Audited results for period ended 31 December 2011
For immediate release: 11 May 2012
Strategic Minerals Plc
("Strategic Minerals", "Group" or the "Company")
Audited results for the period ended 31 December 2011
Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the magnetite iron ore producer and exploration company, is please to announce its audited results for the period from 16 November 2010 to 31 December 2011.
Operational Highlights from Period
· Strategic Minerals (SML) admitted to AIM in June 2011 with an initial market capitalisation of approximately £14.8 million;
· acquisition of Ebony Iron completed in September 2011 for a consideration of £9.4 million, satisfied by the allotment of 94 million new ordinary shares in SML;
· A 1.57 million tonne JORC compliant iron ore resource completed and announced for the Cobre magnetite iron ore stockpile in, New Mexico; and
· Rail spur upgrades at Cobre commenced.
Post Period Highlights
· tenement ownership rights secured for the Jotanooka group of tenements and the Dragon Rocks tenement (Western Australia), and the Roper River and Hodgson group of tenements (Northern Territory);
· JORC compliant estimates are produced for the Iron Glen Project, giving an in-situ value of the mineralisation contained at Iron Glen is estimated at approximately A$140 million;
· commercial contract is completed with Glencore AG to provide 800,000 wet metric tonnes of magnetite from the Cobre Magnetite Stockpile;
· George Cardona is appointed as Non-Executive Director; and
· Strategic Minerals raises £3,125,000 through a placing of new shares.
Steven Sanders, Chairman of Strategic Minerals, said:
"We are delighted with the rapid progress the Company has made since being admitted to AIM in June 2011. Revenue is already coming in from the Cobre Magnetite Stockpile in New Mexico and we are confident that Strategic Minerals has the potential to become a significant producer in the global magnetite market, backed by projects that are well positioned for the industrial markets of North America and Asia."
A copy of the full Report and Accounts will be available for download from the Company's website www.strategicminerals.net.
For further information:
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Company |
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Strategic Minerals plc |
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|
Matthew Bonthrone |
+44(0) 20 7887 1912/+44(0) 7730 402 783 |
|
Nominated Adviser/Joint Broker |
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Allenby Capital Limited |
|
|
Jeremy Porter / James Reeve |
+44 (0) 20 3328 5656 |
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Joint Broker |
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Daniel Stewart & Company Plc |
|
|
Bob Huxford / David Hart |
+44 (0) 20 7776 6550 |
|
Financial Public Relations |
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|
GTH Communications Limited |
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Toby Hall / Suzanne Johnson Walsh |
+44 (0) 20 3103 3903 |
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|
About Strategic Minerals
Strategic Minerals PLC (AIM: SML) is developing a portfolio of projects that provide near term production along with those that potentially offer longer term capital gains. Strategic Minerals currently holds iron ore stockpile assets in North America and exploration properties in Australia. The Company has commenced production at its first magnetite operation, the Cobre stockpile in New Mexico and is continuing to develop a number of other projects within the same segment.
www.strategicminerals.net.
Chairman's Statement
Dear Shareholder,
Since our June 2011 IPO, Strategic Minerals has developed rapidly. Important acquisitions and active project development have given the company a portfolio of highly prospective magnetite iron ore projects.
Revenue is already coming in from the Cobre Magnetite Stockpile and it will fund the next phase in our development, which will focus on the development of our Iron Glen project and other Australian tenements. The fact that Strategic Minerals has cash flow so soon after launch is a significant achievement for a mining company of this kind and demonstrates the highly commercial approach that the Board takes to the management of your investment.
Strategic Minerals has the potential to become a significant producer in the global magnetite market, backed by projects that are well positioned for the industrial markets of North America and Asia. Over the last four years, the global magnetite market has witnessed unprecedented growth, a phenomenon driven mainly by China's increased demand for commodities, but also by reviving activity in the USA. Our entry into the sector as a sizeable production and project development company could therefore hardly have been better timed.
The admission to AIM gave Strategic Minerals a robust financial platform upon which to continue the exploration and project identification programme that commenced prior to listing, in October 2010. Strategic Minerals began the year under review with one primary asset, the 2,100-hectare Iron Glen tenement near Townsville, Queensland. During the course of the year, we made substantial progress with the development of our near-term marketable magnetite asset - the Cobre Magnetite Stockpile at Fiero, southern New Mexico - and our prospective exploration tenements in Queensland, the Northern Territory and Western Australia.
The acquisition of Ebony Iron in September 2011 was a transformational transaction for the company. By assuming 100% control over the Cobre Project, Strategic Minerals can generate significant revenues in the near-term from the project's stockpiles, where a JORC compliant resource of 1.57 million metric tonnes of iron ore has been identified. Additionally, the transaction brought in-principle agreements for exploration rights over several tenements in Western Australia and the Northern Territory.
Strategic Minerals secured full ownership in January 2012 over these exploration-stage tenements acquired with Ebony: the Jotanooka group of tenements and the Dragon Rocks tenement in Western Australia and the Roper River and Hodgson group of tenements in the Northern Territory. Outright ownership gives us the opportunity to consolidate our iron ore assets in Australia and to bring the benefits of operational scale to those longer-term exploration assets.
At the time of writing, magnetite is being trucked from Cobre by road. Completion of the refurbishment of the railway at the site will allow larger quantities to be sold. Those more substantial sales are expected to make the company overall cash-generative by the end of 2012.
It is pleasing to note that, whilst all of the above progress has been made, the investigation of Iron Glen is delivering above expectation results. The JORC compliant report by technical consultants Terra Search puts the in-situ value of the magnetite and silver deposits at Iron Glen at an estimated A$140 million1. A silver-lead-zinc deposit named 'Lead Belly' is currently under investigation and will be intensively appraised during the 2012 field programme.
Having begun the year with one exploration-stage asset, we have accelerated the operational development of Strategic Minerals. Your company is therefore well placed to continue development at Cobre, to investigate prospective targets in Australia with a view to active project development and to make further acquisitions of magnetite stockpiles and tenements in due course.
I would like to take this opportunity to extend my particular thanks to my fellow directors who worked tirelessly throughout the IPO and subsequent project start-up phases of the Company's development, and who continue to play an important strategic role on the board.
Our medium and longer-term ambition is to transform Strategic Minerals into a significant magnetite producer. As such we wish to emulate the recent history of Atlas Iron Limited (ASX: AGO), a very comparable Australian magnetite-based business. Atlas went from a market capitalisation of A$9 million in 2004, based on its initial 2,220-square kilometre exploration-stage landholding in the Pilbara region of Western Australia, to approximately A$3 billion today.
It has been an exciting and hugely rewarding year at Strategic Minerals. With your continued support, we expect to continue building up our operations and shareholder value in the coming financial year. I look forward to reporting further progress at the appropriate time.
Mr. Steven Sanders
Chairman
11 May 2012
1 A price of A$120 per tonne for magnetite concentrate and A$30 per ounce for silver has been used in order to estimate an approximate in-situ value. This figure should only be used as a guide, in terms of providing an order of magnitude estimate of in situ value. The resource would need to be subjected to rigorous financial analysis with application of mining and metallurgical parameters and costings before a more definitive statement of in-situ value could be made.
Business Review
The year under review has been one in which your Company has been primarily focused on lowering risk exposure and increasing shareholder value.
During the last twelve months we have made positive strides by releasing value from the Cobre Magnetite Stockpile and establishing a diversified exploration portfolio of highly prospective iron ore projects across Australia.
The acquisition of Ebony Iron Pty Ltd, which completed in September 2011, positioned Strategic Minerals as a near-term cash earner and a longer-term asset builder. This was an important step for your company, given the steady decline in market support for exploration-stage only mining companies. We believe that the evolution of Strategic Minerals' business model stands us in good stead for the future.
At Cobre, Strategic Minerals operates as a solutions provider and asset manager of magnetite stockpiles, which built up over several years as a result of the mining activities undertaken by Freeport-McMoRan Copper & Gold Inc. Our operational team is working closely with Freeport-McMoRan and with other regional stakeholders, including the railroad company, to ensure that the upgraded rail infrastructure is complete by May 2012, when monthly shipments of up to 70,000 tonnes of magnetite ore are scheduled to commence.
Strategic Minerals aims to supply magnetite to the domestic United States' markets and to export markets from Cobre. The rail facility will enable large bulk shipments of magnetite to be rail-trucked to the Port of Guaymas, Mexico, for onward sea shipment to international steel mills and other customers.
Local United States' industrial demand for magnetite centres on the agri-chemical/fertiliser sector (where it is used as an additive and catalyst in fertiliser production), the cement industry (used to harden concrete) and the water industry (used in filtration). Prices for local US domestic use magnetite are set off-market and are negotiated between buyer and seller.
By offering sales to traders of magnetite and the above-mentioned markets, Strategic Minerals aims to secure a gross margin of between US$40 and US$48 per tonne, depending on wet or dry criteria. At present, the Cobre stockpile, known as Cobre I, contains typically magnetite with an iron content of 64% Fe. As work progresses down the stockpile, the iron content is expected to reduce to around 59% Fe. The difference in grade should not impact substantially on prices.
We are confident that there is a ready demand from the domestic US market and international markets for our product. Indeed, successful negotiations for an off-take agreement have been completed with Glencore, one of the world's leading commodity trading companies. Negotiations with local purchasers of magnetite are also proceeding positively.
Strategic Minerals is scheduled to undertake a feasibility study to determine whether we should install a beneficiation plant at Cobre. Such equipment would enable us to blend the magnetite stockpile and increase the iron grade to approximately 69% Fe. This would enable Cobre to enter into the coal wash magnetite market in the US that offers the opportunity to earn significantly higher gross margins than sales to steel mills.
