TIDMBRD
RNS Number : 8033D
BlueRock Diamonds PLC
28 June 2019
BlueRock Diamonds PLC / AIM: BRD / Sector: Natural Resources
28 June 2018
BlueRock Diamonds PLC ('BlueRock' or the 'Company')
Final Results and Notice of AGM
BlueRock Diamonds PLC, the AIM listed diamond producer, which
owns and operates the Kareevlei Diamond Mine ('Kareevlei') in the
Kimberley region of South Africa, is pleased to announce its final
results for the year ended 31 December 2018.
Overview
-- 2018 showed significant improvements over 2017
o FY 2018 carats sold up 71% to 5,805 (FY 2017: 3,385)
o FY 2018 tonnes processed up 24% to 189,990 tonnes (FY 2017:
153,147 tonnes)
o FY 2018 average grade up 34% to 3.28 cpht (FY 2017: 2.45
cpht)
-- Kareevlei continues to produce diamonds of exceptional
quality and remains one of the top 10 kimberlite pipes in the world
ranked by value per carat
-- Average stone size recovered during 2018 was around 0.35
carats and over 90% of diamonds are gem or near gem quality, hence
the high average value per carat
-- Started to mine KV1 in the second half of the year leading to
a more consistent and higher grade, which has continued into
2019
-- Continued investment in plant and equipment including crushing circuit
-- Several notable advances post period end:
o 365-day operation commenced March 2019 leading to a +30%
increase in operating time
o Appointed a new CEO of Kareevlei, Gus Simbanegavi
o Agreed strategic partnership with Teichmann Group, a pan
African civil engineering and mining group
o Recovered and sold two large stones during Q1 2019, as well as
a 24.98 carat diamond in June, the largest diamond to date, which
sold for $190,000
The Company also announces that the BlueRock Annual General
Meeting ('AGM') will be held at the offices of SP Angel Corporate
Finance LLP, 35-39 Maddox Street, London, W1S 2PP at 10.00a.m.
(BST) on 25 July 2019.
The Company's annual report and accounts, Notice of AGM and
Forms of Proxy will be dispatched to shareholders later today and
will be available on the website at www.bluerockdiamonds.co.uk
As part of the business of the AGM, the Company is proposing a
Capital Reorganisation whereby every 500 existing ordinary shares
of 0.01 pence each will be consolidated into one new ordinary share
of 5 pence each. The timetable of the proposed Capital
Reorganisation is as follows:
Circular posted to Shareholders 28 June 2019
Latest time and date for receipt of Forms 10am on 23 July 2019
of Proxy
Annual General Meeting 25 July 2019
Record Date 6pm on 25 July 2019
Expected date on which New Ordinary Shares 8am on 26 July 2019
will be admitted to trading on AIM
Expected date on which CREST accounts will 26 July 2019
be credited with New Ordinary Shares
Expected date by which definitive new share by 9 August 2019
certificates are to be despatched
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
**S**
For further information, please visit BRD's website
www.bluerockdiamonds.co.uk or contact:
BlueRock Diamonds PLC
Mike Houston, Executive Chairman m.houston@bluerockdiamonds.co.uk
David Facey, FD dfacey@bluerockdiamonds.co.uk
SP Angel (NOMAD and Broker)
Stuart Gledhill / Caroline Tel: +44 (0)20 3470 0470
Rowe
-----------------------------------
SVS Securities plc (Joint Broker)
Tom Curran Tel: +44 (0)20 3700 0100
-----------------------------------
Turner Pope Investments (Joint
Broker) Tel: +44 (0) 20 3621 4120
Lewis Jones/Andy Thacker
-----------------------------------
St Brides Partners Ltd (Financial
PR) Tel: +44 (0)20 7236 1177
Melissa Hancock / Juliet Earl
-----------------------------------
To view the full report with illustrative graphs please visit
our website: www.bluerockdiamonds.co.uk
Chairman's Statement
Dear Shareholders,
I am pleased to present our annual report and accounts for the
year ended 31 December 2018.
