TIDMSML
RNS Number : 0631A
Strategic Minerals PLC
21 September 2022
Strategic Minerals plc
("Strategic Minerals", "SML", the "Group" or the "Company")
Interim Results
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing
mineral company actively developing critical minerals focused
projects, is pleased to announce its unaudited interim profit for
the half year ended 30 June 2022.
Financial Highlights
-- Continued operating profitability with six-month pre-tax
profit of US$248,000 (H1 2021: US$388,000) reflecting reduced sales
in the period.
-- Ongoing after-tax profit for the six-months of US$127,000 (H1
2021 US$207,000) consistent with the drop in sales and tight
control of overheads being maintained.
-- Timing of claims on the Deep Digital Cornwall project of
US$128,000, US$55,000 received to date, saw an increase in debtors
at the end of June (US$435,000), as opposed to the same time last
year (US$335,000).
-- In June 2022, Southern Minerals Group ("SMG"), the Company's
wholly owned subsidiary, began increasing sales prices expected to
reflect in higher revenues in the second half of the year.
-- US$12,000 of share-based payment expense for the interim
six-month period reflects the final charge relating to options
which expired 30 June 2022.
-- US$450,000 invested in development projects during the period
(Leigh Creek Copper Mine ("LCCM") US$250,000 and Redmoor Tin and
Tungsten Mine ("Redmoor") US$200,000).
-- Unrestricted cash at 30 June 2022 was US$430,000 (31 Dec 2021: US$611,000).
Corporate Highlights
-- Access to the Cobre magnetite stockpile rolled over for the
10th time with a subsequent agreement to extend this access for 5
years to 31 March 2027.
-- Unconditional approval for a Program for Environmental
Protection and Rehabilitation ("PEPR") for the planned mining of
copper oxide at Paltridge North at LCCM.
-- Exploration license at Redmoor has been extended another 25 years to 2037.
-- Managing Director, John Peters, acquired a further 5,000,000 shares on market.
Commenting, John Peters, Managing Director of Strategic Miners,
said:
"Just when the first half of 2022 saw early signs of the global
economy emerging from the full effects of the pandemic, conflict in
the Ukraine upended markets and saw price rises that helped fuel
inflationary pressures and rising interest rates. Against this
background, the Company has been managing its Cobre operation and
has, prudently, pushed forward on its development projects.
"After much effort, LCCM, the Company's wholly owned subsidiary,
has secured unconditional approval of the PEPR for mining the
Paltridge North copper oxide deposit, adjacent to LCCM's operating
plant at Mountain of Light. At the same time, the Company's wholly
owned subsidiary, Cornwall Resources Limited ("CRL") owner of
Redmoor exploration rights, has continued its important role in the
Deep Digital Cornwall project and has identified some very
prospective leads for future exploration.
"With the unconditional Paltridge North approval, the Company
has intensified discussions with both existing and previously
identified parties and expects that, once funding is secured, the
inherent value of the LCCM project will begin to be reflected in
the Company's share price. While subject to securing finance, the
Company's current expectations are that operations will restart at
Mountain of Light before the end of the year.
"Post balance date, the UK Government issued both a Critical
Minerals List and Strategy. This has significant implications for
CRL in that both Tin and Tungsten, the main minerals identified at
Redmoor, are on the list. Accordingly, the Redmoor project, in the
Board's view, has the potential to benefit from the Government's
stated strategy to provide assistance in developing such resources,
especially in areas, like East Cornwall, which may benefit from the
Government's "Levelling Up" initiative. CRL and the Board look
forward to exploring how these circumstances can best be applied to
the development of the proposed Redmoor mine.
"My personal, open market purchase of 5m shares, during the
period, reflects my view on how undervalued I believe the Company
is. It was reassuring to see, post balance date, a respected
professional investor, Philip Richards of RAB Capital, echo my
sentiments and join both myself and SML Executive Director, Peter
Wale, in each owning around 4% of the Company.
"With the potential of a second income stream from LCCM, subject
to securing finance, coupled with the new focus on Tin and Tungsten
as critical minerals, it appears the long-awaited market
recognition of the Board's strategic decisions appears close. I
look forward to delivering this for all shareholders, and
particularly long-term shareholders who have shown great
patience."
