Final Results

RNS Number : 1903C

Rare Earth Minerals PLC

13 March 2014

 



13 March 2014

Rare Earth Minerals plc

(the "Company")

Final Results for the year ended 31 December 2013

CHAIRMAN'S STATEMENT

Dear Shareholders,

A Transformational Year

The last financial year has been a transformational one for Rare Earth Minerals Plc ("REM") following our significant investment in the Fleur and El Sauz Lithium Project in northern Mexico - in which we have built a 33.8% economic interest. It is one of the new more significant lithium discoveries in the world in recent years. As at today's date, and as we embark on a continued growth phase for the Company, we are in the strongest financial position in the Company's recent history with cash and assets held for resale  at our disposal of approximately £8 million.

Successful First Phase of Drilling at Lithium Project

Our joint venture with Bacanora Minerals Limited of Canada ("Bacanora") has so far successfully delineated 1.48 million tonnes of Lithium Carbonate from the first phase of drilling from clay deposits on the concessions. REM is optimistic of significant increases in this resource once the results are available from the completed second phase of drilling.

Increased Stake in Lithium Joint Venture Partner in Mexico

Not only has REM's management been working tirelessly with Bacanora on the Fleur and El Sauz concessions, but we have also increased our footprint in the Sonora Province by acquiring 5.45% of the shares in Bacanora. We have also signed the important second joint venture with our partner on the surrounding 200,000 acre Megalit concession, where we see potential for significantly increasing drill-defined lithium resources this year.

Activity and Updates Expected in the Coming Months

Over the past twelve months, we have published more than twenty updates or drilling reports on our Mexican project. We now look forward in 2014 to the Sonora Lithium Project, of which the Fleur and El Sauz concessions comprise the bulk of the identified lithium resources, gaining international recognition as a potential, meaningful supplier to the world lithium market. This will be aided by the publication of upgraded lithium resources, detailed metallurgical analyses and publication for the first time of the Project's potential economics.

Pursuing Our Stated Strategy 

To reflect the potential of the Sonora Lithium Project, REM intends to continue with its stated strategy of increasing its holdings in both Bacanora and the Project itself.

We also expect to maintain the Company's efforts in both Greenland and Australia where we have important exploration targets.

Strong Long-Term Outlook

Your board believes that the long-term outlook for the Company is strong, particularly in light of the recent world focus on lithium demand which was  highlighted by Tesla Motors' announcement of plans to build a US$5 billion Lithium Ion battery "gigafactory" in one the southern states of the USA in partnership with Panasonic.

Your board is, of course, duty bound to ensure that each set of drill results on our lithium project reflects the factual state of play at each reporting point. Beyond this, your board wishes to inform shareholders that it is very excited about the project's potential to eventually play a significant role in the global market for the supply of lithium. The board believes unequivocally that this project is of exceptional quality.

I would like to take this opportunity on behalf of the board to sincerely thank our staff, consultants and joint venture partners for their dedication this year and to thank our invested shareholders for their continued support.

David Lenigas

Executive Chairman

12 March 2014

For further information please contact:

Rare Earth Minerals plc	[phone]
David Lenigas
Kiran Morzaria
W.H. Ireland Limited (NOMAD & Joint Broker)	[phone]
James Joyce
Nick Field
Hume Capital Securities plc (Joint Broker)	[phone]
Guy Peters
Jon Beliss
Square1 Consulting	[phone]
David Bick
Mark Longson

CHIEF EXECUTIVE'S STATEMENT

I am pleased to report that 2013 has been a year of significant achievement. On our primary project, the Fleur-El Sauz project, exploration began in March and within 7 months the project had a defined a substantial maiden resource. It is a great credit to our joint venture partners Bacanora that this project has continued to progress on time and on budget.

REM has interests in a portfolio of assets from early stage exploration such as the Rare Earth Minerals project in Greenland to advanced development projects such as the Fleur - El Sauz Lithium project in Mexico.

PROJECTS

Bacanora Minerals Ltd (5.47% owned by REM)

Bacanora is a Canadian TSX.V listed explorer and developer of industrial minerals in Mexico with a primary focus in Lithium and Borates. Its major project is the:

Sonora Lithium Project - located in the Sonora State Northern Mexico, situated 180 km northeast of Hermosillo.

The project consists of the La Ventana and La Ventana 1 ("La Ventana") concessions, which are owned 100% by Bacanora, with declared inferred resources for the La Ventana Lithium Deposit totalling 60 million tonnes, averaging 3,000 ppm Li (equivalent to 1.6% lithium carbonate equivalent ("LCE") assuming 100% recovery and no process losses) or 930,000 tonnes of LCE. These resources were prepared in accordance with National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"). REM owns 5.45% of Bacanora.

Bacanora has published a Preliminary Economic Assessment on the La Ventana Deposit with the following summary:

·      35,000 tonnes per annum of battery grade LCE. (Assuming $6,000 per tonne of LCE)

·      Capital expenditure US$114 million.

·      20 year open pit mine life.

·      Internal Rate of Return of 138%.

·      1.9 year payback on cost of capital.

·      Operational expenditure - US$ 1,958 per tonne LCE

·      Net Present Value (8% discount rate) of US$848 million.

During the year Bacanora also completed the preliminary metallurgical testing undertaken by the Metallurgical Division of Inspectorate Exploration and Mining Services Ltd ("Inspectorate") of Richmond, Canada. The testing was conducted on a total of 4 samples averaging 9.88 kilograms each. The samples consisted of split drill core with 2 samples from each of the upper and lower clay units.

The bench scale testing focused on two process options designed to liberate lithium into solution from the clays.

The first option was pugging with sulphuric acid followed by a water leach; the second option tested roasting of the clays with several combinations of reagents with the roasted product leached with water in order to put lithium into solution. Results of these solubility tests indicate that the roast-leach process is most favourable as 86.7% of lithium in the upper clay and 88.6% of lithium in the lower clay was put into solution.

Test work on the lithium-bearing solutions derived from the roast-leach process included two stages of evaporation to concentrate the lithium. With the addition of another reagent to the concentrated solutions a precipitate was formed. Assays of the precipitate from the upper clay ranged from 14.6% to 15.85% Li or 77.8% to 84.5% lithium carbonate. Precipitate from the lower clay ranged from 15.5% to 16.96% Li or 82.2% to 90.4% lithium carbonate.

Subsequent to the year end this March, Bacanora announced the commissioning of a pilot plant and have begun the pilot scale testing of the recovery process on the La Ventana deposit.

El Sauz / Fleur Project, Mexico (30% owned by REM)

The contiguous El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions (the "Joint Venture #1 Lands") are owned 70% by Bacanora and 30% by REM under Joint Venture #1. The farm-in licences cover the 34 square kilometre El Sauz and Fleur concessions adjacent to and along strike from Bacanora's  La Ventana discovery.

The El Sauz / Fleur project is a strike extension of La Ventana and La Ventana1 concessions, and has [very?] similar geology and structural controls.

Excellent progress has been made in the development of these concessions. We agreed the Joint Venture #1 in February 2013 and in October 2013 we declared a maiden Inferred resource for the El Sauz and Fleur concessions (prepared to NI 43-101 standards) totalling 88,271,000 tonnes, averaging 3,163 ppm Li at a 2,000 ppm cut-off (1.68% lithium carbonate equivalent) or 1,483 million tonnes of LCE.

Drilling has continued on these areas during the year to infill and identify further extensions of the deposit. In December 2013 we announced significant lithium bearing intervals were intersected in all of the holes of the Stage 2 drilling campaign.

