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Regency Mines PLC (RGM)

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Friday 23 March, 2018

Regency Mines PLC

Half-year Report

RNS Number : 6820I
Regency Mines PLC
23 March 2018
 

 



 

 

 

23 March 2018

 

 

Regency Mines Plc ("Regency" or the "Company"), the natural resources exploration and mineral investing company with interests in hydrocarbon and base metal exploration and production, announces its unaudited half-yearly results for the six months ended 31 December 2017.

 

Chairman's statement

Dear Shareholders,

 

It is with much pleasure that we present these interim results. The six month period to 31 December 2017 was one of significant activity, in which the Company completed the sale of its 5% participation in Horse Hill Developments Ltd, a private oil exploration company, and was able thereby to generate proceeds of £1,719,126, as well as receiving 6,467,500 shares in the AIM-listed Alba Mineral Resources plc.

 

A considerable profit was generated from this sale, only partially offset by an impairment of Regency's interest in a metallurgical coal joint venture in the U.S. The proceeds of this sale allowed the Company to increase by £400,000 its investment in Curzon Energy plc, which it had helped fund in 2016 and which listed on the Standard List of the London Stock Exchange during the half year under review, as well as to increase its current assets and reduce its current liabilities. Net current liabilities were consequently reduced by £629,047 from the 30 June total, while the liquidity of its available for sale financial assets of £1,249,980 was improved by the fact that the bulk of them now comprised London-listed investments.

 

These developments significantly improved the financial position of the Company.

 

Since the end of the calendar year, further funding of £1,050,000 was raised and the balance sheet has been further strengthened. The trade and other receivables have been reduced to near zero, so that current assets now comprise almost entirely cash, while the trade and other payables have also been reduced to near zero, and short term borrowings have been entirely eliminated, so that current liabilities have been almost entirely discharged. The Company now enjoys a substantial net current asset position.

 

It is worth reminding shareholders, many of whom have come on the register since 2010, how the high level of debt we have carried ever since that time and up until recently came about. We had entered into a joint venture in relation to our Mambare lateritic nickel-cobalt project in Papua New Guinea with a party that was expecting to raise substantial funding and obtain a listing. Neither eventualised, partly due to market conditions, and we were left with the unappetising choice of aborting our nearly completed exploration programme with no measurable outcomes or of taking shares in a private entity and carrying our partner financially in order to complete the programme and obtain a maiden JORC Resource. We chose the latter, and in consequence lived with an uncomfortable if reducing level of debt throughout the 2010 to 2016 downturn.

 

Whether we were right in the long term to make that decision will now be seen. We know that in the short and medium term it was proved wrong, for nickel, having failed to recover like other metals between the global financial crisis of 2008 and the commodity market peak in 2010, continued to perform poorly as other metals came out of the down-cycle in 2016. Last year began to see a recovery in the cobalt price, which continues, and this year has seen the start of a recovery in the nickel price, and a pattern of increasing demand for these materials for electric vehicle and other storage batteries that we expect to continue.

 

An opportunity now exists to reinvigorate the Mambare project, and the extremely large Resource we have proved up from what is only a small part of the deposit gives us a strong platform to work from.

 

Meanwhile we have continued to work on building up our presence in hydrocarbon energy sources. Although we have sold out of Horse Hill Developments Ltd, our increased 8.91% shareholding in Curzon Energy plc gives us exposure to the coal bed methane market in the U.S.

 

Our first steps last year into the metallurgical coal market in the U.S. did not generate early production as hoped, and we identified management and organisational deficiencies in our partner that led us to make a provision of £821,566 against the value of these assets. We have however learnt by our experiences and have strong expectations for the development of that business, primarily through our new $2,000,000 commitment to a joint venture with Legacy Hill Resources Ltd, a privately held company with the technical and operating expertise that is needed to develop a successful metallurgical coal project in the competitive U.S. marketplace. 

