RNS Number : 1854P
Strategic Minerals PLC
30 September 2013
 



30 September 2013

Strategic Minerals Plc

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

Interim results for the six months ended 30 June 2013

Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the magnetite iron ore producer and exploration company is pleased to announce its interim results for the six months ended 30 June 2013.

Financial Highlights

 

·    Total revenues generated £14 million (H1 2012: £0.3 million)

·    New Mexican operations EBITDA level profit £325k (H1 2012: loss £79k)

·    Consolidated EBITDA level loss for the period £430k (H1 2012: loss £1.2 million)

·    Total comprehensive loss for the period £3.5 million (H1 2012: loss £1.5 million)

·    Basic and fully diluted loss per share 0.69 pence (H1 2012: loss 0.31 pence)

·    Cash and cash equivalents at 30 June 2013 £1.3 million (H1 2012: £0.8 million)

·    Inventory at 30 June 2013 £2.8 million (30 June 2012: £60,000)

·    Net current assets at 30 June 2013 £1.3 million (30 June 2012: £0.2 million net liabilities)

 

Operational Highlights

 

·    Total sales 247,000 dry metric tonnes ("DMT") (H1 2012: 6,000 DMT )

·    240,000 DMT in export sales (H1 2012: nil)

·    Average export sales applicable Platts IODEX 62% Fe price: $123.21per DMT

·    Average net FOB price achieved: $88.91 per DMT

 

James Fyfe, Executive Chairman of Strategic Minerals, said:

"The Company achieved a satisfactory outcome from its first six months of full scale production at the Cobre stockpile in New Mexico delivering 247,000 dry metric tonnes of product to market. We are firmly focused on adding additional stockpile assets which will enable the Company to achieve cash-profitability at Group level and thereafter a profit after tax for our shareholders."

Paul Harrison, CEO of the Company, added:

"We have generated revenues of £14m in our maiden six months of production, which is a creditable performance. Whilst extreme volatility in the underlying iron ore price during the period (high $160, low $110) impacted our profitability, the business is now in full operation. Our priorities remain highly focused on three key areas namely maximising profitability of our first core asset; securing additional low operating cost tailings deposits and creating value out of our Australian exploration tenements."

 

For further information:

 

Company
Strategic Minerals plc
Paul Harrison, CEO
+44(0) 20 7930 6009/+44(0) 7921 588589 

Nominated Adviser/Joint Broker
Allenby Capital Limited
Jeremy Porter / James Reeve
+44 (0) 20 3328 5656

Joint Broker
Daniel Stewart & Company Plc
Sean Lunn / David Hart
+44 (0) 20 7776 6550

Financial Public Relations
GTH Communications Limited
Toby Hall / Suzanne Johnson Walsh
+44 (0) 20 7822 7493/8492

 

 

About Strategic Minerals

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

 

Chairman's Statement

I am pleased to present our interim report for the six months ended 30 June 2013. During the period the Company operated in "full scale production mode" at the Cobre Mine in New Mexico for the first time. Revenues were generated by export sales and sales at mine-gate to the USA domestic market. We also focused our efforts firmly on securing further tailings assets and made progress with our Australian exploration assets.

Financial Highlights

Strategic Minerals delivered revenues of £14 million in the six month period ended 30 June 2013. (H1 2012: £334k). Such revenues were generated by our New Mexican operations, primarily from export sales which totalled £13.6 million (H1 2012: nil). Domestic sales in the USA totalled £398,000 (H1 2012: £334,000) generating a total gross profit of £547,000.

The Company however incurred a comprehensive loss for the financial period of £3.5 million compared to a loss of £1.5 million for the six month period ended 30 June 2012. The primary contributor to the increased loss was the amortisation of the carrying value of the Company's New Mexican operations which stood at £15.16 million at 31 December 2012. At EBITDA level our New Mexican operations generated a profit of £325k (2012: loss £79k), Australia a loss of £109k (2012: loss £628k) and head office and corporate a loss of £646k (2012: loss £482k), giving a consolidated loss at EBITDA level in the period of £430k (H1 2012: loss £1.2 million). Amortisation charges in respect of intangible assets totalled £3.14 million for the six months ended 30 June 2013 (H1 2012: £75k). Such amortisation charges when combined with depreciation of rail infrastructure (£0.4 million) and historic share based payments (£70k), resulted in an overall loss from operations of £4.1 million in the period (2012: loss £1.3 million).

