Final Results

RNS Number : 6128N
BlueRock Diamonds PLC
19 May 2015
 

 

BlueRock Diamonds plc

Preliminary results for the year ended 31 December 2014

19 May 2015

BlueRock Diamonds (AIM: BRD) is pleased to announce its final results for the year ended 31 December 2014.

Strategic Report

 

Chairman's Statement

 

Dear Shareholders,

 

I am pleased to report that our new plant is now fully operational and we are in commercial production processing at a rate of approximately 80 tonnes of kimberlite per hour. This is the culmination of almost 18 months of hard work during which we have completed our trial mining and constructed our new processing plant.

 

We were pleased with the results of the trial mining from which we recovered 575 carats. These were sold at an average price of US$248, some 36% higher than anticipated in the Competent Person's Report published at the time of our admission to AIM ("CPR"). Whilst we will have a more accurate picture once we have been operating the new plant for a couple of months, evidence to date suggests that recovery grades will be in line with, if not higher than, those set out in the CPR.

 

Following the success of the trial mining, we took the decision in the summer of 2014 to upgrade the original plant, which while serviceable, was unable to process sufficient volume in order for the Company to reach commercial production.

 

The new plant was financed through a non-interest bearing convertible loan from one of our shareholders of £450,000. The total cost of the equipment purchased and constructed was approximately £300,000 and the remainder of the funds have provided the working capital required during the period of construction of the new plant. We have kept the costs to a minimum in large part through the judicious purchase of nearly new equipment and the expertise of our local team.

 

We have designed our new plant in accordance with current industry practice in consultation with experienced mining and production engineers. Our new configuration is based on tried and tested pan technology that is being used successfully by other diamond miners in the region and elsewhere. We do not anticipate major processing issues going forward.

 

Initially we will operate one shift a day during which we will fine tune the plant. After this period we intend to move to two shifts a day, as is normal in the industry. Whilst doubling our capacity and revenue potential, a second shift will only require a 30% increase in our workforce.

 

During the construction period we have been preparing for production by continuing with our mining activities. We have a current stockpile of around 50,000 tonnes of kimberlite ready to be processed. This stockpile has been excavated from pipes K1 and K2 only and to date we have dug down to a depth of around 22 metres on a portion of these pipes.

 

We have not yet begun to mine pipes K3, K4 or K5. Following the introduction of a second shift, we will evaluate further how best to exploit the three undeveloped pipes.

 

I would like to thank everyone at BlueRock and, in particular, Willy Van Vyk our partner in Kimberley and his team in the Northern Cape for all their efforts and I look forward to updating you on our progress in the near future.

 

Paul Beck

 

Non-executive Chairman

 

 

Strategic Report

 

Chief Executive Officer's Review

 

This year has been an exciting year for the Group as we marked completion of trial mining at our Kareevlei property in South Africa and the start of construction of a much larger processing plant. Ministerial consent to transfer the mining right to Kareevlei Mining Pty Limited ("Kareevlei Mining"), our 74% owned subsidiary, was also granted during the year and the right was registered in Kareevlei Mining's name in September 2014.

 

Financial review

 

Revenue and profitability

 

In 2014, the Group made a loss of £430,000 (2013: £537,000) on turnover of £65,000 (2013: Nil). The loss in 2014 effectively reflects the cost to the Group of the trial mining phase that was completed during the year. The turnover reflects the sale of 462 carats at an average price of US$223 per carat.

 

Cash flows

 

Investments

 

During the year we invested approximately £300,000 in the purchase of plant and equipment and £134,000 in non- current assets being the mining right and rehabilitation costs. The majority of the plant and equipment acquired relates to the construction of the new plant. The balance relates largely to equipment required for the operation of the trial mining plant.

 

Financing

 

The investment in the new plant was financed through the issue of a convertible loan of which £400,000 was drawndown during the period.

 

Cash position

 

At the end of the period the Group cash balance was £248,000. Since the year end, we have drawn down a further £50,000 of the convertible loan and have sold the remainder of the diamonds that we had on hand. Now that we have restarted production we are revenue generating again and expect to make our first sales since commissioning of the new plant, in the June auction.

 

Trial mining

 

The objectives of the trial mining phase were to verify the reliability of the historic sampling data and to establish the revenue per carat based on current prices. We have concentrated on the K1 and K2 pipes and I am pleased to say that the grades achieved equalled or slightly exceeded the expected grades. All 575.79 carats of diamonds recovered during trial mining were sold on tender through a Johannesburg based tender house and we achieved an average price of US$248 per carat, 36% above prices anticipated in the CPR. The highest price of US$2,455 per carat was received for a 3.8 carat stone with a number of stones realising prices above US$1,500 per carat. This adds further weight to our belief that Kareevlei will be a high value diamond producer. After achieving our trial mining objectives, the Board took the decision to upgrade and enlarge the effective capacity of the existing processing plant from 25 tonnes per hour to 80 tonnes per hour.

 

In December 2014, we halted processing of kimberlite through the existing plant to allow construction of the new plant to commence, which included the addition of rotary pans to the existing DMS plant and an enlarged and more efficient crushing circuit. We are confident that the new plant will enable us to profitably produce sufficient diamonds at a lower operating cost per tonne in 2015.

 

We are yet to explore the remainder of the Kareevlei property but based on the sampling data received from the previous owners, particularly the K5 pipe, we believe that it still offers excellent medium to long term growth opportunities for the Company.

 

Post balance sheet

 

The construction of the new plant has now been completed and the vertical shaft impact ("VSI") crusher has now been commissioned. The plant is now designed to process approximately 14,000 tonnes per month, based on an 8 hour shift, which we expect, based on grades seen to date, will significantly increase our diamond recoveries.

 

We look forward to updating you on our progress throughout the year.

 

The outlook for the diamond market remains very positive and we expect that prices for quality diamonds, as produced by Kareevlei, will further increase in 2015.

 

As mentioned in my 2013 report, there has been a marked increase in prospecting activities in the Northern Cape during 2014 and we expect that new opportunities for the Company will flow from it.

 

I wish to thank our South African partner and our employees for their effort this year and look forward to working with them in 2015.

 

Riaan Visser

 

Chief Executive Officer

 

 

Strategic Report

 

Operational Review

 

During the period, the Company successfully completed the trial mining phase using material excavated from the K1 and K2 pipes by opencast mining methods and treatment through the existing DMS processing plant. During the trial period, a total of approximately 13,000 tonnes of kimberlite was processed to DMS concentrate with final diamond recovery conducted at the Company's secure recovery plant in Kimberley.

 

Once the upper 10m levels of the pipes, consisting of diluted calcretised kimberlite, had been removed to an overburden stockpile, mining has been focussed on the weathered kimberlite levels to approximately 22m from surface in a portion (approximately 35%) of the pit. The kimberlite was drilled, blasted, and excavated to pre-headfeed stockpiles. Dry screening and crushing into acceptable plant feed size fractions proved beneficial to the treatment process, and these methods will be adopted for the newly upgraded plant configuration.

 

The contracted mining and infield crushing and screening activities continued during the first months of 2015. Surface stockpiles of sized kimberlite ready for processing in the upgraded plant are sufficient for a 3 to 4 month treatment period at the increased throughput rate.