For further information, please contact:
+61 (0) 414 727
Strategic Minerals plc 965
John Peters
Managing Director
Website: www.strategicminerals.net
Email: info@strategicminerals.net
Follow Strategic Minerals on:
Vox Markets: https://www.voxmarkets.co.uk/company/SML/
Twitter: @SML_Minerals
LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc
+44 (0) 20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Broker
Matthew Johnson
Charlie Bouverat
NOTES TO EDITORS
Strategic Minerals plc is an AIM-quoted, profitable operating
minerals company actively developing projects tailored to materials
expected to benefit from strong demand in the future. It has an
operation in the United States of America along with 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 likely to be highly demanded in the future.
In September 2011, Strategic Minerals acquired the distribution
rights to 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 aimed at supplying the
metals and minerals likely to be highly demanded in the future.
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. This was followed in 2018 with
a 12-hole 2018 drilling programme has now been completed and the
resource update that resulted was announced in February 2019. In
March 2019, the Company entered into arrangements to acquire the
balance of the Redmoor Tin/Tungsten project which was settled on 24
July 2019 by way of a vendor loan which was fully repaid on 26 June
2020.
In March 2018, the Company completed the acquisition of the
Leigh Creek Copper Mine situated in the copper rich belt of South
Australia and brought the project temporarily into production in
April 2019. In July 2021, the project was granted a conditional
approval by the South Australian Government for a Program for
Environmental Protection and Rehabilitation (PEPR) in relation to
mining of its Paltridge North deposit and processing at the
Mountain of Light installation. In late June 2022, an updated PEPR,
addressing the conditions associated with the July 2021 approval,
was approved.
CHAIRMAN'S STATEMENT
I am pleased with the Company's achievements, in what has again
proved to be a particularly challenging period for Strategic
Minerals and the world.
Financial results
The Company continued its profitable performance in the first
half of 2022, when many businesses succumbed to cash flow and
profitability impacts arising from the pandemic. This is a credit
to both our local management and the management team as a
whole.
While operations at Cobre have been able to avoid a substantial
impact from the pandemic, the Company's ability to progress its
development projects and general development processes have been
impacted by the Covid-19 pandemic and slowed progress. However, now
with the granting of an unconditional PEPR at Paltridge North, the
Company expects cash flow and profitability to improve
dramatically, in line with full-scale production recommencing at
the Leigh Creek Copper Mine in late 2022, subject to funding.
Unrestricted cash on hand at 30 June 2022 was US$430,000.
After having reduced corporate overheads last year, the Company
successfully reduced these a further 9% in the first half of the
year to US$637,000 (US$698,000 2021). Increases in amortisation
reflected SMG's purchase of a new loader at Cobre.
Strategic Focus
Despite a reduction in sales compared to last year, current
sales levels at the Cobre operations continue to cover operating
costs and allowed the Company some scope to continue its strategic
investment focus on investments in metals such as Copper and
Tin/Tungsten which it expects are likely to see significant price
improvements over the next three to five years, reflecting the
world's new emphasis on critical minerals.
On the back of this strategy, the Company continues to invest in
development programmes, particularly those associated with Leigh
Creek Copper Mine (copper) and Redmoor (tin/tungsten/copper
focused) and continues dialogue with parties that may be interested
in co-investing in these projects.
Cobre Operations
During the first six months of 2022, the management at our Cobre
operations continued their excellent adaption to the challenges
associated with the disruption to world markets arising from the
Covid-19 pandemic and the subsequent impact on prices and demand
associated with the Ukraine conflict.
The first half of the year also saw the receiver for CV
Investments begin the process of formalising claims in relation to
the receivership of CV Investments and we await the result of this
process hopefully but with no expectation of payment.
Leigh Creek Copper Mine ("Leigh Creek" or "LCCM")
The significant work conducted at Leigh Creek, to the first half
of 2022, resulted in the granting of an unconditional PEPR for
copper oxide mining at Paltridge North. This has now prepared the
project to attract funding to restart operations. The strong
performance of the copper price in recent times has improved the
project's potential profitability and the Board feels confident
that 2023 will see full scale production and sales re-commence at
Leigh Creek, subject to funding.
Redmoor Tin-Tungsten Project ("Redmoor")
During the first six months of 2022, the Company has continued
its excellent work within the Deep Digital Cornwall project and has
identified a number of highly prospective areas for future
exploration, notably some indications of near surface tin
occurrences to the southwest of the identified resource.
I am delighted in both Tin and Tungsten being included within
the critical minerals list and strategy and believe that this will
place the Redmoor project in a good position to benefit from the UK
Government's planned support for such projects.
