Strategic Minerals Regulatory News (SML)

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

14th May 2019

Strategic Minerals plc

("Strategic Minerals" or the "Company")

Financial Results for the Year Ended 31 December 2018

Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing mineral company actively developing projects prospective for battery materials, is pleased to announce its audited results for the year ended 31 December 2018.

Financial Highlights

· Profit from operations of US$1.473m (2017: profit of US$1.586m).

· All project development activities in 2018 fully funded internally.

· Unrestricted Group cash position, as at 31 December 2018, US$1.840m (2017: US$3.706m).

Operational Highlights

· Robust sales at Cobre in 2018 produced net cash flow of US$2.163m (2017: US$3.796m), which continue funding overheads and investment into project acquisition and development.

· Acquisition of Leigh Creek Copper Mine Pty Ltd ("LCCM") and preparation for recommencement of operations. Operations successfully commenced in April 2019.

· Excellent results achieved from 12 hole, 2018 drilling programme by the Company's 50% joint venture vehicle, Cornwall Resources Limited ("CRL"), holder of the Redmoor brownfields tin and tungsten project in the historic tin mining region of Cornwall, United Kingdom.

· 200% increase in inferred tin equivalent metal at Redmoor from 4.5m @ 1.0% SnEq to 11.7m @ 1.17% SnEq, as a result of the resource update released in February 2019. This indicates the project's potentially global significance.

· The Company continued its strategy to focus on metals and minerals likely to benefit from an anticipated growth in the battery market.

Commenting, John Peters, Managing Director of Strategic Minerals, said:

"2018 has seen the Company build on the platform that sales at Cobre provide and has sought to develop a near term, second income stream at LCCM. At the same time, it has been active in driving the Redmoor Tin/Tungsten project and CARE exploration.

"The results from the 2018 Redmoor drilling programme have encouraged the Board to acquire the balance of CRL and an offer was made to our joint venture partner, New Age Exploration Limited, that was accepted in March 2019. The transaction is expected to settle on 30 May 2019. Total control of CRL will allow the Company to efficiently deploy expected future cash flows from Cobre and LCCM into the development of the Redmoor project.

"The SML team looks forward to progressing and consolidating its projects throughout 2019, increasing production at LCCM and preparing 2020 to be the year the Company sees a second, material income stream arising from LCCM."

Notice of Annual General Meeting and Shareholders' Evening

SML will hold its Annual General Meeting ("AGM"), followed by a shareholders' evening, at 6:00pm on Tuesday 18 June 2019 on the first floor of the Rutland Arms, 15 Lower Mall, Hammersmith W6 9DJ. Those wishing to attend the AGM and shareholders' evening can register by emailing info@strategicminerals.net (limit of two per shareholder). The shareholders' meeting will provide shareholders the opportunity to meet with all four Directors and will also include a presentation on the Redmoor project by our development team (Brett Grist and James Blight).

Notes to Editors

Strategic Minerals Plc is an AIM-quoted, operating minerals company actively developing projects prospective for battery materials. It has an operation in the United States of America and Australia along with development projects in the UK and Australia. The Company is focused on utilising its operating cash flows, along with capital raisings, to develop high quality projects aimed at supplying the metals and minerals being sought in the burgeoning electric vehicle/battery market.

In September 2011, Strategic Minerals acquired the distribution rights to the Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating asset, which it brought into production in 2012 and which continues to provide a revenue stream for the Company. This operating revenue stream is utilised to cover company overheads and invest in development projects orientated to supplying the burgeoning electric vehicle/battery market.

In January 2016, the portfolio was expanded with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia prospective for cobalt, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In September 2018, the Company entered contracts for the sale of certain CARE tenements identified as gold targets.

In May 2016, the Company entered into an agreement with New Age Exploration Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds from the Company's investment were utilised to complete a drilling programme that year. The drilling programme resulted in a significant upgrade of the resource. This was followed in 2018 with a 12-hole 2018 drilling programme has now been completed and the resource update that resulted was announced in February 2019.

In March 2018, the Company completed the acquisition of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and brought the project into production in April 2019.

The Company, in March 2019, entered into arrangements to acquire the balance of the Redmoor Tin/Tungsten project in Cornwall, UK.

STRATEGIC MINERALS PLC

Report and Financial Statements

Year Ended

31 December 2018

Company Number 07440902

HIGHLIGHTS

FOR THE YEAR ENDED 31 DECEMBER 2018

Financial Highlights

· After tax profit of $1.473m (2017: profit of $1.586m) due to gain on bargain purchase of Leigh Creek Copper Mine Pty Ltd ("LCCM").

· Establishment and issuance of options to Board, Management and Key Consultants of various terms and with vesting requiring a minimum Company traded share price of 5.5p.

· $0.971m cash generated from operations after allowing for corporate overheads.

· Bargain purchase of LCCM results in $2.162m gain on investment for the year.

· All project development activities in 2018 fully funded by existing cash and operational cashflows.

· $2.817m invested in project development activities for the year including $2.011m in LCCM, our near term copper production asset, and $0.639 in Redmoor Tin/Tungsten project in the UK.

· Unrestricted cash position of the Group as at 31 December 2018 was $1.840m (2017: $3.706m).

Operational Highlights

· Continued strong sales at Cobre of $3.350m (2017: $5.607m) despite major client's inability to receive product.

· Renegotiated with Cobre's major client resulting in $0.800m in additional operational cashflow for the year.

· Acquisition in March 2018 of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and establishment of team which has restarted limited operations in April 2019 and is looking to commence full operations in late 2019/early 2020.

· Confirmed world class potential of Redmoor Tin/Tungsten project located in the historic tin mining region of Cornwall, United Kingdom with the successful drilling programme resulting in a resource update, announced early 2019, showing a resource of 11.7mt at a tin equivalent of 1.17% Sn (previously 4.5mt at 1.00% Sn).

· Post year end (March 2019) Company announced arrangements to purchase the balance of the project from its joint venture partner for approximately $3.6m (AUD $5m) - initial payment of approximately $1.45m (AUD $2m), a deferred payment of approximately $0.7m (AUD $1m) and a further deferred payment, subject to sales levels of approximately $1.45m (AUD $2m).

· Drilling programme conducted at CARE's tenements at Hanns Camp, Western Australia resulting in findings for both cobalt and nickel sulphide.

· Divestment of non-core CARE tenements for $102,000 (AUD $145,000). While these tenements may prove prospective for gold, they were mainly held for their rare earth potential which has been discounted and hence considered non core.

· The Company continues to focus its strategy on metals and minerals likely to benefit from an expected boom in the battery market and is pleased to see that prices for these metals and minerals, in 2018 and into 2019, continue to improve in line with the Board's expectations.

· Jeffrey Harrison appointed to the board as Non-Executive Director to support the development of Redmoor.

FORWARD-LOOKING STATEMENT

This Report and Financial Statements for the year ended 31 December 2018 ("Annual Report") contains 'forward-looking information', which may include, but is not limited to, statements with respect to the future financial and operating performance of Strategic Minerals Plc, its subsidiaries, production and exploration operations and affiliated companies, the future price of magnetite/iron ore, the estimation of mineral resources, the realisation of mineral resource estimates, costs of production, capital and exploration expenditures, costs and timing of the development of new deposits, costs and timing of the development of new mines, costs and timing of future exploration, requirements for additional capital, governmental regulation of mining operations and exploration operations, stockpile and tailings dam operations, timing and receipt of approvals, licenses, permits, conversions and ongoing approvals to operate exploration activities, stockpile and tailings dam operations under the United States of America, Australia and other applicable mineral legislation and environmental legislation, environmental risks, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters.

Often, but not always, forward-looking statements can be identified by the use of words such as 'plans', 'expects', 'is expected', 'budget', 'scheduled', 'estimates', 'forecasts', 'intends', 'anticipates' or 'believes', or variations (including negative variations) of such words and phrases, or state that certain actions, events or results 'may', 'could', 'would', 'might' or 'will' be taken, occur or be achieved. Forward- looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Strategic Minerals Plc and/or its subsidiaries, investment assets and/or its affiliated companies to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; stockpile processing/tailings dam operations; conclusions of economic evaluations and studies; fluctuations in the value of UK pounds sterling relative to the United States Dollar, Australian Dollar and other foreign currencies; changes in project parameters as plans continue to be refined; future prices of magnetite/iron ore; possible variations of ore grade or recovery rates; failure of plant, logistics providers, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, insurrection or war; the effect of illness on labour force availability and turnover; delays in obtaining governmental approvals or financing or in the completion of development or construction activities. Although Strategic Minerals Plc has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may well be other factors that cause actions, events or results to differ from those currently anticipated, estimated or intended.

Forward-looking statements contained herein are made as of the date of this Annual Report and Strategic Minerals Plc disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements due to the inherent uncertainty therein.

CHAIRMAN'S STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2018

I am pleased to present Strategic Minerals Plc's Annual Report for the year ended 31 December 2018. The Company continues to follow the strategy laid out by the Board and has undertaken and developed projects that are focused on metals and minerals expected to be sought in bourgeoning battery market. The Group has recorded a seven figure after tax profit for the second consecutive year and utilised this, along with the proceeds from its last equity raising in October 2017 to secure and progress projects without the need to raise capital in 2018.

