Final Results

RNS Number : 9203S

Red Rock Resources plc

29 November 2011

 



Red Rock Resources plc

("Red Rock" or the "Company")

Final Results

for the year ended 30 June 2011

29 November 2011

Chairman's Statement

Dear Shareholders,

I am pleased to present to shareholders the company's annual report for the seventh year of operations. The year was one in which the Company carried out more and better exploration than ever before, became a producer, and achieved a strategic rebalance. It was a year not just of increased profit but of improved performance on every front, where each of our major projects took a significant step forward, and it is a year which we shall look back on with pride.       

Financial discussion

Pre-tax profit rose from £4,754,557 in the year to 30 June 2010 to £13,973,537 in the year to 30 June 2011. The main factor behind this rise was our investment in Jupiter Mines Ltd ceasing to be accounted for as an associate and becoming an available for sale investment at market valuation, as our shareholding was reduced to below 20 per cent, resulting in an attributable profit of £14,237,297. In addition, the Company's acquisition of securities in Ascot Mining plc occurred at below the market price resulting in a profit of £3.6m when marked to market. Total Shareholders' Equity rose from £8,599,527 to £32,843,858 over the prevailing year reflecting the increased profit as well as the raising of £7,126,583 from the issue of new shares over the period. Earnings per share rose from 0.65p per share to 1.78 pence per share.

Sources of funds used in the business were predominantly the issue of new shares and the £3,495,571 proceeds from the sale of 9,533,333 shares in Jupiter Mines Ltd at an average price of 36.7p per share. The Company continues to hold 74,200,832 of its peak holding of 93,104,165 shares in Jupiter Mines Ltd as a strategic investment. 

On another important metric, share price, the Company saw its traded price rise from 1.77p per share at 1 July 2010 to 6.47p per share at 30 June 2011.

Strategy

Our strategy of rebalancing the Company so as to achieve a shift to a position where we were focussed on what we saw as the two key metals was implemented successfully. The Company is now based around the representative industrial metal, iron ore, and the representative precious metal, gold. This balanced commodity weighting reflects our perception that the two dominant socio-economic trends in the near future will be continuing urbanisation and continued growth in the major developing countries of Asia and South America, and a breakdown in the thirty year consensus against inflation in Europe and America as countries struggle with the implications of excess private and public debt.     

The company exercised its option in Colombia to purchase 51% of gold mine owner Mineras Four Points SA and took over management of the El Limon gold mine and in Kenya began a drill programme of over 20,000m to define and develop the Resource package at its joint venture gold asset, the Migori project of Mid Migori Mining Company Limited.

The company pursued further its iron ore strategy, and balanced its development pipeline, by entering into a joint venture and earn-in with NAMA Greenland Ltd, which held unexplored but iron-prospective mineral licenses in Greenland. The Company retains a 1.5% gross royalty on Jupiter Mines Ltd's Mt Ida iron ore project in Western Australia, where a Resource has been declared and a bankable feasibility study is being fast-tracked.  Jupiter Mines Ltd, where the company retains a strategic stake, is also completing a feasibility study on the Mt Mason iron ore project and has announced the start of development of its Tshipi Borwa manganese mine in South Africa.

Delivery

Project delivery is always one of the greatest challenges a mining company faces. It requires management systems that create organisation and discipline at the operating level, but it also requires systems that nurture the initiative to recognise and respond to problems. Our philosophy is one of operational decentralisation, where we aim to have as many decisions as possible taken locally and implemented by locally recruited professionals who we train and mentor, with some support services centrally provided.

In Colombia the Company found itself driven by events to exercise its option and take management control earlier than planned, but once this was done a fast turnaround of the business was achieved and since shortly after our financial year end the business has operated profitably.

In Kenya the requirement was to re-register, digitise and input old data at the same time as analysing new geophysical and mapping data, recruiting and training key staff, putting in place new management and reporting systems, building new facilities, conducting several simultaneous large drill programmes and progressing a tailings project towards feasibility. This was achieved and new Resource figures and a feasibility study are expected to be released soon.    

The planning of a first year's exploration season on a new project would normally not qualify as a challenging task, but weather conditions in Greenland meant there could be no margin of error. Successful delivery of this first field season, with excellent results, was the Company's best planning achievement to date.     

Growth Prospects

The bringing into production of the Tshipi Borwa mine and the completion of the bankable feasibility studies at Mt Ida and Mt Mason will be significant milestones expected to be achieved in 2012 at Jupiter Mines Ltd and with them that company will have come of age. Our key involvement at that stage will be our royalty interest in Mt Ida, which will become of increasing value if Mt Ida continues its course towards possible production by 2015.

