Kropz PLC

Unaudited Half Year Results for H1 2020

RNS Number : 1416X
Kropz PLC
26 August 2020
 

26 August 2020

Kropz Plc

("Kropz" or the "Company")

 

Unaudited Half Year Results for the Six Months ended 30 June 2020

 

Kropz plc (AIM: KRPZ), an emerging African explorer and developer of plant nutrient feed minerals, and its subsidiaries (the "Group") announces its unaudited results for the six months ended 30 June 2020.

 

The financial report is available online at the Company's website www.kropz.com .

 

Key financial indicators

 

· Cash at 30 June 2020 of US$ 21 million (as at 31 December 2019 US$ 16 million);

· trade and other payables at 30 June 2020 of US$ 2 million (as at 31 December 2019 US$ 2 million); and

· property, plant, equipment and exploration assets of US$ 125 million as at 30 June 2020 (as at 31 December 2019 US$ 145 million). Value for the period to 30 June 2020 decreased by US$ 20 million predominantly due to translation and devaluation of ZAR against the US$.

 

Key corporate and operational developments during the period

 

Corporate

 

· Completion of an equity placing to an existing investor and two directors for GBP 304,092 (before expenses) (approximately US$ 353,595) ("the Placing") on 1 June 2020;

· completion of an open offer to existing shareholders to raise up to a further US$ 4 million (before expenses) ("Open Offer"). The Open Offer closed on 26 June 2020 and raised GBP 1,744,870 (before expenses) (approximately US$ 2,163,639); and

· first drawdown under the ARC Fund ("ARC") convertible loan facility of US$ 10 million was settled by way of issue of 130,199,604 new ordinary shares. US$ 30 million of the convertible loan facility remains to be drawn down.

Elandsfontein

 

· Kropz secured the convertible loan facility of up to US$ 40 million (not exceeding a maximum of ZAR 680 million) from ARC, Kropz's major shareholder in June 2020 for the development of Elandsfontein. The first drawdown on the convertible loan facility occurred on 26 June 2020 for US$ 10 million;

· Kropz Elandsfontein (Pty) Ltd ("Kropz Elandsfontein") renegotiated and amended the BNP Paribas SA ("BNP") US$ 30 million project finance facility in June 2020, extending the first capital repayment to 31 December 2022, and quarterly thereafter to 30 September 2024. The amended agreement caters for an interest rate of 6.5% plus US LIBOR, up to project completion (expected to be December 2022) and 4.5% plus US LIBOR thereafter, payable quarterly. The BNP facility remains fully drawn;

· on-going test work results have been used to finalise detailed design inputs for the Elandsfontein Optimisation Project (the "Project");

· an engineering, procurement, and construction management contract for the Project has been awarded to DRA Projects SA (Pty) Ltd; and

· orders have been placed for several long lead items, including stacked screens and flotation cells.

 

Hinda

 

· Kropz concluded a competitive tender for the updating of the Hinda feasibility study;

· Republic of Congo ("RoC") Government approval of the new terms of reference for the updated Environmental and Social Impact Assessment; and

· advancement of the port occupation agreement with the Port Authority of Pointe-Noire.

 

Aflao

 

· Kropz decided to divest its interests in Aflao and is currently in consultation with the project's other shareholders regarding the implementation of this decision, which may include other shareholders taking up the Company's interest; and

· the Company will not be providing any further funding towards Aflao.

 

Key corporate and operational developments post period end

 

Corporate

 

· Mark Summers appointed as the Company's Chief Executive Officer ("CEO"); and

· conditional share awards granted over ordinary shares in the Company to key members of the executive management team, including certain Persons Discharging Managerial Responsibilities ("PDMRs").

 

Elandsfontein

 

· The Project is advancing according to schedule; despite on-going national lockdown as a result of COVID-19; and

· Kropz Elandsfontein was notified that the Water Tribunal ("Tribunal") hearing against Elandsfontein's valid integrated water use licence was set for 3 to 5 September 2020 for three days. The Tribunal will be resumed following a postponement, ordered by the Chairperson of the Tribunal, following COVID-19 concerns. Subsequent South African government guidelines prohibited the Tribunal from reconvening since March 2020.

 

Hinda

 

· Hatch, a leading global engineering and construction firm, was appointed to conduct a focussed assessment on the export logistics capacity for the Hinda project, at the proposed port site in Pointe-Noire; and

· results of the logistics study will enable Kropz to determine the capacity for the first phase of the mining and beneficiation plant at Hinda. 

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) no 596/2014.

 

For further information visit www.kropz.com or contact:

Kropz Plc


Mark Summers (CEO)

+27 (0)79744 8708



Grant Thornton UK LLP

Nominated Adviser

Samantha Harrison

Niall McDonald

+44 (0) 20 7383 5100



Hannam & Partners

Joint Broker

Andrew Chubb

Ernest Bell

 +44 (0)20 7907 8500


Mirabaud Securities Ltd

Joint Broker

Rory Scott

Edward Haig-Thomas

+44 (0)20 3167 7220

+44 (0)20 3167 7222



Tavistock

Financial PR & IR (UK)

Emily Moss

Jos Simson

Oliver Lamb

+44 (0) 207 920 3150

[email protected]


R&A Strategic Communications

PR (South Africa)

James Duncan

+27 (0)11 880 3924

[email protected] 

 

About Kropz plc

 

Kropz is an emerging African explorer and developer of plant nutrient feed minerals with phosphate projects in South Africa and the RoC. The vision of the Group is to become a leading independent phosphate rock producer and to develop into an integrated, mine-to-market plant nutrient company focusing on sub-Saharan Africa.

