Keras Res Regulatory News (KRS)

29 September 2023

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

 Interim Results

Keras Resources plc (AIM: KRS) announces its half year results for the six months ending 30 June 2023.

Overview

· Loss reduced to £255,000 and revenue increased to £397,000 compared to the six-month period ended 30 June 2022 of £467,000 and £212,000 respectively;

· Sales of 2,196 tons compared to the six-month period ended 30 June of 2022 of 1,896 tons;

· 2023 mining season has commenced with processing at the Spanish Fork plant ongoing; and

· Significant interest from fertiliser blenders who have now successfully completed testwork on the high-grade Diamond Creek rock phosphate.

Graham Stacey, Keras Chief Executive Officer, commented, "It was a tough start to the year with record snowfall and an unpredictably long Utah winter, exacerbated by a late spring and widespread heavy rains and flooding throughout the Central California Valley where the majority of our customers are located. That said we believe we are in a strong position to now gear-up on the back of the marketing drive over the past year, which has resulted in significant interest and positive testwork from third party fertiliser blenders and producers. I think it is important to note that creating markets for our product, which in essence is convincing a farm to change its modus operandi, takes time but once that change is made that market has longevity. As mentioned in the Chairman's review we have had significant positive results in the testwork undertaken by third party organic fertiliser companies eager to use our rock phosphate in their blends and look forward to updating our shareholders in the near future about potential long-term offtakes or joint ventures. To that end, we will provide guidance towards the end of the fourth quarter for production and sales figures for 2024." 

The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as amended) as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (as amended). Upon the publication of this Announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

CHAIRMAN'S REVIEW

FOR THE SIX MONTHS ENDED 30 JUNE 2023

I am pleased to provide an update on our progress since the last report and to set out our outlook for the business going forward.

2023 has been a transformative year for Keras with the unbundling of our investment interest in the Nayéga manganese mine in northern Togo and the focus on becoming the pre-eminent high grade organic phosphate producer in North America.

The Diamond Creek phosphate mine

The Diamond Creek phosphate mine, which is believed to be one of the highest grade organic rock phosphate deposits in the US, comprises an opencast operation located on an 840 acre Federal Lease located approximately 80km south-east of Salt Lake City, Utah. Our focus going forward is to build the operation into the premier high-grade organic phosphate producer in the US.

Our target market is the sustainable, organic agriculture sector and we are strong advocates for the benefits of enhancing soil health and reducing the impact that synthetic fertilisers have on water resources. Our organic phosphate fertilizer products help farmers realise better crop growth without sacrificing yields, and reduces the soil degradation seen when farmers use chemically manufactured fertilisers, while at the same time reducing the carbon footprint associated with growing their crops.

Sales for the first six months of 2023 were 2,192 tons sold, compared to the first six months of 2022 of 1,896 tons. Year to date sales total 3,467 tons. The lower than expected first half sales volume were a result of an extended Utah winter and flooding throughout the Central California Valley which impacted several key clients. High producer price inflation in the US also impacted on buying patterns of organic fertilizer feedstocks as aggregators and blenders preferred to preserve cash rather than build fertilizer stocks as cost pressures impacted their own operations. 

Mining has commenced, later than initially planned as a result of both cash flow and inventory management which is a priority. Given our existing saleable inventory, mining for the 2023 season, between now and end-November will be between 2,500 and 4,000 tons dependent on offtake commitments from customers. Although sales for the first half of the year were below expectations, we are confident that these will pick up in the fourth quarter as seen during the same period in 2022. In addition to our own sales of dry crushed and milled product we have now seen a significant interest in organic fertiliser blenders who have now undertaken testwork on our high-grade phosphate rock to be incorporated in their blends. The results of this testwork have been positive and we look forward to updating shareholders once commercial terms have been agreed. As a company we believe that longer term offtakes with fertiliser blenders will form a significant proportion of our sales going forward.

Togo

In May 2023 the Company announced an agreement with the Republic of Togo (the "State") on a way forward for the Nayéga Manganese project ("Nayéga") in Northern Togo. Keras and the State agreed that Nayéga is a Togolese strategic asset and the exploitation permit will be awarded to Société Togolaise de Manganèse, a Togolese incorporated company 100% owned by the State ("STM") and Keras will no longer pursue the Nayéga exploitation permit.