I look forward to reporting to shareholders the operational progress we are making at Cobre.
Elsewhere, your Company has built value across our project portfolio. In addition to the flagship Iron Glen property, Strategic Minerals has acquired the Jotanooka group of tenements and the Dragon Rocks tenement (magnetite Western Australia), and the Roper River and Hodgson group of tenements (haematite Northern Territory).
At Iron Glen, we have been working closely with the respected geological consultancy Terra Search Pty, which has overseen the phase one drilling campaign. An initial JORC compliant resource estimate was released post balance sheet. The objective is to utilise the cash generated by the Cobre stockpile to finance exploration at the Iron Glen property. The phase two drill campaign will work to build upon the existing JORC compliant resource estimate.
I take this opportunity to remind shareholders that Iron Glen benefits from good existing infrastructure. The site is located approximately 10 kilometres west of Woodstock, the Mt. Isa Railway and Flinders Highway, which connects the mining and industrial complex of Mt. Isa to the deep-water port of Townsville 40 kilometres away.
A new connection road and bridge are being constructed from the intersection of the road from Woodstock on the Bruce Highway to the port area in Townsville. This by-pass is under construction and, when completed in 2012, will enable Strategic Minerals to deliver ore directly to the port without travelling through Townsville city centre.
Iron Glen therefore offers a low risk, turn-on ready infrastructure profile. Subject to further resource profiling and positive economic assessment work, the aim is to press ahead with project development and to bring our first mine into production within four years.
I look forward to a new and exciting period for Strategic Minerals. Your company is well positioned to increase its value, advance its assets and maintain a positive market appeal -outcomes that we aim to secure by delivering on our key strategic objectives over the new financial year and beyond.
Patrick Griffiths,
Director
11 May 2012
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD TO 31 DECEMBER 2011
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|
Notes |
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Period to 31 December 2011 |
6 months Period to 30 November 2010 |
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|
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|
£ |
£ |
£
|
|
|
|
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|
|
|
Revenue |
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|
|
- |
- |
|
Cost of Sales |
|
|
|
- |
- |
|
|
|
|
|
─────── |
─────── |
|
Gross profit |
|
|
|
- |
- |
|
|
|
|
|
|
|
|
AIM admission expenses Share based payments Expenses on acquisition of subsidiary |
|
|
(581,124) (1,062,225)
(257,916) |
|
- |
|
Administrative expenses |
|
|
(1,309,480) |
(3,210,745) |
(180,752) |
|
|
|
|
─────── |
─────── |
─────── |
|
Operating loss |
4 |
|
|
(3,210,745) |
(180,752) |
|
|
|
|
|
|
|
|
Finance income |
6 |
|
|
24,044 |
- |
|
Finance costs |
6 |
|
|
(32,946) |
- |
|
|
|
|
|
─────── |
─────── |
|
(Loss) on ordinary activities before taxation |
(3,219,647) |
(180,752) |
|||
|
|
|
|
|
|
|
|
Income tax benefit/(expense) |
7 |
|
|
- |
- |
|
|
|
|
|
─────── |
─────── |
|
(Loss) for the period |
|
|
|
(3,219,647) |
(180,752) |
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|
|
|
|
══════ |
══════ |
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|
|
|
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|
Since there is no other comprehensive income, the loss for the period is the same as the total comprehensive loss for the period. |
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|
|
|
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|
|
Attributable to: |
|
|
|
|
|
|
Equity holders of the company |
|
|
|
(3,219,647) |
(180,752) |
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|
|
|
|
══════ |
══════ |
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|
|
|
|
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|
(Loss) per share attributable to the equity holders of the company during the period (expressed in pence per share) was: |
|||||
|
|
|
|
|
|
|
|
Continuing - Basic and diluted |
8 |
|
|
(1.16)p |
(0.082)p |
|
|
|
|
|
══════ |
══════ |
|
|
|
|
|
|
|
|
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|
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|
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
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|
|
As at 31 December 2011 |
As at 30 November 2010 |
|
|
Notes |
|
|
£ |
£ |
|
Assets |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Goodwill |
10 |
|
|
8,744,173 |
- |
|
Intangibles |
10 |
|
|
1,280,482 |
206,955 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
10,024,655 |
206,955 |
|
Tangible fixed assets |
9 |
|
|
1,519,101 |
1,616 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
11,543,756 |
208,571 |
|
|
|
|
|
─────── |
─────── |
|
Current assets |
|
|
|
|
|
|
Trade and other receivables |
11 |
|
|
502,782 |
23,423 |
|
Cash and cash equivalents |
12 |
|
|
298,909 |
409,987 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
801,691 |
433,410 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
─────── |
─────── |
|
Total Assets |
|
|
|
12,345,447 |
641,981 |
|
|
|
|
|
═══════ |
═══════ |
|
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
|
Equity attributable to owners of the parent |
|
||||
|
Share capital |
15 |
|
|
399,396 |
714,739 |
|
Share premium |
|
|
|
26,407,650 |
- |
|
Currency translation reserve |
|
|
|
(8,777) |
- |
|
Share options reserve |
16 |
|
|
1,062,225 |
46,377 |
|
Other reserves |
|
|
|
(14,363,418) |
- |
|
Retained loss |
|
|
|
(3,400,399) |
(180,752) |
|
|
|
|
|
─────── |
─────── |
|
Total equity |
|
|
|
10,096,677 |
580,364 |
|
|
|
|
|
─────── |
─────── |
|
Liabilities |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Borrowings |
13 |
|
|
1,104,314 |
- |
|
Trade and other payables |
14 |
|
|
1,144,456 |
61,617 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
2,248,770 |
61,617 |
|
|
|
|
|
─────── |
─────── |
|
|
|
|
|
─────── |
─────── |
|
Total equity and liabilities |
|
|
|
12,345,447 |
641,981 |
|
|
|
|
|
═══════ |
═══════ |
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2011
|
|
Notes |
|
|
2011 £ |
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
Investments |
10 |
|
|
25,217,959 |
|
|
|
|
|
─────── |
|
|
|
|
|
25,217,959 |
|
|
|
|
|
─────── |
|
Current assets |
|
|
|
|
|
Trade and other receivables |
11 |
|
|
948,209 |
|
Cash and cash equivalents |
12 |
|
|
274,841 |
|
|
|
|
|
─────── |
|
|
|
|
|
1,223,050 |
|
|
|
|
|
─────── |
|
|
|
|
|
─────── |
|
Total assets |
|
|
|
26,441,009 |
|
|
|
|
|
═══════ |
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
|
Equity attributable to owners of the parent |
||||
|
Share capital |
15 |
|
|
399,396 |
|
Share premium |
|
|
|
26,407,650 |
|
Share options reserve |
16 |
|
|
1,062,225 |
|
Retained loss |
|
|
|
(2,108,065) |
|
|
|
|
|
─────── |
|
|
|
|
|
25,761,206 |
|
|
|
|
|
─────── |
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
14 |
|
|
679,803 |
|
|
|
|
|
─────── |
|
|
|
|
|
679,803 |
|
|
|
|
|
─────── |
|
|
|
|
|
─────── |
|
Total equity and liabilities |
|
|
|
26,441,009 |
|
|
|
|
|
═══════ |
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE PERIOD ENDED 31 DECEMBER 2011
|
|
Notes |
|
Period to 31 December 2011 £ |
6 months to 30 November 2010 £ |
|
Cash flows from operating activities before changes in working capital and provisions |
|
|
||
|
|
|
|
|
|
|
(Loss) before tax |
|
|
(3,210,745) |
(180,752) |
|
Translation differences |
|
|
(8,777) |
- |
|
Depreciation of tangible fixed assets |
|
|
655 |
1,070 |
|
(Increase) in trade and other receivables |
|
|
(58,404) |
(23,423) |
|
Increase in trade and other payables |
|
|
521,242 |
61,617 |
|
Share based payment expense |
|
|
1,062,225 |
46,377 |
|
|
|
|
─────── |
─────── |
|
Cash absorbed by operating activities |
|
|
(1,693,804) |
(95,111) |
|
|
|
|
|
|
|
Finance income |
6 |
|
24,044 |
- |
|
Finance cost |
6 |
|
(32,946) |
- |
|
|
|
|
─────── |
─────── |
|
Net cash absorbed by operating activities |
|
|
(1,702,706) |
(95,111) |
|
|
|
|
─────── |
─────── |
|
Cashflow from investing activities |
|
|
|
|
|
Acquisition of subsidiary, net of cash acquired |
10 |
|
121,648 |
- |
|
Acquisition of intangible fixed assets |
|
|
(875,859) |
(206,955) |
|
Acquisition of tangible fixed assets |
|
|
(1,436,322) |
(2,686) |
|
|
|
|
─────── |
─────── |
|
Cash absorbed by investing activities |
|
|
(2,190,533) |
(209,641) |
|
|
|
|
─────── |
─────── |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Net proceeds from issue of equity share capital |
|
|
2,282,512 |
714,739 |
|
Net proceeds from issue of loan note |
|
|
1,499,649 |
- |
|
|
|
|
─────── |
─────── |
|
Net cash from financing activities |
|
|
3,782,161 |
714,739 |
|
|
|
|
─────── |
─────── |
|
|
|
|
|
|
|
Net (decrease)/ increase in cash and cash equivalents |
|
|
(111,078) |
409,987 |
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
409,987 |
- |
|
|
|
|
─────── |
─────── |
|
Cash and cash equivalents at end of period |
|
|
298,909 |
409,987 |
|
|
|
|
═══════ |
═══════ |
|
|
|
|
|
|
COMPANY STATEMENT OF CASH FLOW
FOR THE PERIOD TO 31 DECEMBER 2011
|
|
|
|
|
£ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities before changes in working capital and provisions |
|
|
|
|
|
|
|
|
|
|
|
(Loss) before tax |
|
|
|
(2,075,391) |
|
(Increase) in trade and other receivables |
|
|
|
(948,209) |
|
Increase in trade and other payables |
|
|
|
679,803 |
|
Share based payment expense |
|
|
|
1,062,225 |
|
|
|
|
|
─────── |
|
Cash absorbed by operating activities |
|
|
|
(1,281,572) |
|
|
|
|
|
|
|
Finance costs |
|
|
|
(32,674) |
|
|
|
|
|
─────── |
|
Net cash absorbed by operating activities |
|
|
|
(1,314,246) |
|
|
|
|
|
─────── |
|
Cashflow from investing activities |
|
|
|
|
|
Acquisition of subsidiaries |
|
|
|
- |
|
|
|
|
|
─────── |
|
Cash absorbed by investing activities |
|
|
|
- |
|
|
|
|
|
─────── |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
Net proceeds from issue of equity share capital |
|
|
|
1,589,087 |
|
|
|
|
|
─────── |
|