 

During the trial mining, all diamond resource variables for K1 and K2 that were evaluated in the sampling data acquired from the previous owners have now been tested. These include the estimated kimberlite pipe morphology, vertical rock type variability, and weathering penetration recorded during the early evaluation phases. In addition, the grade, density, and revenue estimates have also been analysed during this trial period. Of significance is the consistently higher price per carat revenues realised at the five tender sales of the Kareevlei diamond parcels as compared with the estimate set out in the CPR produced at the time of the IPO.

 

The recently upgraded Kareevlei processing plant will provide us with greater flexibility of processing options. These include primary and secondary crushing, scrubbing and sizing, rotary pan pre-concentration, followed by final concentration in the DMS. In addition, a vertical shaft impact crusher has been installed in a tertiary re-crush role to liberate diamonds trapped in uncrushed kimberlite pieces, which we expect will increase recovery rates.

 

John Kilham

 

Chief Technical Officer

 

 

Strategic Report

 

Risk Management

 

Principal risks and uncertainties

 

Introduction

 

The principal risks that relate to the Group have been set out below, categorised as follows:

 

-    Operational risks

-  Risks relating to the Group's operations including mining

 

-    Economic risks

-  Risks associated with changes in the markets in which the Group operates

 

-    Country risks

-  Specific risks relating to the Group's main country of operation, South Africa

 

-    Other risks

-  Other significant risks

 

 

Operational risks

 

Reliability of mineral resource and reliance on historic data

 

The calculation of a mineral resource involves significant assumptions and estimates that may prove inaccurate, including assumptions of diamond prices. In calculating the Inferred Mineral Resource at the Kareevlei tenements, reliance was placed upon measurements and data collected by Diamond Resources (the vendor of the Kareevlei tenements) and other parties. There can be no guarantee that predicted grades will continue to materialise or that the resource will be economically viable. The Company has mitigated this risk by undertaking trial mining designed to provide further evidence to support the mineral resource estimates set out in the CPR prior to expanding our production facilities.

 

Exposure to mining hazards

 

Whilst the Group's exposure is reduced due to the open cast mining technique, the Group remains exposed to a number of risks and hazards associated with mining including pit wall failure, adverse weather and mechanical breakdown. The Company monitors its mining operations constantly to ensure that mining risks are minimised. In addition, the Company's production team has extensive experience operating and maintaining similar production facilities.

 

Security risks

 

Whilst the Group has implemented security procedures, there can be no guarantee that theft of plant, machinery or diamonds will not occur. Should any theft occur, the Company may suffer adverse financial consequences. We have mitigated this risk by ensuring that our security team is present at all times.

 

Economic risks

 

Exposure to a decrease in rough diamond prices

 

As the Group has commenced diamond sales, the profitability of mining operations is directly related to the prevailing diamond price. Historically, diamond prices have been volatile and are affected by numerous factors which the Group is unable to control or predict, including world production levels, international economic trends, industrial and consumer demand, currency exchange fluctuations, seasonality, speculative activity and political events.

 

Exposure to strengthening of the South African Rand and weakening of the US Dollar

 

The Group realises US Dollars for its diamond sales, and reports its results in Pounds Sterling. Should the South African Rand strengthen against the Pound, the costs of the Group's mining operations, which are largely denominated in South African Rand, may be adversely affected. Should the US Dollar weaken against the Pound, the Group's revenues may be reduced.

 

Exposure to movements in the prices of raw materials, equipment and services

 

Should market prices for raw materials, services and equipment, such as diesel or mining equipment increase, the Group's results may be adversely affected. The Group seeks to obtain the best rate for each product or service, taking into account price, service quality and reliability.

 

Country risks 

 

Operations in South Africa

 

The Group's main country of operation is South Africa. Whilst the Directors intend that the Company will carry out its activities in accordance with all applicable laws, rules and regulations, it is possible that new laws, rules or regulations may be enacted or that the interpretation of current laws, rules or regulations may change, either of which may limit the ability of the Company to operate. The Company's activities and profitability may also be adversely affected by economic or political factors outside its control.

 

Financial Risk Management

 

Details of the Group's financial risk management policies are set out in Note 24 of the Financial Statements

 

Other risks

 

Status of Kareevlei Mining's BEE partner

 

Under South African law, it is a requirement that any mining asset is at least 26 per cent. owned by a BEE partner. Kareevlei Mining's BEE partner, Ghaap Mining, holds 26 per cent. of the shares in Kareevlei Mining. Ghaap Mining is a South African private company wholly owned by Mr. William Alexander van Wyk who, in terms of South African legislation, is considered to qualify as a historically disadvantaged South African ("HDSA"). Should Mr. van Wyk cease to or be deemed not to qualify as an HDSA, there is a risk that the BEE partner may not meet its obligations to the Company which may cause the Company to incur unforeseen additional costs or losses.

 

Key Performance indicators

 

Given the early stage nature of the Group's activities the Directors are of the opinion that analysis using financial KPI's is not appropriate for an understanding of the development, performance or position of the business at this time. The Directors constantly review the expenditure and general operating costs to ensure that cash resources are available prior to commitment to this expenditure. In addition to the above, non-financial factors such as compliance with environmental, rehabilitation and other legislation within the Group's area of operation are also considered.

 

The Strategic Report has been approved

 

By order of the board

 

 

Riaan Visser - Director

18 May 2015

 

The report and accounts for the year ended 31 December 2014, including the notice of Annual General Meeting ("AGM"), will be posted to shareholders and will be available for download from the Company's website www.bluerockdiamonds.co.uk shortly. The AGM will be held at the offices of SP Angel Corporate Finance LLP at 35-39 Maddox Street, London W1S 2PP on 25 June 2015 at 10.00a.m.

 

Enquiries:

BlueRock Diamonds plc

Riaan Visser, CEO

www.bluerockdiamonds.co.uk

+27 (0) 84 431 0118

SP Angel Corporate Finance LLP

Nominated Adviser & Broker

David Facey / Katy Birkin / Liz Yong

+44 (0) 20 3470 0470

 

 

Consolidated and Company Statement of Financial Position

 

 

 

Group

 

Company

 

Group

 

Company

 

 

 

31 December

 

31 December

 

31 December

 

31 December

Figures in Pounds

Note(s)

2014

2014

2013

2013

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Non‑Current Assets

 

 

 

 

 

Property, plant and equipment

5

485,605

-

265,918

-

Mining rights

6

81,352

-

-

-

Mining rehabilitation

6

53,007

-

-

-

Investment in subsidiary

7

-

5

-

5

 

 

 

 

 

 

 

 

619,964

5

265,918

5

 

 

 

 

 

 

Current Assets

 

 

 

 

 

Inventories

8

23,629

-

-

-

Loan to group company

9

-

1,259,377

-

519,633

Trade and other receivables

10

35,729

139,048

129,336

51,731

Cash and cash equivalents

11

247,986

229,305

674,574

650,296

 

 

 

 

 

 

 

 

307,344

1,627,730

803,910

1,221,660

 

 

 

 

 

 

Total Assets

 

927,308

1,627,735

1,069,828

1,221,665

 

 

 

 

 

 

Equity and Liabilities

 

 

 

 

 

Equity

 

 

 

 

 

Equity Attributable to Equity Holders of Parent

 

 

 

 

 

Share capital and share premium

13

1,561,184

1,561,184

1,561,184

1,561,184

Retained earnings

 

(976,919)

(377,216)

(536,512)

(384,032)

Equity reserve

16

149,600

149,600

-

-

Foreign exchange difference

 

10,732

-

-

-

 

 

 

744,597

 

1,333,568

 

1,024,672

 

1,177,152

Non‑controlling interest

 

(206,996)

-

(53,588)

-

 

 

 

 

 

 

 

 

537,601

1,333,568

971,084

1,177,152

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Current Liabilities

 

 

 

 

 

Trade and other payables

15

61,459

38,912

77,899

44,513

 

Non-Current Liabilities

Borrowings

 

 

16

 

 

255,255

 

 

255,255

 

 

-

 

 

-

 

Provisions

 

14

 

72,993

 

-

 

20,845

 

-

 

 

 

 

 

 

 

 

389,707

294,167

98,744

44,513

 

 

 

 

 

 

Total Equity and Liabilities

 

927,308

1,627,735

1,069,828

1,221,665

 

 

 

 

 

 

 

The financial statements were approved by the Board of Directors and authorised for issue on 18 May 2015. They were signed on its behalf by:

 

Riaan Visser - Director

 

The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements.

