Final Results

RNS Number : 9653Y

Strategic Minerals PLC

23 May 2016

 

23 May 2016

Strategic Minerals plc

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

Final Results for the year ended 31 December 2015

Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the minerals production and development company, is pleased to announce its final results for the year ended 31 December 2015.

Financial Highlights

·     Cash position of the Group as at 31 December 2015 was $1,049,000

Operational Highlights

·     Early agreement was secured to extend the Cobre mining rights to March 2017;

·     The Company maintained a tight control on overheads with these falling approximately 26% despite increased activity in the year; and

·     The Group's strategy has been reviewed and the Board has undertaken an operating strategy seeking to maintain overheads and has adopted a three-pronged investment strategy across minerals addressing Coal and Bulk Minerals; Advanced Materials; and Metals.

Post Year-End Highlights

·     Negotiations completed in January 2016 to acquire up to 50% of Central Australian Rare Earth Pty Ltd ("CARE");

·     The Company ceased its activity on the Tatu Project and SML ended its involvement in February 2016; and

·     Withdrew from the discussions on the Wanbao Coal Mine in China due to the difficulties in attracting funding.

The Company's Managing Director, John Peters, said:

"2015 was a challenging year where tough decisions had to be made in light of turbulent market conditions, but also a transformational one in which the Company took a stake in an exciting new project and adopted a new investment strategy.  

"We are confident that Strategic Minerals is well positioned for 2016 with a solid cash flow foundation and a proposed self-funded drilling program, and that the outlook for the Company is encouraging. Strategic Minerals now has lower overheads, an existing cash flow stream from Cobre and the potential upside from a drilling programme at the Company's Laverton project in Western Australia. The Company continues to maintain tight controls on its overheads and the Group is actively examining a number of potential opportunities and we look forward to securing additional projects during the year."

For further information, please contact:

Strategic Minerals plc John Peters Managing Director	[phone]
Allenby Capital Limited Nominated Adviser and Joint Broker Jeremy Porter James Reeve	[phone]
Cornhill Capital Limited Joint Broker James Sheehan Colin Rowbury Yellow Jersey PR Limited Financial PR Dominic Barretto Alistair de Kare-Silver	[phone] [phone]

Notes to Editors

Strategic Minerals plc is a minerals production and development company registered in the UK and listed on the AIM market (AIM: SML) of the London Stock Exchange. The Company has projects in the United States of America and Australia. The Company is focused on acquiring and developing cash generative, high quality projects which meet local market demand for commodities. 

In September 2011, Strategic Minerals purchased its first cash generating asset, the Cobre magnetite tailings dam project in New Mexico, USA which it brought into production in 2012 and continues to provide a revenue stream for the Company. The Company acquired, in January 2016, a right to take up to a 50% interest in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia and the Northern Territory that are prospective for nickel sulphides and rare earths.

Chairman's Statement

I am pleased to present the Strategic Minerals Plc's Annual Report for the year ended 31 December 2015. It was a year where tough decisions were made in light of turbulent market conditions, but the Company is nonetheless well positioned for 2016 with a solid cash flow foundation, a proposed self-funded drilling program and the outlook is more encouraging with the Group examining a number of potential projects.

The Group made a comprehensive loss of $1,016,000 as compared to a comprehensive loss in 2014 of $5,712,000. This year's loss reflected operating costs and costs associated with the Tatu project ($540,000), which commenced in March 2015 and then was halted in early 2016. The substantial turn around in gross profit ($1,006,000) from a gross loss in 2014 ($629,000) reflects the cessation of international magnetite sales and a focus on domestic sales. The Group had cash of US$1.049m as at 31 December 2015.

The year has proven to be a challenging one for the international minerals sector and this has impacted upon the plans and arrangements made during earlier periods. Previous plans had to be reviewed in light of the deteriorating market conditions, and tough decisions have had to be made.

Our re-focused Cobre operations are now cash generative and sales ended the year on a strong note with the pipeline for 2016 looking promising. Early agreement was secured to extend the Cobre mining rights to March 2017.

Conditions relating to the Tatu project deteriorated and the Board took the decision to cease the Company's involvement in this project, preferring to safeguard funds for other projects more likely to produce better results.

The Company also withdrew from the discussions on the Wanbao Coal Mine in China due to the difficulties in attracting funding. 

The Company negotiated and conducted due diligence on the rights to acquire, from Rarus Limited ("Rarus"), up to 50% of Central Australian Rare Earth ("CARE") which focuses on nickel sulphide, rare earths and gold exploration.

The strategic focus on near term cash flow projects, enacted throughout 2015, resulted in the Company having a bulk commodities bias.  As the year progressed and these types of projects became more marginal, the market indicated that it was not enamoured by such projects and that further equity to complete these projects would be difficult to raise.

In light of these developments, the Board refocused its strategy with an aim to keep overheads within operating cash flows from the Cobre mine in New Mexico, USA and has adopted a three pronged approach to investments centred around;

a)    Projects with off take arrangements for Bulk Material Minerals;

b)    Advanced Materials (rare Earths, Lithium and Graphite etc) with demand upside; and

c)    Metals expecting significant price improvement over three to five years (nickel, gold, tin etc).

The Company is confident that it is in a stronger position moving into 2016. It has lower overheads, and, at a time when many of the minnow mining companies are being forced to close their doors, we continue to be one of the few that has an underlying cash flow. Additionally, there is the potential upside from a drilling program at the Company's Laverton project in Western Australia. 

The 2016 financial year is expected to see a number of valuable assets become available and we anticipate that we will be in a position to secure access to these assets with minimal cash commitments.

Already we have seen a number of potential opportunities and we look forward to securing additional projects during the year, as well as executing upon the drilling programme in Central Australian Rare Earths Pty Ltd.

The Company now has a good balance of minerals experience and financial acumen within its Board and management which provide it a sound basis for the coming years.

I look forward to working with my fellow Directors and the staff of the Company to ensure that the 2016 financial year is one of operating consolidation and project growth for the Company.

Finally, I would like to acknowledge the support of our shareholders, suppliers and other stakeholders and I look forward to your continued support during 2016 and beyond.

Alan Broome AM

Chairman

23 May 2016

Strategic Review

The Directors of the Company and its subsidiary undertaking (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2015.

Financial Performance

The Company and Group's reporting currency is US dollars as the Group's revenues, expenses, assets and liabilities are predominately in US currency.

The Group made a loss before tax for the financial year of $0.9M (2014: $6.1M). The loss was mainly attributable to operating costs and project investments not carried on. The total after tax loss for the year is $0.9M (2014: $5.7M).

During the year, decisions were undertaken not to proceed with a number of projects and, while all the Australian assets relinquished had already been fully impaired, there continued to be a need to provide for the cessation of the Tatu project. Accordingly, a net $540,000 relating to expenditure on this project was expensed in the 2015 financial year reflecting, effectively, our total cost associated with the project. A further $70,000 non-cash allowance was made in the period for the allocation of options to the Board and management during this period.

The Board and management continued to keep a tight rein on overheads and administration costs decreased again in 2015 by approximately 26% falling to $1.3M compared to $1.7M in 2014.   

In line with the Company's adoption of the virtual certainty rule in valuing deferred tax credits and liabilities, no adjustment for taxation has been made in this financial year and the taxation credit shown in the 2014 financial year arises from the release of a deferred tax liability related to the intangible asset of the Cobre asset. No tax liability existed at 31 December 2015 and the Company has substantial tax losses carried forward.