Net cash from financing activities |
|
|
|
1,589,087 |
|
|
|
|
|
─────── |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
|
274,841 |
|
|
|
|
|
|
|
Cash and cash equivalents at 16 November 2010 |
|
|
|
- |
|
|
|
|
|
─────── |
|
Cash and cash equivalents at 31 December 2011 |
|
|
|
274,841 |
|
|
|
|
|
═══════ |
|
|
|
|
|
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2011
|
|
Share Capital |
Share Premium |
Share Options Reserve |
Other Reserves |
Currency Translation Reserve |
Retained Losses |
Total Equity |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Balance as at 1 June 2010 |
- |
- |
- |
- |
- |
- |
- |
|
Comprehensive income |
|
|
|
|
|
|
|
|
Loss for the Period |
- |
- |
- |
- |
- |
(180,752) |
(180,752) |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
Share issued in the period |
- |
714,739 |
- |
- |
- |
- |
714,739 |
|
Share based payments |
- |
- |
46,377 |
- |
- |
- |
46,377 |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
Total other comprehensive income |
- |
714,739 |
46,377 |
- |
- |
- |
761,116 |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
Balance as at 30 November 2010 |
- |
714,739 |
46,377 |
- |
- |
(180,752) |
580,364 |
|
|
|
|
|
|
|
|
|
|
Shares issued in the year |
399,396 |
25,692,911 |
- |
- |
- |
- |
26,092,307 |
|
Foreign exchange translation adjustment |
- |
- |
- |
- |
(8,777) |
- |
(8,777) |
|
Share based payments |
- |
- |
1,015,848 |
- |
- |
- |
1,015,848 |
|
Group reorganisation |
- |
- |
- |
(14,363,418) |
- |
- |
(14,363,418) |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
Transactions with owners |
399,396 |
25,692,911 |
1,015,848 |
(14,363,418) |
(8,777) |
- |
12,735,960 |
|
Loss for the period |
- |
- |
- |
- |
- |
(3,219,647) |
(3,219,647) |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
Transactions with owners |
- |
- |
- |
- |
- |
(3,219,647) |
(3,219,647) |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
|
───── |
───── |
───── |
─────── |
────── |
────── |
─────── |
|
Balance at 31 December 2011
|
399,396 |
26,407,650 |
1,062,225 |
(14,363,418) |
(8,777) |
(3,400,395) |
10,096,677 |
|
|
═════ |
═══════ |
═══════ |
═══════ |
══════ |
══════ |
══════ |
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.
Share options reserve relates to increases in equity for services received in equity-settled share based payment transactions.
Other reserves consist of an adjustment required for group reorganisation being the formation of a new holding company for Iron Glen Holdings Limited by way of a share for share issue, which is the difference between consideration given and net assets of the company at the date of acquisition.
Currency translation reserve occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.
Retained loss represents the cumulative loss of the company attributable to equity shareholders.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD TO 31 DECEMBER 2011
|
|
|
|
|
|
|
|
|
Share Capital |
Share Premium |
Share Option Reserve |
Retained Losses |
Total Equity |
|
|
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
Balance at beginning of period |
- |
- |
- |
- |
- |
|
Share based payments |
|
|
1,062,225 |
|
1,062,225 |
|
Shares issued in the year |
399,396 |
26,407,650 |
- |
- |
26,807,046 |
|
|
─────── |
─────── |
─────── |
─────── |
─────── |
|
Transactions with owners |
399,396 |
26,407,650 |
1,062,225 |
- |
27,869,271 |
|
Loss for the period |
- |
- |
- |
(2,108,065) |
(2,108,065) |
|
|
─────── |
─────── |
─────── |
─────── |
─────── |
|
Total comprehensive income |
- |
- |
- |
(2,108,065) |
(2,108,065) |
|
|
─────── |
─────── |
─────── |
─────── |
─────── |
|
Balance at 31 December 2011 |
399,396 |
26,407,650 |
1,062,225 |
(2,108,065) |
25,761,206 |
|
|
═══════ |
═══════ |
═══════ |
═══════ |
═══════ |
Share capital is the amount subscribed for shares at nominal value.
Share premium represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.
Share options reserve relates to increases in equity for services received in equity-settled share based payment transactions.
Retained loss represents the cumulative loss of the company attributable to equity shareholders.
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE PERIOD TO 31 DECEMBER 2011
1. General information
Strategic Minerals Plc is currently a mineral exploration and magnetite recovery and marketing company. The company is a public limited company listed on the Alternative Investment Market (AIM) of the London Stock Exchange and incorporated in England and Wales. The address of the registered office of the company is Finsgate, 5 - 7 Cranwood Street, London EC1V 9EE.
2. Significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
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 a period of twelve months from the date of approval of this report. The forecast cash-flow requirements of the business are contingent upon the ability of the group to complete the construction of the railroad on the Cobre Project to generate significant revenue from the project's shipment ready stockpile. A £3m standby equity facility and US$1.5m loan facility were agreed on 21 February 2012 to provide future funding including completing the rail upgrade programme. A private placing to raise £3,125,000 was completed on 2 May 2012.
The uncertainty as to the timing and volume of the future growth in sales and source of funds from investment partners requires the directors to consider the group's ability to continue as a going concern. Notwithstanding this uncertainty, the directors believe that the group has demonstrated progress in achieving its objective of positioning the assets for future investment.
After making enquiries, the directors firmly believe that the company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the financial statements.
Were the group to be unable to continue as a going concern, adjustments may have to be made to the statement of financial position of the group to reduce statement of financial position values of assets to their recoverable amounts, to provide for future liabilities that might arise and to reclassify non-current assets and long-term liabilities as current assets and liabilities.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and IFRIC interpretations issued by the International Accounting Standard Board (IASB) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
New and amended standards adopted by the company
The company has adopted the following new and amended IFRSs as of 1 January 2011:
· IAS 32 (amendment), 'Financial instruments: presentation - classification of rights issue', is effective from annual periods beginning on or after 1 February 2010 and amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro-rata to all of the existing owners of the same class of an entity's non-derivative equity instruments, or to acquire a fixed number of the entity's own equity instruments for a fixed amount in any currency. This amendment will have no impact on the company after initial application.
· IAS 24 (Amendment), 'Related party transactions'. The amended standard is effective for annual periods beginning on or after 1 January 2011. It clarified definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government-related entities. The company does not expect any impact on its financial position or performance.
· IFRIC 14 (Amendment), 'Prepayments of a minimum funding requirement'. The amendment to IFRIC 14 is effective for annual periods beginning on or after 1 January 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The amendment is deemed to have no impact on the financial statements of the company.
· IFRIC 19, 'Extinguishing financial liabilities with equity instruments', is effective for annual periods beginning on or after 1 July 2010. The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In case that this cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised in profit or loss. The adoption of this interpretation will have no effect on the financial statements of the company.
Standards, interpretations and amendments to published standards that are not yet effective
· The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2011 and have not been early adopted:
· IFRS 9, 'Financial instruments: classification and measurement', as issued reflects the first phase of the IASB work on the replacement of IAS 39 and applies to classification and measurement of financial assets as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent phases, the IASB will address classification and measurement of financial liabilities, hedge accounting and derecognition. The adoption of the first phase of IFRS 9 might have an effect on the classification and measurement of the company's assets. At this juncture it is difficult for the company to comprehend the impact on its financial position and performance.
· IFRS 7, 'Financial instruments: disclosures (amendment), is effective for annual periods beginning on or after 1 July 2011. The amendments requires additional quantitative and qualitative disclosures relating to transfers of financial assets, where financial assets are derecognised in their entirety, but where the entity has a continuing involvement in them and where financial assets are not derecognised in their entirety. In addition to the above there has been a subsequent amendment effective for annual periods beginning on or after 1 January 2013 related to the offsetting of financial
assets and financial liabilities. The adoption of these will have no effect on the financial statements of the company.
· IAS 12, 'Income taxes (amendment) - Deferred taxes: recovery of underlying assets', is effective for annual periods beginning on or after 1 January 2012. It introduces a rebuttable presumption that deferred tax on investment properties measured at fair value will derecognised on a sale basis, unless an entity has a business model that would indicate the investment property will be consumed in the business. If consumed a use basis would need to be adopted. The amendments also introduce the requirement that deferred tax on non-depreciable assets measured using the revaluation model in IAS 16 should always be measured on a sale basis. The adoption of this interpretation will have no effect on the financial statements of the company.
