Final Results

RNS Number : 6074L
Regency Mines PLC
27 December 2018
 

Regency Mines Plc

("Regency Mines" or the "Company")

 

Final Audited Results for the Year Ended 30 June 2018

 

 

27 December 2018

A copy of the Company's annual report and financial statements for 2018 - extracts from which are set out below - will be made available on the Company's website www.regency-mines.com shortly and at the Annual General Meeting to be held on 25 January 2019.

 

Chairman's Review

Dear Shareholders,

Overview

 

Everyone invested in the mineral exploration and development sector of the market knows what the broad picture has been. After a multi-year decline from 2010 in commodity prices, which reached its nadir at the very beginning of 2016, and a corresponding decline in the liquidity of, and level of interest in, listed companies in the sector, a sharp recovery took place in the Spring of 2016.

 

Expanding economies worldwide consumed more natural resources, and in retrospect the 2015-16 prices, although an unsustainable aberration, had created expectations so low that the first stages of recovery saw significant price increases in oil and bulk cargo minerals, with base metals generally following behind.

 

Some easy money was made last year, and the setback in 2018 to date has been the first significant pullback in prices, affecting both commodities and share prices, and so in part a normal and healthy reaction. It has been amplified however by signs of a global slowdown, and by the strains on global liquidity as a result of the US reversal of quantitative easing, that has impacted economies outside the US through the dollar exchange rate.

 

There are two main views of future developments. One would hold that China will slow, other economies will decline under the pressure of dollar debts, the Euro area will face a crisis of slow growth exacerbating banking instability, the US economy is reaching full capacity and higher interest rates are inevitable, and the global economic expansion will end with either a short sharp shock or a decline into stagnation. The other would hold that Asia will continue to see managed growth, that intra-Asian trade will increase, and that the US economy will continue to grow adequately under the influence of tax cuts and renewed infrastructure investment.

 

We must prudently be prepared for either scenario. Any commodity-based business is to some extent a creature of the cycle, as stocking and destocking affect demand faster than production can adjust. What we can hope to do in order to manage our long-term strategies through periods of short-term volatility is, first, to create cash flow and revenue from cheap production, secondly, to build into our production some protections against price and demand declines, and thirdly to position ourselves in minerals and sectors seeing secular growth throughout the cycle.

 

Our high-quality metallurgical coal production at MET meets many of these requirements. We expect it to provide us with cash flows from cheap production of a relatively scarce commodity, that serves primarily the robust U.S. market and its recovering steel industry, where demand is underpinned by a fixed price supply contract for significant quantities of coal to a specialist biomass power station.

 

Our nickel-cobalt joint venture at Mambare in Papua New Guinea meets one, in that we are deliberately positioned in nickel because of the expected secular trend of demand growth for stainless steel, and in that the use of both metals in electric car and other battery technologies is growing and significant. We are currently studying the options for some DSO (direct shipping ore) production in order to generate near-term cash flows from this project.

The headline statement of this section of the Annual Report last year read "Our base metal interests can now be seen to be entirely composed of the cathode materials that are key for the new green car and energy storage revolution that is under way." A year later, that remains equally true.

 

Indeed, we have given form to the division set up last year to study and develop our interests in the technologies and services that will serve the electric car and battery sectors with the incorporation of ESTEQ Limited, which has invested in Whitecar Ltd, the leading electric vehicle rental company in the UK, and which has helped set up Allied Energy Services to provide power generation, grid back up and electricity storage from several identified sites.

 

 

With our investment in Curzon Energy plc, where we now have a seat on the board, we target the generation of cash flows from gas in the US, as this cleaner energy source progressively gains market share from coal in the US power generation mix. As this occurs, and related LNG distribution infrastructure expands to support rising production levels, we believe the US will continue to export LNG on an ever-wider scale to Asian and other overseas markets.

 

Leaving aside the possibility of capital transactions, the focus for cash flow from operations must be primarily metallurgical coal for the present, as this will be relatively resistant to any downturn. DSO nickel production depends on strong nickel prices, and so will be more likely short term in a benign environment in which economies grow and increased demand supports a rising nickel price.

 

Review of the year

 

The earlier part of the year to 30 June 2018 saw Regency make profitable disposals of its interest in Horse Hill Developments, increase its stake in Curzon Energy plc at that company's IPO, establish its new energy metal technologies arm ESTEQ Limited make a maiden investment there in Whitecar Ltd.

 

On 30 January 2018, the Company's entire outstanding loan facility of USD835,115 was repaid, following a fundraising at 0.55p a share to raise £1,055,000, of which Directors contributed £100,000.

 

The purpose of the financing was stated to be to repay the loan, to expand the Company's coal footprint in the US, and to recommence activity at Mambare.

 

The announcement on 5 December 2017 of a MOU with Legacy Hill Resources Ltd ("LHR"), was then followed on 27 February by the announcement of a joint venture, and on 6 June by the incorporation and funding of a joint venture company, Mining Equity Trust, LLC ("MET"), to which Regency contributed USD2,000,000, taking out for the purpose a new loan of USD1,600,000. On 2 August, after the financial year end, MET took over the metallurgical coal operations and assets of Omega Holdings, LLC and other companies in Virginia, U.S.A.

 

At the Mambare nickel-cobalt project, Regency put forward a revised work plan incorporating initial ground penetrating radar work in order to provide a conceptual expansion of the deposit envelope and discussed with the contractor the cost and timings of that work. The settlement of certain partner issues was another post year end development, finally occurring in November 2018, and so allowing detailed preparation for work on site to begin.

 

In both cases, it was not until after the year end that real progress could be made and it was as disappointing to us as to other investors who sought a more aggressive timeline.

 

However, both the coal and the nickel-cobalt are strategic long-term projects central to our future, so thorough due diligence and proper structuring with appropriate partners were considered to be essential to achieve the best results.

 

We drilled out a major maiden Resource at Mambare at the beginning of the decade, and have made the painful effort to retain this asset through a bear market in nickel that began two years earlier than in other commodities and has scarcely ended now. We did this because of our confidence that when the nickel and cobalt market recovered, this would become a world class asset. We are not therefore now going to compromise our interests by taking any ill-thought-out actions.

 

In coal, we identified the potential for recovery in the metallurgical sector of the market near the bottom of the coal bear market, but finding an entry point that was going to work and be within our means has been difficult. Our initial partners proved a poor choice, but when we found that LHR with whom we shared an office had the same vision and very relevant expertise, we realised we had a desirable partner on hand. From that point to production of coal was less than a year. At the time these delays seemed frustrating, but in retrospect progress seems quite rapid. Our joint strategic vision is a larger roll-up strategy, followed by the listing of a North American company worth several hundred million dollars; Omega is just the first step. Both parties also intend that as cash is generated through operations, as much of it as possible should be returned to the partners, something that will soon feed into Regency's bottom-line.

 

Discussion of the Results

 

In this transition year, the balance sheet at year end looked fairly similar to that at the beginning, despite the inflows and outflows that occurred during the year.

 

The reported loss increased from £634,267 to £1,549,619, as a£1,482,609 gain on sale of investments was more than offset by an impairment of our interests in joint venture activities with our former coal partner. We shall expect to reverse some of this impairment in time, and will aggressively pursue various avenues to do so. A further factor was that administration costs increased by £271,076 as despite a reduction in payroll costs, the one-off costs associated with downsizing our offices caused a temporary increase in rental and general administrative costs, while finance and legal costs increased as a result of the arrangements connected with financing the MET investment.

 

Principally as a result of this reported loss, total assets declined from £6,450, 885 to £5,840,692 over the year, and total equity declined from £5,278,164 to £4,446,340.

 

Prospects

 

Our objective for the current year is to restructure our balance sheet from short-term to longer-term liabilities, so that the impact of expected cash flows from coal production at MET can strengthen the financing capability of our developing nickel-cobalt operations at Mambare, and make us financially self-sufficient. To this end, we will control further our central overhead, and lay off some of our costs on to partner or investee enterprises, and pursue recoveries where we can.

 

We look to our joint venture operations at both MET and Mambare to progress, and will seek external funding where appropriate. We will look to issuing new capital to external investors at ESTEQ with a view to eventually listing that entity in London. We expect a rapid development in the business of Allied Energy Services.

 

We look to providing the market with profit guidance for MET as soon as reasonably possible, as we believe that when we do so that will have significant market impact.

 

We propose to strengthen and refresh the Board with new appointments as appropriate in the coming year.

 

The measures we have already begun to take to create market awareness and a steady flow of information will continue and intensify, in order both to increase engagement with existing shareholders, and to project to a new audience the identity and vision of the Company.

 

Success on the ground and success in the market will, we believe, be closely linked for us in the coming period, and so we must and will achieve both.

 

 

Andrew Bell 

Chairman and CEO

 

21 December 2018

 

 

Results and Dividends

The Group made a loss after taxation of £1,549,619 (2017: £534,267).   The Directors do not recommend the payment of a dividend.  The following financial statements are extracted from the audited financial statements which were approved by the Board of Directors and authorised for issuance on 21 December 2018.

 

For further information contact:

Andrew Bell 0207 747 9960                                                       Chairman Regency Mines Plc

Scott Kaintz 0207 747 9960                                                        Executive Director Regency Mines Plc

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

Jason Robertson 0207 374 2212                                                Broker First Equity Limited

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018

 

 

 

 

 

 

Notes

30 June

2018

£

30 June

2017

£

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

10

195

15,520

Investments in associates and joint ventures

12

3,161,002

3,585,757

Goodwill

 

42,471

-

Available for sale financial assets

13

1,099,572

1,443,707

Exploration assets

14

-

40,402

Trade and other receivables

15

1,274,569

1,239,779

Total non-current assets

 

5,577,809

6,325,165

Current assets

 

 

 

Cash and cash equivalents

20

126,125

9,176

Trade and other receivables

15

136,758

116,544

Total current assets

 

262,883

125,720

Total assets

 

5,840,692

6,450,885

 

EQUITY AND LIABILITIES

 

 

 

Equity attributable to owners of the Parent

 

 

 

Called up share capital

18

1,926,407

1,904,933

Share premium account

 

20,379,728

19,272,873

Other reserves

 

440,693

895,947

Retained earnings

 

(18,339,478)

(16,795,589)

Total equity attributable to owners of the Parent

 

4,407,350

5,278,164

Non-controlling interests

 

38,990

-

Total equity

 

4,446,340

5,278,164

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

16

296,752

401,634

Short-term borrowings

16

1,097,600

771,087

Total current liabilities

 

1,394,352

1,172,721

Total equity and liabilities

 

5,840,692

6,450,885

 

These financial statements on pages 34 to 75 were approved by the Board of Directors and authorised for issue on 21 December 2018 and are signed on its behalf by:

 

Andrew Bell

Chairman and CEO

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

 

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

 

 

 

 

Notes

Year to 30 June

2018

£

Year to 30 June

2017

£

REVENUE

 

 

 

Management services

 

-

113,350

Total revenue

 

-

113,350

Gain on sale of available for sale investments

13

1,482,609

-

Gain on sale of tenements

 

-

55,183

Impairment of available for sale financial assets

 

(215,372)

-

Exploration expenses

 

643

(930)

Impairment of exploration assets

 

(40,403)

(229,262)

Administrative expenses (net)

4

(735,697)

(464,621)

Foreign currency (loss)/gain

 

(3,312)

49,678

Other income

 

47,257

-

Impairment of investments in joint ventures

12

(1,943,132)

-

Finance costs, net

5

(142,212)

(57,665)

Loss for the year before taxation

3

(1,549,619)

(534,267)

Tax credit

6

-

-

Loss for the year

 

(1,549,619)

(534,267)

Loss per share attributable to:

 

 

 

Equity holders of the Parent

 

(1,543,889)

(534,267)

Non-controlling interest

 

(5,730)

-

 

 

(1,549,619)

(534,267)

Loss per share attributable to owners of the Parent

 

 

 

Loss per share - basic

9

(0.23) pence

(0.13) pence

Loss per share - diluted

9

(0.23) pence

(0.13) pence

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
 
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

 

 

30 June

2018

£

30 June

2017

£

Loss for the year

(1,549,619)

(534,267)

Other comprehensive income

 

 

Items that will be reclassified subsequently to profit or loss

 

 

Decrease in AFS reserve in relation to disposals

(322,507)

-

Surplus on revaluation of available for sale financial assets

(163,111)

110,242

Unrealised foreign currency gain on translation of foreign operations

20,367

58,865

Other comprehensive income for the year

(465,251)

169,107

Total comprehensive expense for the year attributable to owners of the Parent

(2,014,870)

(365,160)

 

All of the Group's operations are considered to be continuing.