Project Review and activities

Cobre Performance

2015 proved an uneven year for operations at the Cobre mine. While it began in line with general expectations, there was a significant lull in demand through May to July. However, in line with the nature of sales at this location, the latter part of 2015 saw demand recover and the year end on par with 2014. This is a pleasing result considering the fall in iron ore prices during 2015 reflecting falling global demand.

During the year, 18,454 short wet tons of magnetite was sold for $1,252,000 compared to the 2014 year when 18,780 short wet tons were sold for $1,266,000. Operations at the mine continue to be closely managed while still ensuring adequate service to customers and safe operating conditions. 

From the middle of 2015, the Company's operating subsidiary at Cobre, Southern Minerals Group LLC ("SMG"), has been applying cash flow to the repayment of debts accumulated when it was exporting product overseas and to acquire machinery for operations. These payments should complete in the May of 2016 and cash flows from Cobre's operations will then become fully available to the Company.

The Company continues to monitor the potential to produce a heavy dense media ("HDM") product suitable for use in flotations circuits in the coal and potash industries. A HDM project at Cobre will be dependent on obtaining long term supply of the magnetite at Cobre, demand for the HDM product being identified at economically justifiable prices and a plausible investment case established. Until then, the HDM project will be placed on hold.

In December 2015, the Company announced a renewed agreement with Freeport, extending its rights at Cobre until March 2017. The Company continues an on-going dialogue with Freeport and hopes to secure a more permanent, mutually beneficial arrangement for future operations at Cobre.

During 2015 and into 2016, SMG has been in discussions with the rail provider to the Cobre mine, South Western Rail Road ("SWRR"), concerning rail facilities provided under previous contracts and concerns we have had that these may have not been completed in line with the contractual requirements. It is anticipated that SMG will take appropriate action to ensure that its entitlements under these contracts have been adequately made or that compensation is provided.

Tatu Project

In March 2015, the Company secured a contract to purchase 100% of the Tatu coal project by acquiring King Country Mine Limited ("KCM") in New Zealand for NZ$255,000 in cash, and a royalty of up to US$2 per tonne of product sold. The Company subsequently completed the purchase of 51% of KCM for a total of NZ$132,500 (including a NZ$5,000 signing fee). Subsequently, regulatory approval was received by the New Zealand authorities for change of control of the mining permits held by KCM.

The Company then appointed a mine manager and undertook a bulk sample to prepare for direct marketing of the planned mine output as well as conducting preparatory work. Whilst the bulk sample produced results largely consistent with previous assessments, it required additional testing to confirm that the deposits situated further from the mine's entrance had lower levels of sulphur. Before committing to this additional expenditure, and in light of the deterioration of the global and domestic coal markets, the Board and management considered it prudent to seek an extension of the deadline to acquire the balance of the equity in KCM, to check on commercial funding for part of the project and re-assess local demand.

As a result of its enquiries the Company found:

a)    it was unable to reach agreement on an extension to the option exercise deadline;

b)    debt funding was unlikely to be available for a substantial portion of the capital expenditure; and

c)    the combination of deteriorating business conditions in New Zealand and the run down in Genesis Energy's coal stockpile, were likely to depress prices for two to three years and result in customers being reluctant to commit to future orders.

These factors worked in tandem to result in the Company withdrawing from any further involvement with the Tatu project.

Wanbao Project

In March 2015, the Company entered into a Memorandum of Understanding with the owners of the Wanbao Metallurgical Coal Mine based in China. The Memorandum of Understanding provided Strategic Minerals the opportunity, over six months, to assess the underlying resource, its market logistics and to then negotiate a mutually agreeable acquisition of up to 49% of the mine. The Company would approach an investment in China cautiously and hence would undertake an extensive due diligence process to ensure that any investment is de-risked and appropriately managed.

Despite attempts to raise private equity style funding for the project, the Company was unable to secure a transaction that would be possible to be funded without a degree of uncertainty and it withdrew from further involvement.

Central Australia Rare Earth Pty Ltd ("CARE") Tenements

In the fourth quarter of 2015 and into January of 2016, the Company negotiated and conducted due diligence on the potential acquisition of 50% of CARE from its owner Rarus Limited. On 1 February 2016, the Company took an initial subscription of 25.5% of CARE for AUD $130,000 and has the right, over a twelve month period, to undertake a second subscription for a further AUD $250,000 which will take the Company's stake in CARE up to 50%.

CARE has ownership rights on twenty four tenements. Four of these tenements, known as the Laverton Project, are subject to a farm-in joint venture with ASX-listed Focus Minerals Limited ("Focus") that grants CARE the right to explore Focus' tenements near the Western Australian Goldfields town of Laverton for 90% ownership of, nickel and other commodities discovered in the tenements excluding gold, copper (where it is the dominant commodity present) and silver to which Focus maintains 100% ownership rights.   

The AUD $250,000 from the second subscription will be used to fund a nickel sulphide exploration drilling programme at the highly prospective Hanns Camp Prospect located within CARE's Laverton Project. Further details on the geology of the site can be found on the Company's website.

In addition to the Laverton Project, CARE holds 100% of a number of tenements in Western Australia that are prospective for rare earths including properties adjoining Lynas Corporation's Mount Weld REE Mine, some of which may also be prospective for gold. 

Rarus has over the past three years secured and developed plans to explore the tenements held in CARE and has expended over USD $1 million to date in the process. A proposal to drill-test the targets at Hanns Camp has been prepared and both Rarus and Strategic Minerals have reviewed and approved the programme with a view to drilling commencing in May 2016.

Safety

The Company is pleased to report that, during 2015, across its operations in United States and Australia that the Company had zero safety incidents and incurred no environmental, regulatory, or operation violations. The Company was quick to implement basic safety procedures in New Zealand at its Tatu Project following the initial acquisition of 51% of the project.

Board and Management Changes

In January 2015, to ensure the Company had the appropriate resources to complete its growth strategy the Company appointed Mr John Peters as Managing Director and Mr Michael Wong Non-executive Director to the Board. At that time Mr Julien McInally stepped down from the Board and remains a key part of management team as Chief Financial Officer.  Mr Lyle Hobbs moved to a Non-executive Director's role at the same time.

In June 2015, Mr Michael Wong stood down as Director, due to other commitments, and the Company appointed Mr Alan Broome OAM as Chairman. Mr Broome's considerable experience across a number of mineral projects was considered a further balancing of resources available to the company at a Board and Management level.

Key Performance Indicators

The Board monitors the activities and performance of the Group on a regular basis. The principal KPIs monitored by the Company are domestic sales of product from Cobre, the cash position of the Group and the health, safety and environmental incidents of the Group. The cash position of the group as at 31 December 2015 was $1,049,000 and there were no health, safety and environmental incidents reported in the year.

Strategy

The near term cash flow strategy adopted by the Company in early 2015 resulted in a bias towards bulk commodities which have been hard hit, in both demand and pricing, during the year. In early 2016, the Company moved away from this strategy and refocused emphasising both an operating and investment strategy.

The Operating Strategy is centred on maintaining and improving cash flows from the Company's magnetite stockpile at the Cobre mine in New Mexico, USA, whilst also limiting corporate overheads in line with this profitability, thus ensuring operating self-sufficiency.