· IFRS 11 joint Arrangements is effective from 1 January 2013. The core principle of the standard is that a party to a joint arrangement determines type of joint arrangements in which it is involved by assessing the rights and obligations and accounts for those rights and obligations in accordance with the type of joint arrangement. Joint ventures now must be accounted for using the equity method. Joint operator which is a newly defined term recognises its assets, liabilities, revenues and expenses and relative shares thereof. The adoption of this will have no effect on the financial statements of the company.
· IFRS 12 Disclosures of Interests with Other Entities is effective from 1 January 2013. It requires increased disclosure about the nature, risks and financial effects of an entity's relationship with other entities along with its involvement with other entities. The adoption of this will have no effect on the financial statements of the company.
· IFRS 13 Fair Value Measurement is effective from 1 January 2013. It defines fair value, sets out in a single IFRS a framework for measuring fair value and requires disclosures about fair value measurements. It includes a three-level fair value hierarchy which priorities the inputs in a fair value measurement. The adoption of this will have no effect on the financial statements of the company.
· IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Interests with Other Entities along with related amendments to IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures will have an effective date of 1 January 2013. Early adoption of these standards is permitted, but only if all five are early adopted together.
· IFRS 10 does not change consolidation procedures but changes whether an entity is consolidated by revising the definition of control and provides a number of clarifications on applying the new definition of control. The adoption of this will have no effect on the financial statements of the company.
· IFRS 1 First-time Adoption of International Financial Reporting Standards (amendment) -Severe Hyperinflation and removal of Fixed Dates for First-time adopters has an effective date for annual periods beginning on or after 1 July 2011. This provides further guidance on how an entity should resume presenting IFRS financial statements when its functional currency ceases to be subject to severe hyperinflation. Early adoption of these standards is permitted. The adoption of this will have no effect on the financial statements of the company.
· IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1 is effective for annual periods beginning on or after 1 July 2012. Items that would be reclassified to the profit and loss at a future point would be presented separately from items that will never be capitalised. The adoption of this will have no effect on the financial statements of the company.
· IAS 19 Employee Benefits (Revised) effective for annual periods beginning on or after 1 January 2013. For defined benefit plans the ability to defer recognition of actuarial gains and losses has been removed. There are new objectives for disclosure stated in the revised standard along with new or revised disclosure requirements. Plus the recognition of termination benefits and the distinction of short-term and other long-term employee benefits have changed. The adoption of this will have no effect on the financial statements of the company.
Basis of consolidation
The consolidated financial statements include the financial statements of the company and its subsidiaries.
Subsidiaries
Subsidiaries are all entities over which Strategic Minerals Plc has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the company. They are de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
Group reorganisation
Strategic Minerals Plc ("SM") acquired its 100% interest in Iron Glen Holdings Limited ("IGH") by way of a share for share exchange. This is a business combination involving entities under common control and the consolidated financial statements are issued in the name of SM but they are a continuance of IGH. Therefore the assets and liabilities of IGH have been recognised and measured in these consolidated financial statements at their pre combination carrying values. The retained earnings and other equity balances recognised in these consolidated financial statements are the retained earnings and other equity balances of SM and IGH. The equity structure appearing in these consolidated financial statements (the number and the type of equity instruments issued) reflect the equity structure of SM including equity instruments issued by the company to effect the consolidation.
The difference between consideration given and net assets of IGH at the date of acquisition is included in other reserves. The comparatives included are for IGH prior to the group reorganisation. The consolidated income statement for the period consists of IGH from 1 December 2010 to 31 December 2011 and SM from the date of acquisition to 31 December 2011.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of the net identifiable assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in 'intangible assets'. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The group allocates goodwill to each business segment in each country in which it operates.
Impairment of non-financial assets
Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment.
At each statement of financial position date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment annually and whenever there is an indication that the asset may be impaired.
Intangible Assets
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a re-valued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
Intangible Assets
Mineral assets: exploration and evaluation
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, seismic acquisition; exploration drilling and testing but do not include costs incurred prior to having obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is general in nature is charged directly to the income statement and that which relates to unsuccessful exploration operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate directly to the discovery and development of specific commercial mineral reserves will remain capitalised and to be depreciated over the lives of these reserves. The success or failure of each exploration effort will be judged on a field-by-field basis as each potentially mineral-bearing structure is identified and tested. Exploration and evaluation costs are capitalised within intangible assets. Costs incurred prior to obtaining legal rights to explore are expensed immediately to the income statement.
All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the directors consider to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets as 'Developed mineral assets' following an impairment review and depreciated accordingly. Where properties are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in which the determination is made.
Costs are amortised on a field by field unit of production method based on commercial proven and probable reserves.
Intangible Assets
The calculation of the 'unit of production' amortisation takes account of the estimated future development costs and is based on the current period and un-escalated price levels. Changes in reserves and cost estimates are recognised prospectively.
E&E costs are not amortised prior to the conclusion of appraisal activities.
Property, plant and equipment
Mineral assets: development and production
Development and production ("D&P") assets are accumulated on a field by field basis and represent the cost of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets as outlined above. The carrying values of producing assets are depreciated using the unit of production method based on entitlement to provide by reference to the ratio of production in the period to the related commercial reserves, taking into account any estimated future development expenditures necessary to bring additional non producing reserves into production.
An impairment test is performed for D&P assets whenever events and circumstances arise that indicate that the carrying value of development or production phase assets may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable amount of each well, generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves.
Decommissioning
Site restoration provisions are made in respect of the estimated future costs of closure and restoration, and for environmental rehabilitation costs (which include the dismantling and demolition of infrastructure, removal of residual materials and remediation of disturbed areas) in the accounting period when the related environmental disturbance occurs. The provision is discounted where material and the unwinding of the discount is included in finance costs. Over time, the discounted provision is increased for the change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability. At the time of establishing the provision, a corresponding asset is capitalised where it gives rise to a future benefit and depreciated over future production from the field to which it relates. The provision is reviewed on an annual basis for changes in cost estimates, discount rates or life of operations. Any change in restoration costs or assumptions will be recognised as additions or charges to the corresponding asset and provision when they occur. For permanently closed sites, changes to estimated costs are recognised immediately in the income.
Non-mineral assets
Non-mineral assets are stated at cost of acquisition less accumulated depreciation and impairment losses. Depreciation is provided on a straight-line basis at rates calculated to write off the cost less the estimated residual value of each asset over its expected useful economic life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful life.
Property, plant and equipment
The annual rate of depreciation for each class of depreciable asset is:
Office equipment - 3 years straight line
Leasehold improvements - 10 years straight line
Rail infrastructure - 10 years straight line
The carrying value of tangible fixed assets is assessed annually and any impairment is charged to the income statement.
Investments
Investments are stated at cost less provision for any impairment in value.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position.
Revenue
Mineral sales revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for the group's share of mineral supplied in the period. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group. Revenue is recognised when the mineral produced is despatched and received by the customers.
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 is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
The carrying amount of deferred tax is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
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 relatively short term nature of these financial instruments.
The company provides financial guarantees to licensed banks for credit facilities extended to a subsidiary company. The fair value of such financial guarantees is not expected to be significantly different as the probability of the subsidiary company defaulting on the credit lines is remote.
Share-based compensation
The fair value of the employee and suppliers services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed over the vesting year is determined by reference to the fair value of the options 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 that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.
The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.
The fair value of share-based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.
Provisions
Provisions are recognised when the company has a present obligation as a result of a past event, and it is probable that the company will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date, and are discounted to present value where the effect is material.
Financial instruments
Non-derivative financial instruments comprise investments in equity and debt securities, 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, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
A financial instrument is recognised when the group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the group's contractual rights to the cash flows from the financial assets expire or if the group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the group's obligations specified in the contract expire or are discharged or cancelled.
Foreign currencies
i) Functional and presentation currency
Items included in the financial statements of the group are measured using the currency of the primary economic environment in which the entity operates (the functional currency), which are mainly in Pounds Sterling (£), US Dollars (USD) and Australian Dollars (AUD). The financial statements are presented in Pounds Sterling (£), which is the group's presentation currency.
ii) Transactions and balances
Foreign currency transactions are translated into the presentational currency using exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
iii) Group companies
The results and financial position of all group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(a) assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
(b) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
(c) all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
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 committed expenditure in respect of its ongoing exploration work and railway construction. To achieve this aim, it seeks to raise new equity finance and debt sufficient to meet the next phase of exploration and where relevant development expenditure.
The Board receives cash flow projections on a monthly basis as well as information on cash balances. The Board will not commit to material expenditure in respect of its ongoing exploration work prior to being satisfied that sufficient funding is available to the group to finance the planned programmes.
Dividends will be issued when there are sufficient reserves available.
Critical accounting judgments and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires management to make estimates and assumptions concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The resulting accounting estimates will, by definition, differ from the related actual results.
Plant and equipment, intangible assets & impairment of goodwill
Intangible assets excluding goodwill and plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on management's estimates of the period that the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to the estimates used can result in significant variations in the carrying value.
The group assesses the impairment of plant and equipment and intangible assets subject to amortisation or depreciation whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Additionally, goodwill arising on acquisitions is subject to impairment review. The group's management undertakes an impairment review of goodwill annually or more frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.
The complexity of the estimation process and issues related to the assumptions, risks and uncertainties inherent in the application of the group's accounting estimates in relation to plant and equipment and intangible assets affect the amounts reported in the financial statements, especially the estimates of the expected useful economic lives and the carrying values of those assets. If business conditions were different, or if different assumptions were used in the application of this and other accounting estimates, it is likely that materially different amounts could be reported in the group's financial statements.