2018 showed significant improvements over 2017, highlights of
which is shown below:
-- FY 2018 carats sold up 71% to 5,805 (FY 2017: 3,385)
-- FY 2018 tonnes processed up 24% to 189,990 tonnes (FY 2017: 153,147 tonnes)
-- FY 2018 average grade up 34% to 3.28 cpht (FY 2017: 2.45 cpht)
Since my appointment in November 2018, we have made a number of
changes to our management team and have fundamentally changed our
operational procedures to allow us to reach our primary goal of
achieving sustainable profitability from mining operations at
Kareevlei. We have also raised sufficient funds in order to enable
us to make the changes necessary to reasonably expect that we will
now be able to move to being profitable.
The Board expects the Company to be self-funding going forward
and has set a target of processing between 280,000 tonnes and
330,000 tonnes in 2019 compared to 190,000 in 2018. Certainly, to
date, the implementation of our new development strategy is
yielding positive results and we have started recovering a higher
number of larger stones.
Post-period end we recovered and sold two large stones during Q1
2019: an 8.97 carat diamond for $74,513 and a 16.28 carat diamond
for $78,947. In early June we recovered our largest diamond to date
- a 24.98 carat diamond which sold for $190,000 on 14 June. The
size and quality of this stone is a step up in the potential of the
operation particularly as backed up by the quality and price of the
diamonds recovered in the typical run of mine production. As the
volume of mining of pure kimberlite increases, the incidence of
these larger stones should also increase.
Review of 2018
Mining
For the first half of 2018 we continued to mine KV2, which
covers an area of 1.1ha and has an inferred grade of 4.5 cpht.
During that period, we also started to strip the calcretised layer
from the surface of KV1. KV1 is slightly bigger than KV2, having an
estimated surface area of 1.4ha and has a significantly higher
inferred grade of 6.3 cpht.
In the second half of 2018, we began mining KV1 and by the end
of the year all of our mining activities were concentrated on
KV1.
A total tonnage of 572,664 tonnes was mined in 2018 (2017 was
265,290 tonnes) with 382,661 tonnes of waste and 190,000 of
processable ore. The strip ratio was 2.0 which included the early
development of KV1.
Production
Tonnes processed in 2018 was 190,000 tonnes, 24% up on 2017,
although average monthly production for the second half of 2018 of
approximately 19,500 tonnes was similar to that in 2017 of
18,800.
In 2018, production remained seasonal, with the first quarter
being affected by the annual shutdown and the rainy season. The
second quarter was affected by the tail end of the rainy season and
the breakdown of the cone crusher which suspended operations for a
period of 10 days. The total time lost due to the above is
estimated at approximately 40 days, almost one third of production
time available for that quarter. Q4 was impacted by the start of
the year end shutdown.
Management had not been able to address the issues created by
the wet conditions and material which make both mining and
processing operations difficult. As a result of this, and only
working a five-day week, the plant utilisation was significantly
down on what would be considered good mining practice. The
introduction of a 365-day operation was announced in Q4 2018 to
commence in Q1 2019 and we commenced 24/7 365-day operations on 26
March 2019.
Recovery, grades and value per carat
The average recovery grade for 2018 was 3.28 cpht compared with
2.45 cpht in 2017, showing an overall improvement. However, there
was significant variation quarter by quarter.
Grade remained variable in the first three quarters of 2018
primarily due to the total reliance upon KV2 during that time. For
historic reasons, KV2 had not been mined in a sustainable way so
that in order to continue to exploit KV2, it was necessary to
continue to mine at higher levels thus diluting the pure kimberlite
and to process low grade stock piles which had been created over
the life of the mine. We started to mine KV1 in the second half of
the year which has led to a more consistent and higher grade which
has continued into 2019.
Value per carat
Kareevlei continues to produce diamonds of exceptional quality
and remains one of the top 10 kimberlite pipes in the world ranked
by value per carat.
The value per carat has remained relatively steady throughout
2018 and similar to that in the last three quarters of 2017. The
value per carat depends upon a number of factors intrinsic to the
asset and a number of factors which are governed by external market
characteristics. The intrinsic factors include the size of the
diamonds, the quality and colour. The average stone size recovered
during 2018 was around 0.35 carats and over 90% of our diamonds are
gem or near gem quality, hence the high average value per
carat.
Safety, health and environment:
During the year, there were no Lost Time Accidents and no
Section 54 stoppages in terms of the Mine health and Safety Act of
South Africa. Post the year end, there was a S54 stoppage amounting
to 8 days in relation to an accident involving one of our
contractors. Remedial action in relation to our training and safety
practices was undertaken to the then satisfaction of the Department
of Mineral Resources and the new management team is implementing a
compliance audit across all aspects of the operations to ensure
full compliance with applicable regulations.