The Group made a total comprehensive after tax profit of $788,000 as compared to a comprehensive after tax profit in 2017 of $1,792,000. While it is pleasing to report such a profit, to some extent this understates the performance in 2018. During the year, operational issues caused our major client at Cobre to be unable to physically receive its minimum 4,000 tons a month product delivery. In working with the client, the Company was able to secure a series of advance payments on expected future product deliveries, which is reflected as deferred revenue in the consolidated statement of financial position.

If this series of payments were taken into consideration, they would add a further $900,000 to sales for the year. This fact is reflected in the high cash figure maintained at the end of 2018, despite the acquisition of Leigh Creek Copper Mine and significant project development costs (notably Redmoor).

The Group had unrestricted cash of $1.840m as at 31 December 2018 (2017: $3.706m).

Throughout 2018, the Company completed both the acquisition of the Leigh Creek Copper Mine Pty Ltd ("LCCM") and further exploration at both the Redmoor Tin/Tungsten Mine, through the joint venture vehicle Cornwall Resources Limited ("CRL") and tenements held by Central Australian Rare Earths Pty Ltd ("CARE").

In the case of CARE, certain tenements in the Mount Weld area, which had been held primarily for their rare earth prospectivity, were, as a result of drilling, found to have little prospectivity for rare earths although still retaining some for gold. As gold is not a battery related metal, and hence not a primary focus for the Company, arrangements were made to sell the tenements, as reported in the Company's announcement on 3 September 2018.

In March 2018, the Company settled the purchase of LCCM which had been an operating copper mine that closed in 2011. In May 2019, the Company recorded its maiden sale from LCCM, providing a key second income stream, and paving the way for broader possibilities, such as potential dividend payments. LCCM was acquired for $2.338m (AUD $3m) with approximately half paid in cash and the balance satisfied by the issuance of 41,567,630 SML shares.

Since acquisition, the Company has assembled a highly experienced team to execute the restart of operations and has invested significantly in drilling and understanding the metallurgy of the site to ensure previous mistakes in the heap leach treatment of the ore are not repeated. The Board continues to be excited with the LCCM acquisition, having obtained 24,900 tonnes of JORC compliant copper metal at less than USD 100 per tonne. The value of the bargain purchase of LCCM has been reflected in our accounts as a gain on acquisition of $2,162,000.

The acquisition of LCCM is consistent with the Board's strategy of achieving a balanced portfolio of cash generating, near term cash generating and exploratory projects with good exposure to the battery market that provide the Company the opportunity to develop projects from internally generated cash flows with minimum equity dilution.

During 2018, CRL conducted a drilling programme designed to expand on the inferred resource and, in so doing, attempt to establish the credibility of the Redmoor project as a standalone operation and amongst its global peers. While drilling and assay were completed in 2018, it was not until early 2019 that an updated resource statement was published. This indicated that the inferred resource had significantly increased to 11.7mt at a tin equivalent (SnEq) of 1.17% (previously 4.5mt at 1.00% SnEq).

The improvement in inferred resource represented increases, since the previous March 2018 resource estimate, of 200% in contained metal, 160% in resource tonnes and 17% in the tin equivalent grade. Which, when put in a global context makes it one of the world's premier undeveloped tin/tungsten mine prospects.

In line with the release of the updated resource statement, the Board considered it an opportune time to acquire the balance of the equity in CRL and on 18 March 2019 announced the acquisition of the balance of CRL shares for cash of AUD $3m and a capped royalty/deferred payment from Redmoor of AUD $2m. The Board believes this project has the potential to produce a world class mining operation and has begun discussions with mining investment houses who have indicated an interest to be involved once prefeasibility and bankable feasibility studies are complete.

n February 2018, the Company welcomed, Mr Jeffrey Harrison to the Board. Mr Harrison is a seasoned, highly experienced mining engineer who has been working with the Company through his involvement in CRL. Mr Harrison's appointment has added balance and depth to the Board's skill set and will prove a vital asset in the development of the Company's projects. During 2018, Mr Harrison was appointed as a member of the newly formed Safety Committee where his workplace experience has proven invaluable in the Company's development of safety procedures for current and planned operations.

The strong position the Company has found itself at the end of 2018 and the development work scheduled for 2019 augurs well for the Board delivering shareholder value.

I look forward to working with my fellow Directors and the staff of the Company to ensure that the 2019 financial year is one of both operating and project growth for the Company.

Finally, I would like to acknowledge the support of our shareholders, suppliers and other stakeholders and I look forward to your continued support during 2019 and beyond.

Alan Broome AM

Chairman

14 May 2019

STRATEGIC REPORT

FOR THE YEAR ENDED 31 DECEMBER 2018

The Directors of the Company and its subsidiaries (which together comprise the Group) present their Strategic Report on the Group for the year ended 31 December 2018.

Financial Performance

The Company and the Group's reporting currency is US dollars as, previously, the Group's revenues, expenses, assets and liabilities were predominately in US currency and the bulk of revenues continues to based in US dollars.

The Group made an operating profit before tax for the financial year of $1.933m (2017: Profit of $2.234m) which, after making allowance for exchange rate movements, produced a total comprehensive after tax profit of $0.788m (2017: Profit $1.792m). The profit in 2018 was derived from both the continued performance of the Company's subsidiary, Southern Minerals Group LLC ("SMG") which operates the Cobre mine along with the recognition of the "fair value" of the Leigh Creek Copper Mine acquired during the financial year.

During the year, the Company made significant investments into its development projects as follows:

a) Leigh Creek Copper Mine Pty Ltd ("LCCM") a near production brownfields copper oxide project in the North Flinders Ranges in South Australia. During 2018, the Company acquired LCCM for $2.338m (AUD $3.0m) by a combination of cash $1.214 (AUD $1.550m) and the issuance of shares $1.124m (AUD $1,450m) and has invested a further $0.797m in preparing the project for recommencing production in 2019.

b) Cornwall Resources Limited ("CRL") a brownfields tin/tungsten project in Cornwall, England where the Group maintained its 50% ownership in CRL through the investment of $0.639m of cash, the proceeds of which were primarily utilised to undertake an exploration drill programme which resulted in a significant upgrade in the inferred resource estimate.

c) Central Australian Rare Earths Pty Ltd ("CARE") a company holding a number of greenfields exploration tenements in Western Australia prospective for Cobalt, Nickel Sulphide and Rare Earths. During 2018, the Company invested $0.237m in furthering drilling, scanning and understanding the geology of the tenements.

Group overheads for 2018 of $2.324m were maintained in line with last year's levels ($2.113m in 2017). The Board and management continue to closely monitor overheads and administration costs to ensure they are appropriately in line with operations.

Head office expenses were slightly increased to $1.250m from $1.086m in 2017 reflecting increased activities across all the Company's projects, including the addition of LCCM.

SMG has now absorbed its previous tax losses and has become a tax paying entity. In line with this, the Company incurred a tax expense of $0.460m (2017: $0.650m) for the year, however, the remainder of the Group continues to generate tax losses.

Cash at the end of the year was $1.840m (2017: $3,706m). The end of year cash position reflected the significant investment made in the Group's projects during the year of $2.887m, Group cash overheads of $1.021m and the offsetting positive cashflow contribution by SMG's Cobre operation of $2.163m.

PROJECT REVIEW AND ACTIVITIES

Cobre Performance

The 2018 year continued to be a profitable year for domestic sales at Cobre despite a reduction in sales as compared to last year. 55,565 short wet tons of magnetite were sold resulting in $3.350m in sales compared to 2017 when 84,980 short wet tons were sold for $5.637m. Operations at the mine continue to be closely managed while still ensuring adequate service to customers and safe operating conditions.

While sales levels at Cobre are down, this reflects the inability of SMG's major client to physically receive its minimum 4,000 tons per month, as specified in its contract. Considering this constraint, Management arranged for a variation of the underlying contract, until 1 March 2019, which saw $375,000 a quarter being paid to the Company as a non-refundable deposit. During 2018, net cash flow from SMG was $2.163m (2017: $3.796m).

SMG's formal access to the Cobre mine magnetite stockpile has now been extended until March 2020. The Company is currently unaware of any likelihood that SMG's access to the magnetite stockpile at Cobre will not be rolled over in the future.

SMG continues to have an exemplary safety record and has developed an enviable culture that reinforces the highest of safety standards.

Leigh Creek Copper Mine Pty Ltd ("LCCM")

On 6 March 2018, the Company acquired LCCM which holds the mining rights to a copper mine in the Flinders Ranges of South Australia.

The LCCM project is a historically mined copper oxide deposit based close to one of the world's largest copper producers (Olympic Dam and Prominent Hill) and is located in the northern Flinders Ranges of South Australia which has been a source of copper since the 1880s. The South Australian government has a stated policy to assist in making this the third largest copper producing area in the world.