 

Consolidated Statement of Comprehensive Income

 

 

Note(s)

12 months ended 31 December 2014

14 months ended 31 December 2013

Figures in Pounds

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

3

65,084

-

Other income

 

-

14,985

Operating expenses

17

(659,726)

605,085)

 

 

 

 

Operating loss

 

(594,642)

(590,100)

 

 

 

 

Taxation

 

(2,943)

 

 

 

 

 

Total loss for the year

 

(597,585)

(590,100)

 

 

 

 

Other Comprehensive Income

 

 

 

 

 

 

 

Items that will be reclassified subsequently to profit and loss

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

 

14,502

-

 

 

 

 

Other comprehensive income for the year net of tax

 

14,502

-

 

 

 

 

 

 

 

 

Total comprehensive income for the year

 

(583,083)

(590,100)

 

 

 

 

Total comprehensive income, net of tax attributable to:

 

 

 

Owners of the parent

 

(429,675)

(536,512)

Non‑controlling interest

 

(153,408)

(53,588)

 

 

 

 

 

 

(583,083)

(590,100)

 

 

 

 

Earnings per share - from continuing activities

 

 

 

Basic and diluted

22

(0.01)

(0.03)

 

The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements 

 

Consolidated and Company Statement of Changes in Equity

 

Figures in Pounds

 

Equity reserve

 

Share capital

 

Share premium

 

Total share capital

 

Accumulated loss

 

Foreign Exchange

reserve

 

 

Total attributable to equity holders of the Group / company

 

Non‑

controlling interest

 

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2013

-

315,250

1,245,934

1,561,184

(536,512)

 

1,024,672

(53,588)

971,084

Minority interest

-

-

-

-

-

 

-

-

-

Loss for the year

 

 

 

 

(440,407)

 

(440,407)

(157,178)

(597,585)

Foreign exchange difference

-

-

-

-

-

10,732

10,732

3,770

14,502

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss for the year

-

-

-

-

(440,407)

10,732

(429,675)

(153,408)

(583,083)

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

Issue of convertible loan notes

149,600

-

-

-

-

 

149,600

-

149,600

 

 

 

 

 

 

 

 

 

 

Total changes

149,600

-

-

-

(440,407)

10,732

(280,075)

(153,408)

433,483

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2014

149,600

315,250

1,245,934

1,561,184

(976,919)

10,732

(744,597)

(206,996)

537,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

14

14

14

 

 

 

 

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2013

-

315,250

1,245,934

1,561,184

(384,032)

 

1,177,152

-

1,177,152

Profit for the year

 

 

 

 

6,816

 

6,816

 

6,816

Other comprehensive income

-

-

-

-

-

 

-

-

-

Total comprehensive profit for the year

-

-

-

-

6,816

 

6,816

-

6,816

Transactions with owners

 

 

 

 

 

 

 

 

 

Issue of convertible loan notes

149,600

-

-

-

-

 

149,600

-

149,600

 

 

 

 

 

 

 

 

 

 

Total changes

149,600

-

-

-

6,816

 

156,416

-

156,416

 

 

 

 

 

 

 

 

 

 

Balance at 31 December 2014

149,600

315,250

1,245,934

1,561,184

(377,216)

 

1,333,568

-

1,333,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

 

14

14

14

 

 

 

 

 

 

 

Figures in Pounds

 

Share capital

 

Share premium

 

Total share capital

 

Accumulated loss

 

Total attributable to equity holders of the Group / company

 

Non‑

controlling interest

 

Total equity

Group

 

 

 

 

 

 

 

 

Balance at 11 October 2012

-

-

-

-

-

-

-

Loss for the year

 

 

 

(536,512)

(536,512)

(53,588)

(590,100)

Other comprehensive income

 

 

 

 

 

 

 

Total comprehensive loss for the year

-

-

-

(536,512)

(536,512)

(53,588)

(590,100)

Transactions with owners

 

 

 

 

 

 

 

Issue of shares

315, 250

1,245,934

1,561,184

-

1,561,184

-

1,561,184

 

 

 

 

 

 

 

 

Total changes

315, 250

1,245,934

1,561,184

(536,512)

1,024,672

(53,588)

971,084

 

 

 

 

 

 

 

 

Balance at 31 December 2013

315, 250

1,245,934

1,561,184

(536,512)

1,024,672

(53,588)

971,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

14

14

14

 

 

 

 

Company

 

 

 

 

 

 

 

 

Balance at 11 October 2012

-

-

-

-

-

-

-

Loss for the year

 

 

 

(384,032)

(384,032)

 

(384,032)

Other comprehensive income

 

 

 

 

 

 

 

Total comprehensive loss for the year

-

-

-

(384,032)

(384,032)

-

(384,032)

Transactions with owners

 

 

 

 

 

 

 

Issue of shares

315,250

1,245,934

1,561,184

-

1,561,184

-

1,561,184

 

 

 

 

 

 

 

 

Total changes

315,250

1,245,934

1,561,184

(384,032)

1,177,152

-

1,177,152

 

 

 

 

 

 

 

 

Balance at 31 December 2013

315,250

1,245,934

1,561,184

(384,032)

1,177,152

-

1,177,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Note

14

14

14

 

 

 

 

 

The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements. 

 

Consolidated and Company Statement of Cash Flows

 

 

 

 

 

Group

 

Company

 

Group

 

Company

 

 

 

12 months ended 31 December 2014

 

12 months ended 31 December 2014

 

14 months ended 31 December 2013

 

14 months ended 31 December 2013

Figures in Pounds

Note(s)

 

 

 

 

Operating activities

 

 

 

 

 

 

 

Cash used in operations

18

(401,748)

(81,247)

(620,155)

(402,622)

 

 

 

 

 

 

Net cash used in operating activities

 

(401,748)

(81,247)

(620,155)

(402,622)

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Purchase of property, plant and equipment

5

(290,481)

-

(266,455)

-

Purchase of non-current assets

 

(134,359)

-

-

-

Increase in investment in subsidiary

 

-

-

-

(5)

Increase in loan advanced to group company

 

-

(739,744)

-

(519,633)

Interest income

 

-

-

-

11,372

 

 

 

 

 

 

Net cash used in investing activities

 

(424,840)

(739,744)

(266,455)

(508,266)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Proceeds on share issue (net of issue costs)

13

-

-

1,561,184

1,561,184

Proceeds on convertible loan notes issue

16

400,000

400,000

-

-

 

 

 

 

 

 

Net cash from financing activities

 

400,000

400,000

1,561,184

1,561,184

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(426,588)

(420,991)

674,574

650,296

Cash and cash equivalents at the beginning of the year

 

674,574

650,296

-

-

 

 

 

 

 

 

Cash and cash equivalents at the end of the year

11

247,986

229,305

674,574

650,296

 

 

 

 

 

 

 

The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements.

