Audited results for year ended 31 December 2012

RNS Number : 6060F

Strategic Minerals PLC

28 May 2013

 



For immediate release: 28 May 2013

Strategic Minerals Plc

("Strategic Minerals", "Group" or the "Company")

Audited results for the year ended 31 December 2012

Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the magnetite iron ore producer and exploration company, is pleased to announce its audited results for the year ended 31 December 2012.

Performance highlights 2012

We achieved our 2012 objectives in full, as Strategic Minerals transitioned from project developer to magnetite supplier to the global marketplace as operations at our Cobre stockpile moved into full-scale production.  Sales to United States domestic customers at mine gate commenced in 2012 and our first export shipment was completed in November.

Financial performance

·      £3.1 million new equity raised in April 2012

·      Total revenues of £3.75 million generated from both US domestic and export sales (2011: nil)

·      Loss for the period £4.36million (2011:£3.41million)

·      Loss per share basic and diluted 1p (2011:1.22p)

Operational performance

·      Key development milestones reached, with completion of rail upgrade at Cobre in June, first test shipment to the Port of Guaymas, Mexico, in August and first export market shipment of 48,000 dry metric tonnes ("DMT") to Glencore AG in November

·      Off-take contract secured with Glencore for supply of an initial 800,000 wet metric tonnes ("WMT")

·      Sales to domestic customers commenced in 2012 with truck sales at the mine gate

·      Exploration results at Iron Glen, Queensland from 30+ hole drill programme indicate the presence of lead, silver, copper and zinc in addition to magnetite

·      Detailed evaluation and review of Australian exploration assets completed

Post Period Highlights

·      £4.2 million net equity raised in February 2013 to provide operational working capital

·      On-going export shipments commence under Glencore off-take contract

·      Company targeting production of 600,000DMT for current year

·      Identification and evaluation of new tailings/stockpile opportunities for acquisition commenced

James Fyfe, Executive Chairman of Strategic Minerals, said:

"We are delighted with the progress the Company has made in 2012. Strategic Minerals achieved key milestones driven by a commitment to commence full scale production at the Cobre stockpile in New Mexico, increase resource knowledge across our portfolio of Australian exploration-stage projects and build sustainable value for shareholders."

Paul Harrison, CEO, added:

"Less than 18 months after our June 2011 listing on AIM, Strategic Minerals has realised its immediate ambition of becoming a  supplier of magnetite ore to the world's industrial markets".

A copy of the full Report and Accounts will be available for download from the Company's website www.strategicminerals.net next week.

For further information:

Company
Strategic Minerals plc
Paul Harrison, CEO	[phone]/[phone]
Nominated Adviser/Joint Broker
Allenby Capital Limited
Jeremy Porter / James Reeve	[phone]
Joint Broker
Daniel Stewart & Company Plc
Sean Lunn / David Hart	[phone]
Financial Public Relations
GTH Communications Limited
Toby Hall / Suzanne Johnson Walsh	[phone]/8492

About Strategic Minerals

Strategic Minerals PLC (AIM: SML) is developing a portfolio of projects that provide near term production along with those that potentially offer longer term capital gains. Strategic Minerals currently holds iron ore stockpile assets in North America and exploration properties in Australia. The Company has commenced production at its first magnetite operation, the Cobre stockpile in New Mexico and is actively seeking to acquire and develop other projects within the same segment. www.strategicminerals.net

Executive Chairman's Report

Strategic Minerals achieved key milestones in 2012, driven by a commitment to commence full scale production at the Cobre stockpile in New Mexico, increase resource knowledge across our portfolio of Australian exploration-stage projects and build sustainable value for shareholders.

These achievements were accomplished against a backdrop of continued high levels of economic volatility  and uncertain commodity demand in the world's major markets. Debt issues in the euro zone, fragile recovery in the United States and concerns over decelerating growth levels in China and other emerging global economies have contributed to a challenging near-term demand environment.

In the face of these challenges, I am pleased to report that Strategic Minerals performed well during 2012. Following my appointment as Executive Chairman and the appointment of Paul Harrison as Chief Executive Officer in June 2012, we embarked upon a near term goal of achieving full scale production at the Company's operations in New Mexico and a comprehensive evaluation of its exploration assets in Australia. While I focused on the Company's operations in New Mexico, Mr. Harrison focused on a detailed review of our pipeline of exploration iron ore assets in Queensland, Western Australia and the Northern Territory of Australia, raising funds to deliver vital working capital for the Company and communication with our shareholders and the wider investing community.

Activities at the Cobre stockpile were strengthened by the conclusion of the Glencore off-take supply contract and the completion of the South Western Railroad rail-spur upgrade. By ensuring the efficient loading and shipment of delivery-ready magnetite at Cobre, Strategic Minerals has successfully established a low-cost, cash generative operation that benefits from a solid customer base and is well positioned to achieve export sales in 2013 totalling approximately 600,000 dry metric tonnes. Strategic Minerals is uniquely positioned to become a relevant supplier to the global iron ore market.

Our Cobre operations provide the launch pad from which Strategic Minerals can pursue the acquisitions of additional magnetite stockpiles and create long-term value. In that regard Strategic Minerals has a very good relationship with the Cobre mine owner Freeport-McMoRan, which we believe puts Strategic Minerals in a good position to secure rights to the additional tailings at Cobre if they become available, as well as potential opportunities at other Freeport-McMoRan mines.

Cobre Operations

Our Cobre operations in New Mexico are now in full scale production. Through the efforts of our team in New Mexico initial shipments took place early in 2012 with trucks collecting the magnetite for domestic US consumers at mine gate, thus providing early cash flow for the project, and our first export shipment was achieved in November.

The most significant development step came with the rehabilitation of the 6.3-mile (10-kilometre) rail-spur link in June 2012, which enabled Strategic Minerals to commence the supply of magnetite to the export market. The spur upgrade included the installation of tie replacements, crossing and point changes, some track replacement and re-ballasting and alignment.

The first test shipment by rail was completed ahead of schedule in August 2012. This eight rail car shipment to the Port of Guaymas in Mexico was undertaken to verify key equipment, processes and procedures ahead of full-scale commercial rail shipments, and to ensure robust, efficient rail freight operations. I am pleased to note that the Strategic Minerals operational team quickly resolved all of the minor operational glitches and equipment issues that were encountered.

Having proven the logistics chain, Strategic Minerals focus turned to satisfying the terms of the commercial contract signed with Glencore AG, a subsidiary of world-leading commodity supplier Glencore International plc which  calls for the supply of 800,000 WMTs (approximately 770,000 DMT) and underlines the strength of the Company's business model as a developer of value adding, delivery-ready resources.

The Glencore contract, first signed in March 2012, was renegotiated in the latter half of the year to facilitate our first export in November 2012 and again in January 2013 to facilitate regular shipments going forward. The November shipment of 48,000 DMT of magnetite was our first export shipment to be effected through the Port of Guaymas and was a hugely important milestone for the Company, marking the end of the development stage and the commencement of full-scale production. Throughout 2013 we intend to complete shipments averaging approximately 50,000 DMT per month. In 2012 we delivered over 20,000 tonnes of magnetite to US domestic customers at the mine gate in addition to the 48,000 DMT sold to Glencore AG.

Total revenues of £3.75 million were achieved in 2012 resulting in a gross profit of £0.9 million in our maiden year of operations at Cobre.

The 2012 achievements at Cobre have demonstrated our ability to acquire and develop projects to deliver shareholder upside. Supplying high volumes of magnetite ore to commercial customers through the export market will enable us to increase our revenues significantly in 2013 and beyond.

Governance

Board composition is an essential component in effective corporate governance and on-going strategic planning. I was pleased to join Strategic Minerals' board in the capacity of Executive Chairman in May 2012, at the same time as Paul Harrison was appointed Chief Executive Officer. The year also saw the appointments of David Anderson as Finance Director and George Cardona, who joined the board as Non-executive Director.

Steven Sanders, who was previously Chairman of the Company, stepped down in May 2012 and remained with the Company as a Non-executive Director until April 2013. Meanwhile, Executive Director Matthew Bonthrone and Non-Executive Director Alex Borrelli chose not to stand for re-election at the Annual General Meeting in June 2012 in order to focus on their other business interests. On behalf of the board, I would like to extend my thanks to Steven, Matthew and Alex, who made substantial contributions to the development of Strategic Minerals, particularly in bringing the Company to the AIM market in 2011.

The board strives to achieve effective decision-making and value-adding results on behalf of the Company's shareholders. The new executive composition of board members has an appropriate balance of skills and experience required to ensure the continued fast-track development of Strategic Minerals in the global iron ore sector and will as opportunities arise be strengthened and enhanced. We are currently actively seeking additional non-executive directors with appropriate skills and experience.

Outlook and prospects

Despite the challenges of operating within a volatile natural resource commodity environment, and concerns in some quarters regarding the near-term future of steel-making output in China, the US and other major manufacturing economies, the outlook for Strategic Minerals remains  encouraging. The Glencore off-take contract and other existing sales relationships in the US give the Company a stable platform for growth.

 We expect to sell 600,000 DMT to the export market during the year ending 31^st December 2013 whilst continuing sales to the local market.

Strategic Minerals remains committed to its strategy of efficiently utilising capital to generate substantial upside and position the Company for future growth. As we progress through 2013, I remain optimistic about the prospects for our industry and our company in particular.

I take this opportunity to thank our hard working and dedicated team, and acknowledge the support provided to the Company by our stakeholders, suppliers and customers.

James J. Fyfe

Chairman

24^th May 2013

Chief Executive Officer's report

2012 was a year of strong operational development for Strategic Minerals at the Cobre stockpile, including the completion of the rail spur upgrade and the achievement of full production output from Q4. This positioned us well to expand delivery in 2013 to an average of 50,000 DMT per month under the Glencore off-take contract and additional sales are expected to continue to domestic customers.

Less than 18 months after our June 2011 listing on AIM, Strategic Minerals has realised its immediate ambition of becoming a supplier of magnetite ore to the world's industrial markets.