The first 6 holes of Stage 2 tested, by way of infill and step out holes between the first 5 holes of Stage 1, a strike length of 2,100 metres of the clay units south from the southern boundary of the La Ventana concession across the Fleur and onto the El Sauz concession. Within the area drilled, the average intercept length for the Upper Clay Unit was 35.84 metres (33.69 metres estimated true thickness) and 27.37 metres (25.73 metres estimated true thickness) for the Lower Clay Unit. The average length of sample intervals in the Upper Clay is 1.47 metres and lithium values range from 27 to 5,910 ppm Li, averaging 1,404 ppm lithium for individual samples. For the Lower Clay Unit the average length of sample intervals is 1.49 metres and lithium values in individual core samples range from 1,250 to 9,660 ppm lithium, averaging 4,177 ppm lithium.

The results from a further 7 holes were announced in January 2014 which significantly increased the potential size of the El Sauz - Fleur project. These holes showed lithium values averaging 1,683 ppm (0.90% LCE) over 20.88 metres in the upper clay and 4,821 ppm Li (2.57% LCE) over 28.80 metres in Lower Clay, which were in line with expectations.

More importantly further drilling identified the deposit extending a further 3 kilometres and surface sampling had recorded grades up to 16,410 ppm (1.64 % Li or 8.7% LCE).

These results confirmed the continuity of the clays identified during the initial drilling programme, and demonstrate the consistency in the thickness of the clays units and grade of lithium within the clays.

Bacanora is now updating the resource figures for both the El Sauz/Fleur and La Ventana projects with the goal of increasing the resource size and upgrading part of the resource to indicated and/or measured categories.

In addition Bacanora is preparing the Preliminary Economic Assessment on the El Sauz/Fleur project which is anticipated to be completed by the end of March 2014.

REM has been very pleased with the progress made at the EL Sauz-Fleur project. Drilling continues to increase the size of the project with further drilling expected to test additional extensions over the coming months.

During the year we defined around 1.48 million tonnes of LCE resource and the significant increase in drilled strike length in the current drilling campaign should have a material impact on the size of the LCE resource once this programme is completed.

The construction of the pilot testing pilot plant is also very positive news as it will refine the metallurgical recovery techniques required to maximize the extraction of the Lithium from the clays, where we have already seen excellent progress to date.

Buenavista, Megalit and San Gabriel, Mexico (REM - option to earn 30%)

In December 2013 we announced Lithium bearing units identified in the La Ventana and El Sauz/Fleur deposit have were identified at surface in 4 parallel trending sequences.

As a result of which REM entered into a new joint venture ("JV #2") with Bacanora that covers these new discoveries and increased concessions under both joint ventures from 5,325 hectares to 100,140 hectares (247,451 acres).

The new concessions cover strategic ground surrounding the entire Sonora Lithium Project, where lithium-bearing clay units have now been identified at surface in 4 parallel and arcuate north-westerly trending sequences that are estimated to extend for at least 40 kilometers in strike length. Reconnaissance work by Bacanora has identified clay units on the new concessions where surface samples of the clays have analysed up to 1,350 parts per million lithium.

REM's new JV #2 deal with Bacanora:

The new Megalit concession staked by Bacanora totals approximately 94,815 hectares (234,291 acres) in area and is contiguous with and surrounds the entire Sonora Lithium Project in northern Mexico. Bacanora's key and strategic 1,500 hectare San Gabriel and 649 hectare Buenavista concessions which immediately joins their La Ventana deposit.

The key terms of the additional concessions package deal (JV #2) with Bacanora are:

·      REM is to acquire an initial 10% interest in the additional concessions package by paying Bacanora $250,000 and spending $500,000 on exploration and drilling over a 12 month period.

·      After the first 12 month period, REM then has the right, at its election, to increase that interest in the additional concessions package to 30% by paying Bacanora another $500,000 and spending a further $1,000,000 on drilling and exploration over a further 12 month period.

·      REM will have an exclusive right of first refusal to further negotiate terms to increase the interest in the additional concessions package to a maximum of 49.9%, provided the terms comply with the Company's stated investment strategy. This right of first refusal will expire on 1 December 2015.

Western Lithium USA Corp (1.75% owned by REM)

Western Lithium USA Corp ("Western Lithium") is developing a major lithium deposit in Northwest Nevada.  The Kings Valley deposit, as it is known, contains a total proven and probable resource of totalling 27,135,000 tonnes, averaging 3,950 ppm Li at a 3,270 ppm cut-off. Based on its NI 43-101 Prefeasibility Study, the Kings Valley project is forecast to have a comparably low first-quartile cost structure against new and incumbent lithium producers, and to generate a net present value of US$552 million at a discount rate of 8%.

In February 2014 Western Lithium announced that a Lithium Demonstration Plant is expected to be operational in the fourth quarter of 2014. Western Lithium intends to use the plant to collect design data for a definitive feasibility study and to demonstrate the viability of producing low cost lithium carbonate from its Kings Valley Project.  Western Lithium has received a USA patent for its proprietary process for separating lithium and potassium byproduct compounds from lithium-rich clays.

As at year end, the carrying value of REM's investment was worth £240,000, subsequent to year end this mark to market value has increased to £600,000 (11 March 2014).

Narsaq, Southern Greenland (100% owned by REM)

REM has four Exploration Licenses covering an area of 870km2. Two of these licenses abut the northern and eastern boundaries of Greenland Minerals and Energy Limited's "GGG" (ASX: GGG) licenses that encompass the world class Kvanefjeld, Sørenson, Zone 3 and Steenstrupfjeld Rare Earth Element ("REE") deposits.

GGG's latest stated estimates for inferred and indicated mineral resources at the Kvanefjeld Deposit as defined by JORC (March 2011) include a metal inventory of 6.55 million tonnes ("Mt") of Total Rare Earth Oxides ("TREOs") (including 0.24 Mt of Heavy Rare Earth Oxides "HREOs" and 0.53 Mt of Yttrium Oxide), 350 Mlbs of U3O8 and 3 Blb's of Zinc.

Including the inferred mineral resources for their Sorensen and Zone 3 deposits, both announced in 2012, GGG's global metal inventory in inferred and indicated categories was 575 Mlbs U3O8, 10.3 Mt TREO and 2.24 Mt Zinc (at a 150 ppm U3O8 cut-off). The rare earth resource inventory included 0.37 Mt HREO and 0.84 Mt Yttrium Oxide. REM intends to carry out some preliminary geological exploration activities on these licenses over the coming year

REM believes that by securing these rights over key strategic blocks in Greenland is important and will become more interesting as GGG progress their feasibility study. Moreover the announcement in October 2013 by Greenland's Parliament that it had voted in favour removing a long-standing zero-tolerance policy concerning uranium and other radioactive elements, represented a significant step forward for Greenland, as it places the country on the path to a potential uranium-producer status, and thereby opens up coincident resources such as rare earth elements to potential exploitation. 

Yangibana Project, Australia (REM-30% free carry)

The Company announced in December 2011 that it had completed an agreement (the "Agreement") with Camelot Trust Corporation Limited ("Camelot") whereby the Company has acquired the entire issued share capital of Mojito Resources Limited which owns a 30% interest in the Yangibana rare earth project ("the Project") situated in the Gascoyne region of Western Australia.

The Project is centred on narrow, discontinuously outcropping ironstone dykes that have been shown to carry anomalous rare earths associated with monazite mineralisation. The rare earths comprise 15 elements with atomic numbers between 57 and 71, plus scandium and yttrium. The heavy rare earth oxides comprise the oxides of europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium and yttrium. The light rare earth oxides comprise the oxides of lanthium, cerium, praseodymium, neodymium and samarium.

