Final Results

RNS Number : 7486P
Strategic Minerals PLC
10 June 2015
 

 

10 June 2015

 

 

Strategic Minerals Plc

('Strategic" or the "Company")

 

Final results for the year ended 31 December 2014

 

Strategic Minerals Plc (AIM"SML; USOTC: SMCDY), the diversified mineral development and production company, is pleased to announce its final results for the year ended 31 December 2014.

 

Operational Highlights:

 

·     Cobre Magnetite tailings operation ("Cobre") in New Mexico, USA completed its final export of product in February 2014 due to declining iron ore prices

·   Export sales during the financial period were understandably down with 64,000 dry metric tonnes ("DMT") exported compared with 423,000 DMT in 2013

·      Domestic sales were up by 25% to 18,800 short wet tons ("SMT") from 15,000 SMT in 2013

·      Cobre operations now focused on domestic sales and operational costs reduced at site 

·      The Company renewed its agreement with Freeport extending its rights at Cobre until February 2016

·      Focus has been on streamlining overheads which resulted in a 52% reduction in administration costs in the period

·      New Board and management appointments made in May 2014 to transform the business' strategy and direction, the results of which are coming into fruition post year-end

 

Post year-end Highlights

 

·      Relinquishment of the Jotanooka tenements in Australia; currently reviewing the Iron Glen tenements

·     Secured low upfront acquisition of the Tatu Coal Project in New Zealand for NZ$255,000 in cash and a royalty of up to US$2 per tonne of product sold

·      Subsequently, the Company has completed the purchase of 51% of Tatu

·      Raised £1M before expenses through a conditional placing to progress the Tatu project

·      Entered into a Memorandum of Understanding with the owners of the Wanbao Metallurgical Coal Mine, China to assess the underlying resource with the aim of purchasing up to 49% of the mine

 

Financial Highlights

 

·      Loss before tax for the financial year of $6.1M (2013: $29.0M)

·      Revenue was down from $37.2M to $6.08M

·      Administration costs decreased during this period to $1.7M (2013: $3.5M)

 

John Peters, Executive Chairman, commented: "The Company has substantially improved its position from where it was a year ago. The changes to the Board and management have resulted in significant reductions in overheads, whilst other improvements have been made with a focus at Cobre on profitable domestic sales, the conditional acquisition of Tatu Energy Coal Project and the potential investment in the Wanbao Coking Coal Project in China.

 

"The Company is confident it now has low overheads, an existing cash flow stream form Cobre and the potential near term cash flow opportunity from Tatu. Further it anticipates possible growth opportunities through the Wanbao Project in China and potential expansion of the Tatu Project to surrounding areas."

 

Copies of the Annual Report and Accounts will be posted to shareholders and made available on the Company's website later today.

 

The financial information of the Group set out in this statement does not constitute "statutory accounts" for the purposes of Section 435 of the Companies Act 2006. The financial information for the year ended 31 December 2014 has been extracted from the Group's audited financial statements which were approved by the Board of directors on 10 June 2015 and will be delivered to the Registrar of Companies for England and Wales in due course.

 

 

 

 

For further information, please contact:

 

Strategic Minerals plc

John Peters

Executive Chairman

 

+61 414 727 965

Allenby Capital Limited

Nominated Adviser and Joint Broker

Jeremy Porter

James Reeve

 

+44 (0)20 3328 5656

Cornhill Capital Limited

Joint Broker

James Sheehan

Colin Rowbury

 

+44 (0)20 3700 2516

Yellow Jersey PR

Financial PR

Kelsey Traynor

Dominic Barretto

+44 (0)779 900 3220

 

 


CHAIRMAN'S REPORT

 

 

It is my pleasure to present Strategic Minerals Plc's Annual Report for the period ending 31 December 2014. During the past 12 months and the beginning of this year, the Company overcame some significant challenges and I am pleased to say that, following substantial changes made within the business, the Company is now positioned for growth with a steady foundation of cash flow, a new acquisition and other potential opportunities.

 

Following Board and management changes in both May 2014 and January 2015, the new team, with demonstrable track records in both capital markets and mining resources, is now focused on unlocking shareholder value in this new environment of depressed mining prices.  

 

The new Board has successfully transitioned the Company's Cobre operation ("Cobre") in the United States from an export focused business to a smaller volume but higher margin business. This change was necessary due to a significant reduction in global iron ore prices which made, and continues to make, export from Cobre unprofitable. The focus on domestic sales of magnetite product means that the Company is now focused on products which are generally not linked to iron ore prices. The Company's Cobre operation is now a cash flow positive business which we expect to continue to support our growth ambitions into the future.

 

Significant reductions in overheads have been achieved in the second half of the year, resulting in current overheads, excluding project review and development costs, of less than US$1 million on an annualised basis. 

 

Further, the Board reviewed a number of select and potential project acquisitions during the 2014 year which resulted in the Company securing an agreement to acquire 100% of the Tatu energy coal project ("Tatu Project") in the North Island of New Zealand in March 2015.  Historical reports have indicated that the Tatu Project has 7.3 million tonnes of coal. The Company is preparing an updated JORC resource estimate, which we will announce the results of in the near future. The Tatu Project is expected to meet all of the Board's strategic criteria; having expected near term cash flow, local market demand where local supply is limited, substantial resource upside potential and attractive financial economics. The selection of Tatu reflected the ability of the Board and Management to identify and negotiate a transaction with a low upfront cost of NZ$255,000, and a royalty of up to US$2 per tonne of product sold.

 

In addition, the Company has signed a Memorandum of Understanding with the owners of the Wanbao coal project ("Wanbao Project") in China. A JORC resource is currently being completed for this project, which will set the framework for discussions on a potential acquisition of up to 49% of the project.  The Wanbao Project has the potential to be a significant project which could supply local large scale steel mills in the area.  As the Company is cognitive of the risks associated with an investment in China, it has undertaken an approach designed to ameliorate these risks and, once the JORC resource review is completed, the Company will undergo significant due diligence to ensure any investment is de-risked and appropriately managed.

 

 

 

In line with the Company's strategy of securing projects with near term cash flow potential and the drop in iron ore prices the Company decided, in the January 2015, to relinquish the Jotanooka iron ore exploration assets. In addition, the Company is reviewing its position with respect to Iron Glen which is a magnetite iron ore, lead and silver tenement.  

 

On 8 June 2015 the Group announced an equity placing which will raise approximately ~US$1,526,000 (£1,000,000) in two Tranches. The First Tranche is unconditional (except for the Admission of the shares to trading on AIM and will raise ~US$750,000 (£492,000) of gross proceeds with the issue of 82,000,000 ordinary shares at a price of 0.6 pence per share.  The Second Tranche of funds, which is subject to shareholder approval at the forthcoming AGM, will raise a further ~US$776,000 (£508,000) of gross proceeds.  It should be noted that there is no guarantee that shareholder approval will be given in relation to the Second Tranche and the Company will adjust its activities in relation to development of the Tatu Project accordingly.

 

The Company made a gross loss of $629,000 as compared to a gross profit in 2013 of $2,005,000. This was mainly due to a drop in iron ore prices which resulted in the Company ceasing export of iron ore from Cobre in February 2015. Overheads were substantially reduced in the period by 52% to $1,684,000 (2013:$3,486,000) The Company made a loss before tax for the financial year of $6,042,000 (2013: $28,298,000).  The loss for the period was mainly attributable to non-cash related charges  of $3,912,000 (2013: $26,762,000).  The total after tax loss for the year was $5,732,000 (2013: $23,879,000).

 

I would like to thank our management and staff for their hard work, as well as my fellow Board members for their contributions. The foundations for growth have been set and the Company looks forward to continuing to deliver significant shareholder value in the future.

Finally, I would like to acknowledge the support of our shareholders, suppliers and other stakeholders and I look forward to your continued support.

 

John Peters

 

 

 

 

Chairman

10 June 2015

 

 

STRATEGIC MINERALS PLC

 

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2014

The Directors of the Company and its subsidiary undertaking (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2014.

STRATEGY

The Company's strategy is to build a diversified portfolio of cash generating assets with an underlying blue sky value proposition.

The Company's criteria for investments are:

Near Term Cash Flows              

Projects that are expected to commence cash flow from operations within 18 to 24 months of acquisition.

Local Market Demand

Local demand should exist for products in order to provide logistical competitive advantage to protect both demand and ensure sustainable profit margins.

Substantial Resource Upside

Projects should have additional resource potential to ensure that the project can take advantage of market upswings.

Financially Attractive

Pre-tax IRR rates and payback hurdles to be met with low upfront expenditure to secure the project.  IRR rates utilised to reflect risk profile of project.  Project to be within the Company's perceived funding capacity.

The Company is well positioned with a sound foundation and a pipeline of opportunities being:

COBRE an existingcash flow positive business producing iron ore magnetite

TATU a potentially modest sized near term producing energy coal project

WANBAO a larger scale metallurgical coal project

 

 

PROJECT REVIEW AND ACTIVITIES

Cobre Performance

 

Due to declining global iron ore prices, the Cobre Magnetite tailings operation in New Mexico, USA, completed its final export of product in February 2014.  The focus of the business is now on the sale of product to domestic customers. As a result, the operation is expected to be cash flow positive. Export sales for the year to 31 December 2014 were understandably down with 64,000 dry metric tonnes ("DMT") (2013: 423,000 DMT) exported and domestic sales were up by 25% to 18,800 short wet tons ("SWT") (2013: 15,000 SWT).

 

Operations at the mine have been successfully streamlined to reduce costs, while still ensuring adequate service to customers and safe operating conditions. 

 

During the year the Company investigated the potential to produce a heavy dense media ("HDM") product suitable for coal washing. However, in line with falls in the price for such products and the Company's strict capital investment criteria, the HDM project has been placed on hold until further market improvements can be seen or customers strategically located to Cobre can be secured.