 

 

Accounting Policies

 

1.     Publication of non-statutory accounts

 

In accordance with section 435 of the Companies Act 2006, the Directors advise that the financial information set out in this announcement does not constitute the Group's statutory financial statements for the year ended 31 December 2014, but is derived from these financial statements. The financial statements for the year ended 31 December 2014 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The financial statements for the year ended 31 December 2014 will be forwarded to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on these financial statements; their reports were unqualified and did not contain statements under Section 498(2) or (3) of the Companies Act 2006.

 

The consolidated statement of financial position at 31 December 2014 and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended have been extracted from the Group's financial statements. Those financial statements have not yet been delivered to the Registrar.

 

1.1   Basis of preparation

 

The preliminary announcement is extracted from the consolidated financial statements of all the entities within the Group. The financial statements of the subsidiary is prepared for the same reporting date as the parent company. Consistent accounting policies are applied for like transactions and events in similar circumstances.

The preliminary announcement has been prepared under the historical cost convention.

 

All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets or liabilities, are eliminated in full.

 

 

1.2   Significant judgements and sources of estimation uncertainty

 

The consolidated financial statements have been prepared using the significant accounting policies and measurement bases summarised below:

 

In the application of the Group's accounting policies the Directors are required to make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.

 

Significant estimates

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The key areas are summarised below:

 

Rehabilitation provision

Estimates and assumptions are made in determining the amount attributable to the rehabilitation provision. These deal with uncertainties such as legal and regulatory framework, timing and future costs. The carrying value of the rehabilitation provision is disclosed in note 14.

 

Useful lives of property, plant and equipment

Depreciation rates detailed below are considered by management to fairly reflect the expected useful lives of the respective asset categories. The property, plant and equipment accounting policy provides further detail.

 

Impairment of non-current assets

The outcome of on-going exploration, and therefore whether the carrying value of the machinery and equipment and funds in trust will ultimately be recovered, is inherently uncertain.

 

The ability of the Group to realise the carrying values of these assets is contingent upon production or discovery of economically recoverable mineral reserves, the on-going title to the resource properties, the ability of the Group to finance the development of the properties and on the future profitable production or proceeds from the property. The success of the Group's mineral exploration properties is also influenced by significant risks, including legal and political risks and future diamond prices.

 

The Directors make the judgements necessary to implement the Group's policy with respect to capitalisation of these assets and consider them for impairment at least annually with reference to indicators in IAS 36. If an indication exists, an assessment is made of the recoverable amount. The recoverable amount is the higher of value in use (being the net present value of expected future cash flows) and fair value less costs to sell. Value in use is estimated based on operational forecasts for advanced stage projects with key inputs that include diamond resources, diamond prices, production levels including grade and tonnes processed, production costs and capital expenditure. However, because of the above-mentioned uncertainties, actual future cash flows could materially differ from those estimated. The carrying values of property, plant and equipment are set out in note 5.

 

Valuation of assets and liabilities

Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is not always available. In that case management uses the best information available. Estimated fair values may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date (see note 27).

 

Judgements in applying the Group's accounting policies

In the process of applying the Group's accounting policies, management make various judgements that can significantly affect the amounts recognised in the financial statements. The critical judgements are considered to be the following:

 

Deferred tax assets

The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group's future taxable income against which the deductible temporary differences can be utilised. Note 4 provides further detail. There is a key judgement in that the amounts potentially involved are uncertain of recovery.

 

1.3   Property, plant and equipment

 

The cost of an item of property, plant and equipment is recognised as an asset when:

·           it is probable that future economic benefits associated with the item will flow to the company; and

·           the cost of the item can be measured reliably.

 

Property, plant and equipment is initially measured at cost.

 

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to or replace part of it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

 

Mining infrastructure, which includes evaluation and development costs capitalised prior to commencement of production, are depreciated using a unit of production method based on the carats produced over the estimated economically recoverable reserves.

 

Motor vehicles and plant and machinery are depreciated on the straight line basis over their expected useful lives to their estimated residual value.

 

Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.

 

The useful lives of items of property, plant and equipment have been assessed as follows:

 

Item

Average useful life

Mining infrastructure

Unit of production method

Motor vehicles

5 years

Plant and machinery

3 years

 

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.

 

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

 

The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

 

1.4   Mining Rights

 

Mining rights are recognised at cost, including any directly attributable transaction costs. The amortisation charge for each period is recognised on a 'units of production' method.

 

1.5   Mining Exploration and Development Costs

 

During the exploration phase of operations, all costs are expensed in the consolidated statement of comprehensive income as incurred.

A subsequent decision to develop a mine property within an area of interest is based on the exploration results, an assessment of the commercial viability of the property, the availability of financing and the existence of markets for the product. Once the decision to proceed to development is made, development and other expenditures relating to the project are capitalised and carried at cost with the intention that these will be depreciated by charges against earnings from future mining operations over the relevant life of mine on a units of production basis. Expenditure is only capitalised provided it meets the following recognition requirements:

·      completion of the project is technically feasible and the Group has the ability to and intends to complete it;

·      the project is expected to generate future economic benefits;

·      there are adequate technical, financial and other resources to complete the project; and

·      the expenditure attributable to the development can be measured reliably.

 

No depreciation is charged against the property until commercial production commences. After a mine property has been brought into commercial production, costs of any additional work on that property are expensed as incurred, except for large development programmes, which will be deferred and depreciated over the remaining life of the related assets.

 

Exploration costs are capitalised as an intangible asset until technical feasibility and commercial viability of extraction of reserves are demonstrable, when the capitalised exploration costs are re-classed to property, plant and equipment. Exploration costs include an allocation of administration and salary costs (including share based payments) as determined by management.

 

Prior to reclassification to property, plant and equipment, exploration and evaluation assets are assessed for impairment and any impairment loss recognised immediately in the statement of comprehensive income.

 

1.6   Investment in subsidiary

 

Company annual report and accounts

 

In the Company's accounts, the investment in subsidiary is carried at cost less any accumulated impairment.

 

The cost of an investment in a subsidiary is the aggregate of the fair value of assets given, liabilities incurred or assumed and equity instruments issued by the Company at the date of exchange.

 

1.7   Inventories

 

Inventories, which include rough diamonds, are stated at the lower of cost of production on the weighted average basis or estimated net realisable value. Cost of production includes direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business less marketing costs. Net realisable value also incorporates costs of processing in the case of the ore stockpiles. Consumable stores are stated at the lower of cost on the weighted average basis or estimated replacement value. Work in progress is stated at raw material cost including allocated labour and overhead costs.

 

1.8   Revenue

 

Revenue is measured at the fair value of consideration receivable.

 

Revenue comprises net invoiced diamond sales to customers excluding VAT. Diamond sales are made through a competitive tender process and recognised when significant risks and rewards of ownership are transferred to the buyer, costs can be measured reliably and receipt of future economic benefits is probable. This is deemed to be the point at which the tender is awarded.

