TIDMSML
RNS Number : 2332C
Strategic Minerals PLC
28 September 2018
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.
28 September 2018
Strategic Minerals Plc
("Strategic Minerals", the "Group" or the "Company")
Interim Results - Half Year to 30 June 2018
US $2.4m Value Added Through Acquisition of Leigh Creek Copper
Mine
Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the diversified
mineral development and production company, is pleased to announce
its unaudited interim results for the half year ended 30 June
2018.
Financial Highlights:
-- After tax profit of $2,406,000 (H1 2017 $158,000)
-- Corporate activity, through the acquisition of Leigh Creek
Copper Mine ("LCCM"), adds significant value as noted by the
Company booking an after tax profit of $2.4m (AUD $3.1m) on its
purchase. The price at which the Company was able to purchase LCCM,
while a fair price for its vendors, reflected the limited financial
resources the vendors had available to progress the project to an
operational level. The profit booked, reflects the independently
estimated added value the Company has already brought to the
project through its ability to supply such capital.
-- Pre-tax profit of $1,246,000 (H1 2017: $690,000) from the
Company's Cobre operation, prior to intercompany management
charges, continues to underpin corporate cash flow.
-- Directors exercised 15m vested options and acquired further stock in the Company.
-- Issue to Directors of 128m options over three tranches vesting at 5.5p, 7.5p and 10.0p.
-- Investment in Cornwall Resources Limited ("CRL") of $107,317,
the owner of the Redmoor tin-tungsten project, maintaining the
Company's 50% interest in CRL.
-- Issue of 38,700,900 SML shares, in April 2018, issued at the
month of March 2018 Volume Weighted Average Price ("VWAP") of
1.9067 pence per share as part payment for the acquisition of
LCCM.
-- Unrestricted cash and cash equivalents at 30 June 2018 were
$1,988,000 (31 Dec 2017: $3,706,000). The reduction in cash
balances reflects the acquisition of LCCM, payment of US tax
liabilities and investment into CRL.
Corporate Highlights:
-- Completion of the acquisition of Leigh Creek Copper Mine
("LCCM") in the North Flinders Ranges in South Australia through
its wholly owned subsidiary Ebony Iron Pty Ltd. The Company also
organised a team to undertake the recommissioning of the mine and
expects LCCM to be in production in 2019. This is of huge strategic
importance to the Company as the commencement of operations will
see the creation of a second cash flow stream. Additionally, access
to the project and its cash flows is 100% controlled by the
Company.
-- The Board was expanded to four members with the addition of
Mr Jeffrey Harrison. His extensive practical mining engineering
skills are expected to prove invaluable as the Company progresses
its LCCM and Redmoor projects.
-- Access to the Cobre magnetite stockpile was rolled over in
line with the relationship the Company has with the mine owner, and
the Company expects this to continue in the future.
-- Sales contract re-negotiation with major Cobre client. The
Company negotiated with one of Cobre's major clients which, due to
internal issues, had been unable to take the material required
under their contract. The Company and the client agreed to amend
the existing contract such that the client could make a series of
quarterly payments, placing the Company in approximately the same
cash position as if the contract had been fully met.
-- Resource update for the Redmoor project. A resource update
noting an almost doubling of the high grade Inferred Mineral
Resource at Redmoor was published by Cornwall Resources Limited
("CRL") and identified the need for further drilling to expand the
resource base and improve the project's economic viability.
-- Investment in CRL and the provision of an underwriting
agreement for our joint venture partner's equity. The Company
considered that momentum needed to be maintained at Redmoor and
that a commitment and commencement of a drilling programme for 2018
was critical to the development of the project. At the time, SML's
joint venture partner, New Age Exploration Limited ("NAE") did not
have the financial capacity to commit to the programme but was
preparing for an equity raise. The Company took the view that it
was imperative for the momentum of the project that drilling
commence and, accordingly, underwrote NAE's portion of the
programme, whilst providing NAE the longest possible time in which
to make their equity payment. Subsequently, NAE completed an equity
raise and the underwriting was cancelled.
-- The Company hosted a Shareholders' Meeting following its AGM.
This provided shareholders the opportunity to interact with the
full Board in an informal environment.
Commenting, John Peters, Managing Director of Strategic
Minerals, said:
"The first half of 2018 has been a pivotal period for the
Company, most notably with the completion of the watershed
acquisition of Leigh Creek Copper Mine. We believe the acquisition
of this asset and the expected commencement of its operations in
2019 provide a strategically significant shift in the risk profile
of the Company. The addition of a second revenue stream,
particularly one derived from a wholly owned asset, ensures the
sustainability and access to cash flows that form the base on which
the Company expects to create long term growth for its projects and
provide value to its shareholders.
"We are also delighted to welcome Jeff Harrison to our Board.
His arrival has significantly expanded the Company's skill base as
it enters an extremely exciting period in the development of Leigh
Creek, Redmoor and Hanns Camp."
For further information, please contact:
+61 (0) 414 727
Strategic Minerals plc 965
John Peters
Managing Director
www.strategicminerals.net
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Notes to Editors
Strategic Minerals Plc is an AIM-quoted, operating minerals
company actively developing projects prospective for battery
materials. It has an operation in the United States of America and
development projects in the UK and Australia. The Company is
focused on utilising its operating cash flows, along with capital
raisings, to develop high quality projects aimed at supplying the
metals and minerals being sought in the burgeoning electric
vehicle/battery market.