Safety
The Company focuses on safety issues and continues to maintain a
high level of performance when it comes to safety. SML and its
subsidiaries have had no reportable environmental or personnel
incidents recorded in the period.
The first half of 2022 has again proven to be a challenging
environment in which to operate and I would like to take this
opportunity to thank my fellow Directors, our management and staff
in New Mexico, South Australia and Cornwall, along with our
advisers, for their support and hard work on our behalf during the
period. Additionally, I would like to thank our clients,
contractors, suppliers and partners for their continued backing. I
look forward to further progressing our key strategic goals in 2022
and pushing onto a brighter 2023.
Alan Broome AM
Non-Executive Chairman
20 September 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Continuing operations
Revenue 1,329 1,511 2,611
Raw materials and consumables used. (256) (286) (524)
_________ _________ _________
Gross profit 1,073 1,225 2,087
Overhead expenses (637) (698) (1,535)
Amortisation (139) (77) (158)
Depreciation (16) (6) (52)
Share based payment (12) (48) (58)
Foreign exchange gain/(loss) (5) (2) (5)
_________ _________ _________
Profit from operations 264 394 279
Finance expense (4) (2) (7)
Lease Interest (12) (4) (15)
_________ _________ _________
Profit/ (loss) before taxation 248 388 257
Income tax (expense)/credit (121) (181) (101)
_________ _________ _________
_________ _________ _________
Profit for the period attributable
to:
Owners of the parent 127 207 156
_________ _________ _________
Other comprehensive income
Exchange gains/(losses) arising
on translation
of foreign operations (902) (145) (516)
_________ _________ _________
_________ _________ _________
Total comprehensive (loss)/income
attributable to:
Owners of the parent (775) 62 (360)
_________ _________ _________
Profit/ (loss) per share attributable to the ordinary equity
holders of the parent:
Continuing activities - Basic c0.08 c0.13 c0.10
- Diluted c0.08 c0.13 c0.10
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Assets
Non-current assets
Intangible Asset 553 600 582
Deferred Exploration and evaluation
costs 4,886 5240 5,228
Other Receivables 139 151 145
Property, plant and equipment 7,301 7,363 7,485
Right of Use Assets 568 150 717
_________ _________ _________
13,447 13,504 14,157
_________ _________ _________
Current assets
Inventories 2 4 4
Trade and other receivables 435 335 485
Income Tax Refund - - 63
Cash and cash equivalents 430 734 611
Prepayments 1 7 6
_________ _________ _________
868 1,080 1,169
_________ _________ _________
Total Assets 14,315 14,584 15,326
_________ _________ ____ _____
Equity and liabilities
Share capital 2,916 2,770 2,916
Share premium reserve 49,387 49,010 49,387
Share options reserve - 88 97
Merger reserve 21,300 21,300 21,300
Warrant Reserve 153 153 153
Foreign exchange reserve (1,209) 64 (307)
Other reserves (23,023) (23,023) (23,023)
Accumulated loss (36,512) (36,700) (36,748)
_________ _________ _________
Total Equity 13,012 13,662 13,775
_________ _________ ____ _____
Liabilities
Non-Current Liabilities
Lease Liabilities 317 19 420
Provisions 405 429 421
_________ _________ _________
722 448 841
_________ _________ _________
Current liabilities
Income Tax Payable 6 17 -
Trade and other payables 309 335 408
Lease Liabilities 266 122 302
_________ _________ _________
581 474 710
_________ _________ _________
Total Liabilities 1,303 922 1,551
_________ _________ ____ _____
Total Equity and Liabilities 14,315 14,584 15,326
_________ _________ ____ _____
CONSOLIDATED STATEMENT OF CASH FLOW
6 months
to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Cash flows from operating
activities
Profit/ (loss) after tax 127 207 156
Adjustments for:
Depreciation of property, plant,
and equipment 16 6 52
Amortisation of Right of Use
asset 139 77 158
Finance expense 4 2 7
Income Tax expense 121 181 101
(Increase) / decrease in inventory 2 (1) (1)
(Increase) / decrease in trade
and other receivables 12 (125) 161
(Increase) / decrease in prepayments 3 9 10
Increase / (decrease) in trade
and other payables 48 91 92
Increase /(decrease) in prepaid
income tax - - (63)
Income tax paid (52) (177) (121)
Share based payment expense 12 48 58
_________ _________ _________
Net cash flows from operating
activities 432 318 610
_________ _________ _________
Investing activities
Increase in PPE Development
Asset (253) (202) (584)
Increase in PPE - - (4)
Increase in deferred exploration
and evaluation asset (201) (131) (564)
_________ _________ _________
Net cash used in investing
activities (454) (333) (1,152)
_________ _________ _________
Financing activities
Net proceeds from issue of
equity share capital - - 523
Lease Payments (151) (88) (195)
_________ _________ _________
Net cash from financing activities (151) (88) 328
