2 Dec 2011 07:00
REGENCY MINES PLC
("Regency" or the "Company")
Final Results
for the year ended 30 June 2011
2 December 2011
Chairman's statement
Dear Shareholders,
In reporting the financial results for the Company's seventh year of operations I am once again able to report a substantial improvement in outcome. The year was also one of strategic advance where we were able to utilise a period of price strength in the Autumn of 2010 to give fresh impetus to our Mambare lateritic nickel joint venture, at the same time becoming a significant shareholder of Direct Nickel Pty Ltd ("Direct Nickel"), our joint venture partner.
Towards the end of the year under review we started a programme of exploration at Mambare, which we expect to lead to the declaration of a Mineral Resource.
Financial Discussion
Pre-tax profit rose from £602,085 in the year to 30th June 2010 to £1,825,679 in the year to 30th June 2011. The main factor in this rise was a rise in the share of profits of our associate company Red Rock Resources plc ("Red Rock") and a gain on dilution of our interest in that associate. Earnings per share rose from 0.13 pence per share to 0.40 pence per share.
Total shareholders' equity rose from £3,943,705 to £14,138,048 over the same period, an increase funded primarily by the issue of new shares at an average price of 3.662 pence per share and by retained earnings. Available for sale financial assets, mainly comprising shares in Direct Nickel and in Oracle Coalfields plc, rose in value from £412,584 to £6,113,440 while investments in associates, mainly comprising shares in Red Rock, rose in value from £1,414,096 to £5,495,296.
The company saw its traded price rise from 1.00 pence per share at 1 July 2010 to 3.16 pence per share at 30 June 2011.
Strategy
Our strategy remains one of developing a base metal and industrial commodity company. It is as easy to manage a project with the potential to develop into a world class asset as to manage a small one, so we prefer to concentrate on a few projects with the potential for scale and incubate them if necessary for years, rather than dissipate our energies. The potential risk of so concentrated a portfolio is offset by maintaining as a secondary focus a transactional and mining investment business that can not only generate profits and act as a reservoir of potential liquidity, but enables us sometimes to hold at arm's length interests in assets where exploration can be financed without direct recourse to Regency Mines shareholders.
This strategy has been pursued since the flotation of the company on AIM in 2005 and its value has been proved most recently in the year under review, when the contribution of the Red Rock holding to the profits and assets figures has enabled the company to hold confidently to its course at the Mambare project in a challenging environment.
This project, a lateritic nickel-cobalt deposit in Papua New Guinea, is one we identified as having the potential scale we look for. The challenges have been that when we took it on it was little explored, that the nickel price has not been strong and that recent investor sentiment towards nickel has been markedly less positive than that towards the ferrous metals, coal or copper. This last challenge carried its own opportunity and at the end of calendar year 2010 we took a Au$ 6,000,000 stake in our partners in Mambare, Direct Nickel, making us a significant shareholder. Following a further subscription since the year end our shareholding in Direct Nickel currently stands on a fully diluted basis at 7.81%.
This subscription, which strengthens the relationship between the two parties, enabled the joint venture to make firm plans for a drill campaign at Mambare in 2011. Direct Nickel has also advanced construction of the pilot plant to demonstrate its proprietary processing technology, and has obtained approval for the reverse takeover and renaming as Direct Nickel Ltd of a suspended company listed on the Australian Stock Exchange.
Our original focus was on nickel and copper in our owned exploration projects. We have not yet found copper prospects with the desired scale and further investment during the year under review, both in our nickel project at Mambare and in nickel treatment technology through Direct Nickel has weighted us more heavily towards nickel. We have looked for opportunities for counterbalancing investment in other areas that might be consistent with our strategy.
Our focus on projects with potential scale, combined with the opportunity to diversify into coal, and a low cost of entry caused us to make an investment in 11.02% of the equity capital of Oracle Coalfields Ltd, that has since been admitted to AIM, where we are currently showing a significant profit.
Operations
The joint venture exploration programme at the Mambare lateritic nickel project in Papua New Guinea began with site preparation of the three areas planned for drilling, followed by a new ground penetrating radar programme and then by a drill programme the aims of which included the production of an Inferred Mineral Resource under the JORC standard. Drilling got under way in July 2011, but we were only able to reach full operation with all drills operational once sufficient personnel had received work visas and arrived on site, so that the programme is not expected to end until Christmas. Results so far have been encouraging, with the ground penetrating radar encountering some deep laterite profiles, drill hole lengths on average significantly higher than in the 2008 drill season at 23.8 metres, and some of the grades encountered higher than any encountered in 2008. Sampling of wet grades with a handheld x-ray fluorescence spectrometer has detected grades over 2% nickel in all three areas being drilled, including 3.36% nickel in one sample interval, so that although we must wait for laboratory results for confirmation we expect the drill programme to validate the high potential of the Mambare deposit.