Our pipeline of managed projects also has the potential to see substantial gain in value as projects mature. The groundwork has been put in place. In Kenya we have a Measured Resource defined at the Macalder tailings, where a Scoping Study is under way, and will shortly have new Resource figures in Migori at the KKM and other key deposits. This will enable the company to take the next steps, whether applying for a mining license at the tailings, or moving into the bankable feasibility stage at KKM. In Colombia, the stabilisation of production at profitable levels and the building of a local team enables the next steps of expansion and improvement to take place. In Greenland, drill targets for 2012 have been identified and the probability is that we will drill them with a view to defining an iron Resource in the next field season.

Elsewhere, our strategic positions in uranium and rare earth explorer Resource Star Ltd, and other investments, remain but until recovery in the financial markets are not expected to be an area of growth.  

Sustainable Development

We have always acted and expected our staff to act with scrupulous care for our impacts on our host communities and their environment. The speed of our development and our lack of human and financial resource made us slow in articulating this as a policy or expressing it in action. This we began to remedy in the last year and we have given assistance to schools and communities in both Kenya and Colombia.

Since the year end we have appointed a Head of Marketing and Community Relations and in Kenya we have employed an environmental scientist, set up a Community and Social Relations Committee with local stakeholders, provided health and safety training and involved all staff in an intensified programme of local assistance.

This is an area where we believe we have the capacity to excel and all our staff are committed to the success and development of our outreach programmes. 

Risk

We are always trying to identify and address areas of future risk and the two of these that were given priority during the year were health and safety and ensuring systems were in place to comply with the new Bribery Act in the UK.

The increased number of personnel in camp in Kenya as the drill programme intensified, the beginning of operations in the challenging and sometimes extreme environment of northern Greenland, and the start of mining and transportation of gold in Colombia were three major developments each of which presented health and safety challenges we had not come across before.

The Company's recognition that the increase in the scale and complexity of our operations would geometrically increase risk led to the imposition of a rigorous health and safety culture across the group and the need to ensure buy-in to this by all staff was reflected in a commitment of senior management time and effort in order to demonstrate changed attitudes and reinforce a message of zero tolerance of any resistance to our new culture of health and safety awareness.

The strong start made in this area was one of our principal achievements during the year. Emergency response plans were put in place in each theatre of operations. Effective training in safety consciousness will be a continuing priority.   

An anti-bribery and whistleblowing policy was put in place and communicated throughout the group. Ensuring systems to maintain compliance and make third-party contractors aware of and committed to our policies is a requirement under the new Bribery Act and we will therefore take further measures to communicate and monitor compliance with our policies beyond the group in all our countries of operation.

Personnel

The Company's key employees are highly qualified professionals and their professional and personal development is both a priority and a benefit to the Company. We have begun to put in place a mentoring and consultation system to make ourselves better employers. Great importance is given to the recruitment of the ablest staff available locally and to their subsequent training.

The two things we look for in our staff, apart from enthusiasm and intelligence, are a mutually supportive and co-operative attitude and an open and constant communication.

The Company's employees have risen to the challenge magnificently in the last year and we are truly lucky to have them.

Outlook

We expect the growth in the Asian economies and Brazil to continue, although at a lesser pace, and against that background the dislocations produced by the instability of the construct that is the Euro currency will be contained.

We expect to see a year of great progress in our key projects. What opportunities may arise outside our existing portfolio we cannot foresee, nor whether we will be in a position to take advantage of them, but even if we have only our existing project pipeline to develop, the prospects are excellent and we will be kept busy.

Andrew Bell

Executive Chairman

29 November 2011

Results and dividends

Red Rock and its subsidiaries (the ''Group'') made a profit before tax of £13,973,537 (2010: £3,455,370).

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 issue on 29 November 2011.

For further information contact:

Andrew Bell	020 7402 4580 or 07766 474849	Red Rock Resources plc	Chairman
Sandra Spencer	020 7402 4580 or 07757 660 798	Red Rock Resources plc	Public and Investor Relations
Peter Trevelyan-Clark/ Ben Jeynes	020 7444 0800	Religare Capital Markets	Nominated Adviser
Nick Emerson	01483 413500	Simple Investments Ltd	Broker

Updates on the Company's activities are regularly posted on its website, www.rrrplc.com.