LCCM has three approved Mining Leases that cover a number of copper oxide deposits, including Lorna Doone, Lynda, Mountain of Light (Rosmann East and Paltridge North) and the Mount Coffin deposit. All the Mineral Resources are contained within the Mining Leases.

The previous owners completed a JORC 2012 compliant Mineral Resource estimate on Lynda, Lorna Doone and Paltridge North deposits in 2016. A total resource of 3.61mt @ 0.69% copper for 24,900 of copper metal forms the base of the project and includes the following Resource category breakdown.

Drilling and metallurgical testing undertaken in 2018 has indicated a capacity to commercially retreat two of the existing heap leach pads and identified both Rosmann East and Paltridge North as economically viable sources from which to commence mining. Metallurgical analysis is being undertaken to derive the most appropriate method of treating ore from both Rosmann East and Paltridge North.

An existing heap leach and copper processing facility is located at the Mountain of Light deposit (adjacent to Rosmann East and nearby Paltridge North) and has been in care and maintenance since 2012. The treatment plant treats the copper solution extracted via a standard heap leach pad into a copper cement (>70% Cu) via two existing Kennecott cones. The Mountain of Light Processing plant is 100% owned by LCCM. Refurbishment works to the plant began in 2018 and the plant became operational in April 2019. 

The region around the project has excellent infrastructure with a modern town (Leigh Creek), sealed airstrip, sealed and all-weather roads, power and water utilities.

In addition to the Mining Leases, two approved Exploration Leases, covering an area of 686km² in the northern Flinders Ranges, are included in the project. These provide excellent opportunities for exploration of new copper oxide resources.

Copper prices have performed excellently during 2018 and into 2019. This reflects an ongoing general decline in mine grades of existing projects and increasing challenges for exploration success, which places copper as a strategically attractive commodity. 

The Company has an offtake agreement for all planned copper production of up to 300 tonnes per month from the LCCM project.

In the first half of 2019, considerable effort is being applied to restart operations at LCCM, beginning with the retreatment of existing heaps which has culminated in our first sale of product as announced in early May 2019.

Cornwall Resources Limited - Redmoor Tin/Tungsten Project

In 2018, SML and its joint venture partner, New Age Exploration Limited ("NAE"), each funded its joint venture vehicle, Cornwall Resources Limited ("CRL") for $0.705m to undertake a drilling programme designed to expand its inferred resource level. The 2018 drilling programme consisted of circa 7,000 metres across 12 holes.

The subsequent assay results exceeded Management's expectations and led to a resource update being published on 14 February 2019 which demonstrated that the overall inferred resource had increased from 4.5m tonnes at a tin equivalent ("SnEq") of 1.00% to 11.7m tonnes at 1.17% SnEq. The result is a 200% increase in contained metal, 160% in resource tonnes and 0.17% in the tin equivalent grade.

Not only has the resource been significantly expanded but the mineralisation has been discovered in discrete locations giving rise to the ability to tailor mining and processing to preferred mineralisation at the time of extraction.

As a result of these excellent grades, the Company moved to acquire full ownership of CRL and has made an offer accepted by NAE management to acquire the other 50% of CRL for AUD $5.0m (estimated at US$3.563m) payable in cash of AUD $3.0m (estimated at US$2.138m) with this amount including AUD $1.0m (estimated at US$0.713m) payable 180 days after settlement and a capped royalty of AUD $2.0m (estimated $1.425m) with half payable on a net smelter revenue of AUD $50m and the balance on a net smelter revenue of AUD $100m. On 8 April 2019, NAE advised that shareholder approval was not required and the parties agreed to settle the acquisition on 30 May 2019 subject to the parties agreeing the form of the promissory note and royalty documents.

Central Australia Rare Earth Pty Ltd ("CARE") Tenements

At the beginning of 2018, the Company, via its 100% owned subsidiary CARE, conducted an Electro Magnetic ("EM") geophysical survey at the Hanns Camp region which identified a significant conductor which was recognised as potentially hosting komatiite lava channel-facies rocks. Follow up drilling, completed in the first half of 2018, identified that the anomalies were not associated with accumulations of nickel sulphide.

In the middle of 2018, CARE completed a 65 hole 3,863m aircore drilling programme at the Hanns Camp and Mt Weld projects. Of these, 25 holes totalling 1,290m were drilled at the Hanns Camp South Targets. Cumulate facies ultramafic lithologies were recognised in one area potentially identifying another komatiite lava channel-facies position prospective for nickel sulphide mineralisation. The remaining 40 holes, totalling 2,573m, were drilled testing a series of gold, nickel and REE targets in the Mt Weld group of tenements. No carbonatite lithologies were intersected or significant REE assays received and no further work is planned in these target areas. Gold assays have highlighted some zones of broad low-level gold anomalism within the weathered profile.

As a result of the completion and evaluation of results from the air core drilling programme, conducted in June 2018, additional targets were identified at Hanns Camp South, Royal North and Royal Central highlighting potential Nickel Sulphide targets. Dr. Martin Gole, along with SML's Consultant Geologist Graeme Purcell, reviewed the data and targets in the field and confirmed the potential for lava channel embayments in the ultramafics which have the potential for hosting nickel sulphide mineralisation. Ground-based EM surveys, across all three targets, were commenced in December 2018 and, due to climactic influences, was not completed until later in the first quarter 2019.

In September 2018, the Company completed the sale of the tenements E38/2829, E38/2442, E38/2587, E38/2856 to GSN for a total consideration of AUD 145,000 paid by way of AUD 100,000 in cash and issuance to CARE of 1,000,000 shares in GSN at an issue price of AUD 0.045.

The Company is planning to complete a strategic assessment of the CARE exploration assets in the first half of 2019 following completion and analysis of the EM survey around Hanns Camp South.

Safety

The Company reports that, during 2018, across its operations in United States and Australia that the Company had one (2017: nil) safety incident which resulted in a prohibition notice (since lifted) and incurred no environmental, regulatory, or other operation violations.

Board and Management Changes

The addition of Jeffrey Harrison is the only change to the composition of the Board. Management changes have been made in line with the acquisition of LCCM although all such changes are based around consultancy, rather than direct employment contracts.

Key Risks and Uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. Strategic Minerals regularly reviews the principal risks that face the business and assesses appropriate responses to mitigate and, where possible, eliminate potential adverse impact. There is the possibility that if more than one event occurs, that the overall effect of such events would compound the possible adverse effects on the Group.

Our principal risks and uncertainties are as follows:

Strategic risk 

Significant and increasing competition exists for mineral acquisition opportunities throughout the world. As a result of this competition, the Group may be unable to acquire rights to exploit additional revenue generative assets such as Cobre and attractive mining development properties such as CARE, CRL and LCCM on terms it considers acceptable. Accordingly, there can be no assurance that the Group will acquire any interest in additional operations that would yield reserves or result in commercial mining operations. The Group expects to undertake sufficient due diligence where warranted to help ensure opportunities are subjected to proper evaluation.

Reserve and resource risk

The Mineral reserve and resource relating to CARE, CRL and LCCM are only estimates and no assurance can be given that the estimated reserves and resources will be recovered or that they will be recovered at the rates estimated. Reserve and resource estimates are based on sampling and, consequently, are uncertain because the samples may not be representative. Reserve and resource estimates may require revision (up or down) based on future actual production experience. The discovery of mineral deposits is dependent upon a number of factors including the technical skill of the exploration personnel involved.

The commercial viability of a mineral deposit, once discovered, is also dependent upon a number of factors, including the size, grade and proximity to infrastructure, metal prices and government regulations, including regulations relating to royalties, allowable production, importing and exporting of minerals, and environmental protection. There can be no guarantee that a mineral deposit will be economically viable. The Group undertakes studies in order to mitigate this risk.

Commodity prices and currency risk

Although the Group's strategy is primarily focused on localised markets which minimises the impact of global commodity prices, global commodity prices will generally affect the markets in which it operates. Fluctuations in commodity markets are affected by numerous factors beyond the Group's control, including global demand and supply, international economic trends, currency exchange fluctuations, expectations for inflation, speculative activity, consumption patterns and global or regional political events. The aggregate effect of these factors is impossible to predict. Fluctuations in commodity prices, over the long term, may adversely impact the returns of the Group's investments. The Group monitors commodity prices and structures its portfolio of assets with commodities that are likely to appreciate in the medium to long term.

The Group reports its results in US Dollars, whilst the functional currency of the parent company from which the Group derives the majority of its funding is Pound Sterling. This may result in additions to the Group's reported costs. Fluctuations in exchange rates between currencies in which the Group invest, reports or derives income may cause fluctuations in its financial results that are not necessarily related to the Group's underlying operations. The Groups converts funds to a currency in which funds will be utilised on an as needed basis.

Dependence on key personnel

The Group and Company are dependent upon the executive and local management teams. Whilst it has entered into contractual agreements with the aim of securing the services of these personnel, the retention of their services cannot be guaranteed. The development and success of the Group depends on the Company's ability to recruit and retain high quality and experienced staff. The loss of the service of key personnel or the inability to attract additional qualified personnel as the Group grows could have an adverse effect on future business and financial conditions. The Group incentivises executives and management with market based remuneration packages, short term and long term incentive schemes.