Summary of Results










 As restated



6 months to

 6 months to

         Year to


30 June

30 June

31 December


2013

2012

              2012


(Unaudited)

(Unaudited)

        (Audited)


£'000

£'000

              £'000









Revenue

13,954

334

3,754

Cost of sales

(13,407)

(173)

(2,851)


________

________

________





Gross profit

547

161

903





Exploration and evaluation expenditure

-

-

(835)

Administrative expenses

(977)

(1,350)

(3,356)





EBITDA

(430)

(1,189)

(3,288)

 

Non cash item:




Depreciation of railway infrastructure

(411)

-

(86)

Share based payment

(70)

(34)

  (95)

Amortisation of intangible asset

(3,144)

(75)

(810)





Loss from operations

(4,055)

(1,298)

(4,279)





Basic and fully diluted loss per share for the period was 0.69 pence (H1 2012 0.31 pence).

New Mexican Operations

The Company receives all of its revenues in US dollars. The majority of the Company's revenues are generated from export sales to Glencore from the United States which are made on a FOB Port of Guaymas, Mexico basis. The FOB price is the applicable Platts IODEX 62% Fe spot market price ("Platts Price") less sea freight and buyer commissions as adjusted, if applicable, by chemical analysis results. In the period under review the Platts Price ranged from a high of $160.00/DMT in February to a low of $110.75/DMT in June. The applicable Platts Price averaged $123.21 and sea freight and buyer commissions averaged $34.30/DMT, resulting in an average FOB price of $86.32/DMT after net chemical analysis adjustments penalty of $2.59/DMT. The chemical analysis adjustments were unusually high in the period as samples were contaminated in a one-off incident at the load port for one shipment by pet-coke being unloaded close by as our shipment was being loaded, significantly increasing sulphur levels in the samples.

With regard to the Company's direct costs these comprise operating costs and royalty payments to Freeport-McMoRan, owner of the New Mexican stock pile at the Cobre mine. Operating costs are made up of inside mine gate costs, rail freight to port costs, export/border-crossing costs to Mexico and port receiving, unloading, storing and ship loading costs. These were largely in line with budget at an aggregate of approximately $63/DMT during the period. Inside mine gate costs comprise excavating, screening, hauling and loading activities which are outsourced to an unrelated third party.

Turning to royalty payments to Freeport-McMoRan, these are incurred as material leaves the mine gate. The royalty rate is linked to the Platts Price in that the monthly royalty payable per SWT (short wet ton) is determined by the average Platts Price in the month prior to the material leaving the mine. The royalty payable ranges from the lowest rate per SWT at a monthly average Platts Price below $116/DMT to a maximum if the monthly average Platts Price exceeds $150/DMT. In between these Low:High levels the royalty level is variable. Accordingly, in gross profit terms the Company benefits from a rising Platts Price but is adversely affected when the Platts Price is falling, as it was in this period. It is worth noting that if the Platts Price were stable at a fixed level for an extended period our breakeven Platts Price/DMT would be approximately $105.00 at gross profit level assuming sea freight, buyer commissions and operating costs at the actual levels incurred in the six months ended 30 June 2013.

The Company's domestic sales are made at a fixed royalty and at negotiated selling prices unrelated to the Platts Price.

Australian Operations

The primary focus for Strategic Minerals now is the monetisation of tailings rather than exploration assets. However, the Company's exploration properties in Australia, in particular the Iron Glen and Jotanooka tenements, hold significant potential. The first of these is located approximately 40km from the deep water port of Townsville, Queensland, and is close to existing road and rail infrastructure. Within an established mining region, areas of the 2,100 hectare tenement have been subject to extensive magnetic and geochemical analysis.