 

The objective of the joint venture is to acquire and assemble a critical mass of production and reserves. We have known and worked with our partners at Legacy Hill for some time now, and have developed a high regard for their capabilities and strengths and an awareness of the degree to which they are complementary to our own. We are confident that we will be able to build a strong working relationship. Through this relationship, we will also try to address the potential of the Rosa mine and other coal assets.

 

At the end of 2017, we announced the formation of a Battery and Storage Technologies Division, which complements our hydrocarbon energy and battery metal activities and will address new developments in battery technology and developing uses for the metals in our portfolio. The first investment made was of £400,000 in White Car Ltd, a new Tesla-operating car hire company that aims to be a disruptor of the car hire market, and where my colleague Scott Kaintz now sits on the board.  

 

We thank our shareholders for their strong support during a period of transition, and look forward to an exciting period in which, from a solid financial base, we start to reap the rewards of investments undertaken and decisions made.

 

 

 

Andrew Bell

Chairman and CEO

 

 23 March 2018



 

Consolidated statement of financial position

as at 31 December 2017


Notes

31 December 2017

31 December 2016

30 June 2017



Unaudited, £

Unaudited, £

ASSETS


Non-current assets


Property plant and equipment


Investments in associates and joint ventures

6

Available-for-sale financial assets

7

Exploration assets


Trade and other receivables


Total non-current assets




Current assets


Cash and cash equivalents


Trade and other receivables


Total current assets




TOTAL ASSETS






EQUITY AND LIABILITIES


Equity attributable to owners of the parent


Called up share capital

8

Share premium account


Other reserves


493,914

Retained earnings


(16,084,194)

Total Equity




LIABILITIES


Current liabilities


Trade and other payables


Short term borrowings


Total current liabilities




TOTAL EQUITY AND LIABILITIES




 

The accompanying notes form an integral part of these financial statements.



 

Consolidated statement of income

for the period ended 31 December 2017

 


Notes

6 months to 31 December 2017

6 months to 31 December 2016



Unaudited, £

Unaudited, £



Revenue


Management services


-

42,000

Gain/(loss) on sale of tenements


-

56,637



-

98,637




Administrative expenses

3

(257,515)

(306,548)

Gain on dilution of interest in associate


-

3,295

Impairment of investment in joint ventures

6

(821,566)

-

Gain/(loss) on sale of investments

7

1,485,611

-

Share of gains in associates


-

3,265

Other income


59,621

38,789

Finance costs, net


(44,854)

(19,600)

Profit /(loss) for the period before taxation from continuing operations


421,297

(182,162)

Tax expense


-

-

Profit /(loss) for the period after taxation from continuing operations


421,297

(182,162)





Earnings per share


Profit /(loss) per share - basic

4

Profit /(loss) per share - diluted

4

 

 

The accompanying notes form an integral part of these financial statements.

 

 

Consolidated statement of comprehensive income

for the period ended 31 December 2017

 



6 months to 31 December 2017



Unaudited, £





Profit /(loss) for the period


421,297

(182,162)

Revaluation of available for sale investments


(335,700)

(2,231)

Group's share of associates' other comprehensive (expense)/ income


-

143,174

Unrealised foreign currency gain/(loss) arising upon retranslation of foreign operations


 

(95,193)

 

(36,667)

Total comprehensive loss for the period


(9,596)


(77,886)



 

The accompanying notes form an integral part of these financial statements.

 

 



 

Consolidated statement of changes in equity

for the period ended 31 December 2017

 

The movements in equity during the period were as follows:

 



As at 30 June 2016

(15,902,032)

324,638

Changes in equity for 2016

Total comprehensive (loss)/income for the period

 

(182,162)

 

(77,886)

Transactions with owners

Issue of shares

Share issue and fundraising costs

Share-based payment transfer

-

65,000

Total Transactions with owners

 

As at 31 December 2016

(16,084,194)

493,914


As at 30 June 2017

(16,795,589)

895,947

Changes in equity for 2017

Profit/ (loss) for the period

Other comprehensive (loss)/income for the period

 

-

 

(430,894)

 

(430,894)

Transactions with owners






Issue of shares

Share issue and fundraising costs

Share-based payment transfer

Total Transactions with owners

 