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2020

 

 

 

 

 

 

Notes

30 June

2020

Unaudited

US$'000

31 December

2019

Audited

US$'000

Non-current assets

Property, plant, equipment and mine development

 

7

86,004

105,224

Exploration assets

8

39,442

40,192

Right-of-use assets


57

37

Other financial assets


1,249

1,534



126,752

146,987

Current assets




Inventories


706

875

Trade and other receivables


411

329

Cash and cash equivalents


20,999

15,530



22,116

16,734

 

TOTAL ASSETS


148,868

 

163,721

 

Current liabilities




Trade and other payables


2,364

1,536

Lease liabilities


36

19

Other financial liabilities

12

395

29,982

Current taxation


634

174

Other tax liabilities


-

451



3,429

32,162

Non-current liabilities




Shareholder loans

11

15,511

14,701

Lease liabilities


24

21

Other financial liabilities

12

30,114

-

Provisions


3,128

3,702



48,777

18,424

 

TOTAL LIABILITIES


52,206

 

50,586





NET ASSETS


96,662

113,135





Shareholders' equity




Share capital

9

548

363

Share premium

9

159,341

147,339

Merger reserve


(20,523)

(20,523)

Foreign exchange translation reserve


(10,441)

53

Share-based payment reserve


162

167

Accumulated losses


(23,467)

(12,536)

 

Total equity attributable to the owners of the Company


105,620

114,863

Non-controlling interests


(8,958)

(1,728)



96,662

113,135

 

The accompanying notes form part of the Condensed Consolidated Financial Statements.

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2020



Six months ended

30 June

Six months ended

30 June


 

 

Notes

2020

Unaudited

US$'000

2019

Unaudited

US$'000





Revenue


-

-

Other income


19

3





Operating expenses


(3,257)

(4,475)





Operating loss


(3,238)

(4,472)





Finance income

13

770

882

Finance expense

14

(11,670)

(2,186)

Impairment losses

15

-

(48,900)





Loss before taxation


(14,138)

(54,676)





Taxation

16

(583)

(246)





Loss after taxation


(14,721)

(54,922)





Loss attributable to:




Owners of the Company


(10,931)

(40,573)

Non-controlling interests


(3,790)

(14,349)



(14,721)

(54,922)





Loss for the period


(14,721)

(54,922)





Other comprehensive income:




Items that may be subsequently reclassified to profit or loss




-  Exchange differences on translation of parent company financial statements from functional to presentation currency


140

70

-  Exchange differences on translating foreign operations


(14,074)

1,268

Total comprehensive loss


(28,655)

(53,584)





Attributable to:




Owners of the Company


(21,425)

(39,527)

Non-controlling interests


(7,230)

(14,057)



(28,655)

(53,584)





Loss per share attributable to owners of the Company :

 

 



Basic and diluted (US cents)

17

(3.80)

(15.39)

 

The accompanying notes form part of the Condensed Consolidated Financial Statements.

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2020


  Share

capital

Share premium

Merger

reserve

Foreign currency translation

reserve

Share-based payment reserve

Retained earnings

 

Total attributable

to owners

Non-controlling interest

Total

equity

 


US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

US$'000

Unaudited - six months ended 30 June 2020










Balance at 1 January 2020

363

147,339

(20,523)

53

167

(12,536)

114,863

(1,728)

113,135

Total comprehensive loss for the period

-

-

-

(10,494)

-

(10,931)

(21,425)

(7,230)

(28,655)











Issue of shares

185

12,332

-

-

-

-

12,517

-

12,517

Cost of issuing shares

-

(320)

-

-

-

-

(320)

-

(320)

Issue of warrants

-

(10)

-

-

10

-

-

-

-

Share based payment charges

-

-

-

-

(15)

-

(15)

-

(15)

Transactions with owners

185

12,002

-

-

(5)

-

12,182

-

12,182

Balance at 30 June 2020

548

159,341

(20,523)

(10,441)

162

(23,467)

105,620

(8,958)

96,662











Unaudited - six months ended 30 June 2019










Balance at 1 January 2019

335

142,026

(20,523)

(1,226)

-

(6,255)

114,357

1,138

115,495

Total comprehensive profit / (loss) for the period

-

-

-

1,046

-

(40,573)

(39,527)

(14,057)

(53,584)











Issue of shares

28

1,101

-

-

-

-

1,129

-

1,129

Acquisition of non-controlling interests

-

-

-

-

-

9

9

(425)

(416)

Transactions with owners

28

1,101

-

-

-

9

1,138

(425)

713

Balance at 30 June 2019

363

143,127

(20,523)

(180)

-

(46,819)

75,968

(13,344)