Hastings Rare Metals Limited ("Hastings") is the manager of the Project and holds a 60% interest. The Project has the potential to increase possible resources by additional drilling along strike in the oxide zone at selected sites and at depth in the as yet largely untested primary zone of the dykes. The ironstone dykes at Yangibana are the weathered surface expressions of ferrocarbonatite dykes which along with the associated fenitic alteration are considered to be sourced from an as yet undiscovered carbonatite intrusion which might have significant rare earth potential.

Hastings has advised REM that intends to commence a new phase of exploration drilling at Yangibana in July 2014. REM is free carried by Hastings through to feasibility study and therefore the new exploration planned on for Yangibana will be at no cost to REM.

Other Projects

The Company continues to hold an investment in the Cup Lake Project in Canada.

FINANCIAL RESULTS

The Group's loss for the period is £0.8 million (2012: £ 1.0 million).

OUTLOOK

Your Company is confident that the investments made by the Company since it changed its investment strategy are both encouraging and potentially very rewarding. We will look to realise this potential over the future years in addition to continuing to review further investment opportunities. I would like to take this opportunity to thank our shareholders, staff and consultants for their continued support.

Kiran Morzaria

Chief Executive Officer

12 March 2014

DIRECTOR'S REPORT

The Directors present their annual report together with the audited consolidated financial statements of the Group for the Year Ended 31 December 2013.

Principal activity

The principal activity of the Group and the Company is that of the identification, development and mining of rare earth minerals.  The Group is also exploring other mining related opportunities.

Domicile and principal place of business

Rare Earth Minerals plc is domiciled in the United Kingdom, which is also its principal place of business.

Business review & future developments

The results of the Group are shown on page 19.  The directors do not recommend the payment of a dividend.

A review of the performance of the Group and its future prospects is included in the Chairman's Statement on page 1, and within the Chief Executive's Statement on pages 2 to 4.

Key Performance Indicators

Due to the current status of the Group, the Board has not identified any performance indicators as key.

Principal risks and uncertainties

The principal risks and uncertainties facing the Group involve the ability to raise funding in order to finance the acquisition and exploitation of mining opportunities and the exposure to fluctuating commodity prices.

In addition, the amount and quality of minerals available and the related costs of extraction and production represent a significant risk to the group.

Financial risk management objectives and policies

The Group's principal financial instruments are available for sale assets, trade receivables, trade payables and cash at bank.  The main purpose of these financial instruments are to fund the Group's operations.

It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken.  The main risks arising from the Group's financial instruments are liquidity risk and interest rate risk.  The board reviews and agrees policies for managing each of these risks and they are summarised below.

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of equity and its cash resources.  Further details of this are provided in the principal accounting policies, headed 'going concern' and note 14 to the financial statements.

Interest rate risk

The Group has no loans and therefore the only interest rate risk is that on its cash balances.  The Group seeks the highest rate of interest receivable on its cash deposits whilst minimising risk.

Directors

The membership of the Board is set out below.  All directors served throughout the period unless otherwise stated.

David Lenigas

Richard Griffiths (resigned 19 September 2013)

Adrian Fairbourn

Donald Strang (appointed 19 September 2013)

Substantial shareholdings

Interests in excess of 3% of the issued share capital of the Company which had been notified as at 12 March 2014 were as follows:

		Ordinary shares of 0.01p each Number	Percentage of capital %
Barclayshare Nominees Limited		659,610,382	12.76
Hargreaves Lansdown (Nominees) Limited		591,557,616	11.45
HSDL Nominees Limited		458,403,501	8.87
TD Direct Investing Nominees (Europe) Limited		378,685,108	7.33
HSBC Client Holdings Nominee (UK) Limited		213,410,406	4.13
Investor Nominees Limited		212,159,116	4.11
L R Nominees Limited		181,298,555	3.51

Payment to suppliers

It is the Group's policy to agree appropriate terms and conditions for its transactions with suppliers by means ranging from standard terms and conditions to individually negotiated contracts and to pay suppliers according to agreed terms and conditions, provided that the supplier meets those terms and conditions.  The Group does not have a standard or code dealing specifically with the payment of suppliers.

Trade payables at the year end all relate to sundry administrative overheads and disclosure of the number of days purchases represented by year end payables is therefore not meaningful.

Events After the Reporting Period

Events After the Reporting Period are outlined in Note 19 to the Financial Statements.

Going concern

The Directors note the substantial losses that the Group has made for the Year Ended 31 December 2013.  The Directors have prepared cash flow forecasts for the period ending 31 March 2015 which take account of the current cost and operational structure of the Group.

The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.

These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements.  Accordingly, the financial statements have been prepared on a going concern basis.

Directors' responsibilities statement

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards as adopted by the European Union  (IFRSs).  Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the group for that period.  In preparing these financial statements, the directors are required to:

-     select suitable accounting policies and then apply them consistently;

-     make judgements and estimates that are reasonable and prudent;

-     state whether applicable IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements;

-     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the financial statements comply with the Companies Act 2006.  They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 

In so far as each of the Directors are aware:

·    there is no relevant audit information of which the Group's auditors are unaware; and

·    the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website.  Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 

Auditors

Chapman Davis LLP, offer themselves for re-appointment as auditor in accordance with Section 489 of the Companies Act 2006.

ON BEHALF OF THE BOARD

David Lenigas

Director

Date: 12 March 2014

PRINCIPAL ACCOUNTING POLICIES

Basis of Preparation

The Group financial statements have been prepared under the historical cost convention, in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs).  The Company's shares are listed on the AIM market of the London Stock Exchange.  Separate financial statements of Rare Earth Minerals plc (the Company) have been prepared on pages 39 to 53 under the historical cost convention and in accordance with applicable accounting standards under UK GAAP.

The principal accounting policies of the Group are set out below.

GOING CONCERN

The Directors note the substantial losses that the Group has made for the Year ended 31 December 2013.  The Directors have prepared cash flow forecasts for the period ending 31 March 2015 which take account of the current cost and operational structure of the Group.

The cost structure of the Group comprises a high proportion of discretionary spend and therefore in the event that cash flows become constrained, costs can be quickly reduced to enable the Group to operate within its available funding.

These forecasts demonstrate that the Group has sufficient cash funds available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements.  Accordingly, the financial statements have been prepared on a going concern basis.

BASIS OF CONSOLIDATION

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the balance sheet date.  Subsidiaries are entities over which the Company has the power to control, directly or indirectly, the financial and operating policies so as to obtain benefits from their activities.  The Company obtains and exercises control through voting rights.  Subsidiaries are fully consolidated from the date at which control is transferred to the Company.  They are deconsolidated from the date that control ceases.

Unrealised gains on transactions between the Company and its subsidiaries are eliminated.  Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.  Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Acquisitions of subsidiaries are dealt with by the acquisition method.  The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition.  On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies.  Goodwill is stated after separating out identifiable intangible assets.  Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.  Acquisition costs are written off as incurred.

Investments in associates are initially recognised at cost and subsequently accounted for using the equity method. Any goodwill or fair value adjustment attributable to the Group's share in the associate is not recognised separately and is included in the amount recognised as investment in associate. The carrying amount of the investment in associates is increased or decreased to recognise the Group's share of the profit or loss and other comprehensive income of the associate, adjusted where necessary to ensure consistency with the accounting policies of the Group. Unrealised gains and losses on transactions between the Group and its associates are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment

TAXATION

Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income statement.