Operational risk

Mining operations are subject to hazards normally encountered in exploration, development and production. These include unexpected geological formations, rock falls, flooding, dam wall failure and other incidents or conditions which could result in damage to plant or equipment, people, or the environment and which could impact any future production throughput. Although it is intended to take adequate precautions to minimise risk, there is a possibility of a material adverse impact on the Group's operations and its financial results. The Group will develop and maintain policies appropriate to the stage of development of its various projects.

Funding risk

Strategic Minerals needs funds, both to manage its working capital requirements and fund new projects, as the Company seeks to grow. If the Company is not able to obtain sufficient financial resources, it may not be able to develop new projects. There can be no assurance that such funds will continue to be available on reasonable terms, or at all in the future. The Directors regularly review cash flow expenditure requirements and the cash flow generated from its Cobre operation to ensure the Group can meet financial obligations as and when they fall due.

Uninsurable risk

The Group may become subject to liability for accidents, pollution and other hazards against which it cannot insure or against which it may elect not to insure because of prohibitive premium costs or for other reasons, such as amounts which exceed policy limits.

Customer risk

The level of profitability of the Group is currently dependant on the performance of the Company's Cobre operation in the United States. The Cobre operation has a number of major customers and should one or more of these customers choose to not to purchase product it may have a substantial impact on the performance of the Group. The Group continues to look for additional customers at Cobre to address this risk and in addition will develop other projects such as Leigh Creek Copper Mine to reduce the risk of dependence on any one customer.

Product risk

The Group has a contract for access to magnetite iron ore at the Cobre operation which automatically renews on the 1 March of each year unless either party terminates the agreement 30 days prior to renewal. There is a risk that the supplier may terminate the agreement in which case the Group would no longer have product to sell. So as to minimise this risk to the Group's management actively engages with its supplier throughout the year to proactively address any concerns that the supplier may raise.

An offtake arrangement is in place for the LCCM project which is subject to minimum product specifications which, while currently considered achievable, cannot be guaranteed. The Company is currently retreating heaps at LCCM to produce product at specification in order to minimise this risk.

Key Performance Indicators

The Board monitors the activities and performance of the Group on a regular basis. The principal KPIs monitored by the Company are domestic sales of product from Cobre, the cash position of the Group, the investment in project activities, the share price of the Company and the health, safety and environmental incidents of the Group.

The sales of domestic product at Cobre were impacted by a major client not taking up its minimum monthly commitment (4,000 short wet tons) although this was offset by the payment of $375,000 per quarter in deposits lodged by the client.

The unrestricted cash position of the group as at 31 December 2018 was $1.840m which decreased by $1.866m from the previous year, principally as a result of the increased investment in project activities which saw a net $2.817m (2017: $1.744m) invested in LCCM, Redmoor and CARE and as a result of a reduction in sales at Cobre to $3.350m (2017: 5.637m).

The share price of the Company at year end was 1.30p (2017: 2.13p) which had increased to 1.65p as at 12 April 2019 with the Company poised to see the benefit of its project development portfolio in the near term.

There was one safety incident in December 2018 which the Board extensively addressed with a full review undertaken on safety policies after year end. There were no environmental incidents during the period.

Strategy

In early 2016, the Company adopted a strategy emphasising both an operating and investment strategy which is continued today.

The Operating Strategy is centred on maintaining and improving cash flows from the Company's magnetite stockpile at the Cobre mine in New Mexico, USA, whilst also limiting corporate overheads in line with this profitability, thus ensuring operating self-sufficiency.

The Investment Strategy is built around a three-pronged approach focused on supplying the burgeoning battery materials market. The strategy features bulk commodities with offtake arrangements, advanced materials with expected improvement in demand (Rare Earths, Cobalt, Graphite etc) and metals with expected pricing improvements over the next three to five years (Nickel Sulphide, Lithium etc).

The Company is well positioned to execute its plans to restart full LCCM production, commence a Pre-Feasibility Study at Redmoor and continue exploration at CARE.

Outlook and Prospects

The Company continues to maintain controls on its overheads, is focused on restarting production at Leigh Creek in 2019, expanding Cobre's profitable domestic sales, completing the acquisition of the other 50% of Cornwall Resources Limited/commencing the Redmoor Pre-Feasibility Study and undertaking further exploration of the CARE tenements.

The Board is confident that the outlook for the Company is encouraging as it now has a strong cash flow stream from Cobre, near term cash flows from LCCM, control of Redmoor and potential upside from CARE in Western Australia.

The Strategic Report was approved and authorised for issue by the Board of Directors and was signed on its behalf by:

John Peters

Managing Director

14 May 2019 

REPORT OF THE DIRECTORS

FOR THE YEAR ENDED 31 DECEMBER 2018

The Directors present their report and the audited financial statements for Strategic Minerals Plc ("the Company") and its wholly owned subsidiaries ("the Group") for the year ended 31 December 2018.

PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE DEVELOPMENTS

The Company is a public limited company registered in the UK whose registered office is 27/28 Eastcastle Street, London, W1W 8DH.

The Principal activity of the Company is a holding company. The principal activity of the Group is the exploration, development and operation of mining projects.

A review of the Group's business during the financial year and its likely development is given in the preceding Chairman's Report and Strategic Review.

RESULTS AND DIVIDENDS

The Group recorded a profit after taxation for the year of $1,473,000 (2017: $1,586,000).

The Directors do not propose to recommend any distribution by way of dividend for the period ended 31 December 2018.

DIRECTORS

The Directors who served the Company during the period and prior to the release of this report were as follows:

Current Directors

DIRECTORS' INTEREST IN SHARES AND OPTIONS

The persons who held office during the year or at the year-end had the following interests in share capital and options of the Company as detailed below.

The following are the shares held as at the reporting date and as at 31 December 2018 for all Directors and their related parties:

The following are the options held as at the reporting date and as at 31 December 2018 for all Directors:

DIRECTORS' REMUNERATION AND SERVICE CONTRACTS

Under their respective service contracts, the officers of the company received fees as detailed in the Directors' Remuneration table in Note 7.

SUBSTANTIAL SHAREHOLDERS

As at 30 April 2019 shareholdings of 3% or more of the issued share capital notified to the Company were:

Based on the total issued share capital of 1,404,059,857.

POLITICAL CONTRIBUTIONS

There were no political contributions made by the Group during the year ended 31 December 2018 (2017: Nil).

INFORMATION TO SHAREHOLDERS - WEBSITE

The Company has its own website (www.strategicminerals.net) for the purposes of improving information flow to shareholders, as well as to potential investors.

GOING CONCERN

These financial statements have been prepared on the assumption that the Group is a going concern.

When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to 30 June 2020 being the period for which projections have been prepared and the minimum period the Directors are required to consider.

The Directors have reviewed the Group's current cash resources, funding requirements and ongoing trading of the operations. The Directors note that the Group's future funding position is reliant on the key customers with the Cobre operation fulfilling the requirements of the underlying sales agreements. As at the date of this report there is uncertainty as to whether these commitments will be fulfilled. If the Group loses a key customer then the directors will be required to raise further funding through debt or equity and cut the spending on the other group assets as appropriate. As at the date of this report there is no certainty regarding the group's ability to execute these transactions. These conditions indicate the existence of material uncertainties which may cast doubt as to the Group's ability to continue as a going concern. In the event that the Group is unable to raise sufficient funds, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

INDEMNITY OF OFFICERS

The Group currently maintains insurance to cover against legal action brought against its Directors and officers. It evaluates on the appointment of new directors whether an indemnity from the Company for the actions of previous directors is warranted. However, the Group may purchase and maintain, for any Director or officer, insurance against any liability in the near future pending the evolution and complexity of any further new projects undertaken by the Company.

FINANCIAL RISK MANAGEMENT

Refer to Note 3 to the financial statements for further details.

EVENTS AFTER THE END OF THE REPORTING PERIOD

Refer to Note 27 to the financial statements for further details.

PUBLICATION OF ACCOUNTS ON COMPANY WEBSITE

Financial statements are published on the Company's website. The maintenance and integrity of the website is the responsibility of the Directors. The Directors' responsibility also extends to the financial statements contained therein.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the Directors, at the time of approval of their report, are aware:

· there is no relevant audit information of which the Group's auditors are unaware; and

· the Directors have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

AUDITORS

In accordance with section 489 of the Companies Act 2006, a resolution proposing that BDO LLP be reappointed as auditors of the Group will be put to the Annual General Meeting.

By order of the Board

John Peters

Director

14 May 2019 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

FOR THE YEAR ENDED 31 DECEMBER 2018

The directors are responsible for preparing the Strategic Report, Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.

In preparing these financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether the Group and parent Company financial statements have been prepared in accordance with IFRS as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

WEBSITE PUBLICATION

The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website (www.strategicminerals.net) in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the ongoing integrity of the financial statements contained therein. 

CORPORATE GOVERNANCE STATEMENT

Board of Directors

The aim of the Board is to function at the head of the Group's management structures, leading and controlling its activities and setting a strategy for enhancing shareholder value. Regular meetings are held to review the Group's forward planning. The Board currently consists of a Non-Executive Chairman, a Managing Director, an Executive Director and a Non-Executive Director.