The Iron Glen project comprises three tenements. To understand the potential extent of magnetite resources within these tenements and therefore their potential value it is essential that we test the extent of magnetic anomalies previously identified. In that regard we plan to undertake a modest early stage exploration programme. The goal is to detail any buried magnetic features within the main magnetic anomaly including the area to the west of where the presence of magnetite was proven in June 2013 by a site visit with our retained advisors, Terra Search. The soil sampling target area is approximately 200 hectares.

 

The end goal is to define an economically viable high grade magnetite concentrate of at least 5 million tonnes (up from 0.6 million tonnes). In addition to magnetite it is hoped that significant additional credits can also be obtained from silver and base metals and possibly gold.

 

Terra Search have mapped out and provided a preliminary costing for taking the programme to its conclusion with JORC resource estimates and an application for a Mining Licence. The overall investment estimated for all phases is approximately AUD2.35 million.

 

In order to comply with regulatory requirements as approved by Department of Natural Resources and Mines and to capitalise on the benefits of Satellite Imagery work previously undertaken by Spectral Geology, it is essential that preliminary field surveys be undertaken on all identified "hot spots". These so called "hot spots" were identified based upon the magnetite signature identified in the Iron Glen Pit area. This work could lead to a significant increase in the resource potential of the Iron Glen project.

 

The Jotanooka tenement is located in Western Australia and is only 300 kilometres from a deep water port with existing rail infrastructure nearby, which could potentially contain a significant iron ore resource. More importantly it neighbours the large SinoSteel iron ore mine which is adjacent to the Company's tenement. Prior evaluations suggested the possibility of an extension of the SinoSteel deposit continuing into the Company's acreage. Consequently, a carefully defined and highly targeted exploration programme has been recommended by the Company's independent geologists to test the existence of this extension. This work will be carried out in the second half of fiscal 2013.

 

Other Matters

During the financial period, Steven Sanders, former Chairman of the Company, stepped down as a non-executive director of the Company. On behalf of the board I would like to thank Steven for his efforts on behalf of the Company during his tenure as a director.

I would like to take this opportunity to thank my fellow Directors, our management and staff in New Mexico and our advisers for their support and hard work during the period and thank our contractors, suppliers and partners for their on-going support.

Full Year Outlook

Subsequent to 30 June 2013 our New Mexican operations completed a 65,000 DMT shipment in August and we anticipate a similar export shipment shortly. Accordingly we anticipate completing total sales of approximately 500,000 DMT in fiscal 2013.

 

James J. Fyfe

Executive Chairman

30 September 2013

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2013

 



As restated



6 months to

6 months to

Year to


30 June

30 June

31 December


2013

2012

2012


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Continuing operations








Revenue

13,954

334

3,754

Cost of sales

(13,407)

(173)

(2,851)


________

________

________





Gross profit

547

161

903





Exploration and evaluation expenditure

-

-

(835)

Administrative expenses

(977)

(1,350)

(3,356)

Amortisation of intangible asset

(3,144)

(75)

(810)

Depreciation of railway infrastructure

(411)

-

(86)

Share based payment

(70)

(34)

(95)


________

________

________





Loss from operations

(4,055)

(1,298)

(4,279)





Finance income

-

-

-

Finance expense

(387)

(28)

(714)


________

________

________





Loss before taxation

(4,442)

(1,326)

(4,993)





Income tax credit

786

19

635


________

________

________





Loss for the period

(3,656)

(1,307)

(4,358)





Other comprehensive income




Exchange (losses) / gains arising on translation

of foreign operations

175

(176)

(676)


________

________

________





Total comprehensive income

(3,481)

(1,483)

(5,034)


________

________

________





Loss for the period attributable to:




Owners of the parent

(3,656)

(1,307)

(4,358)


________

________

________





Total comprehensive income attributable to:




Owners of the parent

(3,481)

(1,483)

(5,034)


________

________

________





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








Continuing activities - Basic and diluted

(0.69)p

(0.31)p

(1.00)p


________

________

________

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2013

 



