Red Rock Resources Regulatory News (RRR)

29 April 2022

Red Rock Resources Plc

Unaudited half-yearly results for the six months ended

 31 December 2021

Red Rock Resources plc ("Red Rock" or "the Company"), the natural resources investment, exploration, and development company with interests in gold, copper and cobalt, and other minerals, announces its half-yearly results for the six months ended 31 December 2021.

Chairman's Statement

It is only a short time since we announced the final results for the year to 30 June 2021, and since then we have released two recent updates, covering the spectrum of our activities. There is little new to add in describing our operations. After completing reverse circulation drill programmes in Kenya (for gold) and Congo (for copper and cobalt) in the period under review, we have since December been able to announce encouraging results as we received reports from the laboratories and carried out our initial assessments and analysis.

In Australia, the six months to December 2021 saw most of our licence applications granted, so that in our 50.1% owned joint venture we now hold 1,501 sq km of prospective acreage around the old gold mining centre of Ballarat. Only one significant licence now awaits grant, but it is a very important one. A diamond drill programme in Victoria, Australia began in December 2021 and with significant delays at Australian laboratories, results have only been sporadically released to date.

A new development in the period under review was the beginning of legal proceedings to enforce our rights in one of our copper-cobalt joint ventures in the Congo. A partner wrongly in our view sold our assets for $20m to the parastatal from which they came. As with our litigation in Kenya some years ago, we have so far been successful in our proceedings, but in this case we have achieved rapid results in a series of favourable judgments since year end. Awards of $4.5m plus costs have not yet been enforced by us, and we also have claims to a substantial part of the unpaid consideration of $15m, which has been retained by the purchaser, pending the legal clarification we believe we have now provided. We also believe we have a legitimate interest in the on-sale of those assets at a very large mark-up, the pursuit of which we currently contemplate. However, while the Directors are confident of a positive outcome for the Company, there remains some uncertainty over realisation and the timing. A further development has been the planned IPO in the USA of Elephant Oil Corporation, where we have just under 400,000 shares, including 35,555 subscribed for in pre-listing placements at $2.25 a share. We had hoped to have seen this happen by now and on a float there would be significant value for us. We will update shareholders as and when there is any definite news.

Elsewhere, we have applied for or acquired gold licences in Burkina Faso and Cote d'Ivoire in separate subsidiaries, and lithium licences in Zimbabwe in a local joint venture. We will progress the exploration of these assets in partnership with other parties, with a view to creating perceived value at minimal cost to us.

Since the summaries we have recently released, we have continued to follow a steady course, and these financial results reflect that. The most significant developments over the period under review and the succeeding months, from a financial point of view, were the geological work carried out, including drilling and associated costs in three countries, and the necessary costs of litigation incurred in the DRC.

If our affairs have followed a steady course, much of which was advertised in advance as we released news of our exploration plans, the world in which we operate has seen dramatic change, and some of this has impacted our share performance as that of other companies in our sector.

Before the steamship, sailors were constrained in their courses and their opportunities by the winds and the tides. The mineral exploration sector can be at times similar. Global liquidity, the gold price, and economic growth are the triad that cannot be gainsaid: when one or more is running strongly, whether that is for better or for worse, the direction of the sector is usually set.

What headwinds or following winds can we expect this year? We have in recent months seen lockdowns, recovery and growth, sanctions and war, and markets have sailed on. If we look behind the headlines, we can see one phenomenon almost worldwide: a large growth in money supply during the period of Covid, the impact of which on inflation was perhaps moderated by a restrained velocity of circulation of money. This was favourable for markets, and largely mitigated other factors.

As the impact of recovery fed through global economies, with manpower and material shortages, inflation began to rise, which some initially saw as transitional, but is now seen by many as a longer term trend. The minutes of the US Fed this month have signalled a willingness to raise interest rates aggressively to combat any persistence of inflation, held back for the moment by nervousness about the Russian invasion of Ukraine and its influence on sentiment and activity. Perhaps more significant, to quote the Financial Times of 6 April, the minutes and comments by participants showed "the central bank could rapidly reduce its $9tn balance sheet from May".

We may question whether the US Government will persist if there is a strong reaction to tightening: it did not in 2017, and the lesson to the rest of the world was if the US could not do it, they certainly could not. But if it does not, then inflation will appear undefeatable. Either way, the trend in rates looks upward, and if that affects liquidity, it is not benign for the sector.

For the gold price, higher rates are both the best of friends and the worst of enemies. If people look short-term at the gap in yields between bonds and deposits and gold, they may feel inclined to switch out of gold. That has perhaps been the mood the market has become used to. If, however, they see inflation remaining slightly longer term, they will remember how good gold is as an inflation hedge and retain it. If they begin to lose faith in fiat currencies and the ability of democratic governments to control their loss of value, they will want to hold a great deal more gold. We may be moving towards the second and third of these situations.

As for economic growth, we seemed set fair for a period of recovery around the world earlier in the year. The war in Ukraine, and the attempts of China to enforce a zero Covid policy in the face of a rapid spread of infections, are causing a decline in confidence. With free markets around the world, the capacity of the global economy to recover rapidly from setbacks and economic shocks has been proven many times, and our base assumption may be that this will be demonstrated again.