As at 31 December 2017

1,905,163

19,287,043

(16,374,292)

472,679

5,290,593

 




As at 30 June 2016

267,004

(410,439)

Changes in equity for 2016

Total comprehensive income/(loss) for the period

(2,231)

Transaction with owners


Share-based payment transfer

As at 31 December 2016

264,773

(267,265)

493,914


As at 30 June 2017

326,097

895,947

Changes in equity for 2017

Total comprehensive income/(loss) for the period

(335,700)

(95,193)

(430,893)

Transaction with owners






Share-based payment transfer

As at 31 December 2017

(9,603)

-

73,482

408,800

472,679

 



 

Consolidated statement of cash flows

for the period ended 31 December 2017

 


Note

6 months to 31 December 2017



Unaudited

£



Cash flows from operating activities


Profit /(loss) before taxation


421,297

(182,162)

(Increase)/decrease in receivables


(601,465)

17,926

(Decrease) in payables


(208,584)

(153,903)

Impairment in JVs

6

821,566

-

Share based payments charge


22,025

65,000

Share of gains in associates


-

(3,265)

Broker's fee received in Curzon Energy Plc's shares


(28,000)

-

Reversal of prior year impairment


(21,614)

-

Interest payable


44,854

19,600

Currency adjustments


-

(49,771)

Loss on dilution of interest in associates


-

(3,295)

Gain on sale of available-for-sale investments

7

(1,485,611)

-

(Gain)/loss on sale of tenements


-

(56,638)

PPE write off/Depreciation


14,934

3,417

Net cash flows from operations


(1,020,598)


(343,091)





Cash flows from investing activities


Proceeds from sale of available-for-sale investments


1,719,126

58,939

Payments to acquire available-for-sale investments


(400,000)

(85,000)

Exploration payments


-

           (284)

Net cash flows from investing activities


1,319,126


(26,345)





Cash flows from financing activities


Proceeds from issue of shares


-

Transaction costs of issue of shares


-

Interest paid


(44,854)

Repayment of borrowings


(224,377)

Net cash flows from financing activities


(269,231)


455,106





Net increase in cash and cash equivalents


29,297


85,670




Cash and cash equivalents at the beginning of period


9,176

Cash and cash equivalents at end of period


38,473


93,630



 



 

 

Half-yearly report notes

for the period ended 31 December 2017

 

1

Company and Group

 


As at 30 June 2017 and 31 December 2017 the Company had one or more operating subsidiaries and has therefore prepared full and interim consolidated financial statements respectively.

 


The Company will report again for the full year ending 30 June 2018.

 

The financial information contained in this half yearly report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the year ended 30 June 2017 has been extracted from the statutory accounts of the Group for that year. Statutory accounts for the year ended 30 June 2017, upon which the auditors gave an unqualified audit report which did not contain a statement under Section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies.

 

2

Accounting Polices

 


Basis of preparation


The consolidated interim financial information has been prepared in accordance with IAS 34 'Interim Financial Reporting'.  The accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 June 2017, which have been prepared in accordance with IFRS.

 

 

3

Administrative expenses

 



6 months to

 31 December 2017



Unaudited

£

Staff Costs:



Payroll


Pension


Consultants


HMRC / PAYE


Professional Services:



Accounting


Legal


-


4,248

Marketing


2,588


19,086

Other


7,800


713

Regulatory Compliance


32,365


34,570

Travel


2,029


5,745

Office and Admin Costs:





General


24,651


2,257

IT related costs


3,709


114

Rent







Total administrative expenses


257,515


306,548

 



 

 

4

Loss per share

 


The following reflects the profit/(loss) and share data used in the basic and diluted profit/(loss) per share computations:

 



6 months to

 31 December 2017



Unaudited, £




Profit/(loss)/profit attributable to equity holders of the parent company

421,297


(182,162)





Weighted average number of Ordinary shares of £0.0001 in issue

576,805,818



Effect of dilutive options



Weighted average number of Ordinary shares of £0.0001 in issue inclusive of outstanding dilutive options