Financing
During 2018, the Company raised a total of GBP1,561,000 gross of
expenses through three placings and subscriptions. The funds raised
went in part to fund improvements to the plant and equipment, but
it became necessary to also apply these funds to finance the
continued losses of the Company as production volumes remained
below that required to ensure self-sustainable operation.
Strategic review
The Company started a strategic review of its operations towards
the end of 2018 which was completed in April 2019. Critical to the
review was the need to create a team that would be able to operate
Kareevlei in a way that would enable the Company to reach the
economies of scale required to operate on a cashflow positive
basis.
The review identified that there were some immediate actions
that we could implement that didn't require any capital investment
but did require investment in the necessary skills.
-- Management appointments
The appointment of a new CEO of Kareevlei, Gus Simbanegavi, an
experienced mining engineer and a strong hands-on processing
manager was announced in May 2019. The engineering skill set has
also been strengthened.
-- Utilisation of the plant capacity
Move to 24/7 365-day operation: +30% increase in operating
time
In order to implement this change, approval was required from
the Department of Mineral Resources to allow weekend working and to
identify and employ staff that meet our stringent employment
policies. Mining in the open pit operation is based on a 6-day week
in line with the MHSA regulations and the Department of Minerals
Resources' approval.
Improvement in plant availability
Although further investment is required in critical spares and
plant inventory, the new appointments have focused on introducing
good mining practice which has already significantly improved plant
availability.
The above changes have had an immediate impact on production
levels in May and June 2019. This together with the planned
investment in the mine and plant (as set out below) is
strengthening our confidence in delivering our annual forecast of
280k to 330k tonnes for the year ended 31 December 2019.
The capital investment required is focused on increasing
throughput by upsizing certain areas, improving availability levels
and increasing our ability to deal with excessively moist ore and
can be categorised as follows:
Mining
Additional development mining is needed to open up KV3, as well
as further develop KV2 and KV5 to provide flexibility and de-risk
this operation as tonnages increase materially.
Processing plant
Replacement of the cone crusher and upgrading the circuit
A decision was taken to replace the current cone crusher with a
larger version and improve the feed mechanism to the crusher. Not
only should this increase the reliability of our crushing circuit,
hence its availability, it will enable us to potentially increase
the capacity of the crushing circuit to above our medium-term
target of 400,000t per annum to enable the building of the
necessary crushed ore inventory. In order to preserve cash, the new
crusher will be acquired on a rent to buy contract, the cost of
which will be partially offset by the release of a smaller rented
crusher. Downstream conveyors, motors and pumps are also being
correctly sized to handle the additional throughput.
Improving engineering/plant availability
Through the establishment of a preventative maintenance plan
which will require an effective inventory of spares and where
necessary, key insurance spares to de-risk excessive lost time in
the event of a major breakdown.
Reengineering material flows/Inventory Management and dealing
with excessively moist ore
The operation currently lacks the ability to create the
necessary stockpiles of material at critical points both in the
mine and in the processing plant. The investment required, which is
largely working capital, is to reengineer the material flow and
will, to a large degree, allow us to continue to process ore if
breakdowns or extreme weather conditions prevent us from operating
the mining and crushing circuit at optimal levels. Management will
also be reviewing how we can build additional run of mine and
crushed ore stocks before the wet season.
In addition to the improvements set out above, the mining plan
was revisited as part of the Strategic Review and a new medium term
plan has been developed which has the goals of optimising the
overall strip ratio as part of a multi-pit arrangement in order to
achieve increased flexibility of mining operation. This has been
undertaken in conjunction with our new Strategic partner, the
Teichmann Group which has also entered into a contract to act as
our mining contractor.
Strategic partner
It was identified at an early stage of the strategic review that
the Company would benefit from an association with a strategic
partner that would bolster our skills in key areas. Teichmann Group
was identified as one such potential partner in part because of
their vast experience in providing mining services throughout
Southern/Central Africa. Teichmann Group is a large civil
engineering group, has been operating since 1995, has 1,800
employees and operates throughout Southern/Central Africa.