62,624

 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 



Six months ended

30 June

Six months ended

30 June



2020

Unaudited

US$'000

2019

Unaudited

US$'000

Cash flows from operating activities




Loss before taxation


(14,138)

(54,676)

Adjustments for:




Depreciation of property, plant and equipment


401

463

Amortisation of right-of-use assets


8

-

Impairment losses


-

48,900

Share-based payment credit


(15)

-

Finance income


(770)

(214)

Finance costs


1,528

2,186

Debt modification loss


938

-

Foreign currency exchange differences


  8,869

24

Fair value loss on game animals


36

-

Operating cash flows before working capital changes


(3,143)

(3,341)

Decrease / (increase) in trade and other receivables


1,402

(814)

(Increase) / decrease in inventories


(6)

1

(Increase / (decrease) in payables


468

(8,386)

(Decrease) / increase in other tax liabilities


(338)

-

Decrease in amounts due from related parties


-

5

(Decrease) in provisions


(453)

-



(2,070)

(12,511)

Income taxes paid


(86)

(17)

Net cash flows used in operating activities


(2,156)

(12,528)

 

Cash flows used in investing activities




Purchase of property, plant and equipment


(1,132)

(5)

Exploration and evaluation expenditure


(127)

(49)

Finance income received


770

214

Net cash flows (used by) / from investing activities


(489)

160

 

Cash flows from financing activities




Finance costs paid


(1,088)

(2,186)

Repayment of lease liabilities


(8)

-

Other financial liabilities received / (repaid)


34

(708)

Issue of ordinary share capital


12,517

710

Costs of share issues


(320)

-

Net cash flows from / (used in) financing activities


11,135

(2,184)

 

Net increase / (decrease) in cash and cash equivalents


8,490

(14,552)

Cash and cash equivalents at beginning of the period


15,530

30,457

Foreign currency exchange (losses) / gains on cash


(3,021)

656

Cash and cash equivalents at end of the period


20,999

16,561

 

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

1.  General information

 

Kropz plc and its subsidiaries is an emerging African explorer and developer of plant nutrient feed phosphate projects in South Africa and the RoC. The principal activity of the Company is that of a holding company for the Group, as well as performing all administrative, corporate finance, strategic and governance functions of the Group.

 

The Company was incorporated on 10 January 2018 and is a public limited company, with its ordinary shares admitted to the AIM Market of the London Stock Exchange on 30 November 2018 trading under the symbol, "KRPZ". The Company is domiciled in England and incorporated and registered in England and Wales. The address of its registered office is 35 Verulam Road, Hitchin, SG5 1QE. The registered number of the Company is 11143400.

 

The Company entered into a number of agreements during 2018 to acquire phosphate assets and in turn become the holding company of the Group with interests in Ghana, South Africa and the RoC.

 

2.  Basis of preparation

 

These interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and in accordance with the accounting policies of the consolidated financial statements for the year ended 31 December 2019. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2019 annual report. The statutory financial statements for the year ended 31 December 2019 were prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), taking account of interpretations by the International Financial Reporting Interpretations Committee ("IFRIC") as applicable in the European Union and in accordance with the requirements of the Companies Act 2006. They have been filed with the Registrar of Companies. The auditors reported on those financial statements; their Audit Report was unqualified but included a material uncertainty related to going concern.

 

The interim consolidated financial statements have been prepared under the historical cost convention unless otherwise stated in the accounting policies. They are presented in United States Dollars, the presentation currency of the Group and figures have been rounded to the nearest thousand.

 

The interim financial information is unaudited and does not constitute statutory accounts as defined in the Companies Act 2006.

 

The interim financial information was approved and authorised for issue by the Board of Directors on 25 August 2020.

 

3.  Significant events

 

The World Health Organization declared coronavirus and COVID-19 a global health emergency on 30 January 2020 which is having a markedly negative impact on global stock markets, currencies and general business activity. The Kropz Elandsfontein project is advancing according to schedule, despite an on-going national lockdown as a result of COVID-19. The directors have considered the impact of COVID-19 on the Group and do not believe that it has had a material impact on carry values and results.

 

4.  Going concern

 

Cash and cash equivalents totalled US$ 21.0 million as at 30 June 2020. The Group has no current source of operating revenue and is therefore dependent on existing cash resources and future fundraisings to meet overheads and future exploration requirements as they fall due.

 

In May 2020, Kropz entered into a convertible loan facility of up to US$ 40 million (not exceeding a maximum of ZAR 680 million) with ARC, the Company's major shareholder. This convertible loan facility is expected to bring the Company's Elandsfontein project, into production in Q4 2021. The equity facility is ringfenced in Kropz Elandsfontein and the Kropz group does not have access to the US$ 40 million and ZAR 200 million currently locked up by BNP in the accounts of Kropz Elandsfontein. As of 30 June, ARC Fund had provided a ZAR equivalent of US$ 10 million. In due course, the ZAR 200 million ringfenced by BNP will be released and utilised towards funding the construction and completion of Elandsfontein.

 

Kropz Elandsfontein renegotiated and amended the BNP US$ 30 million project finance facility in June 2020, extending the first capital repayment to 31 December 2022, and quarterly thereafter to 30 September 2024. Entering into and closing the amended facility agreement with BNP removed the technical default announced to shareholders in February 2020.