As restated



30 June

30 June

31 December


2013

2012

2012


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000

Assets




Non-current assets




Intangible assets

13,110

18,495

16,280

Property, plant and equipment

1,664

2,145

2,003

Deferred tax asset

437

-

437


________

________

________






15,211

20,640

18,720


________

________

________

Current assets




Inventories

2,800

60

1,722

Trade and other receivables

1,305

470

1,097

Cash and cash equivalents

1,331

789

763


________

________

________






5,436

1,319

3,582


________

________

________





Total Assets

20,647

21,959

22,302


________

________

________





Equity and liabilities




Share capital

554

448

448

Share premium reserve

25,106

20,966

20,914

Merger reserve

12,483

12,483

12,483

Foreign exchange reserve

70

395

(105)

Share options reserve

1,327

1,291

1,352

Other reserves

(14,363)

(14,363)

(14,363)

Accumulated loss

(11,609)

(4,902)

(7,953)


________

________

________





Total Equity

13,568

16,318

12,776


________

________

________

Liabilities




Non-current liabilities




Loans and borrowings

-

-

951

Deferred tax liability

2,986

4,094

3,791


________

________

________






2,986

4,094

4,742


________

________

________

Current liabilities




Loans and borrowings

851

1,333

2,059

Trade and other payables

3,242

214

2,725


________

________

________






4,093

1,547

4,784


________

________

________





Total Liabilities

7,079

5,641

9,526


________

________

________





Total Equity and Liabilities

20,647

21,959

22,302


________

________

________

 

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE PERIOD ENDED 30 JUNE 2013

 



As restated



6 months to

6 months to

Year to


30 June

30 June

31 December


2013

2012

2012


(Unaudited)

(Unaudited)

(Audited)


£'000

£'000

£'000





Cash flows from operating activities








Loss before tax

(4,442)

(1,326)

(4,993)

Adjustments for:








Depreciation of tangible fixed assets

411

11

86

Amortisation of intangible assets

3,144

75

810

Exploration and evaluation expenditure

-

-

835

Loss on disposal of property, plant and equipment

-

-

11

Increase in inventory

(1,012)

(60)

(1,722)

(Increase) / decrease in trade and other receivables

(166)

33

(680)

Increase / (decrease) in trade and other payables

602

(931)

1,845

Share based payment expense

70

34

95

Finance expense

387

28

714


_______

_______

_______





Cash absorbed by operating activities

(1,006)

(2,136)

(2,999)





Finance income

-

-

-

Finance expense

(480)

(28)

(111)


_______

_______

_______





Net cash flows from operating activities

(1,486)

(2,164)

(3,110)


_______

_______

_______





Investing activities




Acquisition of intangible fixed assets

(21)

(200)

(113)

Acquisition of tangible fixed assets

-

(637)

(646)


_______

_______

_______





Net cash used in investing activities

(21)

(837)

(759)


_______

_______

_______





Financing activities




Net proceeds from issue of equity share capital

4,203

3,275

3,006

Net (repayment) proceeds (of) /from borrowings

(2,159)

229

1,335


_______

_______

_______





Net cash from financing activities

2,044

3,504

4,341


_______

_______

_______









Net increase / (decrease) in cash and cash equivalents

537

503

472





Cash and cash equivalents at beginning of period

763

299

299

Exchange gains / (losses) on cash and cash equivalents

31

(13)

(8)


_______

_______

_______





Cash and cash equivalents at end of period

1,331

789

763


_______

_______

_______

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2013

 


Share

capital

Share

 options

 reserve

Other

Reserves

Foreign

 exchange

 reserve

Accumulated

loss

Total

Equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Balance as at

1 January 2012 (as restated)

399

17,102

12,483

1,257

(14,363)

571

(3,595)

13,854










Loss for the period






-

(1,307)

(1,307)

Foreign exchange translation






(176)

-

(176)







_______

_______

_______

Total comprehensive income

 for the period






(176)

(1,307)

(1,483)










Shares issued in the year

49

4,031

-

-

-

-

-

4,080

Expense of share issue

-

(167)

-

-

-

-

-

(167)

Share based payments (restated - Note 3)

-

-

-

34

-

-

-

34











_______

_______

_______

_______

_______

_______

_______

_______

Balance at

30 June 2012

(as restated) - Unaudited

448

20,966

12,483

1,291

(14,363)