 

In March 2014, the Company announced a renewed agreement with Freeport, extending its rights at Cobre until February 2016.  The Company will commence discussions in relation to a further extension of this contract prior to the expiry date.
 

 

Tatu Project

 

In March 2015, the Company secured a contract to purchase 100% of the Tatu coal project by acquiring King Country Mine Limited ("KCM") in New Zealand for NZ$255,000 in cash, and a royalty of up to US$2 per tonne of product sold.  Following the announcement to acquire the project on 31 March 2015, the Company has completed the purchase of 51% of KCM for a total of NZ$132,500 (including a NZ$5,000 signing fee). Strategic Minerals has until 31 January 2016 to purchase the remaining 49%, for NZ$122,500 (the "Option"). The exercise of the Option is subject to:

 

a)   Regulatory approvals by the New Zealand authorities for change of control of the mining permits held by KCM; and

b)   Strategic Minerals providing to the vendors of KCM proof of financial capacity to commence operations at the mine. Should the Company not proceed with the Option, the vendors of KCM can acquire the Company's 51% interest in KCM for NZ $1.

The vendors of KCM will be entitled to a royalty stream from production of up to NZ$2 per tonne of product sold from the Tatu mine operations with a guaranteed minimum average royalty payment of NZ$200,000 p.a., payable during the first 5 years from when production is meant to commence irrespective of quantity of product sold . The Company will have the right of first refusal on the sale or transfer of the royalty stream.

 

The Tatu mine was a state owned and operated mine which ceased production in 1970.  Historical exploration reports indicate a resource of 7.3 million tonnes of high quality thermal coal which the Company is currently looking to confirm with a JORC resource as soon as possible.  The project is located near Ohura, in the North Island of New Zealand and is approximately 400 metres above sea level.  Access to the mine is via road and there is potential for a rail siding from a reasonably close location.

 

Based on historical reports, average coal seam thickness appears to be greater than 2 metres which has been based on outcrop at surface, 7 drill holes within 250m of the proposed new mine entrance, old workings and other coal outcrop in close proximity to the project. The energy value of the Tatu coal is expected to be around 24.43 Mj/kg (5,835 kcal/kg) and which has similar or better energy coal characteristics to coal currently being supplied to the North Island of New Zealand.

 

The North Island of New Zealand imports a significant quantity of thermal coal for energy generation and domestic lime and concrete production with some potential large customers within a 150 kilometre radius from Tatu, which is expected to support 200,000 tonnes p.a. of thermal coal production. The Company has engaged local coal marketers who are undertaking sales enquiries to assess demand and progress discussions to support the sale of coal from Tatu. Recent feedback from sales enquiries supports the Company's aim of securing a US$10 per tonne after tax profit margin.  

 

The Company believes the Tatu Project meets all of its investment criteria and it is undertaking a feasibility study to confirm whether it will deliver near term cash flow, has local market demand, has potential resource upside and attractive economics.

 

 

Wanbao Project

 

In March 2015, the Company entered into a Memorandum of Understanding with the owners of the Wanbao Metallurgical Coal Mine based in China.  The Memorandum of Understanding provides Strategic Minerals the opportunity, over six months, to assess the underlying resource, its market logistics and to then negotiate a mutually agreeable acquisition of up to 49% of the mine. The Company will approach an investment in China cautiously and hence will undertake an extensive due diligence process to ensure that any investment is de-risked and appropriately managed.

 

The Wanbao Coal Mine has previously produced premium coking coal with historical underground mining methods resulting in a 50% recovery of saleable product. A JORC resource is being completed to help evaluate the mining lease and surrounding exploration areas. Concurrently a review of the most appropriate mining methods is being undertaken and this initially appears to indicate that surface/strip mining may provide a financially attractive, low capital cost approach to extracting coal.
 

 

Wanbao Project (continued)

 

Like Tatu, the Wanbao Project benefits from access to local market users, with three major steel mills in close proximity to the project.  Sales prices are normally in excess of current global markets due to logistical advantages associated with local supply to local markets.

 

The scale of the Wanbao Project is likely to be much larger than Tatu and, subject to the economic viability of the final proposition meeting Strategic Minerals' investment criterion, it is likely to involve the Company working in partnership with others.

 

 

Safety

 

The Company is pleased to report that, during 2014, across its operations in United States and Australia that the Company had zero safety incidents and incurred no environmental, regulatory, or operation violations. The Company was quick to implement basic safety procedures in New Zealand at its Tatu Project following the initial acquisition of 51% of the project.

 

 

Australian Operations

 

In the first quarter of 2015, the Company agreed to relinquish the Jotanooka tenements.  Whilst the Board believes there is good potential in these tenements, the significant fall in iron ore prices suggests that commercialisation of these resources is at least seven years away. Therefore, the Company has concluded that, while prospective, this tenement does not align with the Company's focus on near term cash flow opportunities. 

 

Similarly, a review is currently being conducted on the Company's Iron Glen tenements.

 

 

Financial Performance

 

The Company's reporting currency is US dollars as the Company's revenues, expenses, assets and liabilities are predominately in US currency.

 

The Company made a loss before tax for the financial year of $6.1M (2013: $29.0M).  The loss was mainly attributable to non-cash related charges for the year of $3.9M (2013: $26.8M).  The total after tax loss for the year is $5.7M (2013: $23.9M).

 

The non-cash charge of $3.9M was due to a number of factors including $1.5M as a result of the normal amortisation charge associated with the Cobre operation and a $2M impairment of the deferred exploration costs associated with the Australian iron ore magnetite tenements in Australia. This impairment was determined in light of a negative outlook for the price of this commodity and the generally negative market sentiment towards earlier stage projects.

 

Administration costs decreased during the financial year to $1.7M (2013: $3.5M).  This 52% reduction of $1.8M was as a result of a concerted effort by the board to significantly reduce overheads which began after the change of board in May 2014. Most of these savings were as a result of reduced directors fees, closing of the London office, cutting of unnecessary expenditure and Directors and Management negotiating with our long term suppliers to, reduce their normal charges.    

 

The Company's taxation credit arises from the release of a deferred tax liability related to the intangible asset of the Cobre asset. No tax liability existed at 31 December 2014 and the Company has substantial tax losses carried forward.

 

 

 

 

 

Board and Management Changes

 

In May 2014, the Company began to transform the business, its strategy and direction with the appointed of Mr Julien McInally and Mr Lyle Hobbs as executive directors.  To ensure the Company had the appropriate resources to complete its growth strategy the Company appointed Mr John Peters (Executive Director) and Mr Michael Wong (Non-executive Director) to the board in January 2015. At that time Mr Julien McInally stepped down from the Board but he remains a key part of management team as Chief Financial Officer.  Mr Lyle Hobbs moved to a Non-executive Director's role at the same time.

 

 

Key Risks and Uncertainties

 

Key risks and Uncertainties have been provided in the Directors Report.

 

 

Key Performance Indicators

 

The Board monitors the activities and performance of the Group on a regular basis.  The principal KPI's monitored by the Company are domestic sales of product from Cobre, the cash position of the Group and the health, safety and environmental incidents of the Group. The cash position of the group as at 31 December 2014 was $946,000 and there were no health, safety and environmental incidents reported in the year.

 

 

Outlook and Prospects

 

The Company has substantially improved its position from where it was a year ago.  The changes to the Board and Management have resulted in significant reductions in overheads, whilst other improvements have been made with a focus at Cobre on profitable domestic sales, the conditional acquisition of the Tatu Energy Coal Project in New Zealand and the potential investment in the larger Wanbao Coking Coal Project in China.

 

The strategy of focusing on a localised market where prices are not dictated purely by global commodity pricing has worked well at Cobre in the United States.  This business model now forms a key foundation to the Company's acquisition strategy and this criterion has been used to evaluate and build the Company's portfolio of projects with the expansion into energy coal and potentially metallurgical coal.

 

The Company is currently working on completing a JORC resource and a Feasibility Study on the Tatu Project.  This work will include a focus on the localised market opportunities in New Zealand and the Company hopes to secure offtake agreements and prepayment of product from potentially customers. The Company will also progress discussions with contractors on potential turn-key type mine development solutions which could include funding.  In addition, mine equipment financing is also being reviewed as part of its funding options for the Tatu Project.

 

Key project management personnel are currently being identified for the Tatu Project and will be appointed at the appropriate time to ensure that our development plans can be maintained and risks appropriately managed.

 

Our potential partners in China will complete a review of the Wanbao Project in the coming months and we hope to progress due diligence and discussions on the potential investment of up to a 49% interest in the Project.

 

The Company is confident it now has low overheads, an existing cash flow stream from Cobre and the potential near term cash flow opportunity from Tatu. Further it anticipates possible growth opportunities through the Wanbao Project in China and potential expansion of the Tatu Project to surrounding areas.