 

The directors have reviewed the overall position and outlook in respect of the matters identified above and have prepared a cash flow forecast for the Company and Group which indicates that the Company will need to raise further funds in the second half of 2021 for working capital purposes and to progress the Hinda project. Management has been successful in raising funds in the past and the directors consider it to be appropriate to prepare the Company and Group financial statements on a going concern basis. However, there is no certainty that adequate funds will be available when needed and the COVID-19 pandemic may adversely impact on the ability of the Group to raise the necessary funding. These circumstances indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business.

 

5.  Significant accounting policies

 

The Company has applied the same accounting policies, presentation, methods of computation, significant judgements and the key sources of estimation of uncertainties in its interim consolidated financial statements as in its audited financial statements for the year ended 31 December 2019 except for the adoption of new standards effective as of 1 January 2020. The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.  

 

Several amendments and interpretations apply for the first time in 2020, but do not have an impact on the interim condensed consolidated financial statements of the Group.

 

New standards, interpretations and amendments adopted by the Group

 

Amendments to IFRS 3: Definition of a Business

The amendment to IFRS 3 clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output. Furthermore, it clarified that a business can exist without including all of the inputs and processes needed to create outputs. These amendments had no impact on the consolidated financial statements of the Group, but may impact future periods should the Group enter into any business combinations.

Amendments to IFRS 7, IFRS 9 and IAS 39: Interest Rate Benchmark Reform

The amendments to IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. A hedging relationship is affected if the reform gives rise to uncertainties about the timing and or amount of benchmark-based cash flows of the hedged item or the hedging instrument. These amendments had no impact on the consolidated financial statements of the Group as it does not have any interest rate hedge relationships.

Amendments to IAS 1 and IAS 8: Definition of Material

The amendments provide a new definition of material that states "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity."

The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the consolidated financial statements of, nor is there expected to be any future impact to, the Group.

Conceptual Framework for Financial Reporting issued on 29 March 2018

The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the IASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. The revised Conceptual Framework includes some new concepts, provides updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts.

These amendments had no impact on the consolidated financial statements of the Group.

6.  Segment information

 

Operating segments

Up to the date of approval of the financial information for the period ended 30 June 2020, the Board of Directors considered that the Group had one operating segment, being that of phosphate mining and exploration. Accordingly, all revenues, operating results, assets and liabilities are allocated to this activity.

 

Geographical segments

Since the acquisition of the interest in Kropz SA (Pty) Limited ("Kropz SA"), Kropz Elandsfontein, Elandsfontein Land Holdings (Pty) Ltd ("Elandsfontein Land Holdings"), all based in South Africa, and Cominco Resources Limited ("Cominco Resources") and its subsidiaries, with assets predominantly in the RoC, in November 2018, the Group operates in two principal geographical areas - South Africa and the RoC.

 

 

30 June 2020

South Africa

US$'000

 

RoC

US$'000

Group

US$'000





Total non-current assets

87,335

39,417

126,752

 

31 December 2019

South Africa

US$'000

 

RoC

US$'000

Group

US$'000





Total non-current assets

106,851

40,136

146,987

 

7.  Tangible assets - Property, plant, equipment and mine development

 


30 June

2020

US$'000

31 December

2019

US$'000

Buildings and infrastructure



Land



Cost

1,750

2,159

Accumulated depreciation and impairment

-

-

Carrying value

1,750

2,159




Buildings



Cost

9,311

11,489

Accumulated depreciation and impairment

(9)

(9)

Carrying value

9,302

11,480




Capitalised road costs



Cost

7,467

9,214

Accumulated depreciation and impairment

(1,991)

(2,150)

Carrying value

5,476

7,064




Capitalised electrical sub-station costs



Cost

3,240

3,998

Accumulated depreciation and impairment

(792)

(844)

Carrying value

2,448

3,154




Machinery, plant and equipment



Critical spare parts



Cost

983

1,213

Accumulated depreciation and impairment

-

-

Carrying value

983

1,213




Plant and machinery



Cost

46,287

56,357

Accumulated depreciation and impairment

(63)

(73)

Carrying value

46,224

56,284




Furniture & fittings



Cost

36

45

Accumulated depreciation and impairment

(34)

(42)

Carrying value

2

3




Geological equipment



Cost

40

49

Accumulated depreciation and impairment

(40)

(49)

Carrying value

-

-




Office equipment



Cost

29

36

Accumulated depreciation and impairment

(12)

(12)

Carrying value

17

24




Other fixed assets



Cost

1

1

Accumulated depreciation and impairment

(1)

(1)

Carrying value

-

-




Motor vehicles



Cost

108

133

Accumulated depreciation and impairment

(107)

(127)

Carrying value

1

6




Computer equipment



Cost

36

44

Accumulated depreciation and impairment

(34)

(39)

Carrying value

2

5




Mine development



Cost

17,014

20,354

Accumulated depreciation and impairment

-

-

Carrying value

17,014

20,354




Stripping activity costs



Cost

2,646

3,265

Accumulated depreciation and impairment

-

-

Carrying value

2,646

3,265




Game animals



Cost

139

213

Accumulated depreciation and impairment

-

-

Carrying value

139

213




Total

86,004

105,224

 