Claims from a former director
The claims made by Riaan Visser, the ex-CEO of the Company,
amounting to GBP260,108, remain unresolved. In August 2018, the
original suit which was to put the Kareevlei Mining (Pty) Limited
into liquidation was converted into a normal claim. As part of the
process of having the original liquidation suit either converted or
dismissed we were advised by our legal advisers that it would be
prudent to deposit funds in an escrow account for the purposes of
settling any eventual court order resulting from the outcome of any
eventual court decision. In order to do this, a loan was agreed
between the Company and two of its directors, Adam Waugh and Paul
Beck for a total amount of GBP231,400. Given the reason for the
loan and the need to arrange finance in a very short period of
time, the Company agreed relatively expensive terms, which are set
out in detail in the body of the financial statements.
After the end of the year, the loan from Paul Beck of GBP50,000
was fully repaid. A repayment schedule has been agreed with Adam
Waugh which envisages repayment over a period of approximately 18
months. It is the Company's intention to repay this loan as soon as
is practicable without compromising the ability of the Group to
meet its operating targets.
Financial review
Revenue and loss for the year
In 2018, the Group made a loss before tax of GBP2,441,943 (2017:
GBP1,201,537) on revenue of GBP1,416,699 (2017: GBP945,924)
reflecting a 71% increase in carats sold. The loss in 2018 reflects
the fact that during 2018 the Group had not yet reached the
economies of scale required to become profitable. Included within
the loss for the year is GBP0.6m of foreign exchange losses on
retranslation of loans to Kareevlei Mining (Pty) Ltd whereas in
2017 a GBP0.07m foreign exchange gain was recorded.
Cash flows
Investments
During the year we invested GBP109,710 (2017: GBP323,002) in the
purchase of plant and equipment. The majority of the plant and
equipment acquired relates to improving the crushing circuit and
the acquisition of key plant that has hitherto been rented.
Financing
In 2018 the Company undertook three equity fund raisings
amounting to GBP1,561,000 gross of expenses. GBP109,710 of this
amount was invested in plant and equipment, the balance was used to
fund the continuing losses of the Group as Kareevlei had not yet
reached the production levels required to become profitable.
In August 2018, the Company agreed a loan from Adam Waugh and
Paul Beck of GBP231,400, the rationale for which is set out in the
section entitled 'Claims from a Former Director' above.
Cash position
At the end of the year the Group cash balance was GBP168,181
(excluding restricted cash). The Group cash balance as at 25 June
2019 was GBP1,168,918.
Events following the end of the year
In February 2019, the Company raised GBP575,000 in order to
further develop the Company's operations.
The Strategic review discussed in detail above was concluded in
April 2019.
The conclusion of this review was that in order to achieve
profitability and to become cashflow positive, further funds would
be required to be able to implement its findings.
Accordingly, GBP982,000 was raised through a placing and
subscription in May 2019, which included GBP310,000 from Teichmann
Group our new strategic partner, who are entitled to appoint a
non-executive director to the board of BlueRock while it maintains
a holding of over 10%. At the same time as the fund raising, Adam
Waugh stepped down as CEO of BlueRock and of Kareevlei although he
remains on the board as a non-executive director in order to
provide a smooth handover to Gus Simbanegavi who has been appointed
as CEO of Kareevlei. Michael Houston has become Executive Chairman
until a replacement CEO is found.
After careful thought the Board concluded that this fund raise
was sufficient to have a reasonable expectation of meeting the plan
to move the Group to being profitable and cashflow positive.
Nevertheless, the Group faces challenges, both internal and
external, which need to be overcome. However, the new team have
settled in quickly and are building confidence with the
introduction of good mining practices.
Outlook
2018 and the events that have followed post-period end have seen
us make significant progress towards achieving our goal of reaching
sustainable profitability in the near-term. The significant
increase in tonnes processed and average grade along with a number
of exceptional quality diamonds produced post-period end underpins
our belief in the potential of the Kareevlei mine. We now have the
right strategy, the right team and sufficient funds in place to
begin to really exploit this potential and I look forward to
providing further updates on our progress in our Q2 production
update in July.
I would like to thank everyone at BlueRock and Kareevlei, as
well as our shareholders for their continued efforts and
support.