_________ _________ _________
Net increase / (decrease)
in cash and cash equivalents (173) (103) (214)
Cash and cash equivalents at
beginning of period 611 833 833
Exchange gains / (losses) on
cash and cash equivalents (8) 4 (8)
_________ _________ _________
Cash and cash equivalents
at end of period 430 734 611
_________ _________ _________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Warrant Share Initial Foreign
Share premium Merger Warrant options Re-structure Exch. Retained Total
capital reserve Reserve Reserve reserve Reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January
2021 2,770 49,010 21,300 153 272 (23,023) 209 (37,139) 13,552
_______ _______ _______ _______ _______ _______ _______ _______ _______
Profit for
the year - - - - - - - 156 156
Foreign
exchange
translation - - - - - - (516) - (516)
_______ _______ _______
Total
comprehensive
income/(loss)
for the year - - - - - - (516) 156 (360)
Share based
payments - - - - 60 - - - 60
Transfer - - - - (235) - - 235 -
Shares issued
in the year 146 405 - - - - - - 551
Share issue
costs - (28) - - - - - - (28)
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2021 2,916 49,387 21,300 153 97 (23,023) (307) (36,748) 13,775
Profit for
the period - - - - - - - 127 127
Foreign
exchange
translation - - - - - - (902) - (902)
_______ _______ _______
Total
comprehensive
income for
the year - - - - - - (902) 127 (775)
Share based
payments - - - - 12 - - - 12
Transfer - - - - (109) - - 109 -
Shares issued
in the year - - - - - - - - -
Share issue
costs - - - - - - - - -
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
30 June 2022 2,916 49,387 21,300 153 - (23,023) (1,209) (36,512) 13,012
_______ _______ _______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the
parent Company.
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
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 2022 comprise the Company and its subsidiaries (together
referred to as the "Group").
2. Significant accounting policies
Basis of preparation
In preparing these financial statements the presentational
currency is US dollars. As the entire group's revenues and majority
of its costs, assets and liabilities are denominated in US dollars
it is considered appropriate to report in this currency.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared in accordance with
International Financial Standards and UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment
in applying the Group's accounting policies. The areas where
significant judgments and estimates have been made in preparing the
financial statements and their effect are disclosed in note 2.
The financial statements have been prepared on a historical cost
basis, except for the acquisition of LCCM and the valuation of
certain investments which have been measured at fair value, not
historical cost.
Going concern basis
The Directors have given careful consideration to the Group and
Parent Company's (together "the Group") ability to continue as a
going concern through review of cash flow forecasts prepared by
management for the period to 31 December 2023. It has reviewed the
key assumptions on which these are based and conducted sensitivity
analysis.
The Group's forward commitments include corporate overhead,
which is actively managed in line with cash generated from the
Cobre asset and costs associated with keeping exploration licences
and mining leases current.
As at 30 June 2022, the Group had US$0.430m of cash on hand.
Group forecasts are based on Management's expectations that tons
sold in 2022 and 2023 will be in line with 2021 levels. An increase
in sales prices for all customers was implemented in June 2022. For
the purposes of the consideration of the Group's ability to operate
as a going concern, only non-discretionary expenditure on projects
is included in the cash flow forecasts. On the basis of these
forecasts, operations at Cobre are expected to provide sufficient
funds until December 2023 to meet all operational costs and
non-discretionary project expenditure.
However, the Board considers additional funds will be required
to progress the development of the Leigh Creek Copper Mine and
Redmoor projects. It is the intention of the group that the LCCM
asset will be developed in the second half of 2022 and Management
are actively pursuing such funding and envisage that this will be
sourced at the asset level.
During the period, the Group secured access to the Cobre
stockpile at Cobre until 2027.
As the Group is reliant on cash being generated from the Cobre
asset in line with forecast, Management has performed reverse
stress testing which shows that a 5% reduction in forecast sales
would result in a cash deficit in June 2023, without management
taking mitigating actions within their control. The Group does not
currently have offtake agreements with customers, therefore there
is uncertainty as to whether forecast sales will be met.
