there were Standards and Interpretations in issue but that are not yet effective and have not been applied in these financial statements. The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the group or company, except for additional disclosures when the relevant Standards come into effect.

 

2	Earnings/(loss) per share	2010 £		2009 £
	The basic earnings/(loss) per share is derived by dividing the profit/(loss) for the year attributable to ordinary shareholders by the weighted average number of shares in issue.
	Profit/(loss) for the period after taxation	3,455,370		(880,772)
	Weighted average number of Ordinary shares of £0.001 in issue	530,859,050		389,691,824
	Earnings/(loss) per share - basic	0.65 pence		(0.23) pence
	Weighted average number of Ordinary shares of £0.001 in issue inclusive of outstanding options	559,329,598		389,691,824
	Earnings/(loss) per share fully diluted	0.62 pence		(0.23) pence

The weighted average number of shares issued for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows:

		2010		2009
	Earnings per share denominator	530,859,050		389,691,824
	Weighted average number of exercisable share options	28,470,548		-
	Diluted earnings per share denominator	559,329,598		389,691,824
	In 2009, the inclusion of the potential Ordinary shares would result in a decrease in the loss per share, they are therefore considered to be anti-dilutive and so have been excluded from the diluted earnings per share denominator.
3	The financial information set out above does not constitute the Company's financial statements for the years ended 30 June 2010, 2009 or 2008.  The financial information for 2008 and 2009 is derived from the financial statements which have been delivered to the Registrar of Companies as restated.  The auditors have reported on the 2010 financial statements; their report was unqualified.  The financial statements for 2010 will be delivered to the Registrar of Companies by 31 December 2010.
4	A copy of the Company's annual report and financial statements for 2010 will be made available on the Company's website www.rrrplc.com on 23 December 2010 and at the Annual General Meeting on 30 December 2010; in addition, it will be mailed to Shareholders by 10 January 2011.

 

END

 

 

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