In September 2011, Strategic Minerals acquired the Cobre
magnetite tailings dam project in New Mexico, USA, a
cash-generating asset, which it brought into production in 2012 and
which continues to provide a revenue stream for the Company. This
operating revenue stream is utilised to cover company overheads and
invest in development projects orientated to supplying the
burgeoning electric vehicle/battery market.
In January 2016, the portfolio was expanded with the acquisition
of shares in Central Australian Rare Earths Pty Ltd, which holds
tenements in Western Australia that are prospective for cobalt,
gold, nickel sulphides and rare earth elements. The Company has
since acquired all shares in Central Australian Rare Earths Pty
Ltd. In September 2018, the Company entered contracts for the sale
of certain CARE tenements that have been identified as gold
targets.
In May 2016, the Company entered into an agreement with New Age
Exploration Limited and, in February 2017, acquired 50% of the
Redmoor tin-tungsten project in Cornwall, UK. The bulk of the funds
from the Company's investment were utilised to complete a drilling
programme that year. The drilling programme resulted in a
significant upgrade of the resource. Phase 1 of the 2018 drill
programme is underway and augurs well for additional drilling to be
undertaken.
In March 2018, the Company completed the acquisition of the
Leigh Creek Copper Mine situated in the copper rich belt of South
Australia and is currently working to bring this into operation in
2019.
Chairman's Statement
Financial results
The results for the first half of 2018 are pleasing as they
reflect the value added by the Board and Management from the
judicious acquisition of Leigh Creek Copper Mine. This augurs well
for the Company being able to report a full year 2018 result that
will exceed its record performance in 2017. After tax profit for H1
2018 of $2,406,000 not only compares well with the previous period
(H1 2017 $158,000) but also compares well with the full year
performance in 2017 of $1,586,000.
Unrestricted cash on hand as at 30 June 2018 was $1,988,000 and
is expected, when combined with cash flows being generated at the
Cobre operations, to assist in funding development of the Leigh
Creek operations whilst allowing for minimal dilution to current
shareholders.
Operating profit of $1,246,000 from our Cobre magnetite
stockpile, prior to intercompany management fees, marked an 80%
increase in profitability versus the first half of 2017 ($690,000).
This increase in profits was achieved despite our major client not
being able to take their minimum purchase levels during the half
year.
Corporate overheads of $838,000 have almost doubled (H1 17
$435,000) and are reflective of the substantial growth the Company
has undertaken, however the Board's commitment to maintain lean
corporate overheads remains in place to ensure the Company's growth
is consistent with its activities.
Addition of New Director
In February, the Board appointed a fourth Director, Jeffery
Harrison. The growth of the Company was considered sufficient to
justify the addition of another Director. The Board identified Jeff
as a suitable candidate given his strong background in mining
engineering, his knowledge of Cornish mining and his Australian
mining experience.
Strategy Focus
The Board has continued to focus on the appropriate strategy for
the Company and, as a multi-resource miner, considers this helps to
differentiate the Company from many of its peers.
The Company continues to maintain a three-pronged approach to
investing in diversified material projects, concentrating on:
1. Coal and Bulk Materials - potential projects in this sector
that are tied to current contracts and further offtake arrangements
at attractive prices.
2. Advanced Materials - considering project opportunities in
materials where it expects demand to increase over the coming years
(such as rare earth elements and graphite).
3. Metals - identifying projects exposed to metals that it
expects to have price improvements over the next three to five
years (such as cobalt, nickel, copper and tin-tungsten).
This strategy is combined with the Company's desire to balance
cash requirements through a mix of cash, near cash, brownfields and
greenfields projects designed to utilise cash generated from
operations for the greatest long term benefit of shareholders.
Accordingly, the Company invests surplus cash flow from Cobre
into the recommencement of operations at Leigh Creek Copper Mine
and drilling programmes for its two major exploration projects -
CARE (nickel and cobalt focused) and Redmoor (tin/tungsten
focused).
Cobre Operations
The Company has worked closely with the management at Cobre in
handling negotiations with a key client. The client needed, due to
their own circumstances, to vary their contract and a temporary
compromise has been implemented that provides Cobre approximately
the same cash position it would have been in should the contract
have been honoured as originally written.
This substantial cash flow continues to underwrite operations
and minimise calls on shareholders for capital.
Leigh Creek Copper Mine
The first half of 2018 has seen the Company complete the
acquisition of the Leigh Creek Copper Mine.
The Project is based in the northern Flinders Ranges of South
Australia and is accessible from the township of Leigh Creek. It
has three approved mining leases that cover a number of copper
oxide deposits, including Lorna Doone, Lynda, Mountain of Light
(Rosmann East and Paltridge South) and the Mount Coffin deposit. An
estimated JORC 2012 compliant Resource of 3.61mt @ 0.69% copper for
24,900 of copper metal forms the base of the project. Additional,
non JORC compliant ore sources of 1.8Mt @ 0.68% copper have also
been identified within existing mining leases.
It was the Board and Management's belief that this represented
exceptional value at the negotiated purchase price of AUD $3m and
this has subsequently been confirmed by independent assessment
which has placed the assets purchased at AUD $6.1m. This resulted
in a gain of US $2.4m being recognised in the half year due to this
bargain acquisition.