The Directors recognise the importance of sound corporate governance commensurate with the size and nature of the Company and the interests of its shareholders and, in 2018, formally adopted The QCA Corporate Governance Code (the 'QCAC") after noting that it had, effectively, implemented its content in its previous arrangements.

In addition to the details provided below, governance disclosures can be found at the company's website at www.strategicminerals.net

Principle 1: Establish a strategy and business model which promote long-term value for shareholders

The Board has developed and enunciated a strategy and business model as detailed on the Company's website at https://www.strategicminerals.net/company/strategy.

The Board considers the Company's strategy provides a framework for medium to longer term growth in shareholder value.

The major risks to the Company's overall strategy stem from the potential failure to maintain access to the Cobre magnetite stockpile and over extending its cash requirements.

With respect to the exposure to operating cash flow only from the Cobre magnetite stockpile, the Board actively embarked on a search for a near term cash flow asset in our preferred mineral suite. With the addition of Leigh Creek Copper Mine, the Board feels it has, to a large extent, mitigated this risk, although it has now developed a new risk associated with the re-commencement of operations at Leigh Creek Copper Mine. Again, Management and the Board have sought to address such concerns through ensuring that sufficient resources are allocated to the project to give it the greatest chance of success.

In relation to cash flow management of the Company, Management and the Board closely monitor existing and expected cash flow resources and plans for committing these to project development and covering of corporate overheads. Additional to this, the Board regularly is in contact with market participants to ensure that sufficient interest is maintained in the market and that the Company can, generally, raise funding as required.

A consideration of broader risks of the Company can also be found at pages 8 to 9 of this report and the financial instruments note 3 of these financial statements.

Principle 2: Seek to understand and meet shareholder needs and expectations

Shareholder input and communication has been actively sought by the Board through direct contact with shareholders at both the Annual General Meeting, shareholder information evenings (sometimes combined with the Annual General Meeting), monitoring of social media platforms, regular RNS releases, interviews on both Proactive Investors and Vox Markets (including occasional shareholder Q & A sessions) and direct one on one meetings with larger investors. At all times, due regard is given to the price sensitive nature of comments.

All shareholders are encouraged to attend the Company's Annual General Meeting and investors have access to current information on the Company through its website and via the info@strategicminerals.net email address.

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success

As the Company is involved in the mining industry, the Board is highly cognisant of its responsibility not only to shareholders but in the broader community. As such, it has adopted a policy to ensure adequate community consultation is undertaken in the areas where we operate. Notably, in New Mexico USA, Cornwall UK and Leigh Creek Australia, communication with local residents and active involvement in the community has been encouraged. Additionally, the Company has a policy to, where possible, employ local residents when undertaking operations. To date, this has proven highly successful with all locations recording either none or extremely low levels of community dissent.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation

The management of the business and the execution of the Group's strategy are subject to a number of risks. The Company regularly reviews the principal risks that face the business and assesses appropriate responses to mitigate and, where possible, eliminate potential adverse impact.

The Board is constantly undertaking a review of risk and, as a mining company, has adopted and engendered a safety culture within the Company to ensure that personnel safety is considered above financial reward.

Information in relation to the Key Risks and Uncertainties that are relevant to the group are set on page 8 - 9 of this report.

Board Committees

The Board has established separate sub-committees around safety (chaired by Alan Broome) and audit (chaired by Alan Broome).

The responsibilities for remuneration within the Company continues to be shared by the entire Board, excluding the Managing Director.

Given the composition of the Board and the size of the Company, it is felt a separate Nomination Committee is not yet warranted. However, as the Company's operations expand, the Board will monitor this aspect of operations and will respond accordingly. The Board collectively undertakes the function of such a committee and where conflicts arise the Directors exclude themselves from voting on such matters.

Further information on the Company's Safety Committee and Audit Committee and their policies are set out under Principle 9 below.

Member details of the sub committees as at the date of this report are:

Principle 5: Maintaining the Board as a well-functioning, balanced team led by the chair

There are currently four (4) Board Directors (two of which are non-executive) and the Board considers that, at this time, this is appropriate to the Company's current level of operations, although this is reviewed formally at least annually. The Board is considered well balanced in that:

- Mr Alan Broome, the Non-Executive Independent Chairman, provides a sounding board for corporate strategy, a wealth of mining experience, is a metallurgist by training and is highly experienced in corporate governance. As such Alan is not involved with the day to day operations of the Company and provides guidance at the Board level. It is Management (notably John Peters and Peter Wale) who have the responsibility to formulate overall strategy, propose it to the Board, adjust the strategy for Board feedback and then enact the approved strategy.

- John Peters, the Managing Director, brings in-depth strategic management and investment banking experience. His practical management has helped to focus the members of the Company and its consultants on the overall strategy while managing the hands on day to day management oversight.

- Peter Wale, the Executive Director, provides an invaluable bridge to shareholders providing insights into shareholder requirements as well as monitoring and handling media aspects. Peter, along with John Peters, manage the Company's interface with shareholders, media and the investment community.

- Jeffrey Harrison, the Non-Executive Director, provides practical mining operational skills to ensure appropriate review of development plans and has contributed to the safety culture within the Company and maintains complete independence in reviewing decisions. Jeff performs this role divorced from the running of the Company and, as such, is considered independent when performing his duties as a Director.

All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational.

Attendance at Board and Committee Meetings

The Board aims to meet at least eight times a year and as required from time to time to consider specific issued required for decision by the board.

The Company held 9 Board meetings and a number of sub-committee meetings during the reporting period and the number of meetings attended by each of the Directors of the Company during the year to 31 December 2018 were:

The directors attended all board meetings and committee meetings that they were eligible and required to attend.

Directors' conflict of interest

The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

Time Commitment of Directors.

The Managing Director is employed by the Group on a full time basis, whereas Mr Wale (Executive Director) and the Non- Executive Directors are remunerated on fixed fee part time basis and are remunerated for hours over and above their normal duties.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

Biographies for the Directors can be found in the 'Board of Directors and Corporate Management' section of the company website at https://www.strategicminerals.net/company/our-team.html

The Board is not dominated by one person or group of people.

The Board undertakes regular reviews of its capacity to guide the Company in seeking to implement the Company's strategy. The appointment of Jeff Harrison in February 2018 illustrates how the Board, realising the need to increase its collective mining operational experience added a fourth Director with such skills. The Board also reviews periodically the appropriateness and opportunity for continuing professional development whether formal or informal.

Independent advice

All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Company's expense. In addition, the Directors have direct access to the advice and services of the Company Secretary, Chief Financial Officer, Company's NOMAD, lawyers and auditors.

Re-election of Directors

The Company's Articles of Association require that one-third of the Directors must stand for re-election by shareholders annually in rotation and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment.

Principle 7: Evaluate the Board performance based on clear and relevant objectives, seeking continuous improvement

Given the size of the Company and the small but critical nature of the roles of the Directors, board performance measures have not been independently developed. The Company relies upon the market and shareholder feedback to assess the Board's performance.

Principle 8: Promote a culture that is based on ethical values and behaviours

The Directors recognise that their decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board seeks to embody and promote a corporate culture that is based on sound ethical values as it believes the tone and culture set by the Board impacts all aspects of the Company, including the way that employees and other stakeholders behave.

The Company has adopted a code for Directors' and employees' dealings in securities which is appropriate for a company whose securities are traded on AIM and is in accordance with the requirements of the Market Abuse Regulation which came into effect in 2016.

The formation of the Safety Committee and the manner in which options are allocated to Directors and key management/consultants has created a team environment in which the running of the company is aligned with medium to longer term shareholder goals.

These measures enable the Company to determine that ethical values and behaviours are recognised and respected.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

As a resource development company, the Board considers the crucial governance structures and processes revolve around Safety and Audit.

Safety Committee

Safety is a critical matter, particularly given the capacity for harm to employees and consultants. The purpose of the Safety committee is to ensure that our vision, to provide a safe workplace where no harm comes to anyone, is applied at all of the Company's locations and that a culture of Safety purveys throughout the organisation.

The Company believes that all reasonable efforts should be undertaken to ensure incidents are prevented, management have ultimate accountability for health and safety but everyone on site has a responsibility to ensure no one comes to harm and employees have the responsibility to stop any job or activity they believe is unsafe and could cause harm to people.

The Safety Committee attempts to monitor, and report to the full Board, on the achievement of the Company in devoting the necessary resources needed to create a working environment, both physically and supervisorial, in which our people and others under our influence and control can work without sustaining injury or suffering ill health; ensuring no business target takes priority over health and safety; using risk assessments to identify hazards and unsafe behaviours and introduce actions to reduce the risk to acceptable levels; investigating and reporting all accidents and dangerous occurrences and preventing future incidents; setting safety targets with the aim of preventing incidents and accidents and communicate the performance to all employees; ensuring all employees are competent to carry out the tasks assigned to them by providing the relevant information, instruction, training and supervision required; encouraging everyone to contribute to working safely and preventing accidents; designing, constructing, operating and maintaining all equipment, buildings and structures to ensure a safe operation; and comply with all current legislation and codes of practice.