Michael Houston
Executive Chairman
Consolidated and Company Statements of Financial Position
Group Group * Company Company
Figures in GBP 2018 2017 2018 2017
------------------------------ ----------- ----------- --------- ---------
Assets
Non-current assets
Property, plant and equipment 570,803 793,111 - -
Mining assets 303,377 272,128 - -
Goodwill - - - -
Investments in subsidiaries - - 5 5
Other receivables 57,458 118,104 - -
Total non-current assets 931,638 1,183,343 5 5
Current assets
Inventories 191,406 103,951 7,352 -
Trade and other receivables 71,864 6,361 6,677,637 5,630,197
Cash and cash equivalents
(including restricted 378,309 268,128 275,736 156,030
cash)
----------- ----------- --------- ---------
Total current assets 641,579 378,440 6,960,725 5,786,227
Total assets 1,573,217 1,561,783 6,960,730 5,786,232
----------- ----------- --------- ---------
Equity and liabilities
Equity
Share capital 44,352 1,398,242 44,352 1,398,242
Share premium 3,460,309 2,811,536 3,460,309 2,811,536
(Accumulated loss) / retained
income (4,609,485) (2,706,643) (62,594) 305,886
Other reserves 2,330,670 (263,797) 2,336,847 126,644
Total equity attributable
to owners of parent 1,225,846 1,239,338 5,778,914 4,642,308
Non-controlling interests (1,599,785) (1,195,696) - -
Total equity (373,939) 43,642 5,778,914 4,642,308
Liabilities
Non-current liabilities
Provisions 204,840 148,282 - -
Borrowings 1,103,894 963,838 1,076,835 963,838
Total non-current liabilities 1,308,734 1,112,120 1,076,835 963,838
Current liabilities
Trade and other payables 587,545 371,298 58,734 145,363
Borrowings 50,877 34,723 46,247 34,723
Total current liabilities 638,422 406,021 104,981 180,086
Total liabilities 1,947,156 1,518,141 1,181,816 1,143,924
Total equity and liabilities 1,573,217 1,561,783 6,960,730 5,786,232
----------- ----------- --------- ---------
* The comparative figures have been reclassified to provide
consistent presentation with the current year.
Consolidated Statement of Profit or Loss and Other Comprehensive
Income
Group Group
Figures in GBP 2018 2017
---------------------------------------------- ----------- -----------
Revenue 1,416,699 945,924
Other income 1,882 446
Administrative expenses (89,498) (86,637)
Operating expenses (3,132,047) (2,212,894)
Other gains - 5,042
Loss from operating activities (1,802,964) (1,348,119)
Finance income 8,600 -
Finance costs (145,571) (82,384)
Other (losses) / gains (506,189) 250,974
Loss before taxation (2,446,124) (1,179,529)
Income tax credit / (expense) 4,181 (22,008)
Loss for the year (2,441,943) (1,201,537)
----------- -----------
Loss for the year attributable to:
Owners of Parent (1,902,842) (843,706)
Non-controlling interest (539,101) (357,831)
(2,441,943) (1,201,537)
----------- -----------
Other comprehensive loss net of tax
Components of other comprehensive income that
may be reclassified
to profit or loss
Gains / (losses) on exchange differences on
translation 519,276 (78,760)
Total other comprehensive income/(loss) 519,276 (78,760)
Total comprehensive loss (1,922,667) (1,280,297)
----------- -----------
Comprehensive loss attributable to:
Owners of parent (1,518,578) (901,987)
Non-controlling interests (404,089) (378,310)
(1,922,667) (1,280,297)
----------- -----------
Basic and diluted loss per share
Basic (loss) / earnings per share (0.01) (0.01)
----------- -----------
The loss after taxation for the financial year for the parent
company was GBP368,481 (2017: Profit of GBP174,742).