 

 

John Peters

Executive Chairman

 

 

 

 

Date 10 June 2015

 

 

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

 

Year to

Year to

Year to

Year to

 

 

31 December

31 December

31 December

31 December

 

Note

2014

2014

2013

2013

 

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

 

 

 

 

Revenue

4

 

6,089

 

37,242

Raw materials and consumables

 

 

(6,718)

 

(35,237)

Used

 

 

________

 

________

 

 

 

 

 

 

Gross profit

 

 

(629)

 

2,005

 

 

 

 

 

 

Foreign exchange gain/(loss)

 

183

 

(55)

 

Other expenses

5

      (1,684)

 

      (3,486)

 

 

 

 

 

 

 

 

 

(1,501)

 

(3,541)

 

Non cash costs

 

 

 

 

 

 

Depreciation

13

(2)

 

(1,036)

 

Impairment to railway infrastructure

13

-

 

(2,324)

 

Impairment of receivable

 

(286)

 

-

 

Amortisation of intangible asset

11

(1,545)

 

(8,578)

 

Impairment of intangible asset

11

(2,079)

 

(14,366)

 

Share based payment

 

_______--

 

         (458)

 

 

 

 

 

 

 

Non cash costs

 

(3,912)

 

(26,762)

 

Total expenses

 

 

(5,413)

 

(30,303)

 

 

 

________

 

________

 

 

 

 

 

 

Loss from operations

 

 

(6,042)

 

(28,298)

 

 

 

 

 

 

Finance expense

7

 

(14)

 

(673)

 

 

 

________

 

________

 

 

 

 

 

 

Loss before taxation

 

 

(6,056)

 

(28,971)

 

 

 

 

 

 

Income tax credit

8

 

324

 

5,092

 

 

 

________

 

________

Loss for the period attributable to the owners of the parent

 

 

(5,732)

 

(23,879)

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Exchange gains arising on translation of foreign operations

 

 

20

 

182

 

 

 

________

 

________

Total comprehensive income attributable to the owners of the parent

 

 

(5,712)

 

(23,697)

 

 

 

________

 

________

 

 

 

 

 

 

 

Loss per share attributable to the ordinary equity holders of the parent:

 

Continuing activities - Basic and diluted

10

 

($0.009)

 

($0.044)

 

 

 

________

 

________

 

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements
 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014

 

 

 

2014

2013

 

Notes

$'000

$'000

Assets

 

 

 

Non-current assets

 

 

 

Intangible assets

11

-

3,370

Property, plant and equipment

13

2

4

 

 

________

________

 

 

 

 

 

 

2

3,374

 

 

________

________

Current assets

 

 

 

Inventories

14

17

2,223

Trade and other receivables

15

244

3,069

Cash and cash equivalents

16

946

1,183

 

 

________

________

 

 

 

 

 

 

1,207

6,475

 

 

________

________

 

 

 

 

Total Assets

 

1,209

9,849

 

 

________

________

Equity and liabilities

 

 

 

Share capital

20

1,169

884

Share premium reserve

 

41,707

39,847

Merger reserve

 

20,240

20,240

Foreign exchange reserve

 

(140)

(160)

Share options reserve

21

-

2,478

Other reserves

 

(23,023)

(23,023)

Retained earnings

 

(39,447)

(36,193)

 

 

________

________

 

 

 

 

Total Equity

 

506

4,073

 

 

________

________

Liabilities

 

 

 

Non-current liabilities

 

 

 

Deferred tax liability

19

-

324

 

 

________

________

 

 

 

 

 

 

-

324

 

 

________

________

Current liabilities

 

 

 

Loans and borrowings

17

-

-

Trade and other payables

18

703

5,452

 

 

________

________

 

 

 

 

 

 

703

5,452

 

 

________

________

 

 

 

 

Total Liabilities

 

703

5,776

 

 

________

________

 

 

 

 

Total Equity and Liabilities

 

1,209

9,849

 

 

________

________

 

These financial statements were approved and authorised for issue by the Board of Directors on

and were signed on its behalf by:

 

 

 

 

John Peters

Director

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements

 
STRATEGIC MINERALS PLC

 

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2014

 

 

Notes

2014

2013

 

 

$'000

$'000

 

 

 

 

Assets

 

 

 

Non-current assets

 

 

 

Investments

12

387

3,279

Property, plant and equipment

13

2

4

 

 

________

________

 

 

 

 

 

 

389

3,283

 

 

________

________

Current assets

 

 

 

Trade and other receivables

15

544

3,179

Cash and cash equivalents

16

114

438

 

 

________

________

 

 

 

 

 

 

658

3,617

 

 

________

________

 

 

 

 

Total Assets

 

1,047

6,900

 

 

________

________

Equity and liabilities

 

 

 

Share capital

20

1,169

884

Share premium reserve

 

41,707

39,847

Merger reserve

 

20,240

20,240

Foreign exchange reserve

 

156

298

Share options reserve

21

-

2,478

Retained earnings

 

(62,475)

(59,674)

 

 

________

________

 

 

 

 

Total Equity

 

797

4,073

 

 

________

________

Liabilities

 

 

 

Current liabilities

 

 

 

Trade and other payables

18

250

2,827

 

 

________

________

 

 

 

 

 

 

250

2,827

 

 

________

________

 

 

 

 

Total Liabilities

 

250

2,827

 

 

________

________

 

 

 

 

Total Equity and Liabilities

 

1,047

6,900

 

 

_______

________

 

These financial statements were approved and authorised for issue by the Board of Directors on

and were signed on its behalf by:

 

 

 

 

John Peters

Director

  

 

The accompanying accounting policies and notes form an integral part of these financial statements

 
STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

 

Year to

 

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Loss before tax

 

(6,056)

(28,971)

Adjustments for:

 

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

2

1,039

Impairment to intangible assets

 

2,079

14,366

Impairment to property, plant and equipment

 

-

2,324

Amortisation of intangible assets

 

1,545

8,578

Loss on disposal of property, plant and equipment

 

-

1

Decrease in inventory

 

2,206

559

(Increase) / decrease in trade and other receivables

 

3,291

(1,795)

Increase / (decrease) in trade and other payables

 

(4,749)

1,047

Share based payment expense

 

-

458

 

 

_______

_______

 

 

 

 

Net cash used in operating activities

 

(1,682)

(2,394)

 

 

_______

_______

 

 

 

 

Investing activities

 

 

 

Acquisition of intangible fixed assets

 

(92)

-

Acquisition of property, plant and equipment

 

 

(50)

 

 

_______

_______

 

 

 

 

Net cash used in investing activities

 

(92)

(50)

 

 

_______

_______

 

 

 

 

Financing activities

 

 

 

Net proceeds from issue of equity share capital

 

1,542

6,580

Net (repayment) from borrowings

 

-

(4,696)

 

 

_______

_______

 

 

 

 

Net cash from financing activities

 

1,542

1,884

 

 

_______

_______

 

 

 

 

Net decrease in cash and cash

 

(232)

(560)

 equivalents

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

1,183

1,732

Effects of exchange rate changes on the balance of cash

held in foreign currencies

 

(5)

11

 

 

_______

_______

 

 

 

 

Cash and cash equivalents at end of year

 

946

1,183

 

 

_______

_______

 

 

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements
 

STRATEGIC MINERALS PLC

 

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

 

 

Year to

 

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

Loss before tax

 

(5,279)

(52,414)

Adjustments for:

 

 

 

Impairment to receivables from subsidiary undertakings

 

408

48,477

Impairment to investment in subsidiary

 

2,915

-

Depreciation

 

2

3

(Increase) / decrease in trade and other receivables

 

2,830

(1,469)

Increase / (decrease) in trade and other payables

 

(2,714)

1,727

Share based payment expense

 

-

458

 

 

_______

_______

 

 

 

 

Net cash flows from operating activities

 

(1,838)

(3,218)

 

 

_______

_______

 

 

 

 

Investing activities

 

 

 

Acquisition of tangible fixed assets

 

-

-

Receipts from / (advances to) subsidiary undertakings

 

(23)

1,181

 

 

_______

_______

 

 

 

 

Net cash flows from investing activities

 

(23)

1,181

 

 

_______

_______

 

 

 

 

 

 

 

 

Financing activities

 

 

 

Net proceeds from issue of equity share capital

 

1,542

6,580

Net (repayment) / proceeds from borrowings

 

-

(4,696)

 

 

_______

_______

 

 

 

 

Net cash from financing activities

 

1,542

1,884

 

 

_______

_______

 

 

 

 

Net decrease in cash and cash equivalents

 

(319)

(153)

 

 

 

 

Cash and cash equivalents at beginning of year

 

438

582

Effects of exchange rate changes on the balance of cash held in foreign currencies

 

(5)

9

 

 

_______

_______

 

 

 

 

Cash and cash equivalents at end of year

 

114

438

 

 

_______

_______

 

 

 

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements
 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

Share

capital

Share

 premium

 reserve

Merger

 reserve

Share

 options

 reserve

Other

Reserves

Foreign

 exchange

 reserve

Retained earnings

Total

equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

 

Balance at

31 December 2012

719

33,432

20,240

2,163

(23,023)

(342)

(12,457)

20,732

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

-

-

(23,879)

(23,879)

Foreign exchange translation

-

-

-

-

-

182

-

182

 

 

 

 

 

 

_______

_______

_______

Total comprehensive income for the year

 

 

 

 

 

 

 

182

(23,879)

(23,697)

 

 

 

 

 

 

 

 

 

 

Shares issued in the year

160

7,073

-

-

-

-

-

7,233

 

Expenses of share issue

-

(658)

-

-

-

-

-

(658)

 

Exercise of options

5

-

-

(143)

-

-

143

5

 

Share based payments charge

-

-

-

458

-

-

-

458

 

_______

_______

_______

_______

_______

_______

_______

_______

Balance at

31 December 2013

884

39,847

20,240

2,478

(23,023)

(160)

(36,193)

4,073

 

_______

_______

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

-

 

(5,732)

(5,732)

Foreign exchange translation

-

-

-

-

-

20

-

20

 

 

 

 

 

 

_______

_______

_______

Total comprehensive income for the year

 

 

 

 

 

 

 

20

(5,732)

(5,712)

Share Warrants Lapsed

 

 

 

(2,478)

 

 

2,478

 

 

Shares issued in the year

285

1,860

-

-

-

-

-

2,145

 

_______

_______

_______

_______

_______

_______

_______

_______

Balance at

31 December 2014

1,169

41,707

20,240

-

(23,023)

(140)

-39,447

506

 

_______

_______

_______

_______

_______

_______

_______

_______

 

 

All comprehensive income is attributable to the owners of the parent Company.