The directors have carried out a detailed impairment review in respect of goodwill. The group assesses at each reporting date whether there is an indication that an asset may be impaired, by considering the net present value of discounted cash flows forecasts which have been discounted The cash flow projections are based on the assumption that the group can realise projected sales. A prudent approach has been applied with no residual value being factored. At the period end, based on these assumptions there was no indication of impairment of the value of goodwill.
However, if the projected sales do not materialise there is a risk that the value of the intangible assets shown above would be impaired.
Commercial reserves estimates
Mineral reserve estimates: estimation of recoverable reserves include assumptions regarding commodity prices, exchange rates, discount rates, production and transportation costs all of which impact future cashflows. It also requires the interpretation of complex geological and geophysical models in order to make an assessment of the size, shape, depth and quality of reservoirs and their anticipated recoveries. The economic, geological and technical factors used to estimate reserves may change from period to period. Changes in estimated reserves can impact developed and undeveloped property carrying values, asset retirement costs and the recognition of income tax assets, due to changes in expected future cash flows. Reserve estimates are also integral to the amount of depletion and depreciation charged to income.
Decommissioning costs
Asset retirement obligations: the amounts recorded for asset retirement obligations are based on each field's operator's best estimate of future costs and the remaining time to abandonment of mineral properties, which may also depend on commodity prices.
Share based payments
The fair value of share based payments recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non -transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience, future expectations and benchmarked against peer companies in the industry.
The preparation of the consolidated financial statements requires management to make estimates and assumptions concerning the future that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The resulting accounting estimates will, by definition, differ from the related actual results.
3. Segment Information
In the opinion of the Directors the group has one class of business, being the exploration for, and development and production of, Mineral, and other related activities.
The group's primary reporting format is determined by geographical segment according to the location of the exploration assets. There is currently two geographic reporting segments: Rest of the world involved in mineral exploration and development in Australia and USA, and the United Kingdom being the head office.
|
Mineral exploration and development |
|
|
|
|
|||||
|
The segment information for the period ended 31 December 2011 is as follows: |
|||||||||
|
|
|
|
|
|
United Kingdom |
|
Rest of the World |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Profit and loss account |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
- |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
AIM admission expenses |
|
|
|
(581,124) |
|
- |
|
(581,124) |
|
|
Share based payments |
|
|
|
(1,062,225) |
|
- |
|
(1,062,225) |
|
|
Expenses on acquisition of subsidiary |
|
|
|
(257,916) |
|
- |
|
(257,916) |
|
|
Administrative expenses |
|
|
|
(174,126) |
|
(1,135,350) |
|
(1,309,476) |
|
|
|
|
|
|
(2,075,391) |
|
(1,135,350) |
|
(3,210,471) |
|
|
Operating loss |
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
- |
|
24,044 |
|
24,044 |
|
Finance costs |
|
|
|
|
(32,674) |
|
(272) |
|
(32,946) |
|
Loss on ordinary activities before taxation |
|
|
|
(2,108,065) |
|
(1,111,578) |
|
(3,219,643) |
|
|
Income tax benefit / (expense) |
|
|
|
- |
|
- |
|
- |
|
|
Loss for the year |
|
|
|
|
(2,108,065) |
|
(1,111,578) |
|
(3,219,643) |
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities |
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
|
|
97,900 |
|
3,204,465 |
|
3,302,365 |
|
Cash and cash equivalents |
|
|
|
|
274,841 |
|
24,068 |
|
298,909 |
|
Total assets |
|
|
|
|
372,741 |
|
3,228,533 |
|
3,604,274 |
|
Segment liabilities |
|
|
|
|
679,803 |
|
1,568,967 |
|
2,248,770 |
|
Total liabilities |
|
|
|
|
679,803 |
|
1,568,967 |
|
2,248,770 |
|
Mineral exploration and development |
|
|
|
|
|||||
|
The segment information for the 6 months ended 30 November 2010 is as follows: |
|||||||||
|
|
|
|
|
|
United Kingdom |
|
Rest of the World |
|
Total |
|
|
|
|
|
|
£'000 |
|
£'000 |
|
£'000 |
|
Profit and loss account |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
- |
|
- |
|
- |
|
|
Recurring administrative expenses |
|
|
|
- |
|
(180,752) |
|
(180,752) |
|
|
Operating loss |
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
|
|
- |
|
- |
|
- |
|
Finance costs |
|
|
|
|
- |
|
- |
|
- |
|
Loss on ordinary activities before taxation |
|
|
|
- |
|
(180,752) |
|
(180,752) |
|
|
Income tax benefit / (expense) |
|
|
|
- |
|
- |
|
|
|
|
Loss for the year |
|
|
|
|
- |
|
(180,752) |
|
(180,752) |
|
|
|
|
|
|
|
|
|
|
|
|
Assets and liabilities |
|
|
|
|
|
|
|
|
|
|
Segment assets |
|
|
|
|
- |
|
231,994 |
|
231,994 |
|
Cash and cash equivalents |
|
|
|
|
- |
|
409,987 |
|
409,987 |
|
Total assets |
|
|
|
|
- |
|
641,981 |
|
641,981 |
|
Segment liabilities |
|
|
|
|
- |
|
61,617 |
|
61,617 |
|
Total liabilities |
|
|
|
|
- |
|
61,617 |
|
61,617 |
4. Operating loss become income tax
Costs by nature
|
|
Period to 31 December 2011 £ |
6 months to 30 November 2010 £ |
||
|
Operating loss is stated after charging/(crediting): |
|
|
|
|
|
Directors' fees and emoluments |
308,834 |
91,633 |
|
|
|
Auditors' fees: - Audit |
36,003 |
- |
|
|
|
Salaries, wages and other staff related costs |
194,433 |
|
|
|
|
Depreciation and amortisation expense |
2,488 |
1,070 |
|
|
|
Operating lease - land and buildings |
46,421 |
9,632 |
|
|
|
Legal, professional and consultancy fees |
360,390 |
47,018 |
|
|
|
Foreign exchange loss |
(12,318) |
- |
|
|
|
Travelling |
138,128 |
3,849 |
|
|
|
Other expenses |
235,101 |
27,550 |
|
|
|
|
───── |
───── |
|
|
|
|
1,309,480 |
180,752 |
|
|
|
|
═══════ |
═══════ |
|
|
5. Employees
|
Staff costs during the period
|
Period to 31 December 2011 £ |
6 months to 30 November 2010 £ |
|
|
|
|
|
Directors' fees including consultancy fees |
308,834 |
91,633 |
|
Wages and salaries |
31,909 |
- |
|
Social security costs |
17,508 |
- |
|
|
─────── |
─────── |
|
Total staff costs |
358,251 |
91,633 |
|
|
═══════ |
═══════ |
The average number of people (including executive directors) employed during the period was:
|
|
Period to 31 December 2011 No. |
6 months to 30 November 2010 No. |
|
|
|
|
|
Total |
7 |
3 |
|
|
════════ |
════════ |
Highest paid Director's emoluments and other benefits for the period ended 31 December 2011 are as listed below:
|
|
Director's fees |
Consultancy fees |
Benefits |
Total |
|
|
£ |
£ |
£ |
£ |
|
S Sanders |
32,500 |
68,333 |
- |
100,833 |
|
|
══════ |
══════ |
══════ |
══════ |
6. Finance income/costs
|
|
Period to 31 December 2011 £ |
6 months to 30 November 2010 £ |
|
|
|
|
|
Bank interest received |
24,044 |
- |
|
Loan interest paid |
(32,946) |
- |
|
|
─────── |
─────── |
|
|
(8,902) |
- |
|
|
═══════ |
═══════ |
7. Taxation
|
|
|
Period to 31 December 2011 |
6 months to 30 November 2010 |
|
|
|
£ |
£ |
|
Current tax expense |
|
- |
- |
|
Deferred tax expense |
|
- |
- |
|
|
|
───── |
───── |
|
|
|
- |
- |
|
|
|
══════ |
══════ |
|
Reconciliation of effective tax rates |
|
£ |
£ |
|
|
|
|
|
|
(Loss) before tax |
|
(3,219,647) |
(180,752) |
|
Tax using domestic rates of corporation tax of 26% (2010: 30%) |
|
(837,108) |
(54,226) |
|
|
|
|
|
|
Effect of: |
|
|
|
|
Expenses not deductible for tax purposes |
|
463,777 |
1,517 |
|
Losses carried forward |
|
373,331 |
52,709 |
|
|
|
────── |
────── |
|
|
|
- |
- |
|
|
|
══════ |
══════ |
The group has excess management expenses of £326,794 (2010: £nil) and unused losses to carry forward of £1,109,090 (2010: £175,697). Deferred tax assets arising from these losses at a rate of 26% (2010: 30%) of £373,331 (£52,709) have not been provided for in the financial statements as their recovery is not probable in the foreseeable future.
8. Losses 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 was basic 278,716,703 adjusted for the historic share reorganisation and consolidation. Fully diluted the weighted average was 278,716,703 (2010: 219,156,498). The loss for the financial period was £3,219,647 (2010: £180,752).
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.