We have reached this position by targeting shareholder value on four fronts:

·      First, a programme of productivity and operational efficiency at Cobre

·      Second, the successful completion of a large-scale sales supply contract with a global commodities trader

·      Third, a detailed review of our pipeline of exploration iron ore assets in Queensland, Western Australia and the Northern Territory of Australia and

·      Fourth, securing funding for careful allocation to meet the working capital needs of the Company through its operational growth phase

Value has been created through:

·      The commercial contract concluded with Glencore AG to deliver 800,000 WMT of magnetite concentrate, giving Strategic Minerals a stable sales outlet that mitigates risk

·      Completing the US$3.5 million refurbishment of the rail spur line to the Cobre mine for bulk 100-ton rail car shipments

·      On-going production increases through 2012, culminating in the first export market shipment of 48,000 DMT in November

These milestones demonstrate Strategic Minerals' technical and operational capabilities as a developer and asset manager of large-scale mine stockpiles. Revenues and experience gained at Cobre establish a stable platform for success as Strategic Minerals looks to acquire rights over additional magnetite stockpiles.

Iron ore exploration: Australia licences

Whilst the ramping up of operations at Cobre has been our focus, we have worked to access the most efficient way of releasing value from the portfolio of exploration properties. Management have taken a fundamental decision that in the current climate the main focus of the Company has to be the development of its core cash producing tailings activities and not in expending significant cash exploring early stage "green field" tenements. As a result the Company is now in the process of rationalising its exploration portfolio.

The most significant of the Company's exploration assets is the Iron Glen property in Queensland. In addition, the Company holds a number of other tenements including Jotanooka and Dragon Rocks tenements (Western Australia) and the Roper River and Hodgson tenements (Northern Territory). These latter tenements were acquired in the Ebony Iron acquisition which was completed in particular to acquire the Cobre tailings asset. Following a detailed review of these tenements working in conjunction with the Company's independent geological mine consultants, Terra Search, the decision was taken to rationalise the portfolio by reducing the Company's exposure to low grade, uneconomic licenses, thereby reducing the on-going cost of maintaining these non-prospective assets.

As a result, the Company is in the process of completing the relinquishment of the Dragon Rocks tenements  back to the state as well as some of the tenements within Hodgson and Roper licenses. Thereafter the Company will turn its attention to the Jotanooka tenements. These moves will reduce the burden of exploration expenditure and allow the focus to shift towards maximising the value of the Iron Glen property.

Iron Glen remains the Company's core exploration prospect. Located approximately 40 kilometres from the deep water Port of Townsville, the 2,100-hectare tenement has been subject to extensive magnetic and geochemical analysis since Strategic Minerals acquired the exploration permit in 2007. A 45-hole drilling programme has returned a JORC compliant resource estimate (Terra Search Pty Ltd) over the Iron-Silver-Copper deposit. Indicated resources comprise 1.77 million tonnes of 30.2% iron, 11.0 grams per tonne (g/t) silver and 0.11% copper. A further 0.15 million tonnes at 19.6% iron is included in the Inferred category, at a cut-off grade of 0.15% iron.

Terra Search Pty was commissioned to conduct exploration on the Iron Glen site in both 2010 and 2011. The 2010 programme consisted of 11 reverse circulation percussion drill holes totaling 1258 metres, drilled along the north-west strike of the ground magnetic anomaly, coincident with the abandoned Iron Glen open pit. The 2011 programme in-filled and marginally extended the earlier programme. The 2011 drilling consisted of 34 holes with total drill meterage of 4452 metres that includes 3648 metres of reverse circulation percussion (RC) and 804.95 metres of core drilling.

Total drilling completed at the Iron Glen polymetallic skarn amounts to 45 holes, totalling 5710 metres, including 4906 metres RC and 804.95 metres core.

Geological, geochemical and geophysical data from these programmes was utilised to calculate at Iron Glen resources to JORC standards, announced on 21 February 2012. Highlights included:

·      Drill indicated resource at 15% cut-off confirmed by independent consultants as 1.77 million tonnes @30.2% Iron (Fe)

·      The indicated resource and adjacent inferred resource of 0.15 million tonnes at 19.6 % Fe resulted in a total resource of 1.92 million tonnes @ 29.3% Iron (Fe), 0.10% Copper (Cu) and 10.3g/t Silver (Ag)

·      Consultants have estimated through preliminary Davis Tube Testwork that Iron Glen contains an Inferred in ground resource of 630,000 tonnes of potential magnetite concentrate

·      In addition to the drill indicated resources referred to above an inferred resource of 2.9 million tonnes @ 13.1 g/t Ag occurs peripheral to the magnetite skarn using a Ag cut-off of 5 g/t Ag

·      Total Silver in-situ indicated and inferred resource estimate is 4.82 million tonnes @ 12.0 g/t Ag (1.86 million ounces)

·      Applying prices as of February 2012 to these magnetite and silver resources resulted in an estimated in-situ value in the order of ~A$140M (this figure is to be used as a guide only)

·      Separately from the magnetite skarn deposit at Iron Glen a silver-lead-zinc deposit has been identified 2 kilometres northwest along strike referred to as the Lead Belly Prospect.

These results provide a positive platform for Strategic Minerals to continue to examine the best way to exploit the asset going forward.

Test work suggests that Iron Glen contains an inferred in-situ resource of 630,000 tonnes of potential magnetite concentrate. The project benefits from good and improving infrastructure to the Port of Townsville. The project benefits from good regional infrastructure. Iron Glen occurs 10 kilometres west of the main railway line and the Flanders Highway that connect the mining/industrial complex of Mt Isa to Townsville. The deep-water port at Townsville is less than 40 kilometres from Iron Glen by rail. A major electricity transmission line traverses 3 kilometres north of Iron Glen. Subject to further resource profiling and positive economic assessment work, the aim is to continue project development in advance of a decision of how best to extract value from the asset.

Concluding comments

Strategic Minerals has made significant progress over the last 12 months, moving from being a pre-production, cash consuming business to being soundly funded and in full scale commercial production. Against the challenges being confronted in the sector by traditional junior exploration companies, Strategic Minerals has now set down a different path, to maximise the profitability of its first core producing asset and to continue to identify new opportunities in the tailings arena.

Working with major participants in the global resources sector the Company has demonstrated its ability to deliver a quality product to the market place. Whilst prices have fluctuated over the last year, and the market faces some challenges in the near-term, we expect to see stabilisation in the magnetite and wider iron ore sector over the medium-term. Strategic Minerals is well positioned to take advantage of future production, acquisition and project development opportunities.

Paul Harrison

Chief Executive Officer

24^th May 2013

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2012

		Year to	As restated Period to
		31 December	31 December
	Notes	2012	2011
		£'000	£'000
Continuing operations
Revenue		3,754	-
Cost of sales		(2,851)	-
		________	________
Gross profit		903	-
AIM admission expenses		-	(581)
Share based payment		(95)	(1,257)
Expenses on acquisition of Ebony Iron Pty Limited		-	(258)
Exploration and evaluation expenditure		(835)	-
Amortisation of intangible asset	3,12	(810)	-
Administrative expenses	6	(3,442)	(1,310)
		________	________
Loss from operations		(4,279)	(3,406)
Finance income	8	-	24
Finance expense	8	(714)	(33)
		________	________
Loss before taxation		(4,993)	(3,415)
Income tax credit	9	635	-
		________	________
Loss for the period		(4,358)	(3,415)
Other comprehensive income
Exchange (losses) / gains arising on translation of foreign operations		(676)	571
		________	________
Total comprehensive income		(5,034)	(2,844)
		________	________
Loss for the period attributable to:
Owners of the parent		(4,358)	(3,415)
		________	________
Total comprehensive income attributable to:
Owners of the parent		(5,034)	(2,844)
		________	________

Loss per share attributable to the ordinary equity holders of the parent:

Continuing activities - Basic and diluted	11	(1.00)p	(1.22)p
		________	________

 

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

			As restated
		2012	2011
	Notes	£'000	£'000
Assets
Non-current assets
Intangible assets	12	16,280	17,950
Property, plant and equipment	13	2,003	1,519
Deferred tax asset	19	437	-
		________	________
		18,720	19,469
		________	________
Current assets
Inventories	14	1,722	-
Trade and other receivables	15	1,097	503
Cash and cash equivalents	16	763	299
		________	________
		3,582	802
		________	________
Total Assets		22,302	20,271
		________	________
Issued capital and reserves attributable to owners of the parent
Share capital	20	448	399
Share premium reserve		20,914	17,102
Merger reserve	3	12,483	12,483
Foreign exchange reserve		(105)	571
Share options reserve	21	1,352	1,257
Other reserves		(14,363)	(14,363)
Accumulated loss		(7,953)	(3,595)
		________	________
Total Equity		12,776	13,854
		________	________
Liabilities
Non-current liabilities
Loans and borrowings	17	951	-
Deferred tax liability	19	3,791	4,168
		________	________
		4,742	4,168
		________	________
Current liabilities
Loans and borrowings	17	2,059	1,500
Trade and other payables	18	2,725	749
		________	________
		4,784	2,249
		________	________
Total Liabilities		9,526	6,417
		________	________
Total Equity and Liabilities		22,302	20,271
		________	________

These financial statements were approved and authorised for issue by the Board of Directors on 24 May 2013 and were signed on its behalf by:

David M Anderson

Director

Company Registration No.: 07440902 (England and Wales)

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

			As restated
	Notes	2012	2011
		£'000	£'000
Assets
Non-current assets
Investments	12	31,209	28,395
Property, plant and equipment	13	4	-
Deferred tax	19	350	-
		________	________
		31,563	28,395
		________	________
Current assets
Trade and other receivables	15	2,673	948
Cash and cash equivalents	16	360	275
		________	________
		3,033	1,223
		________	________
		________	________
Total Assets		34,596	29,618
		________	________
Issued capital and reserves attributable to owners of the parent
Share capital	20	448	399
Share premium reserve		20,914	17,102
Merger reserve	3	12,483	12,483
Share options reserve	21	1,352	1,257
Accumulated loss		(4,292)	(2,303)
		________	________
Total Equity		30,905	28,938
		________	________
Liabilities
Non-current liabilities
Loans and borrowings	17	951	-
		________	________
Current liabilities
Loans and borrowings	17	2,059	-
Trade and other payables	18	681	680
		________	________
		2,740	680
Total Liabilities		________	________
		3,691	680
		________	________
Total Equity and Liabilities		34,596	29,618
		________	_______

