Sovereign Mines of Africa Regulatory News (SMA)

 Sovereign Mines of Africa PLC

("SMA" or "the Company")

Sovereign Mines of Africa PLC (AIM:SML), the gold mining exploration Company with properties in the Republic of Guinea in West Africa, today announces its audited results for the year ended 31 December 2016.

Enquiries:

SOVEREIGN MINES OF AFRICA PLC

Giles Clarke - Chairman c/o Billy Clegg +44 20 3757 4983

SHORE CAPITAL - NOMINATED ADVISER & BROKER

Toby Gibbs/Bidhi Bhoma - Corporate Finance

Jerry Keen - Corporate Broking +44 207 408 4090

CAMARCO

Billy Clegg / Gordon Poole +44 20 3757 4983

SOVEREIGN MINES OF AFRICA PLC

CHAIRMAN'S STATEMENT

2016 was a year of transition for the Company as the Board implemented a strategic review of the Company's assets and activities. The review included changes to the Board's composition as well as a decision not to continue funding the development of its Guinean assets and resulted, post-period, in the successful sale of its 75% interest in the Mandiana Gold Project ("Mandiana") in Republic of Guinea, WA to Volcanic Metals Corp. ("Volcanic"), a Canadian publicly listed mining company.

In consideration for the farm-out, the Company received 2,502,489 common shares in Volcanic representing 9.9% of the outstanding share capital of Volcanic at the time of transaction. It was an important step for the Company and realised immediate value for shareholders whilst retaining an interest in the future of Mandiana.

Following the successful farm out of its interest in Mandiana, the Company is now deemed a cash shell under AIM Rule 15, pursuant to which it is required to make an acquisition which constitutes a reverse takeover under Rule 14, failing which the Exchange will suspend trading in the Company's shares pursuant to AIM Rule 40. Suspension of trading in the Company's shares is scheduled for 21 July 2017, if the Company's shares remain suspended for six months they will be cancelled from trading on AIM on 21 January 2018 pursuant to AIM Rule 41.

Having previously pursued a wider strategy of targeting assets in a number of sectors, the Company is now pursuing a more targeted strategy, including pursuing acquisitions in the Indian consumer goods sector. The Board is actively assessing acquisition opportunities and is in preliminary discussions to acquire a business operating in this sector. There can, at this time, be no guarantee that any acquisition will complete. Further announcements will be made in due course.

Finally I would like to thank Rupert Street for his service as CEO of the Company. Rupert has today stepped down as CEO and resigned as a Director of the Company. The Company intends to appoint a new CEO in due course who will complement the anticipated new direction of the Company and who it is planned will be based in India.

Financial

The loss in the year of £201,547 represents the costs of running the Company during this transitional phase compared with a loss of £1,991,490 in 2015, which included the impairment of its exploration assets of £1,278,059.

The Company had cash resources of £399,446 at 31 December 2016 which will provide sufficient finance to cover the Company's ongoing expenditure for the foreseeable future 

C G Clarke

(Chairman)

31 May 2017

SOVEREIGN MINES OF AFRICA PLC

SOVEREIGN MINES OF AFRICA PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

SOVEREIGN MINES OF AFRICA PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The Reconstruction reserve represents the difference between the investment in the subsidiary and the share capital in the subsidiary on acquisition.

SOVEREIGN MINES OF AFRICA PLC

 CONSOLIDATED STATEMENT OF CASH FLOWS

1. BASIS OF ACCOUNTING

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2016 or 2015 but is derived from those financial statements. Statutory financial statements for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course.

The auditors have reported on the financial statements for the year ended 31 December 2015; their report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as endorsed for use in the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

The principal accounting policies adopted in the preparation of the financial information in this announcement are set out in the Company's full financial statements for the year ended 31 December 2016 and are consistent with those adopted in the financial statements for the year ended 31 December 2015.

The Directors do not recommend the payment of a dividend (2015: nil).

The Board approved this announcement on 31 May 2017.

2. OPERATING SEGMENTS

Operating segments are based on internal reports about components of the Group, which are regularly reviewed by the Chairman being the Chief Operating Decision Makers ("CODM") for strategic decision making and resource allocation in order to allocate resources to the segment and to assess its performance.

The Group undertakes only one business activity as described in the Director's report. All transactions between each reportable segment are accounted for using the same accounting policies as the Group uses, as set out in Note 3. Accordingly, the Group's operating segments have been determined based on geographical areas.

The Group has not generated revenue during the either of the years ended 31 December 2016 or 31 December 2015. The Group's results by reportable segment are as follows:

All transactions between each reportable segment are accounted for using the same accounting policies as the Group uses, as set out in Note 3. The Group's assets and liabilities by reportable segment are as follows: -

3. STAFF COSTS

The average monthly number of Group employees during the year was as follows:

All employees relating to the prior year were engaged in exploration activities in Guinea. Accordingly, the employment costs form part of the exploration costs included in the financial statements as intangible assets.

No Directors' emoluments were paid during the year. Details of transactions with Directors are set out in Note 18 to the financial statements.

Jeremy Sparrow is not taking any fees in relation to his role as Non-executive Director and has in lieu of such been granted 22,000,000 share warrants. Each warrant entitles him to subscribe for one Ordinary Share at the price of 0.23 pence per share. 11,000,000 warrants may be exercised from 28 July 2016 until 29 July 2021. The remaining 11,000,000 warrants are exercisable on the execution of a reverse takeover by the Company. See Note 17 for further details.