The State paid Keras a cash consideration of US$1.7m (one million seven hundred thousand United States dollars) on 17 July 2023 and thereafter:

· Keras will be paid an advisory fee of 1.5% (one and a half percent) of gross revenue generated from the Nayéga mine for the provision of advisory services for 3 (three) years; and

· Keras will be paid 6.0% (six percent) of gross revenue generated from the Nayéga mine for the provision of brokerage services for the lesser of 3.5 (three and a half) years or 900,000 (nine hundred thousand) tonnes of beneficiated manganese ore produced and sold from Nayéga.

Since the agreement was signed in May, the Company and State have had positive discussions regarding the development of Nayéga. This process continues and the Company believes that the continued constructive dialogue between the Company and the State will stand the project in good stead, and we look forward to updating shareholders on the way forward. 

Financial review

The results for the 6 months ended 30 June 2023 show a loss of £255,000 compared to the six-month period ended 30 June 2022 of £467,000. The reduced loss was due to increased revenue of £397,00 (2022: £212,000) and a profit on sale of intellectual property of £184,000.

On 13 April 2023 Chris Grosso from Kershner Grosso & Co. ('Kershner Grosso'), a Saratoga Springs, New York State based Investment Advisor acquired First Uranium Resources Ltd's (CSE: URNM) (KMMIF:OTC) ('First Uranium') entire holding of 8,000,000 ordinary shares of 1 pence each in the Company ("Ordinary Shares") representing 10% of the Company's issued share capital. Subsequent to his initial investment he has increased his holding to 15.64%. The Keras Board is very pleased to have Kershner Grosso on board as a cornerstone shareholder. Kershner Grosso's investment philosophy is very much aligned with Keras's growth strategy in the US and the relationship is expected to provide access to new markets and opportunities throughout North America.

On 4 July 2023 the Company announced receipt of the US$1.7m cash consideration from the Republic of Togo and made cash payments of US$800,000, being part of the consideration for the acquisition of Falcon Isle Resources LLC Falcon Isle Holdings LLC ("Falcon Isle"), and US$240,000, being part of a severance payment to the former CEO of Falcon Isle which totalled US$340,000.

Outlook

Although it has been a tough first half of the year, the Company remains very positive about both the future of Diamond Creek and the fertiliser market macro-economic conditions that underpin its future. We are mining an essential resource that can create value, be part of the greener economy and contribute to a more sustainable future. As a mining company we remain ever conscious of our obligations and commitments in line with best environmental, social and governance ("ESG") practice and will continue to take the initiative within this area.

I would like to thank our shareholders for their ongoing support and I look forward updating all stakeholders as we continue to build Keras and Diamond Creek into the premier organic phosphate producer in the US.

Russell Lamming

Chairman

The notes are an integral part of this condensed consolidated interim financial report.

The notes are an integral part of this condensed consolidated interim financial report.

The notes are an integral part of this condensed consolidated interim financial report.

The notes are an integral part of this condensed consolidated interim financial report.

The notes are an integral part of this condensed consolidated interim financial report.

The notes are an integral part of this condensed consolidated interim financial report.

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2023

1. Reporting entity

Keras Resources plc (the "Company") is a company domiciled in England and Wales. The unaudited condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2023 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 consolidated financial statements as at and for the period ended 31 December 2022. 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 September 2023, subject to certain amendments that were delegated to and approved by a Director on 29 September 2023.

(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 audited consolidated financial statements as at and for the period ended 31 December 2022.

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 audited consolidated financial statements as at and for the period ended 31 December 2022.

4. Financial instruments

Financial risk management

The Group's financial risk management objectives and policies are consistent with those disclosed in the audited consolidated financial statements as at and for the period ended 31 December 2022.

5. Segment information

The Group considers that it operates in two distinct business areas, manganese mining in West Africa and phosphate mining in Utah, USA. These business areas form the basis of the Group's operating segments. For each segment, the Group's CEO (the chief operating decision maker) reviews internal management reports on at least a quarterly basis.

Operations ceased in the manganese segment of the Group during the period. This was a result of the sale of the intellectual property relating to this geographic region. As a result, an amount of £1,412,077 is recognised within other receivables reflecting the amounts due on the sale and an amount of £184,653 recognised as a gain on disposal within operating profit.

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 CEO. 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.

Information about reportable segments

For the six months ended 30 June 2023 (unaudited)