The Investment Strategy is built around a three pronged approach which features bulk commodities with offtake arrangements, advanced materials with expected improvement in demand (Rare Earths, Lithium, Graphite etc) and metals with expected pricing improvements over the next three to five years (Nickel, Gold, Lithium etc).

The Company is well positioned with a sound cash flow foundation, a proposed self-funded drilling program and is examining a number of potential projects.

Outlook and Prospects

The Company continues to maintain controls on its overheads, whilst other developments have been undertaken including a focus at Cobre on profitable domestic sales, the drilling of the CARE tenements and continued examination of potential projects.

The Board and Management have observed a growing trend of minnow mining companies facing major liquidity problems and it feels that, by keeping our house in order, the Company will be well placed to take advantage of opportunities that arise from these liquidity crunches to acquire value adding assets.

The Board is confident that the outlook for the Company is encouraging as it now has lower overheads, an existing cash flow stream from Cobre and the potential upside from a drilling programme at the Company's Laverton project in Western Australia.

John Peters

Managing Director

23 May 2016

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2015

		Year to	Year to	Year to	Year to
		31 December	31 December	31 December	31 December
	Note	2015	2015	2014	2014
		$'000	$'000	$'000	$'000
Revenue	4		1,252		6,089
Raw materials and consumables			(246)		(6,718)
Used			________		________
Gross profit/(loss)			1,006		(629)
Foreign exchange gain/(loss)		(11)		183
Overhead expenses	5	(1,251)		(1,684)
		(1,262)		(1,501)
Non cash costs
Depreciation	13	(10)		(2)
Impairment of loan to joint operation		(222)		-
Write back of provisions	19	831		-
Impairment of receivable		-		(286)
Amortisation of intangible asset	11	-		(1,545)
Impairment of intangible asset	11	(1,149)		(2,079)
Share based payment		(70)_-		-
Total Non cash costs		(620)		(3,912)
Total administration expenses			(1,882)		(5,413)
			________		________
Loss from operations			(876)		(6,042)
Finance expense	7		(4)		(14)
			________		________
Loss before taxation			(880)		(6,056)
Income tax credit	8		-		324
			________		________
Loss for the period attributable to the owners of the parent			(880)		(5,732)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange gains arising on translation of foreign operations			(136)		20
			________		________
Total comprehensive income/(loss) attributable to the owners of the parent			(1,016)		(5,712)
			________		________

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

Basic and diluted	10		($0.001)		($0.009)
			________		________

 

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

		2015	2014
	Notes	$'000	$'000
Assets
Non-current assets
Intangible assets	11	-	-
Property, plant and equipment	13	190	2
		________	________
		190	2
		________	________
Current assets
Inventories	14	4	17
Trade and other receivables	15	418	244
Cash and cash equivalents	16	1,049	946
		________	________
		1,471	1,207
		________	________
Total Assets		1,661	1,209
		________	________
Equity and liabilities
Share capital	21	1,430	1,169
Share premium reserve	21	42,883	41,707
Merger reserve		20,240	20,240
Foreign exchange reserve		(276)	(140)
Share options reserve	22	97	-
Other reserves		(23,023)	(23,023)
Retained earnings		(40,327)	(39,447)
		________	________
Total Equity		1,024	506
		________	________
Liabilities
Non-current liabilities
Provision for mining royalties	19	-	-
		________	________
		-	-
		________	________
Current liabilities
Loans and borrowings	17	85	-
Trade and other payables	18	552	703
		________	________
		637	703
		________	________
Total Liabilities		637	703
		________	________
Total Equity and Liabilities		1,661	1,209
		________	________

STRATEGIC MINERALS PLC

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2015

	Notes	2015	2014
		$'000	$'000
Assets
Non-current assets
Investments	12	-	387
Property, plant and equipment	13	-	2
		________	________
		-	389
		________	________
Current assets
Trade and other receivables	15	509	544
Cash and cash equivalents	16	782	114
		________	________
		1,291	658
		________	________
Total Assets		1,291	1,047
		________	________
Equity and liabilities
Share capital	21	1,430	1,169
Share premium reserve	21	42,883	41,707
Merger reserve		20,240	20,240
Foreign exchange reserve		62	156
Share options reserve	22	97	-
Retained earnings		(63,713)	(62,475)
		________	________
Total Equity		999	797
		________	________
Liabilities
Non-current liabilities
Provision for mining royalties	17	-	-
		________	________
		-	-
		________	________
Current liabilities
Trade and other payables	18	292	250
		________	________
		292	250
		________	________
Total Liabilities		292	250
		________	________
Total Equity and Liabilities		1,291	1,047
		________	________

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2015

		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
Cash flows from operating activities
Loss before tax		(880)	(6,056)
Adjustments for:
Depreciation of property, plant and equipment		10	2
Impairment to intangible assets		1,149	2,079
Impairment of loans to joint operations		222	-
Write back of provision on mining royalies		(831)	-
Amortisation of intangible assets		-	1,545
Loss on disposal of property, plant and equipment		2	-
Decrease in inventory		13	2,206
(Increase) / decrease in trade and other receivables		(174)	3,291
Increase / (decrease) in trade and other payables		(268)	(4,749)
Share based payment expense		70	-
		_______	_______
Net cash used in operating activities		(687)	(1,682)
		_______	_______
Investing activities
Acquisition of intangible fixed assets		(231)	(92)
Acquisition of property, plant and equipment		(200)	-
Loans to joint operations		(222)	-
Investment in joint operations		(100)	-
		_______	_______
Net cash used in investing activities		(753)	(92)
		_______	_______
Financing activities
Net proceeds from issue of equity share capital		1,463	1,542
Net proceeds/(repayment) from borrowings		85	-
		_______	_______
Net cash from financing activities		1,548	1,542
		_______	_______
Net decrease in cash and cash		108	(232)
equivalents
Cash and cash equivalents at beginning of year		946	1,183
Effects of exchange rate changes on the balance of cash held in foreign currencies		(5)	(5)
		_______	_______
Cash and cash equivalents at end of year		1,049	946
		_______	_______

STRATEGIC MINERALS PLC

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2015

		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
Cash flows from operating activities
Loss before tax		(1,238)	(5,279)
Adjustments for:
Impairment to receivables from subsidiary undertakings		60	408
Impairment to investment in subsidiary		487	2,915
Depreciation		-	2
(Increase) / decrease in trade and other receivables		232	2,830
Increase / (decrease) in trade and other payables		103	(2,714)
Share based payment expense		70	-
		_______	_______
Net cash flows from operating activities		(286)	(1,838)
		_______	_______
Investing activities
Loans to joint operations		(453)
Investment in joint operations		(100)	-
Receipts from / (advances to) subsidiary undertakings		49	(23)
		_______	_______
Net cash flows from investing activities		(504)	(23)
		_______	_______
Financing activities
Net proceeds from issue of equity share capital		1,463	1,542
Net (repayment) / proceeds from borrowings		-	-
		_______	_______
Net cash from financing activities		1,463	1,542
		_______	_______
Net decrease in cash and cash equivalents		673	(319)
Cash and cash equivalents at beginning of year		114	438
Effects of exchange rate changes on the balance of cash held in foreign currencies		(5)	(5)
		_______	_______
Cash and cash equivalents at end of year		782	114
		_______	_______