9. Tangible Fixed Assets - Group
|
|
|
|
Railway |
Office |
Leasehold |
Total |
|
|
|
|
Infrastructure |
equipment |
improvements |
|
|
|
|
|
£ |
£ |
£ |
£ |
|
Cost |
|
|
|
|
|
|
|
At 1 December 2010 |
- |
2,686 |
- |
2,686 |
||
|
On acquisition of subsidiary |
81,818 |
- |
- |
81,818 |
||
|
Acquired in the period |
1,425,089 |
9,960 |
1,273 |
1,436,322 |
||
|
|
|
|
|
|
|
|
|
|
───── |
───── |
───── |
───── |
||
|
At 31 December 2011 |
1,506,907 |
12,646 |
1,273 |
1,520,826 |
||
|
|
══════ |
══════ |
══════ |
══════ |
||
|
Depreciation |
|
|
|
|
|
|
|
At 1 December 2010 |
|
- |
1,070 |
- |
1,070 |
|
|
Charge in the period |
|
- |
591 |
64 |
655 |
|
|
|
|
|
|
|
|
|
|
|
───── |
───── |
───── |
───── |
||
|
At 31 December 2011 |
- |
1,661 |
64 |
1,725 |
||
|
|
══════ |
══════ |
══════ |
══════ |
||
|
|
|
|
|
|
|
|
|
Carrying value |
|
|
|
|
|
|
|
At 31 December 2011 |
1,506,907 |
10,985 |
1,209 |
1,519,101 |
||
|
|
══════ |
══════ |
══════ |
══════ |
||
|
As at 1 December 2010 |
- |
1,616 |
- |
1,616 |
||
|
|
══════ |
══════ |
══════ |
══════ |
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
10. Goodwill, intangibles and investments
Group
|
|
Mining Tenements |
Exploration/ Evaluation costs |
Total |
Goodwill |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
|
At 1 December 2010 |
- |
206,955 |
206,955 |
- |
206,955 |
|
On acquisition of subsidiary |
197,668 |
- |
197,668 |
- |
197,668 |
|
Additions |
|
875,859 |
875,859 |
8,744,173 |
9,620,032 |
|
|
───── |
───── |
───── |
───── |
───── |
|
At 31 December 2011 |
197,668 |
1,082,814 |
1,280,482 |
8,744,173 |
10,024,655 |
|
|
══════ |
══════ |
══════ |
══════ |
══════ |
|
Impairment |
|
|
|
|
|
|
At 1 December 2010 and 31 December 2011 |
- |
- |
- |
- |
- |
|
|
══════ |
══════ |
══════ |
══════ |
══════ |
|
Carrying Value |
|
|
|
|
|
|
At 31 December 2011 |
197,668 |
1,082,814 |
1,280,482 |
8,744,173 |
10,024,655 |
|
|
══════ |
══════ |
══════ |
══════ |
══════ |
|
At 1 December 2010 |
- |
206,955 |
206,955 |
- |
206,955 |
|
|
══════ |
══════ |
══════ |
══════ |
══════ |
Iron Glen Holdings Pty Limited
On 31 March 2011, the company completed the acquisition of the entire issued share capital of IGH through a share for share offer to the shareholders of IGH. The business combination was treated as a group reorganisation as it involved entities under common control. The difference between consideration given and net assets of IGH at the date of acquisition is included in other reserves under group reorganisation reserve. The acquisition of IGH allowed the Group to obtain rights to the tenement Iron Glen Project in Queensland, Australia.
Ebony Iron Pty Limited
On the 2 September 2011, the company acquired the entire share capital of Ebony Iron Pty Limited ("Ebony"), a company registered in Australia for an initial consideration of £9,400,000 to be satisfied by the allotment and issue to the shareholders of Ebony of 94,000,000 ordinary shares in the company at 10 pence per share. Ebony held 100% interest in Southern Minerals Group LLC (together "Ebony Group").
In addition to the new ordinary shares, Ebony shareholders will be entitled to, in aggregate, a further consideration of 5 million pounds sterling to be satisfied by the allotment of 50 million new ordinary shares at an issue price of 10 pence per share, subject to the identification by a competent person of an Indicated Mineral Resource that constitutes a Probable Ore Reserve of not less than 200 million tonnes of iron ore (individually or in aggregate) on Ebony Group's current projects before 31 December 2015. Ebony's current projects consist of the Jatanooka group of tenements and the Dragon Rocks tenement in Western Australia, the Roper River and Hodgson groups of tenements located in the Northern Territory of Australia, the Cobre Project in New Mexico, North America.
The directors have no basis to estimate the Probable Ore Reserve as at the date of signing of these financial statements and therefore no additional consideration has been recognised in the group financial statements for the period ended 31 December 2011.
The acquisition of Ebony allowed the group to obtain the tenement ownership rights to the projects mentioned above and positioning itself as a near-term cash earner and a longer-term asset builder.
For the 4 months that Ebony Group has been incorporated in to the results of the reporting period, the company has contributed £457,538 to the group's losses and had the acquisition occurred on the 1 December 2010, the contribution to the group's losses would have been £1,402,457. In determining this amount, the management has assumed that the fair value adjustments, determined provisionally, that arose on the date of the acquisition would have been the same if the acquisition had occurred on the 1 December 2010.
Identifiable assets acquired and liabilities assumed for Ebony Group:
|
|
Book and fair value |
|
|
£ |
|
Exploration and evaluation asset |
197,668 |
|
Railroad Construction and related assets |
81,818 |
|
Trade and other receivables |
420,955 |
|
Cash and cash equivalents |
121,649 |
|
Trade and other payables |
( 166,263) |
|
Net Assets |
655,827 |
|
|
|
|
Goodwill: |
£ |
|
Purchase consideration: |
9,400,000 |
|
Fair value of net assets acquired |
(655,827) |
|
Goodwill acquired |
(8,744,173) |
The company assesses at each reporting date whether there is an indication that the goodwill may be impaired, by considering whether the value in use is greater than the recoverable amount. If an indication of impairment exists an impairment review is carried out. At the year end, there was no indication of any impairment of the value of the goodwill held.
The Mining tenements and exploration/evaluations costs are not amortised as there is no revenue being generated and the group is still in an early exploration phase.
The explorations/evaluation costs include prepaid costs relating to exploration permit applications.
The recoverability of the carrying amount of the deferred exploration and evaluation expenditure is dependent on successful development and commercial exploitation, or alternatively the sale, of the respective areas of interest. The group has an interest in certain exploration tenements and the amounts shown above include amounts expended to date in the acquisition and/or exploration of those tenements.
The exploration license is due to expire on 23 May 2012. Management have lodged an application to extend the license with the Department of Mines and Energy and are confident that the extension will be granted. In addition management has lodged an application for a Mineral Development Licence within the existing exploration permit covering an area of 1,067 hectares and two further exploration licences adjoining the existing licence covering an additional 97 square kilometres.
Company Shares in subsidiary
undertakings
£
Cost
Acquisition 25,217,959
At 31 December 2011 25,217,959
═══════
Impairment
Charge for the year -
At 31 December 2011 -
═══════ Carrying Value
At 31 December 2011 25,217,959
In the opinion of the Directors, the aggregate value of the company's investment in its subsidiary undertakings is not less than the amount included in the balance sheet.
Holdings of more than 20%
The company holds more than 20% of the share capital of the following companies:
Country of Principal Class of Proportion Incorporation activity share of ownership
interest
Subsidiary undertakings
Iron Glen Holdings Pty Limited Australia Mining Ordinary 100%
Holding
Company
Ebony Iron Pty Limited Australia Mining Ordinary 100%
Iron Glen Pty Limited (i) Australia Mining Ordinary 100%
Southern Minerals Group LLC (ii) USA Mining Ordinary 100%
Jatanooka Iron Pty Ltd (i) Australia Dormant Ordinary 100%
Dragon Rock Minerals Pty Ltd (i) Australia Dormant Ordinary 100%
(i) Held by Iron Glen Holdings Pty Limited
(ii) Held by Ebony Iron Pty Limited
|
|
|
Capital and reserves
£ |
Profit/(loss) for the period from 1 December 2010 to 31 December 2011 £
|
|
Iron Glen Holdings Pty Limited |
|
734,875 |
(519,597) |
|
Ebony Iron Pty Limited |
|
1,475,962 |
(1,264,027) |
|
Iron Glen Pty Limited |
|
(143,408) |
(134,443) |
|
Southern Minerals Group LLC |
|
(120,462) |
(134,586) |
11. Trade and other receivables
|
Group |
|
2011 £ |
2010 £ |
|
Other receivables |
|
403,135 |
21,464 |
|
Taxes and social security costs |
|
99,647 |
1,959 |
|
|
|
────── |
────── |
|
|
|
502,782 |
23,423 |
|
|
|
══════ |
══════ |
|
Company |
|
|
|
|
Taxes and social security costs |
|
95,400 |
- |
|
Amounts owed by subsidiary undertakings |
|
850,309 |
- |
|
Prepayments |
|
2,500 |
- |
|
|
|
────── |
────── |
|
|
|
948,209 |
- |
|
|
|
══════ |
══════ |
There were no other receivables that were past due or impaired. The other receivables are categorised as loans and other receivables. The directors consider that the carrying amount of other receivables approximates their fair value.
12. Cash and cash equivalents
|
Group |
|
2011 £ |
2010 £ |
|
|
|
|
|
|
Bank current account |
|
298,909 |
409,987 |
|
|
|
────── |
────── |
|
|
|
298,909 |
409,987 |
|
|
|
══════ |
══════ |
|
|
|
|
|
|
Company |
|
|
|
|
Bank current account |
|
274,841 |
- |
|
|
|
────── |
────── |
|
|
|
274,841 |
- |
|
|
|
══════ |
══════ |
13. Borrowings
The carrying values of the borrowings and their maturity are as follows:
|
Group |
|
|
|
|
2011 £ |
2010 £ |
|
Current |
|
|
|
Repayable within one year: |
|
|
|
Loan notes |
1,104,314 |
- |
|
|
────── |
────── |
|
|
1,104,314 |
- |
|
|
══════ |
══════ |
The loan notes are unsecured, bear interest at 10% and were fully repayable at 31 December 2011.