395

(4,902)

16,318


_______

_______

_______

_______

_______

_______

_______

_______










Loss for the period






-

(3,051)

(3,051)

Foreign exchange translation






(500)

-

(500)







_______

_______

_______

Total comprehensive income for the year






(500)

(3,051)

(3,551)










Shares issued in the period

-

-

-

-

-

-

-

-

Expenses of share issue

-

(52)

-

-

-

-

-

(52)

Share based payments

-

-

-

61

-

-

-

61


_______

_______

_______

_______

_______

_______

_______

_______

Balance at

31 December 2012 - Audited

448

20,914

12,483

1,352

 (14,363)

(105)

(7,953)

12,776


_______

_______

_______

_______

_______

_______

_______

_______










Loss for the period







(3,656)

(3,656)

Foreign exchange translation






175

-

175







_______

_______

_______

Total comprehensive income for the year






175

(3,656)

(3,481)










Shares issued in the year

103

4,517

-

-

-

-

-

4,620

Expenses of share issue

-

(420)

-

-

-

-

-

(420)

Exercise of options

3

95

-

(95)

-

-

-

3

Share based payments

-

-

-

70

-

-

-

70


_______

_______

_______

_______

_______

_______

_______

_______

Balance at

30 June 2013 - Unaudited

554

25,106

12,483

1,327

(14,363)

70

(11,609)

13,568


_______

_______

_______

_______

_______

_______

_______

_______

 

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

 

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

 

 

NOTES FORMING PART OF THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2013

 

1.   General information

Strategic Minerals Plc ("the Company") is a public company incorporated in England and Wales.  The condensed consolidated interim financial statements of the Company for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the "Group").

 

2.   Accounting policies

Basis of preparation

 

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. They do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2012 Annual Report. The financial information for the half years ended 30 June 2013 and 30 June 2012 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

 

The annual financial statements of Strategic Minerals Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2012 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2012 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

 

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements.

 

In addition, the IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

 

3.  Critical accounting estimates and judgements

 

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

 

Judgements

 

(a)  Revenue recognition

 

The eventual price invoiced for export sales is determined based on a formula linked to the Platts IODEX 62% Fe CFR China in months following the month of sale and quality analysis post loading.  For 2012 the amount recorded as revenue was the final agreed invoice value so no judgement has been applied in recording revenue for the year.  In the period to 30 June 2013 an estimate of future Platts IODEX 62% Fe CFR China price has been used in determining the amount of revenues recognised in respect of one of the shipments.

 

Estimates and assumptions

(b)  Carrying value of intangible assets

In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held.

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

(c)  Share based payments, warrants and options

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

 

4.

Prior-year adjustment

 

During 2012 the Directors commenced a review of the accounting for the acquisition of Ebony Iron Pty Limited in 2011.  Concurrently the Conduct Committee of the Financial Reporting Council ("FRC") raised a number of queries regarding the accounting for the transaction and other matters.  As a result of our review and correspondence with the FRC the Directors concluded on the need to restate the 2011 financial statements with the consequent need to restate the comparatives for the 6 month period to 30 June 2012.

 

A reconciliation of the comparative amounts previously stated in the condensed consolidated statements for the period to 30 June 2012 to re-stated comparative amounts for the consolidated statement of comprehensive income and consolidated statement of financial position is provided below.  A detailed description of each adjustment then follows. 

 



As previously





stated

Adjustments

Restated



£'000

£'000

£'000


Assets





Non-current assets





Goodwill

8,744

(8,744)

-


Intangible assets

2,119

16,376

18,495



_______

_______

_______








10,863

7,632

18,495


Property, plant and equipment

2,145

-

2,145



_______

_______

_______








13,008

7,632

20,640



_______

_______

_______


Current assets










Inventories

60

-

60


Trade and other receivables

470

-

470


Cash and cash equivalents

789

-

789



_______

_______

_______








1,319

-

1,319



_______

_______

_______



_______

_______

_______







Total Assets

14,327

7,632

21,959



_______

_______

_______


Equity and liabilities





Share capital

448

-

448


Share premium reserve

30,272

(9,306)