Consolidated statement of financial position

as at 30 June 2011

						30 June 2011		30 June 2010
						£		£
ASSETS
Non current assets
Property, plant and equipment						13,327,546		5,100
Investments in associates						975,732		7,332,533
Available for sale financial assets						24,472,120		1,373,680
Other financial assets						4,095,696		-
Exploration assets						501,062		295,616
Total non current assets						43,372,156		9,006,929
Current assets
Cash and cash equivalents						268,788		563,198
Other receivables						6,658,183		1,126,897
Total current assets						6,926,971		1,690,095
TOTAL ASSETS						50,299,127		10,697,024
EQUITY AND LIABILITIES Equity attributable to owners of the parent
Called up share capital					723,983				583,908
Share premium account					13,041,125				6,347,920
Other reserves					2,751,616				(350,069)
Retained earnings					13,988,004				2,017,768
Total					30,504,728				8,599,527
Non controlling interest					2,339,130				-
Total equity						32,843,858		8,599,527
LIABILITIES
Current liabilities
Trade and other payables					4,032,785				235,058
Short-term borrowings					1,750,450				760,323
Current tax liabilities					84,085				909,030
Total current liabilities					5,867,320				1,904,411
Non current liabilities
Long-term borrowings					2,817,500				-
Deferred tax liabilities					8,770,449				193,086
TOTAL EQUITY AND LIABILITIES					50,299,127				10,697,024

Consolidated income statement

for the year ended 30 June 2011

		Year to  30 June 2011		Year to  30 June 2010
		£		£
Revenue Management services Sale of minerals		64,076 878,535		8,956 -
Total revenue		942,611		8,956
Gain on sales of investments Gain on sales of exploration assets Profit on transfer of investment from associate Cost of sale of minerals Gain on dilution of interest in associate Impairment of investment in associate Impairment of available for sale investment Financial assets at fair value through profit and loss Exploration expenses Impairment of exploration assets		1,215,666 169,322 14,238,297 (1,463,251) 252,947 (70,298) - 3,647,104 (781,169) (261,224)		519,636 3,527,968 2,018,255 - 259,174 (89,601)  (20,090) - (197,622) -
Administrative expenses		(3,487,603)		(683,658)
Share of losses of associates Finance costs		(386,228) (42,637)		(519,220) (69,241)
Profit for the year before taxation Tax expense		13,973,537 (3,713,553)		4,754,557 (1,299,187)
Profit for the year		10,259,984		3,455,370
Profit for the year attributable to: Equity holders of the parent Non-controlling interest		11,924,606 (1,664,622)		3,455,370 -
		10,259,984		3,455,370
Earnings per share attributable to owners of the parent: Basic Diluted		1.78 pence 1.71 pence		0.65 pence 0.62 pence

All of the operations are considered to be continuing.

Consolidated statement of comprehensive income

for the year ended 30 June 2011

		Year to  30 June 2011		Year to  30 June 2010
		£		£
Profit for the year		10,259,984		3,455,370
Other comprehensive income
Surplus/(deficit) on revaluation of available for sale investment		4,082,474		(140,850)
Deferred tax on revaluation of available for sale investments		(1,061,795)		513,641
Losses on revaluation of available for sale investments reclassified to the consolidated statement of income		-		(1,842,117)
Group's share of associates' other comprehensive income		-		(45,933)
Deferred tax on associates		-		10,989
Unrealised foreign currency loss arising upon retranslation of foreign operations		(53,778)		(9,339)
Total comprehensive income net of tax for the year		13,226,885		1,941,761
Total comprehensive income net of tax attributable to: Owners of the parent Non-controlling interest		14,891,507 (1,664,622)		1,941,761 -
		13,226,885		1,941,761