 

1.9   Income Taxes

 

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

 

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

 

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

 

Deferred tax assets and liabilities are calculated, without discounting, at tax rates and laws that are expected to apply to their respective period of realisation, provided those rates and laws are enacted or substantively enacted by the end of the reporting period.

 

Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary difference will be utilised against future taxable income. This is assessed based on the Group's forecast of future operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused tax loss or credit.

Deferred tax liabilities are always provided for in full.

 

Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other comprehensive income or equity, respectively.

 

1.10   Mining Rehabilitation asset

 

The estimated cost of environmental rehabilitation is based on current legal requirements and existing technology. A provision is raised based on the present value of the estimated costs. These costs are included in the cost of the related asset. The capitalised assets are depreciated in accordance with the accounting policy for property, plant and equipment.

 

1.11   Financial instruments

 

Initial recognition and measurement

 

Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the instruments.

 

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement.

 

For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument.

 

Financial liabilities and equity

 

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

 

Management considers that the Group's financial liabilities comprise trade and other payables.

 

Convertible loan notes

 

The convertible loan notes are accounted for as compound instruments. The fair value of the liability portion of the convertible loan notes is determined using a market interest rate on an equivalent non-convertible loan note. This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan notes. The remainder of the proceeds are allocated to the conversion option, which is recognised and included in shareholders' equity, net of tax effects and is not subsequently re-measured.

 

Trade and other payables

 

Trade and other payables are not interest bearing and are recognised initially at fair value. Subsequently they are carried at amortised cost.

 

Financial assets

 

The Group classifies its financial assets under the definitions provided in International Accounting Standard 39 (IAS 39) Financial Instruments: Recognition and measurement, depending on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Management considers that the Group's financial assets fall under the 'loans and receivables' category.

 

Loans between group companies

 

This includes loans between the holding company and its subsidiary which are recognised initially at fair value plus direct transaction costs.

 

Loans to group companies are classified as loans and receivables.

 

Loans from group companies are subsequently classified as financial liabilities measured at amortised cost.

 

Trade and other receivables

 

Trade and other 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 Company will not be able to collect all amounts due according to the original terms of the receivables.

 

1.12   Cash and cash equivalents

 

Cash and cash equivalents consist of highly liquid instruments, such as bank deposits, certificates of deposit, time deposits, treasury notes and other money market instruments, which have maturities from inception of less than three months.

 

1.13   Operating expenses

 

Operating expenses are recognised in profit or loss upon utilisation of the service on an accruals basis.

 

1.14   Leases

 

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

 

Operating leases - lessee

 

Operating lease payments are recognised as an expense on a straight‑line basis over the lease term. The difference between the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

 

1.15   Provisions

 

Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that the Group will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. Where the effect of discounting is material, provisions are discounted. The discount rate used is a pre-tax rate that reflects current market assessment of the time value of money and, where appropriate, the risks specific to the liability.

 

1.16   Foreign currency transactions and balances

 

Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss.

 

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date).

 

1.17   Foreign operations

 

In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than Pounds are translated into Pounds upon consolidation. The functional currency of the entities in the Group has remained unchanged during the reporting period.

 

On consolidation, assets and liabilities have been translated into Pounds at the closing rate at the reporting date. Income and expenses have been translated into Pounds at the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or loss and are recognised as part of the gain or loss on disposal.

 

1.18   Equity, reserves and dividend payments

 

Share capital represents the nominal value of shares that have been issued.

 

Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

 

Other components of equity include the following:

 

• Translation reserve - comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into Sterling

• Retained earnings includes all current and prior period retained profits

• Equity reserve represents the fair value, of the equity component of the convertible loans, assessed at initial drawdown of the convertible loan.

 

All transactions with owners of the parent are recorded separately within equity.

 

Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been approved in a general meeting prior to the reporting date.

 

1.19   Share-based employee remuneration

 

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans are cash-settled.

 

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair value of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).

 

All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to retained earnings. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest.

 

Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

 

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

 

2.     New Standards and Interpretations

 

The following new standards and amendments to standards are effective for annual periods beginning on or after 1 January 2014. The implementation of these standards is not expected to have a material effect on the Group.

 

Standard

 

·     IFRS 10 'Consolidated Financial Statements' (IFRS 10)

 

·     IFRS 10 supersedes IAS 27 'Consolidated and Separate Financial Statements' (IAS 27) and SIC 12

'Consolidation-Special Purpose Entities'. IFRS 10 revises the definition of control and provides extensive new guidance on its application. These new requirements have the potential to affect which of the Group's investees are considered to be subsidiaries and therefore to change the scope of consolidation. The requirements on consolidation procedures, accounting for changes in non-controlling interests and accounting for loss of control of a subsidiary are unchanged.

 

·     Management has reviewed its control assessments in accordance with IFRS 10 and has concluded that there is no effect on the classification (as subsidiaries) of any of the Group's investees held during the period or comparative periods covered by these financial statements.

 

·     IFRS 12 'Disclosure of Interests in Other Entities' (IFRS 12)

IFRS 12 integrates and makes consistent the disclosure requirements for various types of investments, including unconsolidated structured entities. It introduces new disclosure requirements about the risks to which an entity is exposed from its involvement with structured entities.

 

2.1   Standards and interpretations not yet effective

 

Standards, amendments and interpretations which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early:

 

Standard

Description

Effective date

IFRS 9

IFRS 15

Financial Instruments

Revenue from contracts with customers

1 January 2018

1 January 2017

 

The implementation of these standards is not expected to have a material effect on the Group.

 

3.     Segmental reporting

 

Operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

 

The Group's operations relate to the exploration for, and development of mineral deposits in the Kimberley region of South Africa and as such the Group has only one reportable segment. The non-current assets in the Kimberley region are £589,004.

 

All revenue consists of sales of diamonds in South Africa through auctions as is customary in the industry. The Company sells its diamonds through auctions run by Flawless Diamonds.

 

4.     Tax expense

 

 

Company

2014

Company

2013

 

 £

 

£

 

 

 

Current tax

2,943

-

Deferred tax

-

-

Income tax expense for the year

2,943

-

 

 

 

Factors affecting the tax charge for the year

 

 

Profit/(loss) before tax

14,613

(384,032)

 

 

 

UK rate of taxation

20%

20%

 

 

 

Profit/(loss) before tax multiplied by the UK rate of taxation

2,923

(76,806)

 

 

 

Effects of:

 

 

Expenses not deductible for tax purposes

20

35,935

Losses brought forward

(40,871)

-

Losses carried forward

40,871

40,871

 

 

 

Tax expense

2,943

-

 

The Group has gross tax losses and temporary differences of £204,357 for which no deferred tax asset has been recognised.