(Loss)/profit per share - basic

0.073 pence


(0.06) pence







(Loss)/profit per share - fully diluted

0.072 pence


(0.06) pence




 

 

Options and warrants with all conditions met, that were also in the money at the end of each respective period:

 



6 months to

 31 December 2017



Unaudited, £




Share options granted to employees, fully vested and in the money at the end of the respective period



Warrants given to shareholders as a part of placing equity instruments, fully vested and in the money at the end of the respective period

 

-



Total instruments fully vested and in the money






At 31 December 2016, the effect of all the instruments (fully vested and in the money) is anti-dilutive as it would lead to a further reduction of loss per share, therefore they were not included into the diluted loss per share calculation.

 



Options and warrants with conditions not met at the end of the period, that could potentially dilute basic EPS in the future, but were not included in the calculation of diluted EPS because they are anti-dilutive for the periods presented:

 



6 months to

 31 December 2017



Unaudited, £




Share options granted to employees - not vested and/or out of the money



Warrants given to shareholders as a part of placing equity instruments - not all conditions met and/or out of the money

 

 

236,685,670



Total options and warrants with not all conditions met and/or out of the money






Total number of instruments in issue not included into the fully diluted EPS calculation


 



 

Half-yearly report notes

for the period ended 31 December 2017, continued

 

5

Segmental analysis

 


Since the last annual financial statements the Group has not made any changes or additions to how it measures its segmental results.

 




For the 6 month period to 31 December 2017




Management services


Revenue




Result


Segment results


Loss before tax and finance costs




Interest receivable


Interest payable


Loss for the period before taxation




Taxation expense


Loss for the period after taxation


 

 

 




For the 6 month period to 31 December 2016




Management services


Revenue




Result


Segment results


Loss before tax and finance costs




Interest receivable


Interest payable


Loss for the period before taxation




Taxation expense


Loss for the period after taxation

 



 


A measure of total asset and liabilities for each segment is not readily available and so this information has not been presented.

 



 

Half-yearly report notes

for the period ended 31 December 2017, continued

 

6

Investments in associates and joint ventures

 



31 December 2017

Unaudited


At the beginning of the period


Additions


Gain on re-translation into group presentation currency


Transferred to available-for-sale investments


Impairment


At the end of the  period

2,764,191

1,787,848

3,585,757

 

 

As a result of the Group's evaluation of its non-financial assets, an impairment loss of £821,566 on investments in associates and joint ventures was recognised in the income statement (2016: £nil). This relates to the Company's investments in Vali Carbon Corporation, a company targeting the acquisition and development of metallurgical coal assets in Virginia, as announced on 6 February 2017, 9 March 2017 and on 16 March 2017.

 

The Directors recognise that Vali Carbon Corporation has suffered from significant managerial and organizational deficiencies to date, particularly a lack of financial capital and focus from the majority owner of the business.  As such the Company considers advancement of these assets to be on hold pending further negotiation and discussion with the majority partner. 

 

Simultaneously, the Company is exploring options to potentially inject some of its metallurgical coal investments into the joint venture with Legacy Hill Resources first announced on 27 February 2018, as part of a larger US metallurgical coal investment and development strategy.     

 

Given the broad uncertainty around the future of these assets, the fact that the metallurgical coal market remains buoyant and the original investment thesis sound with multiple potential pathways for future development, an impairment value of £821,566 for the year was determined to most appropriately reflect the present situation and pervading uncertainties.

 

 

7

Available-for-sale financial assets

 



31 December 2017

Unaudited


At the beginning of the period


Additions


Disposals


Revaluations


Reversal of impairment


Transfer from investments in associates


At the end of the  period

1,249,979

1,230,229

1,443,707

 

In August 2017 the Company disposed of 1.9% of its stake in Horse Hill Developments Ltd ("HHDL") to UK Oil and Gas ("UKOG"). For this interest the Company received £54,498 in obligations assumed by the buyer as well as £268,502 of value in UKOG shares. These shares were subsequently sold for proceeds of £1,298,555.