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.  In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date.

Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity.

FINANCIAL ASSETS

The Group's financial assets include cash, other receivables and available for sale assets.

All financial assets are recognised when the Group becomes party to the contractual provisions of the instrument.  All financial assets are initially recognised at fair value, plus transaction costs.

Trade and other receivables are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms of the receivables.  The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale financial assets include listed securities. These available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive income and reported within the available-for-sale reserve within equity, except for impairment losses and foreign exchange differences, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired, the cumulative gain or loss recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. Interest calculated using the effective interest method and dividends are recognised in profit or loss within finance income.

Reversals of impairment losses are recognised in other comprehensive income.

INTANGIBLE ASSETS - LICENCES 

Licences are recognised as an intangible asset at historical cost and are carried at cost less accumulated amortisation and accumulated impairment losses.  The licences have a finite life and no residual value and are amortised over the life of the licence.

EXPLORATION OF MINERAL RESOURCES

Acquired intangible assets, which consist of mining rights, are valued at cost less accumulated amortisation.

The Group applies the full cost method of accounting for exploration and evaluation costs, having regard to the requirements of IFRS 6 'Exploration for and Evaluation of Mineral Resources'.  All costs associated with mining development and investment are capitalised on a project by project basis pending determination of the feasibility of the project.  Such expenditure comprises appropriate technical and administrative expenses but not general overheads.

Such exploration and evaluation costs are capitalised provided that the Group's rights to tenure are current and one of the following conditions is met:

(i)      such costs are expected to be recouped through successful development and exploitation of the area of interest or alternatively by its sale; or

(ii)     the activities have not reached a stage which permits a reasonable assessment of whether or not economically recoverable resources exist; or

(iii)    active and significant operations in relation to the area are continuing.

When an area of interest is abandoned or the directors decide that it is not commercial, any exploration and evaluation costs previously capitalised in respect of that area are written off to profit or loss.

Amortisation does not take place until production commences in these areas.  Once production commences, amortisation is calculated on the unit of production method, over the remaining life of the mine.  Impairment assessments are carried out regularly by the directors.  Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount.  Such indicators include the point at which a determination is made as to whether or not commercial reserves exist.

The asset's residual value and useful lives are reviewed and adjusted if appropriate, at each reporting date.  An assets' carrying value is written down immediately to its recoverable value if the assets carrying amount is greater than its listed recoverable amount.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and in hand, bank deposits repayable on demand, and other short-term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, less advances from banks repayable within three months from the date of advance if the advance forms part of the Group's cash management.

GOODWILL

Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is capitalised and reviewed annually for impairment.  Goodwill is carried at cost less accumulated impairment losses.  Negative goodwill is recognised immediately after acquisition in profit or loss.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).  As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level.  Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows.

IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS (continued)

Goodwill, other individual assets or cash-generating units that include goodwill and other intangible assets with an indefinite useful life are tested for impairment at least annually.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill.  Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit.  With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

EQUITY

Share capital is determined using the nominal value of shares that have been issued.

The share premium account represents premiums received on the initial issuing of the share capital.  Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

The share based payment reserve represents the cumulative amount which has been expensed in the income statement in connection with share based payments, less any amounts transferred to retained earnings on the exercise of share options.

Retained earnings include all current and prior period results as disclosed in the income statement.

FOREIGN CURRENCIES

The financial statements are presented in Sterling, which is also the functional currency of the parent Company.

In the individual financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised  in profit or loss.

In the consolidated financial statements, the financial statements of subsidiaries, originally presented in a functional currency, have been translated into Sterling.  Assets and liabilities have been translated into Sterling at the exchange rates ruling at the balance sheet date.  Profit and losses have been translated at an average monthly rate for the period. Any differences arising from this procedure are taken to the foreign exchange reserve.  Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities to the foreign entity and translated into Sterling at the closing rates.

SHARE BASED PAYMENTS

The Group issues equity-settled share-based payments to certain employees (including directors). Equity-settled share-based payments are measured at fair value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the Group's estimate of the shares that will eventually vest.

Fair value is measured using the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

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.

SHARE BASED PAYMENTS (continued)

No adjustment is made to the expense or share issue cost recognised in prior periods if fewer share options are, ultimately exercised than originally estimated.  Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of shares issued are allocated to share capital with any excess being recorded as share premium.

FINANCIAL LIABILITIES

The Group's financial liabilities include trade and other payables.  Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual provisions of the instrument.

All financial liabilities are recognised initially at fair value, net of direct issue costs, and are subsequently recorded at amortised cost using the effective interest method with interest related charges recognised as an expense in the income statement.

Dividend distributions to shareholders are included in 'other short term financial liabilities' when the dividends are approved by the shareholders'.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Significant judgments and estimates

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the reported period.  The estimates and associated judgments are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

The estimates and underlying judgments are reviewed on an ongoing 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.

In the preparation of these consolidated financial statements, estimates and judgments have been made by management concerning calculating the fair values of the assets acquired on business combinations, and the assumptions used in the calculation of the fair value of the share options.  Actual amounts could differ from those estimates.

Management has made the following estimates that have the most significant effect on the amounts recognised in the financial statements.

Impairment of goodwill

The basis of review of the carrying value of goodwill is as detailed in note 4.  The carrying value of goodwill is £581,000 at the balance sheet date.  Management do not consider that any reasonably foreseeable changes in the key assumptions would result in an impairment. Further details of management's assessment of the goodwill for impairment are included in note 4.

Business combinations

On initial recognition, the assets and liabilities of the acquired business and the consideration paid for them are included in the consolidated financial statements at their fair values.  In measuring fair value, management uses estimates of future cash flows.  Any subsequent change in these estimates would affect the amount of goodwill if the change qualifies as a measurement period adjustment.  Any other change would be recognised in the income statement in the subsequent period.  Details of acquired assets and liabilities are given in note 18.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)

Significant judgments and estimates (continued)

Share-based payments

The Group measures the cost of the equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The charge for the period ended 31 December 2013 of £52,000 (2012: £86,000) is determined using a Black-Scholes Valuation model, using the assumptions detailed in note 8.

Treatment of exploration and evaluation costs

IFRS 6 "Exploration for and Evaluation of Mineral Resources" requires an entity to consistently apply a policy to account for expenditure on exploration and evaluation of a mineral resource.  The directors have set out their policy in respect of the treatment of these costs on page 14.  Amounts capitalised in the year to 31 December 2013 were £nil (2012 £Nil).

Treatment of licenses

The Company purchased the entire share capital of Mojito Resources Limited during the period ended 31 December 2011. Mojito Resources Limited is the beneficial owner of a 30% interest in the Tenements in the Yangibana Rare Earth Project. These have been treated in the accounting records of Mojito Resources Limited and on consolidation as an intangible asset. The directors consider the fair value of the tenements to be equal to the book value in Mojito Resources Limited at the date of acquisition as the interest in the tenements were purchased during the financial period. In addition Mojito Resources Limited has entered into an Agreement with GTI Resources Limited and Gascoyne Metals Pty Limited in respect of the Yangibana Project. Mojito Resources is not however liable for any of the exploration costs in the initial sole funding period until a Feasibility Report is produced by the operators (GTI Resources Limited). At this stage therefore the directors have treated the licenses as an intangible asset. Following the completion of the Feasibility report the directors will review the accounting treatment going forward giving consideration to their respective responsibilities for the development of the project.

Adoption of new or amended IFRS

 

In the current year, the following new and revised Standards and Interpretations have been adopted and have affected the amounts reported in these financial statements.