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

	Share capital	Share  premium  reserve	Merger  reserve	Share  options  reserve	Other Reserves	Foreign  exchange  reserve	Retained earnings	Total equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 January 2014	884	39,847	20,240	2,478	(23,023)	(160)	(36,193)	4,073
Loss for the year	-	-	-	-	-	-	(5,732)	(5,732)
Foreign exchange translation	-	-	-	-	-	20	-	20
						_______	_______	_______
Total comprehensive income for the year						20	(5,732)	(5,712)
Shares warrants lapsed	-	-	-	(2,478)	-	-	2,478	-
Shares issued in the year	285	1,860	-	-	-	-	-	2,145
	_______	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2014	1,169	41,707	20,240	-	(23,023)	(140)	(39.447)	506
	_______	_______	_______	_______	_______	_______	_______	_______
Loss for the year	-	-	-	-	-	-	(880)	(880)
Foreign exchange translation	-	-	-	-	-	(136)	-	(136)
						_______	_______	_______
Total comprehensive income for the year						(136)	(880)	(1,016)
Share based payments	-	-	-	97	-	-	-	97
Shares issued in the year	261	1,309	-	-	-	-	-	1,570
Share issue costs	-	(133)	-	-	-	-	-	(133)
	_______	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2015	1,430	42,883	20,240	97	(23,023)	(276)	(40,327)	1,024
	_______	_______	_______	_______	_______	_______	_______	_______

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

STRATEGIC MINERALS PLC

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2015

		Share		Share
	Share	premium	Merger	Options	Foreign	Retained	Total
	capital	reserve	reserve	Reserve	exchange reserve	earnings	equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 January 2014	884	39,847	20,240	2,478	298	(59,674)	4,073
Loss for the year	-	-	-	-	-	(5,279)	(5,279)
Foreign exchange translation	-	-	-	-	(142)	-	(142)
					_______	_______	_______
Total comprehensive income					(142)	(5,279)	(5,421)
for the year
Share warrants Lapsed	-	-	-	(2,478)	-	2,478	-
Shares issued in the year	285	1,860	-	-	-	-	2,145
	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2014	1,169	41,707	20,240	-	156	(62,475)	797
	_______	_______	_______	_______	_______	_______	_______
Loss for the year					-	(1,238)	(1,238)
Foreign exchange translation					(94)	-	(94)
					_______	_______	_______
Total comprehensive income					(94)	(1,238)	(1,332)
for the year
Share based payments	-	-	-	97	-	-	97
Shares issued in the year	261	1,309	-	-	-	-	1,570
Share issue costs	-	(133)	-	-	-	-	(133)
	_______	_______	_______	_______	_______	_______	_______
Balance at 31 December 2015	1,430	42,883	20,240	97	62	(63,713)	999
	_______	_______	_______	_______	_______	_______	_______

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

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015

1.   Significant accounting policies

Basis of preparation

In preparing these financial statements the presentational currency is US dollars.  As the entire group's revenues and majority of its costs, assets and liabilities are denominated in US dollars it is considered appropriate to report in this currency.

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.

The financial statements have been prepared on a historical cost basis.

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 2017 being the period for which projections have been prepared and the minimum period the Directors are required to consider.

The projections include future sales from the Cobre operations, which are expected to be sold domestically. This domestic market is subject to unpredictable sales volumes and the Directors are of the view that future sales revenue is difficult to accurately forecast. If the Group is unable to meet its forecast sales revenue as a result of this unpredictability, further funding may be required. As a result, a material uncertainty exists which may cast significant doubt over the Group's ability to continue as a going concern and therefore it may be unable to release its assets and discharge its liabilities in the normal course of business.

After making enquiries, the Directors believe that the Group 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.

Adoption of standards effective in 2015

There were no new standards effective for the first time for periods beginning on or after 1 January 2015.

1.   Significant accounting policies

Issued IFRS that are not yet effective

Any standards and interpretations that have been issued but are not yet effective, and that are available for early application, have not been applied by the Group in these financial statements.

International Financial Reporting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended 31 December 2015:

IFRS 15 Revenue from Contracts with Customers

IFRS 15 is intended to clarify the principles of revenue recognition and establish a single framework for revenue recognition. The core principle is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard is effective for periods beginning on or after 1 January 2018. IFRS 15 is not yet endorsed by the EU.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement in its entirety.  This standard is effective for periods beginning on or after 1 January 2018 with retrospective application. IFRS 9 is not yet endorsed by the EU.

The effects of IFRS 15 Revenues from Contracts with Customers and IFRS 9 Financial Instruments are still being assessed, as these new standards may have a significant effect on the Group's future financial statements. The Group does not expect other pronouncements to have a material impact upon the Group's primary statements and disclosure.

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including

including:

-       The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights,

-       substantive potential voting rights held by the company and by other parties,

-       other contractual arrangements and

-       historic patterns in voting attendance.

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 acquisition 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 on which control ceases.

1    Significant accounting policies (continued)

Investment in joint operations

A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Those parties are called joint operators.

A joint operator shall account for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses.

The Group recognises its share of assets and liabilities of King Country Mining, as it is accounted for as a joint operation.

Impairment of non-financial assets (excluding inventories)

Impairment tests of 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'). 

Impairment charges are included in the statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income. 

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 statement of comprehensive income 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 statement of comprehensive income.

1    Significant accounting policies (continued)

Exploration and evaluation assets (continued)

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 has been valued using estimated discounted cash flow and is being amortised over the term of the contract at a rate to match the sale of magnetite.

Property, plant and equipment

Items  of  property,  plant  and  equipment  are  initially  recognised  at  cost. As  well  as  the purchase price, cost includes directly attributable costs.

Depreciation is provided on all items  of  property,  plant  and  equipment  so  as  to  write  off  their  carrying  value  over  their expected useful economic lives.  It is provided at the following rates:

·      Office equipment - 3 years straight line

·      Plant and machinery - on a unit of production basis

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

The carrying value of property, plant and equipment assets is assessed annually and any impairment is charged to the statement of comprehensive income.

Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in the statement of profit or loss. A leased asset is depreciated over the useful life of the asset.

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.

1    Significant accounting policies (continued)

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call with banks. Restricted cash is not available for use by the Group and therefore is not considered highly liquid.

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 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 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.

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 period 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 statement of comprehensive income, with a corresponding adjustment to equity.

1    Significant accounting policies (continued)

Share-based compensation (continued)

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.

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 Group has a present obligation as a result of a past event, and it is probable that the Group 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 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.

1    Significant accounting policies (continued)

Financial assets

The Group classifies its financial assets as loans and receivables.

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.  They arise principally through the provision of goods and services to customers (eg trade receivables), but also incorporate other types of contractual monetary asset.  They are initially recognised at fair value plus transaction costs that are directly attributable to tier acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.

Financial liabilities

The Group classifies its financial liabilities as other financial liabilities at amortised cost.

Other financial liabilities are trade payables and loans and borrowings, consisting of finance lease obligations, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

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.

On consolidation, the results of overseas operations are translated into US Dollars 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 gain 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 periodic cash flow projections 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

There are no judgements made in the current year that would have a material effect on the assets and liabilities of the Company in the next financial year. 

Estimates and assumptions

(a)  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 11.

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 the expected level of product which the Company will be able to sell. The carrying value for this intangible asset is now fully amortised. 