Post acquisition, the Company has moved quickly to set up a
highly skilled team tasked to recommence mine operations in 2019.
Existing contracts in place ensure that 100% of the production will
be sold at 85% of LME prices.
This potential sizeable cash flow from Leigh Creek Copper Mine
has a very strategic impact on the risk profile of the Company. The
ability to have two revenue streams insulates the Company from
risks that may impact on the Company and positions us for further
growth.
The Board is confident that developments at Leigh Creek Copper
Mine will help to drive company valuation through 2019.
Redmoor tin-tungsten project
In March 2018, a resource update indicating a 4.5Mt high-grade
Inferred Mineral Resource was released. This represented an almost
100% increase over the high-grade Inferred Mineral Resource
reported in 2015. The resource was defined in high-grade zones
within the Sheeted Vein Systems and drilling had identified a
further 4 - 6Mt high grade exploration target within the Sheeted
Vein System.
In March 2017, the Company, through its 50% investment in
Cornwall Resources Limited ("CRL") began a drilling programme at
the Redmoor project located in the world class Cornwall
tin-tungsten-copper mineralised district.
Scoping level mineral processing and underground mining studies
were undertaken by Fairport Engineering Ltd (UK). To maintain this
momentum a further drilling programme was commenced, and the
Company provided its 50% contribution for drilling costs. Further,
the Company underwrote the 50% contribution of its joint venture
partner, New Age Exploration Limited ("NAE"). This ensured the
timely commencement of drilling and certainty of funding, whilst
providing New Age Exploration the longest time practical for it to
raise its funding. After June, NAE was able to raise the required
funding and the Company's underwriting commitment was
cancelled.
Prior to undertaking the drill programme, an extensive community
relations programme was undertaken and remains ongoing; the local
community and Council are working closely with CRL in a highly
collaborative manner.
CARE
During the first half of 2018, a 65 hole 3,863m air core
drilling programme was completed at the Hanns Camp and Mt Weld
Projects, This consisted of 25 holes totalling 1,290m being drilled
at the Hanns Camp South Targets. Cumulate facies ultramafic
lithologies were recognised in one area potentially identifying
another komatiite lava channel-facies position prospective for
nickel sulphide mineralisation.
Additionally, 40 holes totalling 2,573m were drilled testing a
series of gold, nickel and rare earth elements targets in the Mt
Weld group of tenements.
The Company engaged Dr Martin Gole, an internationally
recognised nickel expert, to assess the significance of the drill
results and the prospectivity for potential nickel sulphide
mineralisation.
Issues of Capital
During the half year, Directors in the Company exercised
15,000,000 vested options and a further 38,700,900 shares were
issued as part payment for the acquisition of Leigh Creek Copper
Mine.
In February, in line with approvals received from shareholders
in general meeting, Directors were issued 128,000,000 new options
across three tranches which vest upon the share price staying above
5.5p, 7.5p and 10.0p for five consecutive days.
Safety
The Company continues to maintain a high level of safety
performance with SML and its subsidiaries having no reportable
environmental or personnel incidents recorded in the period. With
the addition of Jeff Harrison as a Director, the Board took the
opportunity to establish a separate Safety Sub-Committee chaired by
Jeff, with Alan Broome AM as the other member.
I would like to take this opportunity to thank my fellow
Directors, our management and staff in New Mexico, Cornwall, South
and Western Australia, along with our advisers, for their support
and hard work on your behalf during the period. Additionally, I
would like to thank our clients, contractors, suppliers and
partners for their on-going support.
Alan Broome AM
Non-Executive Chairman
28 September 2018
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 30 JUNE 2018
6 months 6 months Year to
to to
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Continuing operations
Revenue 2,120 1,440 5,642
Cost of sales (391) (272) (914)
_________ _________ _________
Gross profit 1,729 1,168 4,728
Other income 2,464 - -
Administrative expenses (1,386) (860) (2,308)
Depreciation (36) (48) (48)
Share based payment (92) (91) (41)
Share of net losses of associates and
joint ventures 1 (49) (63)
Foreign exchange gain/(loss) 7 (20) (34)
Gain on revaluation of investments - 58 -
of associates
Profit/(loss) from operations 2,687 158 2,234
_________ _________ _________
Profit/(loss) before taxation 2,687 158 2,234
Income tax (expense)/credit (281) - (648)
_________ _________ _________
Profit/(loss) for the period 2,406 158 1,586
Other comprehensive income
Exchange gains/(losses) arising on
translation
of foreign operations (93) 77 206
_________ _________ _________
Total comprehensive income/(loss) 2,313 235 1,792
_________ _________ _________
Profit/(loss) for the period attributable
to:
Owners of the parent 2,313 235 1,792
_________ _________ _________
Total comprehensive income/(loss) attributable
to:
Owners of the parent 2,313 235 1,792
_________ _________ _________
Profit/(loss) per share attributable cents Cents cents
to the ordinary equity holders of the
parent:
Continuing activities - Basic 0.19 0.01 0.13
-- Diluted 0.17 0.01 0.12
` STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2018
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Assets
Non-current assets
Deferred Exploration and evaluation
costs 6,174 812 1,242
Property, plant and equipment 295 130 257
Investments in joint ventures- equity
accounted 1,755 1,316 1,611
Restricted cash 100 100 100
Trade and other receivables 111 - -
Intangible asset goodwill - 295 -
_________ _________ _________
8,435 2,653 3,210