IFRS 13 Fair Value Measurement

The Group has applied IFRS13 for the first time in the current year. IFRS13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. IFRS13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under IFRS13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, IFRS13 includes extensive disclosure requirements.

IFRS13 requires prospective application from 1 January 2013. In addition, specific transitional provisions were given to entities such that they need not apply the disclosure requirements set out in the Standard in comparative information provided for periods before the initial application of the Standard.

In accordance with these transitional provisions, the Group has not made any new disclosures required by IFRS13 for the 2012 comparative period. Other than the additional disclosures, the application of IFRS13 has not had any impact on the amounts recognised in the consolidated financial statements.

Adoption of new or amended IFRS (continued)

Amendments to IAS1 Presentation of Financial Statements

(as part of the Annual Improvements to IFRSs 2009; 2011 Cycle issued in May 2012)

The Annual Improvements to IFRSs 2009; 2011 have made a number of amendments to IFRSs. The amendments that are relevant to the Group are the amendments to IAS1 regarding when a statement of financial position as at the beginning of the preceding period (third statement of financial position) and the related notes are required to be presented. The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position.

This has no impact for the 2013 financial statements.

Amendments to IFRS7 Disclosures

The Group has applied the amendments to IFRS7 Disclosures-Offsetting Financial Assets and Financial Liabilities for the first time in the current year. The amendments to IFRS7 require entities to disclose information about rights of offset and related arrangements (such as collateral posting requirements) for financial instruments under an enforceable master netting agreement or similar arrangement.

As the Group does not have any offsetting arrangements in place, the application of the amendments has had no impact on the disclosures or on the amounts recognised in the consolidated financial statements.

At the date of authorisation of these financial statements, the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS9                     Financial Instruments

IFRS10                   Consolidated Financial Statements

IFRS12                   Joint Arrangements#

IAS27 (revised)    Investment Entities

IAS28 (revised)    Investments in Associates and Joint Ventures

IAS32 (revised)    Offsetting Financial Assets and Financial Liabilities

IAS36 (revised)    Recoverable Amount Disclosures for Non Financial Assets

IAS39 (revised)    Novation of Derivatives and Continuation of Hedge Accounting

IFRIC Interpretation21 Levies

The directors do not expect that the adoption of the Standards and Interpretations listed above will have a material impact on the financial statements of the Group in future periods, except as that IFRS9 will impact both the measurement and disclosures of Financial Instruments.

Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, however, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

RARE EARTH MINERALS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2013

		Year ended		Year ended
	Note	31 December 2013		31 December 2012
		£'000		£'000
Other administrative expenses		(766)		(789)
Total administrative expenses		(766)		(789)
Loss from operations	1	(766)		(789)
(Loss) on sale of avaliable for sale assets		(48)		(184)
Loss before taxation		(814)		(973)
Taxation	2	-		-
Loss before and after taxation, and loss attributable to the equity holders of the Comapny		(814)		(973)
Other comprehensive income
Currency translation differences		(127)		(22)
Fair value adjustment of equity swap		580		-
Transfer to income statement of available for sale reserve		47		115
Decrease in value of available for sale asset		(203)		(25)
Total other comprehensive income for the period, net of tax
		297		68
Total comprehensive loss for the year, attributable to owners of the company		(517)		(905)
Loss per ordinary share
Basic and diluted loss per share (pence)	3	(0.03)		(0.07)

RARE EARTH MINERALS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2013

		Share capital	Share premium	Share based payment reserves	Available for sale reserve	Hedging & Exchange reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2012		561	6,866	626	(137)	25	(6,064)	1,877
Share based payments		-	-	86	-	-	-	86
Issue of share capital		67	335	-	-	-	-	402
Share placing costs		-	(3)	-	-	-	-	(3)
Transactions with owners		67	332	86	-	-	-	485
Currency translation differences		-	-	-	-	(22)	-	(22)
Transfer to income statement		-	-	-	115	-	-	115
Decrease in value of available for sale asset		-	-	-	(25)	-	-	(25)
Loss for the year		-	-	-	-	-	(973)	(973)
Total comprehensive loss for the period		-	-	-	90	(22)	(973)	(905)
Balance at 31 December 2012		628	7,198	712	(47)	3	(7,037)	1,457
Share based payments		-	-	52	-	-	-	52
Transfer on exercise of options		-	-	(264)	-	-	264	0
Premium on Share swap		-	2,261	-	-	-	-	2,261
Shares issued		191	1,512	-	-	-	-	1,703
Share placing costs		-	(11)	-	-	-	-	(11)
Transactions with owners		191	3,762	(212)	-	-	264	4,005
Currency translation differences		-	-	-	-	(127)	-	(127)
Transfer to income statement		-	-	-	47	-	-	47
Fair value adjustment of equity swap		-	-	-	-	580	-	580
Decrease in value of available for sale asset		-	-	-	(203)	-	-	(203)
Loss for the period		-	-	-	-	-	(814)	(814)
Total comprehensive loss for the period		-	-	-	(156)	453	(814)	(517)
Balance at 31 December 2013		819	10,960	500	(203)	456	(7,587)	4,945

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

RARE EARTH MINERALS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2013

		31 December 2013		31 December 2012
ASSETS	Note	£'000		£'000
Non-current
Intangible assets	4	698		879
Investment in associate	5	1,496		-
		2,194		879
Current
Trade and other receivables	7	688		489
Derivative financial instrument	11	630		-
Available for resale assets	6	699		35
Cash and cash equivalents		961		176
Total current assets		2,978		700
Total assets		5,172		1,579
LIABILITIES
Current
Trade and other payables	8	227		122
Total liabilities		227		122
EQUITY
Issued share capital	10	819		628
Share premium		10,960		7,198
Share based payment reserve		500		712
Available for resale asset reserve		(203)		(47)
Hedging & Exchange reserve		456		3
Retained earnings		(7,587)		(7,037)
Equity attributable
to equity holders of the Company		4,945		1,457
Total equity and liabilities		5,172		1,579

The consolidated financial statements were approved by the Board on 12 March 2014.

David Lenigas
Director

Company number 05234262

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

RARE EARTH MINERALS PLC

CONSOLIDATED CASHFLOW STATEMENT

For the year ended 31 December 2013

		Year ended		Year ended
		31 December 2013		31 December 2012
		£'000		£'000
Cash flow from operating activities
Loss after taxation		(766)		(789)
Amortisation of intangibles		54		57
Equity settled share based payments		52		86
(Increase) in trade and other receivables		(249)		(151)
Increase in trade and other payables		105		81
Net cash (outflow) from operating activities		(804)		(716)
Cash flows from investing activities
Net payments for investment in associate		(1,496)		-
Payments for investments in AFS assets		(902)		-
Receipts on sale of AFS assets		34		250
Net cash outflow from investing activities		(2,364)		250
Cash flows from financing activities
Proceeds from issue of share capital		1,703		402
Proceeds from settlement of share swap		2,261		-
Share issue costs		(11)		(3)
Net cash inflow from financing activities		3,953		399
Net increase/(decrease) in cash and cash equivalents		785		(67)
Cash and cash equivalents at beginning of period		176		243
Cash and cash equivalents at end of period		961		176

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

nOTES TO THE FINANCIAL STATEMENTS

1          LOSS before taxation and segmental information

Loss before taxation

The loss before taxation is attributable to the principal activities of the Group. 