 

5.     Property, plant and equipment

 

 

Group

 

 

 

 

 

 

 

 

2014

 

2013

 

Cost / Valuation

Accumulated depreciation

Carrying Value

 

Cost / Valuation

Accumulated depreciation

Carrying Value

Mine infrastructure

31,847

(6,002)

25,845

 

18,529

(537)

17,992

Motor vehicles

6,304

(2,117)

4,187

 

6,547

-

6,547

Plant and machinery

508,594

(53,021)

455,573

 

241,379

-

241,379

Total

546,745

(61,140)

485,605

 

266,455

(537)

265,918

 

Reconciliation of property, plant and equipment ‑ Group - 2014 

 

 

Opening balance
 

 

Additions
 

 

Depreciation

 

FX revaluation

 

Total

 

 

 

 

 

 

Mine infrastructure

17,992

13,990

(5,465)

(672)

25,845

Motor vehicles

6,547

-

(2,117)

(243)

4,187

Plant and machinery

241,379

276,491

(53,021)

(9,276)

455,573

 

 

 

 

 

 

 

265,918

290,481

(60,603)

(10,191)

485,605

 

 

6.     Mining Rights and Mining Rehabilitation

 

 

 

Opening balance
 

 

Additions
 

 

Depreciation

 

FX revaluation

 

Total

 

 

 

 

 

 

Mining Rights

-

81,352

-

-

81,352

 

 

 

 

 

 

 

-

81,352

-

-

81,352

 

The addition in the year relates to the transfer of the mining right to Kareevlei Mining Pty Limited following receipt of ministerial consent. The mining right was registered in September 2014.

 

 

 

Opening balance
 

 

Additions
 

 

FX revaluation

 

Total

 

 

 

 

 

Mining Rehabilitation

-

52,148

859

53,007

 

 

 

 

 

 

-

52,148

859

53,007

 

For further details on the mining rehabilitation provision see note 14.

 

7.     Investment in subsidiary

 

Name of company

% holding 2014

Carrying amount 2014

Kareevlei Mining Proprietary Limited

74%

5

 

 

 

Name of subsidiary

Location

Net loss after tax (2014) (South African Rand)

Net loss after tax (2014) (Pounds)

Net loss after tax (2013) (South African Rand)

Net loss after tax (2013) (Pounds)

Kareevlei Mining Proprietary Limited

Northern Cape Province in South Africa

(14,337,609)

(795,968)

(3,599,508)

(206,109)

 

Details of minority

 

The most significant element of the Mining Charter is the ownership requirement which stipulates that mines must commit to obtaining 26 per cent effective ownership by Historically Disadvantaged South Africans ("HDSAs") (being the meaningful participation of HDSAs in the ownership, voting rights, economic interest and management control of mining entities) by 2014.
 

BlueRock's subsidiary, Kareevlei Mining Proprietary Limited, is 26 per cent owned by Ghaap Mining Proprietary Limited, a Kimberley based company. Ghaap Mining Proprietary Limited is a South African private company wholly owned by Mr. William Alexander van Wyk who, in terms of South African legislation is considered to qualify as an HDSA.

 

 

Summary of Group's interest in subsidiary

 

 

 

 

 

 

2014

 

2013

 

 

Rand

Pounds

Rand

Pounds

Total assets

12,472,379

692,418

7,206,149

417,264

Total liabilities

(26,809,888)

(1,488,380)

(10,765,557)

(623,368)

Capital

(100)

(6)

(100)

(5)

Loss

14,337,609

795,968

3,599,508

206,109

 

-

-

-

-

  

8.     Inventories

 

2014

2013

2014

2013

 

Group

Group

Company

Company

Diamonds on hand

23,629

-

-

-

 

23,629

-

-

-

 

9.     Loan to group company

 

Subsidiary

 

2014

2013

2014

2013

                                                                                                                  

Group

Group

Company

Company

Kareevlei Mining Proprietary Limited

 

-

 

-

 

1,259,377

 

519,633

 

The loan bears interest at the Nedbank Limited prime variable overdraft rate or unsecured loans to corporate customers and is repayable on demand.

 

The net carrying value of the loan to group company is considered a reasonable approximation of the fair value.

 

10.    Trade and other receivables

 

 

 

2014

2013

2014

2013

 

Group

Group

Company

Company

 

Accrued income

 

-

 

-

 

133,462

 

49,462

Prepayments

1,852

75,585

1,822

1,151

VAT

25,550

53,751

3,764

1,118

Other receivables

8,327

-

-

-

 

35,729

129,336

139,048

51,731

 

The carrying value of all trade and other receivables including the loan to group company is considered a reasonable approximation of fair value.

 

11.    Cash and cash equivalents

 

Cash and cash equivalents consist of:

 

 

2014

2013

2014

2013

 

Group

Group

Company

Company

Cash on hand

172

23

-

-

Bank balances

247,814

674,551

229,305

650,296

 

247,986

674,574

229,305

650,296

 

12.    Share based payments

 

As disclosed in the Directors' Report, the Directors were granted share options under share option agreements dated 19 August 2013.On 30 September 2014, the Company amended the conversion terms of the options granted to Riaan Visser and John Kilham such that the option exercise prices were reduced to 14 pence (Tranche 1), 22 pence (Tranche 2) and 40 pence (Tranche 3). No other changes were made to the terms of the share options.

 

The share options held by each Director and the exercise prices are as follows:

 

Director

Number of ordinary shares subject to share options

Tranche 1

Tranche 2

Tranche 3

Number

Exercise price (pence)

Number

Exercise price (pence)

Number

Exercise price (pence)

P. Beck

472,876

157,625

18

157,625

40

157,626

55

J. Kilham

472,876

157,625

14

157,625

22

157,626

40

T. Leslie

472,876

157,625

18

157,625

40

157,626

55

A. Markgraaff

472,876

157,625

18

157,625

40

157,626

55

J. Quirk

945,750

315,250

18

315,250

40

315,250

55

C. Visser

1,891,502

630,500

14

630,501

22

630,501

40

Total

4,728,756

1,576,250

-

1,576,251

-

1,576,255

-

 

Options are valued at date of grant using the Black-Scholes option pricing model. The fair value per option of options granted during the period and the assumptions used in the calculation are shown below:

 

Date of Grant

19/08/2013

19/08/2013

19/08/2013

 

18p

40p

55p

Share price at Grant (upon admission)

 0.07

0.07

0.07

Share under option

1,576,251

1,576,251

1,576,254

Expected volatility

50%

50%

50%

Option life (years)

 5

5

5

Interest rate (%)

1.5

1.5

1.5

Dividend yield (%)

 -  

-

-

Fair Value per option (£)

 0.0138

0.0048

0.0028

 

On 30 September 2014 there was a modification to the share options such that the new terms are as follows:

 

Date of Modification

30/09/2014

30/09/2014

30/09/2014

30/09/2014

30/09/2014

 

14p

18p

22p

40p

55p

Share price on date of modification

 0.115

 0.115

 0.115

0.115

0.115

Share under option

 788,125

 788,125

 788,126

1,576,252

788,128

Expected volatility

50%

50%

50%

50%

50%

Option life (years)

 3.9

3.9

3.9

3.9

3.9

Interest rate (%)

1.5

1.5

1.5

1.5

1.5

Dividend yield (%)

 -  

 -  

 -  

-

-

Fair Value per option (£)

 0.0386

 0.0302

0.0241

0.0105

0.0060

 

Share options in issue at the year end under the various schemes are personal to the option holder and are not transferable, or assignable. They shall not be exercisable on or after the fifth anniversary of the grant date.

 

No share options were exercised during the year.

 

There was no charge recorded for the period relating to share based payments including the modification on 30 September 2014 on the grounds of materiality. 

 

13.    Share capital and share premium

Issued

 

2014

2013

2014

2013

 

Group

Group

Company

Company

31,525,041 Ordinary issued share capital of 1p each

315,250

315,250

315,250

315,250

Share premium

1,245,934

1,245,934

1,245,934

1,245,934

 

 

 

 

 

 

1,561,184

1,561,184

1,561,184

1,561,184

 

On incorporation one ordinary share of 0.01p was issued fully paid to each of Jonathan Quirk, Paul Beck and Paul Munday at nominal value.