Current assets
Inventories 3 20 7
Trade and other receivables 1,204 471 1,081
Cash and cash equivalents 1,988 1,259 3,706
Prepayments 81 25 -
_________ _________ _________
3,276 1,775 4,794
_________ _________ _________
Total Assets 11,711 4,428 8,004
_________ _________ _________
Equity and liabilities
Share capital 2,087 1,908 2,009
Share premium reserve 47,118 44,564 45,935
Merger reserve 20,240 20,240 20,240
Foreign exchange reserve (302) (338) (209)
Share options reserve (29) 229 137
Other reserves (23,023) (23,023) (23,023)
Accumulated loss (35,515) (39,818) (38,180)
_________ _________ _________
Total Equity 10,576 3,762 6,909
_________ _________ _________
Liabilities
Current liabilities
Loans and borrowings - 60 -
Trade and other payables 356 286 447
Rehabilitation premium 111 - -
Deferred revenue 594 320 -
Deferred Consideration 74 - -
Income Tax Payable - - 648
_________ _________ _________
1,135 666 1,095
_________ _________ _________
Total Liabilities 1,135 666 1,095
_________ _________ _________
Total Equity and Liabilities 11,711 4,377 8,004
_________ _________ _________
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE PERIODED 30 JUNE 18
6 months 6 months Year to
to to
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cash flows from operating activities
Profit/(loss) after tax 2,406 158 1,586
Adjustments for:
Bargain Purchase (2,464) - -
Depreciation of property, plant and
equipment 36 48 74
Share of net / (profit) losses from
associates (1) 49 63
Non Cash Director Remuneration 213 - -
Share Based payment expense 92 91 209
(Increase) / decrease in inventory 4 (7) 6
(Increase) / decrease in trade and
other receivables (193) 445 (138)
Increase / (decrease) in trade and
other payables (91) 398 440
Increase / (decrease) in prepayments (69) (19) (6)
Increase/ (decrease) in deferred revenue 594 91 209
Increase /decrease in income tax payable (648) - 648
Revaluation of investment in associates - (58) -
_________ _________ _________
Net cash flows from operating activities (121) 1,196 2,882
_________ _________ _________
Investing activities
Increase in deferred exploration and
evaluation (1,443) - (186)
Acquisition of property, plant and
equipment - (37) (190)
Investment in associates and joint
operations (107) (1,068) (1,328)
Loans to third parties (26) - (40)
_________ _________ _________
Net cash used in investing activities (1,576) (1,105) (1,744)
_________ _________ _________
Financing activities
Net proceeds from issue of equity share
capital - 60 1,399
Net proceeds/(repayment) of borrowings - - -
_________ _________ _________
Net cash from financing activities - 60 1,399
_________ _________ _________
Net increase / (decrease) in cash and
cash equivalents (1,697) 151 2,537
Cash and cash equivalents at beginning
of period 3,706 1,105 1,105
Exchange gains / (losses) on cash and
cash equivalents (21) 3 64
_________ _________ _________
Cash and cash equivalents at end of
period 1,988 1,259 3,706
_________ _________ _________
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 30 JUNE 2018
Share Share Foreign
Share premium Merger options Other exchange Retained Total
capital reserve reserve reserve reserves reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
________ ________ ________ ________ ________ ________ ________ ________
Balance at
1 January 2017
- audited 1,873 43,865 20,240 138 (23,023) (415) (39,976) 2,702
________ ________ ________ ________ ________ ________ ________ ________
Gain/(Loss) for
the period - - - - - - 1,586 1,586
Foreign exchange
translation - - - - - 206 - 206
________ ________ ________ ________ ________ ________ ________ ________
Total
comprehensive
income for the
year - - - - - 206 1,586 1,792
Shares issued in
the year 136 2,113 - - - - - 2,249
Expenses of
share
issue (43) - - - - - (43)
Transfer - - - (210) - - 210 -
Share based
payments - - - 209 - - - 209
________ ________ ________ ________ ________ ________ ________ ________
Balance at
31 December
2017-
audited 2,009 45,935 20,240 137 (23,023) (209) (38,180) 6,909
________ ________ ________ ________ ________ ________ ________ ________
Profit for the
period - - - - - - 2,407 2,407
Foreign exchange
translation - - - - - (93) - (93)
________ ________ ________ ________ ________ ________ ________ ________
Total
comprehensive
income for the
half year - - - - - (93) 2,407 2,314
Shares issued in
the year 78 1,183 - - - - - 1,261
Expenses of
share
issue - - - - - - - -
Transfer - - - (258) - - 258 -
Share based
payments - - - 92 - - - 92
________ ________ ________ ________ ________ ________ ________ ________
Balance at
30 June 2018 -
Unaudited 2,087 47,118 20,240 (29) (23,023) (302) (35,515) 10,576
________ ________ ________ ________ ________ ________ ________ ________
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
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
1. General information
Strategic Minerals Plc ("the Company") is a public company
incorporated in England and Wales. The consolidated interim
financial statements of the Company for the six months ended 30
June 2018 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. IAS 34 is
not required to be adopted by the Company and has not been applied
in the preparation of this interim information. The consolidated
financial statements 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 2017 Annual Report. The
financial information for the half years ended 30 June 2018 and 30
June 2017 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 2017 included within this report does not constitute the
full statutory accounts for that period. The statutory Annual
Report and Financial Statements for 2017 have been filed with the
Registrar of Companies. The Independent Auditors' Report on that
Annual Report and Financial Statement for 2017 was unqualified, and
included an emphasis on matter paragraph regarding the Group's
ability to continue as a going concern 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 except for policies stated below.