These financial statements were approved and authorised for issue by the Board of Directors on 24 May 2013 and were signed on its behalf by:

David M Anderson

Director

Company Registration No.: 7440902 (England and Wales)

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2012

		Year to	As restated Period to
		31 December	31 December
	Notes	2012	2011
		£'000	£'000
Cash flows from operating activities
Loss before tax		(4,993)	(3,415)
Adjustments for:
Depreciation of tangible fixed assets		86	1
Amortisation of intangible assets		810	-
Exploration and evaluation expenditure		835	-
Loss on disposal		11	-
(Increase) in inventory		(1,722)	-
(Increase) in trade and other receivables		(680)	(58)
Increase in trade and other payables		1,845	521
Share based payment expense		95	1,257
Finance expense		714	33
Finance income		-	(24)
		_______	_______
Cash absorbed by operating activities		(2,999)	(1,685)
Finance income	8	-	24
Finance expense	8	(111)	(33)
		_______	_______
Net cash absorbed by operating activities		(3,110)	(1,694)
		_______	_______
Investing activities
Acquisition of subsidiary, net of cash acquired	12	-	122
Acquisition of intangible fixed assets		(113)	(876)
Acquisition of tangible fixed assets		(646)	(1,436)
		_______	_______
Cash absorbed by investing activities		(759)	(2,190)
		_______	_______
Financing activities
Net proceeds from issue of equity share capital		3,006	2,283
Net proceeds from borrowings		1,335	1,499
		_______	_______
Net cash from financing activities		4,341	3,782
		_______	_______
Net increase / (decrease) in cash and cash
Equivalents		472	(102)
Cash and cash equivalents at beginning of period		299	410
Effects of exchange rate changes on the balance of cash held in foreign currencies		(8)	(9)
		_______	_______
Cash and cash equivalents at end of period		763	299
		_______	_______

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

COMPANY STATEMENT OF CASH FLOW

FOR THE YEAR ENDED 31 DECEMBER 2012

		Year to	As restated Period to
		31 December	31 December
		2012	2011
		£'000	£'000
Cash flows from operating activities
Loss before tax		(2,339)	(2,303)
Adjustments for:
Impairment to receivables from subsidiary undertakings		585	-
(Increase) in trade and other receivables		(648)	(948)
Increase in trade and other payables		83	680
Share based payment expense		95	1,257
Finance expense		714	33
Finance income		-	(24)
		________	________
Cash absorbed by operating activities		(1,510)	(1,305)
Finance income	8	-	24
Finance expense	8	(111)	(33)
		_______	_______
Net cash absorbed by operating activities		(1,621)	(1,314)
		_______	_______
Investing activities
Acquisition of tangible assets		(4)	-
		________	________
Cash absorbed by investing activities		(4)	-
		________	________
Financing activities
Net proceeds from issue of equity share capital		3,006	1,589
Net proceeds from borrowings		1,488	-
Advances to subsidiary undertakings		(2,784)	-
		________	________
Net cash from financing activities		1,710	1,589
		________	________
Net increase in cash and cash equivalents		85	275
Cash and cash equivalents at beginning of period		275	-
		________	________
Cash and cash equivalents at end of period		360	275
		________	________

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

	Share capital	Share  premium  reserve	Merger  reserve	Share  options  reserve	Other reserves	Foreign  exchange  reserve	Accumulated loss	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 November 2010	-	715	-	46	-	-	(180)	581
Loss for the period						-	(3,415)	(3,415)
Foreign exchange translation						571	-	571
						_______	_______	_______
Total comprehensive income  for the period						571	(3,415)	(2,844)
Shares issued in the year	305	16,387	-	-	-	-	-	16,692
Shares issued for acquisition of Ebony Iron Pty (restated - Note 3)	94	-	12,483	-	-	-	-	12,577
Share based payments (restated - Note 3)	-	-	-	1,211	-	-	-	1,211
Group reorganisation	-	-	-	-	(14,363)	-	-	(14,363)
	_______	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2011 (as restated)	399	17,102	12,483	1,257	(14,363)	571	(3,595)	13,854
	_______	_______	_______	_______	_______	_______	_______	_______
Loss for the year						-	(4,358)	(4,358)
Foreign exchange translation						(676)	-	(676)
						_______	_______	_______
Total comprehensive income for the year						(676)	(4,358)	(5,034)
Shares issued in the year	49	4,031	-	-	-	-	-	4,080
Expenses of share issue	-	(219)	-	-	-	-	-	(219)
Share based payments	-	-	-	95	-	-	-	95
	_______	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2012	448	20,914	12,483	1,352	(14,363)	(105)	(7,953)	12,776
	_______	_______	_______	_______	_______	_______	_______	_______

All comprehensive income is attributable to the owners of the parent.

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

Share capital is the amount subscribed for shares at nominal value.

Share premium reserve represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Merger reserve arises from the 100% acquisition of Ebony Iron Pty Limited on 2 September 2011 whereby the excess of the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve, in accordance with section 612 of the Companies Act 2006.

Share option reserve relates to increases in equity for services received in equity-settled share based payment transactions.

Other reserves consist of an adjustment arising from the Group reorganisation in 2011 being the formation of a new holding Company for Iron Glen Holdings Limited by way of a share for share issue, and is the difference between consideration given and net assets of the Company at the date of acquisition.

Foreign exchange reserve occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

Accumulated loss represents the cumulative loss of the Group attributable to equity shareholders.

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

		Share		Share
	Share	premium	Merger	options	Accumulated	Total
	capital	reserve	reserve	reserve	loss	equity
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at
30 November 2010	-	-	-	-	-	-
Loss for the period					(2,303)	(2,303)
	_______	_______	_______	_______	_______	_______
Total comprehensive income for the period					(2,303)	(2,303)
	_______	_______	_______	_______
Shares issued in the year	305	17,102	-	-	-	17,407
Shares issued for acquisition of Ebony Iron Pty (restated - Note 3)	94	-	12,483	-	-	12,577
Share based payments (restated - Note 3)	-	-	-	1,257	-	1,257
	_______	_______	_______	_______	_______	_______
Balance at 31 December 2011 (as restated)	399	17,102	12,483	1,257	(2,303)	28,938
	_______	_______	_______	_______	_______	_______
Loss for the year					(1,989)	(1,989)
	_______	_______	_______	_______	_______	_______
Total comprehensive income
for the year	-	-	-	-	(1,989)	(1,989)
	_______	_______	_______	_______	_______	_______
Shares issued in the year	49	4,031	-	-	-	4,080
Expense of share issue	-	(219)	-	-	-	(219)
Share based payments	-	-	-	95	-	95
	_______	_______	_______	_______	_______	_______
Balance at 31 December 2012	448	20,914	12,483	1,352	(4,292)	30,905
	_______	_______	_______	_______	_______	_______

All comprehensive income is attributable to the owners of the parent Company.

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

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2012

1.   Significant accounting policies

Basis of preparation

The principal accounting policies adopted in the preparation of the financial statements are set out below.  The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates.  It also requires Group management to exercise judgment in applying the Group's accounting policies.  The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

      Going concern basis

      These financial statements have been prepared on the assumption that the Group is a going concern.

      When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to 30 June 2014. At 31 December 2012 the Group had net current borrowings of £1,296,000 and net current liabilities of £1,202,000.  In February 2013 the Company successfully completed a Placement of shares raising £4.2m (net of expenses) the proceeds of which in part was used to settle borrowings and trade payables at year end.

      After making enquiries, the Directors believe that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.

      Were the Group to be unable to continue as a going concern, adjustments may have to be made to the statement of financial position of the Group to reduce the statement of financial position values of assets to their recoverable amounts, to provide for future liabilities that might arise and to reclassify non-current assets and long-term liabilities as current assets and liabilities.

New and amended standards adopted by the Company

     There are no IFRS's or IFRIC interpretations that are effective for the first time in this financial period that          would be expected to have a material impact on the Group.

Standards, interpretations and amendments to published standards that are not yet effective

The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2012 and have not been early adopted:

·       IFRS 9, Financial Instruments: Classification and Measurement, as issued reflects the first phase of the IASB work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and de-recognition. The adoption of the first phase of IFRS 9 might have an effect on the classification and measurement of the Company's assets. At this juncture it is difficult for the Company to assess the potential impact on its financial position and performance.

There are no other IFRS's or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Basis of consolidation

Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary.  The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the purchase method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date.  The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.

Goodwill

Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, re-measured subsequently through profit or loss.  Direct costs of acquisition are recognised immediately as an expense.

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

Impairment of non-financial assets (excluding inventories)

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end.  Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.  Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs').  Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights.  The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

 Exploration and evaluation assets

The Group has continued to apply the 'successful efforts' method of accounting for Exploration and Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 'Exploration for the Evaluation of Mineral Resources'

The successful efforts method means that only the costs which relate directly to the discovery and development of specific mineral reserves are capitalised. Such costs may include costs of license acquisition, technical services and studies; exploration drilling and testing but do not include costs incurred prior to having obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is general in nature is charged directly to the income statement and that which relates to unsuccessful exploration operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate directly to the discovery and development of specific commercial mineral reserves will remain capitalised and to be depreciated over the lives of these reserves. Exploration and evaluation costs are capitalised within intangible assets.  Costs incurred prior to obtaining legal rights to explore are expensed immediately to the income statement.

All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the Directors consider to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets as 'Developed mineral assets' following an impairment review and depreciated accordingly.  Where properties are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in which the determination is made.

Costs are amortised on a Tenement by Tenement unit of production method based on commercial proven and probable reserves.

Contractual relationship

The contractual relationship recognised as a result of the acquisition of Ebony Iron Pty Limited (see Note 3) has been valued using estimated discounted cash flow and is being amortised over the term of the contract.

Property, plant and equipment

The annual rate of depreciation for each class of depreciable asset is:

Office equipment - 3 years straight line

Leasehold improvements - 10 years straight line

Rail infrastructure - on a per ton basis for inventory transported by rail in the year

The carrying value of tangible fixed assets is assessed annually and any impairment is charged to the statement of comprehensive income.