 

 

 

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements
 

STRATEGIC MINERALS PLC

 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

 

Share

 

Share

 

 

 

 

 

Share

premium

Merger

Options

Foreign

Retained

Total

 

 

capital

reserve

reserve

Reserve

exchange

reserve

earnings

equity

 

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2012

719

33,432

20,240

2,163

32

(6,838)

49,748

 

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

-

(52,979)

(52,979)

 

Foreign exchange translation

-

-

-

-

266

-

266

 

 

 

 

 

 

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

266

(52,979)

(52,713)

 

for the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in the year

160

7,073

-

-

-

-

7,233

 

Expenses of share issue

-

(658)

-

-

-

-

(658)

 

Exercise of share options

5

-

-

(143)

-

143

5

 

Share based payments charge

-

-

-

458

-

-

458

 

 

_______

_______

_______

_______

_______

_______

_______

 

Balance at

31 December 2013

884

39,847

20,240

2,478

298

(59,674)

4,073

 

 

_______

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Loss for the year

 

 

 

 

-

(5,279)

(5,279)

 

Foreign exchange translation

 

 

 

 

(142)

-

(142)

 

 

 

 

 

 

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

 

 

(142)

(5,279)

(5,421)

 

for the year

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Warrants Lapsed

 

 

 

(2,478)

 

2,478

 

 

 

 

 

 

 

 

 

 

 

Shares issued in the year

 

285

1,860

-

-

-

-

2,145

 

 

_______

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

Balance at

31 December 2014

1,169

41,707

20,240

-

156

(62,475)

797

 

 

_______

_______

_______

_______

_______

_______

_______

 

 

All comprehensive income is attributable to the owners of the parent Company.

 

 

 

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2014

 

 

Share capital is the amount subscribed for shares at nominal value.

 

Share premium reserve represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

 

Merger reserve arises from the 100% acquisition of Ebony Iron Pty Limited on 2 September 2011 whereby the excess of the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve, in accordance with section 612 of the Companies Act 2006.

 

Share option reserve relates to increases in equity for services received in equity-settled share based payment transactions and on the grant of share options.

 

Other reserves consist of an adjustment arising from the Group reorganisation in 2011 being the formation of a new holding Company for Iron Glen Holdings Limited by way of a share for share issue, and is the difference between consideration given and net assets of the Company at the date of acquisition.

 

Foreign exchange reserve occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

 

Retained earnings represent the cumulative loss of the Group attributable to equity shareholders.

 

 

 

EMPHASIS OF MATTER

 

The following paragraph has been extracted, without amendment, from the audit report contained within the Company's annual report and accounts for the year ended 31 December 2015:


In forming our opinion of the financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 1 to the financial statements concerning the Group and Company's ability to continue as going concerns. The Group has identified a requirement to raise additional funds within 12 months of the year end to meet liabilities as they fall due. The directors have entered into a placing agreement to raise the required funds. However, part of the equity placing is subject to shareholder approval at the forthcoming Annual General Meeting and there can be no guarantee that the shareholders will approve the proposal. Furthermore, the cash from the First Tranche has not been received. These conditions, along with other matters explained in Note 1 to the financial statements indicate that, in the absence of additional funds being raised, there exists material uncertainty which may cast significant doubt about the Group and the Company's ability to continue as a going concern. These financial statements do not include the adjustments that would result if the Group and Company were unable to continue as going concerns.

STRATEGIC MINERALS PLC

 

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2014

 

1.   Significant accounting policies

Basis of preparation

In preparing these financial statements the presentational currency is US dollars which was adopted as the presentational currency in the prior year.  As the entire group's revenues and majority of its costs, assets and liabilities are denominated in US dollars it is considered appropriate to report in this currency.

 

The principal accounting policies adopted in the preparation of the financial statements are set out below.  The policies have been consistently applied to all the years presented, unless otherwise stated.

 

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

 

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates.  It also requires Group management to exercise judgment in applying the Group's accounting policies.  The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

 

Going concern basis

These financial statements have been prepared on the assumption that the Group is a going concern.

 

When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to 30 June 2016 being the period for which projections have been prepared and the minimum period the Directors are required to consider. At 31 May 2015, the Group had cash reserves of $783,000 and on 8 June 2015, the Group announced an equity placing which will raise approximately ~US$1,526,000 (£1,000,000) in two Tranches. The First Tranche is unconditional (except for the admission of the shares on AIM) and will raise ~US$750,000 (£492,000) of gross proceeds with the issue of 82,000,000 ordinary shares in the Company.  The Second Tranche of funds, which is subject to shareholder approval at the forthcoming AGM, will raise a further ~US$776,000 (£508,000) of gross proceeds.

 

On the basis that the directors expect to secure the funds from the First Tranche and the expectation that the rights to the Cobre operation will be extended beyond February 2016, the directors are satisfied that the going concern basis of preparation of the financial statements continues to be appropriate. However, should the First Tranche funds not be forthcoming or the Cobre rights not be extended there exists a material uncertainty which may cast significant doubt over the Group's and the Company's ability to continue as a going concern and therefore it may be unable to release its assets and discharge its liabilities in the normal course of business.

 

After making enquiries, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

 

Adoption of standards effective in 2014

No material changes to accounting policies arose as a result of new standards applied by the Group from 1 January 2014, including IFRS 10 Consolidated Financial Statement and IFRS 12 Disclosure of Interests in Other entities.

 

Issued IFRS that are not yet effective

Any standards and interpretations that have been issued but are not yet effective, and that are available for early application, have not been applied by the Group in these financial statements.

 

The Group does not expect other pronouncements to have a material impact upon the Group's primary statements and disclosure.

 

 

 

 

1    Significant accounting policies (continued)

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.  The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the purchase method.  In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.  The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

 

Impairment of non-financial assets (excluding inventories)

Impairment tests of intangible assets with indefinite useful economic lives are undertaken annually at the financial year end.  Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

 

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows: its cash generating units ('CGUs'). 

 

Impairment charges are included in the statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income. 

 

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives.

 

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights.  The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

 

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

 

 

 

1    Significant accounting policies (continued)

Exploration and evaluation assets

The Group has continued to apply the 'successful efforts' method of accounting for Exploration and Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 'Exploration for the Evaluation of Mineral Resources'. 

 

The successful efforts method means that only the costs which relate directly to the discovery and development of specific mineral reserves are capitalised. Such costs may include costs of license acquisition, technical services and studies; exploration drilling and testing but do not include costs incurred prior to having obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is general in nature is charged directly to the statement of comprehensive income and that which relates to unsuccessful exploration operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate directly to the discovery and development of specific commercial mineral reserves will remain capitalised and to be depreciated over the lives of these reserves. Exploration and evaluation costs are capitalised within intangible assets.  Costs incurred prior to obtaining legal rights to explore are expensed immediately to the statement of comprehensive income.

 

All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the Directors consider to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets as 'Developed mineral assets' following an impairment review and depreciated accordingly.  Where properties are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in which the determination is made.

 

Costs are amortised on a Tenement by Tenement unit of production method based on commercial proven and probable reserves.

 

Contractual relationship

The contractual relationship recognised as a result of the acquisition of Ebony Iron Pty Limited has been valued using estimated discounted cash flow and is being amortised over the term of the contract at a rate to match the sale of magnetite.

 

Property, plant and equipment

Items  of  property,  plant  and  equipment  are  initially  recognised  at  cost. As  well  as  the purchase price, cost includes directly attributable costs.

 

Depreciation is provided on all items  of  property,  plant  and  equipment  so  as  to  write  off  their  carrying  value  over  their expected useful economic lives.  It is provided at the following rates:

 

Office equipment - 3 years straight line

Leasehold improvements - 10 years straight line

Rail infrastructure - on a per ton basis for inventory transported by rail in the year

 

The carrying value of tangible fixed assets is assessed annually and any impairment is charged to the statement of comprehensive income.

 

Investments

Investments are stated at cost less provision for any impairment in value.

 

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

 

1    Significant accounting policies (continued)

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.  Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

 

Revenue

Revenue from the sale of magnetite is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment.  These criteria are considered to be met when the goods are delivered to the buyer, being the point of shipment for export sales and the point of leaving the mine gate for domestic sales to the US market.

 

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.  Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

 

Taxation

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

 

The tax currently payable is based on taxable profit for the year.  Taxable profit differs from profit as reported in the same income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible.  The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

 

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

 

·      the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·      investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

 

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

 

·      the same taxable Group Company; or

·      different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

·     

1    Significant accounting policies (continued)

Fair values

The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the Group at the statement of financial position date approximated their fair values, due to the relatively short term nature of these financial instruments.

 

Share-based compensation

The fair value of the employee and suppliers services received in exchange for the grant of options and warrants is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options and warrants granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options and warrants that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options and warrants that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.

 

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options and warrants are exercised.

 

The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, and exercise restrictions. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience.

 

Equity instruments

Ordinary shares are classified as equity.

 

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

 

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation.  Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.

 

Financial instruments

Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

 

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transactions costs.

 

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

 

1    Significant accounting policies (continued)

Financial assets

The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired.  The Group has not classified any of its financial assets as held to maturity.

 

Fair value through profit or loss

This category comprises only in-the-money derivatives.  They are carried in the statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income in the finance income or expense line.

 

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (eg trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transaction costs that are directly attributable to tier acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

 

Available-for-sale

Non-derivative financial asset not included in the above categories are classified as available-for-sale and are carried at fair value.

 

Financial liabilities

The Group classifies its financial liabilities into one of two categories; depending on the purpose for which the liability was acquired.

 

Fair value through profit or loss

This category comprises only out-of-the-money derivatives.  They are carried in the consolidated statement of financial position at fair value with changes in fair value recognised in the consolidated statement of comprehensive income.