Reconciliation of property, plant, equipment and mine development - Period ended 30 June 2020

 


Opening

Balance

US$'000

Additions

US$'000

Fair value loss

US$'000

Depreciation charge

US$'000

Foreign exchange gain/loss

US$'000

Closing balance

US$'000

Buildings and infrastructure







Land

2,159

-

-

-

(409)

1,750

Buildings

11,480

-

-

(1)

(2,177)

9,302

Capitalised road costs

7,064

-

-

(265)

(1,323)

5,476

Capitalised electrical sub- station costs

3,154

-

-

(116)

(590)

2,448








Machinery, plant and equipment







Critical spare parts

1,213

-

-

-

(230)

983

Plant and machinery

56,284

613

-

(9)

(10,664)

46,224

Furniture & fittings

3

-

-

(1)

-

2

Geological equipment

-

-

-

-

-

-

Office equipment

24

-

-

(3)

(4)

17

Motor vehicles

6

-

-

(4)

(1)

1

Computer equipment

5

-

-

(2)

(1)

2








Mine development

20,354

519

-

-

(3,859)

17,014








Stripping activity costs

3,265

-

-

-

(619)

2,646








Game animals

213

-

(36)

-

(38)

139








Total

105,224

1,132

(36)

(401)

(19,915)

86,004

 

Reconciliation of property, plant, equipment and mine development - Year ended 31 December 2019


Opening

Balance

US$'000

Additions

US$'000

 

Fair value loss

US$'000

Depreciation charge

US$'000

Foreign exchange gain/loss

US$'000

Closing balance

US$'000

Buildings and infrastructure







Land

2,108

-

-

-

51

2,159

Buildings

11,210

-

-

(3)

273

11,480

Capitalised road costs

7,497

-

-

(597)

164

7,064

Capitalised electrical sub-station costs

3,339

-

-

(259)

74

3,154








Machinery, plant and equipment






 

 

Critical spare parts

1,185

-

-

-

28

1,213

Plant and machinery

54,262

713

-

(5)

1,314

56,284

Furniture & fittings

4

-

-

(1)

-

3

Geological equipment

1

-

-

(1)

-

-

Office equipment

27

-

-

(4)

1

24

Other fixed assets

1

-

-

-

(1)

-

Motor vehicles

24

-

-

(18)

-

6

Computer equipment

5

5

-

(6)

1

5








Mine development

18,724

1,177

-

-

453

20,354








Stripping activity costs

3,188

-

-

-

77

3,265








Game animals

251

-

(44)

-

6

213








Total

101,826

1,895

(44)

(894)

2,441

105,224

 

Kropz Elandsfontein has a fully drawn down project financing facility with BNP for US$ 30 million. BNP has an extensive security package over all the assets of Kropz Elandsfontein and Elandsfontein Land Holdings as well as the share investments in those respective companies owned by Kropz SA.

 

8.  Intangible assets - exploration and evaluation costs

 


30 June

2020

US$'000

31 December

2019

US$'000

Capitalised exploration costs



Cost

39,442

40,192

Amortisation and impairment

-

-

Carry value

39,442

40,192

 

 

Reconciliation of exploration assets


Opening

Balance

US$'000

Additions

US$'000

Foreign exchange loss

US$'000

Closing balance

US$'000

Period ended 30 June 2020





Capitalised exploration costs

40,192

127

(877)

39,442

 

Reconciliation of exploration assets


Opening

Balance

US$'000

Additions

US$'000

Foreign exchange loss

US$'000

Closing balance

US$'000

Year ended 31 December 2019





Capitalised exploration costs

40,772

289

(869)

40,192

 

The costs of mineral resources acquired and associated exploration and evaluation costs are not subject to amortisation until they are included in the life-of-the-mine plan and production has commenced.

 

Where assets are dedicated to a mine, the useful lives are subject to the lesser of the asset category's useful life and the life of the mine, unless those assets are readily transferable to another productive mine. In accordance with the requirements of IFRS 6, the directors assessed whether there were any indicators of impairment. No indicators were identified.

 

9.  Share capital

 

Shares were issued during the period as set out below:

 


 

Number of

Share capital

Share premium

Merger reserve

 

Total


shares

US$'000

US$'000

US$'000

US$'000

For the six months ended 30 June 2020






At 31 December 2019

283,406,307

363

147,339

(20,523)

127,179







Placing of shares

4,505,060

5

350

-

355

Convertible loan - issue of shares

130,199,604

148

9,852

-

10,000

Open offer - issue of shares

25,849,920

32

2,130

-

2,162

Cost of issuing shares

-

-

(320)

-

(320)

Issue of warrants

-

-

(10)

-

(10)

443,960,891

548

159,341

(20,523)

139,366

 

For the year ended 31 December 2019






At 31 December 2018

261,881,253

335

142,026

(20,523)

121,838







Issue of shares to advisers

1,357,080

2

708

-

710

Issue of shares on compulsory redemption of Cominco Resources minorities

803,315

1

418

-

419

Placing of shares

19,364,659

25

4,248

-

4,273

Warrants issued

-

-

(30)

-

(30)

Cost of issuing shares

-

-

(31)

-

(31)

283,406,307

363

147,339

(20,523)

127,179

The changes to the issued share capital of the Company which occurred between 1 January 2020 and 30 June 2020 were as follows:

Placing of shares

On 1 June 2020, the Company placed a total of 4,505,060 shares to an existing investor and two directors (300,000 shares were placed with Lord Robin Renwick and 30,000 with Mark Summers) at a price of 6.75 pence per ordinary share for a total cash consideration of GBP 304,092 (before expenses) (equal to approximately US$ 353,595).