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

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018

 

 

The movements in equity during the year were as follows:

 

 

 

 

 

 

Share capital

£

Share premium account

£

Retained earnings

£

Other reserves

£

attributable to owners of the

Parent

£

Non-controlling

interests

£

Total equity

£

 

As at 1 July 2016

1,872,522

17,399,710

(15,902,032)

324,638

3,694,838

-

3,694,838

 

Changes in equity for 2017

 

 

 

 

 

 

 

 

Loss for the year

-

-

(534,267)

-

(534,267)

-

(534,267)

 

Other comprehensive income

 

 

 

 

 

 

 

 

for the year

-

-

(359,290)

528,397

169,107

-

169,107

 

Transactions with owners

 

 

 

 

 

 

 

 

Issue of shares

32,411

1,918,253

-

-

1,950,664

-

1,950,664

 

Share issue and fundraising costs

-

(45,090)

-

-

(45,090)

-

(45,090)

 

Share-based payment transfer

-

-

-

42,912

42,912

-

42,912

 

Total transactions with owners

32,411

1,873,163

-

42,912

1,948,486

-

1,948,486

 

As at 30 June 2017

1,904,933

19,272,873

(16,795,589)

895,947

5,278,164

-

5,278,164

 

Changes in equity for 2018

 

 

 

 

 

 

 

 

Loss for the year

-

-

(1,543,889)

-

(1,543,889)

(5,730)

(1,549,619)

 

Other comprehensive income

 

 

 

 

 

 

 

 

for the year

-

-

-

(465,251)

(465,251)

-

(465,251)

 

Acquisition of new subsidiary

-

-

-

-

-

44,720

44,720

 

Transactions with owners

 

 

 

 

 

 

 

 

Issue of shares

21,474

1,158,855

-

-

1,180,329

-

1,180,329

 

Share issue and fundraising costs

-

(52,000)

-

-

(52,000)

-

(52,000)

 

Share-based payment transfer

-

-

-

9,997

9,997

-

9,997

 

Total transactions with owners

21,474

1,106,855

-

9,997

1,138,326

-

1,138,326

 

As of 30 June 2018

1,926,407

20,379,728

(18,339,478)

440,693

4,407,350

38,990

4,446,340

 

Other reserves

 

Available

for sale

financial

asset

reserve

£

 

 

Share-based

payment

reserve

£

Associate

investments

reserve

£

Foreign

currency

translation

reserve

£

Total

other

reserves

£

As at 1 July 2016

267,004

22,945

(410,439)

445,128

324,638

Changes in equity for 2017

 

 

 

 

 

Other comprehensive income for the year

110,242

-

-

58,865

169,107

Transfer to retained earnings

(51,149)

-

410,439

-

359,290

Share based payment transfer

-

42,912

-

-

42,912

As at 30 June 2017

326,097

65,857

-

503,993

895,947

Changes in equity for 2018

 

 

 

 

 

Other comprehensive(expense) / income for the year

 

 

 

 

 

Decrease in available for sale asset reserve in relation to disposals

(322,507)

-

-

-

(322,507)

Change in available for sale asset reserve due to revaluation

(163,111)

-

-

 

(163,111)

Unrealised foreign currency gain on translation of foreign operations

-

-

-

20,367

20,367

Total Other comprehensive (expense) / income for the year

(485,618)

-

-

20,367

(465,251)

Share based payment transfer

-

9,997

-

-

9,997

As at 30 June 2018

(159,521)

75,854

-

524,360

440,693

                           

 

See note 17 for a description of each reserve included above.

 

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

 

 

Year to 30 June

2018

£

Year to 30 June

2017

£

Cash flows from operating activities

 

 

Loss before taxation

(1,549,619)

(534,267)

(Increase)/decrease in receivables

(108,653)

1,501

Increase/(decrease) in payables

44,000

(217,503)

Depreciation

15,325

6,197

Impairment of exploration properties

40,403

229,262

Share-based payments

35,017

91,359

Currency adjustments

3,313

(49,679)

Finance cost, net

142,212

57,665

Agents fees settled in Curzon's shares, recorded as Other income

(28,000)

-

Gain on sale of investments

(1,482,609)

-

Gain on sale of tenements

-

(55,183)

Impairment of available for sale financial assets

215,372

-

Impairment of investments in joint ventures

1,943,132

-

Impairment of loans and receivables

95,033

-

Net cash outflow from operations

(635,074)

(470,648)

Cash flows from investing activities

 

 

Proceeds from sale of available for sale investments

1,791,758

-

Proceeds from sale of tenements

-

58,837

Purchase of available for sale financial assets

(800,000)

(75,000)

Payments for exploration costs

-

(594)

Payments for investments in associates and joint ventures

(443,034)

(1,531,778)

Net cash inflow/(outflow) from investing activities

548,724

(1,548,535)

Cash flows from financing activities

 

 

Proceeds from issue of shares

1,124,310

1,576,701

Transaction costs of issue of shares

(59,500)

(45,090)

Interest paid

(136,730)

(72,048)

Proceeds of new borrowings

-

771,087

Repayment of borrowings

(724,781)

(210,251)

Net cash inflow from financing activities

203,299

2,020,399

Net (decrease)/increase in cash and cash equivalents

116,949

1,216

Cash and cash equivalents at the beginning of period

9,176

7,960

Cash and cash equivalents at end of period

126,125

9,176

 

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

 

COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018

 

 

 

 

 

 

Notes

30 June

2018

£

30 June

2017

£

ASSETS

 

 

 

Non-current assets

 

 

 

Property, plant and equipment

10

195

15,520

Investments in subsidiaries

11

483

482

Investments in associates and joint ventures

12

3,277,662

3,702,417

Available for sale financial assets

13

694,423

1,433,858

Exploration assets

14

-

40,402

Trade and other receivables

15

2,745,016

2,045,053

Total non-current assets

 

6,717,779

7,237,732

Current assets

 

 

 

Cash and cash equivalents

20

6,505

8,125

Trade and other receivables

15

124,346

116,286

Total current assets

 

130,851

124,411

Total assets

 

6,848,630

7,362,143

 

EQUITY AND LIABILITIES

 

 

 

Called up share capital

18

1,926,407

1,904,933

Share premium account

 

20,379,728

19,272,873

Other reserves

 

(79,453)

496,514

Retained earnings

 

(16,755,707)

(15,474,628)

Total equity

 

5,470,975

6,199,692

LIABILITIES

 

 

 

Current liabilities

 

 

 

Trade and other payables

16

280,055

391,364

Short-term borrowings

16

1,097,600

771,087

Total current liabilities

 

1,377,655

1,162,451

Total equity and liabilities

 

6,848,630

7,362,143

 

These financial statements on pages 34 to 75 were approved by the Board of Directors and authorised for issue on 21 December 2018 and are signed on its behalf by:

 

Andrew Bell

Chairman and CEO

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

 

COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

The movements in reserves during the year were as follows:

 

 

 

Share capital

£

Share premium account

£

 

Retained earnings

£

 

Other reserves

£

 

Total equity

£

As at 30 June 2016

1,872,522

17,399,710

(15,148,556)

240,772

4,364,448

Changes in equity for 2017

 

 

 

 

 

Loss for the year

-

-

(326,072)

-

(326,072)

Other comprehensive income for the year

-

-

-

212,830

212,830

Transactions with owners

 

 

 

 

 

Issue of shares

32,411

1,918,253

-

-

1,950,664

Share issue and fundraising costs

-

(45,090)

-

-

(45,090)

Share-based payment transfer

-

-

-

42,912

42,912

Total transactions with owners

32,411

1,873,163

-

42,912

1,948,486

As at 30 June 2017

1,904,933

19,272,873

(15,474,628)

496,514

6,199,692

Changes in equity for 2018

 

 

 

 

 

Loss for the year

-

-

(1,352,545)

-

(1,352,545)

Other comprehensive income for the year

-

-

71,466

(585,965)

(514,499)

Transactions with owners

 

 

 

 

 

Issue of shares

21,474

1,158,855

-

-

1,180,329

Share issue and fundraising costs

-

(52,000)

-

-

(52,000)

Share-based payment transfer

-

-

-

9,997

9,997

Total transactions with owners

21,474

1,106,855

-

9,997

1,138,326

As at 30 June 2018

1,926,407

20,379,728

(16,755,707)

(79,454)

5,470,974

 

 

 

 

Other reserves

Available for sale financial asset reserve

£

 

Share-based

payment reserve

£

 

 

Currency reserve

£

 

Total other reserves

£

As at 30 June 2016

215,855

22,945

1,972

240,772

Changes in equity for 2017

 

 

 

 

Other comprehensive income for the year

110,242

-

102,588

212,830

Share-based payment transfer

-

42,912

-

42,912

As at 30 June 2017

326,097

65,857

104,560

496,514

Changes in equity for 2018

 

 

 

 

Other comprehensive income for the year

 

 

 

 

Decrease in available for sale asset reserve in relation to disposals

(355,602)

-

-

(355,602)

Change in available for sale asset reserve due to revaluation

(158,898)

-

-

(158,898)

Transfer between reserves

33,095

-

(104,560)

71,466

Total Other comprehensive (expenses)/income

(481,405)

-

(104,560)

(585,965)

Share-based payment transfer

-

9,997

-

9,997

As at 30 June 2018

(155,308)

75,854

-

(79,454)

 

See note 17 for a description of each reserve included above.

 

COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

 

 

Year to 30 June

2018

£

Year to 30 June

2017

£

Cash flows from operating activities

 

 

Loss before taxation

(1,352,545)

(326,072)

(Increase)/decrease in receivables

(668,028)

54,214

(Decrease)/increase in payables

44,000

(223,661)

Depreciation

15,325

6,197

Agents fees settled in Curzon's shares, recorded as Other income

(28,000)

-

Share-based payments

35,017

91,359

Finance (income)/costs, net

27,590

(47,771)

Currency gains/(losses)

(38,124)

33,612

Gain on sale of investments

(1,482,818)

-

Impairment of associate

1,943,132

-

Debtors write off

95,033

-

Impairment of available for sale investment

215,372

-

Impairment of exploration expenses

40,403

-

Net cash outflow from operations

(1,153,643)

(412,122)

Cash flows from investing activities

 

 

Payments for investments in associates and joint ventures

(443,034)

(1,531,778)

Purchase of available for sale financial assets

(400,000)

(75,000)

Proceeds from sale of available for sale investments

1,791,758

-

Net cash inflow/(outflow) from investing activities

948,724

(1,606,778)

Cash flows from financing activities

 

 

Proceeds from issue of shares

1,124,310

1,576,701

Transaction costs of issue of shares

(59,500)

(45,090)

Interest paid

(136,730)

(72,048)

Proceeds of new borrowings

-

771,087

Repayments of borrowings

(724,781)

(210,251)

Net cash inflow from financing activities

203,299

2,020,399

Net (decrease)/increase in cash and cash equivalents

(1,620)

1,499

Cash and cash equivalents at the beginning of period

8,125

6,626

Cash and cash equivalents at end of period

6,505

8,125

 

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

 

NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2018

 

 

 

1.  Principal accounting policies

1.1  Authorisation of financial statements and statement of compliance with IFRS

The Group financial statements of Regency Mines plc ("the Company" or "Regency") for the year ended 30 June 2018 were authorised for issue by the Board on 21 December 2018 and signed on the Board's behalf by Andrew Bell and Scott Kaintz. Regency Mines plc

is a public limited company incorporated and domiciled in England and Wales. The Company's ordinary shares are traded on AIM.

1.2  Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as endorsed by the EU ("IFRS") and the requirements of the Companies Act applicable to companies reporting under IFRS.

 

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below.

Going concern

The consolidated entity has incurred a loss before tax of £1,549,619 for the year ended 30 June 2018 (2017: loss of £534,267) and had a net cash outflow of £86,351 (2017: £2,019,183) from operating and investing activities. At that date there was a net current liability of

£1,131,469 (2017: £1,047,003). The loss resulted mainly from the impairment of the Group's investment in joint ventures £1,943,132 (2017: loss resulted mainly from impairment of exploration and available for sale assets totalling £229,262).

 

During the reporting year the Company has made significant strides in achieving financial stability through the acquisition of the first producing asset in its history. To acquire these producing metallurgical coal interests, the Company completed a Joint Venture Agreement with Legacy Hill Resources and established Mining Equity Trust ("MET").

 

On 2 August 2018, MET purchased the metallurgical coal interests of Omega Holdings in Cedar Bluffs, Virginia. The Company has a 47% stake in the associate and has forecasted revenues of USD30,468,239 for the 10 months to June 2019.

 

The Company completed its deleveraging process through the repayment of the convertible loan with YA PN Ltd on 30 January 2018. The Directors remain confident in the Company's ability to raise new finance from stock markets if it is required in 2019 and the Group has demonstrated a consistent ability to do so. On 11 January 2018, the Company raised £1,050,000 through the issue of 190,909,090 new ordinary shares at 0.01p each at a price of 0.55 per share.

 

Regency owns liquid assets that it can sell to fund operations, the most significant being its 8.9% stake in Curzon Energy Plc, listed on the Standard List of the London Stock Exchange. The value of this holding in Q4 2018 was approximately £120k. The Company also has a 5.584% interest in Whitecar Ltd, and an 80% ownership interest in Allied Energy Ltd. During the past year the Company has disposed of its interest in Alba Resources plc for gross proceeds of £299k.

 

The Group has demonstrated the ability to raise debt as required, as most recently demonstrated by the Omega Holdings acquisition, where the Company raised USD1.6m from a group of institutional investors in May 2018.

 

The Directors believe that based on the forecasts and projections prepared, sufficient resources will be available for the Company to continue to operate as a going concern for the foreseeable future, and that the Company will be able to access adequate debt and equity capital to supplement income from its US metallurgical coal operations.