On 29 November 2017, Regency announced that it has completed the sale to dispose of its remaining 3.1% interest in HHDL for £630,000, of which 50% would was delivered in cash and 50% in shares of the buyer, Alba Mineral Resources plc ("Alba").

 



 

Half-yearly report notes

for the period ended 31 December 2017, continued

 

8

Share Capital of the company

 


The share capital of the Company is as follows:

 



Number


Nominal, £





Allotted, issued and fully paid



As at 30 June 2017






Issued 6 December 2017 at 0.625 pence per share in relation to SIP






At 31 December 2017





 

9

Capital Management


Management controls the capital of the Group in order to control risks, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.

The Group's debt and capital includes ordinary share capital and financial liabilities, supported by financial assets.

There are no externally imposed capital requirements.

Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.

There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.

 

 



 

Half-yearly report notes

for the period ended 31 December 2017, continued

 

10       Subsequent events

 

ESTEQ Investment into Whitecar Ltd.

On 22 December 2017 the Company announced that its wholly owned subsidiary, EsTeq Ltd, had agreed to invest £400,000 into Whitecar Ltd, in two tranches, one at closing and a further in February 2018.  In February 2018 EsTeq completed the terms of this investment by investing the second £200,000 tranche into Whitecar Ltd, bringing the total invested to £400,000 and its shareholding to 5.8% of Whitecar. 

 

Strategic Fundraising and Loan Repayment

On 11 January 2018 the Company raised £1,050,000 through the issuance of 190,909,090 new ordinary shares of 0.01 pence each.  Each participant in the placing received a warrant along with each share purchased to subscribe for a further share at 1.0 pence for 24 months.  The Company retains the ability to call these warrants in the event that the volume weighted average price of the Company's shares equals or exceeds 3.5 pence for ten consecutive business days.   

 

On 30 January 2018 the Company further announced that it had repaid in full all of its outstanding convertible loan notes with YA II PN, Ltd.  This payment totalled $835,115 and was broken down into $725,647 of principal and $33,548 of interest.

 

Joint Venture with Legacy Hill Resources

On 27 February 2018 the Company announced that it had executed a joint venture agreement with Legacy Hill Resources ("LHR"), a privately-owned mining company, setting out a framework for cooperation.  The purpose of the joint venture was to structure and finance acquisitions in the U.S. metallurgical coal sector including their subsequent management and operation.

 

Under the terms of the joint venture, LHR will own 30% of the joint venture, to reflect their efforts in financing, conducting due diligence and managing the acquisition process to date.  LHR will contribute $1m in cash and Regency will contribute up to $2m in cash, with the total equity contributions under this agreement capped at $3m.  Regency will thereby hold a proportion of the joint venture equal to 70% of its relative cash contributions.  If more than $3m of cash investment was required, a new agreement would be entered into for that additional amount.  LHR was to be responsible for day to day operations of the investments and all these terms and relationships were to be formalized in a full agreement when appropriate. 

 

Update on Rosa Mine Due Diligence

 

On 27 February 2018 the Company announced that alongside Legacy Hill Resources due diligence had been carried out on the Company's option to acquire 80% of the Rosa metallurgical coal mine and wash plant not already owned by Regency.  While the original sixty-day timeline had expired, Regency was continuing to review information gathered on the Rosa mine, to reach out and speak with stakeholders, and to discuss additional partnership options regarding this asset with Legacy Hill Resources.  The Company further explained that the eventual terms of any potential transaction regarding Rosa might require additional negotiation and would likely be different than those originally announced.   

 

 

For further information contact:

Andrew Bell 0207 747 9960                                                                                 Chairman Regency Mines Plc

Scott Kaintz 0207 747 9960                                                                                  Executive Director Regency Mines Plc

Roland Cornish/Rosalind Hill Abrahams 0207 628 3396                              NOMAD Beaumont Cornish Limited

Jason Robertson 020 7374 2212                                                                          Broker First Equity Limited

 

 


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