Open offer shares

In terms of an Open Offer, the Company issued a total of 25,849,920 shares on 26 June 2020 at 6.75 pence per ordinary share for a total cash consideration of GBP 1,744,870 (before expenses) (equal to approximately US$ 2,163,639).

ARC subscribed for 25,481,482 Open Offer Shares on the same terms (equal to approximately US$ 2,132,801). Mark Summers subscribed for 50,000 Open Offer shares.

Convertible loan facility

In addition to the Placing and Open Offer, the Group secured a convertible loan facility from ARC, Kropz's major shareholder, in June 2020 for the development of Elandsfontein. The first drawdown on the convertible loan facility occurred on 26 June 2020 for US$ 10 million. Under the terms of the convertible loan facility, ARC committed to provide up to a ZAR equivalent of US$ 40 million (ZAR 680 million) to the Company which will be converted into new ordinary shares. The convertible loan facility will be used exclusively for Kropz Elandsfontein's purposes.

In June 2020, the Company made its first quarterly drawdown request in terms of the convertible loan facility. The first drawdown which was for US$ 10 million was paid by way of issue of 130,199,604 new ordinary shares at the issue price of 6.75 pence per ordinary share to ARC on 26 June 2020. The next drawdown of the convertible loan facility is expected to be made on 10 September 2020 and quarterly thereafter, in line with the terms of the convertible loan facility.

Share-based payment arrangements

 

Employee Share Option Plan and Long-Term Incentive Plan

 

The Company issued a total of 8,190,355 share options during the period ended 31 December 2018. Ian Harebottle resigned on 29 February 2020 and the 3,362,909 executive share option plan ("ESOP") options awarded to him lapsed and expired on that date. Accordingly, a total of 4,827,746 options were outstanding as at 30 June 2020.

 

The charge to profit and loss was US$ 39,000 (31 December 2019: US$ 137,000) and US$ 54,000 previously charged to profit and loss was reversed on the lapse of options.

 

Equity warrants

 

As part of the convertible loan facility and fundraising described above, Kropz granted 121,837 warrants over the ordinary shares of 0.1 pence each in the Company, exercisable at 6.75 pence apiece for a period of two years from 31 July 2020.   The warrants were valued at the year-end using a Black-Scholes valuation model. The charge to the share premium account during the year was US$ 10,000 (31 December 2019: US$ 30,000).

 

As at 30 June 2020, 1,321,837 equity warrants were in place (31 December 2019: 1,200,000 equity warrants).

 

10.  Key management personnel remuneration

 

The remuneration for each Director and Key Management Personnel of the Group during the period was as follows:

 



Short-Term Benefits

Total

US$

Period ended 30 June 2020

Base Salary

US$

Bonus

US$

Options 

US$ 

Executive directors





Ian Harebottle

197,432

-

(54,322)(i)

143,110

Mark Summers

123,915

-

27,161

151,076


321,347

-

(27,161)

294,186

Non-executive directors





Lord Robin Renwick

24,656

-

-

24,656

Linda Beal

23,063

-

-

23,063

Mike Daigle

18,492

-

-

18,492

Machiel Reyneke

-

-

-

-

Michael Nunn

-

-

-

-


66,211

-

-

66,211






Total directors' remuneration

387,558

-

(27,161)

360,397






Executives





Jan Steenkamp

33,190

-

-

33,190

Michelle Lawrence

84,093

-

11,835

95,928


117,283

-

11,835

129,118

 

(i)  Ian Harebottle resigned on 29 February 2020 and the ESOP options awarded to him lapsed and expired. The option expense previously recognised to profit and loss was accordingly reversed.

 



Short-Term Benefits

 

Total

US$

Period ended 30 June 2019

Base Salary

US$

Bonus

US$

Options 

US$ 

Executive directors





Ian Harebottle

205,326

-

-

205,326

Mark Summers

139,011

-

-

139,011


344,337

-

-

344,337

Non-executive directors





Lord Robin Renwick

29,649

-

-

29,649

Linda Beal

24,121

-

-

24,121

Mike Daigle

31,677

-

-

31,677

Machiel Reyneke

-

-

-

-

Michael Nunn

-

-

-

-


85,447

-

-

85,447






Total directors' remuneration

429,784

-

-

429,784






Executives





Michelle Lawrence

83,749

-

-

83,749


83,749

-

-

83,749

The following ESOP options, which were issued at the time of admission to AIM as share-based payment arrangements, were outstanding at the period ended 30 June 2020:

 

Name

Expiry Date

Exercise Price (pence)

Number of Options

Mark Summers

28 November 2028

0.1

3,362,609

Michelle Lawrence

28 November 2028

0.1

1,465,137




4,827,746

 

11.  Shareholder loans payable

 


30 June

2020

US$'000

31 December

2019

US$'000

ARC

15,511

14,701

 

The loans: (i) are US$ denominated but any payments will be made in ZAR at the then-current exchange rate; (ii) carry interest at monthly US LIBOR plus 3 per cent; and (iii) are repayable by no later than 1 January 2035 (or such earlier date as agreed between the parties to the shareholder agreements).