Investments

Investments are stated at cost less provision for any impairment in value.

Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts.  Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.

Revenue

Revenue from the sale of magnetite is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment.  These criteria are considered to be met when the goods are delivered to the buyer, being the point of shipment for export sales and the point of leaving the mine gate for domestic sales to the US market.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value.  Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Taxation

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year.  Taxable profit differs from profit as reported in the same income statement 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 Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

·       the initial recognition of goodwill;

·       the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·       investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·       the same taxable Group Company; or

·       different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Fair values

The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the Group at the statement of financial position date approximated their fair values, due to the relatively short term nature of these financial instruments.

Share-based compensation

The fair value of the employee and suppliers services received in exchange for the grant of options and warrants is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options and warrants granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options and warrants that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options and warrants that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options and warrants are exercised.

The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, and exercise restrictions. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.

Equity instruments

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

Provisions

Provisions are recognised when the Company has a present obligation as a result of a past event, and it is probable that the Company will be required to settle that obligation.  Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.

Financial instruments

Non-derivative financial instruments comprise investments in equity, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transactions costs.

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

Foreign currencies

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur.  Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.  Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation, in which case exchange differences are recognised in other comprehensive income and accumulated in the foreign exchange reserve along with the exchange differences arising on the retranslation of the foreign operation.

Exchange gains and losses arising on the retranslation of monetary available for sale financial assets are treated as a separate component of the change in fair value and recognised in profit or loss.  Exchange gains and losses on non-monetary available for sale financial assets form part of the overall gain or loss recognised in respect of that financial instrument.

On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place.  All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date.  Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve. 

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the profit or loss on disposal.

Management of capital

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Group arise in respect of the costs of financing working capital as inventory is built up prior to sale.

The Board receives cash flow projections on a monthly basis as well as information on cash balances. The Board will not commit to material expenditure prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes.

2.    Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future.  Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  In the future, actual experience may differ from these estimates and assumptions.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Judgements

(a)  Revenue recognition

The eventual price invoiced for export sales is determined based on a formula linked to the Platts IODEX 62% Fe CFR China in months following the month of sale and quality analysis post loading.  For 2012 the amount recorded as revenue is the final agreed invoice value so no judgement has been applied in recording revenue for the year.  In future periods an estimate of future Platts IODEX 62% Fe CFR China price may be necessary in determining the amount of revenues recognised.

Estimates and assumptions

(b)  Carrying value of intangible assets

In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held for which further details are given in Note 12.

In assessing the continuing carrying value of the other intangible asset, being the contractual relationship acquired on the acquisition of Ebony Iron Pty Limited, the key estimate and assumption made in the valuation model adopted has been estimated Platts IODEX 62% Fe CFR China price over the term of the contract.  The quantity of material is known and our direct costs have been assumed to be fixed at current levels.  The variable is thus the market price of magnetite for both 62% Fe and the discount for the lower grade material at 59% Fe.  The material we have been granted exclusive rights over contains in total approximately 800,000 tonnes at 64.2% Fe and approximately 770,000 tonnes at an average grade of 59.1% Fe.  These future prices cannot be forecast with certainty as changes are determined by reference to external market forces.  The price range used in considering whether impairment arises is management's estimates based on the range of available external forecasts

(c)  Share based payments

The fair value of share based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour based on past experience, future expectations and benchmarked against peer companies in the industry.

3.	Prior-year adjustment

During the year the Directors commenced a review of the accounting for the acquisition of Ebony Iron Pty Limited in 2011.  Concurrently the Conduct Committee of the Financial Reporting Council ("FRC") raised a number of queries regarding the accounting for the transaction and other matters.  As a result of our review and correspondence with the FRC the Directors have concluded on the need to restate the 2011 comparatives amounts to these accounts as shown below.

A reconciliation of the comparative amounts previously stated in the consolidated statements to re-stated comparative amounts for the consolidated statement of comprehensive income and consolidated statement of financial position is provided below.  A detailed description of each adjustment then follows.  There is no restatement required of the consolidated statement of financial position at the beginning of 2011.

		As previously
		stated	Adjustments	Restated
		£'000	£'000	£'000
	Assets
	Non-current assets
	Goodwill	8,744	(8,744)	-
	Intangible assets	1,281	16,669	17,950
		_______	_______	_______
		10,025	7,925	17,950
	Property, plant and equipment	1,519	-	1,519
		_______	_______	_______
		11,544	7,925	19,469
		_______	_______	_______
	Current assets
	Trade and other receivables	503	-	503
	Cash and cash equivalents	299	-	299
		_______	_______	_______
		802	-	802
		_______	_______	_______
		_______	_______	_______
	Total Assets	12,346	7,925	20,271
		_______	_______	_______
	Equity and liabilities
	Share capital	399	-	399
	Share premium reserve	26,408	(9,306)	17,102
	Merger reserve	-	12,483	12,483
	Foreign exchange reserve	(9)	580	571
	Share options reserve	1,062	195	1,257
	Other reserves	(14,363)	-	(14,363)
	Accumulated loss	(3,400)	(195)	(3,595)
		_______	_______	_______
	Total Equity	10,097	3,757	13,854
		_______	_______	_______
	Liabilities
	Current liabilities
	Loans and borrowings	1,500	-	1,500
	Trade and other payables	749	-	749
		_______	_______	_______
		2,249	-	2,249
		_______	_______	_______
	Non-current liabilities
	Deferred tax liability	-	4,168	4,168
		_______	_______	_______
	Total Equity and Liabilities	12,346	7,925	20,271
		_______	_______	_______

	Revenue	-		-
	Cost of Sales	-		-
		_______		_______
	Gross profit	-		-
	AIM admission expenses	(581)		(581)
	Share based payments	(1,062)	(195)	(1,257)
	Expenses on acquisition of Ebony Iron Pty Limited	(258)		(258)
	Administrative expenses	(1,310)		(1,310)
		_______		_______
	Loss from operations	(3,211)		(3,406)
	Finance income	24		24
	Finance expense	(33)		(33)
		_______		_______
		(3,220)		(3,415)
	Income tax benefit/(expense)	-		-
		_______		_______
	Loss for the period	(3,220)		(3,415)
		_______		_______

Prior-year adjustments description

(a)   Revision to acquisition accounting for Ebony Iron Pty Limited

On 2 September 2011 the Company acquired 100% of the issued share capital of Ebony Iron Pty Limited by the issuance of 94,000,000 ordinary shares in the Company.  In the accounts to 31 December 2011 the fair value of the consideration was calculated using 10p per share, being the amount stated in the acquisition agreement, and the difference between this consideration and the fair value of the identifiable net assets acquired was treated as goodwill.

IFRS 3 (Revised) Business combinations require the consideration transferred in a business combination to be measured at the acquisition date fair value.  On 2 September 2011 the market price of the Company's shares was 13.38p.  The use of 10p per share was thus an error.  The increase in the fair value of the consideration of £3,177,000 is reflected in the table above.  This also gives rise to an adjustment to the Company statement of financial position (see below) to increase the carrying value of the cost of investment.

Following a reassessment of the net assets acquired the Directors have concluded that an intangible asset should have been recognised being a contract entered into by a wholly owned subsidiary of Ebony Iron Pty Limited, Southern Minerals Group LLC, pursuant to which it had the exclusive rights to market a magnetite stockpile held at the Cobre mine in New Mexico, as referred to in other parts of these financial statements.  The fair value of this contract at the date of acquisition has been assessed as £15,895,000 with the result that no goodwill now arises from this acquisition.

In accordance with IAS 21 The effects of changes in foreign exchange rates, the carrying value of the intangible asset has been expressed in the functional currency of Southern Minerals Group LLC, being the US dollar, and translated at closing rate which has resulted in the foreign exchange adjustments reflected in Notes 12 and related Note 19, Deferred tax.

(b)   Revision to deferred tax

A deferred tax liability of £4,168,000 has been recognised in respect of the temporary difference arising on the intangible asset recognised on the acquisition of Ebony Iron Pty Limited (see (a) above).

(c)   Accounting for a Merger reserve

As the Company acquired over 90% of the equity holding in Ebony Iron Pty Limited, section 612 of the Companies Act 2006 applies and requires the difference between the fair value of consideration received and nominal value of the shares issued to be transferred to a Merger reserve rather than the Share premium reserve.  After adjusting for the £3,177,000 noted in (a) above an amount of £12,483,000 has been transferred to the Merger reserve.  This also gives rise to a similar adjustment to the Company statement of financial position as shown below.

(d)   Revision to share-based payment expense

In the period to 31 December 2011 warrants were issued to various suppliers in settlement of services provided and share options granted to certain of the Group's Directors and key management personnel.  In valuing these warrants and options using the Black-Scholes option pricing model an expected volatility of 10% was used.  In the opinion of the Directors this was inappropriate and an appropriate rate would be 55%.  This has led to the share based payment charge for 2011 increasing by £195,000 to £1,257,000.

(e)   There was no effect on the consolidated statement of cash flow as a result of the above amendments other than to increase the loss before tax and the amount of share based payment expenses shown in the reconciliation to cash absorbed by operating activities.

The impact on the Company statement of financial position is set out below.