Consolidated Statement of Changes in Equity - Group
Foreign
Capital currency Share-based (Accumulated Attributable Non-
loss) / to owners
Share redemption translation payment retained of controlling
Share
Figures in GBP capital Premium reserve reserve reserve income the parent interests Total
---------------------------- ----------- --------- ---------- ----------- ----------- ------------ ------------ ----------- -----------
Balance at 1 January 2017 556,796 2,443,826 - (332,160) 34,339 (1,862,937) 839,864 (817,386) 22,478
Changes in equity
Loss for the year - - - - - (843,706) (843,706) (357,831) (1,201,537)
Foreign exchange movement - - - (58,281) - - (58,281) (20,479) (78,760)
Total comprehensive income - - - (58,281) - (843,706) (901,987) (378,310) (1,280,297)
Issue of equity 841,446 449,552 - - - - 1,290,998 - 1,290,998
Share issue costs - (81,842) - - - - (81,842) - (81,842)
Share-based payments - - - - 92,305 - 92,305 - 92,305
Balance at 31 December 2017 1,398,242 2,811,536 - (390,441) 126,644 (2,706,643) 1,239,338 (1,195,696) 43,642
----------- --------- ---------- ----------- ----------- ------------ ------------ ----------- -----------
Balance at 1 January 2018 1,398,242 2,811,536 - (390,441) 126,644 (2,706,643) 1,239,338 (1,195,696) 43,642
Changes in equity
Loss for the year - - - - - (1,902,842) (1,902,842) (539,101) (2,441,943)
Foreign exchange movement - - - 384,264 - - 384,264 135,012 519,276
Total comprehensive income - - - 384,264 - (1,902,842) (1,518,578) (404,089) (1,922,667)
Issue of equity 649,120 924,480 - - - - 1,573,600 - 1,573,600
Share issue expenses - (125,972) - - - - (125,972) - (125,972)
Share buy-back (2,003,010) - 2,003,010 - - - - - -
Share-based payments - (149,735) - - 207,193 - 57,458 - 57,458
Balance at 31 December 2018 44,352 3,460,309 2,003,010 (6,177) 333,837 (4,609,485) 1,225,846 (1,599,785) (373,939)
----------- --------- ---------- ----------- ----------- ------------ ------------ ----------- -----------
Consolidated and Company Statements of Cash Flows
Group Group * Company Company
Figures in GBP 2018 2017 2018 2017
------------------------------------- ----------- --------- --------- -----------
Cash flows used in operations
Cash used in operations (1,363,407) (904,338) (492,472) (175,183)
Net cash flows used in operations (1,363,407) (904,338) (492,472) (175,183)
Income taxes paid (17,772) (90,621) (17,772) (90,621)
Net cash flows used in operating
activities (1,381,179) (994,959) (510,244) (265,804)
----------- --------- --------- -----------
Cash flows used in investing
activities
Proceeds from sales of property,
plant and - 23,782 - -
Equipment
Purchase of property, plant
and equipment (109,710) (323,002) - -
Increase in loan advanced to
group company - - (923,172) (1,148,687)
Movement in rehabilitation 60,647 (118,105) - -
Guarantee
----------- --------- --------- -----------
Cash flows used in investing
activities (49,063) (417,325) (923,172) (1,148,687)
----------- --------- --------- -----------
Cash flows from financing activities
Proceeds from issuing shares
(net of fees) 1,447,628 1,147,157 1,447,628 1,147,157
Proceeds from borrowings 231,400 500,000 231,400 500,000
Repayments of borrowings (134,449) (250,699) (125,906) (250,699)
Increase in restricted cash (210,128) - (210,128) -
Cash flows from financing activities 1,334,451 1,396,458 1,342,994 1,396,458
----------- --------- --------- -----------
Net decrease in cash and cash
equivalents (95,791) (15,826) (90,422) (18,033)
Exchange rate changes on cash
and cash (4,156) (7,601) - -
Equivalents
----------- --------- --------- -----------
Net decrease in cash and cash
equivalents (99,947) (23,427) (90,422) (18,033)
Cash and cash equivalents at
beginning of 268,128 291,555 156,030 174,063
Year
----------- --------- --------- -----------
Cash and cash equivalents at
end of year 168,181 268,128 65,608 156,030
----------- --------- --------- -----------
* Comparative figures have been reclassified to provide
consistent presentation with the current year.
BASIS OF PREPARATION
The consolidated and separate financial statements of BlueRock
Diamonds Plc have been prepared in accordance with International
Financial Reporting Standards and as adopted by the European Union
and the Companies Act 2006. The consolidated and separate financial
statements have been prepared under the historical cost convention
except as noted below. They are presented in British Pounds
Sterling (Pounds) which is also the functional currency of the
Company.
