Keras Res Regulatory News (KRS)

Keras Resources plc / Index: AIM / Epic: KRS / Sector: Mining

28 June 2016

Keras Resources plc ('Keras' or 'the Company' or 'the Group')

Interim Results

Keras Resources plc, the Australian gold mining company, is pleased to announce its interim results for the six months ended 31 March 2016.

Highlights:

· Rapid transformation into an Australian based gold miner with first cash payment received post period end

· Targeting production of 30,000 ounces of gold per annum from mid-2017

· Acquisition of four tribute agreements in total, of which three were secured during the period, bringing total tribute gold inventory to over 500,000 ounces

· Board bolstered through appointment of Peter Hepburn-Brown, who has significant regional knowledge

· Strengthened balance sheet

o Loan note fundraising completed raising £564,000 in February 2016

o Post period end equity placement completed to raise £1,250,000 (before expenses)

· Continued development of higher grade assets and assessment of value accretive opportunities

Chairman's Statement

I am delighted that Keras can now call itself a producing gold mining company following the recent receipt of our first payment. Tribute agreements provide us with the excellent opportunity to rapidly generate cash flow at low cost. Since identifying this niche opportunity in a proven Australian gold region, we have signed a total of four tribute agreements and have become AIM's only listed Australian gold mining company. We aim to deliver 20,000 - 30,000 ounces of gold once steady state operations are reached.

The refinement of our strategy and our recent acquisitions, which also prompted a change in name, is particularly timely given the current positive pricing environment for gold. The 16% increase in the A$ gold price experienced in Q1 2016 represents the strongest quarterly gold price performance in 30 years. Combined with the current environment in the Australian mining sector, which has led to major cost decreases, margins for gold mining operations have strengthened significantly.

In November 2015, Keras acquired its first tribute agreement, the Grants Patch Gold Tribute Project in the prolific Australian gold region surrounding Kalgoorlie by the acquisition of a private Australian company, Chaffers Mining. The tribute agreement with Paddington Gold Pty Ltd ('PGPL'), a subsidiary of Norton Gold Fields Ltd ('Norton'), provides an entitlement to mine some of their gold deposits for processing at their Paddington Mill, located 25 km away, in return for a 22% royalty as well as a payment to cover mining and processing costs. This land covers historically reported resources of 5,741,155t @ 1.97g/t for 363,599 ounces of gold which is comprised of both shallow laterite deposits and the high grade underground Prince of Wales Mine.

We were particularly attracted to this agreement due to the limited working capital required to commence production. This has been made possible by structuring our strategy to focus firstly on mining the shallow laterite deposits which will generate cash flow which can then be used to part fund development of the underground mine into production.

First gold ore haulage was delivered to the Paddington Mill, on 8 April 2016, signalling our official transformation into AIM's only Australian gold mining company and setting the clock ticking for our first cash payment which was received in May 2016.

These operational activities were conducted in tandem with the signing of three further tribute agreements in the Kalgoorlie region, which increased our gold tribute inventory to over 500,000 ounces. The first was a profit share agreement with Kalgoorlie Mining Associates to mine the Wycheproof Gold Deposit, announced on 23 February 2016, which is a high-grade, shallow deposit located on existing mining leases, located in Western Australia.

The second was a binding profit share agreement with KalNorth Gold Mines Limited ('KalNorth') over the Lindsay's Project located 65km NNE of Kalgoorlie and about 40km E of the Grants Patch Gold Tribute Project, where the Company has now commenced mining. Keras recently executed an exclusive and irrevocable option to mine the Lindsay's Project in consideration for a share of the net revenues. Formal documentation is now being finalised to allow mining to commence in the near future.

The Lindsay's Project incorporates total open pit and underground resources of 215,100 ounces Au at a grade of 1.7g/t Au of which 77% falls in the Indicated Resource category. This includes the high-grade Parrot Feathers deposit (likely to be an underground operation) which comprises a resource of 401,000t at a grade of 4.2g/t Au containing 54,000 ounces Au and which holds significant exploration potential down dip.

Post period end, an additional tribute agreement from PGPL to mine the Royal Standard North lease area ('Royal Standard'), located in the Mount Pleasant region located approximately 20km of the Grants Patch lease area where the Company is currently mining the Accord and Anomaly 22 deposits. The project is expected to deliver 25,000 to 50,000 tonnes of ore at approximately 2 g/t to be defined for mining. The Company completed a successful preliminary drilling campaign including 2m at 1.88g/t, 10m at 2.2g/t and 4m at 4.44g/t.

In addition to the tribute acquisitions, Keras entered into a pre-payment agreement in May 2016 with Norton on all gold ore delivered to the Paddington Mill. The agreement will expedite 80% of the payment on gold processed at the Paddington mill and reduce the Company's working capital requirements. Further information can be found in the announcement of 23 May 2016. 

In terms of our development timeline, with production underway now at Grants Patch our goal of 30,000 ounces per annum from mid-2017 is well on track. We have recently raised £1,250,000 (before expenses) to allow for the accelerated development of the Prince of Wales and Lindsay's undergrounds. These operations will come on line in 2017 and will provide us with a steady base-load production rate of 30,000 ounces per annum.

African Portfolio

Our Nayega Manganese Project in Togo still remains an important asset within our portfolio, although until the mining licence is received, we are not able to move this forward. However, we continue to actively engage with the Togolese Ministry of Mines to progress our application and further announcements regarding the status of our application will be made as soon as practicable.