 

 

 

 

 

Company Statement of Comprehensive Income

As permitted by Section 408 Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The Company's loss for the financial year was £1,352,545 (2017: loss of £324,423). The Company's other comprehensive loss for the financial year was £481,405 (2017: income £110,242).

Amendments to published standards effective for the year ended 30 June 2018.

New standards, amendments and interpretations effective for the periods from 1 July 2017

The following new standards, amendments and interpretations are effective for the first time in these financial statements. However, none have a material effect on the Group and Company:

Amendments to IAS 12 Deferred Tax relating to recognition of deferred tax assets for unrealised losses, effective for the periods beginning on or after 1 January 2017.

Amendments to IAS 7 Financial Instruments: Disclosures, effective for accounting periods beginning on or after 1 January 2017.

Annual Improvements to IFRSs (2014-2016 cycle), Amendments to IFRS 12, effective for accounting periods beginning on or after 1 January 2017.

 

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 July 2017 that had a significant effect on the Group's financial statements.

New standards, amendments and interpretations not yet adopted

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 for the year presented:

 

 

 

Issued date

IASB mandatory effective date, for the periods beginning on or after

New Standards and interpretations

 

 

IFRS 9 Financial Instruments

Various

01-Jan-18

IFRS 15 Revenue from contracts with customers

28-May-14

01-Jan-18

Clarifications to IFRS 15 Revenue from contracts with customers

12-Apr-16

01-Jan-18

Amendments to IFRS 15: Effective date of IFRS 15

15-Sep-15

01-Jan-18

IFRS 16 Leases

13-Jan-16

01-Jan-19

IFRIC 23 Uncertainty over Income Tax Treatments

07-Jun-17

01-Jan-19

IFRS 17 Insurance contracts1

18-May-17

01-Jan-21

Amendments to Existing Standards

 

 

Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2)

 

20-Jun-16

 

01-Jan-18

Annual Improvements to IFRSs (2014-2016 Cycle)

08-Dec-16

01-Jan-17 and 01-Jan-18

IFRIC 22 Foreign Currency Transactions and Advance Consideration

08-Dec-16

01-Jan-18

Amendments to IFRS 9: Prepayment features with negative compensation

12-Oct-17

01-Jan-19

Amendments to IAS 40: Transfers of investment property

08-Dec-16

01-Jan-18

Amendments to IAS 28: Long-term interests in associates and joint ventures1

12-Oct-17

01-Jan-19

Annual improvements to IFRSs (2015-2017 Cycle)1

12-Dec-17

01-Jan-19

Amendments to IAS 19: Plan amendment, curtailment or settlement1

07-Feb-18

01-Jan-19

Amendments to References to the conceptual framework in IFRSs1

29-Mar-18

01-Jan-20

Amendments to IAS 1 and IAS 8: Definition of Material1

31-Dec-18

01-Jan-20

 

1 Not yet endorsed for use in the EU at the time these accounts were authorised for issue.

 

 

 

 

 

1. Principal accounting policies continued

1.2  Basis of preparation continued

The Directors do not expect that the adoption of these standards will have a material impact on the financial information of the Group in future periods, except for IFRS 9 as detailed below.

IFRS 9 "Financial Instruments" will impact both the measurement and disclosures of financial instruments. The Group is planning to

first apply this standard at the beginning of the next reporting year to 30 June 2019. The Group will not retrospectively re-state prior period but will recognise any difference between the previous carrying amount and the carrying amount at 1 July 2018 in the opening retained earnings at 1 July 2018 for the assets that have not been disposed of at the date of initial application. All the investments in equity instruments, that are held by the Group at 30 June 2018 are currently included in available for sale financial assets line in the Statement of Financial Position. The Group is analysing its investments in equity instruments on an investment-by-investment basis and in respect of each one plans to make an irrevocable election to present subsequent changes in the fair value either in profit and loss (FVTPL)

or in other comprehensive income (FVTOCI). For equity instruments designated at FVTOCI under IFRS 9, only dividend income will be recognised in profit or loss, all other gains and losses will be recognised in OCI without reclassification on derecognition. This differs from the current treatment of AFS equity instruments under IAS 39 where gains and losses recognised in OCI are reclassified on derecognition or impairment.

 

IFRS 15 "Revenue from Contracts with Customers" - the Company is pre-revenue hence the adoption would have no impact on the reported results.

Adoption of IFRS 16 will result in the Group recognising right of use of assets and lease liabilities for all contracts that are, or contain,

a lease. For leases currently classified as operating leases, under current accounting requirements the Group does not recognise related assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial statements the total commitment. Since the Group currently only has short-term (less than 12 months) operating leases, IFRS 16 will not have an impact on the results or balance sheet of the Group.

 

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard. The Group does not have any contract that falls within the scope of this standard and therefore it would have no impact on the reported results.

 

IFRIC 23 is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. This interpretation is unlikely to have a material effect on the reported results.

Standards adopted early by the Group

The Group has not adopted any standards or interpretations early in either the current or the preceding financial year.

1.3  Basis of consolidation

The consolidated financial statements of the Group incorporate the financial statements of the Company and entities controlled by the Company, its subsidiaries, made up to 30 June each year.

Subsidiaries

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain economic benefits from their activities. Subsidiaries are consolidated from the date on which control is obtained, the acquisition date, until the date that control ceases.

 

The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date.

 

Provisional fair values are adjusted against goodwill if additional information is obtained within one year of the acquisition date about facts or circumstances existing at the acquisition date. Other changes in provisional fair values are recognised through profit or loss.

 

Intra-group transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation, except to the extent that intra-group losses indicate an impairment.

 

 

 

 

 

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

derecognises the assets (including goodwill) and liabilities of the subsidiary;

derecognises the carrying amount of any non-controlling interest;

derecognises the cumulative translation differences recorded in equity;

recognises the fair value of the consideration received;

recognises the fair value of any investment retained;

recognises any surplus or deficit in profit or loss; and

reclassifies the Parent's share of components previously recognised in other comprehensive income to profit or loss or retained earnings, as appropriate.

Non-controlling interests

Profit or loss and each component of other comprehensive income are allocated between the aims of the Parent and non-controlling interests, even if this results in the non-controlling interest having a deficit balance.

 

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. Any differences between the adjustment for the non-controlling interest and the fair value of consideration paid or received are recognised in equity.

1.4   Summary of significant accounting policies

1.4.1       Investment in associates

An associate is an entity over which the Company is in a position to exercise significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee.

 

Investments in associates are recognised in the consolidated financial statements using the equity method of accounting. The Group's share of post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in other comprehensive income are recognised directly in other comprehensive income. The carrying value of the investment, including goodwill, is tested for impairment when there is objective evidence of impairment. Losses in excess of the Group's interest in those associates are not recognised unless the Group has incurred obligations or made payments on behalf of the associate.

 

Where a Group company transacts with an associate of the Group, unrealised gains are eliminated to the extent of the Group's interest in the relevant associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.

 

Where the Company's holding in an associate is diluted, the Company recognises a gain or loss on dilution in profit and loss. This is calculated as the difference between the Company's share of proceeds received for the dilutive share issue and the value of the Company's effective disposal.

 

In the Company accounts investments in associates are recognised and held at cost. The carrying value of the investment is tested for impairment when there is objective evidence of impairment.

1.4.2        Interests in joint ventures

A joint venture is a joint arrangement whereby the partners who have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of the joint arrangement, which exists only when decisions on relevant activities require the unanimous consent of the parties sharing control. The Group recognises its interest in the entity's assets and liabilities using the equity method of accounting. Under the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of its net assets, less distributions received and less any impairment in value of individual investments. The Group Income Statement reflects the share of the jointly controlled entity's results after tax.

 

Any goodwill arising on the acquisition of a jointly controlled entity is included in the carrying amount of the jointly controlled entity and is not amortised. To the extent that the net fair value of the entity's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised and added to the Group's share of the entity's profit or loss in the period in which the investment is acquired.

 

 

 

 

 

1. Principal accounting policies continued

1.4   Summary of significant accounting policies continued

1.4.2        Interests in joint ventures continued

Financial statements of the jointly controlled entity will be prepared for the same reporting period as the Group. Where necessary, adjustments are made to bring the accounting policies used into line with those of the Group and to reflect impairment losses where appropriate. Adjustments are also made in the Group's financial statements to eliminate the Group's share of unrealised gains and losses on transactions between the Group and its jointly controlled entity. The Group ceases to use the equity method on the date from which it no longer has joint control over, or significant influence in, the joint venture.

At 30 June 2018, the Group had following contractual arrangements:

•           Oro Nickel Limited, a contractual arrangement with Direct Nickel Projects Pty Ltd, which represents a joint venture established through an interest in a jointly controlled entity, in order to develop and exploit the Mambare nickel project;

•           Mining Equity Trust, LLC ("MET"), a new Delaware-incorporated limited liability company, this is a contractual arrangement with Legacy Hill Resources Ltd ("LHR"), a privately-owned mining company, (as majority shareholder) and the Company (as minority shareholder) will hold their interests in MET joint venture. More details are disclosed in note 12.

 

1.4.3        Taxation

Corporation tax payable is provided on taxable profits at the current rate. The tax expense represents the sum of the current tax expense and deferred tax expense.

 

The tax currently payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition, other than in a business combination, of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date.

 

Deferred tax is charged or credited in profit or loss, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity, or items charged or credited directly to other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income.

 

Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax relates to income tax levied by the same tax authorities on either:

•           the same taxable entity; or

•           different taxable entities which intend to settle current tax assets and liabilities on a net basis or to realise and settle them simultaneously in each future period when the significant deferred tax assets and liabilities are expected to be realised or settled.

1.4.4        Property, plant and equipment

Property, plant and equipment acquired and identified as having a useful life that exceeds one year is capitalised at cost and is depreciated on a straight-line basis at annual rates that will reduce book values to estimated residual values over their anticipated useful lives as follows:

•           Office furniture, fixtures and fittings - 33% per annum

•           Leasehold improvements - 5% per annum

 

 

 

 

1.4.5        Foreign currencies

Both the functional and presentational currency of Regency Mines plc is Sterling (£). Each Group entity determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

 

The functional currencies of the foreign subsidiaries and joint ventures are the Australian Dollar ("AUD"), the Papua New Guinea Kina ("PNG") and the US Dollar ("USD").

 

Transactions in currencies other than the functional currency of the relevant entity are initially recorded at the exchange rate prevailing on the dates of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the exchange rate prevailing at the reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on retranslation are included in profit or loss for the period, except for exchange differences on non-monetary assets and liabilities, which are recognised directly in other comprehensive income when the changes in fair value are recognised directly in other comprehensive income.

 

On consolidation, the assets and liabilities of the Group's overseas operations are translated into the Group's presentational currency at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates have fluctuated significantly during the year, in which case the exchange rate at the date of the transaction is used. All exchange differences arising, if any, are recognised as other comprehensive income and are transferred to the Group's foreign currency translation reserve.

1.4.6        Revenue

Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of the Group and the Company, when those inflows result in increases in equity.

Revenue is measured at the fair value of the consideration received or receivable for investment asset disposals in the normal course

of business and is recognised when revenue and associated costs can be measured reliably, and future economic benefits are probable.

In addition, revenue from management services is recognised on an accruals basis when the services have been delivered and any associated costs have been incurred.

1.4.7        Exploration assets

Exploration assets comprise exploration and development costs incurred on prospects at an exploratory stage. These costs include the cost of acquisition, exploration, determination of recoverable reserves, economic feasibility studies and all technical and administrative overheads directly associated with those projects. These costs are carried forward in the Statement of Financial Position as non-current intangible assets less provision for identified impairments.

 

Recoupment of exploration and development costs is dependent upon successful development and commercial exploitation of each area of interest and will be amortised over the expected commercial life of each area once production commences. The Group and the Company currently have no exploration assets where production has commenced.

 

The Group adopts the "area of interest" method of accounting whereby all exploration and development costs relating to an area of interest are capitalised and carried forward until abandoned. In the event that an area of interest is abandoned, or if the Directors consider the expenditure to be of no value, accumulated exploration costs are written off in the financial year in which the decision is made. All expenditure incurred prior to approval of an application is expensed with the exception of refundable rent which is raised as a receivable.

 

Upon disposal, the difference between the fair value of consideration receivable for exploration assets and the relevant cost within non-current assets is recognised in the Income Statement.

 

 

 

 

 

1. Principal accounting policies continued

1.4   Summary of significant accounting policies continued

1.4.8        Share-based payments

Share options

The Group operates an equity-settled share-based payment arrangement whereby the fair value of services provided is determined indirectly by reference to the fair value of the instrument granted.

 

The fair value of options granted to Directors and others in respect of services provided is recognised as an expense in the Income Statement with a corresponding increase in equity reserves - the share-based payment reserve until the award has been settled and then make a transfer to share capital.

 

On exercise or lapse of share options, the proportion of the share-based payment reserve relevant to those options is transferred to retained earnings. On exercise, equity is also increased by the amount of the proceeds received.

The fair value is measured at grant date and charged over the vesting period during which the option becomes unconditional.

The fair value of options is calculated using the Black-Scholes model taking into account the terms and conditions upon which the options were granted. The exercise price is fixed at the date of grant.