Joint arrangements
Under IFRS 11 Joint Arrangements, investments in joint
arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights and
obligations of each investor, rather than the legal structure of
the joint arrangement. Strategic Minerals Limited has one joint
operation at 30 June 2018.
Joint operations
A joint operation is a joint arrangement whereby the parties
have joint control of the arrangement have rights to the assets and
obligations for the liabilities, relating to the arrangement.
Strategic Minerals Plc recognises its direct right to the assets,
liabilities, revenues and expenses of the joint operations and its
share of any jointly held or incurred assets, liabilities, revenues
and expenses.
Joint Ventures
A joint venture is a joint arrangement whereby the parties that
have joint control of the arrangement have the rights to the net
assets of the joint arrangement. Interests in joint ventures are
accounted for using the equity method, after initially being
recognised at cost in the consolidated statement of financial
position.
Business Combinations
Business Combinations occur where an acquirer obtains control
over one or more businesses. A business combination is accounted
for by applying the acquisition method unless it is a combination
involving entities or businesses under common control. The business
combination will be accounted for from the date that control is
obtained, whereby the fair value of identifiable assets acquired
and liabilities (including contingent liabilities assumed) is
recognised.
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
Accounting policies (continued)
Where an acquirer has been unable to complete the initial
accounting for a business combination by the end of the reporting
period in which the combination occurred - provisional accounting
shall be used during a 12 month measurement period.
During this measurement period, the acquirer retrospectively
adjusts the provisional amounts recognised at the acquisition date
to reflect new information obtained about facts and circumstances
that existed as of the acquisition date and, if known, would have
affected the measurement of the amounts recognised as of that date.
The measurement period ends as soon as the acquirer receives the
information it was seeking about facts and circumstances that
existed as of the acquisition date or learns that more information
is not obtainable.
The measurement period does not exceed one year from the
acquisition date. After the measurement period ends, an acquirer
can make adjustments to correct errors in accordance with IAS 8
Accounting Policies, Changes in Accounting Policies, Changes in
Accounting Estimates and Errors.
All transaction costs incurred in relation to business
combinations, other than those associated with the issue of a
financial instrument are recognised as expenses in profit and loss
when incurred
The acquisition of a business may result in the recognition of
goodwill or gain from a bargain purchase.
New, revised or amending accounting standards and
interpretations
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.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial
Instruments: Recognition and Measurement in its entirety. This
standard is effective for periods beginning on or after 1 January
2018 with retrospective application.
IFRS 9 introduces significant changes to the classification and
measurement requirements for financial instruments. As at 31 June
2018 the Group has not experienced credit losses in relation to the
Cobre operations. Management will continue to assess the overall
credit risk of the debtor portfolio when calculating the ongoing
bad debt provision.
All intercompany receivables on the Company statement of
financial position are repayable on demand. In line with the
requirements of IFRS 9 the directors and management have assessed
the underlying liquid assets of each counterparty at the year end
and has assessed the credit risk to be low at this stage. The
directors and management will continue to monitor the credit risk
attached to the sales contracts (Group and Company) and the credit
risk of intercompany receivables and adopt an appropriate provision
policy under the requirements of IFRS 9.
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) Joint arrangement and joint operation
The Company holds a 50% interest in Cornwall Resources Limited
("CRL") which owns the Redmoor Tin-Tungsten project in the United
Kingdom with the other shareholder being New Age Exploration
Limited ("NAE"). Under the shareholders agreement with NAE, CRL is
operated as a 50:50 joint venture with each party being entitled to
appoint one Director. Based on this, the Group considers that they
have joint control over the arrangement. Under IFRS 11, this joint
arrangement is classified as a joint venture and has been included
in the consolidated financial statements using the equity
method.
Estimates and assumptions
(a) Asset acquisition versus business combination
In April 2018, the company acquired a 100% interest in Leigh
Creek Copper Mine Pty Ltd ("LCCM") which owns exploration tenements
in the South Australia. The LCCM acquisition meets the definition
of a Business Combination in accordance with IFRS 3 and has been
treated as such.
(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.
(c) Share based payments, warrants and options
The fair value of warrants and options recognised in the income
statement is measured by use of either a Black Scholes Valuation
Model or probabilistic model. The model calculates the fair value
of an option that vests if the Company's stock price exceeds the
vesting hurdle. The model 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
recent past experience.
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
4. Segment information
The Group has four main segments:
-- Head Office - This segment holds all the United Kingdom (UK)
administrative costs for central operations, finances the Group's
operations.
-- SMG - This segment is involved in the sale of magnetite to
the US domestic market through the Company's wholly owned
subsidiary Southern Minerals Group LLC (SMG).
-- UK - This segment holds the Company's investment in the UK
being the Redmoor Tin/Tungsten project in Cornwall which is held by
Cornwall Resources Limited and which is 50% owned by the
Company.