The carrying value of exploration and evaluation costs have been impaired in full due to the Company deciding to drop the Tatu Project in February 2016.

(b)  Share based payments

The fair value of share based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model after taking into account market based vesting conditions and 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.

(c)  Carrying value of investments and amounts owed by subsidiary undertakings

The shares and loans in subsidiary undertakings have been impaired as the directors have concluded that the net assets of the subsidiaries at reporting date are insufficient to recover the balances.

3	Financial instruments - Risk management

The Group is exposed the following financial risks:

·       Credit risk

·       Cash flow interest rate risk

·       Foreign exchange risk

·       Commodity 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

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

Financial assets

		Loans and receivables
		2015	2014
	Group	$'000	$'000
	Cash and cash equivalents	1,049	946
	Trade and other  receivables	372	196
		_______	_______
	Total financial assets	1,421	1,142
		_______	_______

	Financial liabilities
		Financial liabilities at amortised cost
		2015	2014
	Group	$'000	$'000
	Trade and other payables	501	560
	Loans and borrowings	85	-
		_______	_______
	Total financial liabilities	586	560
		_______	_______

3	Financial instruments - Risk management (continued)

	Financial assets	Loans and receivables
		2015	2014
	Company	$'000	$'000
	Cash and cash equivalents	782	114
	Trade and other  receivables	-	-
	Amounts owed by subsidiary undertakings	465	514
		_______	_______
	Total financial assets	1,247	628
		_______	_______

	Financial liabilities
		Financial liabilities at amortised cost
		2015	2014
	Company	$'000	$'000
	Trade and other payables	241	113
		_______	_______
	Total financial liabilities	241	113
		_______	_______

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 assessments 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.

At 31 December 2015 the Group had external borrowings of $85,000. The loan of the Group relates to the purchase of equipment and is based in US dollars. The carrying amount of the equipment being $190,000 has been provided as collateral over the loan. The loan incurs a fixed interest of 5% per annum.

There are no borrowings of the Company.

Cash flow interest rate risk

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

3	Financial instruments - Risk management (continued)

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.  In 2014, sales to the export market were invoiced by the parent Company in US dollars. In 2015 the parent Company had net payables owing which were denominated in both US dollar, New Zealand dollars 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
		US dollar						Sterling						Australian dollar								Total
		2015		2014				2015			2014			2015				2014				2015			2014
		$'000		$'000				$'000			$'000			$'000				$'000				$'000			$'000
	Group
	Net foreign currency financial assets/(liabilities)
	US dollar	269			209				41			13			-				381					310			603
	Sterling	-			-				640			(12)			-				-					640			(12)
	Australian dollar	-			-				(44)			-			25				(9)					(19)			(9)
	New Zealand dollar	-			-				(96)			-			-				-					(96)			-
		_______			_______				_______			_______			_______				_______					_______			_______
	Total net exposure	269			209				541			1			25				372					835			582
		_______	_______				_______						_______			_______			_______				_______			_______

3	Financial instruments - Risk management (continued)
		Functional currency of individual entity
		Sterling				Total
		2015	2014			2015	2014
		$'000	$'000			$'000	$'000
	Company
	Net foreign currency financial assets/(liabilities)
	US Dollar	41	13			41	13
	Australian dollar	(44)	-			(44)	-
	New Zealand dollar	(96)	-			(96)	-
		_______	_______			_______	_______
	Total net exposure	(99)	13			(99)	13
		_______	_______			_______	_______

Commodity price risk

In 2014, 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.  There were no exports of product in the 2015 year, hence, there is no exposure to market price risks in the current year.

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 Board receives periodic cash flow projections as well as information regarding cash balances.  The Group does not have any overdraft or credit lines in place other than a borrowing from an equipment supplier.  The liquidity risk of each Group entity is managed centrally by the finance function. 

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 2015	$'000	$'000	$'000	$'000	$'000
	Trade and other payables	405	96	-	-	-
	Loans and borrowings	43	42	-	-	-
		_______	_______	_______	_______	_______
	Total	448	138	-	-	-
		_______	_______	_______	_______	_______
			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 2014	$'000	$'000	$'000	$'000	$'000
	Trade and other payables	560	-	-	-	-
	Loans and borrowings	-	-	-	-	-
		_______	_______	_______	_______	_______
	Total	560	-	-	-	-
		_______	_______	_______	_______	_______

3	Financial instruments - Risk management (continued)

			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 2015	$'000	$'000	$'000	$'000	$'000
	Trade and other payables	241	-	-	-	-
	Loans and borrowings	-	-	-	-	-
		_______	_______	_______	_______	_______
	Total	241	-	-	-	-
		_______	_______	_______	_______	_______
			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 2014	$'000	$'000	$'000	$'000	$'000
	Trade and other payables	113	-	-	-	-
	Loans and borrowings	-	-	-	-	-
		_______	_______	_______	_______	_______
	Total	113	-	-	-	-
		_______	_______	_______	_______	_______

Capital Disclosures

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

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. 

4	Segment information

The Group has four main segments during the period:

·     Southern Minerals Group LLC (SMG) - This segment is involved in the sale of magnetite to both the US domestic market and historically transported 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 however these tenements were dropped during the financial year.

·     New Zealand - This segment holds the company's interest in the Tatu project in New Zealand which was secured during the financial year and consequently dropped in February 2016.

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 board and management team which includes the Board and the Chief Financial Officer.

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's statement of financial position.

4	Segment information (continued)
		SMG	Head Office		Australia		New Zealand		Intra Segment Elimination		Total
		2015	2015		2015		2015		2015		2015
		$'000	$'000		$'000		$'000		$'000		$'000
	Revenues	1,252	200		-		-		(200)		1,252
	Cost of sales	(246)	-		-		-		-		(246)
		_______	_______		_______		_______		-_______		_______
	Gross profit	1,006	200		-		-		(200)		1,006
	Overhead expenses	(623)	(809)		(19)		-		200		(1,251)
	Finance expense	(4)	-		-		-		-		(4)
	Share based payments	-	(70)		-		-		-		(70)
	Depreciation	(10)	-		-		-		-		(10)
	Impairment of intangible assets	-	-		-		(1,149)		-		(1,149)
	Write back of provisions	-	-		-		831		-		831
	Impairment of loan to joint operations	-	-		-		(222)		-		(222)
	Foreign exchange	-	(11)		-		-		-		(11)
		_______	_______		_______		_______		_______		_______
	Segment profit /
	(loss) before taxation	369	(690)		(19)		(540)		-		(880)
		_______	_______		_______		_______		_______		_______

4	Segment information (continued)

			Head		New
		SMG	Office	Australia	Zealand	Total
	As at 31 December 2015	$'000	$'000	$'000	$'000	$'000
	Additions to non-current assets (excluding deferred tax)	200	-	-	1,149	1,349
		_______	_______	_______	_______	_______
	Reportable segment assets (excluding deferred tax)	793	826	42	-	1,661
		_______	_______	_______	_______	_______
	Reportable segment liabilities	(327)	(292)	(18)	-	(637)
		_______	_______	_______	_______
	Deferred tax liabilities					-
						_______
	Total Group liabilities					(637)
						_______