 

Non-market conditions are performance conditions that are not related to the market price of the entity's equity instruments. They are not considered when estimating the fair value of a share-based payment. Where the vesting period is linked to a non-market performance condition, the Group recognises the goods and services it has acquired during the vesting period based on the best available estimate

of the number of equity instruments expected to vest. The estimate is reconsidered at each reporting date based on factors such as a shortened vesting period, and the cumulative expense is 'trued up' for both the change in the number expected to vest and any change in the expected vesting period.

 

Market conditions are performance conditions that relate to the market price of the entity's equity instruments. These conditions are included in the estimate of the fair value of a share-based payment. They are not taken into account for the purpose of estimating the number of equity instruments that will vest. Where the vesting period is linked to a market performance condition, the Group estimates the expected vesting period. If the actual vesting period is shorter than estimated, the charge is accelerated in the period that the

entity delivers the cash or equity instruments to the counterparty. When the vesting period is longer, the expense is recognised over the originally estimated vesting period.

 

For other equity instruments granted during the year (i.e. other than share options), fair value is measured on the basis of an observable market price.

 

When a share-based payment is modified, the Group determines whether the modification affects the fair value of the instruments granted, affects the number of equity instruments granted or is otherwise beneficial to the employee. In cases where the exercise price of options granted to employees is reduced, the Group recognises the incremental change in fair value (along with the original fair value determined at grant date) over the remaining vesting period as an expense and an increase in equity. Decreases in the fair value are not considered. To determine if an increase has occurred, management compares the fair value of the modified award with the fair value of the original award at the modification date. Any other benefit to the employee is taken into account in estimating the number of equity instruments that are expected to vest.

Share Incentive Plan

Where the shares are granted to the employees under the Share Incentive Plan, the fair value of services provided is determined indirectly by reference to the fair value of the free, partnership and matching shares granted on the grant date. Fair value of shares is measured on the basis of an observable market price, i.e. share price as at grant date and is recognised as an expense in the Income Statement on the date of the grant. For the partnership shares the charge is calculated as the excess of the mid-market price on the date of grant over the employee's contribution.

1.4.9       Pension

The Group operates a defined contribution pension plan which requires contributions to be made to a separately administered fund. Contributions to the defined contribution scheme are charged to the profit and loss account as they become payable.

 

 

 

 

1.4.10        Finance costs/revenue

Borrowing costs are recognised on an accruals basis using the effective interest method.

Finance income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

1.4.11        Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised where the Group has become party to the contractual provisions of the instrument.

Investments

Investments in subsidiary companies are classified as non-current assets and included in the Statement of Financial Position of the Company at cost at the date of acquisition less any identified impairments.

 

For acquisitions of subsidiaries or associates achieved in stages, the Company re-measures its previously held equity interests in the acquiree at its acquisition-date fair value and recognises the resulting gain or loss, if any, in profit or loss. Any gains or losses previously recognised in other comprehensive income are transferred to profit and loss.

 

Investments in associates and joint ventures are classified as non-current assets and included in the Statement of Financial Position of the Company at cost at the date of acquisition less any identified impairment.

Financial assets

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

Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise through the provision of goods or services (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried

at amortised cost using the effective interest rate method, less provision for impairment.

Impairment provision is recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such provision being the difference between the net carrying amount and the net present value of the future expected cash flows associated with the impaired receivable.

 

The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position.

Cash and cash equivalents

Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

 

 

 

 

 

1. Principal accounting policies continued

1.4   Summary of significant accounting policies continued

Restricted cash

Cash which is restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period is not considered cash and cash equivalents and is classified as restricted cash.

Trade and other receivables

Trade receivables, which generally have 30-day terms, are recognised at original invoice amount less an allowance for any uncollectable amounts. An allowance for impairment is made when there is objective evidence that the Group will not be able to collect the debts.

Bad debts are written off when identified.

Available for sale financial assets

Non-derivative financial assets not included in the above categories are classified as available for sale and comprise principally the Group's strategic investments in entities not qualifying for subsidiaries, associates or jointly controlled entities. These equity investments are intended to be held by the Group for an indefinite period of time. They are carried at fair value, where this can be reliably measured, with movements in fair value recognised in other comprehensive income and debited or credited to the available for sale trade investments reserve. Where the fair value cannot be reliably measured, the investment is carried at cost or a lower valuation where the Directors consider the value of the investment to be impaired.

 

Available for sale investments are included within non-current assets. On disposal, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had previously been recognised directly in reserves is recognised in the Income Statement, the cost of such disposed of investments is written off on a first in first out method.

Income from available for sale investments is accounted for in the Income Statement when the right to receive it has been established.

The Group assesses at each reporting date whether there is objective evidence that an investment is impaired. When there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Income Statement - is removed from other comprehensive income and

recognised in the Income Statement. Impairment losses on equity investments are not reversed through the Income Statement; increases in their fair value after impairment are recognised directly in other comprehensive income.

Financial liabilities and equity

The Group classifies its financial liabilities into one of the two categories: fair value through profit and loss or other financial liabilities. The Group has not classified any of its financial liabilities as fair value through profit and loss.

Other financial liabilities comprise trade and other payables and borrowings.

Warrants

Derivative contracts that only result in the delivery of a fixed amount of cash or other financial assets for a fixed number of an entity's own equity instruments are classified as equity instruments. Warrants relating to equity finance and issued together with ordinary shares placement are valued by residual method and treated as directly attributable transaction costs and recorded as a reduction of share premium account based on the fair value of the warrants. Warrants classified as equity instruments are not subsequently re-measured (i.e., subsequent changes in fair value are not recognised).

Trade and other payables

Trade and other payables are initially recognised at fair value and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

Borrowings

Borrowings are recorded initially at their fair value, plus directly attributable transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement or redemption, are recognised in the Income Statement over the term of the instrument using an effective rate of interest.

Deferred and contingent consideration

Where it is probable that deferred or contingent consideration is payable on the acquisition of a business based on an earn out arrangement, an estimate of the amount payable is made at the date of acquisition and reviewed regularly thereafter, with any change in the estimated liability being reflected in the Income Statement. Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest.

 

 

 

 

1.5   Significant accounting judgements, estimates and assumptions

The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Significant judgements in applying the accounting policies

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

Impairment of investments in joint ventures

The carrying amount of investments in joint ventures is tested for impairment annually; in addition, assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amounts for those assets may not be recoverable. During the year, investments into two joint ventures, Vali Carbon Corporation and Carbon Minerals Corporation, were fully impaired. The Directors have taken the view that insufficient management controls and a lack of efficacy by the Company's JV partner and operator in the United States has led to an inability to bring these businesses into metallurgical coal production along the timelines originally envisioned.

Efforts to assist in correcting these operating deficiencies were ultimately unsuccessful and as such the Directors feel an impairment of these assts is appropriate.

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined using the Black-Scholes model.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

in the principal market for the asset or liability; or

in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

 

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

 

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

 

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities;

Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

 

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

 

 

 

1.  Principal accounting policies continued

1.5 Significant accounting judgements, estimates and assumptions continued

Impairment of available for sale financial assets

The Group follows the guidance of IAS 39 to determine when an available for sale financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which fair value of an investment is less than its cost.

 

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. "Significant" is evaluated against the original cost of the investment and "prolonged" against the period in which the fair value has been below its original cost. Mining share prices typically have more volatility than most other shares and this is taken into account by management when considering if a significant decline in the fair value of its mining investments has occurred. Management would consider that there is a prolonged decline in the fair value of an equity investment when the period

of decline in fair value has extended to beyond the expectation management have for the equity investment. This expectation will be influenced particularly by the company development cycle of the investment.

 

As a result of the Group's evaluation, impairment of £215,372 (2017: £nil) on available for sale investments was recognised in the income statement.

 

2. Segmental analysis

As with all natural resource exploration and development ventures yet to generate cash from operations, ensuring adequate cash is available to meet operational obligations and to provide for investment opportunities is critical. This is therefore the main focus of management information presented to the chief operational decision makers, being the Executive Chairman and the Board of Directors.

 

The only sources of funds are issues of new equity and sales of exploration rights, investments or other assets. Therefore, in addition to monitoring the current market perception of the Company to shareholders, brokers and other possible providers of equity finance, constant attention is paid to:

•          available cash; and

•          the market value of the Group's listed investments.

At 30 June 2018 the Group had cash and cash equivalents of £126,125 (2017: £9,176).

Once the Group's main focus of operations becomes production of natural resources, the nature of management information examined by the Board will alter to reflect the need to monitor revenues, margins, overheads and trade balances, as well as cash.

 

 

 

 

 

2. Segmental analysis continued

IFRS 8 requires the reporting of information about the revenues derived from the various areas of activity and the countries in which revenue is earned, regardless of whether this information is used by management in making operating decisions.

 

 

 

Year to 30 June 2018

 

Australian exploration

£

Battery storage, battery metals, and energy

storage

£

 

Other investments

£

 

Corporate

and unallocated

£

 

 

Total

£

Revenue

 

 

 

 

 

Management services

-

-

-

-

-

Impairment of investment in joint ventures

-

-

(1,943,132)

-

(1,943,132)

Gain on sale of available for sale investments

-

-

1,482,609

-

1,482,609

Exploration expenses

643

-

-

-

643

Administrative expenses1

(715)

(54,216)

-

(680,766)

(735,697)

Currency (loss)/gain

(40,414)

-

-

37,102

(3,312)

Share of profits in associates

-

-

-

-

-

Impairment of exploration assets

-

-

(40,403)

-

(40,403)

Impairment of available for sale investments

-

-

(215,372)

-

(215,372)

Other income

-

12,250

-

35,007

47,257

Finance cost - net

-

-

-

(142,212)

(142,212)

Net (loss) before tax from continuing operations

(40,486)

(41,966)

(716,298)

(750,869)

(1,549,619)

 

 

 

Year to 30 June 2017

 

Australian exploration

£

Battery storage, battery metals, and energy

storage

£

 

Other investments

£

Corporate

and unallocated

£

 

 

Total

£

Revenue

 

 

 

 

 

Management services

-

-

-

113,350

113,350

 

-

-

-

113,350

113,350

Gain on sale of tenements

55,183

-

-

-

55,183

Gain/(loss) on sale of investments

-

-

-

-

-

Exploration expenses

(930)

-

-

-

(930)

Administrative expenses1

(278)

-

-

(464,343)

(464,621)

Impairment of exploration assets

(229,262)

-

-

-

(229,262)

Impairment of available for sale investments

-

-

-

-

-

Finance cost - net

-

-

-

(57,665)

(57,665)

Net (loss) before tax from continuing operations

(91,997)

-

-

(442,270)

(534,267)

1 Included in administrative expenses is a depreciation charge of £15,325 (2017: £6,197) under Corporate and unallocated.

 

 

Information by geographical area

Presented below is certain information by the geographical area of the Group's activities. Investment sales revenue and exploration property sales revenue are allocated to the location of the asset sold.

 

 

Year to 30 June 2018

 

UK

£

 

Australia

£

Papua New Guinea

£

 

USA

£

 

Total

£

Revenue

-

-

-

-

-

Gain on sale of investments

1,482,609

-

-

-

1,482,609

Total segment revenue and other gains

1,482,609

-

-

-

1,482,609

Non-current assets

 

 

 

 

 

Investments in associates and joint ventures

-

-

1,657,625

1,503,377

3,161,002

Goodwill

42,471

-

-

-

42,471

Property, plant and equipment

195

-

-

-

195

Available for sale financial assets

583,350

47,328

-

468,894

1,099,572

Total segment non-current assets

626,017

47,328

1,657,625

1,972,270

4,303,240

 

 

Year to 30 June 2017

UK

£

Australia

£

Papua New Guinea

£

USA

£

Total

£

Revenue

 

 

 

 

 

Management services

113,350

-

-

-

113,350

Gain on sale of tenements

-

55,183

-

-

55,183

Total segment revenue and other gains

113,350

55,183

-

-

168,533

Non-current assets

 

 

 

 

 

Investments in associates and joint ventures

15,811

-

1,622,302

828,160

2,466,273

Property, plant and equipment

15,520

-

-

-

15,520

Available for sale financial assets

1,183,025

260,682

-

-

1,443,707

Exploration assets

-

-

-

40,402

40,402

Total segment non-current assets

1,214,356

260,682

1,622,302

868,562

3,965,902

 


 

 

 

 

3. Loss on ordinary activities before taxation

Group

2018

£

2017

£

Loss on ordinary activities before taxation is stated after charging:

 

 

Auditor's remuneration:

 

 

- fees payable to the Company's auditor for the audit of consolidated and Company financial statements

16,200

16,000

- fees payable to subsidiary auditors for the audit of subsidiary financial statements

-

-

Depreciation

15,352

6,197

Directors' emoluments (note 8)

204,689

257,967

Share-based payments - Directors

9,997

87,340

Share-based payments - Staff

-

4,019

As declared in note 8, Directors are remunerated in part by third parties with whom the Company and Group have contractual arrangements.