 

On 8 November 2012 the Company issued fully paid for cash consideration 8,339,997 ordinary shares of 0.01p each at nominal value.

 

On 18 December 2012 the Company issued for cash consideration 1,500,000 ordinary shares of 0.01p each at an issue price of 10p per share.

 

On 8 January 2013 the Company issued for cash consideration 800,000 ordinary shares of 0.01p each at an issue price of 10p per share.

 

On 7 March 2013 the Company issued for cash consideration 2,149,338 ordinary shares of 0.01p each at 13p per share.

At a general meeting of the Company on 3 September 2013 shareholders approved a capitalisation and consolidation, pursuant to which 1,266,144,462 ordinary shares of 0.01p were issued to shareholders pro‑rata to their shareholding, following which the 1,278,933,800 ordinary shares of 0.01p in issue were consolidated into 12,789,338 ordinary shares of 1p each.

 

Further to the capitalisation and restructuring on 3 September 2013, the Company issued for cash consideration 18,735,703 ordinary shares of 1p each at 7p per share.

 

Movements in the number of ordinary shares of the Company in issue during the period are summarised in the table below.

 

 

Ordinary shares of 0.01p issued

Total number of ordinary shares of 0.01p in issue

Ordinary shares of 1p issued

Total number of ordinary shares of 1p in issue

11 October 2012

3

3

-

-

8 November 2012

8,339,997

8,339,997

-

-

18 December 2012

1,500,000

9,840,000

-

-

8 January 2013

800,000

10,640,000

-

-

7 March 2013

2,149,338

12,789,338

-

-

3 September 2013

1,266,144,462

1,278,933,800

-

-

3 September 2013

(1,278,933,800)                    

-

12,789,338

12,789,338

3 September 2013

-

-

18,735,703

31,525,041

31 December 2013

-

-

-

31,525,041

31 December 2014

-

-

31,525,041

31,525,041

 

 

14. Provisions

 

Reconciliation of provisions - Group - 2014

 

 

Opening balance

Movement

Total

 

Provision - Rehabilitation costs

20,845

52,148

72,993

 

 

The provision for environmental rehabilitation closure cost was independently assessed by Ndi Mudau of NDI Geological Consulting Services. The closure cost assessment reports over the Remainder of the Farm No. 113 (Skietfontein), Portion of Portion 2 (Kareeboompan) of the Farm 142, Portion 1 (Westhoek) of the Farm 113, and Portion 2 (Klipvlei) of the Farm 113. The financial provision was calculated in accordance with Regulation 54 of the Minerals and Petroleum Resources Development Act 2002 (Act 28 of 2002) and is dated 14 March 2014.

 

15. Trade and other payables

 

 

2014

Group

2013

Group

2014

Company

2013

Company

Trade payables

28,820

41,555

15,155

11,643

Corporation tax payables

2,943

-

2,943

-

Accrued expenses

29,696

36,344

20,814

32,870

 

61,459

77,899

38,912

44,513

 

The carrying value of trade and other payables are considered to be a reasonable approximation of fair value.

 

16.   Borrowings

 

On 16 October 2014, the Company resolved to create up to £450,000 of convertible loan stock. £400,000 of this was drawn down immediately.

 

The loan term is for 5 years maturing on 16 October 2019 and carries a zero coupon (nil interest).

 

The loan note will be convertible:

 

·      at the note holder's option at any time up to the end of the term at a conversion price of 11 pence per ordinary share; and

·      at the Company's option after the second anniversary of initial subscription provided that the one month volume weighted average price of the Company's ordinary shares is in excess of 120% of the conversion price and the closing mid-market price on the date prior to the Company opting to convert exceeds 120% of the conversion price.

 

In addition if the Company sells its interest in its subsidiary undertaking before the final repayment date for consideration equivalent to or greater than 120% of the loan note outstanding then the notes will become redeemable and a 20% premium will be payable to the note holder.

 

Management have carried out an assessment of the terms of the convertible loan and have judged that the instrument consists of three components:

 

·      a loan instrument; held at amortised cost

·      an equity component

·      an embedded redemption feature (payable on a sale of the Company's interest for consideration greater than 120% of the loan note value). The embedded derivative should be recognised separately as a derivative financial instrument at fair value through profit and loss (FVTPL). Management have reviewed the terms of the embedded derivative and have determined that the derivative has an insignificant value.

 

A fair value exercise to determine the value of the three components was undertaken by the Directors at the date the convertible loan was initially drawn down.

 

The fair value of the host loan instrument (including the embedded redemption feature) been valued as the residual of:

 

a)     The fair value of the instrument as a whole discounted at a commercially applicable rate of 9.25%;

b)     The residual amount between the transaction price of the loan and the fair value of the liability has been allocated to an equity reserve.

 

 

2014

2013

2014

2013

 

Group

Group

Company

Company

Fair value of consideration

400,000

-

400,000

-

Liability component at date of issue

250,400

-

250,400

-

Finance cost

4,855

 

4,855

 

Liability component at year end

255,255

-

255,255

-

 

 

 

 

 

Equity component

149,600

-

149,600

-

 

17.   Operating expenses

 

Result from operating activities is stated after charging:

Group

2014

Group

2013

 

Depreciation

 

60,603

537

Loss on foreign exchange transactions

45,779

41,138

Rehabilitation costs

703

20,845

Legal and professional fees

65,980

247,286

Finance costs

Operational and direct costs

6,490

347,297

-

135,283

Staff costs

8,326

10,000

Directors fee

Travel costs

29,500

17,846

-

50,183

Sundry

8,714

-

Operating Lease Rentals - Land and Buildings

39,238

5,091

 

 

 

Fees receivable by the Group auditors:

 

 

Fees - audit of financial statements                                                        

17,500

23,450

Fees - audit of accounts of subsidiary of the company

Fees - other services

5,623

6,127

7,000

41,873

 

659,726

605,085

 

  18.   Cash used in operations

 

 

2014

2013

2014

2013

 

Group

Group

Company

Company

 

(Loss)/profit before taxation

 

(594,642)

 

(590,100)

 

9,758

Tax adjustments for:

 

 

 

 

Depreciation and amortisation

60,603

537

-

(11,372)

Foreign exchange revaluation of fixed assets

10,191

-

-

-

Movements in provisions

52,148

20,845

-

-

Changes in working capital:

 

 

 

 

Trade and other receivables

93,607

(129,336)

(87,317)

 (51,731)

Trade and other payables

(26)

77,899

(3,688)

 44,513

Inventories

(23,629)

-

-

-

 

(401,748)

(620,155)

(81,247)

(402,622)

 

19.   Commitments

 

Operating leases - as lessee (expense)

Minimum lease payments due

2014

Group

2013

Group

2014

Company

2013

Company

 ‑ within one year

19,093

18,664

-

-

 ‑ in second to fifth year inclusive

85,120

84,467

-

-

 ‑ later than five years

-

15,684

-

-

 

 

 

 

 

 

104,213

118,815

-

-

 

Operating lease payments represent rentals payable by the Group for certain of its mining properties. Leases are negotiated for an average term of seven years and rentals are fixed for an average of three years. No contingent rent is payable.