The loss before taxation is stated after charging:

	Year ended 31 December 2013		Year ended 31 December 2012
	£'000		£'000
Share based payment charge	52		86
Amortisation charge	54		57
Staff costs (see note 16)	238		142
Fees payable to the Company's auditor for the audit of the financial statements	10		13
Fees payable to the Company's auditor and its associates for other services:
Other services relating to taxation compliance	-		1

Segmental information

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available.

The chief operating decision maker has defined that the Group's only reportable operating segment during the period is mining.

Subject to further acquisitions the Group expects to further review its segmental information during the forthcoming financial year.

The Group has not generated any revenues from external customers during the period.

In respect of the total assets, £1,515,000 (2012: £588,000) arise in the UK, and £235,000 (2012: £172,000) arise in Greenland, £1,951,000 arise in Mexico (2012: £Nil), £244,000 arise in USA (2012: £Nil) and £647,000 (2012: £819,000) arise in Australia.

2          Taxation

There is no tax credit on the loss for the current or prior period.

The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

	Year ended		Year ended
	31 December 2013	2013	31 December 2012	2012
	£'000	%	£'000	%
Loss before taxation	(814)		(973)
Loss multiplied by standard rate	(189)	23/24	(238)	24/26
of corporation tax in the UK
Effect of:
Overseas loss not recognised	(11)		(12)
Deferred tax asset not recognised	200	23/24	250	24/26
Total tax charge for year	-		-

The Group has tax losses in the UK, subject to Her Majesty's Revenue and Customs approval, of approximately £2,227,000 (31 December 2012: £1,595,000) available for offset against future operating profits.  The Group has not recognised any deferred tax asset in respect of these losses, which would amount to £454,000 (31 December 2012: £250,000) due to there being insufficient certainty regarding its recovery.

3          LOSS PER SHARE

The calculation of the basic loss per share is calculated by dividing the consolidated loss attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the period.

	Year ended		Year ended
	31 December 2013		31 December 2012
	£'000		£'000
(Loss) attributable to owners of the Company	(814)		(973)
	2013		2012
	Number		Number
Weighted average number of shares for calculating basic loss per share	3,167,733,205		1,480,231,072
	2013		2012
	Pence		Pence
Basic and diluted loss per share	(0.03)		(0.07)

The impact of the share options are  anti dilutive.

4          INTANGIBLE ASSETS

	Exploration costs		Goodwill		Licences				Total
	£'000		£'000		£'000				£'000
Cost
At 1 January 2012	70		711		292				1,073
Reclassification	(33)		-		(39)				(72)
Exchange Difference	-		(19)		(3)				(22)
At 31 December  2012	37		692		250				979
Additions	-		-		-				-
Exchange Difference	-		(111)		(38)				(149)
At 31 December 2013	37		581		212				830
Amortisation and impairment
At 1 January 2012	-		-		(43)				(43)
Amortisation charge in the year	-		-		(57)				(57)
At 31 December  2012	-		-		(100)				(100)
Amortisation charge in the year	-		-		(54)				(54)
Exchange difference	-		-		22				22
At 31 December 2013	-		-		(132)				(132)
Net book value at 31 December 2013	37		581		80				698
Net book value at 31 December 2012	37		692		150				879
Net book value at 1 January 2012	70		711		249				1,030

On 4 May 2011 the group entered into an agreement to acquire interests in 5 claims in Saskatchewan, Canada, as part of the Cup Lake Syndicate. Consideration paid totalled £33,000.

During the periods the Group incurred expenses which were in relation to the application of several prospecting licenses in Greenland, these costs have been re-classified as prepaid exploration & licence costs amounting to £184,000. The Group is awaiting confirmation of transfer of these licences to 2 subsidiaries newly incorporated in Greenland and currently held in trust on the Group's behalf.

Goodwill of £692,000 arose on this acquisition, being the difference in the purchase price of £905,000 and the provisional fair value (£214,000) of the licences within Mojito Resources Limited, being the only asset in the company.  The directors are continuing to review their provisional assessment of the fair value of the licences acquired although do not expect any material adjustment. The directors have therefore identified only one cash generating unit to which the goodwill is allocated.

As set out in the accounting policies Goodwill is reviewed annually or in the event of an indication of impairment. The recoverable amount of goodwill has been determined by the fair value less costs to sell.  The directors consider that there have been no changes in circumstances between acquisition on 1 December 2012 and 31 December 2013 that would give rise to an impairment charge.

At this stage the Feasibility Study has not been completed to fully assess the potential future cash flows of developing the area under licence. The directors, however, having given consideration to the past exploration of the Project which has identified nine individual occurrences of rare earth elements known to occur within the Project area consider that the goodwill is not impaired. Management's review of the recoverable amount is most sensitive to changes in the commodity prices of the underlying minerals and the existence of the rare earth elements within the Project Area.  Since the acquisition date there has been no significant fluctuation in the commodity prices of the underlying minerals or any material changes to the Project Area. The directors consider that no impairment is required at 31 December 2013. Further information in relation to the projects is contained within the Chairman's & Chief Executive's statements on pages 1 to 4.

Deferred tax has not been recognised on the intangible assets acquired as it is not material to the financial statements.

5          Investment in ASSOCIATES

	31 December 2013		31 December 2012
	£'000		£'000
Changes in equity accounted investment
At beginning of the year	-		-
Investment in associate - Equity purchases	1,496		-
Share of retained profit/(loss) attributable to the group	-		-
Investment book value as at end of the year	1,496		-

The Group holds a 30% voting and equity interest in Mexilit S.A. de C.V. (Mexilit), a company incorporated under the laws of Mexico, which was purchased during the year. 

This investment is accounted for under the equity method.  Mexilit has a reporting date of 31 December.  The shares are not publicly listed on a stock exchange and hence published results are not available.  Therefore the fair value of the Group's investment equates to the carrying book value of £1,496,000.

6          Available for sale assets

Available for sale assets	31 December 2013		31 December 2012
	£'000		£'000
Current Assets - Listed Investments
Valuation at 1 January	35		379
Additions at cost	902		-
Disposal proceeds	(34)		(250)
Transfer from equity reserves	47		115
Realised (loss) on disposal	(48)		(184)
Change in fair value recognised in other comprehensive income	(203)		(25)
Valuation at 31 December	699		35

On 8 December 2011 the Company completed the acquisition of 1.27 million shares in Greenland Minerals and Energy Limited, representing 0.31% of that Company's issued share capital. During the year ended 31 December 2012 the Company disposed of  1,070,000 shares, for net proceeds of £250,000. During the year ended 31 Decembers 2013 the Company disposed of the remaining 200,000 shares for net proceeds of £34,000.

During the year ended 31 December 2013 the Company acquired 2,007,500 shares in Bacanora Minerals Limited and 1,791,000 shares in Western Lithium USA Corporation.

Available-for-sale assets comprise investments in listed securities which are traded on stock markets throughout the world, and are held by the Group as a mix of strategic and short term investments

7          TRADE AND OTHER RECEIVABLES

	31 December 2013		31 December 2012
	£'000		£'000
Current
Other receivables	484		305
Prepaid exploration costs	184		172
Prepayments and accrued income	20		12
	688		489

Included within other receivables is £472,898 (31 December 2012: £300,525)  in respect of unpaid share capital of which £382,925 remains outstanding at the date of approving the financial statements.

There is no impairment of receivables and no amounts are past due at 31 December 2013 or 31 December 2012.

The fair value of these financial assets is not individually determined as the carrying amount is a reasonable approximation of fair value.

8         TRADE AND OTHER PAYABLES

	31 December 2013		31 December 2012
	£'000		£'000
Trade payables	135		95
Accruals and deferred income	92		27
	227		122

The fair value of trade and other payables has not been disclosed as, due to their short duration, management considers the carrying amounts recognised in the balance sheet to be a reasonable approximation of their fair value.