 

 

4.  Administrative expenses

 

 

 

 

Group 2018 £

Group 2017 £

Company 2018 £

Company 2017 £

Staff costs

 

 

 

 

 

 

 

 

Payroll

 

 

 

 

197,329

269,472

195,829

269,472

Pension

 

 

 

 

11,953

-

11,953

-

Consultants

 

 

 

 

24,800

15,000

15,000

15,000

Employer's NI

 

 

 

 

12,436

11,970

12,436

11,970

Professional services

 

 

 

 

 

 

 

 

Accounting

 

 

 

 

55,628

45,176

55,628

45,176

Legal

 

 

 

 

46,106

9,376

43,977

9,376

Marketing

 

 

 

 

14,256

1,375

14,256

1,375

Other

 

 

 

 

37,856

9,213

37,856

9,213

Regulatory compliance

 

 

 

 

61,844

69,109

61,844

69,109

Travel

 

 

 

 

26,394

16,939

26,172

16,939

Office and admin

 

 

 

 

 

 

 

 

General

 

 

 

 

164,419

(34,491)

123,139

(34,769)

IT-related costs

 

 

 

 

11,489

19,223

11,489

19,223

Rent

 

 

 

 

65,742

28,489

65,742

28,489

Insurance

 

 

 

 

5,477

3,771

5,477

3,771

Total administrative expenses

 

 

 

 

735,697

464,621

680,766

464,343

 

5. Finance costs, net

Group

2018

£

2017

£

Interest expense

(142,212)

(57,665)

Interest income

-

-

 

(142,212)

(57,665)

 

 

 

 

 

6. Taxation

2018

£

2017

£

Current period taxation of the Group

 

 

UK corporation tax at 19.00% (2017: 19.75%) on profits for the period

-

-

Deferred tax

 

 

Origination and reversal of temporary differences

-

-

Deferred tax assets derecognised

-

-

Tax (credit)

-

-

Factors affecting the tax charge for the year

 

 

Loss on ordinary activities before taxation

(1,549,619)

(534,267)

Loss on ordinary activities at the average UK standard rate of 19% (2017: 19.75%)

(294,428)

(105,518)

Effect of non-deductible expense

382,207

45,279

Indexation allowance on gains

(5,529)

-

Effect of tax benefit of losses carried forward

37,445

60,239

Tax losses brought forward

(119,695)

-

Current tax (credit)

-

-

The Finance Act 2013 set the main rate of corporation tax at 20% from 1 April 2016 and at 19% from 1 April 2017.

Deferred tax amounting to £nil (2017: £nil) relating to the Group's investments was recognised in the Statement of Comprehensive Income. No deferred tax charge has been made due to the availability of trading losses, which are estimated circa £3,204 thousand (2017: £2,266 thousand), and capital losses estimated circa £nil (2017: £30,000).

7.  Staff costs

 

 

The aggregate employment costs of staff (including Directors) for the year was:

 

 

2018 £

2017 £

Wages and salaries

 

 

165,700

163,900

Pension

 

 

11,953

10,201

Social security costs

 

 

12,436

15,189

Employee share-based payment charge

 

 

35,017

91,359

Total staff costs

 

 

225,106

280,649

 

 

 

 

 

The average number of Group employees (including Directors) during the year was:

 

 

2018 Number

2017 Number

Executives

 

 

3

3

Administration

 

 

1

1

 

 

 

4

4

 

The Company's staff are employed both by the Company and Red Rock Resources plc ("Red Rock"). During the year, staff costs of

£nil (2017: nil) were recharged to Red Rock. Such recharges are offset against administration expenses in the Income Statement.

During the year, for all Directors and employees who have been employed for more than three months, the Company contributed to

a defined contributions pension scheme as described under Directors' remuneration in the Directors' Report and a Share Incentive Plan ("SIP") as described under Management incentives in the Directors' Report.

 


 

 

 

 

8.   Directors' emoluments

 

 

 

2018

 

Directors'

fees

£

 

Consultancy

fees

£

 

Share Incentive

Plan

£

Share-based payments options

£

 

Pension contributions

£

Social security costs

£

 

Total

£

Executive Directors

 

 

 

 

 

 

 

A R M Bell

50,400

15,000

7,200

5,199

3,835

4,571

86,205

S Kaintz

67,400

-

7,200

4,799

4,726

7,146

91,271

Non-executive Directors

E Bugnosen

18,000

-

7,020

-

1,204

989

27,213

 

135,800

15,000

21,420

9,997

9,766

12,706

204,689

 

 

 

 

2017

Directors'

fees

£

Consultancy

fees

£

Share Incentive

Plan

£

Share-based payments options

£

 

Pension contributions

£

Social security costs

£

 

Total

£

Executive Directors

 

 

 

 

 

 

 

A R M Bell

49,800

15,000

15,141

21,935

3,700

4,227

109,803

S Kaintz

66,800

-

15,141

20,217

3,907

7,196

113,261

Non-executive Directors

E Bugnosen

18,000

-

14,564

333

1,002

1,005

34,904

 

134,600

15,000

44,846

42,485

8,609

12,428

257,968

 

The number of Directors who exercised share options in the year was nil (2017: nil).

During the year, the Company contributed to a Share Incentive Plan more fully described in the Directors' Report on pages 26 to 28. 2,304,000 free shares (2017: 1,371,428) were issued to each employee, including Directors, making a total of 4,539,788

(2017: 3,870,248) free and matching shares issued in relation to services provided by those employees during the reporting year.

The Company also operates a contributory pension scheme more fully described in the remuneration details on page 27.

 

 

.

 

 

 

 

9.  Loss per share

The basic earnings/(loss) per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue. Diluted earnings/(loss) per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue plus the weighted average number of ordinary shares that would be issued on conversion of all dilutive potential ordinary shares into ordinary shares.

 

 

2018

£

2017

£

(Loss) attributable to equity holders of the Parent Company

(1,543,889)

(534,267)

Weighted average number of ordinary shares of £0.0001 in issue, used for basic EPS

672,554,882

398,184,727

Earnings/(loss) per share - basic

(0.23) pence

(0.13) pence

Earnings/(loss) per share - fully diluted

(0.23) pence

(0.13) pence

 

At 30 June 2018 and at 30 June 2017, the effect of all the instruments in issue is anti-dilutive as it would lead to a further reduction of loss per share, therefore they were not included in the diluted loss per share calculation.

 

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

 

 

2018

£

2017

£

(a) Number of convertible potential shares - convertible loans, assume converted at the most beneficial price for the holder. More details are disclosed in this note below

 

-

 

147,717,876

(b) Share options granted to employees - total, of them

27,060,000

27,060,000

- Vested at the end of reporting period

25,330,000

15,330,000

- Not vested at the end of the reporting period

1,730,000

11,730,000

(c) Number of warrants given to shareholders as a part of placing equity instruments

434,665,467

236,685,670

Total number of contingently issuable shares that could potentially dilute basic earnings per share in future and anti-dilutive potential ordinary shares that were not included into the fully diluted EPS calculation

 

461,725,467

 

411,463,546

 

Convertible loans

On 29 May 2018, the Company took a loan of £1,060,343, net of arrangement fees, (USD1,600,000 gross of arrangement fees in original currency of borrowing) from institutional investors to fund its 47% interest in a joint venture Mining Equity Trust, LLC ("MET").

More information on this loan is disclosed in note 16. The loan's initial term is six months with an extension option. If extended, the loan may be converted by the noteholder at a fixed price equal to 130% of the 10-day VWAP prior to the initial repayment date/date of the available six-month extension period (the "Fixed Price"). If paid in shares, the payment amount will be convertible at the lower of (i) the Fixed Price, or (ii) a price equal to 90 per cent of the lowest daily VWAP over the five trading days immediately preceding the date of the relevant payment date.

 

On 5 April 2017, the Company raised an unsecured USD1,000,000 (USD900,000 net of fees) one-year convertible loan bearing interest at 12%. The lender had an option to convert any part of the loan at any time during the twelve months into the Company's ordinary shares at the lower of a fixed conversion price of 1.155 pence per share and a variable conversion price of 90 per cent. of the lowest daily VWAP at which the shares have traded in the five trading days prior to each conversion. This loan was repaid in cash in full on 30 January 2018.

For the purposes of the inclusion into this disclosure, the conversion price most beneficial for the lender was applied, which is 90% of the VWAP for five days before 30 June 2017.

 

There were no ordinary share transactions after 30 June 2018, that could have changed the EPS calculations significantly if those transactions had occurred before the end of the reporting period.

 


 

 

 

 

10.   Property, plant and equipment

Group and Company

 

Leasehold improvements

£

Office furniture and

equipment

£

 

Total

£

Cost

 

 

 

At 1 July 2016

32,822

126,712

159,534

Additions

-

-

-

Disposals

-

-

-

At 30 June 2017 and at 30 June 2018

32,822

126,712

159,534

Depreciation

 

 

 

At 1 July 2016

(15,422)

(122,395)

(137,817)

Charge

(3,900)

(2,297)

(6,197)

At 30 June 2017

(19,322)

(124,692)

(144,014)

Charge

(13,500)

(1,825)

(15,325)

At 30 June 2018

(19,322)

(124,692)

(144,014)

Net book value

 

 

 

At 30 June 2018

-

195

195

At 30 June 2017

13,500

2,020

15,520

 

11.  Investments in subsidiaries and goodwill

 

Company

 

 

 

 

 

£

Cost

 

 

 

 

 

 

At 1 July 2016 and 30 June 2017

 

 

 

 

 

482

Additions

 

 

 

 

 

1

At 30 June 2018

 

 

 

 

 

483

Impairment

 

 

 

 

 

 

At 1 July 2016, 30 June 2017 and 30 June 2018

 

 

 

 

 

-

Net book amount at 30 June 2018

 

 

 

 

 

483

Net book amount at 1 July 2016 and 30 June 2017

 

 

 

 

 

482

 

The Parent Company of the Group holds more than 50% of the share capital of the following companies, the results of which are consolidated:

 

 

Company

 

Country of registration

 

Class

Proportion

held by Group

 

Nature of business

Regency Mines Australasia Pty Limited

Australia

Ordinary

100%

Mineral exploration

Regency Resources Inc

USA

Ordinary

100%

Natural resources

ESTEQ Limited

UK

Ordinary

100%

Holding company

Allied Energy Services Ltd (indirectly owned through ESTEQ Limited)

 

UK

 

Ordinary

 

80%

 

Energy storage, trading and grid backup

 

 

 

 

Goodwill

On 10 November 2017, RGM formed a new 100% owned subsidiary, ESTEQ Limited, to act as the vehicle for development of opportunities in the battery and storage technology sector. On 15 March 2018, ESTEQ Limited committed to investing £250,000 into newly issued shares of Allied Energy Services Limited, representing 80% interest in that entity. Non-controlling shareholders brought with them land rights and connections for seven projects where combined battery and gas fired generation plants could be connected to the UK national grid. These seven projects had a combined export capacity potential of 140MW. They also have engaged in discussions with multi-national technology and equipment manufacturers to supply the plant required for the construction of the projects. Further advanced contractual discussions have occurred with several approved engineering, procurement and construction contractors to construct, connect and commission each generation plant. Allied Energy had also previously negotiated a five-year framework agreement with a major network player to develop grid services, to tender for services on Allied Energy's behalf, and to manage the resulting revenue contracts. Further, the existing management team offers many years of experience in renewable energy, from procuring finance to finding key partners and in constructing multiple anaerobic digestion plants across the United Kingdom.

 

12.   Investments in associates and  joint ventures

 

 

 

 

 

Group

Company

Carrying Balance

 

 

 

 

£

£

At 1 July 2016

 

 

 

 

1,638,113

1,754,776

Additions

 

 

 

 

1,928,134

1,928,131

Transferred to available for sale investments

 

 

 

 

(40,881)

(40,881)

Gain on re-translation from functional into Group presentation currency

 

 

 

60,391

60,391

At 30 June 2017

 

 

 

 

3,585,757

3,702,417

Additions

 

 

 

 

1,503,377

1,503,377

Impairment of investment in joint ventures

 

 

 

 

(1,928,132)

(1,928,132)

Net book amount at 30 June 2018

 

 

 

 

3,161,002

3,277,662

               

 

On 11 June 2017, the Company signed a shareholders' agreement with Legacy Hill Resources Ltd, in accordance with which the Company will hold 47% of Mining Equity Trust, LLC ("MET"), a new Delaware-incorporated limited liability company in and through which Legacy Hill Resources Ltd ("LHR"), a privately-owned mining company, (as majority shareholder) and the Company (as minority shareholder)

will hold their interests in the MET joint venture. This 47% stake represents Regency's proportionate share of cash and non-cash contributions to the establishment of the JV. The contribution of Regency to the JV has been funded in part by a USD1,600,000 loan provided by Cuart Investments PCC Ltd and YA II PN Ltd; the loan details are further described in the note 16.

 

During the year, investments in Vali Carbon Corporation and Carbon Minerals Corporation were impaired. The Directors have taken the view that insufficient management controls and a lack of efficacy by the Company's JV partner and operator in the United States have led to an inability to bring these businesses into metallurgical coal production along the timelines originally envisioned. Efforts to assist in correcting these operating deficiencies were ultimately unsuccessful and as such the Directors feel an impairment of these assets is appropriate.