4. TAXATION 

A deferred tax asset has not been recognised in respect of deductible temporary differences relating to losses carried forward at the year-end, as there is insufficient evidence that taxable profits will be available in the foreseeable future against which the deductible temporary difference can be utilised. The amount of the asset not recognised is £569,446 (2015: £547,306).

A deferred tax asset has also not been recognised in respect of deductible temporary differences relating to the cost of the equity settled share based payments awards detailed in Note 16, as there is insufficient evidence that taxable profits will be available in the foreseeable future against which the deductible temporary difference can be utilised. The amount of the asset not recognised in 2016 is £162,526.

The assets would be recovered if the Group made taxable profits in future years.

5. LOSS PER SHARE

Basic earnings per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period.

Due to there being a loss during the period there are no dilutive transactions and therefore no diluted loss per share has been presented.

6. INTANGIBLE ASSETS

Exploration activities are deferred until a reasonable assessment can be made of the existence or otherwise of economically recoverable reserves. The Directors have reviewed the carrying value of the exploration assets and an impairment provision has been made to reflect their expected recoverable value, in the light of discussions with potential strategic partners. 

The 2015 Impairment charges are included under "Administrative expenses" in the Consolidated Statement of Comprehensive Income.

7. ASSETS HELD FOR SALE

As explained in the Directors Report, on 20 January 2017 the Group sold its 75% interest in the Mandiana Gold Project to Volcanic Gold Mines Inc ('Volcanic'), formerly Volcanic Metals Corp, in exchange for 100% of the Company's shares in Sovereign Mines of Africa Limited, the Company received 2,502,489 shares in Volcanic, a company listed on TSX Venture Exchange, a stock exchange in Canada. At the date of the transaction Volcanic's shares had a share price of CAD$0.45 (approximately £0.28 per share). This transaction meets the IFRS 5 'Non-current assets held for sale and Discontinued operations' definition of held for sale because the asset was available for immediate sale in its present condition and the sale was highly probable at the balance sheet date. There are no additional measurement differences on reclassified to held for sale as the assets were fully impaired in the prior year (see Notes 11 and 12).

8. TRADE AND OTHER PAYABLES

9. SHARE CAPITAL

a) Share capital

The Company has one class of Ordinary share which carry no right to fixed income nor have any preferences or restrictions attached.

b) Share issues during the year

On 30 June 2015, the Company's share capital was subdivided from 310,858,850 Ordinary shares of 1 pence each into 310,850,858 Ordinary shares of 0.1 pence each and 310,858,850 Deferred shares of 0.99 pence each. On 30 December 2015, the Company raised additional working capital of £550,000 through a placing of 550,000,000 new Ordinary shares with new and existing investors at a price of 0.1p each.

On 22 June 2016, the Company redeemed all of the 310,858,850 deferred shares of 0.99 pence each (created as a result of the subdivision in June 2015 of each of the Company's former ordinary shares of 1.0 pence each into one ordinary share of 0.01 pence and one deferred share of 0.99 pence) for 100 pence in aggregate, in accordance with the rights attaching to such classes of shares. The redemption was funded out of the proceeds of the subscription by Lea Yeat Limited for 200 new Ordinary shares of 0.01 pence in the Company for 0.5 pence each in cash, made for the purpose of such redemption.

The Ordinary shares carry no right to fixed income nor have any preferences or restrictions attached.

10.  SHARE-BASED PAYMENTS

The Company has an unapproved share option scheme under which options to subscribe for the Company's shares have been granted to two directors. The vesting condition is the number of years' service. The share options and warrants currently in existence were granted and are exercisable as follows:

Share options

The Directors did not exercise any share options or warrants during 2016 (2015: none).

22,000,000 share warrants over Ordinary Shares were granted to Jeremy Sparrow following his appointment as a Non-Executive director on 18 July 2016. Jeremy Sparrow is not taking any fees in relation to his appointment to the Board of the Company and has in lieu of such been granted the 22,000,000 warrants. Each warrant entitles him to subscribe for one Ordinary share at the price of 0.23 pence per share.

At the year-end, the market value of the Company's shares was 0.425p per share. The highest price during the year was 0.860p and the lowest price was 0.225p. The share-based payment charge relating to the share options and warrants granted to directors amounted to £89,821 (2015 restated: £585,851).

The number and weighted average exercise prices of share options and warrants are as follows:

The estimated fair values of options and warrants which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those fair values, are as follows:

Expected volatility was determined by calculating the standard deviation of daily continuously compounded returns of the Company's share price calculated back from the date of grant. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.

11. TRANSACTIONS WITH RELATED PARTIES

N A Steinberg, a former director and part-time Finance Director who resigned during 2016, is a partner in Munslows LLP, a firm of Chartered Certified Accountants. That firm charged fees of £13,800 (2015: £20,000) excluding VAT to the Group in respect of professional services in the period. Of the fees charged, £nil (2015: £10,000 included in trade and other payables) was outstanding at year end.

12. POSTING OF ACCOUNTS AND NOTICE OF AGM

The Report and Accounts for the period ended 31 December 2016 will shortly be available on the Company's website and will be sent to registered shareholders by post shortly together with notice of the Company's AGM.