Keras Res Regulatory News (KRS)

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

29 May 2019

 Keras Resources plc

("Keras" or the "Company")

Interim Results

Keras Resources plc, the AIM listed mineral resource company, is pleased to announce its interim results for the six months ended 31 March 2019.

Highlights

· Primary focus is the development of the Nayega manganese project in Togo into a profitable mine

· Mine and processing plant constructed, currently configured to produce c. 75,000 tons per annum

· Proved up concept of profitable production at Nayega and efficient shipment to market

o Bulk sample of 10,000 tons of 35%+ manganese concentrate delivered to end user and testing commenced

o Assays demonstrated that the manganese content in the sample substantially exceeds the minimum requirement

· On receipt of exploitation licence, currently awaiting ministerial approval, plan to expand/improve plant to increase production to be financed in conjunction with an offtake agreement

· Intention to distribute holding of shares in Calidus Resources Limited to Keras shareholders when the ASX escrow period ends and Performance Shares and converted to ordinary shares; expected by end July 2019

· Appointed Graham Stacey as COO post period end to ensure a seamless transition into commercial production at Nayega

Chairman's Statement

Once more I am pleased to be able to report on the progress Keras has made towards becoming a profitable producer of manganese in Africa.

Manganese production / Togo

The primary focus of Keras is the development of the Nayega manganese project in Togo into a profitable mine. The period under review saw the construction of the mine and processing plant, the production of some 10,000 tons of 35%+ manganese concentrate, the successful trucking of the material to Lomé and loading onto a vessel for shipment to the end user. The concept of profitable production at Nayega and efficient shipment to market has been conclusively proved. Much credit for this success is due to our mining contractor Carriere Mines Travaux Public, with whom we have established an excellent relationship.

The plant as currently configured is capable of producing some 75,000 tons per annum, which would result in a substantial profit for Keras. However, on receipt of the exploitation licence we would expect to expand and improve the plant to add more value as well as increasing production. We intend this to be financed in conjunction with an offtake agreement, and do not expect to require further equity funding.

The key to this expansion is to obtain the exploitation licence. All the terms of the licence and the protocols associated with it have been agreed with the Government of Togo, and all that remains is the confirmation of the Council of Ministers. As part of the process we will convert our 85% owned Societe General de Mine SARL to a public company, Societe General de Mine SA, in which the Government of Togo will have a carried interest of 10%. This will reduce our current 85% ownership to 76.5%. Our extra capital requirement will be satisfied by the capitalisation of existing loans, but our minority partners will need to provide further capital, either by paying cash or by forgoing income.

The bulk sample has now been delivered to the end user, and testing has commenced. Assays have demonstrated that the manganese content in the sample substantially exceeds the minimum requirement.

As part of our commitment to mining in Togo, in 2017 we also obtained five exploration licences, covering 854.3 square kilometres of ground in Togo that cover previously discovered cobalt and nickel mineralisation. Initial exploration on the licences has been undertaken, and, when the exploitation licence for Nayega is finalised, we will seek ways to take these licences forward.

Calidus Resources Limited

Keras intends to distribute its holding of shares in Calidus Resources Limited ("Calidus") to Keras shareholders when the ASX escrow period ends, which is on 22 June 2019, and all Calidus performance shares have been converted to ordinary shares, which is expected in July 2019 following the completion of Calidus' Pre-Feasibility Study at its Warrawoona Gold Project. Keras will own 723,750,000 Calidus Shares at that time.

Having sought advice from our lawyers and our tax advisers, the Directors are currently of the opinion that the distribution is likely to be best achieved by a Capital Reduction Scheme. Before a final decision is made, we will be seeking Counsel's opinion on the taxation issues, as no tax clearance procedure is available. Such a scheme will require the approval of the Court as well as a resolution of shareholders. While the Directors expect to proceed as soon as the Performance share conversion is complete, they have recently been made aware of certain tax issues in Australia resulting from the mining tenements owned by Calidus potentially being treated as real estate property in Australia rather than business assets, and which require clearance from the Australian tax authorities before the Capital Reduction scheme can be proposed.

The Calidus Shares are included in the financial statements at fair value, which comprises the closing mid-market price on the ASX at 31 March 2019, converted to sterling at the prevailing exchange rate, less a discount for uncertainty on the Performance Shares.

Management changes

Since the end of the period Mr. Graham Stacey has been appointed Chief Operating Officer (Non-Board) to ensure a seamless transition into commercial production at Nayega. Graham was Project Manager at Nayega during the successful production of the bulk sample. He previously worked with Russell Lamming and me at Chromex Mining PLC, where he was COO and a main board director.

Financial review

The total amount receivable from the end user to cover the cost of the bulk sample was $1.95 million (£1.5 million) which covered all costs including capital expenditure, production, logistics and management costs of the project. As the ownership of the bulk sample was only transferred on the 25 April when the vessel departed Port Lomé and post period end, the financial effects are not reflected in the Interim Statements but will be recognised in the second half year. The period shows a loss before and after tax of £439,000 (2018 -£177,000). The increase reflects the increased activity in Togo, including management and overhead costs not recognised in inventories. It should be noted that the value of stock recognised at 31 March 2019 was only £718,000, and a surplus from the bulk sample will be recognised in the second half year. To cover the mismatch between the date of payments and receipts, Dave Reeves and I advanced a total of £300,000 to Keras as a short term, interest free, unsecured loan. Repayment was initially due by the end of March 2019 but has been deferred.

Cash conservation remains a priority until commercial mining produces positive cash flow, and the non-executive directors are continuing to be remunerated at some 50% of their entitlements. Should future developments require new cash, Keras is in a position to obtain this by borrowing against the security of its holding of Calidus shares or disposing of a small proportion of such shares rather than seeking new equity.

Outlook

The key to moving forward as a producer of manganese in Africa is the grant of the Nayega exploitation licence. As and when that is approved by the Togo Council of Ministers, Keras will be able to move forward rapidly without the requirement for further equity finance in the near term. Further projects are in a late stage of negotiation, but the Board is taking the conservative view that it should not enter into new commitments without certainty as to how they will be financed.

The position in which Keras currently finds itself gives me and my colleagues on the Board cause for considerable optimism.

Brian Moritz

Chairman

28 May 2019

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31 MARCH 2019

Notes to the Condensed Consolidated Interim Financial Statements

For the six months ended 31 March 2019

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 2019 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 operates as an explorer and developer.

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 2018. 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 28 May 2019.

(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 2018.

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 2018.

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 2018.

5. Segment information

The Group considers that it now operates in one distinct business areas, being that of manganese and cobalt exploration in West Africa. This 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.

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 the exploration industry.

For the six months ended 31 March 2019 (unaudited)