		As previously
		stated	Adjustments	Restated
		£'000	£'000	£'000
	Assets
	Non-current assets
	Investments	25,218	3,177	28,395
	Current assets
	Trade and other receivables	948	-	948
	Cash and cash equivalents	275	-	275
		_______	_______	_______
		1,223	-	1,223
		_______	_______	_______
		_______	_______	_______
	Total Assets	26,441	3,177	29,618
		_______	_______	_______
	Equity and liabilities
	Share capital	399	-	399
	Share premium reserve	26,408	(9,306)	17,102
	Merger reserve	-	12,483	12,483
	Share options reserve	1,062	195	1,257
	Accumulated loss	(2,108)	(195)	(2,303)
		_______	_______	_______
	Total Equity	25,761	3,177	28,938
		_______	_______	_______
	Liabilities
	Current liabilities
	Trade and other payables	680	-	680
		_______	_______	_______
	Total Equity and Liabilities	26,441	3,177	29,618
		_______	_______	_______

4.	Financial instruments - Risk management

The Group is exposed the following financial risks:

·       Credit risk

·       Foreign exchange risk

·       Other market price risk

·       Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments.  This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them.  Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from last year unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are:

·       Trade and other receivables

·       Cash and cash equivalents

·       Trade and other payables

·       Loans and borrowings

A summary of the financial instruments held by category is provided below:

Financial assets

						Loans and receivables
						2012	2011
	Group					£'000	£'000
	Cash and cash equivalents					763	299
	Trade and other  receivables					963	403
						_______	_______
	Total financial assets					1,726	702
						_______	_______

		Financial liabilities
					Financial liabilities at amortised cost
					2012	2011
		Group			£'000	£'000
		Trade and other payables			2,708	739
		Loans and borrowings			3,010	1,500
					_______	_______
		Total financial liabilities			5,718	2,239
					_______	_______

	Financial assets					Loans and receivables
						2012	2011
	Company					£'000	£'000
	Cash and cash equivalents					360	275
	Trade and other  receivables					561	4
	Amounts owed by subsidiary undertakings					4,706	850
						_______	_______
	Total financial assets					5,627	1,129
						_______	_______

		Financial liabilities
					Financial liabilities at amortised cost
					2012	2011
		Company			£'000	£'000
		Trade and other payables			665	410
		Loans and borrowings			3,010	-
					_______	_______
		Total financial liabilities			3,675	410
					_______	_______

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. 

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility.  Further details regarding these policies are set out below:

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales.  It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts.  Such credit ratings are taken into account by local business practices.

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties with minimum rating "A" are accepted.

Further disclosures regarding trade and other receivables, which are neither past due nor impaired other than shown, are provided in note 15.

Fair value and cash flow interest rate risk

All of the Group's and Company's borrowings are at fixed rate.

Foreign exchange risk

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency.  The Group's policy is, where possible, to allow Group entities to settle liabilities denominated in their own functional currency (being Pound Sterling, US dollar and Australian dollar) with the cash generated from their own operations where possible in that currency.  Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

The parent Company maintains US dollar and Pounds sterling bank accounts.  Sales to the export market are invoiced by the parent Company in US dollars, and in the year the parent Company entered into loans denominated in both US dollar and Australian dollars.

All receivables and payables are settled at the prevailing spot rate; no forward contracts or other hedging instruments are currently entered into.  The Board monitors the total foreign exchange risk on a periodic basis but given the major in and out flows of cash are in US dollars there is a natural hedge in place which minimises the overall exposure.

As of 31 December the net exposure to foreign exchange risk was as follows:

		Functional currency of individual entity
		Sterling		Australian dollar		Total
		2012	2011	2012	2011	2012	2011
		£'000	£'000	£'000	£'000	£'000	£'000
	Group
	Net foreign currency financial
	assets/(liabilities)
	Australian dollar	(257)	-	-	-	(257)	-
	US Dollar	514	-	310	317	824	317
		_______	_______	_______	_______	_______	_______
	Total net exposure	257	-	310	317	567	317
		_______	_______	_______	_______	_______	_______

		Functional currency of individual entity
		Sterling				Total
		2012	2011			2012	2011
		£'000	£'000			£'000	£'000
	Company
	Net foreign currency financial
	assets/(liabilities)
	Australian dollar	(257)	-			(257)	-
	US Dollar	514	-			514	-
		_______	_______			_______	_______
	Total net exposure	257	-			257	-
		_______	_______			_______	_______

Other market price risk

The Group's sale of magnetite to the export market, as opposed to US domestic customers, is priced by reference to the market quoted Platts IODEX 62% Fe CFR China price over which the Group has no influence.  The Group made its first export sale in the last quarter of 2012.  Market prices in 2012 were particularly volatile.  In the last quarter the high and low prices were $144.50 and $106.50 respectively.  A 5% movement in the Platts IODEX 62% Fe CFR China price would have adjusted revenues for the year by £195,000.

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments.  It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.  To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 30 days.  The Group also seeks to reduce liquidity risk by fixing interest rates (and hence cash flows) on its long-term borrowings.

The Board receives rolling cash flow projections on a monthly basis as well as information regarding cash balances.  The Group does not have any overdraft or other credit lines in place.  The liquidity risk of each Group entity is managed centrally by the finance function.  Budgets are prepared locally and agreed by the board in advance, enabling the Group's cash requirements to be anticipated. 

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:

			Between	Between	Between
	Group	Up to 3	3 and 12	1 and 2	2 and 5	Over
		months	months	year	years	5 years
	At 31 December 2012	£'000	£'000	£'000	£'000	£'000
	Trade and other payables	2,418	289	-	-	-
	Loans and borrowings	1,978	95	1,046	-	-
		_______	_______	_______	_______	_______
	Total	4,396	384	1,046	-	-
		_______	_______	_______	_______	_______
			Between	Between	Between
	Group	Up to 3	3 and 12	1 and 2	2 and 5	Over
		Months	months	year	years	5 years
	At 31 December 2011	£'000	£'000	£'000	£'000	£'000
	Trade and other payables	739	-	-	-	-
	Loans and borrowings	396	-	-	1,104	-
		_______	_______	_______	_______	_______
	Total	1,135	-	-	1,104	-
		_______	_______	_______	_______	_______

			Between	Between	Between
	Company	Up to 3	3 and 12	1 and 2	2 and 5	Over
		Months	months	year	years	5 years
	At 31 December 2012	£'000	£'000	£'000	£'000	£'000
	Trade and other payables	667	-	-	-	-
	Loans and borrowings	1,978	95	1,046	-	-
		_______	_______	_______	_______	_______
	Total	2,645	95	1,046	-	-
		_______	_______	_______	_______	_______
			Between	Between	Between
	Company	Up to 3	3 and 12	1 and 2	2 and 5	Over
		Months	months	year	years	5 years
	At 31 December 2011	£'000	£'000	£'000	£'000	£'000
	Trade and other payables	410	-	-	-	-
	Loans and borrowings	-	-	-		-
		_______	_______	_______	_______	_______
	Total	410	-	-		-
		_______	_______	_______	_______	_______

Capital Disclosures

The Group monitors "adjusted capital" which comprises all components of equity (i.e. share capital, share premium, merger reserve, and accumulated loss).

The Group's objectives when maintaining capital are:

·       to safeguard the entity's ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other  stakeholders, and

·       to provide an adequate return to shareholders by pricing products with the level of risk.

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. 

5.	Segment information

The Group has three main segments:

·     Southern Minerals Group LLC (SMG) - This segment is involved in the sale of magnetite to both the US domestic market and shipment of magnetite to port for onward export sale. 

·     Head Office - This segment incurs all the administrative costs of central operations and finances the Group's operations.  A management fee is charged for certain of these expenses.

·     Australia - This segment holds the tenements in Australia and incurs all related operating costs.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that carry out different functions and operations and operate in different jurisdictions.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Executive Chairman, Chief Executive Officer, and the Finance Director.

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with EU Adopted IFRS but excluding non-cash losses, such as the amortisation of intangible assets, and the effects of share-based payments.

Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Loans and borrowings are allocated to the segments in which the borrowings are held. Details are provided in the reconciliation from segment assets and liabilities to the Group position.

				Head
			SMG	Office	Australia	Total
			2012	2012	2012	2012
			£'000	£'000	£'000	£'000
	Revenue		3,754	-	-	3,754
	Cost of sales		(2,851)	-	-	(2,851)
			_______	_______	_______	_______
	Gross profit		903	-	-	903
	Exploration and evaluation expenditure		-	-	(835)	(835)
	Administrative expenses		(689)	(1,258)	(1,495)	(3,442)
			_______	_______	_______	_______
	Segment profit / (loss) from operations		214	(1,258)	(2,330)	(3,374)
	Finance expense		-	(714)	-	(714)
			_______	_______	_______	_______
	Segment profit / (loss) before taxation		214	(1,972)	(2,330)	(4,088)
			_______	_______	_______
	Amortisation of intangible asset					(810)
	Share-based payments charge					(95)
						_______
	Group loss before taxation					(4,993)
						_______

				Head
			SMG	Office	Australia	Total
			2011	2011	2011	2011
			£'000	£'000	£'000	£'000
	Revenue		-	-	-	-
	Cost of sales		-	-	-	-
			_______	_______	_______	_______
	Gross profit		-	-	-	-
	AIM admission expenses		-	(581)	-	(581)
	Expenses on acquisition of Ebony Iron Pty Limited		-	(258)	-	(258)
	Administrative expenses		(214)	(174)	(922)	(1,310)
			_______	_______	_______	_______
	Segment loss from operations Finance income		(214) -	(1,013) -	(922) 24	(2,149) 24
	Finance expense		-	(33)	-	(33)
			_______	_______	_______	_______
	Segment loss before taxation		(214)	(1,046)	(898)	(2,158)
			_______	_______	_______
	Share-based payments (as restated)					(1,257)
						_______
	Group loss before taxation (as restated)					(3,415)
						_______

				Head
			SMG	office	Australia	Total
	As at 31 December 2012		£'000	£'000	£'000	£'000
	Additions to non-current assets (excluding deferred tax)		577	4	698	1,279
			_______	_______	_______	_______
	Reportable segment assets (excluding deferred tax)		19,749	657	1,459	21,865
			_______	_______	_______	_______
	Reportable segment liabilities		1,290	3,691	754	5,735
			_______	_______	_______
	Deferred tax liabilities					3,791
						_______
	Total Group liabilities					9,526
						_______

	As at 31 December 2011		£'000	£'000	£'000	£'000
	Additions to non-current assets		18,176	-	1,085	19,261
			_______	_______	_______	_______
	Reportable segment assets		18,189	373	1,709	20,271
			_______	_______	_______	_______
	Reportable segment liabilities		1	680	1,568	2,249
			_______	_______	_______
	Deferred tax liabilities					4,168
						_______
	Total Group liabilities					6,417
						_______

		External revenue by		Non-current assets
		location of customers		by location of assets
		2012	2011	2012	2011
		£'000	£'000	£'000	£'000
	United States of America	1,058	-	17,248	18,176
	Switzerland	2,696	-	-	-
	Australia	-	-	1,118	1,293
	United Kingdom	-	-	354	-
		_______	_______	_______	_______
		3,754	-	18,720	19,469
		_______	_______	_______	_______

Revenues from one customer total £2,696,000 (2011 - £nil). 