Audit Committee

The purpose of the Audit Committee is to provide formal and transparent arrangements for considering how to apply the financial reporting and internal control principles set out in the QCAC and to maintain an appropriate relationship with the Company's auditors. The key terms are as follows:

- to monitor the integrity of the financial statements of the Company and Group, and any formal announcement relating to the Company's performance;

- to monitor the effectiveness of the external audit process and make recommendations to the Board in relation to the appointment, re-appointment and remuneration of the external auditors;

- to keep under review the relationship with the external auditors including (but not limited to) their independence and objectivity; and

- to keep under review the effectiveness of the Company's financial reporting and internal control policies and systems.

Further details of board committees are given under Principle 5 above.

Securities Trading

The Company has adopted a share dealing code for dealings in shares by Directors and senior employees which is compliant with the Market Abuse Regulation (EU) No 596/2014 ("MAR") and appropriate for an AIM company. The Directors will comply with MAR and AIM Rule 21 relating to dealings and will take all reasonable steps to ensure compliance by persons discharging managerial responsibility ("PDMR") and persons closely associated with them.

Suitability of governance structures

The Board intends that the Company's governance structures evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Directors believe a healthy dialogue exists between the Board, the Company's shareholders and other stakeholders. The Board regularly has reports on shareholder feedback through summary of social media comments, shareholder information evenings and undertakes site visits and customer visits throughout the year.

In addition, all shareholders are encouraged to attend the Company's Annual General Meeting. The outcomes of all shareholder votes are disclosed in a clear and transparent manner via a regulatory information service, such as RNS of the London Stock Exchange.

The Company includes historical annual reports, notices of general meetings and RNS announcements over the last five years on its website. The Company lists contact details on its website and on all announcements released via RNS, should shareholders wish to communicate with the Board.

The Company intends to include, when relevant, in its annual report, any matters of note arising from the audit or remuneration committees. 

AUDIT COMMITTEE REPORT

This report addresses the responsibilities, the membership and the activities of the Audit Committee in 2018 up to the approval of the 2018 Annual Report and 2018 year-end Financial Statements.

Responsibilities

The main responsibilities of the Audit Committee are the following:

1. monitor the integrity of the annual and interim financial statements;

2. Review the effectiveness of financial and related internal controls and associated risk management;

3. Manage the relationship with our external auditors including plans and findings, independence and assessment regarding reappointment.

Membership

Members of the of the Audit Committee are Alan Broome (Chairman), Peter Wale and Jeffrey Harrison.

Activities in 2018

With regard to the 2018 year-end Audit, the committee has reviewed the following key audit matters:

1. going concern,

2. the adoption of the new revenue recognition standard (IFRS 15) and the Financial Instruments standard (IFRS 9), and

3. the acquisition fair values of LCCM

The Committee has reviewed the Group's current cash resources, funding requirements and ongoing trading of the operations. The Committee notes that the Group's future funding position is reliant on the key customers with the Cobre operation fulfilling the requirements of the underlying sales agreements. As at the date of this report there is uncertainty as to whether these commitments will be fulfilled. If the Group loses a key customer then the directors will be required to raise further funding through debt or equity and cut the spending on the other group assets as appropriate. As at the date of this report there is no certainty regarding the group's ability to execute these transactions. These conditions indicate the existence of material uncertainties which may cast doubt as to the Group's ability to continue as a going concern. In the event that the Group is unable to raise sufficient funds, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business.

Conclusion

In 2019 and beyond, the Committee will continue to adopt the new reporting and regulatory requirements and ensure that the system of internal controls is both maintained and regularly reviewed for improvement. The Committee will also continue to closely monitor the financial risks faced by the business and progress made towards mitigating these.

For and on behalf of the Audit Committee

Alan Broome

14 May 2019

Chair of Audit Committee 

REMUNERATION COMMITTEE REPORT

This remuneration report has been prepared by the Remuneration Committee and approved by the Board.

The report for 2018 sets out the details of remuneration for the Directors and discloses the amounts paid during the year.

Membership

Members of the of the Remuneration Committee are Alan Broome (Chairman) Peter Wale and Jeffrey Harrison. Other Directors are invited to attend as appropriate and only if they do not have a conflict of interest.

The aim of the Remuneration Committee is to attract, retain and motivate the executive management of the Company and to offer the opportunity for employees to participate in share option schemes to incentivise employees to enhance shareholder value.

Director Remuneration

Compensation for Directors who held office during the year is as follows:

* Mr J Harrison was appointed on 7 February 2018.

Going forward into 2019 and beyond, the Committee and I will remain focused on ensuring that reward at the Company continues to be closely aligned with the delivery of long term shareholder value.

For and on behalf of the Remuneration Committee

Alan Broome

14 May 2019

Chair of Remuneration Committee 

INDEPENDENT AUDITOR'S REPORT

FOR THE YEAR ENDED 31 DECEMBER 2018

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF STRATEGIC MINERALS PLC

Opinion

We have audited the financial statements of Strategic Minerals Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2018 which comprise the consolidated statement of comprehensive income, the consolidated and parent company statement of financial position, the consolidated and the parent company's statement of cash flows, the consolidated and the parent company's statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

· the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2018 and of the group's profit for the year then ended;

· the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

· the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty related to going concern

We draw attention to Note 1 of the financial statements which indicates that the Group needs additional funding in the next twelve months. This matter along with the other matters set out in Note 1 relating to the uncertainty around the Group and Parent Company's ability to fund its working capital needs and development plans indicate the existence of a material uncertainty which may cast significant doubt over the Group and Parent Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.

We have highlighted going concern as a key audit matter based on our assessment of the significance of the risk and the effect on our audit strategy.

Our audit procedures in response to this key audit matter included the following:

· We critically assessed the directors' and management's cash flow forecast, and the underlying assumptions, in particular the key sensitivity which analysed the impact of a key customer to the Cobre operations no longer being able to fulfil their obligations under the offtake arrangement.

· We discussed with Management and the Board the Group's strategy to ensure that funds are available to the Group to fund its operations and development plans.

· We obtained and reviewed documents which support the funding streams included by Management and the Directors in the Group cashflow forecast.

· We reviewed key cash outflows to underlying budgets for the Group's key assets or projects to ensure commitments have been appropriately included.

· We compared forecast operating cost cash flows to current run rates for the underlying business.

· We reviewed and considered the adequacy of the disclosure within the financial statements relating to the directors' assessment of the going concern basis of preparation. 

Key audit matters

In addition to the matter described in the material uncertainty related to going concern section, key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Our application of materiality

Total Assets was determined as an appropriate basis as the principal focus of the Group remains fundamentally focussed on the development of its exploration and development assets.

Materiality for the Parent Company was set at $90,000 (2017: $60,000) and was restricted to 75% of Group materiality (2017: 75% of Group materiality).

We apply the concept of materiality both in planning and performing our audit and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Performance materiality is the application of materiality at the individual account or balance level set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole. Performance materiality was set at 75% (2017: 75%) of the above materiality levels for both Group and Company on the basis that we have not identified high volumes or values of misstatements in prior year audits.

We agreed with the Audit Committee that we would report to the Committee all individual audit differences identified during the course of our audit in excess of $8,000.

Whilst materiality for the financial statements as a whole was $175,000 each significant component of the Group was audited to a lower level of materiality ranging from $12,000 to $90,000 which was used to determine the financial statement areas that were included within the scope of the component audits and the extent of sample sizes used during the audit.

An overview of the scope of our audit

Our group audit was scoped by obtaining an understanding of the group and its environment, including the group's system of internal control, and assessing the risks of material misstatement in the financial statements at the group level.

Our group audit scope focused on the group's principal operating subsidiaries being Strategic Minerals Plc, Southern Minerals Group LLC, Leigh Creek Copper Mine Pty Ltd and Central Australia Rare Earths Pty Ltd, which were subject to a full scope audit. Together with the parent company and its group consolidation, which was also subject to a full scope audit, these represent the significant components of the group.

The remaining components of the group were considered non-significant and these components were principally subject to analytical review procedures, together with additional substantive testing over the risk areas detailed above where applicable to that component. The full scope audits covered 98% of the group's net assets.

The audits of each of the components were performed in the United Kingdom. All of the audits were conducted by BDO LLP.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

· the information given in the strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

· the strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of Directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Directors' responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the group's and the parent company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the parent company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the parent company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the parent company and the parent company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Matt Crane (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London

14 May 2019

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit per share attributable to the ordinary equity holders of the parent:

The accompanying accounting policies and notes form an integral part of these financial statements. 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

These financial statements were approved and authorised for issue by the Board of Directors on 14 May 2019

and were signed on its behalf by

John Peters

Director

The accompanying accounting policies and notes form an integral part of these financial statements.COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

As permitted by Section 408 of the Companies Act 2006, the statement of comprehensive income of the parent Company is not presented as part of these financial statements. The parent Company made a profit for the year of $588,000 (2017: loss of $113,000).