BlueRock Diamonds Plc is incorporated in England and Wales with
company number 08248437 with registered office, 4th Floor, Reading
Bridge House, George Street, Reading, Berkshire, RG1 8LS.
The preparation of financial statements in conformity with
International Financial Reporting Standards requires the use of
certain critical accounting estimates. It also requires management
to exercise its judgement in the process of applying the group's
accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated and separate financial
statements are set out below.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Valuation of embedded derivatives
There is an adjustable conversion feature within the convertible
loan agreement which effects the conversion price and the number of
new ordinary shares issued. IFRS 9 requires a fair value
calculation of the embedded derivative at recognition, as it is not
closely related to the host contract, and a revaluation to be
performed at each year end. The embedded derivative has been fair
valued using the Monte Carlo model which requires critical
estimates, in particular the Group's future share price volatility.
At the year end the fair value of the embedded derivative was GBP12
463. Further details can be found in note 16.
Rehabilitation provision
Estimates and assumptions are made in determining the amount
attributable to the rehabilitation provision. These deal with
uncertainties such as legal and regulatory framework, timing and
future costs. The carrying value of the rehabilitation provision is
disclosed in note 14. The Board use an expert to determine the
existing disturbance level and associated cost of works and
estimates of inflation and risk-free discount rates are based on
market data.
Impairment of non-current assets
Mining assets and Property, plant and equipment representing the
group's mining assets in South Africa are reviewed for impairment
at each reporting date. The impairment test is performed using the
approved Life of Mine plan and those future cash flow estimates are
discounted using asset specific discount rates and are based on
expectations about future operations. The impairment test requires
estimates about future production and sales volumes, diamond
prices, grades, operating costs and capital expenditures necessary
to extract resources in the current medium term mine plan. Given
the presence of an inferred resource, rather than a defined
reserve, greater estimation is required to determine the resources
to be included in the forecasts and only a portion of the inferred
resource is currently incorporated into the plan. Production
forecasts include further growth from existing production levels,
reflecting plant upgrades, steps to improve mining flexibility and
investment to open new mining areas. Diamond prices are estimated
with reference to recent achieved prices and the Board's assessment
of the diamond market outlook.
Changes in such estimates could impact recoverable values of
these assets.
The impairment test using the medium-term forecasts indicated
significant headroom as at 31 December 2018 and therefore no
impairment is considered to be appropriate. However, such headroom,
which itself excludes additional resources included in the Resource
Statement but which are outside of the medium-term forecasts, is
dependent on the achieving increases in short term and medium term
production by opening additional pits and upgrading the plant.
However, the directors consider the forecasted production levels to
be achievable best estimates.
Expected credit loss assessment for receivables due from
subsidiaries
The Directors make judgements to assess the expected credit loss
provision on the loan to the Company's subsidiary. This includes
assessment of scenarios and the subsidiary's ability to repay its
loan under such scenarios considering risks and uncertainties
including diamond prices, future production performance,
recoverable diamond reserves, environmental legislation and other
factors. No credit loss provision was raised. If the assumed
factors vary from actual occurrence, this will impact on the amount
at which the loan should be carried on the Company Statement of
Financial Position.
Capitalised stripping costs
Waste removal costs (stripping costs) are incurred during the
development and production phases at surface mining operations.
Furthermore, during the production phase, stripping costs are
incurred in the production of inventory as well as in the creation
of future benefits by improving access and mining flexibility in
respect of the ore to be mined, the latter being referred to as a
'stripping activity asset'. Judgement is required to distinguish
between these two activities at Kareevlei. The orebody needs to be
identified in its various separately identifiable components. An
identifiable component is a specific volume of the orebody that is
made more accessible by the stripping activity. Judgement is
required to identify and define these components, and also to
determine the expected volumes (tonnes) of waste to be stripped and
ore to be mined in each of these components. These assessments are
based on a combination of information available in the mine plans,
specific characteristics of the orebody and the milestones relating
to major capital investment decisions.
Judgement is also required to identify a suitable production
measure that can be applied in the calculation and allocation of
production stripping costs between inventory and the stripping
activity asset. The ratio of expected volume (tonnes) of waste to
be stripped for an expected volume (tonnes) of ore to be mined for
a specific component of the orebody, compared to the current period
ratio of actual volume (tonnes) of waste to the volume (tonnes) of
ore is considered to determine the most suitable production
measure.