6.	Operating loss

Costs by nature

		Year to	Period to
		31 December	31 December
		2012	2011
		£'000	£'000
	Operating loss is stated after charging/(crediting):
	Directors' fees and emoluments	491	309
	Auditors' remuneration: see below	106	36
	Salaries, wages and other staff related costs	459	195
	Depreciation expense	86	2
	Operating lease - land and buildings	59	46
	Legal, professional and consultancy fees	1,690	361
	Travelling and related costs	140	138
	Foreign exchange loss	64	16
	Other expenses	347	207
		________	________
		3,442	1,310
		________	________

Auditors' remuneration comprises the following elements:

	Fees charged by the Group's auditor:
	For the audit of the 2012 financial statements	26	21
	Amount charged for the prior year in excess of the amount provided	26	-
	Fees charged by the auditor to the Australian subsidiaries:
	For the audit of the 2012 financial statements	18	15
	Amount charged for the prior year in excess of the amount provided	36	-
		________	________
		106	36
		________	________
7.	Directors and employees
	Staff costs during the period
		Year to	Period to
		31 December	31 December
		2012	2011
		£'000	£'000
	Directors' fees including consultancy fees	491	309
	Wages and salaries	459	177
	Social security costs	26	18
		________	________
	Total staff costs	976	504
		________	________

The average number of people (including executive Directors) employed during the period was:

		2012	2011
		Number	Number
	Total	8	7
		________	________

Remuneration of the Directors in the period is summarised as follows:

	Directors' fees	Salary and consultancy fees	Benefits in kind	Total
	2012	2012	2012	2012
	£	£	£	£
M.D. Bonthrone	24,000	-	-	24,000
S. Sanders	17,500	-	-	17,500
P. Griffiths	-	116,883	-	116,883
M.A. Borrelli	17,500	-	-	17,500
G Cardona	-	-	-	-
J Fyfe	-	140,000	-	140,000
P Harrison	-	140,000	-	140,000
D Anderson	-	30,000	5,382	35,382
	________	________	________	________
			-
Total	59,000	426,883	5,382	491,265
	________	________	________	________

	Directors' fees	Salary and consultancy fees	Benefits in kind	Total
	2011	2011	2011	2011
	£	£	£	£
M.D. Bonthrone	1,000	75,667	-	76,667
S. Sanders	32,500	68,333	-	100,833
P. Griffiths	1,000	97,834	-	98,834
M.A. Borrelli	32,500	-	-	32,500
G Cardona	-	-	-	-
J Fyfe	-	-	-	-
P Harrison	-	-	-	-
D Anderson	-	-	-	-
	________	________	________	________
Total	67,000	241,834	-	308,834
	________	________	________	________

Directors' remuneration shown above comprises all of the salaries, Directors' fees, consultancy fees and other benefits and emoluments paid to the Directors.

The salary and consultancy fees to P Griffiths during the period were paid by the Company's subsidiary Iron Glen Holdings Pty Limited.

Each Director is also paid all reasonable expenses incurred wholly, necessarily and exclusively in the proper performance of his duties.

8.	Finance income / expense
		Year to	Period to
		31 December	31 December
		2012	2011
		£'000	£'000
	Bank interest received	-	24
	Loan interest and finance charges	(714)	(33)
		________	________
		(714)	(9)
		________	________

9.	Taxation
		Year to	Period to
		31 December	31 December
		2012	2011
		£'000	£'000
	Current tax expense	-	-
	Deferred tax credit on amortisation of intangible	198	-
	Deferred tax credit on losses	437	-
		________	________
		635	-
		________	________
	Reconciliation of effective tax rates	£'000	£'000
	(Loss) before tax	(4,993)	(3,415)
	Tax using domestic rates of corporation tax of 24% (2011: 26%)	(1,198)	(888)
	Effect of:
	Expenses not deductible for tax purposes	24	515
	Losses carried forward	1,174	373
	Deferred tax credit	635	-
		________	________
		635	-
		________	________

The Group has excess management expenses of £966,000 (2011: £327,000) and unused losses to carry forward of £4,712,000 (2011: £1,109,000). A deferred tax asset of £437,000 arising from losses carried forward in the UK and USA at a rate of 24% and 40% respectively has been recognised.  No deferred tax asset has been recognised for losses in Australia as their recovery is not probable in the foreseeable future.  No deferred tax asset was recognised in 2011.

10.	Parent Company loss

As permitted by Section 408 of the Companies Act 2006, the income statement of the parent Company is not presented as part of these financial statements.  The parent Company's loss for the year was £1,989,000 (2011 - £2,303,000).

11.	Loss per share

Losses per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted average number of shares in issue during was basic 434,531,331 (2011 - 278,716,703) adjusted for the historic share reorganisation and consolidation. Fully diluted the weighted average was 434,531,331 (2011: 278,716,703). The loss for the financial period was £4,358,000 (2011 as restated - £3,415,000).

Due to the Group's results for the period, the diluted earnings per share is deemed to be the same as the basic earnings per share.

On 7 February 2013 the Company issued a further 102,666,667 fully paid ordinary shares at 4.5pence per share.

On 27 March 2013 the Company received notice of the exercise of 3,000,000 warrants to subscribe for 3,000,000 new ordinary shares of £0.001 each.

12.	Intangibles and investments

        Group

			Exploration/	Other
		Mining	evaluation	intangible
		tenements	costs	asset	Total
		£'000	£'000	£'000	£'000
	Cost
	At 1 December 2010	-	207	-	207
	Additions	-	876	-	876
	Acquisition of Ebony Iron Pty - prior year adjustment (Note 3)	198	-	15,895	16,093
	Foreign exchange	-	-	774	774
		________	________	________	________
	At 31 December 2011	198	1,083	16,669	17,950
	At 1 January 2012	198	1,083	16,669	17,950
	Acquisition from Quadrio Resources Pty Limited	-	585	-	585
	Additions in the year	-	113	-	113
	Relinquished	(198)	(637)	-	(835)
	Foreign exchange	-	(27)	(714)	(741)
		________	________	________	________
	At 31 December 2012	-	1,117	15,955	17,072
		________	________	________	________
	Amortisation
	At 1 December 2010	-	-	-	-
	Amortisation	-	-	-	-
		________	________	________	________
	At 31 December 2011	-	-	-	-
	At 1 January 2012	-	-	-	-
	Amortisation	-	-	(810)	(810)
	Foreign exchange	-	-	18	18
		________	________	________	________
	At 31 December 2012	-	-	(792)	(792)
		________	________	________	________
	Net book value
	At 1 December 2010	-	207	-	207
		________	________	________	________
	At 31 December 2011 (as restated)	198	1,083	16,669	17,950
		________	________	________	________
	At 31 December 2012	-	1,117	15,163	16,280
		________	________	________	________

Ebony Iron Pty Limited

On the 2 September 2011, the Company acquired the entire share capital of Ebony Iron Pty Limited ("Ebony"), a Company registered in Australia.

In the 2011 accounts the fair value of the consideration was calculated using the share price stated in the Sale Purchase Agreement.  As noted in Note 3 this was an error and the full description of the ensuing prior year adjustment is given in that Note.

In addition to the new ordinary shares, Ebony shareholders were entitled to, in aggregate, a further consideration of 5 million pounds sterling to be satisfied by the allotment of 50 million new ordinary shares at an issue price of 10 pence per share, subject to the identification by a competent person of an Indicated Mineral Resource that constitutes a Probable Ore Reserve of not less than 200 million tonnes of iron ore (individually or in aggregate) before 31 December 2015 in identified tenements in the Northern Territory and Western Australia.  At 31 December 2011 the Western Australia tenements to which the contingent consideration attached had not been acquired by the Group and thus no potential liability existed at 31 December 2011.  During the course of 2012, as explained further below, decisions were taken to relinquish or not pursue extensions following the expiry of license terms and as such  no contingent consideration will be payable on those relinquished tenements.  The Directors do not consider any deferred consideration will be payable in the future and will confirm this fact with Ebony shareholders in advance of future actions. 

The other intangible asset arises from the contractual relationship entered into by Southern Minerals Group LLC ('SMG'), an entity wholly owned by Ebony Iron Pty Limited, with a third party for the rights to a magnetite stockpile held at that party's Cobre mine in New Mexico, USA.  Under the terms of the contract SMG has exclusive rights to market approximately 1,500,000 tons of magnetite.  The intangible asset is being amortised on a per ton basis as the magnetite is sold.

The list of identifiable assets acquired and liabilities assumed for Ebony Group is set out below and reflects the changes made as a result of the prior year adjustment, as set out in Note 3:

		Book and
		fair value
		£'000
	Intangible asset - contractual relationship	15,895
	Exploration and evaluation asset	198
	Railroad Construction and related assets	82
	Trade and other receivables	421
	Cash and cash equivalents	121
	Trade and other payables	(166)
	Deferred taxation	(3,974)
		________
	Net Assets	12,577
		________
	Goodwill:	£'000
	Purchase consideration	12,577
	Fair value of net assets acquired	(12,577)
		________
	Goodwill acquired	-
		________

In the 4 months commencing 2 September 2011 the date the Ebony Group was acquired and consolidated in to the results of the Company's reporting period to 31 December 2011, Ebony contributed a loss of £457,538 to the Group's losses.  Had the acquisition occurred on 1 December 2010, the start of such reporting period, the contribution to the Group's losses would have been a loss of £1,402,457. In

determining this amount, the management had assumed that the fair value adjustments, determined provisionally, that arose on the date of the acquisition would have been the same if the acquisition had occurred on the 1 December 2010.

Mining tenements and exploration and evaluation costs

Exploration and evaluation costs at 31 December 2012 comprise only the Queensland sites held by Iron Glen Pty Limited.  These costs are not currently being amortised as there is no revenue being generated given that these assets are still in an early exploration phase.