			Head		New
		SMG	Office	Australia	Zealand	Total
	As at 31 December 2014	$'000	$'000	$'000	$'000	$'000
	Additions to non-current assets (excluding deferred tax)	-	-	92	-	92
		_______	_______	_______	_______	_______
	Reportable segment assets (excluding deferred tax)	666	144	399	-	1,209
		_______	_______	_______	_______	_______
	Reportable segment liabilities	(435)	(250)	(18)	-	(703)
		_______	_______	_______	_______
	Deferred tax liabilities					-
						_______
	Total Group liabilities					(703)
						_____ __

		External revenue by		Non-current assets
		location of customers		by location of assets
		2015	2014	2015	2014
		$'000	$'000	$'000	$'000
	United States	1,252	1,271	190	-
	Switzerland	-	4,818	-	-
	United Kingdom	-	-	-	2
		_______	_______	_______	_______
		1,252	6,089	190	2
		_______	_______	_______	_______

Revenues from Customer A totalled $463,000 (2014: $665,000), which represented 37% of total domestic sales in the United States (2014:52%) and Customer B totalled $485,000 (2014: $256,000) which represented 39% of total sales (2014: 20%).  There were no export sales in the year (2014: $4,818,000)

5	Operating loss Group

Costs by nature

		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
	Operating loss is stated after charging:
	Directors' fees and emoluments (Note 6)	249	794
	Fees payable to the company's auditor for the	40	28
	audit of the parent company and consolidated financial statements
	Staff costs (Note 6)	217	201
	Operating lease - land and buildings	-	31
	Legal, professional and consultancy fees	394	371
	Travelling and related costs	57	76
	Other expenses	294	183
	Foreign exchange gain/(loss)	11	(183)
	Amortisation of intangible asset	-	1,545
	Impairment to intangible asset (see note 11)	1,149	2,079
	Write back of provision	(831)	-
	Impairment of loan to joint operations	222	-
	Share based payments charge Depreciation Impairment of Receivable	70 10 -	- 2 286
		________	________

6	Directors and employees Group
	Staff costs during the year
		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
	Directors' remuneration including consultancy fees	249	794
	Wages and salaries	217	178
	Social security and other costs	-	23
	Share based payments	70	-
		________	________
	Total staff costs	536	995
		________	________

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

		2015	2014
		Number	Number
	Total	4	4
		________	________

6

Directors and employees (continued)

Remuneration of the Directors and other key management personnel in the period is summarised as follows:

		Directors' fees	Salary and  consultancy  fees	Loss of  office	Share based  payments	Total
		2015	2015	2015	2015	2015
		$	$	$	$	$
	A Broome	30,608	-	-	-	30,608
	J Peters	-	149,930	-	27,175	177,105
	L Hobbs	33,573	-	-	4,529	38,102
	J McInally	-	110,900	-	27,175	138,075
	M Wong	13,614	-	6,846	1,891	22,351
		________	________	________	________	________
	Total	77,795	260,830	6,846	60,770	406,241
		________	________	________	________	________

		Directors' fees	Salary and  consultancy  fees	Loss of  office	Share based  payments	Total
		2014	2014	2014	2014	2014
		$	$	$	$	$
	P. Griffiths	-	74,694	-	-	74,694
	J Fyfe	-	145,522	98,874	-	244,396
	P Harrison	-	32,958	98,874	-	131,832
	D Anderson	-	82,395	49,437	-	131,832
	P Stephens	18,539	-	4,120	-	22,659
	J McInally	-	134,556	-	-	134,556
	L Hobbs	-	41,059	-	-	41,059
	A Borelli	12,359	-	-	-	12,359
		________	________	________	________	________
	Total	30,898	511,184	251,305	-	793,387
		________	________	________	________	________

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

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

7	Finance expense Group
		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
	Loan interest and finance charges	4	14
		________	________

8	Taxation
		Year to	Year to
		31 December	31 December
		2015	2014
		$'000	$'000
	Current tax expense	-	-
	Deferred tax credit on amortisation and impairment of intangible	-	324
	Deferred tax (charge)	-	-
		________	________
		-	324
		________	________
	Reconciliation of effective tax rates	$'000	$'000
	(Loss) before tax	(880)	(6,056)
	Tax using UK domestic rates of corporation tax of 20 % (2014 - 21%)	(176)	(1,271)
	Effect of:
	Expenses not deductible for tax purposes	58	762
	Losses carried forward	118	509
	Deferred tax credit, net	-	324
		________	________
		-	324
		________	________

The Group has excess management expenses of $593,000 (2014 - $1,162,000) and unused losses to carry forward of $16,286,000 (2014 - $15,382,000).  No deferred tax asset has been recognised for losses as their full recovery is not probable in the foreseeable future. 

9	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 $1,238,000 (2014 - $5,279,000).

10	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 the year was basic 809,995,423 (2014 - 629,902,908). Fully diluted the weighted average was 809,995,423 (2014 - 629,902,908). The loss for the financial period was $880,000 (2014 - loss $5,732,000).

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.

 

11	Intangible Assets

Group

			Exploration/	Other
			evaluation	intangible
			costs	asset	Total
			$'000	$'000	$'000
	Cost
	At 1 January 2014		1,825	25,772	27,597
	Additions in the year		92	-	92
	Foreign exchange		162	-	162
			________	________	________
	At 31 December 2014		2,079	25,772	27,851
	At 1 January 2015		2,079	25,772	27,851
	Additions in the year (see note 26)		1,149	-	1,149
	Disposals		(2,079)	-	(2,079)
			________	________	________
	At 31 December 2015		1,149	25,772	26,921
			________	________	________
	Amortisation and impairment
	At 1 January 2014		-	24,227	24,227
	Impairment		2,079	1,545	3,624
			________	________	________
	At 31 December 2014		2,079	25,772	27,851
	At 1 January 2015		2,079	25,772	27,851
	Impairment		1,149	-	1,149
	Disposal		(2,079)	-	(2,079)
			________	________	________
	At 31 December 2015		1,149	25,772	26,921
			________	________	________
	Net book value
	At 1 January 2014		1,825	1,545	3,370
			________	________	________
	At 31 December 2014		-	-	-
			________	________	________
	At 31 December 2015		-	-	-
			________	________	________

Other intangible

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.  The intangible asset was fully written down in the prior year. 

11	Intangibles  (continued)

Mining tenements and exploration and evaluation costs

Exploration and evaluation costs are not currently being amortised as the carrying value of exploration and evaluation costs have been impaired in full due to the Company deciding to drop the Tatu Project in February 2016. The reasons for this decision were as follows:

a)   It was unable to reach agreement on an extension to the option timing;

b)   Debt funding was unlikely to be available for a substantial portion of the capital expenditure; and

c)   The combination of deteriorating business conditions in New Zealand and the run down in Genesis Energy's coal stockpile, were likey to depress prices for two to three years and result in customers being reluctant to commit to future orders.

The disposals during the year relate to the Australian assets being dropped during the financial year.

12	Investments

	Company	Loans to	Shares in
		Subsidiary	subsidiary
		Undertakings	undertakings	Total
		$'000	$'000	$'000
	Cost
	At 31 December 2014	6,027	45,752	51,779
	Movement in year	-	-	-
		________	________	________
	At 31 December 2015	6,027	45,752	51,779
		________	________	________
	Impairment
	At 31 December 2014	(6,027)	(45,365)	(51,392)
	Charge for the year	-	(387)	(387)
		________	________	________
	At 31 December 2015	(6,027)	(45,752)	(51,779)
		________	________	________
	Carrying Value
	At 31 December 2014	-	387	387
		________	________	________
	At 31 December 2015	-	-	-
		________	________	________

 

The shares and loans in subsidiary undertakings have been impaired as the directors have concluded that the net assets of the subsidiaries at reporting date are insufficient to recover the balances.