 

12.  Other financial liabilities

 


30 June

2020

US$'000

31 December

2019

US$'000

BNP

30,114

29,537

Greenheart Foundation

395

445

Total

30,519

29,982

 

Non-current financial liabilities

30,114

-

Current financial liabilities

395

29,982

Total

30,519

29,982

 

BNP

 

A US$ 30,000,000 facility was made available by BNP to Kropz Elandsfontein in September 2016. Interest was charged at three months US LIBOR plus 4.5 per cent. and was initially repayable quarterly over two years. The first capital repayment was due on 31 March 2018.

 

The Group was unable to fund the instalment payments on the loan as they fell due in early 2018 and consequently, under the terms of the facility agreement, was in default from 1 April 2018. On 20 September 2018, the Group and BNP conditionally agreed a waiver of the breach and restructure of the facility under which the first capital repayment was deferred to 30 September 2020. In addition, BNP provided the necessary consents required to facilitate all the contemplated transactions leading up to the admission of Kropz plc to AIM. In June 2019 management determined that the completion of the project was likely to be delayed and the anticipated cost of the project might increase by up to US$ 20 million. These developments meant that Kropz Elandsfontein was not in full compliance with the terms of the facility agreement and a standstill arrangement was put in place whilst a plan for the recommissioning of the project was agreed with BNP. In accordance with IFRS, the non-compliance with the facility agreement terms has required the loan to be classified as a current liability at 31 December 2019. Even though there is no requirement to report the 30 June 2019 comparative statement of financial position, if it were to be included, there would be a reclassification of the BNP loan as at 30 June 2019 to current liabilities. The facility has been fully drawn down.

 

During January 2020, given the delays in agreeing the recommissioning plan of Elandsfontein, Kropz Elandsfontein was once again placed into default by BNP. In May 2020, Kropz Elandsfontein and BNP agreed to amend and restate the term loan facility agreement entered into in September 2016 (as amended from time to time). The BNP facility amendment agreement extends inter alia the final capital repayment date to Q3 2024, with eight equal capital repayments to commence in Q4 2022 and an interest rate of 6.5 per cent. plus US LIBOR, up to project completion and 4.5 per cent. plus US LIBOR thereafter. Financial closure of the facility amendment agreement occurred on 25 June 2020.

 

In accordance with IFRS 9, the Group has recognised a loss of US$ 938,000 in profit and loss arising from the modification of the loan.

13.  Finance income


Six months ended

30 June

2020

US$'000

Six months ended

30 June

2019

US$'000

Interest income

770

214

Foreign exchange gains

-

668

Total

770

882

 

14.  Finance expense


Six months ended

30 June

2020

US$'000

Six months ended

30 June

2019

US$'000

Shareholder loans

363

395

Foreign exchange losses

9,204

-

Bank debt

1,027

1,791

BNP - debt modification loss (Note 12)

938

-

Finance leases

1

-

Other

137

-

Total

11,670

2,186

 

15.  Impairment loss

 

As announced on 12 September 2019 in an Elandsfontein update, test work confirmed that a reverse flotation modification to the current circuit would produce a saleable product at a lower grade than originally targeted. At that time, as a direct consequence of the prevailing depressed phosphate rock prices, an alternate process modification was being considered to deliver the required process efficiencies at viable economic returns and further test work was required to at least the end of 2019 to confirm this.

 

As a result of the above delay in recommissioning and current depressed phosphate rock prices, an impairment of US$ 49 million was made to the carrying value of property, plant, equipment, mine development costs and exploration assets in Kropz Elandsfontein as at 30 June 2019.

 

The impairment was allocated as follows:

 



US$'000

Property, plant, equipment and mine development assets


47,497

Exploration assets


1,403

Total


48,900

 

Subsequently, test work confirmed that the modified metallurgical configuration for the flotation circuit can produce higher concentrate grade product and there was an increase in projected future phosphate rock prices. The positive test work results and increased phosphate rock market price projections incorporated in the year-end impairment review enabled the impairment provision recognised at 30 June 2019 to be reversed in the full-year financial statements ended 31 December 2019 as the recoverable amount of assets significantly exceeded its carry amount. Those same assumptions apply at 30 June 2020 and no impairment is thus necessary for the period ended 30 June 2020.

 

16.  Taxation

 

Major components of tax charge

Six months ended

30 June

2020

US$'000

Six months ended

30 June

2019

US$'000

Deferred



Originating and reversing temporary differences

-

-

Current tax



UK tax in respect of current period

583*

246

Total

583

246

 

* Given current COVID-19 volatility seen in the market, the tax charge arose predominantly due to the devaluation of GBP against US$ and the recorded unrealised foreign exchange gains being taxable in the UK.