In the event that there is a reduction in forecast sales at
Cobre or LCCM funding is not raised, these conditions indicate a
material uncertainty which may cast significant doubt as to the
Group's ability to continue as a going concern and therefore it may
be unable to realise its assets and discharge its liabilities in
the normal course of business.
If further funds are required, the Directors have reasonable
expectation based on the ability of the Company to raise funds in
the past that the Group will have access to sufficient resources by
way of debt or equity markets to meet all non-discretionary
expenditure. Consequently, the consolidated financial statements
have been prepared on a going concern basis.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern.
New standards, interpretations, and amendments effective 1 July
2022:
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early.
Investment in joint arrangements
The Group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The group classifies its interests in joint arrangements as
either:
-- Joint ventures: where the group has rights to only the net assets of the joint arrangement.
-- Joint operations: where the group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
-- The structure of the joint arrangement
-- The legal form of joint arrangements structured through a separate vehicle
-- The contractual terms of the joint arrangement agreement
-- Any other facts and circumstances (in any other contractual arrangements).
The Group accounts for its interests in joint ventures initially
at cost in the consolidated statement of financial position.
Subsequently joint ventures are accounted for using the equity
method where the Group's share of post-acquisition profits and
losses and other comprehensive income is recognised in the
consolidated statement of profit and loss and other comprehensive
income (except for losses in excess of the Group's investment in
the associate unless there is an obligation to make good those
losses).
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the joint venture. The investor's share in
the joint ventures' profits and losses resulting from these
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in joint venture.
Where there is objective evidence that the investment in a joint
venture has been impaired the carrying amount of the investment is
tested for impairment in the same way as other non-financial
assets.
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues, and
expenses in accordance with its contractually conferred rights and
obligations. In accordance with IFRS 11 Joint Arrangements, the
Group is required to apply all of the principles of IFRS 3 Business
Combinations when it acquires an interest in a joint operation that
constitutes a business as defined by IFRS 3.Where there is an
increase in the stake of the joint venture entity from an associate
to a subsidiary and the acquisition is considered as an asset
acquisition and not a business combination in accordance with
IFRS3, this step up transaction is accounted for as the purchase of
a single asset and the cost of the transaction is allocated in its
entirety to that asset with no gain or loss recognised in the
income statement. The step-up acquisition of CRL in 2019 has been
accounted for as a purchase of a single asset and the cost of the
transaction is allocated in its entirety to that balance sheet.
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.
Estimates
(a) Carrying value of intangible assets
Management assesses the carrying value of the exploration and
evaluation assets for indicators of impairment based on the
requirements of IFRS 6 which are inherently judgemental. This
includes ensuring the Group maintains legal title, assessment
regarding the commerciality of reserves and the clear intention to
move the asset forward to development.
i) The Redmoor projects are early-stage exploration projects and
therefore Management have applied judgement in the period as to
whether the results from exploration activity provide sufficient
evidence to continue to move the asset forward to development.
There are no indicators of impairment for the Redmoor project in
the period to 30 June 2022.
(b) Share based payments
The fair value of share-based payments recognised in the
statement of comprehensive income is measured by use of the Black
Scholes model after taking into account market-based vesting
conditions and conditions attached to the vesting and exercise of
the equity instruments. The expected life used in the model is
adjusted based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future
share price behaviour based on past experience.
(c) Carrying value of amounts owed by subsidiary undertakings.
IFRS9 requires the parent company to make certain assumptions
when implementing the forward- looking expected credit loss model.
This model is required to be used to assess the intercompany loan
receivables from its subsidiaries for impairment. Arriving at an
expected credit loss allowance involved considering different
scenarios for the recovery of the intercompany loan receivables,
the possible credit losses that could arise and probabilities for
these scenarios.
The following were considered: the exploration project risk, the
future sales potential of product, value of potential reserves and
the resulting expected economic outcomes of the project.
(d) Carrying Value of Development Assets
Management assesses the carrying value of development assets for
indicators of impairment based on the requirements of IAS36 which
are inherently judgemental.
The following are the key assumptions used in this assessment of
Carrying value.
i) Mineable reserves over life of project
ii) Forecasted Copper pricing
iii) Capital and operating cost assumptions to deliver the mining schedule
iv) Foreign exchange rates
v) Discount rate
vi) Estimated project commencement date.
If the carrying amount of the Development asset exceeds the
recoverable amount, the asset is impaired. The Group will reduce
the carrying amount of the asset to its recoverable amount and
recognise an impairment loss. The assessment is carried out twice
per year - end of half year reporting period and end of annual
reporting period.