9         share based payments

The Group operates share option schemes for certain employees (including directors).  Options are exercisable at the option price agreed at the date of grant.  The options are settled in equity once exercised.  The expected life of the options is three years.  If the options remain unexercised after a period of ten years from the date of grant, the options expire.  Options are forfeited if the employee leaves the Group before the options vest. There are no other vesting requirements.

Details of the number of share options and the weighted average exercise price (WAEP) outstanding during the period are as follows:

	31 December 2013				31 December 2012
	Number		WAEP		Number		WAEP
			£				£
Outstanding at the beginning of the year	212,925,000		0.0021		144,925,000		0.005
Granted	110,000,000		0.0006		68,000,000		0.0006
Amended	-		-		126,000,000		0.0006
Amended	-		-		(126,000,000)		(0.005)
Exercised	(112,000,000)		(0.0006)
Outstanding at the end of the year	210,925,000		0.0021		212,925,000		0.0021
Exercisable at year end	210,925,000				76,925,000

The share options outstanding at the end of the period have a weighted average remaining contractual life of 6.36 years (31 December 2012: 7.60 years) and have the following exercise prices and fair values at the date of grant:

First exercise date (when vesting conditions are met)	Grant date	Exercise price	Fair value	31 December 2013	31 December 2012
		£	£	Number	Number
7 March 2008	7 March 2005	0.03	0.019221	5,100,000	5,100,000
6 March 2009	6 March 2006	0.00325	0.020776	3,825,000	3,825,000
28 January 2013	28 January 2010	0.005	0.004	24,000,000	38,000,000
29 November 2013	29 November 2010	0.005	0.003537	48,000,000	98,000,000
13 December 2012	13 December 2012	0.0006	0.00055	20,000,000	68,000,000
28 January 2013	14 December 2012	0.005	(0.000476)	(24,000,000)	(38,000,000)
28 January 2013	14 December 2012	0.0006	0.000551	24,000,000	38,000,000
29 November 2013	14 December 2012	0.005	(0.000471)	(48,000,000)	(98,000,000)
29 November 2013	14 December 2012	0.0006	0.000549	48,000,000	98,000,000
28 June 2013	28 June 2013	0.0006	0.000371	110,000,000	-
				210,925,000	212,925,000

The share options can be exercised up to seven years after the date first exercisable. 

At 31 December 2013 all 210,925,000 options were exercisable (31 December 2012: 76,925,000).

For those options granted where IFRS 2 "Share-Based Payment" is applicable, the fair values were calculated using the Black-Scholes model.  The inputs into the model were as follows:

	Risk free rate	Share price volatility	Expected life	Share price at date of grant
7 March 2005	4.75%	100%	3 years	£0.03
6 March 2006	4.75%	100%	3 years	£0.0325
28 January 2010	0.50%	100%	3 years	£0.004
29 November 2010	0.50%	160%	3 years	£0.0043
13 December 2012	0.50%	122%	1 month	£0.0006
14 December 2012 amendments	0.50%	122%	2 months	£0.0006
14 December 2012 amendments	0.50%	122%	11 months	£0.0006
28 June 2013	0.50%	137%	6 months	£0.0004

Expected volatility was determined by calculating the historical volatility of the Company's share price for 12 months prior to the date of grant.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group recognised total expenses of £52,000 (year ended 31 December 2012: £86,000) relating to equity-settled share-based payment transactions during the period.

10        share capital

	31 December 2013		31 December 2012
	£'000		£'000
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p	417		417
4,017,952,383 ordinary shares of 0.01p (31 December 2012: 2,113,619,050)	402		211
	819		628

	Ordinary shares
	No.		£'000
Allotted and issued
At 31 December 2012	2,113,619,050		211
Issue of shares for cash	1,904,333,333		191
At 31 December 2013	4,017,952,383		402

On 14 March 2013 666,666,667 Ordinary Shares of 0.01p were issued for proceeds of £400,000 before share placing costs.

On 21 June 2013 666,666,666 Ordinary Shares of 0.01p were issued for proceeds of  £300,000 before share placing costs.

On 22 August 2013 150,000,000 Ordinary Shares of 0.01p were issued for proceeds of £750,000 before share placing costs.

On 29 August 2013 165,000,000 warrants were exercised for Ordinary Shares of 0.01p for proceeds of £99,000.

On 10 September 2013 135,666,666 warrants were exercised for Ordinary Shares of 0.01p for proceeds of £81,400.

On 9 October 2013 36,000,000 options were exercised for Ordinary Shares of 0.01p for proceeds of £21,600.

On 8 November 2013 8,333,334 warrants were exercised for Ordinary Shares of 0.01p for proceeds of £5,000.

On 8 November 2013 44,000,000 options were exercised for Ordinary Shares of 0.01p for proceeds of £26,400.

On 20 December 2013 32,000,000 options were exercised for Ordinary Shares of 0.01p for proceeds of £19,200.

The deferred shares have no voting rights and are not eligible for dividends.

Warrants issued

On 6 March 2013 subscribers to the share issue were awarded a half warrant per share at an exercise price of 0.06 pence, resulting in the issue of 333,333,334 warrants. Additionally on 22 August 2013 a further 75,000,000 warrants were issued to shareholders at an exercise price of 0.5 pence. All of these warrants expire on 30 June 2014.

Each warrant is governed by the provisions of warrant instruments representing the warrants which have been adopted by the Company. The rights conferred by the warrants are transferable in whole or in part subject to and in accordance with the transfer provisions set out in the Articles. The holders of warrants have no voting rights, pre-emptive rights or other rights attaching to Ordinary Shares. All warrants issued vest in full.

These warrants fall outside the scope of IFRS2 as they have been issued to shareholders in their capacity as shareholders and have therefore not been treated as share based payments.

The following table shows details of the warrants granted and exercised during the year:

	31 December 2013				31 December 2012
	Number		WAEP		Number		WAEP
			£				£
Outstanding at the beginning of the year	-				-		-
Granted	408,333,334		0.0006		-		-
Exercised	(309,000,000)		(0.0006)		-		-
Outstanding at the end of the year	99,333,334		0.00146		-		-
Exercisable at year end	99,333,334

11           Derivative financial instrument

On 17 June 2013 the Company announced that it had entered into an equity swap agreement ("the Equity Swap Agreement") with YAGM over 666,666,666 of the Subscription Shares ("the Swap Shares"). In return for a payment by the Company to YAGM of £150,000 ("the Initial Escrowed Funds"), twelve monthly settlement payments in respect of such payment were to be made by YAGM to the Company, or by the Company to YAGM, based on a formula related to the difference between the prevailing market price (as defined in the Equity Swap Agreement) of the Company's ordinary shares in any month and a 'benchmark price' that is 5% above the Subscription Price. Thus the funds received by the Company in respect of the Swap Shares are dependent on the future price performance of the Company's ordinary shares.

The Initial Escrowed Funds was deposited into an escrow account ("the Escrow Account") and the subsequent monthly settlement payments will be managed through the Escrow Account under the terms of the Equity Swap Agreement.

YAGM may elect to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances. The Company may pause a monthly payment under the Equity Swap Agreement once in each six month period.

YAGM has agreed that it and its affiliates will refrain from holding any net short position in respect of the Company's ordinary shares and has agreed restrictions on the volume of ordinary shares in the Company that it can trade from time to time until the expiry or if earlier termination of the Equity Swap Agreement.