 

Other financial liabilities

Other financial liabilities include bank borrowings, liability components of convertible loan notes and trade payables and other short-term monetary liabilities which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

 

 

 

 

1    Significant accounting policies (continued)

Foreign currencies

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur.  Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.  Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation, in which case exchange differences are recognised in other comprehensive income and accumulated in the foreign exchange reserve along with the exchange differences arising on the retranslation of the foreign operation.

 

Exchange gains and losses arising on the retranslation of monetary available for sale financial assets are treated as a separate component of the change in fair value and recognised in profit or loss.  Exchange gains and losses on non-monetary available for sale financial assets form part of the overall gain or loss recognised in respect of that financial instrument.

 

On consolidation, the results of overseas operations are translated into US Dollars at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date.  Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. 

 

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the gain or loss on disposal.

 

Management of capital

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Group arise in respect of the costs of financing working capital as inventory is built up prior to sale.

 

The Board receives periodic cash flow projections as well as information on cash balances. The Board will not commit to material expenditure prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes.

 

 

2.  Critical accounting estimates and judgements

 

The Group makes certain estimates and assumptions regarding the future.  Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Judgements

 

(a)  Revenue recognition

 

The eventual price invoiced for export sales is determined based on a formula linked to the Platts IODEX 62% Fe CFR China in months following the month of sale and quality analysis post loading.  For 2014 the amount recorded as revenue is the final agreed invoice value so no judgement has been applied in recording revenue for the year. 

 

Estimates and assumptions

(b)  Carrying value of intangible assets

In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held for which further details are given in Note 11. With the decline of the iron ore price the carrying value of the exploration and evaluation costs are considered to be non recoverable Accordingly an impairment adjustment of $2,079,000 was made for the year.

In assessing the continuing carrying value of the other intangible asset, being the contractual relationship acquired on the acquisition of Ebony Iron Pty Limited, the key estimate and assumption made in the valuation model adopted has been the expected level of product which the Company will be able to sell. The carrying value for this intangible asset is now fully amortised. 

(c)  Share based payments

The fair value of share based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour based on past experience.

 

3

Financial instruments - Risk management

 

The Group is exposed the following financial risks:

 

·       Credit risk

·       Foreign exchange risk

·       Other market price risk

·       Liquidity risk

 

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial statements.

 

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from last year unless otherwise stated in this note.

 

Principal financial instruments

 

The principal financial instruments used by the Group, from which financial instrument risk arises, are:

 

·       Trade and other receivables

·       Cash and cash equivalents

·       Trade and other payables

 

A summary of the financial instruments held by category is provided below:

 

Financial assets

 

 

Loans and receivables

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Cash and cash equivalents

946

1,183

 

Trade and other  receivables

244

2,829

 

 

_______

_______

 

 

 

 

 

Total financial assets

1,190

4,012

 

 

_______

_______

 

 

Financial liabilities

 

 

 

 

Financial liabilities at amortised cost

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Trade and other payables

703

5,168

 

Loans and borrowings

-

-

 

 

_______

_______

 

 

 

 

 

Total financial liabilities

703

5,168

 

 

_______

_______

 

3

Financial instruments - Risk management (continued)

 

 

Financial assets

Loans and receivables

 

 

2014

2013

 

Company

$'000

$'000

 

 

 

 

 

Cash and cash equivalents

114

438

 

Trade and other  receivables

30

2,319

 

Amounts owed by subsidiary undertakings

514

633

 

 

_______

_______

 

 

 

 

 

Total financial assets

658

3,390

 

 

_______

_______

 

 

 

Financial liabilities

 

 

 

 

Financial liabilities at amortised cost

 

 

2014

2013

 

Company

$'000

$'000

 

 

 

 

 

Trade and other payables

250

2,550

 

Loans and borrowings

-

-

 

 

_______

_______

 

 

 

 

 

Total financial liabilities

250

2,550

 

 

_______

_______

 

General objectives, policies and processes

 

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function.  The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  Further details regarding these policies are set out below:

 

Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales.  It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts.  Such credit assessments are taken into account by local business practices.

 

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "A" are accepted.

 

Further disclosures regarding trade and other receivables, which are neither past due nor impaired other than shown, are provided in Note 15.  Of the total of Trade receivables at 31 December 2014,78% was due from one customer (2013 - 81%).

 

The group had no loans outstanding at year end.

 

Fair value and cash flow interest rate risk

 

All of the Group's and Company's borrowings were at fixed rate.  At 31 December 2014 the Group had no external borrowings.

3

Financial instruments - Risk management (continued)

 

Foreign exchange risk

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency.  The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their own functional currency (being Pound Sterling, US dollar and Australian dollar) with the cash generated from their own operations where possible in that currency.  Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

 

The parent Company maintains US dollar and Pounds sterling bank accounts.  Sales to the export market are invoiced by the parent Company in US dollars, and in 2013 the parent Company entered into loans denominated in both US dollar and Australian dollars.

 

All receivables and payables are settled at the prevailing spot rate; no forward contracts or other hedging instruments are currently entered into.  The Board monitors the total foreign exchange risk on a periodic basis but given the major in and out flows of cash are in US dollars there is a natural hedge in place which minimises the overall exposure.

 

As of 31 December the net exposure to foreign exchange risk was as follows:

 

 

 

Functional currency of individual entity

 

 

Sterling

Australian dollar

Total

 

 

2014

2013

2014

2013

2014

2013

 

 

$'000

$'000

$'000

$'000

$'000

$'000

 

Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/(liabilities)

 

 

 

 

 

 

 

Australian dollar

 

-

 

-

 

-

 

US Dollar

13

2,420

381

500

394

2,920

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

Total net exposure

13

2,420

381

500

394

2,920

 

 

_______

_______

_______

_______

_______

_______

 

 

 

 

Functional currency of individual entity

 

 

Sterling

 

Total

 

 

2014

2013

 

 

2014

2013

 

 

$'000

$'000

 

 

$'000

$'000

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net foreign currency financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

assets/(liabilities)

 

 

 

 

 

 

 

US Dollar

13

2,420

 

 

13

2,420

 

 

_______

_______

 

 

_______

_______

 

 

 

 

 

 

 

 

 

Total net exposure

13

2,420

 

 

13

2,420

 

 

_______

_______

 

 

_______

_______

 

 

3

Financial instruments - Risk management (continued)

 

Other market price risk

The Group's sale of magnetite to the export market, as opposed to US domestic customers, is priced by reference to the market quoted Platts IODEX 62% Fe CFR China price over which the Group has no influence.  There was only one shipment of product in 2014 and hence exposure to market price risks have been substantially reduced.

 

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments.  It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.  To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 30 days.  The Group also seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on its long-term borrowings.

 

The Board receives periodic cash flow projections as well as information regarding cash balances.  The Group does not have any overdraft or other credit lines in place.  The liquidity risk of each Group entity is managed centrally by the finance function. 

 

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:

 

 

 

 

Between

Between

 

 

Group

Up to 3

3 and 12

1 and 2

Over

 

 

months

months

Year

5 years

 

At 31 December 2014

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Trade and other payables

819

-

-

-

 

Loans and borrowings

-

-

-

-

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

Total

819

-

-

-

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

Between

Between

 

 

Group

Up to 3

3 and 12

1 and 2

Over

 

 

months

months

Year

5 years

 

At 31 December 2013

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Trade and other payables

3,609

1,559

-

-

 

Loans and borrowings

-

-

-

-

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

Total

3,609

1,559

-

-

 

 

_______

_______

_______

_______

 

 

3

Financial instruments - Risk management (continued)

 

 

 

 

Between

Between

 

 

Company

Up to 3

3 and 12

1 and 2

Over

 

 

months

months

year

5 years

 

At 31 December 2014

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Trade and other payables

250

-

-

-

 

Loans and borrowings

 

 

 

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

Total

250

-

-

-

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

Between

Between

 

 

Company

Up to 3

3 and 12

1 and 2

Over

 

 

months

months

year

5 years

 

At 31 December 2013

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Trade and other payables

991

1,559

-

-

 

Loans and borrowings

-

-

-

-

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

Total

991

1,559

-

-

 

 

_______

_______

_______

_______

 

 

Capital Disclosures

The Group monitors "adjusted capital" which comprises all components of equity (i.e. share capital, share premium, merger reserve, and retained earnings).

 

The Group's objectives when maintaining capital are:

 

·       to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other  stakeholders, and

·       to provide an adequate return to shareholders by pricing products with the level of risk.

 

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. 

 

 

4

Segment information

 

The Group has three main segments during the period:

 

·     Southern Minerals Group LLC (SMG) - This segment is involved in the sale of magnetite to both the US domestic market and historically transported magnetite to port for onward export sale. 

·     Head Office - This segment incurs all the administrative costs of central operations and finances the Group's operations.  A management fee is charged for certain of these expenses.

·     Australia - This segment holds the tenements in Australia and incurs all related operating costs.

 

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that carry out different functions and operations and operate in different jurisdictions.

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Executive Chairman, Chief Executive Officer, and the Finance Director.

 

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with EU Adopted IFRS but excluding non-cash losses, such as the amortisation of intangible assets, and the effects of share-based payments.

 

Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Loans and borrowings are allocated to the segments in which the borrowings are held. Details are provided in the reconciliation from segment assets and liabilities to the Group's statement of financial position.