The impairment to shares in subsidiary undertakings belongs to the Australian reportable segment as per Note 4.

12	Investments (continued)

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 statement of financial position.

Holdings of more than 20%

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

	Subsidiary undertakings	Country of	Principal	Class of	%
		Incorporation	activity	share	Owned
	King Country Mining	New Zealand	Assets held for exploration	Ordinary	50%
	Iron Glen Holdings Pty Limited	Australia	Holding	Ordinary	100%
			Company
	Ebony Iron Pty Limited	Australia	Holding Company	Ordinary	100%
	Iron Glen Pty Limited (i)	Australia	Assets held for exploration	Ordinary	100%
	Southern Minerals Group LLC (ii)	USA	Sale of magnetite	Ordinary	100%
	Jotanooka Iron Pty Limited (i)	Australia	Assets held for exploration	Ordinary	100%
	Dragon Rock Minerals Pty Limited (i)	Australia	Assets held for exploration	Ordinary	100%

(i)    Held by Iron Glen Holdings Pty Limited

(ii)   Held by Ebony Iron Pty Limited

13	Property, plant and equipment
		Railway	Plant and	Office
		infrastructure	machinery	equipment	Total
	Group	$'000	$'000	$'000	$'000
	Cost
	At 1 January 2014	3,498	-	7	3,505
	Disposals	-	-	-	-
		________	________	________	________
	At 31 December 2014	3,498	-	7	3,505
	At 1 January 2015	3,498	-	7	3,505
	Additions	-	200	-	200
	Disposals	-	-	(7)	(7)
		________	________	________	________
	At 31 December 2015	3,498	200	-	3.698
		________	________	________	________
	Depreciation
	At 1 January 2014	3,498	-	3	3,501
	Charge in the year	-	-	2	2
		________	________	________	________
	At 31 December 2014	3,498	-	5	3,503
	At 1 January 2015	3,498	-	5	3,503
	Charge in the year	-	10	-	10
	Disposals	-	-	(5)	(5)
		________	________	________	________
	At 31 December 2015	3,498	10	-	3,508
		________	________	________	________
	Carrying value
	At 1 January 2014	-	-	4	4
	At 31 December 2014	-	-	2	2
		________	________	________	________
	At 31 December 2015	-	190	-	190
		________	________	________	________

The property, plant and equipment of the Company relate to office equipment only.

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2015

14	Inventories
		2015	2014
		$'000	$'000
	Finished goods held for sale	4	274
	Less stock provision	-	(257)
		________	________
		4	17
		________	________

There are no finished goods included at their fair value less cost to sell in 2015 (2014:$17,000).

No Inventories (2014: $257,000) have been written off to profit or loss in the year.

15	Trade and other receivables
		2015	2014
	Group	$'000	$'000
	Trade receivables	372	482
	Less: provision for impairment of trade receivables	-	(286)
		________ ________ 372	________ ________ 196
	Other receivables	46	48
		________	________
		418	244
		________	________
	Company
	Trade receivables	-	-
	Amounts owed by subsidiary undertakings	465	514
	Other receivables	44	30
		________	________
		509	544
		________	________

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
		2015	2014
	Group	$'000	$'000
	Bank current accounts - unrestricted	946	846
	Bank - restricted	103	100
		________	________
		1,049	946
		________	________

The restricted cash related to a cash deposit held for a Standby Letter of Credit as security for a supplier.

16	Cash and cash equivalents (continued)

		2015	2014
	Company	$'000	$'000
	Bank current accounts	782	114
		________	________

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

17	Borrowings

		2015	2014
	Group	$'000	$'000
	Loans and borrowings	85	-
		________	________

The loan of the Group relates to the purchase of equipment and is based in US dollars. The carrying amount of the equipment being $190,000 has been provided as collateral over the loan. The loan incurs a fixed interest of 5% per annum.

There are no borrowings of the Company.

18	Trade and other payables
		2015	2014
	Group	$'000	$'000
	Trade payables	501	560
	Other payables	-	51
	Accruals and deferred income	51	92
		________	________
		552	703
		________	________
	Company	$'000	$'000
	Trade payables	241	113
	Other payables	-	45
	Accruals and deferred income	51	92
		________	________
		292	250
		________	________

 

Book values approximate to fair value at 31 December 2015 and 2014.

19	Provisions

			Mining
			royalty	Total
			$'000	$'000
	At 1 January 2015		-	-
	On acquisition		831	831
	Write back of provision		(831)	(831)
			________	________
	At 31 December 2015		-	-
			________	________

The provision for mining royalty is the fair value of a mining royalty payable to the vendor of the Tatu project in New Zealand, which was acquired during the 2015 financial year. The fair value of the royalty provision was calculated based on the expected production over the life of the project discounted at 12% per annum and converted to US dollars at the exchange rate on the date of acquisition. The Company decided not to continue with the Tatu project in February 2016 and hence the provision has been written back during the 2015 financial year.

 

 

20	Deferred tax

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (2014 - 21%).  The reduction in the main rate of corporation tax to 21% was substantively enacted in July 2013. This new rate will be applied to deferred tax balances which are expected to reverse after 1 April 2014, the date on which that new rate becomes effective.

The deferred tax liability arises from the fact that the other intangible asset (see Note 11) has no tax base and thus the deferred tax liability represented the total tax credit that would be available if the amortisation of the intangible asset was tax deductible in an entity. Following the full impairment of the underlying intangible asset the remaining deferred tax liability has been released. The deferred tax asset arose from tax losses which were expected to be recovered in the foreseeable future.

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

		2015	2014
	Deferred tax liability	$'000	$'000
	At 1 January	-	324
	Recognised in profit and loss
	Tax credit	-	(324)
		________	________
	At 31 December	-	-
		________	________

		2015	2014
	Deferred tax asset	$'000	$'000
	At 1 January	-	-
	Recognised in profit and loss
	Tax (charge) / credit	-	-
	Foreign exchange	-	-
		________	________
	At 31 December	-	-
		________	________

Of this total deferred tax asset, $Nil (2014 - $Nil) arises in the Company.

21		Share Capital and Premium
			Number		Value $
		At 1 January 2014	553,825,560		40,731,273
		Placement on 10 April 2014	170,000,000		2,144,128
			__________		__________
		At 31 December 2014	723,825,560		42,875,401
		Placement on 12 June 2015	82,000,000		772,342
		Placement on 14 July 2015	84,666,667		798,525
		Issue costs on placements	-		(132,968)
			__________		__________
		At 31 December 2015 Ordinary shares of 1 pence each	890,492,227		44,313,300
			__________		__________

During the financial year, the Company raised $1,570,867 (£1,000,000) by placing 166,666,667 shares at a subscription price of £0.006 in two tranches. The first tranche of 82,000,000 shares was issued in June and a second tranche of 84,666,667 shares were issued in July after being approved by shareholders at the annual general meeting.  The cost associated with this capital raising was $132,968 which includes the value of broker options of US$27,000 as disclosed below in the options and warrants.

22	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. There were 62,000,000 options issued to directors and senior executives during the year and 8,333,333 options issued to brokers to the capital raising which was completed in July 2015.