(e) Determination of incremental borrowing rate for leases
Under IFRS 16, where the interest rate implicit in the lease
cannot be readily determined the incremental borrowing rate is
used. The incremental borrowing rate is defined as the rate of
interest that a lessee would have to pay to borrow, over a similar
term and with a similar security, the funds necessary to obtain an
asset of a similar value to the cost of the right-of-use asset in a
similar economic environment.
Judgements
(a) Investments in subsidiaries
Investment in subsidiaries comprises of the cost of acquiring
the shares in subsidiaries.
If an impairment trigger is identified and investments in
subsidiaries are tested for impairment, estimates are used to
determine the expected net return on investment. The estimated
return on investment takes into account the underlying economic
factors in the business of the Company's subsidiaries including
estimated recoverable reserves, resources prices, capital
investment requirements, and discount rates among other things.
(b) Contingent consideration as part of Asset acquisition
Judgement was required in determining the accounting for the
contingent consideration payable as per of the CRL acquisition. The
group has an obligation to pay A$1m on net smelter sales arising
from CRL production reaching A$50m and a further A$1m on net
smelter sales arising from CRL production reaching A$100m.
Whilst a possible obligation exists in relation to the
consideration payable, given the early stage of the project it was
concluded that at reporting date it is not probable that an outflow
of resources embodying economic benefits will be required to settle
the obligation
4. Segment information
The Group has four main segments during the period:
-- Southern Minerals Group LLC (SMG) - This segment is involved
in the sale of magnetite to both the US domestic market and
historically transported magnetite to port for onward export
sale.
-- Head Office - This segment incurs all the administrative
costs of central operations and finances the Group's operations. A
management fee is charged for completing this service and other
certain services and expenses.
-- Development Asset - This segment holds the Leigh Creek Copper
Mine Development Asset in Australia and incurs all related
operating costs.
-- United Kingdom - The investment in the Redmoor project in
Cornwall, United Kingdom is held by this segment.
Factors that management used to identify the Group's reportable
segments.
The Group's reportable segments are strategic business units
that carry out different functions and operations and operate in
different jurisdictions.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the board
and management team which includes the Board and the Chief
Financial Officer.
Measurement of operating segment profit or loss, assets, and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with International
Accounting Standards.
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.
Intra
6 Months to 30
June 2022 Head Segment
United Development
(Unaudited) SMG Office Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,329 - - - - 1,329
_______ _______ _______ _______ _______ _______
Gross profit 1,329 - - - 1,329
Raw materials/consumables (256) - - - - (256)
Overhead expenses (281) (380) (6) - 30 (637)
Management fee
income/(expense) (200) 206 - (6) -
Share based payments - (12) - - - (12)
Amortisation (139) - - - - (139)
Depreciation (16) - - - - (16)
Foreign exchange
gain/(loss) - 63 - - (68) (5)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 437 (123) (6) - (44) 264
_______ _______ _______ _______ _______ _______
Lease Interest (10) (2) (12)
Finance Expense - - - (4) - (4)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 427 (123) (8) (4) (44) 248
_______ _______ _______ _______ _______ _______
Inter
6 Months to 30 June 2021 Head Segment
(Unaudited) SMG Office United Kingdom Development Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,511 - - - - 1,511
_______ _______ _______ _______ _______ _______
Gross profit 1,511 - - - 1,511
Raw materials/consumables (286) - - - - (286)
Overhead expenses (311) (383) (4) - - (698)
Management fee income/(expense) (200) 201 - (1) -
Share based payments - (48) - - - (48)
Amortisation (77) - - - - (77)
Depreciation (6) - - - - (6)
Lease Interest (4) - - - - (4)
Foreign exchange gain/(loss) - (306) - - 304 (2)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) from operations 627 (536) (4) - 303 390
_______ _______ _______ _______ _______ _______
Finance Expense - - - (2) - (2)
Segment profit /(loss) before taxation 627 (536) (4) (2) 303 388
_______ _______ _______ _______ _______ _______
Intra
Year to 31 December
2021 Head Segment
United Development
(Audited) SMG Office Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 2,611 - - - - 2,611
_______ _______ _______ _______ _______ _______
Total Revenue 2,611 - - - 2,611
Raw Materials/Consumables (524) - - - - (524)
Overhead expenses (678) (910) (8) - 61 (1,535)
Management fee
income/(expense) (398) 396 - 2 -