On the 20 February 2012, the company refinanced the loan notes into the following:
(a) an unsecured convertible loan note of £950,670 effective from 2 January 2012 with an interest rate of 10 per cent per annum repayable on or before the 14 December 2014. The convertible loan note can be converted into the company's ordinary shares on or before the repayment date at 15 pence per share.
(b) the balance of the loan has been refinanced on similar terms as before but with a repayment date of 30 June 2012.
14. Trade and other payables
|
Group |
|
2011 £ |
2010 £ |
|
|
|
|
|
|
Trade payables |
|
399,409 |
16,477 |
|
Short term loan |
|
395,335 |
- |
|
Applications for shares not allotted |
|
270,000 |
- |
|
Other payables |
|
10,375 |
- |
|
Accruals and deferred income |
|
69,337 |
45,140 |
|
|
|
────── |
────── |
|
|
|
1,144,456 |
61,617 |
|
|
|
══════ |
══════ |
|
Company |
|
£ |
£ |
|
|
|
|
|
|
Trade payables |
|
198,326 |
- |
|
Applications for shares not allotted |
|
270,000 |
- |
|
Other payables |
|
13,965 |
- |
|
Accruals and deferred income |
|
197,512 |
- |
|
|
|
───── |
───── |
|
|
|
679,803 |
- |
|
|
|
═════ |
═════ |
15. Share capital
|
|
2011 |
2010 |
||
|
|
No |
£ |
No |
£ |
|
Allotted, called up and fully paid |
|
|
|
|
|
Ordinary shares |
399,396,393 |
399,396 |
271,466,171 |
714,739 |
|
|
═══════ |
═══════ |
═══════ |
═══════ |
On 10 November 2010, 1 ordinary share of £1.00 was issued for cash. This was subdivided into 1,000 ordinary shares of £0.001 each.
During the period, the company acquired all the shares in Iron Glen Holdings Limited ("IGH") by way of share for share exchange. The shares issued during the period to the shareholders of IGH were as follows:
· on 25 November 2010 138,339,979 ordinary shares were issued at £0.05 each
· on 15 January 2011, 56,155,002 ordinary shares were issued at £0.05 each
· on 3 February 2011, all the issued ordinary shares of £0.001 each was subdivided into 777,983,924 ordinary shares of £0.00025 each
· on 16 March 2011, 340,831,564 ordinary shares were issued at £0.00025 each
· on 29 March 2011, 6,706,668 ordinary shares were issued at £0.00025 each
· On 9 May 2011, all the issued ordinary shares of £0.00025 each were consolidated into 281,380,539 ordinary shares of £0.001 each
On 3 June 2011, 15,000,000 ordinary shares of £0.001 each were issued for cash at £0.05 each.
On 7 July 2011 1,000,000 ordinary shares of £0.001 each and on 29 July 2011 a further 500,000 ordinary shares of £0.001 each were issued for cash at £0.05 each.
On 16 September 2011, 94,000,000 ordinary shares of £0.001 each were issued at £0.1 each in exchange for all the issued share capital of Ebony Iron Pty Limited.
On 1 November 2011, 7,515,854 ordinary shares for £0.001 each were issued for cash at £0.1 each.
On 12 January 2012, 3,700,000 ordinary shares of £0.001 each were issued for cash at £0.10 each and a further 6,000,000 ordinary shares were issued 30 January 2012 to acquire tenement ownership rights from Quadrio Reserves Pty Limited.
On 2 May 2012, the company completed a private placing of 39,062,500 ordinary shares of £0.001 each at 8 pence per share to raise £3,125,000. In addition, the places were issued with one warrant on each share allotted exercisable at 12 pence per share before 20 April 2014.
16. Share-based payments
The group has a share-ownership compensation scheme for senior executives of the group whereby senior executives may be granted options to purchase ordinary shares in the company.
The group has on occasion issued warrants to third parties by way of settlement of liabilities to strategic suppliers. Each share warrant converts into one ordinary share of Strategic Mineral Plc upon exercise. No amounts are paid or payable by the recipient of the warrant for the warrant. The warrants carry neither rights to dividends nor voting rights at shareholders meetings.
Warrants
On 31 March 2011, 23,369,988 warrants were issued to a supplier for services provided, exercisable at 1.86p per share on or before 31 March 2014.
On 31 March 2011, 3,000,000 warrants were issued to a supplier for services provided, exercisable at 0.1p per share on or before 31 March 2013.
On 1 June 2011, 4,445,708 warrants were issued to a supplier for services provided, exercisable at 5p per share on or before 8 June 2012. On 7 July 2011, 1,000,000 warrants were exercised at 5p per share and the remaining warrants were forfeited by the warrant holder.
On 30 June 2011, 8,921,416 warrants were issued to a supplier for services provided, exercisable at 5p per share on or before 29 June 2016. On 29 July 2011, 500,000 warrants were exercised at 5p per share.
The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:
|
|
March 2011 warrants |
March 2011 warrants |
1 June 2011 warrants |
|
Share price at date of grant |
5.00p |
5.00p |
7.25p |
|
Exercise price |
1.86p |
0.10p |
5.00p |
|
Expected volatility |
10% |
10% |
10% |
|
Expected dividend |
Nil |
Nil |
Nil |
|
Contractual life |
3 years |
2 years |
3 years |
|
Risk free rate |
4% |
4% |
4% |
|
Estimated fair value of each warrant |
2.95p |
4.51p |
2.24p |
Number of outstanding existing Warrants at 31 December 2011:
|
Date of grant |
Granted |
Exercised /vested |
Forfeits |
At 31.12.11 |
Exercise price |
Exercise/ Vesting date |
|
|
|
|
|
|
|
|
From |
To |
|
31.03.11 |
23,369,988 |
- |
- |
23,369,988 |
1.86p |
31.03.11 |
31.03.14 |
|
31.03.11 |
3,000,000 |
- |
- |
3,000,000 |
0.1p |
31.03.11 |
31.03.13 |
|
01.06.11 |
4,445,708 |
(1,000,000) |
(3,445,708) |
- |
5p |
01.06.11 |
02.12.11 (½) |
|
|
|
|
|
|
|
|
02.06.12 (½) |
|
30.06.11 |
8,921,416 |
(500,000) |
- |
8,421,416 |
5p |
30.6.11 |
29.06.16 |
|
|
────── |
────── |
────── |
────── |
|
|
|
|
|
39,737,112 |
(1,500,000) |
(3,445,708) |
34,791,404 |
|
|
|
|
|
══════ |
══════ |
══════ |
══════ |
|
|
|
|
|
|
|
|
|
|
|
|
Options
On 31 March 3011, 26,639,956 options were issued to the group's directors and key management personnel, exercisable at 3.1p per share on or before 31 March 2014.
|
Number of outstanding options at 31 December 2011: |
|||||||
|
|
|
|
|
|
|
|
|
|
Date of grant |
|
Granted |
Exercised/ Vested |
Forfeits |
At 31.12.11 |
Exercise Price |
Exercise period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.03.11 |
|
26,639,956 |
- |
- |
26,639,956 |
3.1p |
31.3.11 to 31.03.14 |
|
|
|
══════ |
══════ |
══════ |
══════ |
|
|
The estimated fair value of the warrants issued during the year was calculated by applying the Black-Scholes option pricing model. The assumptions used in the calculation were as follows:
|
Share price at date of grant |
5p |
|
Exercise price |
3.10p |
|
Expected volatility |
10% |
|
Expected dividend |
Nil |
|
Contractual life |
3 years |
|
Risk free rate |
4% |
|
Estimated fair value of each warrant |
1.85p |
17. Contingencies
Ebony Iron Pty Ltd has a contractual dispute regarding its obligations under a supply agreement where a supplier has made a claim of AUS$5.8m. Ebony Iron Pty Ltd's Directors are of the view that they have complied with all contractual and legal requirements with respect to the contract. However, the Directors do not expect that the dispute will give rise to a material outflow of economic resources. The Directors have determined it is not possible to estimate the eventual legal and other costs of finalising this matter at this stage.
The company has no contingent liabilities in respect of legal claims arising from its ordinary course of business and it is not anticipated that any material liabilities will arise from any contingent liabilities.
18. Commitments
(a) Bank guarantees provided by the group
Ebony Iron Pty Ltd has given a bank guarantee for a standby letter of credit as at 31 December 2011 of £323,394 (USD500,000) to Freeport Moran Ltd in connection with a magnetite purchase agreement supported by a Cash Deposit by the company with the issuing bank.
(b) Operating lease commitments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
|
Group |
2011 £ |
2010 £ |
|
Within one year |
37,519 |
- |
|
|
────── |
────── |
|
|
37,519 |
- |
|
|
══════ |
══════ |
(c) Capital expenditure commitments
As at 31 December 2011, Southern Minerals Group LLC had entered into commitments amounting to USD 1,164,914 relating to the completion of a railroad in order to secure purchases of magnetite located at a mine in New Mexico, USA and also provide bank guarantees of USD 500,000 and USD 800,000 to the magnetite supplier, respectively prior to commencing the first loading onto the rail cars and six weeks after the first shipment from the mine.