These financial statements were approved and authorised for issue by the Board of Directors on 14 May 2019

and were signed on its behalf by:

John Peters

Director

The accompanying accounting policies and notes form an integral part of these financial statements.CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

The accompanying accounting policies and notes form an integral part of these financial statements. 

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

The accompanying accounting policies and notes form an integral part of these financial statements. 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

All comprehensive income is attributable to the owners of the parent Company.

The accompanying accounting policies and notes form an integral part of these financial statements. 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

All comprehensive income is attributable to the owners of the parent Company. 

The accompanying accounting policies and notes form an integral part of these financial statements. 

CONSOLIDATED AND COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

Share capital is the amount subscribed for shares at nominal value.

Share premium reserve represents the excess of the amount subscribed for share capital over the nominal value of these shares net of share issue expenses.

Merger reserve arises from the 100% acquisition of Ebony Iron Pty Limited on 2 September 2011 whereby the excess of the fair value of the issued ordinary share capital issued over the nominal value of these shares is transferred to this reserve, in accordance with section 612 of the Companies Act 2006.

Share option reserve relates to increases in equity for services received in equity-settled share based payment transactions and on the grant of share options.

Other reserves consist of an adjustment arising from the Group reorganisation in 2011 being the formation of a new holding Company for Iron Glen Holdings Limited by way of a share for share issue and is the difference between consideration given and net assets of the Company at the date of acquisition.

Foreign exchange reserve occurs on consolidation of the translation of the subsidiaries balance sheets at the closing rate of exchange and their income statements at the average rate.

Retained earnings represent the cumulative loss of the Group attributable to equity shareholders.NOTES FORMING PART OF THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

1. Significant accounting policies

Basis of preparation

In preparing these financial statements the presentational currency is US dollars. As the entire group's revenues and majority of its costs, assets and liabilities are denominated in US dollars it is considered appropriate to report in this currency.

The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated.

These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations (collectively IFRSs) issued by the International Accounting Standards Board (IASB) as adopted by the European Union ("adopted IFRSs").

The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant judgments and estimates have been made in preparing the financial statements and their effect are disclosed in note 2.

The financial statements have been prepared on a historical cost basis, except for the acquisition of LCCM and the valuation of certain investments which have been measured at fair value, not historical cost.

Going concern basis

These financial statements have been prepared on the assumption that the Group is a going concern.

When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to 30 June 2020 being the period for which projections have been prepared and the minimum period the Directors are required to consider.

The Directors have reviewed the Group's current cash resources, funding requirements and ongoing trading of the operations. The Directors note that the Group's future funding position is reliant on the key customers with the Cobre operation fulfilling the requirements of the underlying sales agreements and the offtake contract being renewed for a further 12 months from March 2020. Based on past experience the Directors are confident that the offtake contract will be renewed and as at the date of this report there is no evidence to suggest that it will not be renewed. However, there is uncertainty as to whether the Group's customers will

continue to fulfil the requirements of their contractual arrangements and this will impact upon the Group's future working capital position. If the Group loses a key customer then the directors will be required to raise further funding through debt or equity and cut the spending on the other group assets as appropriate. As at the date of this report there is no certainty regarding the group's ability to execute these transactions. These conditions indicate the existence of material uncertainties which may cast significant doubt as to the Group and Company's ability to continue as a going concern. In the event that the Group is unable to raise sufficient funds, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group and Company was unable to continue as a going concern.

Adoption of standards effective in 2018

A number of new and amended standards became mandatory and are effective for annual periods beginning on or after 1 January 2018. Below is a list of the new standards which impacted the Group; where appropriate these new standards have been incorporated into the Financial Statements:

IFRS 15 Revenue from contracts with customers ("IFRS 15")

IFRS 15 provides a principles based five step model to be applied to all contracts with customers. New estimates and judgmental thresholds have been introduced, which may affect the amount and/or timing of revenue recognized. Specifically, IFRS 15 introduces a five-step approach to revenue recognition with an entity recognising revenues when a performance obligation is satisfied, which is when "control" of the goods has transferred to the customer. The Group currently recognises revenues when the control is transferred. Control of goods is transferred at the point of time, when magnetite is passed to the buyer at the gate. This is consistent with the current revenue recognition and the adoption of IFRS 15 does not have an impact on overall revenue recognition.

IFRS 9 Financial Instruments ("IFRS 9")

IFRS 9 classification and measurement of financial assets replaces the multiple category and measurement models in IAS 39 for debt instruments with a new mixed measurement model having only two categories: amortized cost and fair value through profit or loss. IFRS 9 also addresses requirements for financial liabilities; these were largely carried forward from IAS 39, Financial Instruments - Recognition and Measurement, except that fair value changes due to credit risk for liabilities designated at fair value through profit and loss would generally be recorded in other comprehensive income.

The adoption of IFRS 9 has impacted the Group and Company as a result of the existing incurred loss approach under IAS 39 being replaced by the forward looking expected credit loss ("ECL") model approach of IFRS 9. The expected credit loss model is required to be applied to the trade receivables and intercompany loan receivables which are classified as held at amortised cost.

At 31 December 2018, Strategic Minerals plc (SM plc) has $4.510m (1 January 2018 $3.793m) loans outstanding to subsidiaries. These loans are owed by various subsidiaries.

The advances have been made on an interest free basis and are repayable on demand. As some loans do not currently have sufficient liquid assets to be able to repay the amounts due if demanded, these loans are considered to be credit-impaired for the purposes of IFRS 9 and lifetime expected credit losses are required to be recognised.

As at 1 January 2018 the Company has determined a $3.279m credit loss allowance and $2.068m credit loss allowance at 31 December 2018 as a result of the application of the expected credit loss model approach of IFRS 9. As part of the assessment of expected credit losses on the intercompany loans receivable, the Directors have assessed for each loan balance, the cash flows associated with a number of different recovery scenarios. This included consideration of exploration project risk, the future sales potential of product, value of potential reserves and the resulting expected economic outcomes of each project.

As required by the standard, no transitional adjustment was processed at the date of initial application (1 January 2018) as the Directors concluded that the loss provision calculated under an ECL approach to be materially consistent with the carried forward loss provision in the 31 December 2017 financial statements.

Issued IFRS that are not yet effective and have not been adopted early

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods and which have not been adopted early. None of these are expected to have a significant effect on the Group, in particular:

IFRS "16 Leases" (effective for periods beginning on or after 1 January 2019) requires lessees to use single on-balance sheet model and recognise all lease assets and liabilities on the balance sheet. Management have completed an assessment of existing operating contracts and do not anticipate the adoption of IFRS 16 to have a significant impact on the Group's financial statements.

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

De-facto control exists in situations where the company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the company considers all relevant facts and circumstances, including:

- The size of the company's voting rights relative to both the size and dispersion of other parties who hold voting rights,

- substantive potential voting rights held by the company and by other parties,

- other contractual arrangements and

- historic patterns in voting attendance.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Investment in joint arrangements

The Group is a party to a joint arrangement when there is a contractual arrangement that confers joint control over the relevant activities of the arrangement to the group and at least one other party. Joint control is assessed under the same principles as control over subsidiaries.

The group classifies its interests in joint arrangements as either:

· Joint ventures: where the group has rights to only the net assets of the joint arrangement

· Joint operations: where the group has both the rights to assets and obligations for the liabilities of the joint arrangement.

In assessing the classification of interests in joint arrangements, the Group considers:

· The structure of the joint arrangement

· The legal form of joint arrangements structured through a separate vehicle

· The contractual terms of the joint arrangement agreement

· Any other facts and circumstances (in any other contractual arrangements).

The Group accounts for its interests in joint ventures initially at cost in the consolidated statement of financial position. Subsequently joint ventures are accounted for using the equity method where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses)

Profits and losses arising on transactions between the Group and its joint ventures are recognised only to the extent of unrelated investors' interests in the joint venture. The investor's share in the joint ventures' profits and losses resulting from these transactions is eliminated against the carrying value of the joint venture.

Any premium paid for an investment in a joint venture above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the investment in joint venture. Where there is objective evidence that the investment in a joint venture has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

The Group accounts for its interests in joint operations by recognising its share of assets, liabilities, revenues and expenses in accordance with its contractually conferred rights and obligations. In accordance with IFRS 11 Joint Arrangements, the Group is required to apply all of the principles of IFRS 3 Business Combinations when it acquires an interest in a joint operation that constitutes a business as defined by IFRS 3.

Listed equity investments

Listed equity investments in an active market are usually valued at the mid-price on the valuation date.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method under IFRS3 Business Combinations ("IFRS3"). The cost of the business combination is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group and the Company in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the relevant conditions for recognition are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the fair value of the consideration paid over the Group's interest in the fair value of the identifiable assets, liabilities and contingent liabilities acquired. If the Group's interest in the fair value of the acquiree's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. Transaction costs incurred directly in connection with business combinations are expensed.

Impairment of non-financial assets (excluding inventories)

Impairment tests of intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest Group of assets to which it belongs for which there are separately identifiable cash flows: its cash generating units ('CGUs').