-- Australia - This segment holds the tenements in Australia through the Company's wholly owned subsidiaries, Central Australia Rare Earths Pty Ltd and Leigh Creek Copper Mine Pty Ltd.
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 Chairman and Directors.
Measurement of operating segment profit or loss, assets and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with EU Adopted
IFRS but excluding non-cash losses, such as the amortisation of
intangible assets, and the effects of share-based payments.
Segment assets exclude tax assets and assets used primarily for
corporate purposes. Segment liabilities exclude tax liabilities.
Loans and borrowings are allocated to the segments in which the
borrowings are held. Details are provided in the reconciliation
from segment assets and liabilities to the Group's statement of
financial position.
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
4. Segment information (continued)
6 Months to 30 June Head Office SMG Australia UK Inter Total
2018 (Unaudited) Segment
Elimination
$'000 $'000 $'000 $'000 $'000 $'000
Revenue 2 2,118 - - - 2,120
Cost of sales - (391) - - - (391)
_______ ______ _______ _______ _______ _______
Gross Profit 2 1,727 - - - 1,729
Bargain Purchase 2,464 - - 2,464
Depreciation - (36) - - - (36)
Overhead expenses (838) (445) (103) - - (1,386)
Management fee 200 (200) - -
Share based expense (92) - - - - (92)
Write back of provisions (379) - 379 -
Equity accounting
profit 1 - - 1
Foreign Exchange 8 - - - (1) 7
_______ _______ _______ _______ _______ _______
(1,098) 1,046 2,361 - 378 2,687
Segment profit/(loss)
from operations (1,098) 1,046 2,361 - 378 2,687
________ ________ ________ ________ ________ ________
Segment profit/(loss)
before taxation (1,098) 1,046 2,361 - - 2,687
________ ________ ________ ________ ________ ________
6 Months to 30 June Head Office SMG Australia UK Inter Total
2017 (Unaudited) Segment
Elimination
$'000 $'000 $'000 $'000 $'000 $'000
Revenue 200 1,435 - - (195) 1,440
Cost of sales - (272) - - - (272)
________ ________ ________ ________ ________ ________
Gross Profit 200 1,163 - - (195) 1,168
Depreciation - (48) - - - (48)
Overhead expenses (433) (425) (2) - - (860)
Management fee - (200) - - 200 -
Share based expense (91) - - - - (91)
Equity accounting loss - - - (49) - (49)
Foreign Exchange (15) - - - (5) (20)
Gain on revaluation
of investment in associate 58 58
________ ________ ________ ________ ________ ________
(539) (673) 56 (49) 195 (1,010)
Segment profit/(loss)
from operations (339) 490 56 (49) - 158
________ ________ ________ ________ ________ ________
Segment profit/(loss)
before taxation (339) 490 56 (49) - 158
________ ________ ________ ________ ________ ________
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
4. Segment information (continued)
Year to 31 December Head SMG Australia Inter Segment Total
2017(Audited) Office Elimination
$'000 $'000 $'000 $'000 $'000
Revenue 5 5,637 - - 5,642
Cost of sales - (914) - - (914)
________ ________ ________ ________ ________
Gross profit 5 4,723 - - 4,728
Depreciation - (74) - - (74)
Overhead expenses (1,086) (1,016) (11) - (2,113)
Management fee 391 (400) - 9 -
Impairment of intangible - - - - -
asset
Write back provisions 776 - - (776) -
Share-based payments
charge (209) - - - (209)
Share of net loss
from associates (63) - - - (63)
Foreign exchange 73 - - (108) (35)
________ ________ ________ ________ ________
(118) (1,490) (11) (875) (2,494)
Segment profit / (loss)
from operations 113 3,233 (11) (875) 2,234
Finance expense - - - - -
________ ________ ________ ________ ________
Segment profit / (loss)
before taxation 113 3,233 (11) (875) 2,234
________ ________ ________ ________ ________
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
4. Segment information (continued)
As at 30 June 2018 (Unaudited) Head Office SMG UK Australia Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current
assets (excluding deferred
tax) 107 - - 1,469 1,576
________ ________ ________ ________ ________
Reportable segment assets
(excluding deferred
tax) 3,098 2053 - 6,560 11,711
Reportable segment liabilities 189 680 - 266 1,135
________ ________ ________ ________ ________
Total Group Liabilities 1,135
________
As at 30 June 2017 (Unaudited) Head Office SMG UK Australia Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current
assets (excluding deferred
tax) - 37 1,068 - 1,105
________ ________ ________ ________ ________
Reportable segment assets
(excluding deferred
tax) 302 1,650 1,316 1,160 4,428
Reportable segment liabilities 35 562 - 69 666
________ ________ ________ ________ ________
Total Group Liabilities 666
________
As at 31 December 2017(Audited) Head Office SMG UK Australia Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current
assets (excluding deferred
tax) 1,328 190 - 186 1,704
________ ________ ________ ________ ________
Reportable segment assets
(excluding deferred
tax) 3.339 3,065 - 1,600 8,004
________ ________ ________ ________ ________
Reportable segment liabilities 199 870 26 1,095
________ ________ ________ ________ ________
Total Group liabilities 1,095
________
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
5. Operating loss
Administration costs by nature
6 months 6 months
to to Year to
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Operating gain/loss is stated after
charging/(crediting):
Directors' fees and emoluments 414 181 497
Depreciation 36 48 74
Equipment rental 130 134 300
Equipment maintenance 34 - 70
Equity accounting share of loss/(profit) (1) 49 63
Auditors' remuneration 8 - 34
Salaries, wages and other staff
related costs 276 116 557
Insurance 11 26 -
Legal, professional and consultancy
fees 329 147 341
Travelling and related costs 69 71 121
Foreign exchange (7) 20 35
Share based payments 92 91 209
Other expenses 126 185 193
6 Exploration and Evaluation Expenditure
In the six months ending 30 June 2018 the Company purchased
Leigh Creek Copper Mine Pty Ltd which resulted in the addition of
deferred exploration and evaluation costs at acquisition which were
recognised at fair value.