The Group had losses for tax purposes of approximately US$ 42.2 million (US$ 37.6 million as at 31 December 2019) which, subject to agreement with taxation authorities, are available to carry forward against future profits. A net deferred tax asset arising from these losses has not been established as the Directors have assessed the likelihood of future profits being available to offset such deferred tax assets is uncertain.

 

17.  Earnings per share

 

The calculations of basic and diluted earnings per share have been based on the following loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding:

 


Six months ended

30 June

2020

US$'000

Six months ended

30 June

2019

US$'000

Loss attributable to ordinary shareholders

(10,931)

(40,573)

Weighted average number of ordinary shares in Kropz plc

288,009,877

263,591,748




Basic and diluted loss per share (US cents)

(3.80)

(15.39)

 

The diluted loss per share and the basic loss per share are recorded as the same amount, as the conversion of share options decreases the basic loss per share, thus being anti-dilutive.

 

18.  Related party transactions

 

Details of share issues, Key Management Personnel remuneration and shareholder loans are explained in Notes 9, 10 and 11. In addition, the following transactions were carried out with related parties:

 

Related party balances

Loan accounts - Owed to related parties

 


30 June

2020

US$'000

31 December

2019

US$'000

ARC

15,511

14,701

Total

15,511

14,701

 

Related party balances

Interest paid to related parties

 


Six months ended

30 June

2020

US$'000

Six months ended

30 June

2019

US$'000

ARC

363

395

Total

363

395

 

19.  Seasonality of the Group's business

 

There are no seasonal factors which materially affect the operations of any company in the Group.

 

20.  Events after the reporting period

 

On 4 August 2020, the Company granted conditional share awards over ordinary shares in the Company to key members of the executive management team, including certain PDMRs, including Mark Summers and Chief Operating Officer Michelle Lawrence, under its Long Term Incentive Plan ("LTIP Awards"). These LTIP Awards have performance conditions aligned to the implementing the Group's strategic plans, including appropriate weightings on the successful commissioning of the Elandsfontein mine and completion of an updated feasibility study on the Hinda project.

 

The LTIP Awards are nil priced options over a total of 6,700,000 ordinary shares representing 1.5 per cent. of the Company's issued share capital. Following the grant of the LTIP Awards, together with the existing 4,827,746 awards currently under option under the ESOP ("ESOP Awards"), the ESOP Awards and LTIP Awards represent 2.6 per cent. of the Company's issued share capital.

 

Of this total, 2,350,000 LTIP Awards have been granted to each of Mark Summers and Michelle Lawrence. The LTIP Awards will vest on 31 December 2021, subject to the terms of the LTIP Plan Rules (as set out in the Company's Admission Document), including financial and non-financial performance conditions and, in respect of Mark Summers and Michelle Lawrence, continued employment by the Group.

Company information

 

Directors

Lord Robin William Renwick of Clifton, Non-executive Chairman

Mark Robert Summers, Chief Executive Officer and Chief Financial Officer

Michael (Mike) John Nunn, Non-executive Director

Machiel Johannes Reyneke, Non-executive Director

Michael (Mike) Albert Daigle, Independent Non-executive Director

Linda Janice Beal, Independent Non-executive Director

 

Company secretary

Mark Robert Summers

Company number

11143400

 

Registered address

35 Verulam Road

Hitchin

SG5 1QE

 

Independent auditors

BDO LLP

55 Baker Street

London W1U 7EU

 

Nominated adviser

Grant Thornton UK LLP

30 Finsbury Square

London EC2A 1AG

 

Joint broker

H&P Advisory Limited

2 Park Street

Mayfair

London W1K 2HX

 

Joint broker

Mirabaud Securities Limited

5th Floor

10 Bressenden Place

London SW1E 5DH

 

Legal advisers as to English Law

Memery Crystal LLP

165 Fleet Street

London EC4A 2DY

 

Legal advisers as to South African Law

Werksmans Attorneys

The Central, 96 Rivonia Road

Sandton 2196

Johannesburg

South Africa 

 

Bowman Gilfillan

22 Bree Street

Cape Town 8000

South Africa

 

Legal advisers as to the laws of Republic of Congo

PricewaterhouseCoopers Tax & Legal

88 Avenue du General de Gaulle

B.P. 1306

Pointe-Noire

Congo

 

Legal advisers as to the laws of the British Virgin Islands

Harney Westwood & Riegels LP

Craigmuir Chambers

PO Box 71,

Road Town

Tortola VG1110

British Virgin Islands

 

Registrars

Link Asset Services

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

 

Principal bankers

Barclays

One Churchill Place

London E14 5HP

 

BNP Paribas

11 Crescent Place

Melrose Arch

Johannesburg 2196

South Africa

 

Financial PR

Tavistock Communications Limited

1 Cornhill

London EC3V 3ND

 

Market consultant

CRU Consulting

Chancery House

53-64 Chancery Lane

London WC2A 1QS

 

Company's website: www.kropz.com

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