In Australia we carried out 2,753 line/km of Versatile Time-Domain Electromagnetic (VTEM) geophysical survey in four areas of interest, three in Western Australia for nickel, copper, and graphite, and one in Queensland for copper, following up earlier drilling and ground exploration. Drill targets were identified in each area and analysis will continue, but a decision was made to give priority to the Mambare drill programme and the Direct Nickel pilot plant programme up to the end of 2011.
Sustainable Development
Papua New Guinea is an unspoilt and biologically diverse environment. We have always acted carefully to ensure that our exploration has minimal impacts and that we restore the natural environment, or leave it in a position quickly to restore itself though plant growth, at the end of each exploration phase.
We will continue to act with consideration for our impacts on our host communities and their environment.
Our liaison with the local clans, of two of which I am proud to be an honorary chief, and their communities is close and we walk around with the local leaders and landholders before cutting any trackway or path, discussing compensation and ownership for each likely disturbance including every tree cut. Since the land in the licence area is held under customary tribal ownership the rights of an individual are often unclear, and there is never a time when there is not some argument or dissatisfaction; these problems arise between the members of the tribe or village, or between them and people who have married into the tribe or settled on their land, but they impact on us. The task of negotiation is never over, and it is necessary to give constant attention to the cultivation of trust and easy relationships so that problems can be discussed and resolved as they arise.
As part of our community development programme we have given a range of assistance to local communities, including through our paramedic and through schoolroom construction. This is an area of activity we intend to develop further in the coming year.
Our joint venture local company in Papua New Guinea has applied for licences over areas of geothermal potential and we expect these to proceed to grant shortly as the consultation process has been successful. Should our exploration of these areas be successful, we hope that any nickel-cobalt laterite project we develop will use renewable energy sources and provide sustainable energy to Oro province.
Risk
Whenever we meet as a Board or in operating committees, the first item of discussion is always a report on accidents and incidents, reflecting our determination to inculcate a culture of safety awareness at every level. Exploration inevitably takes us to areas, and puts us in situations, where the risks of harm are increased and the consequences are harder to control.
We are always trying to identify and address areas of future risk and the two of these that were given priority during the year were health and safety and ensuring systems were in place to comply with the new Bribery Act in the UK.
We recognise that the increase in the scale of our operations has the potential to increase risk at a geometric rate and this has led to the imposition of a rigorous health and safety culture across the group. The need to ensure buy-in to this by all staff is recognised by our joint venture partner and is reflected in a commitment of management time and effort in order to reinforce the message at all levels. This has included the imposition of operating time restrictions on our drilling contractors.
We aim for a zero accident policy and effective training in safety consciousness will be a continuing priority.
An anti-bribery and whistleblowing policy was put in place and communicated throughout the group. Ensuring systems to maintain compliance and make contractors aware of and committed to our policies is a requirement under the new Bribery Act and we will therefore take further measures to communicate and monitor compliance with our policies beyond the group in our countries of operation.
Personnel
The Company's key employees are highly qualified professionals and their professional and personal development is both a priority and a benefit to the Company. We have put in place a mentoring and consultation system to make ourselves better employers and are introducing a share incentive plan (SIP) to ensure all staff continue to identify with the future success of the Company.
We are grateful for the contribution our staff have made to the business over the year, and for their loyalty, good humour and their commitment.
Outlook
The continuing process of development and urbanisation in the Asian and South American economies and notably the BRIC countries (Brazil, Russia, India and China), are likely to lead to steady annual increases in the demand for stainless steel, to the manufacture of which two-thirds of nickel production is devoted. The long-term prospects for our key commodity remain strong.
We consider that our Mambare nickel asset is of a scale and grade that make it potentially world-class. We believe that the Direct Nickel processing technology for lateritic nickels is a disruptive technology that will change the nickel mining industry. We intend to be leaders in that change.
We expect to see our drilling at Mambare lead to the definition of a Mineral Resource under the JORC standard early in 2012 and to see Direct Nickel's pilot plant operate successfully and demonstrate that technology on the same timeframe.
These key developments, and the expected start of trading in Direct Nickel Ltd shares on the Australian Stock Exchange, will, we hope, underpin a year of expected strong progress. We expect to look back in a year's time and describe this year as one that was transformative in the history of the company.