Keras holds an 85% interest in the Nayega manganese project which covers a 92,390 hectares area in northern Togo, held through Societe Generale des Mines SARL. The project is 30km from a main road which has direct access to the regionally important deepwater port of Lome 600km away and has >800,000t per annum back loading capabilities.

In terms of our iron ore portfolio, we are assessing various options and in discussions with parties regarding their future.

Corporate Review

In tandem with our first gold tribute acquisition, we were pleased to appoint Peter Hepburn-Brown as a non-executive director of the Company and Peter George to Chief Operating Officer in November 2015.

Financial Review

Keras has recorded a total comprehensive loss for the 6 months ended 31 March 2016 of £750,000. Keras only commenced mining towards the end of the March 2016 and consequently no revenue has been recorded during the period. The loss largely recognises Keras's status as a developing company with the majority of expenditure costs expensed during the period. Finance costs of £416,000 during the period include costs associated with loan note fundraising in February 2016 and £265,000 associated with the recognition of a liability to YA Global in relation to the closure of the YA Global Position. This was previously announced to the market on 17 February 2016 and is also disclosed in note 12 to the accounts.

In November 2015 Keras announced the acquisition of 100% of the share capital Chaffers Mining Pty Ltd, a private Australian company that has a 5-year Tribute Agreement with Paddington Gold Pty Ltd. The gross acquisition consideration was £930,000 payable as share consideration in Keras Resources Plc. This share consideration is issued in two tranches being £465,000 payable upon closing of the acquisition in November 2015 and a further £465,000 of shares to be issued once 10,000 ounces of gold have been mined from the Tribute Agreement. This second tranche has been recognised as a deferred liability to be settled via issue of shares in Keras when the production target has been met.

In February 2016 Keras raised £564,000 by way of the issue of an unsecured loan note, which includes an 8% redemption premium and a 10% coupon payable upfront. Additionally, the Company issued 112.8 million warrants to subscribe for new ordinary shares in the Company. The warrants are exercisable at 0.5p and are valid for two years from the date of issue. Our Managing Director Dave Reeves and our new Non-Executive Director Peter Hepburn-Brown are subscribed for £194,445 and £50,000 nominal value Notes respectively. In March 2016 14,000,000 warrants were exercised raising £70,000 for the Company and post period end a further 17,752,933 warrants were exercised.

Post period end, Keras raised £1,250,000 before expenses by way of the issue of new shares to provide the capital required to commence production at the Prince of Wales Underground mine and the Lindsay's Mine. Further information can be found in the announcement of 15 April 2016.

Outlook

This time last year we had an African iron ore and manganese portfolio that, while prospective in terms of asset-class and location, were stymied by the depressed iron ore price and licence applications. Now, we are a cash generative Australian gold miner with a strong and diverse gold inventory in a proven gold mining region. Our corporate profile is de-risked and with further cash flow forthcoming, we will be in an excellent position to build our portfolio of both tribute agreements and company-owned projects in line with our stated strategy.

I look forward to the coming months, during which we aim to fast-track production from the Prince of Wales underground mine at Grants Patch, and the other deposits held under tribute in order to make the most of the timescale defined under each agreement. We are confident that these activities, particularly set against a supportive gold price backdrop, will ensure the excellent momentum behind the business that we have established in early 2016 will be maintained.

I would like to thank our hard working team, our shareholders and our advisers for their efforts and support during the period and I look forward to addressing the market over the coming months as a gold miner with a strengthened balance sheet.

Brian Moritz

Chairman

28 June 2016

For further information, please visit www.kerasplc.com, follow us on Twitter @kerasplc or contact the following:

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 MARCH 2016

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2016

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31 MARCH 2015

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31 MARCH 2016

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2016

1. Reporting entity

Keras Resources plc (the "Company") is a company domiciled in England and Wales. The condensed consolidated interim financial statements of the Company as at and for the six months ended 31 March 2016 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities. The Group currently transitioned during the period from a exploration & development company into gold production towards the end of March 2016.

2. Basis of preparation

(a) Statement of compliance

This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial performance and position of the Group since the last annual consolidated financial statements as at and for the year ended 30 September 2015. This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards.

This condensed consolidated interim financial report was approved by the Board of Directors on 27 June 2016.

(b) Judgements and estimates

Preparing the interim financial report requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing this condensed consolidated interim financial report, significant judgements made by Management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 30 September 2015.

3. Significant accounting policies

The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 30 September 2015.

4. Financial instruments

Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 30 September 2015.

5. Segment information

During the reporting period the Group operated in three distinct business areas, being that of iron ore exploration, that of manganese exploration and that of gold exploration and extraction. These business areas form the basis of the Group's operating segments. For each segment, the Group's Managing Director (the chief operating decision maker) reviews internal management reports on at least a quarterly basis. It is expected that in the next reporting period this segment reporting layout will change with the Group's greater emphasis on the gold production in Australia.

Other operations relate to the group's administrative functions conducted at its head office and by its intermediate holding company together with consolidation adjustments.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Group's Managing Director. Segment results are used to measure performance as management believes such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within these industries.

For the six months ended 31 March 2016 (unaudited)

For the six months ended 31 March 2016 (unaudited)