Share based payments - (58) - - - (58)
Amortisation- right
of use asset (158) - - - - (158)
Depreciation (52) - - - - (52)
(Loss)/ gain on
intercompany loans - 29 - - (29) -
Foreign exchange
gain/(loss) - (478) - - 473 (5)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 801 (1,021) (8) - 507 279
_______ _______ _______ _______ _______ _______
Lease Interest (12) - (3) (15)
Finance Expense - - - (7) - (7)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 789 (1,021) (11) (7) 507 257
_______ _______ _______ _______ _______ _______
As at 30 June 2022 Head
(Unaudited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 201 253 454
_______ _______ _______ ______ _______
Reportable segment assets 1,181 160 5,068 7,906 14,315
_______ _______ _______ ______ _______
Reportable segment liabilities 651 172 31 449 1303
_______ _______ _______ _______ _______
As at 30 June 2021 Head
(Unaudited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 131 202 333
_______ _______ _______ ______ _______
Reportable segment assets 1,166 143 5,298 7,977 14,584
_______ _______ _______ ______ _______
Reportable segment liabilities 227 146 37 512 922
_______ _______ _______ _______ _______
As at 31 December 2021 Head
(Audited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 568 584 1,152
_______ _______ _______ _______ _______
Reportable segment assets 1,603 82 5,533 8,108 15,326
_______ _______ _______ _______ _______
Reportable segment liabilities 795 185 66 505 1,551
_______ _______ _______ _______ _______
External revenue by Non-current assets
location of customers by
location of assets
30 June 30 June 30 June 30 June
2022 2021 2022 2021
$'000 $'000 $'000 $'000
United States 1,329 1,511 648 275
United Kingdom - - 4,905 5,305
Australia - - 7,894 7,924
_______ _______ _______ _______
1,329 1511 13,447 13,504
_______ _______ _______ _______
Revenues from Customer A totalled $188,315 (2021: $244,683),
which represented 14% (2021: 16%) of total domestic sales in the
United States, Customer B totalled $506,503 (2021: $673,560) which
represented 38% (2021: 45%) and Customer C totalled $436,587 (2021:
$ 523,027) which represented 33% (2021: 35%).
5. Operating Loss
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Operating gain/loss is stated
after charging/(crediting):
Directors' fees and emoluments 197 222 428
Equipment rental 2 63 116
Equipment maintenance 12 34 60
Fees payable to the company's
auditor for the - - 111
audit of the parent company and
consolidated financial statements
Non- Audit Services - - 13
Salaries, wages, and other staff
related costs 248 211 480
Legal, professional and consultancy
fees 96 85 169
Other Expenses 82 83 158
_______ _______ _______
637 698 1,535
_______ _______ _______
Lease Interest 12 4 15
Finance Fee 4 2 7
Foreign exchange 5 2 5
Amortisation of Right of use
assets 139 77 158
Depreciation 16 6 52
Share based payments 12 48 58
_______ _______ _______
Total 825 837 1,830
_______ _______ _______
6. Intangible assets - exploration and evaluation costs
6 months 6 months
to to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cost
Opening balance for the period 5,228 5,026 5,026
Additions for the period 201 131 564
Grant Reimbursement (123) - (196)
Research and development incentive - - (65)
Foreign exchange difference (420) 83 (101)
_______ _______ _______
Closing balance for period 4,886 5,240 5,228
_______ _______ _______
7. Property, plant and equipment
Development Plant and
Asset Machinery Total
$'000 $'000 $'000
Group
Cost
At 1 January 2021 (audited) 6,828 762 7,590
Additions 202 - 202
Foreign exchange difference (176) (9) (185)
________ ________ ________
At 30 June 2021 (unaudited) 6,854 753 7,607
Additions for period 382 4 386
Foreign exchange difference (209) (11) (220)
________ ________ ________
At 31 December 2021 (audited) 7,027 746 7,773
________ ________ ________
Additions 253 - 253
Foreign exchange difference (403) (18) (421)
_______ ________ _______-
At 30 June 2022 (Unaudited) 6,877 728 7,605
________ ________ ________
Depreciation
At 1 January 2021 (audited) - (239) (239)
Charge for the period - (9) (9)
Foreign exchange difference 4 4
________ ________ ________
At 30 June 2021 (unaudited) - (244) (244)
Charge for the period - (43) (43)
Foreign exchange difference - (1) (1)
________ ________ ________
At 31 December 2021 (audited) - (288) (288)
________ ________ ________
Charge for the period - (16) (16)
Foreign exchange difference - - -
________ ________ ________
As at 30 June 2022(unaudited) - (304) (304)
________ ________ ________
Carrying Value
As at 30 June 2021 (unaudited) 6,854 509 7,363
________ ________ ________
As
at
31
December
2021(audited) 7,027 458 7,485
________ ________ ________
As at 30 June 2022 (unaudited) 6,877 424 7,301
________ ________ ________
8. Leases
The Group has leases for an office, plant and machinery and a
vehicle. Each lease is reflected on the balance sheet as a
right-of-use asset and a lease liability. The Group classifies its
right-of-use assets in a consistent manner to its property, plant
and equipment.