 

At 30 June 2018, the Parent Company of the Group had a significant influence by virtue other than a shareholding of over 20% or had joint control through a joint venture contractual arrangement in the following companies:

 

 

Name

 

Country of registration

 

Class

Proportion

held by Group

 

Status at 30 June 2018

 

Accounting year end

Direct

 

 

 

 

 

Mining Equity Trust, LLC ("MET")1

USA

Ordinary

47%

Active

31 December 2018

Carbon Minerals Corporation

USA

Ordinary

20%

Fully impaired

31 December 2018

Vali Carbon Corporation

USA

Ordinary

20%

Fully impaired

31 December 2018

Oro Nickel Limited1

Papua New Guinea

Ordinary

50%

Active

30 June 2018

1 These entities have not yet completed financial statements at the time of preparation of the financial statements of Regency Mines plc. Financial statements will be available after the accounting year end of the entities.

 


 

 

 

 

12.   Investments in associates and joint ventures continued

At 30 June 2017, the Parent Company of the Group had a significant influence by virtue other than a shareholding of over 20% or had joint control through a joint venture contractual arrangement in the following companies:

 

 

Name

 

Country of registration

 

Class

Proportion

held by Group

 

Accounting year end

Direct

 

 

 

 

Carbon Minerals Corporation1

USA

Ordinary

20%

31 December 2017

Vali Carbon Corporation1

USA

Ordinary

20%

31 December 2017

Oro Nickel Limited1

Papua New Guinea

Ordinary

50%

30 June 2017

1 These entities have not yet completed financial statements at the time of preparation of the financial statements of Regency Mines plc. Financial statements will be available after the accounting year end of the entities.

 

As of 1 July 2017, a decision was taken that Red Rock Resources, an AIM listed company, accounted as associate up until 30 June 2016, should be carried in the accounts as available for sale financial asset. Market value of shares at 1 July 2017 was £40,881.

13.   Available for sale financial  assets

 

 

 

Group

Company

 

£

£

Carrying value

 

 

 

At 1 July 2017

 

1,147,460

1,147,460

Additions during the year

 

145,127

135,278

Transfer from investment in associates (note 12)

 

40,881

40,881

Revaluation

 

110,239

110,239

Value at 30 June 2017

 

1,443,707

1,433,858

Additions during the year

 

1,336,502

936,502

Disposals during the year

 

(1,318,181)

(1,318,181)

Revaluation

 

(163,597)

(158,897)

Impairment

 

(215,372)

(215,372)

Impairment reversal

 

16,513

16,513

Value at 30 June 2018

 

1,099,572

694,423

Market value of investments

The market value as at 30 June 2018 of the available for sale listed and unlisted investments was as follows:

 

Group

 

Company

 

2018

£

2017

£

 

2018

£

2017

£

Quoted on London AIM

183,349

80,758

 

183,349

80,758

Quoted on Standard List of LSE

468,894

-

 

468,894

-

Quoted on other foreign stock exchanges

42,179

47,577

 

42,179

37,728

Unquoted investments at fair value

405,150

1,315,372

 

-

1,315,372

At 30 June

1,099,572

1,443,707

 

694,422

1,433,858

 

In August 2017 the Company disposed of 1.9% of its stake in Horse Hill Development Ltd ("HHDL") to UK Oil and Gas ("UKOG"). For this interest the Company received £54,498 in obligations assumed by the buyer as well as £268,502 of value in UKOG shares. These shares were subsequently sold for gross proceeds of £1.3m.

 

On 29 November 2017, the Company completed a sale of its remaining 3.1% interest in HHDL for £630,000, of which £315,000 was delivered in cash and 50% in shares of the buyer, Alba Mineral Resources plc ("Alba"). These shares were subsequently sold for gross proceeds of

£299,286.

Total gain recognised on sale of available for sale investments during the reporting year was £1,482,609, of which gain on sale of HHDL shares amounted to £453,502 and gain on sale of UKOG shares £1,029,185.

 

 

During the reporting year the Company sold part of its shares in Alba, recognising a loss on sale of those shares in the amount of £21,481. Gain on sale of shares in Greatland Gold plc, that were also sold by the Company during the year, was recorded in the amount of £21,403.

On 4 October 2017, Curzon Energy Plc, classified under unquoted investments at fair value in the comparative period in the table above, listed its shares at the Standard Listing segment of the Official List, to trade on London Stock Exchange's main market for listed securities.

On 22 December 2017, ESTEQ Ltd, the Company's 100% owned subsidiary, made an initial investment of £200,000 in Whitecar Ltd.,

a company currently operating electric vehicle rental car services in several UK locations. It was followed by another £200,000 investment in Whitecar by ESTEQ in February 2018. These two tranches gave ESTEQ an initial holding of 5.8% in Whitecar Ltd. Whitecar has continued its European expansion during and after the year end, opening a new operating branch in Oslo, Norway and preparing for its first two operating locations in Germany, while significantly increasing the size of its operating fleet in the United Kingdom. Whitecar closed its most recent fundraise during Q3 2018 at a share price of £0.04, implying a valuation of the Company's holdings of £462,160. With this in consideration, the Directors believe that the value of the contribution paid for the original investment represents fair value of the residual 5.59% investment at the year end and no impairment is required.

 

14.   Exploration assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

 

 

 

 

£

£

£

£

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June

 

 

 

 

 

 

 

 

 

 

 

 

2,894,837

2,785,118

 

1,050,372

1,050,372

Additions during the year

 

 

 

 

 

 

 

 

 

 

 

 

-

594

 

-

-

Disposals in the year

 

 

 

 

 

 

 

 

 

 

 

 

-

(2,321)

 

-

-

Exchange gains

 

 

 

 

 

 

 

 

 

 

 

 

-

111,446

 

-

-

At 30 June

 

 

 

 

 

 

 

 

 

 

 

 

2,894,837

2,894,837

 

1,050,372

1,050,372

Impairment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June

 

 

 

 

 

 

 

 

 

 

 

 

(2,854,435)

(2,551,218)

 

(1,009,970)

(1,009,970)

Impairments recognised in the year

 

 

 

 

 

 

 

 

 

 

 

 

(40,402)

(229,262)

 

(40,402)

-

Exchange gains

 

 

 

 

 

 

 

 

 

 

 

 

-

(73,955)

 

-

-

At 30 June

 

 

 

 

 

 

 

 

 

 

 

 

(2,894,837)

(2,854,435)

 

(1,050,372)

(1,009,970)

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 30 June

 

 

 

 

 

 

 

 

 

 

 

 

-

40,402

 

-

40,402

                                     

 

15.   Trade and other receivables

 

 

 

 

 

 

 

Group

 

 

Company

 

 

 

 

 

 

2018

2017

 

2018

2017

 

 

 

 

 

 

£

£

£

£

 

Non-current

 

 

 

 

 

 

 

 

 

 

 

Amounts owed by Group undertakings

 

 

 

 

 

-

-

 

1,470,447

805,274

 

Amounts owed by related parties

 

 

 

 

 

 

 

 

 

 

 

- due from associates and joint ventures

 

 

 

 

 

1,274,569

1,239,779

 

1,274,569

1,239,779

 

Total

 

 

 

 

 

1,274,569

1,239,779

 

2,745,016

2,045,053

 

Current

 

 

 

 

 

 

 

 

 

 

 

Sundry debtors

 

 

 

 

 

105,686

66,170

 

98,674

65,912

 

Prepayments

 

 

 

 

 

24,809

44,111

 

19,409

44,111

 

Amounts owed by related parties

 

 

 

 

 

 

 

 

 

 

 

- due from key management

 

 

 

 

 

6,263

6,263

 

6,263

6,263

 

Total

 

 

 

 

 

136,758

116,544

 

124,346

116,286

 

                             

 

 

 

 

 


 

16.   Trade and other payables

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

 

Company

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

2017

 

2018

2017

 

 

 

 

 

 

 

 

 

 

 

 

£

£

£

£

Trade and other payables

 

 

 

 

 

 

 

 

 

 

 

 

59,754

212,164

 

43,057

201,892

Amounts due to related parties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

- due to Red Rock Resources plc

 

 

 

 

 

 

 

 

 

 

 

 

203,498

118,015

 

203,498

118,015

Accruals

 

 

 

 

 

 

 

 

 

 

 

 

33,500

71,455

 

33,500

71,457

Trade and other payables

 

 

 

 

 

 

 

 

 

 

 

 

296,752

401,634

 

280,055

391,364

Short-term borrowings (note 22)

 

 

 

 

 

 

 

 

 

 

 

 

1,097,600

771,087

 

1,097,600

771,087

Total

 

 

 

 

 

 

 

 

 

 

 

 

1,394,352

1,172,721

 

1,377,655

1,162,451

 

Trade and other payables include a balance of £203,498 (2017: £118,015) owing to Red Rock Resources plc, a related party entity as a result of same directorships.

Loan from Cuart and YA II PN to fund MET JV

On 29 May 2018, the Company took a loan of £1,060,343, net of arrangement fees, (USD1,600,000 gross original value) from institutional investors to fund its 47% interest in a joint venture Mining Equity Trust, LLC ("MET"). The loan carries a 10% interest rate and is for

an initial term of six months and is subject to an implementation fee of USD96,000. A further six-month extension is available for a 5% fee. If extended, the loan may be converted by the noteholder at a fixed price equal to 130% of the 10-day VWAP prior to the initial repayment date of the available six-month extension period (the "Fixed Price"). If paid in shares, the payment amount will be convertible at the lower of (i) the Fixed Price, or (ii) a price equal to 90 per cent of the lowest daily VWAP over the five trading days immediately preceding

the date of the relevant payment date. The Company has the right to prepay the loan at any time in full for a 3% redemption fee, provided that after the First Repayment Date the Company may only prepay the loan if the stock price is trading below the Fixed Price at the time of prepayment.

YA II PN Limited

A short-term loan of £nil (2017: £771,087) was provided by YA II PN Limited. Interest on the balance of this loan is charged at a rate of 12% per annum. This loan and all accumulated interest was repaid in full on 30 January 2018.

17.  Reserves

Share premium

The share premium account represents the excess of consideration received for shares issued above their nominal value net of transaction costs.

Foreign currency translation reserve

The translation reserve represents the exchange gains and losses that have arisen on the retranslation of overseas operations.

Retained earnings

Retained earnings represent the cumulative profit and loss net of distributions to owners.

Available for sale financial asset reserve

The available for sale financial asset reserve represents the cumulative revaluation gains and losses in respect of available for sale trade investments.

Associate investments reserve

The associate investments reserve represents the cumulative share of gains/losses of associates recognised in the Statement of Other Comprehensive Income.

Share-based payment reserve

The share-based payment reserve represents the cumulative charge for options granted, still outstanding and not exercised.

 

 

 

 

18.   Share capital of the Company

The share capital of the Company is as follows:

 

Issued and fully paid

2018

£

2017

£

791,239,654 (2017: 576,491,064) ordinary shares of £0.0001 each

79,124

57,650

1,788,918,926 deferred shares of £0.0009 each

1,610,027

1,610,027

2,497,434,980 A deferred shares of £0.000095 each

237,256

237,256

As at 30 June

1,926,407

1,904,933

 

Movement in ordinary shares

 

Number

Nominal

£

As at 1 July 2016 - ordinary shares of £0.0001 each

252,384,571

25,239

Issued 30 August 2016 at £0.004 per share

65,625,000

6,563

Issued 13 October 2016 at £0.004 per share

9,375,000

937

Issued 20 December 2016 at £0.004 per share

52,500,000

5,250

Issued 18 January 2017 at £0.004 per share

15,000,000

1,500

Issued 20 January 2017 at £0.004 per share

12,500,000

1,250

Issued 08 February 2017 at £0.005 per share

21,000,000

2,100

Issued 22 February 2017 at £0.0065 per share

11,538,461

1,154

Issued 28 February 2017 at £0.008 per share

18,125,000

1,812

Issued 01 March 2017 at £0.0039 per share

17,898,183

1,790

Issued 13 March 2017 at £0.013 per share

576,923

58

Issued 20 March 2017 at £0.008 per share

625,000

63

Issued 21 March 2017 at £0.008 per share

4,000,000

400

Issued 27 March 2017 at £0.008 per share

3,750,000

375

Issued 03 April 2017 at £0.01 per share

32,020,493

3,202

Issued 04 April 2017 at £0.0105 per share

5,119,658

512

Issued 10 April 2017 at £0.008 per share

500,000

50

Issued 21 April 2017 at £0.008 per share

2,175,000

217

Issued 03 May 2017 at £0.009 per share

33,999,996

3,400

Issued 05 May 2017 at £0.009 per share

17,777,779

1,778

As at 30 June 2017 - ordinary shares of £0.0001 each

576,491,064

57,650

Issued 06 Dec 2017 at £0.00625 per share

2,304,000

230

Issued 11 Jan 2018 at £0.0055 per share

190,909,090

19,091

Issued 29 Jan 2018 at £0.0055 per share

18,181,818

1,818

Issued 06 Apr 2018 at £0.00475 per share

3,353,682

335

As at 30 June 2018 - ordinary shares of £0.0001 each

791,239,654

79,124

 


 

 

 

 

18.   Share capital of the Company continued

Share re-organisation

The Company's share capital consists of three classes of shares, being:

•           Ordinary shares with a nominal value of 0.01 pence, which are the Company's listed securities.