Exploration/
evaluation
costs
Cost $'000
At 1 January 2017 -
Additions on acquisition of associates 1,056
At 30 June 2017 ( unaudited) 1,056
Additions in the year 186
At 31 December 2017 ( audited) 1,242
Additions to 30 June 2018* 4,932
At 30 June 2018 ( unaudited)
*Additions for the period are for both CARE
and LCCM. 6,174
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
7 Investments in associates and joint ventures
Investments
(Unaudited)
Cost $'000
At 1 January 2018 1,611
Acquisition of joint venture interests *107
Share of equity profit in joint
ventures 1
Foreign exchange difference 36
________
At 30 June 2018 1,755
________
* During the period the Company paid $107,000 in cash to acquire
an additional 779,265 shares in Cornwall Resources Limited ("CRL)
(CRL was previously New Age Exploration Limited) which holds the
Redmoor tin/tungsten project in Cornwall. Company's interest in CRL
remains at 50%.
30 June 31 December
2018 2017
(Unaudited) ( Audited)
Investment in joint venture - Cornwall Resources
Limited 1,755 1,611
Total Investments 1,755 1,611
________ ________
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
8 Business Combination
In April 2018, the company acquired a 100% interest in Leigh
Creek Copper Mine Pty Ltd ("LCCM") which owns exploration tenements
in the South Australia. The purchase adds copper exposure to
company's portfolio of strategic projects. The company believes
that demand and supply factors for copper over the next five years
will lead to price increases going forward, which in turn will add
substantial shareholder value.
The fair values of the identifiable assets acquired and
liabilities assumed are provisional.
For the three months ended 30 June 2018, LCCM incurred costs of
$81,857. If the acquisition had occurred on 1 January 2018,
management estimates that LCCM costs incurred would have been
$517,000 and consolidated profit (loss) for the year would not have
changed as costs associated with LCCM are capitalised to Deferred
Exploration and Evaluation Expenditure.
In determining these amounts management has assumed that the
fair value adjustments, determined provisionally, that arose on the
date of acquisition would have been the same if acquisition had
occurred on 1 January 2018.
a) Consideration transferred
Cash 1,175,543
Equity Instruments (38,700,900 ordinary
shares)(i) 1,046,385
Loan Conversion 38,755
Deferred Equity instruments (2,866,730 74,030
ordinary shares) (ii) ________
Total Consideration 2,334,713
________
i. The fair value of the ordinary shares issued was based on the
share price of GBP 0.01907.
Of the 38,700,900 shares being issued, voluntary escrow
arrangements ensure that one third is escrowed for three months
after issue and another one third is escrowed for six months after
issue. At 30 June 2018, 12,900,300 shares were not subject to any
lock-in arrangements.
ii. The group has agreed to issue additional ordinary shares on
5 March 2019, subject to no warranty claims. Share price for the
additional consideration is GBP 0.01907.
b) Acquisition - related costs
The group incurred acquisition related costs of $84,791 on legal
fees and due diligence. The costs have been included in
'administrative expenses'.
c) Identifiable assets acquired and liabilities at provisional fair value.
Non-current trade and other receivables 117,270
Mining Information/ tenement 4,702,527
Property Plant and Equipment 78,180
Other Receivables 2,638
Environmental Liability (117,270)
________
Total identifiable net assets acquired 4,783,345
________
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
Business Combination (cont'd)
d) Gain from bargain purchase.
Gain from bargain purchase arising from the acquisition has been
measured as follows:
Consideration transferred (2,334,713)
Fair value of identifiable net assets 4,783,345
Foreign Exchange 15,508
________
Gain from a bargain purchase 2,464,140
________
Gain from bargain purchase has been included in "Other Income"
in the profit and loss.
9 Dividends
No dividend is proposed for the period.
10 Earnings per share
Earnings per ordinary share have been calculated using the
weighted average number of shares in issue during the relevant
financial year as provided below.
6 months 6 months Year to
to to
30 June 30 June 31 December
2018 2017 2017
(Unaudited) (Unaudited) (Audited)
Weighted average number of shares-Basic 1,275,230,925 1,227,015,247 1,250,589030
Earnings/(Loss) for the period $2,406,000 $158,000 $1,586,000
Earnings/(Loss) per share in the 0.19 cents 0.01 cents 0.13 cents
period-Basic
Earnings/(Loss) per share in the 0.17 cents 0.01 cents 0.12 cents
period-diluted
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
FOR THE PERIODED 30 JUNE 2018
11. Share capital and premium
2018 2018 2017 2017
No $'000 No $'000
Allotted, called up and
fully paid
Ordinary shares 1,376,193,127 49,205 1,245,825,560 46,472
__________ __________ __________ __________
In January 2018, the Company issued 15,000,000 ordinary shares
due to options being exercised at an exercise price of 1 pence.