So, of the three factors, we may judge perhaps as follows: liquidity, slightly negative and slightly concerning; gold price, positive to very positive; economic growth, cautious tinged with optimism.

The Company will continue to bear in mind the risks and constraints of operating in uncertain markets. In its current form, since 2016, Red Rock has shown stability in its performance, while broadening and advancing its asset base. One point of continuity is that it has tended to outperform in periods of high liquidity and growth, and especially in strong markets for gold. Without losing the entrepreneurial spirit that allows it to seize opportunities and engage in accretive deal making, there will be a strong focus on cash generation and creating opportunities for value crystallization.

The addition of new early-stage exploration subsidiaries in West Africa and the lithium venture in Zimbabwe, and the search for cobalt and copper in the DRC, create new opportunities for partnership and value recognition outside of just gold, these being in the battery metals space.

The coming period will have great economic and political challenges, but we are confident, having considered the range of possible outcomes, that with prudence and skill we will turn this into a period of remarkable opportunity. We will, like other explorers, operate with limited financial resources but are confident in our ability to keep the business adequately funded. Meanwhile, we thank all stakeholders for their ongoing support for the Company and its ventures.

Andrew Bell 

Chairman

29 April 2022

Consolidated Statement of Financial Position  as at 31 December 2021

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Income

for the period ended 31 December 2021

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Comprehensive Income  for the period ended 31 December 2021

The accompanying notes form an integral part of these Financial Statements.

Consolidated Statement of Changes in Equity for the period ended 31 December 2021

The movements in equity during the period were as follows:

Consolidated Statement of Cash Flows for the period ended 31 December 2021

Half-Yearly Report Notes

for the period ended 31 December 2021

As at 31 December 2021, 30 June 2021 and 31 December 2020 the Company had one or more operating subsidiaries and has therefore prepared full and interim consolidated Financial Statements respectively.

The Company will report again for the year ending 30 June 2022.

The financial information contained in this half yearly report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the year ended 30 June 2021 has been extracted from 

the statutory accounts for the Group for that year. Statutory accounts for the year ended 30 June 2021, upon which the auditors gave an 

unqualified audit report, which did not contain a statement under Section 498(2) or (3) of the Companies Act 2006, have been filed with 

the Registrar of Companies.

4 Administrative Expenses

Included in the above admin costs for the year are £174,000 in costs related to the administration of subsidiary project undertakings.

Half-Yearly Report Notes

for the period ended 31 December 2021, continued

5 Project Development Expenses

Project development expenses include costs, incurred during the assessment and due diligence phases of a project, when material uncertainties exist regarding whether the project meets the Company's investment and development criteria and whether as a result the project will be advanced further.

6 Finance Income/(Expenses), Net

Half-Yearly Report Notes

for the period ended 31 December 2021, continued

Half-Yearly Report Notes

for the period ended 31 December 2021, continued

Reconciliation of Liabilities Arising from Financing Activities

13  Subsequent Events

VUP Project

On 6 January 2022, the Company announced that it had obtained a court order from the Commercial Court in Lubumbashi for the payment of the principal amount of $2.5m, relating to the appropriation of the Group's interests in the VUP joint venture. On 19 January 2022, the Court issued a further award of $2m in damages to the Group, with costs. The matter currently remains in the enforcement phase.

As at the reporting date, the Group held £0.7m in "Investments in joint ventures" and £0.4m in "Exploration assets," associated with the VUP project. The Directors believe the carrying value of these assets are supported by the awards of principal and damages post reporting date and that recognition of the disposal of the asset and corresponding proceeds will take place at the conclusion of the legal process in the courts.

Burkina Faso Projects

On 6 January 2022, the Company announced that it had acquired two gold and base metal exploration projects in Burkina Faso via its 100% owned subsidiary Faso Greenstone SARLU (FGS). FGS acquired a 100% interest in the Boulon licence area and an 80% interest in the Bilbale licence area, with a work program on both licences for 2022 to include prospect mapping and auger drilling.

Kenyan Drilling Results

On 7 January 2022, the Company announced the results of its first batch of sample drilling in the Mikei gold project in Kenya, providing encouraging indications of gold formations in the licence area. Further results of the drilling program were announced on 22 March 2022. The Group remains in the process of planning the next stage of drilling activity on this licence area, following analysis of these results.

Copper and Cobalt drilling, DRC

On 15 February 2022, the Company announced the results of an early-stage drilling program at the Luanshimba copper/cobalt project in DRC, in which the Group holds an interest via its 80% subsidiary Red Rock Galaxy SA. The results of the drilling program were encouraging with various copper and cobalt structures having been intersected. Additional drilling is planned to take place to further delineate the structures and to ultimately pursue a formal resource.

Zimbabwe Lithium Project

On 31 March 2022, the Company announced the establishment of its 75% owned subsidiary, African Lithium Resources Pvt Ltd (ALR), and its acquisition of Lithium exploration licences and licence applications in Zimbabwe. Early sample results have been encouraging with the Group expecting to announce more comprehensive analysis and results in the near future.

Australian Gold Drilling

On 12 April 2022, the Company announced that the first phase of drilling on its Australian gold project, held via its New Ballarat Gold Corporation joint venture. Initial results confirmed the intersection of two gold bearing structures, with full analysis of the drilling results and samples currently taking place and to subsequently be reported in more detail.