•           Deferred shares with a value of 0.09 pence.

•           A Deferred shares with a value of 0.0095 pence.

Subject to the provisions of the Companies Act 2006, the deferred shares may be cancelled by the Company, or bought back for

£1 and then cancelled. These deferred shares are not quoted and carry no rights whatsoever.

Warrants

At 30 June 2018, the Company had 434,665,467 warrants in issue (2017: 236,685,670) with exercise price ranging £0.008-£0.018 (2017: £0.0039-£0.018). Out of those, 264,090,904 (2017: 54,999,996) have market performance conditions that accelerate the expiry date. Weighted average remaining life of the warrants at 30 June 2018 was 395 days (2017: 637 days). All the warrants are issued by the Group to its shareholders in the capacity of shareholders and therefore are outside of IFRS 2 scope.

 

 

Group and Company

2018

number of warrants

2017

number of warrants

Outstanding at the beginning of the period

236,685,670

11,111,111

Granted during the period

209,090,908

255,326,482

Exercised during the period

-

-

Lapsed during the period

(11,111,111)

(29,751,923)

Outstanding at the end of the period

434,665,467

236,685,670

 

At 30 June 2018 the Company had the following warrants to subscribe for shares in issue:

 

Grant

Expiry date

Warrant exercise price

£

Number of warrants

30 Aug 2016

11 Mar 2019

0.008

64,137,500

19 Oct 2016

11 Mar 2019

0.008

9,375,000

20 Dec 2016

19 Dec 2018

0.013

26,062,500

18 Jan 2017

17 Jan 2019

0.013

13,750,000

19 Jan 2017

18 Jan 2019

0.008

12,500,000

10 Feb 2017

20 Feb 2019

0.010

21,000,000

22 Feb 2017

27 Aug 2018

0.013

10,961,538

10 Apr 2017

20 Oct 2018

0.013

16,010,246

05 May 2017

07 May 2019

0.018

17,777,779

08 May 2017

07 May 2019

0.018

33,999,996

23 Jan 2018

22 Jan 2020

0.010

190,909,090

12 Feb 2018

11 Feb 2020

0.010

18,181,818

Total warrants in issue at 30 June 2018

 

 

434,665,467

 

The aggregate fair value related to the share warrants granted during the reporting period was £nil (2017: £nil).

 

 

 

 

Capital management

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

The Group's debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements.

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

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

19.  Share-based payments

Employee share options

In prior years, the Company established an employee share option plan to enable the issue of options as part of the remuneration of key management personnel and Directors to enable them to purchase ordinary shares in the Company. Under IFRS 2 "Share-based Payments", the Company determines the fair value of the options issued to Directors and employees as remuneration and recognises the amount as an expense in the Income Statement with a corresponding increase in equity.

At 30 June 2018 and at 30 June 2017, the Company had outstanding options to subscribe for ordinary shares as follows:

 

 

Options issued 14 June 2016 exercisable at 0.45 pence per share expiring 29 January 2022

Number

Options issued 9 September 2016 exercisable at 0.8p per share expiring 9 September 2022

Number

 

Total number

A R M Bell

2,960,000

10,400,000

13,360,000

S Kaintz

2,820,000

9,600,000

12,420,000

E Bugnosen

560,000

-

560,000

Employees

720,000

-

720,000

Total

7,060,000

20,000,000

27,060,000

 

 

2018

 

 

2017

 

 

 

Company and Group

 

Number of options Number

Weighted average exercise

price Pence

 

 

Number of

options Number

Weighted average exercise

price Pence

Outstanding at the beginning of the period

27,060,000

0.71

 

7,060,000

0.45

Granted during the year

-

-

 

20,000,000

0.80

Cancelled during the year

-

-

 

-

-

Outstanding at the end of the period

27,060,000

0.71

 

27,060,000

0.71

 

No options were granted during the reporting year. During the financial year ended 30 June 2017, 20,000,000 options were issued

at an exercise price of 0.8 pence and they expire on 9 September 2022. The options were granted in four tranches, first tranche vested immediately and the other three tranches had time vesting conditions attached.

The weighted average fair value of each option granted during the year was 0.244 pence (2017: 0.244 pence).

The exercise price of options outstanding at 30 June 2018 and 30 June 2017 ranged between 0.45p and 0.8p. Their weighted average contractual life was 4.014 years (2017: 5.014 years).

Of the total number of options outstanding at 30 June 2018, 25,330,000 (2017: 15,330,000) had vested and were exercisable.

The weighted average share price (at the date of exercise) of options exercised during the year was nil (2017: nil) as no options were exercised.

 


 

 

 

 

19. Share-based payments continued

The following information is relevant in the determination of the fair value of options granted under equity-settled share-based remuneration schemes:

 

 

Granted on 9 September 2016

Granted on 14 June 2016

 

Option pricing model used

Black-Scholes model

Black-Scholes model

Weighted average shares price at grant date, pence

0.55

0.35

Exercise price, pence

0.80

0.45

Weighted average contractual life, months

62.00

55.00

Expected volatility, %

58.843

61.986

Expected dividend growth rate, %

0

0

Risk-free interest rate, %

0.309

0.679

 

Share-based remuneration expense related to the share options grant is included in the administrative expenses line in the Consolidated Income Statement in the amount of £9,997 (2017: £42,912).

Share Incentive Plan

In January 2012 the Company implemented a tax efficient Share Incentive Plan, a government approved scheme, the terms of which provide for an equal reward to every employee, including Directors, who have served for three months or more at the time of issue. The terms of the plan provide for:

•           each employee to be given the right to subscribe any amount up to £150 per month with Trustees who invest the monies in the Company's shares;

•           the Company to match the employee's investment by contributing an amount equal to double the employee's investment ("matching shares"); and

•           the Company to award free shares to a maximum of £3,600 per employee per annum. The subscriptions remain free of taxation and national insurance if held for five years.

All such shares are held by SIP Trustees and the ordinary shares cannot be released to participants until five years after the date of the award.

During the financial year, a total of 5,657,682 free, matching and partnership shares were awarded (2017: 6,491,086) with a fair value ranging between 0.475 to 0.625 pence (2017: fair value ranging between 0.425 pence to 1.05 pence) resulting in a share-based payment charge of £25,020 (2017: £48,446), included in the administrative expenses line in the Consolidated Income Statement.

 

20. Cash and cash equivalents

Group

30 June

2018

£

30 June

2017

£

Cash in hand and at bank

126,125

9,176

 

 

Company

30 June

2018

£

30 June

2017

£

Cash in hand and at bank

6,505

8,125

 

 

 

 

21. Financial instruments

21.1 Categories of financial instruments

The Group and Company hold a number of financial instruments, including bank deposits, short-term investments, loans and receivables and trade payables.

 

The carrying amounts for each category of financial instrument, measured in accordance with IAS 39 as detailed in the accounting policies, are as follows:

 

 

Group

30 June

2018

£

30 June

2017

£

FINANCIAL ASSETS

 

 

Available for sale financial assets at fair value through other comprehensive income

Quoted equity shares

694,422

128,332

Unquoted equity shares

405,150

1,315,375

Total available for sale financial assets carried at fair value

1,099,572

1,443,707

Cash and cash equivalents

 

126,125

 

9,176

Loans and receivables

 

 

Trade and other receivables

1,411,327

1,356,323

Total financial assets held at amortised cost

1,411,327

1,356,323

 

 

 

Total financial assets

2,637,025

2,809,206

 

 

 

Total current

262,883

125,720

Total non-current

2,374,141

2,683,486

 

 

Company

30 June

2018

£

30 June

2017

£

FINANCIAL ASSETS

 

 

Available for sale financial assets at fair value through other comprehensive income

Quoted equity shares

694,422

118,485

Unquoted equity shares

-

1,315,375

Total available for sale financial assets

694,422

1,433,860

Cash and cash equivalents

6,505

8,125

Loans and receivables

 

 

Trade and other receivables

2,869,362

2,161,339

Total financial assets held at amortised cost

2,869,362

2,161,339

 

 

 

Total financial assets

3,570,290

3,595,199

 

 

 

Total current

130,851

116,286

Total non-current

3,439,439

3,478,913

 


 

 

 

 

21.   Financial instruments continued

21.1   Categories of financial instruments continued

Available for sale financial assets carried at fair value using valuation techniques other than observable market value

As at 30 June 2018, £405,150 (2017: £1,315,372) of the Group's available for sale financial assets are valued using valuation techniques other than observable market price due to the investment being privately held and no quoted market price information is available. Financial instruments valued using other valuation techniques can be reconciled from beginning to ending balances as follows:

 

 

Group

 

Company

Company and Group

2018

£

2017

£

 

2018

£

2017

£

Brought forward

1,315,372

1,139,873

 

1,315,372

1,139,873

Additions

753,000

75,000

 

353,000

75,000

Disposals

(850,000)

-

 

(850,000)

-

Revaluation

5,150

100,499

 

-

100,499

Reclassified to listed (Curzon Energy Plc)

(603,000)

-

 

(603,000)

-

Impairment

(215,372)

-

 

(215,372)

-

 

405,150

1,315,372

 

-

1,315,372

 

During the year the Group made an additional cash investment of £353,000 in Curzon Energy Plc (formerly Westport Energy Plc), which brought the value of its investment to £603,000 (2017: £250,000). This investment was held at cost until its shares were admitted to trading on Standard Listing of the LSE on 4 October 2017, since then it has been carried at observable market value.

 

The Group's investment in Direct Nickel Ltd was further impaired to zero value during the year. At 30 June 2017 it was carried at cost less impairment and valued at £215,372. There is currently no intention to dispose of this investment in the foreseeable future.

 

In the comparative year, the Group made a cash and share investment of £445,000 in Horse Hill Developments Ltd, that was further re-valued to £850,000. During the reporting period, all the shares in Horse Hill Developments Ltd. were sold.

 

During the reporting period, the Company's 100% owned subsidiary ESTEQ Limited invested £400,000 into shares of Whitecar Ltd ("Whitecar"), a company currently operating electric vehicle rental car services out of Heathrow and several UK locations; this represented 5.8% of Whitecar Ltd issued share capital at 30 June 2018.

 

 

Group

30 June

2018

£

30 June

2017

£

Financial liabilities

 

 

Loans and borrowings

 

 

Trade and other payables

296,753

401,634

Short-term borrowings

1,097,600

771,087

Total financial liabilities

1,394,353

1,172,721

 

 

 

Total current

1,394,353

1,172,721

Total non-current

-

-

 

Trade receivables and trade payables

Management assessed that other receivables and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.

Borrowings

The carrying value of interest-bearing loans and borrowings is determined by calculating present values at the reporting date, using the issuer's borrowing rate.

 

 

 

 

21.2   Fair values

Financial assets and 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 (unadjusted) market prices in active markets for identical assets or liabilities;

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

The carrying amount of the Group and Company's financial assets and liabilities is not materially different to their fair value. The fair value of financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Where a quoted price in an active market is available, the fair value is based on the quoted price at the end of the reporting period. In the absence of a quoted price in an active market, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

The following table provides the fair value measurement hierarchy of the Group's assets and liabilities:

 

Group

Level 1

£

Level 2

£

Level 3

£

Total

£

30 June 2018

 

 

 

 

Available for sale financial assets at fair value through other comprehensive income

- Quoted equity shares

694,422

-

-

694,422

- Unquoted equity investments

-

405,150

-

405,150

30 June 2017

 

 

 

 

Available for sale financial assets at fair value through other comprehensive income

- Quoted equity shares

128,332

-

-

128,332

- Unquoted equity investments

-

1,315,375

-

1,315,375

 

Company

Level 1

£

Level 2

£

Level 3

£

Total

£

30 June 2018

 

 

 

 

Available for sale financial assets at fair value through other comprehensive income

- Quoted equity shares

694,422

-

-

694,422

- Unquoted equity investments

-

-

-

-

30 June 2017

 

 

 

 

Available for sale financial assets at fair value through other comprehensive income

- Quoted equity shares

118,485

-

-

118,485

- Unquoted equity investments

-

1,315,375

-

1,315,375

 


 

 

 

 

21. Financial instruments continued

21.3   Financial risk management policies

The Directors monitor the Group's financial risk management policies and exposures and approve financial transactions.

The Directors' overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of credit risk policies and future cash flow requirements.

Specific financial risk exposures and management

The main risks the Group is exposed to through its financial instruments are credit risk and market risk, consisting of interest rate risk, liquidity risk, equity price risk and foreign exchange risk.

Credit risk

Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss for the Group.

 

Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial liability of significant customers and counterparties), ensuring, to the extent possible, that customers and counterparties to transactions are of sound creditworthiness. Such monitoring is used in assessing receivables for impairment.

 

Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating or in entities that the Directors have otherwise cleared as being financially sound.

 

Trade and other receivables that are neither past due nor impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed in note 15.

There are no amounts of collateral held as security in respect of trade and other receivables.

The consolidated Group does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the consolidated Group.

Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:

•           monitoring undrawn credit facilities;

•           obtaining funding from a variety of sources; and

•           maintaining a reputable credit profile.

The Directors are confident that adequate resources exist to finance operations to commercial exploration and that controls over expenditure are carefully managed. All financial liabilities are due to be settled within the next twelve months.