 

20.   Contingent Liabilities

 

There were no contingent liabilities as at 31 December 2014

 

21.   Staff numbers and costs

 

 

2014

Group

2014

Company

Directors' fees (see note 24)

29,500

29,500

Staff salaries

8,326

-

 

37,826

29,500

 

During the year the Group comprised of two staff members, consisting of the Chief Executive Officer and Director (2013: two staff members)..

 

22.  EPS (Earnings per share)

 

 

Group

2014

Group

2013

 

£

£

Profit attributable to ordinary shareholders

(429,675)

(536,512)

Weighted average number of shares

31,525,041

16,167,984

Basic earnings per share

(0.01)

(0.03)

 

 

 

Weighted average number of shares after dilution

36,253,797

17,149,090

Fully diluted earnings per share

(0.01)

(0.03)

 

Share options granted to directors could potentially dilute EPS in the future but are not included in a dilutive EPS calculation because they are antidilutive for the period.

 

23.   Related parties

 

Relationships

 

 

Director and Indirect shareholder ‑ John Kilham (John's Kilham's wife is a shareholder)

Shareholder and Director - John Kilham

Shareholder and director - John Kilham

Kgalagadi Engineering & Mining Supplies (Pty) Ltd

Kgalagadi Geoservices (Pty) Ltd

Kgalagaadi Asset Management (Pty) ltd

 

Minority Interest ‑ William van Wyk

Kgalagadi Engineering & Mining Supplies (Pty) Ltd

Ghaap Mining (Pty) Ltd

 

Members of key management other than directors

William van Wyk

 

Related party balances

Loan account ‑ Owing by related party

2014

2013

2014

2013

 

Group

Group

Company

Company

 

Kareevlei Mining Proprietary Limited

 

-

 

-

 

1,259,377

 

519,633

Accrued income

-

-

133,462

49,462

           

 

As disclosed in Note 21, details of the remuneration of the Directors for the financial year are set out below:

 

CB Visser - Received fees of £24,000

Jonathan Quirk - Received fees of £6,000

 

In addition, during the year Kareevlei Mining engaged Kgalagadi Engineering & Mining Supplies (Pty) Limited ("Kgalagadi") to refurbish and upgrade the plant and equipment located at the Kareevlei Tenements for £72,634.

John Kilham, Chief Technical Officer of BlueRock, is a director and shareholder of Kgalagadi. William van Wyk, the beneficial owner of BlueRock's Black Economic Empowerment ("BEE") partner Ghaap Mining, is also a Director and shareholder of Kgalagadi.

 

In addition, during the year Kareevlei Mining made consultancy payments of £19,792 to Kgalagadi Geoservices (Pty) Limited ("Kgalagadi Geoservices"). John Kilham, Chief Technical Officer of BlueRock, is sole director and shareholder of Kgalagadi Geoservices.

 

In addition, during the year Kareevlei Mining made payments on a monthly basis totalling of £3,785 to Kgalagadi Asset Management (Pty) Limited ("Kgalagadi Asset Management") for office and sorting plant rental. John Kilham, Chief Technical Officer of BlueRock, is sole director and shareholder of Kgalagadi Asset Management.

 

A convertible loan note for £400,000 was issued in October 2014 to one of the Company's substantial shareholders (see note 16).

 

24.   Risk management

 

Capital risk management

 

The Group's capital management objectives are:

 

·    to safeguard the Group's ability to continue as a going concern and provide access to adequate funding for its exploration and development project so that it continues to provide returns and benefits to shareholders;

·    to support the Group's growth; and

·    to provide capital for the purpose of strengthening the Group's risk management capability.

 

The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Group including planned exploration work and capital efficiency, projected profitability, projected operating cash flows and projected capital expenditures. Management regards total equity as capital and reserves, for capital management purposes If additional equity funding should be required, the Group may issue new shares.

 

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and cash flow interest rate risk), credit risk and liquidity risk.

 

Liquidity risk

 

The Group's risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities. The maximum amount payable under the terms of the convertible loan note is disclosed in note 16.

 

Credit risk

 

Credit risk consists mainly of cash deposits and cash equivalents. The Group only deposits cash with major banks with high quality credit standing and limits exposure to any one counter‑party.

 

The credit risk on receivables from subsidiaries is significant and their recoverability is dependent on the discovery and successful development of economic reserves by these subsidiaries undertakings. Given the nature of the Company's business significant amounts are required to be invested in exploration activities. The Directors manage this risk by reviewing expenditure plans and budgets in relation to projects. This review ensures that any expenditure is value-enhancing and as a result the amounts receivable will be recoverable subject to successful discovery and development of economic reserves. The maximum credit exposure of the Company as at 31 December 2014 is £1,329,839.

 

Foreign exchange risk

 

At 31 December 2014, if the pound sterling had weakened/strengthened by 12% against the South African Rand with all other variables held constant, post‑tax loss for the year would have been £64k lower or £81k higher, mainly as a result of foreign exchange gains or losses on translation of South African Rand denominated trade receivables and intragroup borrowings.

 

The exchange rates used for conversion of foreign monetary items were - 2014: 18.01, 2013: 17.27

 

Summary of assets and liabilities by category

 

The carrying amounts of the financial assets and liabilities as recognised at the statement of financial position date of the years under review may also be categorised as follows:

 

 

Group

Group

Company

Company

 

2014

2013

2014

2013

Loans and receivables

£

£

£

£

Cash and cash equivalents

247,986

674,574

229,305

650,296

Trade and other receivables

8,327

-

133,462

49,462

 

256,313

674,574

362,767

699,758

Financial liabilities held at amortised cost

 

 

 

 

Trade and other payables

55,516

77,899

35,969

44,513

Borrowings

255,255

-

-

-

 

310,771

77,899

35,969

44,513

 

25.   Events after the reporting period

 

Further to the issue in October 2014 of £450,000 convertible loan notes of which £400,000 was drawn down immediately, the Company exercised its option to draw down the remaining £50,000 for general working capital purposes. This was completed on 27 April 2015.

 

The new plant was fully operational and the vertical shaft impact ("VSI") crusher was commissioned in May 2015.

 

26.   Ultimate controlling party

 

The company considers that there is no ultimate controlling party.

 

27.   Fair value measurement of financial instruments

 

Financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as follows:

 

·      Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

·      Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

·      Level 3: unobservable inputs for the asset or liability.

 

The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis as at each period end:

 

 

2014

2013

2014

2013

 

Group

Group

Company

Company

Financial liabilities held at amortised cost

 

 

 

 

Convertible loan notes - Level 3

255,255

-

255,255

-

 

255,255

-

255,255

-

 

Measurement of fair value of financial instruments

 

The Company's management team perform valuations of financial items for financial reporting purposes, including Level 3 fair values. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information.

 

Convertible loan notes (Level 3)

 

The estimated fair value of the convertible loan note is categorised within Level 3 of the fair value hierarchy. The fair value estimate has been determined using a present value technique. The present value of the loan at inception of £250,400 is estimated by discounting the contractual cash flows at 9.25%. The discount rate has been determined using the interest rate that the entity would pay to unrelated party, at the reporting date, adjusted to reflect the redemption feature.

 

The most significant input is the discount rate of 9.25%.

 

28.   Profit for the year

 

As permitted by section 408 of the Companies Act 2006, the parent company's profit and loss account has not been included in these financial statements. The profit after taxation for the financial year for the parent company was £6,816 (2013: loss after taxation of £384,032).

 

 

 

 

 


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