Our aim is to build on the success of our associate Red Rock Resources plc in the iron ore field and the company's presence in nickel and nickel technology to build a strong and diversified mineral group.
Andrew Bell
Executive Chairman
1 December 2011
Results and dividends
Regency and its subsidiaries made an after tax profit of £2,142,986 (2010: profit £515,807).
The Directors do not recommend the payment of a dividend.
The following financial statements are extracted from the audited financial statements which were approved by the Board of Directors and authorised for issue on 1st December 2011.
For further information contact:
Andrew Bell | 0207 402 4580 or 07766 474849
| Regency Mines plc | Chairman
|
Sandra Spencer | 0207 402 4580 or 07757 660 798
| Regency Mines plc | Public and Investor Relations |
Peter Trevelyan-Clark/ Ben Jeynes
| 020 7444 0800 | Religare Capital Markets | Nominated Adviser |
Nick Emerson | 01483 413500 | Simple Investments Ltd | Broker |
Updates on the Company's activities are regularly posted on its website, www.regency-mines.com.
Consolidated statement of financial position
as at 30 June 2011
30 June 2011 | 30 June 2010 | |||
£ | £ | |||
ASSETS Non current assets Property, plant and equipment Investments in associates Goodwill Available for sale financial assets Exploration assets |
169,211 5,495,296 54,034 6,113,440 3,119,718 |
28,181 1,414,096 47,273 412,584 2,048,408 | ||
Total non current assets | 14,951,699 | 3,950,542 | ||
Current assets Cash and cash equivalents Trade and other receivables |
|
1,165,912 1,035,885 |
30,828 303,788 | |
Total current assets | 2,201,797 | 334,616 | ||
TOTAL ASSETS | 17,153,496 | 4,285,158 |
EQUITY AND LIABILITIES Equity attributable to owners of the parent Called up share capital Share premium account Share based payment reserve Other reserves Retained earnings |
611,952 11,248,428 172,744 1,437,564 667,360 |
427,882 4,755,071 174,915 63,634 (1,477,797) | ||
Total equity LIABILITIES Current liabilities Trade and other payables Short-term borrowings | 14,138,048
826,269 2,181,229 | 3,943,705
341,453 - | ||
Non current liabilities | ||||
Deferred tax liabilities | 7,950 | - | ||
TOTAL EQUITY AND LIABILITIES | 17,153,496 | 4,285,158 |
Consolidated income statement
for the year ended 30 June 2011
Year to 30 June 2011 | Year to 30 June 2010 | ||||
£
| £ | ||||
Revenue - Management services | 166,988
| 42,012
| |||
Total revenue | 166,988 | 42,012 | |||
Gain on dilution of interest in associate Impairment of investment in associate Impairment of available for sale financial asset Exploration expenses |
1,028,422 - (76,199) (412,682) |
182,857 (466) - (53,432) | |||
Administrative expenses (net) | (1,014,704) | (495,161) | |||
Share of profits of associates (net of tax) Finance costs | 2,174,091 (40,237) | 930,809 (4,534) | |||
Profit for the year before taxation Tax credit/(charge) | 1,825,679 317,307 | 602,085 (86,278) | |||
Profit for the year attributable to owners of the parent | 2,142,986 | 515,807 | |||
Earnings per share attributable to owners of the parent Earnings per share - basic Earnings per share - diluted |
0.40 pence 0.40 pence |
0.13 pence 0.13 pence | |||
Consolidated statement of comprehensive income
for the year ended 30 June 2011
Year to 30 June 2011 | Year to 30 June 2010 | |||
£ | £ | |||
Profit for the year | 2,142,986 | 515,807 | ||
Surplus/(deficit) on revaluation of available for sale financial assets Impairment of available for sale financial assets Deferred tax on available for sale financial assets Share of other comprehensive income/(expense) of associates | 734,053 - (161,799) 628,687 | (36,888) (25,755) 68,201 (504,714) | ||
Deferred tax on losses of associates | (163,458) | 18,077 | ||
Unrealised foreign currency gain | 336,447 | 55,757 | ||
Total comprehensive income for the year attributable to owners of the parent | 3,516,916 | 90,485 | ||
Consolidated statement of changes in equity
for the year ended 30 June 2011
The movements in equity during the period were as follows: |
| ||||||
| Share capital | Share premium account | Retained earnings | Share based payment reserve | Other reserves | Total equity | |