20,966


Merger reserve

-

12,483

12,483


Foreign exchange reserve

(22)

417

395


Share options reserve

1,062

229

1,291


Other reserves

(14,363)

-

(14,363)


Accumulated loss

(4,617)

(285)

(4,902)



_______

_______

_______







Total Equity

12,780

3,538

16,318



_______

_______

_______







Liabilities





Current liabilities





Loans and borrowings

1,333

-

1,333


Trade and other payables

214

-

214



_______

_______

_______








1,547

-

1,547



_______

_______

_______


Non-current liabilities





Deferred tax liability

-

4,094

4,094



_______

_______

_______







Total Equity and Liabilities

14,327

7,632

21,959



_______

_______

_______

 

 



As previously





stated

Adjustments

Restated



£'000

£'000

£'000







Revenue

334


334


Cost of Sales

(173)


(173)



_______


_______







Gross profit

161


161







Amortisation of intangible asset


(75)

(75)


Share based payments

-

(34)

(34)







Administrative expenses

(1,350)


(1,350)



_______


_______







Loss from operations

(1,189)


(1,298)







Finance income

-


-


Finance expense

(28)


(28)



_______


_______








(1,217)


(1,326)







Income tax benefit/(expense)

-

19

19



_______


_______







Loss for the period

(1,217)


(1,307)



_______


_______

 

Prior-year adjustments description

 

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

 

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

 

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

 

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

 

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

 

(b)   Revision to deferred tax

 

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

 

(c)   Accounting for a Merger reserve

 

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

 

(d)   Revision to share-based payment expense

 

In the period to 31 December 2011 warrants were issued to various suppliers in settlement of services provided and share options granted to certain of the Group's Directors and key management personnel.  In valuing these warrants and options using the Black-Scholes option pricing model an expected volatility of 10% was used.  In the opinion of the Directors this was inappropriate and an appropriate rate would be 55%.  This has led to the share based payment charge for 2011 increasing by £195,000 to £1,257,000.  In the period to 30 June 2012 further warrants were issued and an expected volatility of 10% was also used.  Revising this to 55% gave rise to a charge in the period of £34,000. 

 

The cumulative additional charge of £229,000 is reflected in the adjusted balance sheet shown above.

 

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

 

5.

Segment information

 

The Group has three main segments:

 

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

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

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

 

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

 

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

 

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

 

Measurement of operating segment profit or loss, assets and liabilities

 

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

 

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

 





Head






SMG

Office

Australia

Total


6 Months to 30 June 2013 (Unaudited)


2013

2013

2013

2013




£'000

£'000

£'000

£'000
















Revenue


13,954

-

-

13,954









Cost of sales


(13,407)

-

-

(13,407)




_______

_______

_______

_______









Gross profit


547

-

-

547









Depreciation of railway infrastructure


(411)

-

-

(411)


Administrative expenses


(222)

(646)

(109)

(977)




_______

_______

_______

_______


 

Segment profit / (loss) from operations


 

 

(86)

 

 

(646)

 

 

(109)

 

 

(841)









Finance expense


-

(387)

-

(387)




_______

_______

_______

_______









Segment profit / (loss) before taxation


(86)

(1,033)

(109)

(1,228)




_______

_______

_______













Amortisation of intangible asset

(3,144)


Share-based payments charge

(70)






_______





Group loss before taxation

(4,442)







_______

 





Head




6 months to 30 June 2012 (Unaudited)


SMG

Office

Australia

Total




2012

2012

2012

2012




£'000

£'000

£'000

£'000
















Revenue


334

-

-

334









Cost of sales


(173)

-

-

(173)




_______

_______

_______

_______









Gross profit


161

-

-

161









Administrative expenses


(240)

(482)

(628)

(1,350)




_______

_______

_______

_______









Segment loss from operations

 

 


(79)

(482)

(628)

(1,189)


Finance expense


-

(28)

-

(28)




_______

_______

_______

_______









Segment loss before taxation


(79)

(510)

(628)

(1,217)




_______

_______

_______













Amortisation of intangible asset

(75)


Share-based payments (as restated)

(34)