In 2012 the Group acquired certain other tenements, known as the Western Australia tenements, by the issue of shares to Quadrio Resources Pty Limited on 25 January 2012.  This did not represent the acquisition of a business, but the acquisition of these assets only.  The Company issued 6,000,000 ordinary shares and with a market price of the Company's shares on that date of 9.75pence per share recorded the fair value of the acquired assets at £585,000.

During the course of 2012 further costs were incurred on these tenements and other tenements acquired from Ebony Iron Pty Limited.  However decisions were subsequently taken to relinquish or not pursue extensions following the expiry of license terms resulting in the full carrying value of these tenements being impaired.

The recoverability of the remaining carrying amount of the deferred exploration and evaluation expenditure on the Queensland site is dependent on successful development and commercial exploitation, or alternatively the sale, of the respective areas of interest.

	Company	Loans to	Shares in
		subsidiary	subsidiary
		undertakings	undertakings	Total
		£'000	£'000	£'000
	Cost
	At 31 December 2011 (as previously stated)	-	25,218	25,218
	Prior year adjustment (Note 3)	-	3,177	3,177
	Reclassification of amounts due from certain  subsidiary undertakings	3,399	-	3,399
		________	________	________
	At 31 December 2011 (as restated) and 31 December 2012	3,399	28,395	31,794
		________	________	________
	Impairment
	At 31 December 2011	-	-	-
	Charge for the year	(585)	-	(585)
		________	________	________
	At 31 December 2012	(585)	-	(585)
		________	________	________
	Carrying Value
	At 31 December 2011	-	28,395	28,395
		________	________	________
	At 31 December 2012	2,814	28,395	31,209
		________	________	________

In the opinion of the Directors, the aggregate value of the Company's investment in its subsidiary undertakings is not less than the amount included in the balance sheet.

Holdings of more than 20%

The Company holds more than 20% of the share capital of the following companies:

					Proportion
		Country of	Principal	Class of	of ownership
		Incorporation	activity	share	interest
	Subsidiary undertakings
	Iron Glen Holdings Pty Limited	Australia	Holding Company	Ordinary	100%
	Ebony Iron Pty Limited	Australia	Holding Company	Ordinary	100%
	Iron Glen Pty Limited (i)	Australia	Exploration	Ordinary	100%
	Southern Minerals Group LLC (ii)	USA	Mining	Ordinary	100%
	Jotanooka Iron Pty Limited (i)	Australia	Exploration	Ordinary	100%
	Dragon Rock Minerals Pty Limited (i)	Australia	Exploration	Ordinary	100%

(i)    Held by Iron Glen Holdings Pty Limited

(ii)   Held by Ebony Iron Pty Limited

13	Tangible fixed assets
		Railway	Office	Leasehold
		infrastructure	equipment	improvements	Total
	Group	£'000	£'000	£'000	£'000
	Cost
	At 1 December 2010	-	2	1	3
	Additions	1,425	10	1	1,436
	On acquisition of subsidiary	82	-	-	82
		________	________	________	________
	At 31 December 2011	1,507	12	2	1,521
	At 1 January 2012	1,507	12	2	1,521
	Additions	642	4	-	646
	Disposals	-	(12)	-	(12)
	Foreign exchange	(65)	-	-	(65)
		________	________	________	________
	At 31 December 2012	2,084	4	2	2,090
		________	________	________	________
	Depreciation
	At 1 December 2010	-	1	-	1
	Charge in the period	-	-	1	1
		________	________	________	________
	At 31 December 2011	-	1	1	2
	At 1 January 2012	-	1	1	2
	Charge in the year	86	-	-	86
	Eliminated on disposals	-	(1)	-	(1)
		________	________	________	________
	At 31 December 2012	86	-	1	87
		________	________	________	________
	Carrying value
	At 1 December 2010	-	1	1	2
		________	________	________	________
	At 31 December 2011	1,507	11	1	1,519
		________	________	________	________
	At 31 December 2012	1,998	4	1	2,003
		________	________	________	________

The tangible assets of the Company relate to office equipment only.

14.	Inventories
		2012	2011
		£'000	£'000
	Finished goods held for sale	1,722	-
		________	________

15.	Trade and other receivables
	Group	2012	2011
		£'000	£'000
	Trade receivables	466	-
	Other receivables	700	503
	Less: provision for impairment of other receivables	(69)	-
		________	________
		1,097	503
		________	________
	Company
	Trade receivables	374	-
	Amounts owed by subsidiary undertakings	2,006	850
	Other receivables	293	98
		________	________
		2,673	948
		________	________

There were no Trade or Other receivables that were past due or impaired beyond the charge reflected above. The Trade and Other receivables are categorised as loans and other receivables and are not materially different to their carrying values.

16.	Cash and cash equivalents
		2012	2011
	Group	£'000	£'000
	Bank current accounts	763	299
		________	________
	Company
	Bank current accounts	360	275
		________	________

        The Group's balances are held with well-known and highly rated UK, USA and Australian banks.

17.	Borrowings

The carrying values of the borrowings and their maturity are as follows:

		2012	2011
	Group	£'000	£'000
	Current
	Repayable within one year:
	Loan notes	-	1,104
	Other loans	2,059	396
		________	________
		2,059	1,500
		________	________

		2012	2011
	Company	£'000	£'000
	Current
	Repayable within one year:
	Other loans	2,059	-
		________	________
		2,059	-
		________	________

The loan notes outstanding at 31 December 2011 were unsecured, carried interest at 10% and were fully repayable at 31 December 2011.

On the 20 February 2012, the Company refinanced the loan notes into the following:

(a)   an unsecured convertible loan note of £950,670 effective from 2 January 2012 with an interest rate of 10 per cent per annum repayable on or before the 14 December 2014. The convertible loan note could be converted into the Company's ordinary shares on or before the repayment date at 15 pence per share and immediate repayment required if certain events outside the Company's control occurred.

(b)   the balance of the loan had been refinanced on similar terms as before but with a repayment date of 30 June 2012 which has subsequently been re-negotiated to repay this balance in full by 31 December 2013.

The other loans outstanding at 31 December 2012 were denominated in pounds sterling and US dollars with maturities of between 45 and 60 days from date of draw-down. 

		2012	2011
	Group and Company	£'000	£'000
	More than one year
	Repayable on 31 December 2014:
	Loan notes	951	-
		________	________
		951	-
		________	________

Subsequent to the year-end the repayment terms of £791,000 of these loan notes were re-negotiated with a repayment schedule agreed to repay this amount in full by 31 December 2013 and the convertible loan can no longer be converted into the Company's ordinary shares.

18.	Trade and other payables
		2012	2011
	Group	£'000	£'000
	Trade payables	1,529	400
	Applications for shares not allotted	-	270
	Other payables	320	10
	Accruals and deferred income	876	69
		________	________
		2,725	749
		________	________
	Company	£'000	£'000
	Trade payables	184	198
	Applications for shares not allotted	-	270
	Other payables	29	14
	Accruals and deferred income	468	198
		________	________
		681	680
		________	________

Book values approximate to fair value at 31 December 2012 and 2011.

19	Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25 % (2011 - 25 %).  The reduction in the main rate of corporation tax to 23% was substantively enacted in July 2012. This new rate will be applied to deferred tax balances which are expected to reverse after 1 April 2013, the date on which that new rate becomes effective.

The movement on the deferred tax account is as shown below:

		2012	2011
	Deferred tax liability	£'000	£'000
	At 1 January	(4,168)	-
	Recognised in profit and loss
	Tax credit	198	-
		________	________
		(3,970)	-
	Arising on business combination (Note 3 and 12)	-	(3,974)
	Foreign exchange	179	(194)
		________	________
	At 31 December	(3,791)	(4,168)
		________	________

		2012	2011
	Deferred tax asset	£'000	£'000
	At 1 January	-	-
	Recognised in profit and loss
	Tax credit	437	-
		________	________
	At 31 December	437	-
		________	________

        Of this total deferred tax asset, £350,000 arises in the Company.

20.	Share capital
		2012	2012	2011	2011
		No	£'000	No	£'000
	Allotted, called up and fully paid
	Ordinary shares	448,158,893	448	399,396,393	399
		__________	__________	__________	__________

On 10 November 2010, 1 ordinary share of £1.00 was issued for cash.  This was subdivided into 1,000 ordinary shares of £0.001 each.

Movements in 2011

During the period, the Company acquired all the shares in Iron Glen Holdings Limited ("IGH") by way of share for share exchange. The shares issued during the period to the shareholders of IGH were as follows:

·    on 25 November 2010 138,339,979 ordinary shares were issued at £0.05 each

·    on 15 January 2011, 56,155,002 ordinary shares were issued at £0.05 each

·    on 3 February 2011, all the issued ordinary shares of £0.001 each was subdivided into 777,983,924 ordinary shares of £0.00025 each

·    on 16 March 2011, 340,831,564 ordinary shares were issued at £0.00025 each 

·    on 29 March 2011, 6,706,668 ordinary shares were issued at £0.00025 each

·    On 9 May 2011, all the issued ordinary shares of £0.00025 each were consolidated into 281,380,539 ordinary shares of £0.001 each

On 3 June 2011, 15,000,000 ordinary shares of £0.001 each were issued for cash at £0.05 each.

On 7 July 2011 1,000,000 ordinary shares of £0.001 each and on 29 July 2011 a further 500,000 ordinary shares of £0.001 each were on exercise of the same number of warrants at £0.05 each.

On 16 September 2011, 94,000,000 ordinary shares of £0.001 each were issued in exchange for all the issued share capital of Ebony Iron Pty Limited.

On 1 November 2011, 7,515,854 ordinary shares for £0.001 each were issued for cash at £0.1 each.

Movements in 2012

On 12 January 2012, 3,700,000 ordinary shares of £0.001 each were issued for cash at £0.10 each and a further 6,000,000 ordinary shares were issued on 30 January 2012 to acquire tenement ownership rights from Quadrio Reserves Pty Limited pursuant to the acquisition completed on 25 January at a price of £0.0975 per share.

On 2 May 2012, the Company completed a private placing of 39,062,500 ordinary shares of £0.001 each at £0.08 per share to raise £3,125,000 before expenses. In addition, participants in the placement were granted a one for one warrant on each share purchased exercisable at £0.12 per share on or before 30 April 2014.