| £ | £ | £ | £ | £ | £ | ||
As at 30 June 2009 | 352,808 | 3,775,578 | (1,996,189) | 117,748 | 488,956 | 2,738,901 | |
Changes in equity for 2010 | |||||||
Profit for the year | - | - | 515,807 | - | - | 515,807 | |
Other comprehensive expense for the year | - | - | - | - | (425,322) | (425,322) | |
Transactions with owners Issue of shares |
75,074 |
1,097,541 |
- |
- |
- |
1,172,615 | |
Share issue and fundraising costs |
- |
(118,048) |
- |
- |
- |
(118,048) | |
Share based payment charge | - | - | - | 59,752 | - | 59,752 | |
Share-based payment transfer | - | - | 2,585 | (2,585) | - | - | |
Total transactions with owners | 75,074 | 979,493 | 2,585 | 57,167 | - | 1,114,319 | |
| As at 30 June 2010 | 427,882 | 4,755,071 | (1,477,797) | 174,915 | 63,634 | 3,943,705 | |
Changes in equity for 2011 | |||||||
Profit for the year | - | - | 2,142,986 | - | - | 2,142,986 | |
Other comprehensive income for the year | - | - | - | - | 1,373,930 | 1,373,930 | |
Transactions with owners Issue of shares | 184,070 |
6,556,683 | - | - |
- |
6,740,753 | |
Share issue and fundraising costs | - |
(63,326) | - | - |
- |
(63,326) | |
Share-based payment transfer | - | - | 2,171 | (2,171) |
- | - | |
Total transactions with owners | 184,070 | 6,493,357 | 2,171 | (2,171) | - | 6,677,427 | |
| As at 30 June 2011 | 611,952 | 11,248,428 | 667,360 | 172,744 | 1,437,564 | 14,138,048 | |
| Available for sale financial asset reserve | Associate investments reserve | Foreign currency translation reserve | Consolidation Reserve | Total other reserves | ||
| £ | £ | £ | £ | £ | ||
| As at 30 June 2009 | (217,072) | 437,763 | 115,344 | 152,921 | 488,956 | |
Changes in equity for 2010 | ||||||
Profit for the year | - | - | - | - | - | |
Other comprehensive income/(expense) for the year | 5,558 | (486,637) | 55,757 | - | (425,322) | |
Transactions with owners | ||||||
| Share-based payments | - | - | - | - | - | |
| As at 30 June 2010 | (211,514) | (48,874) | 171,101 | 152,921 | 63,634 | |
Changes in equity for 2011 | ||||||
Profit for the year | - | - | - | - | - | |
Other comprehensive income for the year | 572,254 | 465,229 | 336,447 | - | 1,373,930 | |
Transactions with owners | ||||||
| Share-based payments | - | - | - | - | - | |
| As at 30 June 2011 | 360,740 | 416,355 | 507,548 | 152,921 | 1,437,564 |
Consolidated statement of cash flows
for the year ended 30 June 2011
Year to 30 June 2011 |
Year to 30 June 2010 | |||
£ | £ | |||
Cash flows from operating activities | ||||
Profit before taxation Increase in receivables Increase in payables Depreciation Exploration property costs Impairment of exploration properties Share based payments Currency (gains)/losses Finance cost (net) Share of profits of associate Impairment of associate investment Impairment of available for sale financial assets Exceptional gains on dilution of interest in associate
| 1,825,679 (732,097) 484,816 28,784 - 319,056 - (67,523) 40,237 (2,174,091) - 76,199 (1,028,422) | 602,085 (136,626) 115,298 11,691 53,432 - 59,752 9,555 4,534 (930,809) 466
(182,857) | ||
Net cash outflow from operations
| (1,227,362) | (393,479) | ||
Cash flows from investing activities Interest received Interest paid Purchase of associate company investments Purchase of fixed assets Purchase of available for sale financial assets Exploration costs
|
10,689 (50,926) (250,000) (159,616) (5,043,002) (1,003,355) |
31 (4,565) (80,075) (29,007) (255,642) (464,561) | ||
Net cash outflow from investing activities | (6,496,210) | (833,819) | ||
Cash inflows from financing activities Proceeds from issue of shares Transaction costs of issue of shares Proceeds of new borrowings
|
6,740,753 (63,326) 2,181,229 |
1,172,615 (118,048) -
| ||
Net cash inflow from financing activities
| 8,858,656 | 1,054,567 | ||
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of period
|
1,135,084
30,828 |
(172,731)
203,559 | ||
Cash and cash equivalents at end of period
| 1,165,912 | 30,828 |
Notes
1 | Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as endorsed by the EU ("IFRS") and the requirements of the Companies Act applicable to companies reporting under IFRS.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below.