_______





Group loss before taxation (as restated)

(1,326)







_______

 





Head




Year to 31 December 2012 (Audited)


SMG

Office

Australia

Total




2012

2012

2012

2012




£'000

£'000

£'000

£'000
















Revenue


3,754

-

-

3,754









Cost of sales


(2,851)

-

-

(2,851)




_______

_______

_______

_______









Gross profit


903

-

-

903









Exploration and evaluation expenditure


-

-

(835)

(835)


Depreciation of railway infrastructure


(86)

-

-

(86)


Administrative expenses


(603)

(1,258)

(1,495)

(3,356)




_______

_______

_______

_______


 

Segment profit / (loss) from operations


 

214

 

(1,258)

 

(2,330)

 

(3,374)









Finance expense


-

(714)

-

(714)




_______

_______

_______

_______









Segment profit / (loss) before taxation


214

(1,972)

(2,330)

(4,088)




_______

_______

_______













Amortisation of intangible asset

(810)


Share-based payments charge

(95)






_______





Group loss before taxation

(4,993)







_______

 





Head






SMG

office

Australia

Total


As at 30 June 2013 (Unaudited)


£'000

£'000

£'000

£'000









Additions to non-current assets (excluding deferred tax)


-

-

21

21




_______

_______

_______

_______









Reportable segment assets (excluding deferred tax)


17,468

1,245

1,497

20,210




_______

_______

_______

_______









Reportable segment liabilities


2,509

1,394

190

4,093




_______

_______

_______










Deferred tax liabilities

2,986



_______





Total Group liabilities

7,079



_______

 

 


As at 30 June 2012 (Unaudited)


£'000

£'000

£'000

£'000









Additions to non-current assets


637

-

200

837




_______

_______

_______

_______
















Reportable segment assets


18,669

770

2,520

21,959




_______

_______

_______

_______









Reportable segment liabilities


102

1,310

135

1,547




_______

_______

_______










Deferred tax liabilities

4,094



_______





Total Group liabilities

5,641



_______

 





Head






SMG

office

Australia

Total


As at 31 December 2012 (Audited)


£'000

£'000

£'000

£'000









Additions to non-current assets (excluding deferred tax)


577

4

698

1,279




_______

_______

_______

_______









Reportable segment assets (excluding deferred tax)


19,749

657

1,459

21,865




_______

_______

_______

_______









Reportable segment liabilities


1,290

3,691

754

5,735




_______

_______

_______










Deferred tax liabilities

3,791

 



_______





Total Group liabilities

9,526



_______

 

6.

Operating loss

 

Costs by nature



6 months to

6 months to

Year to



30 June

30 June

31 December



2013

2012

2012



(Unaudited)

(Unaudited)

(Audited)



£'000

£'000

£'000


Operating loss is stated after charging/(crediting):










Directors' fees and emoluments

418

194

491


Auditors' remuneration

10

47

106


Salaries, wages and other staff related costs

127

221

459


Operating lease - land and buildings

27

31

59


Legal, professional and consultancy fees

221

584

1,690


Travelling and related costs

62

97

140


Foreign exchange (gain) / loss

(58)

9

64


Other expenses

170

167

347



________

________

________








977

1,350

3,356



________

________

________

 

7

Loss per share

 

Losses per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year. The weighted average number of shares in issue during the period was basic 531,305,190 (year to 2012 - 434,531,331; 6 months to 30 June 2012 - 420,687,484) adjusted for the historic share reorganisation and consolidation. Fully diluted the weighted average was 531,305,190 (year to 2012 - 434,531,331; 6 months to 30 June 2012 - 420,687,484). The loss for the financial period was £1,682,000 (year to 2012 as restated - £4,358,000; 6 months to 30 June 2012 as restated - £1,307,000).

 

As the Group has made a loss for the period, diluted earnings per share is deemed to be the same as the basic earnings per share.

 

 

 

8.

Share capital







2013

2013

2012

2012



No

£'000

No

£'000


Allotted, called up and fully paid






Ordinary shares

553,825,560

554

448,158,893

448



__________

__________

__________

__________

 

 

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

 

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

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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