        Post year end

On 7 February 2013 the Company completed a private placing of 102,666,667 ordinary shares of £0.001 each at £0.045 per share to raise £4,200,000 net of expenses.

On 27 March 2013 the Company received notice of the exercise of 3,000,000 warrants to subscribe for 3,000,000 new ordinary shares of £0.001 each.

21.	Share-based payments

The Group has a share-ownership compensation scheme for senior executives of the Group whereby senior executives may be granted options to purchase ordinary shares in the Company.

The Group has on occasion issued warrants as detailed below to third parties in settlement of liabilities to strategic suppliers. Each share warrant converts into one ordinary share of Strategic Minerals Plc upon exercise. No amounts are paid or payable by the recipient of the warrant for the warrant. The warrants carry neither rights to dividends nor voting rights at shareholders meetings.

Warrants

On 31 March 2011, 23,369,988 warrants were issued to a supplier for services provided, exercisable at £0.0186 per share on or before 31 March 2014.

On 31 March 2011, 3,000,000 warrants were issued to a supplier for services provided, exercisable at £0.001 per share on or before 31 March 2013.  On 27 March 2013 the Company received notice and these warrants were exercised for 3,000,000 new ordinary shares at £0.001 each.

On 1 June 2011, 4,445,708 warrants were issued to a supplier for services provided, exercisable at £0.05 per share on or before 8 June 2012. On 7 July 2011, 1,000,000 warrants were exercised at £0.05 per share and the remaining warrants were forfeited by the warrant holder.

On 30 June 2011, 8,921,416 warrants were issued to a supplier for services provided, exercisable at £0.05 per share on or before 29 June 2016. On 29 July 2011, 500,000 such warrants were exercised at £0.05 per share.

On 1 March 2012, 12,000,000 warrants were issued to a third party advisor to the Company comprising 4,000,000 at an exercise price of £0.12 per share, 4,000,000 at an exercise price of £0.16 per share and 4,000,000 at an exercise price of £0.20 per share.  The warrants vest in quarterly periods commencing 1 June 2012 until 1 March 2015 at the rate of 1,000,000 warrants per quarter.

On 3 May 2012, 39,062,500 warrants were issued to participants in an equity placement of 39,062,500 new ordinary shares at £0.08 per share at an exercise price of £0.12 per share and exercisable on or before 30 April 2014.

The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing model. Expected volatility was originally stated at 10% but has been revised to 55% as this is considered more appropriate given the Company does not have a long representative period to consider and therefore the Directors have also looked at comparable companies.  The assumptions used in the calculation were as follows:

		March 2011 warrants	March 2011 warrants	1 June 2011 warrants	May 2012 warrants	March 2012 warrants
	Share price at date of grant	5.00p	5.00p	7.25p	8.80p	10.75p
	Exercise price	1.86p	0.10p	5.00p	12.00p	12.00p
	Expected volatility	55%	55%	55%	55%	55%
	Expected dividend	Nil	Nil	Nil	Nil	Nil
	Contractual life	3 years	2 years	3 years	2 years	3 years
	Risk free rate	4%	4%	4%	0.22%	0.39%
	Estimated fair value of each warrant	3.12p	4.51p	3.32p	0.29p	3.2p

Number of outstanding Warrants at 31 December 2012:

	Date of		Exercised/		At	Exercise	Exercise/
	grant	Granted	vested	Forfeits	31.12.12	price	Vesting date
							From	To
	31.03.11	23,369,988	-	-	23,369,988	1.86p	31.03.11	31.03.14
	31.03.11	3,000,000	-	-	3,000,000	0.1p	31.03.11	31.03.13
	01.06.11	4,445,708	(1,000,000)	(3,445,708)	-	5p	01.06.11	02.12.11 (½)
								02.06.12 (½)
	30.06.11	8,921,416	(500,000)	-	8,421,416	5p	30.06.11	29.06.16
	01.03.12	4,000,000	-	-	4,000,000	12p	01.06.12	01.03.13
	01.03.12	4,000,000	-	-	4,000,000	16p	01.06.13	01.03.14
	01.03.12	4,000,000	-	-	4,000,000	20p	01.06.14	01.03.15
	03.05.12	39,062,500	-	-	39,062,500	12p	03.05.12	30.04.14
		_________	_________	_________	_________
		90,799,612	(1,500,000)	(3,445,708)	85,853,904
		_________	_________	_________	_________

Options

On 31 March 2011, 26,639,956 options were issued to the Group's Directors and key management personnel, exercisable at 3.1p per share on or before 31 March 2014.

Number of outstanding options at 31 December 2011:

	Date of		Exercised/		At	Exercise	Exercise/
	grant	Granted	vested	Forfeits	31.12.11	price	period
	31.03.11	26,639,956	-	-	26,639,956	3.1p	31.03.11 to 31.03.14
		_________	_________	_________	_________

The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:

	Share price at date of grant	5p
	Exercise price	3.10p
	Expected volatility	55%
	Expected dividend	Nil
	Contractual life	3 years
	Risk free rate	4%
	Estimated fair value of each warrant The total number of share options and warrants outstanding at 31 December 2012 was 100,493,860. The share options outstanding at the year-end had a weighted average remaining contractual life of 730 days (2011 - 1,096).	2.44p

22.	Commitments

(a)    Operating lease commitments

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

		2012	2011
	Group	£'000	£'000
	Within one year	54	37
		________	________

(b)    Capital expenditure commitments

At 31 December 2011, Southern Minerals Group LLC had an outstanding commitment amounting to approximately USD1,164,914 relating to the refurbishment of a spur rail line in New Mexico.

At 31 December 2012, no capital commitments existed.

23.	Controlling party

There is no ultimate controlling party of the Group. Strategic Minerals Plc acts as the parent Company to Iron Glen Holdings Pty Limited, Ebony Iron Pty Limited, Iron Glen Pty Limited, Southern Minerals Group LLC, Jotanooka Iron Pty Limited and Dragon Rock Minerals Pty Limited.

24.	Related party transactions

Transactions in 2012

During the year Strategic Minerals Plc settled various expenses on behalf of Ebony Iron Pty Limited, Iron Glen Holdings and Iron Glen Pty Limited in the amount of £1,035,967, £282,003 and £603,980 respectively.  A loan previously held in Ebony Iron Pty Limited for £1,186,000 was transferred to Strategic Minerals Plc in the year.  These loans are non-interest bearing, unsecured and have no fixed repayment and are at call.  At 31 December 2012 these amounts all remained due to the Company.  In addition the Company charged £41,854 to Iron Glen Holdings Pty Limited for management fees for the year ended 31 December 2012.

During the year the Company advanced funds to Southern Minerals Group LLC of £4,299,077 to fund the working capital requirements of that entity.  Southern Minerals Group LLC also invoiced the Company for the costs incurred in connection with the Company's export sales at a margin.  The Company also charged management fees of £114,016 for the year ended 31 December 2012.  At 31 December 2012 the balance due from Southern Minerals Group LLC was £2,006,385 and is non-interest bearing and unsecured without any fixed repayment terms.

During the year £29,716 was paid to Sanders Ortoli Vaughn-Flam Rosenstadt LLP, a firm in which S Sanders is a member, in connection with legal advice provided to the Company.  An amount of £17,500 was also incurred in respect of Directors' fees.

During the year £20,000 and £27,000 was paid to RiverWide Capital Partners Limited, a Company in which J Fyfe and P Harrison have a material interest, for consultancy services and the provision of the Company's London office facilities respectively.

During the year £17,500 was paid to M A Borelli, a director of the Company for Directors' fees.  £24,000 was paid to M D Bonthrone, a director of the Company, for Directors' fees.  An amount of £116,883 was paid to P Griffiths, a director of the Company for director and consultancy fees.  An amount of £140,000 each paid to J Fyfe and P Harrison, Directors of the Company, for director and consultancy fees.

At 31 December 2012 an unsecured loan of £160,000 was due to Walter Doyle, a shareholder of the Company on which interest of 10% is charged.

Transactions in 2011

During the period ended 31 December 2011, Strategic Minerals Plc loaned money to and paid expenses on behalf of Ebony Iron Pty Limited, Iron Glen Holdings and Iron Glen Pty Limited in the amount of £586,270, £156,561 and £107,478 respectively. The loans are non-interest bearing, unsecured, have no fixed repayment term and are at call. At the yearend these amounts all remained due to the Company. In addition, the Company charged £249,424 to Iron Glen Holdings Pty Limited for management fees in the period ended 31 December 2011.

During the period £32,500 and £68,333 were paid to Sanders Ortoli Vaughn-Flam Rosenstadt LLP, in which S. Sanders a director of the Company is a member, for Directors' fees and salary and consultancy fees respectively.

During the period, £1,000 and £75,667 were paid to M D Bonthrone, a director of the Company, for Directors' fees and consultancy fees respectively.

During the period, £32,500 was paid to M A Borrelli, a director of the Company, for Directors' fees.

During the period, £1,000 and £97,834 were paid to P Griffiths, a director of the Company for Directors' fees and consultancy fees respectively.

During the period, £30,207 and £7,907 were paid to J Felix and J Bohringer, Directors of Iron Glen Holdings Pty Limited, for consultancy and Directors fees respectively.

During the period, £113,353 was paid to JASP Pty Limited, in which J Peters is a director of Ebony Iron Pty Limited, for consultancy fees.

During the period, £31,909 was paid to D Weidermeir, a director of Ebony Iron Pty Limited, for director's fees.

As at the 31 December 2011, an unsecured and interest free loan of £166,719 was due to Walter Doyle, a shareholder of the Company. During the period, an amount of £28,003 was paid to Walter Doyle for consultancy services.

25.	Events after the reporting period

On 7 February 2013 the Company issued 102,666,667 fully paid ordinary shares at £0.045 per share pursuant to an Equity Placement which raised £4.2million net of expenses.

On 27 March 2013 the Company received notice of the exercise of 3,000,000 warrants to subscribe for 3,000,000 new ordinary shares of £0.001 each.

 

END

 

 

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