These judgements and estimates are used to calculate and
allocate the production stripping costs to inventory and/or the
stripping activity asset(s). Furthermore, judgements and estimates
are also used to apply the stripping ratio calculation in
determining the amortisation of the stripping activity asset.
No stripping costs were capitalised during the current financial
year as the waste stripping ratio was below the estimated average
strip ratio for the relevant sections of the ore body based on the
existing medium term detailed mine plans, as the primary benefit of
the stripping was access to ore mined in the period. Whilst there
may be a longer term benefit through access to deeper sections of
the ore body the Board concluded that the criteria for recognition
under the Group's accounting policy were not met having considered
the absence of a defined measured and indicated resource and
consideration of the longer term mine planning status. All
stripping costs incurred during the period were charged to the
statement of profit or loss.
Contingent liabilities
The Group is subject to claims by a former director and
companies related to that former director totalling GBP260,108.
Whilst fully disputing the claims, the Group maintains liabilities
to the claimants of GBP199,728 as disclosed in note 15. The Group
has placed monies in escrow with its attorneys to meet any payments
under the claims. The Group has taken legal advice which advises
that the claims are without merit and no provision is made for the
additional claim amount. This matter has required the Board to
exercise judgment in assessing both the extent to which liabilities
should be retained and the decision not to provide for the
additional claim amount.
GOING CONCERN
The Board have reviewed the Group's cash flow forecasts which
cover a period of at least the next 12 months from the approval
date of the financial statements, which demonstrate that the Group
will have sufficient funds to meet its liabilities as they fall due
throughout the period following the GBP982,000 equity placing and
recent tender proceeds which included the sale of a 24.9c/t diamond
for approximately $190,000. Following the move to continuous
operations, operational changes and investment at the mine,
production has increased in line with planned production figures
with further production increases anticipated as the crusher
upgrades and other operational changes take effect in the coming
months. The Board has considered reasonable downside sensitivities
including price volatility and delays to production growth given
the inherent risks associated with the production plan, together
with mitigating actions available to the Group and is satisfied
that liquidity is maintained under such reasonable downside cases.
Accordingly, the financial statements have been prepared on a going
concern basis.
CONSOLIDATION
Subsidiaries
Subsidiaries are all entities over which the group has control.
The group controls an entity when the group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the group. They are deconsolidated
from the date that control ceases.
The group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the group. The consideration transferred
includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the
acquisition date. The group recognises any non-controlling interest
in the acquiree on an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest's proportionate share
of the recognised amounts of acquiree's identifiable net
assets.
Acquisition-related costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated. When necessary, amounts reported by
subsidiaries have been adjusted to conform with the group's
accounting policies.
Disposal of subsidiaries
When the group ceases to have control of a subsidiary any
retained interest in the entity is remeasured to its fair value at
the date when control is lost, with the change in carrying amount
recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the
retained interest as an associate, joint venture or financial
asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as
if the group had directly disposed of the related assets or
liabilities. This may mean that amounts previously recognised in
other comprehensive income are reclassified to profit or loss.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Financial information set out in this announcement does not
constitute accounts as defined in Section 434 of the Companies Act
2006.
The Consolidated and Company Statements of Financial position at
31 December 2018, the Consolidated Statement of Profit or Loss and
Other Comprehensive Income, Consolidated Statement of Changes in
Equity - Group, Consolidated and Company Statements of Cash Flows
and associated notes for the year then ended have been extracted
from the Group's 2018 financial statements upon which the auditor's
opinion is unqualified and does not include any statement under
Section 498(2) or (3) of the Companies Act 2006.
The Annual Report and Financial Statements for the year ended 31
December 2018 will be posted to shareholders today and laid before
the Company at the Annual General Meeting. A copy of the accounts
is also available on the Company's website
(www.bluerockdiamonds.co.uk) in accordance with AIM Rule 26, and
will be delivered to the Registrar of Companies in due course.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UWAWRKOANURR
(END) Dow Jones Newswires
June 28, 2019 04:30 ET (08:30 GMT)
Bluerock Diamonds (LSE:BRD)
Historical Stock Chart
From Apr 2024 to May 2024
Bluerock Diamonds (LSE:BRD)
Historical Stock Chart
From May 2023 to May 2024