Office Lease Plant, Machinery
and Vehicles Total
$'000 $'000 $'000
Right of Use Assets
As at 1 January 2021 (audited) 40 38 78
Additions - 156 156
Amortisation(capitalised) (9) (4) (13)
Amortization - (71) (71)
________ ________ ________
As at 30 June 2021 (unaudited) 31 119 150
________ ________ ________
Additions - 666 666
Amortisation(capitalised) - (5) (5)
Amortization (11) (83) (94)
________ ________ ________
As at 31 Dec 2021 (Audited) 20 697 717
________ ________ ________
Additions - - -
Amortisation(capitalised) (9) (1) (10)
Amortization - (139) (139)
________ ________ ________
As at 30 June 2022 (unaudited) 11 557 568
________ ________ ________
Lease Liabilities
As at 1 January 2021 (audited) 40 40 80
Additions - 156 156
Interest Payments 1 5 6
Lease Payments (10) (91) (101)
________ ________ ________
As at 30 June 2021 (unaudited) 31 110 141
________ ________ ________
Additions - 666 666
Interest Payments 1 8 9
Lease Payments (10) (84) (94)
________ ________ ________
As at 31 Dec 2021 (Audited 22 700 722
________ ________ ________
Interest Payments 1 11 12
Lease Payment (5) (146) (151)
________ ________ ________
As at 30 June 2022 (unaudited) 18 565 583
________ ________ ________
Current 266 122 302
Non-Current 317 19 420
________ ________ ________
583 141 722
________ ________ ________
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
to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Weighted average number of
shares - Basic 1,593,558,030 1,573,956,203 1,593,558,030
Weighted average number of
shares - Diluted 1,593,558,030 1,573,956,203 1,593,558,030
Earnings for the period $127,000 $207,000 $156,000
Earnings per share in the period
- Basic c0.08 c0.13 c0.10
Earnings per share in the period
- Diluted c0.08 c0.13 c0.10
11. Share capital and premium
30 June 30 June 30 June 30 June
2022 2022 2021 2021
No $'000 No $'000
Allotted, called up
and fully paid
Ordinary shares 2,015,964,616 52,303 1,909,297,949 51,780
____________ ____________ ____________ ____________
Share options and warrants
The number of options as at 30 June 2022 and a reconciliation of
the movements during the half year are as follows:
Granted
as
at
Date 31 Granted as Date Date
of December at 30 June Exercise of of
Grant 2021 Expired 2022 price vesting expiry
15.02.18 17,500,000 (17,500,000) - 5.00p 01.01.22 30.06.22
09.08.18 4,750,000 (4,750,000) - 5.00p 01.01.22 30.06.22
____________ ____________ ____________
22,250,000 (22,250,000) -
____________ ____________ ____________
Warrants
The number of warrants as at 30 June 2022 and a reconciliation
of the movements during the half year are as follows:
Granted
as at 31 Granted
December as at 30 Exercise Date of Date of
2021 Expired June 2022 price vesting expiry
03.12.20 175,000,000 - 175,000,000 1.00p 03.12.20 30.12.22
12. Post balance date events
Critical Minerals List
In August 2022 the UK Government issued both a Critical Minerals
List and Strategy. Both Tin and Tungsten, the main minerals
identified at Redmoor, are on this list. Accordingly, the Redmoor
project, has the potential to benefit from the Government's stated
strategy to provide assistance in developing such resources.
New Shareholding
In September 2022, a respected professional investor, Mr Philip
Richards of RAB Capital purchased 81,000,000 ordinary shares of 0.1
pence in the Company representing 4.02% of the Company's issued
share capital .
Copies of this interim report will be made available on the
Company's website, www.strategicminerals.net.
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END
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