In April 2018, the Company issued 38,790,000 ordinary shares at
a price of GBP 0.19 to shareholders in Leigh Creek Copper Mine Pty
Ltd, pursuant to its agreement to acquire the balance of Leigh
Creek Copper Mine Pty Ltd
Share options and warrants
The number of options and warrants as at 30 June 2018 and a
reconciliation of the movements during the half year are as
follows:
Date of Granted as Issued Lapsed or Granted Exercise Date of Date of
Grant at 31 December cancelled/ as at 30 price vesting expiry
2017 exercised June 2018
10.04.15 2,000,000 - 2,000,000 - 1.0p 19.04.17 30.06.18
10.04.15 12,000,000 - - 12,000,000 1.0p 19.05.17 30.06.19
06.01.17 13,000,000 - 13,000,000 - 1.0p 19.04.17 30.06.18
06.01.17 13,000,000 - - 13,000,000 1.0p 19.05.17 30.06.19
15.02.18* - 72,000,000 - 72,000,000 2.75p 30.06.19 30.06.20
15.02.18*** - 38,500,000 - 38,500,000 3.75p 30.06.20 30.06.21
15.02.18*** - 17,500,000 - 17,500,000 5.00p 30.06.21 30.06.22
40,000,000 128,000,000 15,000,00 153,000,000
----------------- ------------- ------------- -------------
* Tranche 1 options were issued to directors and management
during the half year. They expire on the 30.06.20 and had a market
based vesting condition which is satisfied once a 5.5 pence volume
weighted average price ("VWAP") per ordinary share is achieved over
five consecutive trading days on AIM.
** The Tranche 2 options were issued to directors and management
during the half year. They expire on 30.06.21 and had a market
based vesting condition which is satisfied once a 7.5 pence VWAP
per ordinary share is achieved over five consecutive trading days
on AIM.
*** The Tranche 3 options were issued to directors and
management during the half year. They expire on 30.06.22 and had a
market based vesting condition which is satisfied once a 10.0 pence
VWAP per ordinary share is achieved over five consecutive trading
days on AIM.
The estimated fair value of options issued during the half year
are calculated by applying a Black Scholes or probabilistic option
pricing model after taking into account market based vesting
conditions. The assumptions used in the calculation were as
follows:
Tranche 1 Tranche Tranche 3
2
Share price at date of grant 2.0p 2.0p 2.0p
Exercise price 2.75p 3.75p 5.0p
Market vesting condition 5.50p 7.50p 10.00p
Expected volatility 60% 60% 60%
Expected dividend Nil Nil Nil
Contractual life 2.37 years 3.37 years 4.37 years
Risk free rate 0.79% 0.79% 0.79%
Estimated fair value of each
option 0.39p 0.40p 0.41p
11 Post balance date events
On 8 August 2018, Mr Peter Wale was appointed as Executive
Director. Mr Wale had previously held the position of Non-
Executive Director.
On 9 August 2018, Mr John Peters the Managing Director exercised
options over 3,000,000 shares which were due to expire on 30 June
2019. Mr Peters provided GBP30,000 which represented an exercise
price of
GBP0-01 per share.
On 9 August 2018, Mr Peter Wale, exercised options over
2,000,000 shares which were due to expire on 30 June 2019. Mr Wale
provided GBP20,000 which represented an exercise price of GBP0-01
per share.
On 9 August 2018, Mr Alan Broome, exercised options over
1,500,000 shares which were due to expire on 30 June 2019. Mr
Broome provided GBP15,000 which represented an exercise price of
GBP0-01 per share.
On 9 August 2018, the board approved to grant options to two
directors, Jeffery Harrison and Peter Wale, and to key personnel
across the Company's four major areas of operation. These have been
allocated in three option tranches:
-- Tranche 1 - 35,200,000 options, Vesting Price GBP0.0550,
Exercise Price GBP0.0275, Maturity 30/06/20
-- Tranche 2 - 10,750,000 options, Vesting Price GBP0.0750,
Exercise Price GBP0.0375, Maturity 30/06/21
-- Tranche 3 - 4,750,000 options, Vesting Price GBP0.1000,
Exercise Price GBP0.0500, Maturity 30/06/22
On 3(rd) September 2018, the Company announced the sale of
tenement E38/2829, E38/2442, E38/2587 and E38/2856 to Great
Southern Mining Limited ("GSM").The tenements are owned by the
groups' 100% owned subsidiary Central Australian Rare Earths Pty
Ltd ("CARE").
Total consideration for the sale is AUD 145,000 to be paid by
way of AUD 100,000 in cash and issuance to
CARE of 1,000,000 shares in GSM at an issue price of AUD 0.045.
A non-refundable deposit of AUD 50,000 was deposited on exchange of
contracts and the cash balance and the shares will be provided on
transfer of title. 500,000 GSM shares will be subject to a
voluntary escrow until 30 December 2018, with the balance
voluntarily escrowed until 30 June 2019.
Copies of this interim report will be made available on the
Company's website, www.strategicminerals.net.
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
IR SELFIWFASEIU
(END) Dow Jones Newswires
September 28, 2018 02:00 ET (06:00 GMT)
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