In order to maintain current rights of tenure exploration tenements, Iron Glen Holdings Pty Ltd and its subsidiaries are required to perform minimum exploration work and meet minimum expenditure requirements. These obligations are subject to periodic renegotiation. These obligations are not provided for in the group's financial statements and are payable:
|
Group |
2011 £ |
2010 £ |
|
Within one year |
5,800 |
21,240 |
|
After one year but no more than five years |
- |
6,585 |
|
|
────── |
────── |
|
|
5,800 |
27,825 |
|
|
══════ |
══════ |
19. Financial instruments
The group's activities expose it to a variety of financial risks: credit risk, cash flow interest rate risk, foreign currency risk, liquidity risk and capital risk. The group's activities also expose it to non-financial risks: market risk. The group's overall risk management programme focuses on unpredictability and seeks to minimise the potential adverse effects on the group's financial performance. The Board, on a regular basis, reviews key risks and, where appropriate, actions are taken to mitigate the key risks identified.
Financial instruments - Risk Management
The group is exposed through its operations to the following risks:
Ø Cash flow interest rate risk
Ø Foreign Exchange Risk
Ø Liquidity risk
Ø Capital risk
Ø Market 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 previous periods unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the group, from which financial instrument risk arises are as follows:
Ø Trade and other receivables
Ø Cash and cash equivalents
Ø Trade and other payables
Ø Borrowings
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 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 Board receive regular updates from the Executive Directors through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce as far as possible without unduly affecting the group's competitiveness and flexibility. Further details regarding these policies are set out below:
Cash flow interest rate risk
The group is exposed to cash flow interest rate risk from its deposits of cash and cash equivalents with banks. The cash balances maintained by the group are proactively managed in order to ensure that the maximum level of interest is received for the available funds but without affecting the working capital flexibility the group requires.
The group is not at present exposed to cash flow interest rate risk on borrowings as it has no significant debt. No subsidiary company of the group is permitted to enter into any borrowing facility or lease agreement without the prior consent of the company.
Interest rates on financial assets and liabilities
The group's financial assets consist of cash and cash equivalents, loans and other receivables. The interest rate profile at 31 December of these assets was as follows:
|
|
|
Total |
Financial assets on which interest is earned |
Financial assets on which interest is not earned |
|
31 December 2011 |
|
£'000 |
£'000 |
£'000 |
|
UK sterling |
|
275 |
275 |
- |
|
Australian Dollar |
|
13 |
13 |
- |
|
US Dollar |
|
11 |
- |
11 |
|
Total |
|
299 |
288 |
11 |
The group earned interest on its interest bearing financial assets at rates between 1% and 3% during the year.
A change in interest rates on the statement of financial position date would increase/ (decrease) the equity and the anticipated annual income or loss by the theoretical amounts presented below. The analysis is made on the assumption that the rest of the variables remain constant. The analysis with respect to 31 December 2011 was prepared under the same assumptions.
|
|
Change of 1.0% in the interest rate as of |
|
|
|
31 December 2011 |
|
|
|
Increase of 1.0% |
Decrease of 1.0% |
|
Instruments bearing variable interest (£'000) |
2 |
(2) |
It is considered that there have been no significant changes in cash flow interest rate risk at the reporting date compared to the previous year end and that therefore this risk has had no material impact on earnings or shareholders' equity.
Foreign exchange risk
Foreign exchange risk arises because the group has operations located in various parts of the world whose functional currency is not the same as the functional currency in which other group companies are operating. Although its geographical spread reduces the group's operation risk, the group's net assets arising from such overseas operations are exposed to currency risk resulting in gains and losses on retranslation into Sterling. Only in exceptional circumstances will the group consider hedging its net investments in overseas operations, as generally it does not consider that the reduction in foreign currency exposure warrants the cash flow risk created from such hedging techniques. It is the group's policy to ensure that individual group entities enter into local transactions in their functional currency wherever possible and that only surplus funds over and above working capital requirements should be transferred to the parent company treasure. The group considers this policy minimises any unnecessary foreign exchange exposure.
In order to monitor the continuing effectiveness of this policy the Board through their approval of both corporate and capital expenditure budgets and review of the currency profile of cash balances and management accounts, considers the effectiveness of the policy on an ongoing basis.
The following table discloses the major exchange rates of those currencies utilised by the group:
|
|
|
USD |
EUR |
|
Average for 2011 |
|
1.60 |
1.56 |
|
At 31 December 2011 |
|
1.55 |
1.52 |
|
|
|
|
|
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 readily available cash balances (or agreed facilities) to meet expected requirements for a period of at least 60 days. The group currently has no long term borrowings.
Capital risk
The group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
Market risk
The market may not grow as rapidly as anticipated. The group may lose customers to its competitors. The group's major competitors may have significantly greater financial resources than those available to the company. There is no certainty that the company will be able to achieve its projected levels of sales or profitability.
20. Events after the reporting period
On 26 January 2012, the company acquired the secured full tenement ownership rights for the Jotanooka group of tenements and the Dragon Rocks tenement in Western Australia (the "WA Tenements"); and the Roper River and Hodgson groups of tenements located in the Northern Territory of Australia (the "NT Tenements").
The company agreed that their acquisition of the NT and WA tenement ownership rights from Quadrio Resources Pty Ltd was satisfied by the issue of six million fully paid ordinary shares in the company and AU$20,000.
At the time of the Ebony Iron Pty Limited acquisition by Strategic Minerals Plc, Ebony Iron Pty Limited also held the rights to explore iron ore on the NT Tenements and agreed with the owner to acquire full ownership net of retained exploration rights for fertiliser minerals at no additional cost to the company.
On the 13 February 2012, the company announced its first revenue from its Cobre Stockpile Project in New Mexico to customers in North America. The initial delivery of the 1,200 tonnes contracted is currently being trucked off the site ahead of the completion of the rail-spur upgrade at the property which is on schedule for completion in May 2012. After that point the company anticipates deliveries will be rail-freighted from Cobre. The rail-spur will allow up to 40,000-60,000 tonnes a month to be freighted from the site.
On the 20 February 2012, the company refinanced AUD1.2m of the AUD1.8m loan which was due for repayment on 31 December 2011. Under the new terms, the company entered into a £950,670 convertible loan note agreement (the "Loan") which is effective 1 January 2012 and has an interest rate of 10 per cent per annum, payable annually in arrears. Any unpaid interest due will attract a default interest rate of 14 per cent per annum. The repayment date of the loan is 14 December 2014. The amount outstanding under the Loan plus any accrued interest is capable of conversion into new ordinary shares of 0.1p each in the company at a conversion price of £0.15 per Ordinary Share.
The Loan is convertible only at the discretion of the company, which is entitled to pre-pay any or the entire principal of the Loan at any time without the prior approval of the lenders by way of either conversion at £0.15 per Ordinary Share (together with interest accrued up to the date of conversion) or redemption by the company at par (together with interest accrued up to the date of redemption). The Loan will automatically convert into new Ordinary Shares, to the extent not already done so or repaid, on the final repayment date of 31 December 2014 unless the company elects to redeem any outstanding principal and interest at par.
The balance of that loan (AUD0.6 million) has been refinanced on similar terms as before but with a repayment date of 30 June 2012. The funding will enable the company to continue construction of the rail upgrade to allow commencement of operations at its Cobre mine and provides additional working capital.
On the 21 February 2012, the company announced that it has entered into a £3 million Standby Equity Distribution Agreement ("SEDA") and a US$1.5 million loan facility ("Loan Agreement") with YA Global Master SPV Ltd (the "Investor"), an investment fund managed by Yorkville Advisors LLC ("Yorkville"). The SEDA will provide flexibility to the company over future funding while the Loan Agreement will be used primarily to provide the funding required to complete the rail upgrade programme at Strategic's Cobre Project in New Mexico.
On the 26 March 2012, the company announced that George Cardona has been appointed as a Non-Executive Director of the company.
21. Controlling party
There is no ultimate controlling party of the group. Strategic Minerals Plc acts as the parent company to Iron Glen Holdings Pty Limited, Ebony Iron Pty Limited, SML Logistics Inc, Iron Glen Pty Limited, Southern Minerals Group LLC, Jatanooka Iron Pty Ltd and Dragon Rock Minerals Pty Limited.
22. Related party transactions
During the period ended 31 December 2011, Strategic Minerals Plc loaned money to and paid expenses on behalf of Ebony Iron Pty Limited, Iron Glen Holdings and Iron Glen Pty Limited in the amount of £586,270, £156,561 and £107,478 respectively. The loans are non-interest bearing, unsecured, have no fixed repayment term and are at call. At the yearend these amounts all remained due to the company. In addition, the company charged £249,424 to Iron Glen Holdings Pty Limited for management fees in the period ended 31 December 2011.
During the period £32,500 and £68,333 were paid to Sanders Rosenstadt LLP, in which S. Sanders a director of the company is a member, for directors' fees and salary and consultancy fees respectively.
During the period, £1,000 and £75,667 were paid to M D Bonthrone, a director of the company, for directors' fees and consultancy fees respectively.
During the period, £32,500 was paid to M A Borrelli, a director of the company, for directors' fees.
During the period, £1,000 and £97,834 were paid to P Griffiths, a director of the company for directors' fees and consultancy fees respectively.
During the period, £30,207 and £7,907 were paid to J Felix and J Bohringer, directors of Iron Glen Holdings Pty Limited, for consultancy and directors fees respectively.
During the period, £113,353 was paid to JASP Pty Limited, in which J Peters is a director of Ebony Iron Pty Limited, for consultancy fees.
During the period, £31,909 was paid to D Weidermeir, a director of Ebony Iron Pty Limited, for director's fees.
As at the 31 December 2011, an unsecured and interest free loan of £166,719 was due to Walter Doyle, a shareholder of the company. During the period, an amount of £28,003 was paid to Walter Doyle for consultancy services.
This information is provided by RNS
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