By 31 December 2013 447,791,357 shares had been closed out for net proceeds of £2,261,000 which has been credited to share premium.  The remaining balance has been fair valued at 31 December 2013, resulting in a fair uplift adjustment based on the benchmark price and formula of the arrangement, with the unrealised gain credited to reserve and highlighted in other comprehensive income.

	31 December 2013		31 December 2012
	£'000		£'000
Fair Value as at 1 January	-		-
Cost of equity swap arrangement	150		-
Settled during the year	(100)		-
Fair value adjustment to 31 December	580		-
Fair Value carried forward as at 31 December	630		-

12           contingent liabilities

There were no contingent liabilities at 31 December 2013 or 31 December 2012.

13           capital commitments

There were no capital commitments at 31 December 2013 or 31 December 2012.

14           Financial instruments

The Group is exposed to a variety of financial risks which result from both its operating and investing activities.  The Board is responsible for co-ordinating the Group's risk management and focuses on actively securing the Group's short to medium term cash flows.  Long term financial investments are managed to generate lasting returns.

The Group has purchased shares in Companies which are listed on public trading exchanges such as the TSX and ASX, and these shares are held as available-for-sale assets.  The most significant risks to which the Group is exposed are described below:

a           Credit risk

The Group's credit risk will be primarily attributable to its trade receivables.  At 31 December 2013, the Group had minimal trade receivables and therefore minimal risk arises.

Generally, the Group's maximum exposure to credit risk is limited to the carrying amount of the financial assets recognised at the balance sheet date, as summarised below:

		31 December 2013				31 December 2012
	AFS  (carried at fair value	Loans and receivables	Non financial assets	Statement of Financial position total	AFS  (carried at fair value)	Loans and receivables	Non financial assets	Statement of financial position total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
								-
Available-for-sale financial asset	699	-	-	699	35	-	-	35
Total long term financial assets	699	-	-	699	35	-	-	35
Other short term financial assets	630	-	-	630	-	-	-	-
Other receivables	-	484	-	484	-	305	-	305
Prepayments and accrued income	-	-	204	204	-	-	184	184
Cash and cash equivalents	-	961	-	961	-	176	-	176
Total	1,279	1,445	204	2,978	35	481	184	700

Financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

·    Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;         

·    Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·    Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.  In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.  Management's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement, and considers factors specific to the investment.

Investments

The Group's investment in shares in Bancora Minerals Limited and Western Lithium USA Corporation included as an available-for-sale asset has been classified as Level 1, as market prices are available and the market is considered an active, liquid market.

The credit risk on liquid funds is limited because the Group only places deposits with leading financial institutions in the United Kingdom.

b           Liquidity risk

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.  The Directors prepare rolling cash flow forecasts and seek to raise additional equity funding whenever a shortfall in funding is forecast.  Details of the going concern basis of preparing the financial statements are included in the principal accounting policies.

c           Market risk

The amount and quality of minerals available and the related costs of extraction and production represent a significant risk to the group. The group is exposed to fluctuating commodity prices in respect of the underlying assets. The Group seeks to manage this risk by carrying out appropriate due diligence in respect of the projects in which it invests.

Interest rate risk

The Group has no loans and therefore little interest rate risk.

d           Financial liabilities

The group's financial liabilities are classified as follows:

	31 December 2013						31 December 2012
	Other financial liabilities at amortised cost		Liabilities not within the scope		Total		Other financial liabilities at amortised cost		Liabilities not within the scope		Total
	£'000		£'000		£'000		£'000		£'000		£'000
Trade payables	135		-		135		95		-		95
Accruals and deferred income	-		92		92		-		27		27
Total	135		92		227		95		27		122

Maturity of financial liabilities

All financial liabilities at 31 December 2013 and 31 December 2012 mature in less than one year.

Borrowing facilities for the period ended 31 December 2013

The Group has no undrawn committed borrowing facilities at 31 December 2013 (31 December 2012: £ Nil).

e           Capital risk management

The Group's objectives when managing capital are:

-     to safeguard the Group's ability to continue as a going concern, so that it continues to provide returns and benefits for the shareholders;

-     to support the Group's stability and 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 and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. Management regards total equity as capital and reserves, for capital management purposes.

When the net assets of the parent Company are below half of the called up share capital, the directors contact the shareholders accordingly.

15        RELATED PARTY TRANSACTIONS

Included within creditors at 31 December 2013 is £Nil (31 December 2012: £2,800) in respect of monies owed to Richard Griffiths, who was a director of Rare Earth Minerals plc.

Included within accruals at 31 December 2013 is £18,000 (31 December 2012: £12,000) in respect of monies owed to Adrian Fairbourn, a director of Rare Earth Minerals plc.

In addition to his directors fees Don Strang was paid £52,000 consultancy fees during the year. At the year end the amount owed to Don Strang is £60,000 (31 December 2012 £nil).

16        Employee remuneration

Employee benefits expense

The expense recognised for employee benefits, including Directors' emoluments, is analysed below:

	Year ended		Year ended
	31 December 2013		31 December 2012
	£'000		£'000
Wages, salaries and fees	238		142
Share based payments	8		86
	246		228

The average number of employees (including directors) employed by the Group during the period was:

	2013		2012
	No.		No.
Directors	3		3
	3		3

Included within the above are amounts in respect of Directors, who are considered to be the key management personnel, as follows:

	Year ended		Year ended
	31 December 2013		31 December 2012
	£'000		£'000
Salaries & fees	208		142
Share based payments	8		47
	216		189

Details of Directors' emoluments are included in the Report on Remuneration on pages 9 - 10.

17        subsidiaries

Subsidiary	Proportion of ordinary share capital held	Nature of business	Country of incorporation
Mojito Resources Ltd	100%	Mining	British Virgin Islands
REM Mexico Ltd	100%	Mining	England & Wales

18        ACQUISITIONS

On 1 December 2011, the group acquired the entire issued share capital of Mojito Resources Limited, a company registered in the British Virgin Islands, from Camelot Trust Corporation Limited for consideration of £905k. The consideration was settled by £380,000 of cash and 250 million ordinary shares in Rare Earth Minerals plc, at a fair value of £0.0021 per share, being the market value of the shares at the date of acquisition. Following the transaction, Camelot Trust Corporation Limited owned 17.3% of the share capital of Rare Earth Minerals plc.  Mojito Resources Limited owns a 30% interest in the Yangibama Rare Earth Project situated in the Gascoyne region of Western Australia.

At acquisition Mojito Resources Limited owned 30% of 6 exploration licences relating to the Yangibama Rare Earth Project, there were no other identifiable assets or liabilities of the Company acquired. In addition there is deferred contingent consideration of AUS$500,000.  At the date of acquisition the directors consider that this is unlikely to be paid and have therefore not provided for this in the financial statements.

Mojito Resources Limited has not contributed any profits or losses to the Group financial statements since acquisition. Details of the Project and the background to the acquisition by the Group are included within the Chairman's & Chief Executive' Statements on pages 1-4.

19        EVENTS AFTER THE REPORTING PERIOD

On 10 January 2014 and 4 March 2014, the Company announced it had increased its shareholding in Bacanora Minerals Ltd to 3.17% and then 5%, through on-market purchases totalling £172,000 & £317,000 respectively.  This when aggregated with REM's 30% direct interest in the Fleur-El Sauz concession, results in a total economic interest of approximately 33.5%.

On 6 March 2014, the Company announced it had completed the placing of 1,150,000,000 ordinary shares of 0.01pence for a cash price of 0.4pence per share, raising gross proceeds of £4,600,000.

 

END

 

 

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