 

 

4

Segment information (continued)

 

 

 

 

 

Head

 

 

 

 

 

SMG

Office

Australia

Total

 

 

 

2014

2014

2014

2014

 

 

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

6,089

-

-

6,089

 

 

 

 

 

 

 

 

Cost of sales

 

(6,718)

-

-

(6,718)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Gross profit

 

(629)

-

-

(629)

 

 

 

 

 

 

 

 

Administrative expenses

 

(766)

(1,064)

43

(1,787)

 

 

 

_______

_______

_______

_______

 

Segment profit / (loss) from operations

 

(1,395)

(1,064)

43

(2,416)

 

 

 

 

 

 

 

 

Finance expense

 

-

(14)

-

(14)

 

Amortisation of intangible asset

 

(1,545)

-

-

(1,545)

 

Depreciation

 

-

(2)

 

(2)

 

Impairment to intangible asset

 

-

-

(2,079)

(2,079)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Segment profit / (loss) before taxation

 

(2,940)

(1,080)

(2,036)

(6,056)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

 

 

4

Segment information (continued)

 

 

 

 

 

Head

 

 

 

 

 

SMG

Office

Australia

Total

 

 

 

2013

2013

2013

2013

 

 

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

37,242

-

-

37,242

 

 

 

 

 

 

 

 

Cost of sales

 

(35,237)

-

-

(35,237)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Gross profit

 

2,005

-

-

2,005

 

 

 

 

 

 

 

 

Administrative expenses

 

(874)

(2,416)

(251)

(3,541)

 

 

 

_______

_______

_______

_______

 

Segment profit / (loss) from operations

 

1,131

(2,416)

(251)

(1,536)

 

 

 

 

 

 

 

 

Finance expense

 

-

(673)

-

(673)

 

Amortisation of intangible asset

 

(8,578)

-

-

(8,578)

 

Depreciation of railway infrastructure

 

(1,036)

-

-

(1,036)

 

Impairment to railway infrastructure

 

(2,324)

-

-

(2,324)

 

Impairment to intangible asset

 

(14,366)

-

-

(14,366)

 

Share based payments charge

 

 

(458)

 

(458)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Segment profit / (loss) before taxation

 

(25,173)

(3,547)

(251)

(28,971)

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

 

 

 

 

 

4

Segment information (continued)

 

 

 

 

 

Head

 

 

 

 

 

SMG

office

Australia

Total

 

As at 31 December 2014

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

Additions to non-current assets (excluding deferred tax)

 

-

-

92

92

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Reportable segment assets (excluding deferred tax)

 

666

144

399

1,209

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Reportable segment liabilities

 

(551)

(250)

(18)

(819)

 

 

 

_______

_______

_______

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

-

 

 

_______

 

 

 

 

Total Group liabilities

(819)

 

 

_______

 

 

 

 

 

Head

 

 

 

 

 

SMG

office

Australia

Total

 

As at 31 December 2013

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

 

Additions to non-current assets (excluding deferred tax)

 

-

-

50

50

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Reportable segment assets (excluding deferred tax)

 

7,222

786

1,841

9,849

 

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

Reportable segment liabilities

 

(4,727)

(683)

(42)

(5,452)

 

 

 

_______

_______

_______

 

 

 

 

 

 

 

 

 

Deferred tax liabilities

(324)

 

 

_______

 

 

 

 

Total Group liabilities

(5,776)

 

 

_______

 

 

 

 

External revenue by

Non-current assets

 

 

location of customers

by location of assets

 

 

2014

2013

2014

2013

 

 

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Other

1,271

1,032

-

1,545

 

Switzerland

4,818

36,210

-

-

 

Australia

 

-

-

1,825

 

United Kingdom

 

-

2

4

 

 

_______

_______

_______

_______

 

 

 

 

 

 

 

 

6,089

37,242

2

3,374

 

 

_______

_______

_______

_______

 

Revenues from one customer totalled $4,818,000 (2013 - $36,210,000). 

 

 

5

Operating loss

 

Costs by nature

 

 

Year to

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

Operating loss is stated after charging:

 

 

 

 

 

 

 

Directors' fees and emoluments (Note 6)

794

1,163

 

Fees payable to the company's auditor for the

28

44

 

audit of the parent company and consolidated

financial statements

 

 

 

Staff costs (Note 6)

201

476

 

Operating lease - land and buildings

31

84

 

Legal, professional and consultancy fees

371

839

 

Travelling and related costs

76

252

 

Other expenses

183

628

 

 

________

________

 

 

 

 

 

 

1,684

3,486

 

 

 

 

 

Depreciation of railway infrastructure

-

1,036

 

Impairment to railway infrastructure

-

2,324

 

Amortisation of intangible asset

1,545

8,578

 

Impairment to intangible asset

2,079

14,366

 

Share based payments charge

-

458

 

 

________

________

 

6

Directors and employees

 

 

 

 

 

 

 

Staff costs during the year

 

 

 

 

Year to

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

 

Directors' remuneration including consultancy fees

794

1,163

 

Wages and salaries

178

359

 

Social security and other costs

23

117

 

 

________

________

 

 

 

 

 

Total staff costs

995

1,639

 

 

________

________

 

The average number of people (including executive Directors) employed during the year was:

 

 

 

2014

2013

 

 

Number

Number

 

 

 

 

 

Total

4

8

 

 

________

________

 

 

 

 

 

6

Directors and employees (continued)

 

 

 

Remuneration of the Directors in the period is summarised as follows:

 

 

 

Directors'

fees

Salary and

 consultancy

 fees

Termination payment

Share

based

 payments

Total

 

 

2014

2014

2014

2014

2014

 

 

$

$

$

$

$

 

 

 

 

 

 

 

 

P. Griffiths

-

74,694

-

-

74,694

 

J Fyfe

-

145,522

98,874

-

244,396

 

P Harrison

-

32,958

98,874

-

131,832

 

D Anderson

-

82,395

49,437

-

131,832

 

P Stephens

18,539

-

4,120

-

22,659

 

J McInally

-

134,556

-

-

134,556

 

L Hobbs

-

41,059

-

-

41,059

 

A Borelli

12,359

-

-

-

12,359

 

 

________

________

________

________

________

 

 

 

 

 

 

 

 

Total

30,898

511,184

251,305

-

793,387

 

 

________

________

________

________

________

 

 

 

 

Directors'

fees

Salary and

 consultancy

 fees

Benefits in

 kind

Share

based

 payments

Total

 

 

2013

2013

2013

2013

2013

 

 

$

$

$

$

$

 

 

 

 

 

 

 

 

S. Sanders

23,963

-

-

-

23,963

 

P. Griffiths

-

174,191

-

-

174,191

 

G Cardona

-

-

-

-

-

 

J Fyfe

-

375,408

-

36,754

412,162

 

P Harrison

-

375,408

-

36,754

412,162

 

D Anderson

-

187,704

23,816

17,353

228,873

 

P Stephens

2,046

-

-

-

2,046

 

 

________

________

________

________

________

 

 

 

 

 

 

 

 

Total

26,009

1,112,711

23,816

90,861

1,253,397

 

 

________

________

________

________

________

 

Directors' remuneration shown above comprises all of the salaries, Directors' fees, consultancy fees and other benefits and emoluments paid to the Directors.

 

Each Director is also paid all reasonable expenses incurred wholly, necessarily and exclusively in the proper performance of his duties.

 

 

 

 

 

7

Finance expense

 

 

 

 

Year to

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

 

Loan interest and finance charges

14

673

 

 

________

________

 

8

Taxation

 

 

 

 

Year to

Year to

 

 

31 December

31 December

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

 

Current tax expense

-

-

 

Deferred tax credit on amortisation and impairment of intangible

324

5,798

 

Deferred tax (charge)

-

(706)

 

 

________

________

 

 

 

 

 

 

324

5,092

 

 

________

________

 

 

 

 

 

Reconciliation of effective tax rates

$'000

$'000

 

 

 

 

 

(Loss) before tax

(6,056)

(28,971)

 

Tax using UK domestic rates of corporation tax of 21 % (2013 - 23%)

(1,271)

(6,663)

 

 

 

 

 

Effect of:

 

 

 

Expenses not deductible for tax purposes

762

6,155

 

Losses carried forward

509

508

 

Deferred tax credit, net

324

5,092

 

 

________

________

 

 

 

 

 

 

324

5,092

 

 

________

________

 

The Group has excess management expenses of $1,162,000 (2013 - $653,000) and unused losses to carry forward of $15,382,000 (2013 - $14,265,000).  No deferred tax asset has been recognised for losses as their full recovery is not probable in the foreseeable future. 

 

 

9

Parent Company loss

 

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent Company is not presented as part of these financial statements.  The parent Company's loss for the year was $5,279,000 (2013 - $52,979,000).

 

 

10

Loss per share

 

Losses per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted average number of shares in issue during the year was basic 629,902,908 (2013 - 542,430,126). Fully diluted the weighted average was 629,902,908 (2013 - 542,430,126). The loss for the financial period was $5,732,000 (2013 - loss $23,879,000).

 

Due to the Group's results for the period, the diluted earnings per share is deemed to be the same as the basic earnings per share.
 

 

11

Intangibles

       

Group

 

 

 

Exploration/

Other

 

 

 

 

evaluation

intangible

 

 

 

 

costs

asset

Total

 

 

 

$'000

$'000

$'000

 

Cost

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

 

1,769

25,772

27,541

 

Additions in the year

 

50

-

50

 

Foreign exchange

 

6

-

6

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2013

 

1,825

25,772

27,597

 

 

 

 

 

 

 

At 1 January 2014

 

1,825

25,772

27,597

 

Additions in the year

 

92

-

92

 

Foreign exchange

 

162

-

162

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

 

2,079

25,772

27,851

 

 

 

________

________

________

 

 

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

At 31 December 2012

 

-

(1,283)

(1,283)

 

 

 

 

 

 

 

At 1 January 2013

 

-

(1,283)

(1,283)

 

Amortisation

 

-

(8,578)

(8,578)

 

Impairment

 

-

(14,366)

(14,366)

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2013

 

-

(24,227)

(24,227)

 

 

 

 

 

 

 

At 1 January 2014

 

-

(24,227)

(24,227)

 

Amortisation

 

-

(1,545)

(1,545)

 

Impairment

 

(2,079)

-

(2,079)

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

 

(2,079)

(25,772)

(27,851)

 

 

 

________

________

________

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2012

 

1,769

24,489

26,258

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2013

 

1,825

1,545

3,370

 

 

 

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

 

-

-

-

 

 

 

________

________

________

 

Other intangible

 

The other intangible asset arises from the contractual relationship entered into by Southern Minerals Group LLC ('SMG'), an entity wholly owned by Ebony Iron Pty Limited, with a third party for the rights to a magnetite stockpile held at that party's Cobre mine in New Mexico, USA.  The intangible asset was fully amortised at year end. 
 