Consolidated statement of changes in equity

for the year ended 30 June 2011

The movements in equity during the period were as follows:
	Share capital	Share premium account	Retained earnings	Other reserves	Total attributable to owners of the parent	Non-controlling interest		Total equity
	£	£	£	£	£	£		£
As at 30 June 2009	464,843	4,853,650	(1,440,607)	1,166,545	5,044,431	-		5,044,431
Changes in equity for 2010
Profit for the year	-	-	3,455,370	-	3,455,370	-		3,455,370
Other comprehensive (expense) for the year	-	-	-	(1,513,609)	(1,513,609)	-		(1,513,609)
Transactions with owners Issue of shares	119,065	1,619,505	-	-	1,738,570	-		1,738,570
Share issue costs	-	(125,235)	-	-	(125,235)	-		(125,235)
Share-based payment transfer	-	-	3,005	(3,005)	-	-		-
Total transactions with owners	119,065	1,494,270	3,005	(3,005)	1,613,335	-		1,613,335
As at 30 June 2010	583,908	6,347,920	2,017,768	(350,069)	8,599,527	-		8,599,527
Changes in equity for 2011
Profit/(loss) for the year	-	-	11,924,606	-	11,924,606	(1,664,622)		10,259,984
Other comprehensive income for the year	-	-	-	2,966,901	2,966,901	-		2,966,901
Transactions with owners Issue of shares	140,075	6,986,508	-	-	7,126,583	-		7,126,583
Share issue costs	-	(293,303)	-	-	(293,303)	-		(293,303)
On acquisition of subsidiary	-	-	-	-	-	4,003,752		4,003,752
Share-based payment charge	-	-	-	180,414	180,414	-		180,414
Share-based payment transfer	-	-	45,630	(45,630)	-	-		-
Total transactions with owners	140,075	6,693,205	45,630	134,784	7,013,694	4,003,752		10,837,032
As at 30 June 2011	723,983	13,041,125	13,988,004	2,751,616	30,504,728	2,339,130		32,843,858

Consolidated statement of changes in equity, continued

for the year ended 30 June 2011

	Available for sale trade investments reserve	Associate investments reserve	Foreign currency translation reserve	Share-based payment reserve	Total other reserves
	£	£	£	£	£
As at 30 June 2009	1,115,809	(91,282)	6,750	135,268	1,166,545
Changes in equity for 2010
Profit for the year	-	-	-	-	-
Other comprehensive (expense) for the year	(1,469,326)	(34,944)	(9,339)	-	(1,513,609)
Transactions with owners
Share-based payment charge	-	-	-	(3,005)	(3,005)
Total transactions with owners	-	-	-	(3,005)	(3,005)
As at 30 June 2010	(353,517)	(126,226)	(2,589)	132,263	(350,069)
Changes in equity for 2011
Profit for the year	-	-	-	-	-
Other comprehensive income/(expense) for the year	3,020,679	-	(53,778)	-	2,966,901
Transactions with owners
Share-based payment charge	-	-	-	180,414	180,414
Share-based payment transfer	-	-	-	(45,630)	(45,630)
Total transactions
with owners	-	-	-	134,784	134,784
As at 30 June 2011	2,667,162	(126,226)	(56,367)	267,047	2,751,616

Consolidated statement of cash flows

for the year ended 30 June 2011

	Year to	Year to
	30 June 2011	30 June 2010
	£	£
Cash flows from operating activities
Profit before taxation	13,973,537	4,754,557
(Increase) in receivables	(5,931,785)	(852,355)
Increase in payables	1,427,361	55,075
Share of losses in associates	386,228	519,221
Interest receivable	(150,170)	(7,336)
Interest payable	192,807	17,843
Finance costs	-	58,734
Impairment of exploration properties	261,224	-
Exploration expenses	-	197,622
Share-based payments	180,414	-
Currency adjustments	26,500	(14,852)
Impairment of associate	70,298	89,601
Impairment of available for sale investment	-	20,090
Gain on dilution of interest in associates	(252,947)	(259,174)
Profit on sale of investments	(1,215,666)	(519,636)
Profit on transfer of available for sale investment from associate	(14,238,297)	(2,018,255)
Financial assets at fair value through profit and loss	(3,647,104)	-
Depreciation	710,735	2,345
Profit on disposal of exploration properties	-	(3,527,968)
Net cash (outflow) from operations	(8,206,865)	(1,484,488)
Corporation tax paid	(826,951)	-
Net cash used in operations	(9,033,816)	(1,484,488)
Cash flows from investing activities
Interest received	150,170	7,336
Acquisition of subsidiary net of cash	(2,752,682)	-
Proceeds of sale of investments	3,816,061	1,700,629
Payments to acquire associate company investments	(450,637)	(354,284)
Payments to acquire available for sale investments	(774,207)	(1,502,165)
Exploration expenditure	(504,364)	(142,905)
Payments to acquire property plant and equipment	(1,193,039)	(7,445)
Net cash (outflow) from investing activities	(1,708,694)	(298,834)
Cash flows from financing activities
Proceeds from issue of shares	7,126,583	1,738,570
Transaction costs of issue of shares	(293,303)	(125,235)
Interest paid	(192,807)	(17,843)
Finance costs	(53,140) 3,860,767	(111,874) 813,463
Proceeds of new borrowings
Net inflow from financing activities	10,448,100	2,297,081
Net  (decrease)/increase in cash and cash equivalents	(294,410)	513,759
Cash and cash equivalents at the beginning of period	563,198	49,439
Cash and cash equivalents at end of period	268,788	563,198