Impairment charges are included in the statement of comprehensive income, except to the extent they reverse gains previously recognised in other comprehensive income.

Externally acquired intangible assets

Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives.

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual or legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:

Exploration and evaluation assets

The Group has continued to apply the 'successful efforts' method of accounting for Exploration and Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 'Exploration for the Evaluation of Mineral Resources'.

The successful efforts method means that only the costs which relate directly to the discovery and development of specific mineral reserves are capitalised. Such costs may include costs of license acquisition, technical services and studies, exploration drilling and testing but do not include costs incurred prior to having obtained the legal rights to explore the area. Under successful efforts accounting, exploration expenditure which is general in nature is charged directly to the statement of comprehensive income and that which relates to unsuccessful exploration operations, though initially capitalised pending determination, is subsequently written off. Only costs which relate directly to the discovery and development of specific commercial mineral reserves will remain capitalised and to be depreciated over the lives of these reserves. Exploration and evaluation costs are capitalised within intangible assets. Costs incurred prior to obtaining legal rights to explore are expensed immediately to the statement of comprehensive income.

All lease and licence acquisition costs, geological and geophysical costs and other direct costs of exploration, evaluation and development are capitalised as intangible or property, plant and equipment according to their nature. Intangible assets comprise costs relating to the exploration and evaluation of properties which the Directors consider to be unevaluated until reserves are appraised as commercial, at which time they are transferred to tangible assets as 'Developed mineral assets' following an impairment review and depreciated accordingly. Where properties are appraised to have no commercial value, the associated costs are treated as an impairment loss in the period in which the determination is made. Management consider all tenements relating to each project to represent one asset when undertaking their impairment assessment.

Where Management acquires exploration and evaluation assets through a corporate acquisition an assessment is made as to whether this transaction meets the definition of a business combination and therefore accounted for under IFRS 3 or represents an asset purchase.

Costs are amortised on a unit of production method based on commercial proven and probable reserves.

Contractual relationship

The contractual relationship recognised as a result of the acquisition of Ebony Iron Pty Limited in 2011 was valued at that time using estimated discounted cash flow. The value of the acquisition is fully impaired and management continues to assess whether there is evidence to reverse this impairment. However, due to the short-term nature of the contract to purchase iron ore at the Cobre operation it is not considered appropriate to reverse the impairment as at balance date.

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.

Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:

· Office equipment - 3 years straight line

· Plant and machinery (except screening equipment) - 5 to 10 years straight line basis

· Development assets - on a unit of production basis

· Screening equipment - on a unit of production basis

· Rail infrastructure - on a per ton basis for inventory transported by rail in the year. This asset has been fully impaired in previous periods.

The carrying value of property, plant and equipment assets is assessed annually and any impairment is charged to the statement of comprehensive income.

Investments in subsidiaries - company only

Investments in subsidiaries are stated at cost less provision for any impairment in value.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and deposits held on call with banks. Restricted cash is not available for use by the Group and therefore is not considered highly liquid.

Revenue

Revenue from the sale of magnetite is recognised when the group passes control of the product to the customer and it is probable the group will receive the funds. Control is considered to have passed when the goods are passed to the buyer, being the point of leaving the mine gate for domestic sales to the US markets.

Where a contract allows the group to advance bill ahead of delivery, a liability in relation the outstanding performance obligation is only recognised on the date when payment is received. In those cases, the entity recognises revenue only after it transfers the goods to the buyer.

Inventories

Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Taxation

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the same income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date.

Deferred tax

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

· the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

· investments in subsidiaries where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised.

Fair values

The carrying amounts of the financial assets and liabilities such as cash and cash equivalents, receivables and payables of the Group at the statement of financial position date approximated their fair values, due to the relatively short term nature of these financial instruments.

Share-based compensation

The fair value of the employee and suppliers' services received in exchange for the grant of options and warrants is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options and warrants granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options and warrants that are expected to vest. At each statement of financial position date, the entity revises its estimates of the number of options and warrants that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the statement of comprehensive income, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options and warrants are exercised.

The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model or other appropriate models, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, and exercise restrictions. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour and is selected based on past experience.

Equity instruments

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from proceeds.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the Directors' best estimate of the expenditure required to settle the obligation at the statement of financial position date and are discounted to present value where the effect is material.

Provisions for decommissioning costs are recognised in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets. Provisions are recorded at the present value of the expenditures expected to be required to settle the Group's future obligations. Provisions are reviewed at each reporting date to reflect the current best estimate of the cost at present value. Any change in the date on which provisions fall due will change the present value of the provision. These changes are treated as an administration expense. The unwinding of the discount is reflected as a finance expense.

Financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus any directly attributable transactions costs and are subsequently carried at amortised cost.

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire or are discharged or cancelled.

Financial assets:

All financial assets other than an immaterial investment in listed equity shares, which are measured at fair value through profit or loss, are classified as financial assets at amortised cost. The Group determines the classification of its financial assets at initial recognition.

The Group's financial assets include cash and cash equivalents and trade receivables.

The Company's financial assets include cash and cash equivalents and loans receivable due from subsidiaries.

The Group and Company recognise a loss allowance for expected credit losses ("ECL") on intercompany loans which are measured at amortised cost. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument.

The Company and Group recognise an ECL on intercompany loans, based on management's assessment and understanding of the credit risk attaching to each asset, changes in the level of credit risk between periods an assessment of the scenarios under which management expect the assets to be repaid. Any credit loss will be calculated as the net present value of the difference between the contractual and expected cash flows and the ECL will represent the weighted average of those credit losses based on the respective risks of each scenario.

The Group applies the IFRS 9 simplified approach to measuring credit losses using a lifetime expected credit loss provision for trade receivables.

Further details of the reviews undertaking during the year are set out in Note 2 below.

Financial liabilities

The Group classifies its financial liabilities as other financial liabilities at amortised cost.

Other financial liabilities are trade payables and loans and borrowings, consisting of finance lease obligations, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method.

Foreign currencies

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. The functional currency of the Company is deemed to be GBP. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss, except for foreign currency borrowings qualifying as a hedge of a net investment in a foreign operation, in which case exchange differences are recognised in other comprehensive income and accumulated in the foreign exchange reserve along with the exchange differences arising on the retranslation of the foreign operation.

On consolidation, the results of overseas operations are translated into US Dollars at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the foreign exchange reserve.

On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated statement of comprehensive income as part of the gain or loss on disposal.

Management of capital

The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The principal liabilities of the Group arise in respect of the costs of financing working capital as inventory is built up prior to sale.

The Board receives periodic cash flow projections as well as information on cash balances. The Board will not commit to material expenditure prior to being satisfied that sufficient funding is available to the Group to finance the planned programmes.

2. Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Carrying value of intangible assets

Management assess the carrying value of the exploration and evaluation assets for indicators of impairment based on the requirements of IFRS 6 which are inherently judgemental. This includes ensuring the Group maintains legal title, assessment regarding the commerciality of reserves and the clear intention to move the asset forward to development.

Both the CARE and Redmoor projects are early stage exploration projects and therefore Management have applied judgement in the period as to whether the results from exploration activity provide sufficient evidence to continue to move the asset forward to development. In relation to CARE there are 5 tenement licences that expire in the next 12 months. Management assesses for impairment on a one asset basis rather than tenement by tenement and considered that the expiry of these licences do not represent an indicator of impairment at 31 December 2018.

There are no indicators of impairment in the 31 December 2018 financial year. Further detail regarding the carrying value of exploration and evaluation can be found in note 10.

(b) Share based payments

The fair value of share-based payments recognised in the statement of comprehensive income is measured by use of the Black Scholes model after taking into account market based vesting conditions and conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour based on past experience. Further details are given in Note 20.

(c) Carrying value of amounts owed by subsidiary undertakings

IFRS9 requires the parent company to make assumptions when implementing the forward- looking expected credit loss model. This model is required to be used to assess the intercompany loan receivables from its subsidiaries for impairment. Arriving at an expected credit loss allowance involved considering different scenarios for the recovery of the intercompany loan receivables, the possible credit losses that could arise and probabilities for these scenarios.

The following were considered; the exploration project risk, the future sales potential of product, value of potential reserves and the resulting expected economic outcomes of the project.

(d) Investments in joint arrangements

Under the shareholders agreement with NAE, CRL is operated as a 50:50 joint venture with each party being entitled to appoint one Director. Based on this, the Group considers that they have joint control over the arrangement. Under IFRS 11, this joint arrangement is classified as a joint venture and has been included in the consolidated financial statements using the equity method.

Refer to Note 11 for details in relation to investments in joint arrangements.

(e) Business combinations.

Significant estimates were made in determining the fair value of assets acquired in the groups acquisition of Leigh Creek these are described in note 12.

The Group is exposed to the following financial risks:

· Credit risk

· Foreign exchange risk

· Commodity price risk

· Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from last year unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are:

· Trade and other receivables

· Cash and cash equivalents

· Restricted cash

· Trade and other payables

· Investments in quoted equity securities

A summary of the financial instruments held by category is provided below:

Financial assets