 

11

Intangibles  (continued)

 

Mining tenements and exploration and evaluation costs

 

Exploration and evaluation costs are not currently being amortised as there is no revenue being generated given that these assets are still in an early exploration phase. In 2012 the Group acquired certain tenements, known as the Western Australia tenements, by the issue of shares to Quadrio Resources Pty Limited on 25 January 2012.  This did not represent the acquisition of a business, but the acquisition of these assets only.  The Company issued 6m shares at a market price of 9.75p, totalling $911,000 in consideration. The recoverability of the remaining carrying amount of the deferred exploration and evaluation expenditure is dependent on successful development and commercial exploitation, or alternatively the sale, of the respective areas of interest. With the decline in the iron ore price and the downturn in the market for early stage assets it was determined to impair the carrying value of exploration and evaluation costs in full.

 

 

12

Investments

 

 

Company

Loans to

Shares in

 

 

 

Subsidiary

subsidiary

 

 

 

Undertakings

undertakings

Total

 

 

$'000

$'000

$'000

 

Cost

 

 

 

 

At 31 December 2013

6,004

45,752

51,756

 

Movement in year

23

-

-

 

 

________

________

________

 

 

 

 

 

 

At 31 December 2014

6,027

45,752

51,779

 

 

________

________

________

 

 

 

 

 

 

Impairment

 

 

 

 

At 31 December 2013

(6,004)

(42,473)

(48,477)

 

Charge for the year

(23)

(2,892)

(2,915)

 

 

________

________

________

 

 

 

 

 

 

At 31 December 2014

(6,027)

(45,365)

(51,392)

 

 

________

________

________

 

Carrying Value

 

 

 

 

 

 

 

 

 

At 31 December 2013

-

3,279

3,279

 

 

________

________

________

 

 

 

 

 

 

At 31 December 2014

-

387

387

 

 

________

________

________

 
 
 

 

12

Investments (continued)

 

In the opinion of the Directors, the aggregate value of the Company's investment in its subsidiary undertakings is not less than the amount included in the balance sheet.

 

Holdings of more than 20%

 

The Company holds more than 20% of the share capital of the following companies:

 

 

 

 

 

 

 

 

Subsidiary undertakings

Country of

Principal

Class of

%

 

 

Incorporation

activity

share

Owned

 

 

 

 

 

 

 

 

 

 

 

 

 

Iron Glen Holdings Pty Limited

Australia

Holding

Ordinary

100%

 

 

 

Company

 

 

 

 

 

 

 

 

 

Ebony Iron Pty Limited

Australia

Holding Company

Ordinary

100%

 

 

 

 

 

 

 

Iron Glen Pty Limited (i)

Australia

Assets held for exploration

Ordinary

100%

 

 

 

 

 

 

 

Southern Minerals Group LLC (ii)

USA

Sale of magnetite

Ordinary

100%

 

 

 

 

 

 

 

Jotanooka Iron Pty Limited (i)

Australia

Assets held for exploration

Ordinary

100%

 

 

 

 

 

 

 

Dragon Rock Minerals Pty Limited (i)

Australia

Assets held for exploration

Ordinary

100%

 

(i)    Held by Iron Glen Holdings Pty Limited

(ii)   Held by Ebony Iron Pty Limited

 

 

 

 

13

Property, plant and equipment

 

 

 

 

 

 

Railway

Office

Leasehold

 

 

 

infrastructure

Equipment

improvements

Total

 

Group

$'000

$'000

$'000

$'000

 

 

 

 

 

 

 

Cost

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

3,498

7

2

3,507

 

Disposals

-

-

(2)

(2)

 

 

________

________

________

________

 

 

 

 

 

 

 

At 31 December 2013

3,498

7

-

3,505

 

 

 

 

 

 

 

At 1 January 2014

3,498

7

-

3,505

 

 

________

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

3,498

7

-

3,505

 

 

________

________

________

________

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2013

138

-

1

139

 

Charge in the year

1,036

3

-

1,039

 

Impairment

2,324

-

-

2,324

 

Eliminated on disposals

-

-

(1)

(1)

 

 

________

________

________

________

 

 

 

 

 

 

 

At 31 December 2013

3,498

3

-

3,501

 

 

 

 

 

 

 

At 1 January 2014

3,498

3

-

3,501

 

Charge in the year

-

2

-

2

 

 

________

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

3,498

5

-

3,503

 

 

________

________

________

________

 

 

 

 

 

 

 

Carrying value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 December 2013

-

4

-

4

 

 

________

________

________

________

 

 

 

 

 

 

 

At 31 December 2014

-

2

-

2

 

 

________

________

________

________

 

The property, plant and equipment of the Company relate to office equipment only.

 

 

 

14

Inventories

 

 

 

 

2014

2013

 

 

$'000

$'000

 

 

 

 

 

Finished goods held for sale

274

2,625

 

Less stock provision

(257)

(402)

 

 

________

________

 

 

 

 

 

 

17

2,223

 

 

________

________

 

The amount of inventory which has been recognised as an expense during the year is $6,718,000 (2013 - $35,237,000).

 

15

Trade and other receivables

 

 

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Trade receivables

482

2,709

 

Less: provision for impairment of trade receivable

(286)

-

 

 

________

________

196

________

________

2,709

 

 

 

 

 

Other receivables

48

360

 

 

________

________

 

 

 

 

 

 

244

3,069

 

 

________

________

 

Company

 

 

 

 

 

 

 

Trade receivables

-

2,203

 

Amounts owed by subsidiary undertakings

514

633

 

Other receivables

30

343

 

 

________

________

 

 

 

 

 

 

544

3,179

 

 

________

________

 

There were no Trade or Other receivables that were past due or impaired beyond the charge reflected above. The Trade and Other receivables are categorised as loans and other receivables and are not materially different to their carrying values.

 

16

Cash and cash equivalents

 

 

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Bank current accounts - unrestricted

846

683

 

Bank - restricted

100

500

 

 

________

________

 

 

 

 

 

 

946

1,183

 

 

________

________

 

The restricted cash related to a cash deposit held for a Standby Letter of Credit as security for a supplier.

 

 

16

Cash and cash equivalents (continued)

 

 

 

2014

2013

 

Company

$'000

$'000

 

 

 

 

 

Bank current accounts

114

438

 

 

________

________

 

The Group's balances are held with well-known and highly rated UK, USA and Australian banks.

 

 

17

Borrowings

 

There were no borrowings in both the current and prior year.

 

 

18

Trade and other payables

 

 

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Trade payables

560

4,795

 

Other payables

51

442

 

Accruals and deferred income

92

215

 

 

________

________

 

 

 

 

 

 

703

5,452

 

 

________

________

 

 

 

 

 

Company

$'000

$'000

 

 

 

 

 

Trade payables

113

2,209

 

Other payables

45

436

 

Accruals and deferred income

92

182

 

 

________

________

 

 

 

 

 

 

250

2,827

 

 

________

________

 

Book values approximate to fair value at 31 December 2014 and 2013.

 

 

 

 

19

Deferred tax

 

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 21% (2013 - 23%).  The reduction in the main rate of corporation tax to 21% was substantively enacted in July 2013. This new rate will be applied to deferred tax balances which are expected to reverse after 1 April 2014, the date on which that new rate becomes effective.

 

The deferred tax liability arises from the fact that the other intangible asset (see Note 11) has no tax base and thus the deferred tax liability represented the total tax credit that would be available if the amortisation of the intangible asset was tax deductible in an entity. Following the full impairment of the underlying intangible asset the remaining deferred tax liability has been released. The deferred tax asset arose from tax losses which were expected to be recovered in the foreseeable future.

 

The movement on the deferred tax account is as shown below:

 

 

2014

2013

 

Deferred tax liability

$'000

$'000

 

 

 

 

 

At 1 January

324

6,122

 

 

 

 

 

Recognised in profit and loss

 

 

 

Tax credit

(324)

(5,798)

 

 

________

________

 

 

 

 

 

At 31 December

-

324

 

 

________

________

 

 

 

 

2014

2013

 

Deferred tax asset

$'000

$'000

 

 

 

 

 

At 1 January

-

706

 

 

 

 

 

Recognised in profit and loss

 

 

 

Tax (charge) / credit

-

(706)

 

Foreign exchange

-

-

 

 

________

________

 

 

 

 

 

At 31 December

-

-

 

 

________

________

 

Of this total deferred tax asset, $Nil (2013 - $Nil) arises in the Company.

 

 

20

Share Capital and Premium

 

 

 

 

 

 

Number

 

Value $

 

 

 

 

 

 

 

 

At 1 January 2013

448,158,893

 

34,150,181

 

 

 

 

 

 

 

 

Placement on 7 February 2013

102,666,667

 

6,576,541

 

 

 

 

 

 

 

 

Exercise warrants on 27 March 2013

3,000,000

 

4,551

 

 

 

__________

 

__________

 

 

 

 

 

 

 

 

At 31 December 2013

553,825,560

 

40,731,273

 

 

 

 

 

 

 

 

Placement on 10 April 2014

170,000,000

 

2,144,128

 

 

 

__________

 

__________

 

 

 

 

 

 

 

 

At 31 December 2014 Ordinary shares of 1 pence each

723,825,560

 

42,875,401

 

 

 

__________

 

__________

 

 

 

             

 

On 10 April 2014 the Company announced that it has raised approximately $1,650,000 (£1,000,000) before expenses from new investors through subscription to 125,000,000 ordinary shares (the "Subscription Shares") at a price of £0.008 per Subscription Share (the "Subscription Price"). Further, the Company had issued 45,000,000 ordinary shares (the "Glencore Shares") in the Company to Glencore AG at the Subscription Price, in exchange for an obligation owed to them.