Notes

1

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. Company statement of comprehensive income As permitted by section 408 Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The Company's profit for the financial year was £12,331,820 (2010: £3,677,013). The Company's other comprehensive income for the financial year was £3,022,030 (2010: loss £1,469,326). Amendments to published standards effective for the year ended 30 June 2011 The following standards have been adopted during the year: ·              IAS 1 (Revised) "Presentation of Financial Statements"; ·              IAS 7 (Revised) "Statement of Cash Flows"; ·              IAS 17 (Revised) "Leases"; ·              IAS 27 (Revised) "Consolidated and Separate Financial Statements"; ·              IAS 32 (Revised) "Financial Instruments: Presentation"; ·              IAS 36 (Revised) "Impairment of Assets"; ·              IAS 39 (Revised) "Financial Instruments: Measurement"; Although the adoption of these amendments has had no impact on the financial position and performance of the Group, additional disclosures have been provided to comply with the revised standards. 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. Adoption of standards and interpretations As at the date of authorisation of these financial statements, there were standards and interpretations in issue but that are not yet effective and have not been applied in these financial statements, as listed below: Standards, amendments and interpretations in issue but not effective ·              IFRS 7 "Financial Instruments: Disclosure (amendment)"; ·              IFRS 9 "Financial Instruments: Classification and Measurement"; ·              IFRS 10 "Consolidated Financial Statements"; ·              IFRS 11 "Joint Arrangements"; ·              IFRS 12 "Disclosure of Interests in Other Entities"; ·              IFRS 13 "Fair Value Measurement"; ·              IAS 12 "Income Taxes (amendment)"; ·              IAS 24 "Related Party Disclosures (revised)"; ·              IAS 28 "Investments in Associates (revised)".

Notes to financial statements

for the year ended 30 June 2011

1	Basis of preparation (continued) The Directors do not anticipate that the adoption of these standards and interpretations in future periods could have a material effect on the financial position or performance of the Group and Company, other than the introduction of IFRS10 which could affect the financial position and performance and IFRS 12 which is likely to increase the level of disclosure required in respect of the Group's investments. IFRS 10 is a new standard which establishes principles for the presentation and preparation of consolidated financial statements. As a result of its publication, the Directors will be required to consider the application of the revised definition of control to determine whether additional entities will need to be consolidated and whether consolidation is still appropriate for those that currently are. The new definition of control will require the directors to consider whether the Company has: a)    power over the investee b)    exposure, or rights, to variable returns from involvement with the investee; and c)     the ability to use power over the investee to affect the amount of the investor's returns. The financial effect of such changes on the Group has not yet been reliably estimated. However, it is widely expected, irrespective of industry sector and without specific reference to the Group that the adoption of IFRS 10 is likely to result in more entities being consolidated.
2		Earnings per share	2011		2010
		The basic earnings per share is derived by dividing the profit for the year attributable to ordinary shareholders by the weighted average number of shares in issue.
		Profit for the period after taxation	£11,924,606		£3,455,370
		Weighted average number of Ordinary shares of £0.001 in issue	668,431,704		530,859,050
		Earnings per share-basic	1.78 pence		0.65 pence
		Weighted average number of Ordinary shares of £0.001 in issue inclusive of outstanding options	698,902,868		559,329,598
		Earnings per share-fully diluted	1.71 pence		0.62 pence

The weighted average number of shares issued for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows:

		2011		2010
	Earnings per share denominator	668,431,704		530,859,050
	Weighted average number of exercisable share options	30,471,164		28,470,548
	Diluted earnings per share denominator	698,902,868		559,329,598

3              The financial information set out above does not constitute the Company's financial statements for the years ended 30 June 2011 or 2010. The auditors have reported on the 2011 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 2011 will be delivered to the Registrar of Companies by 31 December 2011.

4.             A copy of the Company's annual report and financial statements for 2011 will be made available on the Company's website www.rrrplc.com on 29 November 2011 and at the Annual General Meeting on 23 December 2011; in addition, it will be mailed to Shareholders by 1 December 2011.

 

END

 

 

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