Market risk

Interest rate risk

The Company is not exposed to any material interest rate risk because interest rates on loans are fixed in advance.

Equity price risk

Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors for commodities, but also include political, economic, social, technical, environmental and regulatory factors.

Foreign exchange risk

The Group's transactions are carried out in a variety of currencies, including Australian Dollar, Papua New Guinea Kina and UK Sterling. To mitigate the Group's exposure to foreign currency risk, non-Sterling cash flows are monitored.

 

 

 

 

 

 

 

 

 

 

 

 

 

22.   Reconciliation of liabilities arising from financing activities

 

 

 

 

 

30 June 2017

£

 

 

 

Cash flows loan repayment

£

Non cash flow loan funds transferred directly to MET JV escrow by the

lender

£

 

 

Non cash flow forex movement

£

 

Non cash flow interest and arrangement fees accreted

£

 

 

 

30 June 2018

£

Cuart and YA II PN loan to finance MET

-

-

1,060,343

9,719

27,537

1,097,600

YA II PN loan

771,087

(861,511)

-

(24,251)

114,675

-

 

771,087

(861,511)

1,060,343

(14,532)

142,212

1,097,600

Significant non cash flow transactions

During the year a loan from a group of institutional investors in the amount of £1,060,343, net of arrangement fees of £146,156, (USD1,407,287 net of arrangement fees of USD192,713 in the original loan currency), was paid directly to the MET JV escrow account as Regency's share of investment into MET JV.

23.   Operating lease commitments

On 5 April 2013, Red Rock Resources plc entered into a joint lease agreement with Regency Mines plc and Greatland Gold plc at Ivybridge House, 1 Adam Street, London WC2N 6LE. The lease was non-cancellable until 1 December 2017. The Company let the lease expire on

1 December 2017 and moved into new offices.

On 21 August 2017, the Company entered into a new lease agreement for office space with WeWork Aldwych House. The initial lease runs from 1 October 2017 through 30 September 2019 and is non-cancellable during this period. Thereafter the lease can be terminated by giving one full calendar month notice.

 

The Group and Company's total of future minimum lease payments under non-cancellable operating leases are as presented in the table below:

 

 

 

 

Group

 

Company

 

 

 

2018

2017

 

2018

2017

 

 

 

 

£

£

 

£

£

 

Not later than one year

 

 

86,638

12,069

 

86,638

12,069

 

Later than one year and not later than five years

 

 

21,750

-

 

21,750

-

 

Later than five years

 

 

-

-

 

-

-

 

Total non-cancellable operating leases commitments at 30 June

 

 

108,388

12,069

 

108,388

12,069

 

                         

 

24.   Significant agreements and transactions

 

•           Financing

•           On 11 January 2018, the Company raised £1,050,000 through the issue of 190,909,090 new ordinary shares at 0.01p each at a price

•           of 0.55 per share. Directors Andrew Bell and Scott Kaintz invested an aggregate of £100,000 cash in the strategic financing to acquire 18,181,818 shares. Each share issued had an attached warrant to subscribe for a further share at 1.0p. The warrants were issued with the Company being able to accelerate warrant conversion if the volume weighted average price of shares equalled or exceeded 3.5p for 10 consecutive days.

•           Further to this, on 29 January 2018 Regency Mines announced that it had successfully closed an additional £100,000 fundraise through the Teathers mobile application, which was fully subscribed. 18,181,818 new ordinary shares of 0.01p each were issued under the fundraise at a price of 0.55p per ordinary share on the same terms as described in the announcement dated 11 January 2018.

•           On 30 January 2018, the Company announced that it had repaid its convertible loan with YA PN Ltd. The final pay-out amounted to USD835,115. It included USD725,647 of principal and USD33,548 of accrued interest with a reduced pre-payment fee of 10%.

•           On 6 June 2018 the Company announced that it had agreed to borrow gross proceeds of USD1,600,000 from institutional investors in order to fund a portion of its obligations under the MET coal joint venture. The loan will carry a 10% interest rate and be for an initial term of six months, subject to an implementation fee of USD96,000. A further six-month extension would be available for a 5% fee and if extended the loan may be converted by the noteholder at a fixed price equal to 130% of the 10 day VWAP prior to the date of the extension period. If extended beyond six months the loan is subject to a repayment schedule with payments to be paid in cash or shares at the discretion of the Company. If paid in shares the payment amounts will be convertible at the lower of the fixed price noted above, or a price equal to 90% of the lowest daily VWAP over the five trading days immediately proceeding the date of the relevant repayment date. The Company has the right to repay the loan at any time for a 3% redemption fee provided that the Company may only repay the loan if the stock is trading below the fixed price at the time of prepayment. The lender was also to receive three performance bonuses of USD50,000 if the Company's share price traded above either £0.008, £0.01 and £0.0125 for ten consecutive days.

•          

 

 

Sale of interests

•           On 10 July 2017, the Company announced the sale of 1.9% of its interest in Horse Hill Developments Ltd, to UK Oil and Gas Plc ("UKOG") for total consideration of £323,000. £268,502 of the total was delivered in UKOG shares and the balance was a cash payment that was applied to Regency's proportionate share of outstanding Horse Hill cash calls. UKOG was also granted a right of first refusal for 18 months over Regency's remaining 3.1% stake in Horse Hill Developments Ltd. The sale was announced as completed on 24 August 2017.

•           On 18 October 2017, the Company announced the conditional sale of the remainder of its 3.1% interest in Horse Hill Developments Ltd, to Alba Mineral Resources Plc ("Alba") for total consideration of £630,000. Of the consideration 50% was expected to be paid in cash,

£315,000, and the balance in Alba shares at a price equal to the volume weighted average price of Alba shares in the 15 days prior to completion. On 29 November 2017, Regency Mines announced that it had completed the sale.

US metallurgical coal interests

•           On 24 November 2017 the Company announced that it had paid a refundable advance of £34,800 giving the Company the option to buy the 80% balance of the Rosa Metallurgical Coal Mine owned by Carbon Minerals Corporation, that the Company did not currently own.

Regency had a sixty-day period in which to carry out due diligence on the mine and complex. Should due diligence have proven favourable Regency would have been able to acquire the mine, wash plant and other property rights, rights of action, leases, licences, permits, shareholdings, and other rights including ownership of MCoal Corporation, the direct holder of the assets, for the sum of £250,000.

This option was subsequently allowed to lapse.

•           On 6 December 2017, Regency Mines plc announced that it had entered into a Memorandum of Understanding with Legacy Hill Resources Ltd for co-operation in structuring, financing and owning coal investments in the US. On 27 February 2018, Regency Mines plc announced the execution of a Joint Venture Agreement with Legacy Hill Resources. According to the terms of the agreement,

LHR would own 30% of the JV initially and would subsequently contribute a further USD1m in cash. Regency was to contribute a further USD2m and equity contributions were capped at USD3m cash.

•           On 6 June 2018, the Company announced that it had deposited USD2,000,000 in an escrow towards its joint venture funding and 47% holding of Mining Equity Trust. Mining Equity Trust is the limited liability company in and through which Legacy Hill Resources and Regency Mines hold their interests in the metallurgical coal joint venture. Regency agreed to borrow gross proceeds of USD1,600,000 from institutional investors to fund a portion of its obligations under the JV. The loan carried an interest rate of 10% and was subject to an implementation fee of USD96,000.

Curzon Energy Plc investment

•           On 28 September 2017 the Company announced Curzon Energy Plc's intention to raise gross proceeds of £2.3m and to seek admission of its shares to the Standard Listing segment of the Official list to trade on the London Stock Exchange. Regency further announced its intention to follow its pre-IPO investment with a further £400,000 as part of the IPO fundraising.

•           On 4 October 2017 Curzon's shares were admitted to trading on the London Stock Exchange and Regency received 6,467,500 new Curzon shares, including a 7% broking fee on its IPO subscription rebated in Curzon shares, and post IPO held a 8.91% stake in Curzon.

Battery and Storage Technologies Division (ESTEQ)

•           On 14 November 2017, Regency Mines announced the creation of a new Battery and Storage Technologies Division. A new company, ESTEQ Limited, was formed to act as the vehicle for development of opportunities in the battery and storage technology sector.

•           On 22 December 2017, ESTEQ agreed terms for an investment in the battery storage and technology space. An initial investment of

£200,000 was planned in Whitecar Ltd, a company operating electric vehicle rental car services out of Heathrow and several UK locations. Following the initial investment, it was decided that ESTEQ will subscribe for a further £200,000 in February 2018 on the condition that Whitecar successfully closes a Crowdcube funding of at least £650,000. Initial investment gave ESTEQ 3.3% of Whitecar and a Regency representative joined the Whitecar board. On February 2018, ESTEQ had a fully diluted holding of 5.8% in Whitecar following the subsequent investment of £200,000.

•           ESTEQ also committed to investing up to a maximum of £250,000 in developing a new project in energy storage and grid backup, under the name Allied Energy Services Ltd. The Company received 80% of the share capital of Allied Energy Services Ltd following its investment.

Change of broker

•           On 1 November 2017 the Company announced the appointment of First Equity Limited as broker to the Company with immediate effect.

Change of registered office

•           On 28 March 2018 the Company announced that its registered office had changed to Salisbury House, London Wall, London, EC2M 5PS.

 

 

 

 

24.   Commitments

As at 30 June 2018, the Company had entered into the following commitments:

•      Exploration commitments: Ongoing exploration expenditure is required to maintain title to the Group mineral exploration permits. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group.

•      On 21 August 2017, the Company entered into a new lease agreement for office space with WeWork Aldwych House. The initial lease runs from 1 October 2017 through 30 September 2019 and is non-cancellable during this period. Thereafter the lease can be terminated by giving one full calendar month notice.

25.   Pledged assets

•      On 6 June 2018 the Company announced a USD1,600,000 loan had been agreed in order to fund Regency's commitments to the MET coal joint venture in the United States. As part of this loan facility the Company agreed to pledge the 470 shares of capital stock in Mining Equity Trust and to allow the shares to be held in escrow for the duration of the loan.

26.   Related party transactions

•      On 5 April 2013, Regency Mines plc, Red Rock Resources plc, where Andrew Bell currently is a Director, and Greatland Gold plc, where Andrew Bell previously was a Director, entered into a joint lease at Ivybridge House, 1 Adam Street, London WC2N 6LE. The total cost to the Company for these expenses during the year was £17,397 (2017: £121,046), of which £14,497 represented the Company's share of the office rent and the balance is services provided (2017: £60,523). The Company let this agreement lapse at expiration on 1 December 2017.

•      The costs incurred on behalf of the Company by Red Rock Resources plc are invoiced at each month end and settled on a quarterly basis. By agreement, the Company pays interest at the rate of 0.5% per month on all balances outstanding at each month end until they are settled. The total charged to Red Rock Resources plc for the year was £42,200 (2017: £15,869). Of this, £13,376 was outstanding at 30 June 2018.

•      The costs incurred by the Company on behalf of Red Rock Resources plc were £45,699 (2017: £44,646). Of this, £14,096 was outstanding at 30 June 2018.

•      Related party receivables and payables are disclosed in notes 15 and 16, respectively.

•      The Company held 9,084,760 shares (1.91%) in Red Rock Resources plc as at 30 June 2018 and at 30 June 2017.

•      The key management personnel are the Directors and their remuneration is disclosed within note 8.

27.   Events after the reporting period

•      On 2 August 2018, Mining Equity Trust completed its purchase of the metallurgical coal operations at Cedar Bluff, Southwest Virginia of Omega Holdings LLC.

•      On 19 October 2018 Regency announced that its 47% owned subsidiary MET had sold 44,020 tonnes of coal in September and had achieved total revenues of USD1.96m. For the ten months to June 2019 the Company announced forecasts of 691,192 tonnes of coal sales and revenues of USD30.5m.

•      On 14 November 2018 Regency announced an update regarding its Mambare nickel-cobalt project in Papua New Guinea. Regency announced that it had reached a new framework agreement with its 50% JV partner, Direct Nickel Projects Limited, in which Regency consented to a change of control and anticipated a further change where DNi Projects would move its 50% JV interest into a separate special purpose vehicle. The parties further agreed that Regency would act as the main information hub of the JV and would be responsible for budgets and work programmes. All decisions on budgets, personnel, programmes and strategy would be taken jointly. Regency further announced that it had been approached by third parties interested in co-operating on the Mambare project.

•      On 20 December 2018, Curzon Energy announced that it had suspended well testing operations at Coos Bay, and would conduct a comprehensive review of its strategy to determine the optimal way forward. Curzon indicated that it was considering joint venture partners for the project, and that the ultimate commerciality would only be determined through additional appraisal drilling. Curzon also announced that negotiations with Pared Energy regarding a potential multi-TCF Texas gas project were proceeding constructively.

28.   Control

There is considered to be no controlling related party.

 

30.  These results are audited, however the information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006.  The consolidated statement of financial position at 30 June 2018 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended have been extracted from the Group's 2018 statutory financial statements.  Their report was unqualified and contained no statement under sections 498(2) or (3) of the Companies Act 2006. The financial statements for 2018 will be delivered to the Registrar of Companies by 31 December 2018.


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