 

 

21

Share based payments

 

The Group has a share-ownership compensation scheme for senior executives of the Group whereby senior executives may be granted options to purchase ordinary shares in the Company. No options were granted in the current year.

 

No options or warrants have been granted in the current or prior year. The Group historically issued options and/or warrants to third parties in settlement of liabilities to strategic suppliers. Each share option or warrant converts into one ordinary share of Strategic Minerals Plc upon exercise. No amounts are paid or payable by the recipient of the options or warrants. The options and warrants carry neither rights to dividends nor voting rights at shareholders meetings.

 

Warrants

 

Number of outstanding Warrants at 31 December 2014 and a reconciliation of their movements during the year were:

 

 

Date of

Granted at

Exercised/

Lapsed/

Granted at

Exercise

Exercise Period

 

grant

31.12.13

vested

cancelled

31.12.14

price

 

 

 

 

 

 

 

 

From

To

 

 

 

 

 

 

 

 

 

 

31.03.11

23,369,988

-

(23,369,988)

-

1.86p

31.03.11

31.03.14

 

30.06.11

8,421,416

-

-

8,421,416

5p

30.06.11

29.06.16

 

01.03.12

4,000,000

-

(4,000,000)

-

16p

01.06.13

01.03.14

 

01.03.12

4,000,000

-

-

4,000,000

20p

01.06.14

01.03.15

 

03.05.12

39,062,500

-

(39,062,500)

-

12p

03.05.12

30.04.14

 

 

_________

_________

_________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

78,853,904

-

(66,432,488)

12,421,416

 

 

 

 

 

_________

_________

_________

_________

 

 

 

 

The warrants outstanding at 31 December 2014 had a weighted average exercise price of 9.83p and a remaining contractual life of 389 days.     
 

 

21

Share based payments (continued)

 

Options

 

Number of outstanding options at 31 December 2014 and a reconciliation of their movements during the year were:

 

 

Date of

Granted at

Exercised/

Lapsed/

Granted at

Exercise

Exercise Period

 

Grant

31.12.13

vested

cancelled

31.12.14

price

 

 

 

 

 

 

 

 

 

From

To

 

31.03.11

26,639,956

-

(26,639,956)

-

3.1p

31.03.11

31.03.14

 

06.11.13

31,000,000

-

(25,000,000)

6,000,000

5.0p

27.06.13

27.06.16

 

06.11.13

16,500,000

-

(12,500,000)

4,000,000

7.5p

27.06.13

27.06.16

 

06.11.13

12,500,000

-

(12,500,000)

-

10.0p

27.06.13

27.06.16

 

 

_________

_________

   _________

_________

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

86,639,956

-

(76,639,956)

10,000,000

 

 

 

 

 

_________

_________

 _________

_________

 

 

 

 

At 31 December 2014 all options on hand were fully vested. On 2 June 2014 50 million options relating to past directors were cancelled. The options outstanding at 31 December 2014 had a weighted average exercise price of 6p and a weighted average remaining contractual life of 544 days.

 

The estimated fair value of options or warrants issued are calculated by applying the Black-Scholes option pricing model. No options or warrants were issued during the 2014 financial year.  

 

 

22

Commitments

 

(a)    Operating lease commitments

 

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

 

 

 

2014

2013

 

Group

$'000

$'000

 

 

 

 

 

Within one year

-

86

 

 

________

________

 

(b)    Capital expenditure commitments

 

At 31 December 2014, no capital commitments existed (2013 - $Nil).

 

 

23

Controlling party

 

There is no ultimate controlling party of the Group.

 

 

 

 

24

Related party transactions

 

Directors' remuneration has been disclosed in Note 6. There were no other relevant transactions with Directors.

 

25

Events after the reporting period

 

Acquisition after reporting date

 

On 31 March 2015, the company announced that it had entered into both a Share Purchase Agreement ("SPA") to acquire the Tatu thermal coal project in the North Island of New Zealand and a Memorandum of Understanding ("MoU") with the Tao Nan City Wanbao Mining Power Ltd Co.("TNCW") in relation to recommencement of the Wanboa coking coal mine in Jilian Province, China.

(i)     Tatu thermal coal project

The terms of the SPA provide for the Company to purchase 100% of the shares of King Country Mine Limited ("KCM"), the holder of the mining permit and access contracts for Tatu, as follows:

 

-      A non-refundable signing payment of NZ$5,000 payable within three business days of entering the SPA.

 

-      A payment of NZ$127,500 for the purchase of 51% of the shares of KCM payable within three business days of entering the SPA.  Both payments were made in April 2014 and the Company has now acquired its 51% interest in KCM.  The Company will know by the end of July whether approval by the New Zealand authorities for change of control of the mining permits held by KCM has been obtained. Should approval not be forthcoming the Company will receive back NZ$77,500. 

 

-      SML has the option, for ten (10) months from execution of the SPA, to acquire the remaining 49% of KCM for NZ$122,500 ("Option").  The exercise of this Option is subject to regulatory approvals by the New Zealand authorities for change of control of the mining permits held by KCM and SML providing to the vendors of KCM proof of financial capacity to commence the mine. Should SML not proceed with the Option, the vendors of KCM will acquire the 51% interest in KCM held by SML for NZ $1.

 

-      The vendors of KCM will be entitled to a royalty stream from production of up to NZ$2 per tonne of product sold from the Tatu mine operations.  The Company will have the right of first refusal on the sale or transfer of the royalty stream.

 

-      Under the terms of the SPA, production is to commence within twelve (12) months of exercise of the Option to acquire the remaining 49% of KCM.  During the first five (5) years from when production is meant to commence, SML guarantees the current KCM owners a minimum average royalty payment of NZ$200,000 p.a. payable irrespective of quantity of product sold. The vendors of KCM will have a right of first refusal in relation to the transport, loading and haul road maintenance contract(s) for Tatu.

(ii)    Wanbao coking coal mine

The Key Terms of the MoU is as follows:

 

-      TNCW is to undertake, at its cost, a review of the resource potential of Wanbao within six months.

 

-      The company is to fully review the report and provide commentary on the perceived potential resource available and provide its thoughts on the most appropriate manner of accessing these resources.

 

-      During the review, the company is to consult with TNCW and provide advice on potential drilling and testing requirements.

 

-      TNCW has provided the company a six month exclusivity period during which time TNCW will provide, at its discretion, an offer of involvement in the on-going operations of Wanbao.  Further announcements will be made as appropriate on the progress of this project and when further terms have been agreed.

 

 

25

Events after the reporting period (continued)

 

Options issued after reporting date

 

On 10th April 2015 the Company issued 62,000,000 options over the Company's ordinary shares ("Options") under its Enterprise Management Incentive Scheme ("EMI Scheme").

 

The following Options have been approved by the Board of Strategic Minerals for issuance under the EMI Scheme to certain directors, executives and employees of the Company, exercisable at 1p per share.  The Options will vest in two equal tranches upon a volume weighted average price ("VWAP") per ordinary share over five consecutive trading days on AIM of either 1.5 pence or 3 pence, as provided below:

 

 

Director and Manegement

Options Granted

Exercise Price

Vesting Condition

 

Expiry Date

John Peters, Managing Director

12,000,000

12,000,000

1 pence

1.5 pence VWAP

3.0 pence VWAP

30 June 2018

30 June 2019

Julien McInally, Chief Financial Officer

12,000,000

12,000,000

1 pence

1.5 pence VWAP

3.0 pence VWAP

30 June 2018

30 June 2019

Lyle Hobbs, Non-Executive Director

2,000,000

2,000,000

1 pence

1.5 pence VWAP

3.0 pence VWAP

30 June 2018

30 June 2019

Michael Wong, Non-Executive Director

2,000,000

2,000,000

1 pence

1.5 pence VWAP

3.0 pence VWAP

30 June 2018

30 June 2019

Employees

3,000,000

3,000,000

1 pence

1.5 pence VWAP

3.0 pence VWAP

30 June 2018

30 June 2019

Total

62,000,000

 

 

 

              

 

Each Option is exercisable into one ordinary share of 0.1p each in the Company. Once vested, the Options may be exercised at any time up until their expiry date. Shares issued through the exercise of these Options will have trading restrictions whereby 25% of the Options exercised can be traded immediately after exercise and a further 25% can be traded each three months thereafter until all shares are eligible to be traded.

 

10,000,000 options previously issued to employees were cancelled on the same day.

 

 

Placement

 

On 8th June 2015 the Group announced an equity placing which will raise approximately ~US$1,526,000 (£1,000,000) in two Tranches. The First Tranche is unconditional (except for the Admission of the shares to trading on AIM) and will raise US$750,000 (£492,000) of gross proceeds with the issue of 82,000,000 ordinary shares at a price of 0.6 pence per share.  The Second Tranche of funds, which is subject to shareholder approval at the forthcoming AGM, will raise a further ~US$776,000 (£508,000) of gross proceeds with the issue of 84,666,667 ordinary shares at 0.6 pence per share.  The placement was arranged by Cornhill Capital Limited.

 

As part of the fundraising, the Company will grant to Cornhill a total of 8,333,333 warrants.  Each warrant allows Cornhill to subscribe for one ordinary share of 0.1p each in the Company at the Placing Price (the "Warrants").  The Warrants are to be issued on the approval of the Second Tranche and are exercisable for 36 months from the issue date.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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