Company Statement of Comprehensive Income
As permitted by Section 408 Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The Company's loss for the financial year was £1,103,424 (2010: £464,302). The Company's other comprehensive expense for the financial year was £572,254 (2010: £62,642).
Amendments to published standards effective for the year ended 30 June 2011
The following standards have been adopted during the year: ·; IAS 1 (Revised) "Presentation of Financial Statements"; ·; IAS 7 (Revised) "Statement of Cash Flows"; ·; IAS 17 (Revised) " Leases"; ·; IAS 23 "Borrowing Costs"; ·; IAS 27 (Revised) "Consolidated and Separate Financial Statements"; ·; IAS 32 (Revised) "Financial Instruments: Presentation"; ·; IAS 36 (Revised) "Impairment of Assets"; ·; IAS 39 (Revised) " Financial Instruments: Measurement";
Although the adoption of these amendments has had no impact on the financial position and performance of the Group, additional disclosures have been provided to comply with the revised standards.
Standards adopted early by the Group The Group has not adopted any standards or interpretations early in either the current or the preceding financial year.
|
Adoption of standards and interpretations As at the date of authorisation of these financial statements, there were Standards and Interpretations in issue but that are not yet effective and have not been applied in these financial statements, as listed below: Standards, amendments and interpretations in issue but not effective ·; IFRS 9 "Financial Instruments: Classification and Measurement"; ·; IFRS 10 "Consolidated Financial Statements"; ·; IFRS 11 "Joint Arrangements"; ·; IFRS 12 "Disclosure of Interests in Other Entities"; ·; IFRS 13 "Fair Value Measurement"; ·; IAS 12 "Income Taxes (amendment)"; ·; IAS 24 "Related Party Disclosures (revised)"; ·; IAS 28 "Investments in Associates (revised)"; and
| |
The Directors do not anticipate that the adoption of these standards and interpretations in future periods could have a material effect on the financial position or performance of the Group and Company, other than the introduction of IFRS 10 which could affect the financial position and performance and IFRS 12 which is likely to increase the level of disclosure required in respect of the Group's investments.
IFRS 10 is a new standard which establishes principles for the presentation and preparation of consolidated financial statements. As a result of its publication, the Directors will be required to consider the application of the revised definition of control to determine whether additional entities will need to be consolidated and whether consolidation is still appropriate for those that currently are.
The new definition of control will require the directors to consider whether the Company has:
a) power over the investee b) exposure, or rights, to variable returns from involvement with the investee; and c) the ability to use power over the investee to affect the amount of the investor's returns.
The financial effect of such changes on the Group has not yet been reliably estimated. However, it is widely expected, irrespective of industry sector and without specific reference to the Group that the adoption of IFRS 10 is likely to result in more entities being consolidated.
|
2
Earnings per share | 2011 £ | 2010 £ | ||
The basic earnings per share is derived by dividing the profit for the year attributable to ordinary shareholders by the weighted average number of shares in issue. |
| |||
Profit for the period after taxation | 2,142,986 | 515,807 | ||
Weighted average number of Ordinary shares of £0.001 in issue | 531,371,469 | 392,059,622 | ||
Earnings per share - basic | 0.40 pence | 0.13 pence | ||
Weighted average number of Ordinary shares of £0.001 in issue inclusive of outstanding options | 536,128,145 | 392,059,622 | ||
Earnings per share - fully diluted | 0.40 pence | 0.13 pence | ||
Earnings per share, continued | ||||
The weighted average number of shares issued for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows: | ||||
2011
| 2010
| |||
Earnings per share denominator | 531,371,469 | 392,059,622 | ||
Weighted average number of exercisable share options | 4,756,676 | - | ||
Diluted earnings per share denominator | 536,128,145 | 392,059,622 | ||
In accordance with IAS 33, the diluted earnings per share denominator takes into account the difference between the average market price of ordinary shares in the year and the weighted average exercise price of the outstanding options. As such the diluted earnings per share denominator for 2010 has been recalculated, with the effect that none of the options in 2010 were considered dilutive.
3 The financial information set out above does not constitute the Company's financial statements for the years ended 30 June 2011 or 2010. The auditors have reported on the 2011 financial statements; their report was unqualified and contained no statement under sections 498(2) or (3) of the Companies Act 2006. The financial statements for 2011 will be delivered to the Registrar of Companies by 31 December 2011.
4 A copy of the Company's annual report and financial statements for 2011 will be made available on the Company's website www.regency-mines.com by 5 December 2011 and at the Annual General Meeting on 30 December 2011; in addition, it will be mailed to Shareholders by 7 December 2011.