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LONDON (Alliance News) - Red Rock Resources PLC on Thursday said it has entered the new financial year with greater liquidity in its investments, a pipeline of new income streams and a lower cost base as it reported a narrower loss and a rise in the value of its investment portfolio.
Red Rock shares were up 17% to 0.67 pence per share on Thursday morning.
Red Rock's priority at the start of the financial year to the end of June 2016 was to source a producing oil and gas project generating free cashflow in order to compliment its exploration activities within the mining sector, mostly focused on gold.
The company did achieve this, but all three of the company's income streams only began to filter through just after the end of the year, pushing the income into the current financial year.
"The initial schedules for the oil and gold payments would have seen them start to be paid earlier, but commissioning and optimisation of these projects meant the first payments were later, and smaller, than anticipated, coming in August and September respectively," said the company.
"On the other hand Jupiter [Mines Ltd] announced an initial distribution earlier and larger than expected, stating in November 2016 that it planned to pay at the beginning of March 2017 a sum which would net Red Rock USD658,350, equivalent at current exchange rates to approximately GBP530,000, with the prospect of a further payment later, that may be almost as large," Red Rock added.
Red Rock's three income streams come from gold royalties in Colombia, interests in oil and gas assets in the US and dividend income from manganese mining and marketing activities in South Africa.
Red Rock's total investment portfolio held a value of GBP2.0 million, rising from GBP1.3 million a year earlier. Its investments in companies listed in London rose to GBP105,933 from GBP27,120 while the value of investments in non-listed firms rose to GBP1.9 million from GBP1.3 million.
The value of Red Rock's total assets rose over the course of the year to end the period at GBP10.7 million compared to the value of GBP10.0 million reported a year earlier. That was the result of a rise in the value of the investment portfolio combined with a lift in non-current receivables.
Red Rock fell short of generating positive cashflow in the year, resulting in its cash balance falling to GBP26,564 from GBP29,426.
The company's income in the period came from the GBP599,225 profit generated from selling off one of its investments, alongside gains from interest on its bank balance and foreign exchange. The pretax loss for the year totalled GBP283,280, significantly narrower than the GBP7.7 million loss booked a year ago.
Reducing costs was also a major priority for Red Rock in the year. The company sublet its office space and also "laid off the majority of our staff". Red Rock said those efforts led to the bulk of its overhead costs being eliminated in the second half. Administrative costs were over 20% lower than the previous year.
Since the end of the financial year, Red Rock said it has secured further instalment payments from the sale of the El Limon mine in Colombia, made a further investment in its sole London-listed interest, Goldstone Resources Ltd, and secured first payments from the gold royalty held over gold assets and oil and gas projects.
"Costs have continued to be tightly controlled, and the current fiscal year will be the first which reflects this new low level of overheads for the entire period," said Red Rock.
Red Rock said it is also proceeding with the prosecution of the judicial review case in Kenya to protect its interest in the Migori gold asset and its 1.2 million ounce gold resource. A moratorium on grants of licenses and permits in the Ivory Coast has ended and the company expects its gold exploration applications there to pass into the final stages of permitting.
The investment in Jupiter Mines, which delisted from AIM in January 2016, was retained after the miner had a successful year with its Tshipi mine, paying a maiden dividend to Red Rock just after the recently-ended financial year. Jupiter has said it expects further distributions from the mine to be "probable".
"Elsewhere, we expect significant income growth from our oil and gold interests, and resolution of the issues that had arisen in Kenya. We will also pursue, if necessary through arbitration, the early repayment and conversion of our USD1.0 million promissory note from Colombia Milling Ltd," said Red Rock.
"We continue to review actively opportunities for development that have the potential to add shareholder value. We expect 2016-17 to be a year of significant growth for the business as the sector recovery means we begin to realise the value contained within our existing project and investment portfolio, at a time when increasing revenue flows may be expected to cover and exceed our much reduced overheads," Red Rock added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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