The Group historically issued options and/or warrants to third parties in settlement of liabilities to strategic suppliers. Each share option or warrant converts into one ordinary share of Strategic Minerals Plc upon exercise. No amounts are paid or payable by the recipient of the options or warrants. The options and warrants carry neither rights to dividends nor voting rights at shareholders meetings.

Warrants and Options

Number of outstanding warrants and options at 31 December 2015 and a reconciliation of their movements during the year were:

	Date of	Granted at	Issued	Lapsed/	Granted at	Exercise	Exercise Period
	grant	31.12.14		cancelled	31.12.15	price
							From	To
	30.06.11	8,421,416	-	-	8,421,416	5p	30.06.11	29.06.16
	01.03.12	4,000,000	-	(4,000,000)	-	20p	01.06.14	01.03.15
	06.11.13	6,000,000	-	(6,000,000)	-	5.0p	27.06.13	27.06.16
	06.11.13	4,000,000	-	(4,000,000)	-	7.5p	27.06.13	27.06.16
	10.04.15	-	*31,000,000	(2,000,000)	29,000,000	1.0p	10.04.15	30.06.18
	10.04.15	-	*31,000,000	(2,000,000)	29,000,000	1.0p	10.04.15	30.06.19
	14.07.05	-	^8,333,333	-	8,333,333	0.6p	14.07.15	16.07.18
		_________	_________	_________	_________
		22,421,416	70,333,333	(18,000,000)	74,754,749
		_________	_________	_________	_________

 

22	Share based payments (continued)

The warrants outstanding at 31 December 2015 had a weighted average exercise price of 2.29p and a remaining contractual life of 979 days.     

* There were 62,000,000 options issued to directors and management during the half year.  The 31,000,000 options that expire on the 30.06.18 had a market based vesting condition which is satisfied once a 1.5 pence volume weighted average price ("VWAP") per ordinary share is achieved over five consecutive trading days on AIM. The options that expire on 30.06.19 had a market based vesting condition which is satisfied once a 3.0 pence VWAP per ordinary share is achieved over five consecutive trading days on AIM. A total of 4,000,000 of these options  were cancelled due to the departure of a Non-executive Director.

^ In addition, 8,333,333 options were issued to the broker in relation to the June 2015 capital raise.

The estimated fair value of options issued is calculated by applying the Black-Scholes option pricing model after taking into account market based vesting conditions. The assumptions used in the calculation were as follows:

		April 2015 options	April 2015 options	July 2015 options
	Share price at date of grant	0.55p	0.55p	0.40p
	Exercise price	1.00p	1.00p	0.60p
	Market vesting condition	1.50p	3.00p	N/A
	Expected volatility	96%	96%	96%
	Expected dividend	Nil	Nil	Nil
	Contractual life	3 years	4 years	3 years
	Risk free rate	0.79%	0.79%	0.79%
	Estimated fair value of each option	0.26p	0.27p	0.21p

Expected volatility was determined based on the historic volatility of the Company's shares and other peer companies. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

23	Commitments

(a)    Operating lease commitments

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

		2015	2014
	Group	$'000	$'000
	Within one year	-	-
		________	________

(b)    Capital expenditure commitments

At 31 December 2015, no capital commitments existed (2014 - $Nil).

24	Controlling party

There is no ultimate controlling party of the Group.

25	Related party transactions

Director and key management personnel remuneration has been disclosed in Note 6. There were no other relevant transactions with Directors or other related parties.

26	Investment in joint operations

On 31 March 2015, the Company entered into a share purchase agreement to acquire, King Country Mining Limited (KCM), a New Zealand company which holds coal mining tenements known as the Tatu thermal coal project (Tatu) in the North Island of New Zealand. The Company agreed to pay US$87,000 as follows: NZ$5,000 (US$3,300) to the vendor upon signing of the share purchase agreement and a further NZ$127,500 (US$83,700) for 51% of the issued shares in King Country Mining Limited (KCM). The Company has the option to acquire the remaining 49% of issued shares in KCM for a cash consideration of NZ$122,500 from the other shareholders once approvals and funding for the development of a coal mine are in place. Under the agreement the Company has until 31 January 2016 to purchase the remaining 49% and if the Company does not acquire the remaining 49% the other shareholder of KCM has the right to purchase back the 51% held by the Company for  NZ$1. Once the Company holds all of the issued shares in KCM, it will be required to pay a mining royalty to the vendor shareholders as follows:

- NZ$ 2.00 per tonne for the first 2 million tonnes or NZ$ 2 per tonne for the first 3.5 million tonnes if mining rights are granted to the adjacent tenements before the initial 2 million tonnes has been sold;

- NZ$ 1.00 per tonne from thereon; and

- a minimum royalty of NZ$ 200,000 per annum to be paid for the first five years. 

The parties that hold the issued capital of KCM are considered to be in a joint arrangement as these parties only have joint control. Furthermore KCM is considered to be a joint operation in accordance with the International Financial Reporting Standards and the Company recognises its direct right to the assets, liabilities, revenues and expenses of joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. Furthermore, the Company has recognised as a provision for 51% of the present value of future royalty payments based on current production forecasts.  

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:

	Book Value	Adjustment	Fair Value
	$'000	$'000	$'000
Deferred exploration and evaluation	101	817	918
Provision for mining royalty	-	(831)	(831)
Net assets	101	(14)	87

Fair value of consideration paid

			Fair Value
			$'000
Cash (NZ$132,500)			87
Goodwill			-

27	Events after the reporting period

Central Australia Rare Earths subscription agreement

On 1 February 2016, the Company announced that it entered into an agreement to subscribe for up to 50% of Central Australian Rare Earth Pty Ltd ("CARE") for AUD$380,000 (approximately USD$270,000 or £190,000) with an initial subscription of 25.5% acquired for AUD$130,000, which will be used to repay third party loans made to CARE to fund tenement fees. The Company has the right to acquire up to an additional 24.5% over a 12 month period for AUD$250,000 (the "Second Subscription") with each subscription for shares to be a minimum of AUD$50,000. After Strategic Minerals has subscribed for AUD$380,000 worth of shares in CARE it will own 50% and Rarus Limited will own 50%. Each party will fund its 50% of costs for future work or either party can be diluted.

CARE has ownership rights on twenty four tenements. Four of these tenements, known as the Laverton Project, are subject to a farm-in joint venture with ASX-listed Focus Minerals Limited ("Focus") that grants CARE the right to explore Focus' tenements near the Western Australian Goldfields town of Laverton for 90% ownership of, nickel and other commodities discovered in the tenements excluding gold, copper (where it is the dominant commodity present) and silver to which Focus maintains 100% ownership rights.  

The AUD$250,000 from the Second Subscription will be used to fund a nickel sulphide exploration drilling programme at the highly prospective Hanns Camp Prospect located within CARE's Laverton Project.

In addition to the Laverton Project, CARE holds 100% of a number of tenements in Western Australia that are prospective for rare earths, including properties adjoining Lynas Corporation's Mount Weld REE Mine, and some of these tenements may also be prospective for gold.

Tatu Project.

On 1 February 2016, the Company announced that it would discontinue its involvement in the Tatu Project due to potential customers being reluctant to commit to future local orders, the depression in the New Zealand coal price, and the inability to negotiate mutually agreeable terms to extend the option over the project.

 

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