SNRP.L Regulatory News (SNRP)

RNS Number : 0641P

Strategic Natural Resources PLC

08 July 2010

 

 

08 July 2010

Strategic Natural Resources PLC

 

("Strategic Natural Resources" or the "Company")

 

Full Year Results for the year ended 28 February 2010

 

Strategic Natural Resources (AIM:SNRP), the explorer and producer of coal assets in South Africa, announces its audited full year results for the year ended 28 February 2010.

 

Highlights:

·; Focus on extending the prospecting rights area under control and expanding commercial operations for export

·; The Group ended the year with 185,000 ha of prospecting licenses; five times more than last year

·; An export feasibility study has been commissioned

·; The Competent Persons Report, including new bore holes, is being updated

·; Short and medium term focus on local steam market and exports

·; First trial burner delivered and installed; the burner enables existing boilers to burn SNR's coal

 

Richard Latham, Chairman, said, "We have spent the year concentrating on developing the Company by extending the prospecting rights under our control and expanding market applications for our products. Although we made a loss of £0.3m, this had been expected. I am confident that the Company is pursuing the right strategy to unlock the potential of SNR."

 

For further information, please contact:

 

Strategic Natural Resources plc

David Nel, Chief Executive Officer

+27 (0) 41 374 0842

Jeremy Metcalfe, Communications Director

+44 (0)7785 346 718

 

Nominated Adviser - Allenby Capital Limited

Nick Naylor / James Reeve

+44 (0) 20 3328 5656

 

Broker - SP Angel Corporate Finance Limited

Emin Eyi / Tercel Moore

+44 (0) 20 7647 9646

 

Financial PR/IR - Blythe Weigh Communications

+44 (0) 20 7138 3204

Ana Ribeiro / Tim Blythe / Matthew Neal

 

For further information about Strategic Natural Resources please visit

 

www.snrplc.co.uk 

STRATEGIC NATURAL RESOURCES PLC

 

Chairman's Statement

FOR THE YEAR ENDED 28 FEBRUARY 2010

 

 

Chairman's Statement

I have pleasure in presenting the Group's results for the year ended 28 February 2010. The Group continues to invest in drilling and mine development activities as evidenced by our expanding resource base.

As anticipated, the Group made a loss of £0.34m after deducting tax and minority interests compared with a profit of £1.78m in 2009.

Excluding the interest receivable on the vendor loan note, the Group recorded a loss of £0.5m which comprises administrative expenses less net interest income. In addition, the Group invested £0.3m in drilling and exploration costs. These costs together with related foreign exchange adjustments, have been capitalised.

We therefore report a headline loss per share of 0.54p (2009 headline loss per share 0.62p).

The last financial year has been an active one. We received two merger approaches, in July and in August, neither of which were concluded. We were also fortunate in being able to secure the support of shareholders both new and old, raising a total of just over £1m during the year, and a further £2.7m after the year end. In addition we raised £0.32m through a loan during the year which was repaid with interest in the current year.

We spent the year under review concentrating on increasing the potential of the Group by extending the prospecting rights area under its control and expanding market applications for its products. The Group ended the financial year with nearly five times as much land covered by its prospecting licences as it started with, some 185,000 ha in total. Drilling efforts were reduced as we shifted our focus to developing additional markets for the coal as it became clear that the global economic crisis and delays within the South African electricity industry would not allow fast track development of IPSA Group PLC's ("IPSA") planned mine mouth power generation plant.

During the financial year ended 28 February 2010 Elitheni Coal (Pty) Limited ("Elitheni") commenced coal extraction on a test basis and supplied coal to a small number of brickyards in the Eastern Cape of South Africa. This involved the test marketing of the Elitheni's coal and some 4,000 tonnes were supplied during the year.

In January 2010, Elitheni personnel and a local engineering company oversaw the delivery and installation of the first trial burner capable of converting existing boilers to enable them to burn the Elitheni's coal. It is anticipated that Elitheni will develop sales of coal to the local industrial market based on this low pressure boiler conversion project, which is currently undergoing enhancements as a result of the trial unit installed earlier this year and is expected to be introduced as a final product to market by the end of the third quarter of 2010. Our new joint venture to supply steam solutions to the local industrial market is looking forward to developing business during the coming year and will assist in delivering early revenue streams for Elitheni.

In addition to the development of the local industrial steam market aimed at early revenues, Elitheni have commissioned an export feasibility study. The Company has contracted Ports of Africa a local consultancy, experienced in coal handling and port logistics, to complete the study. Development of the Company's export strategy is based on the buoyancy of demand for coal to be supplied overseas. Exports will allow the mine the opportunity to ramp up its supply capabilities, on the basis of an increased level of production, ahead of initiating supply for power generation.

 

Running concurrently with the export feasibility study, the Company has commissioned the update of its Competent Persons Report with additional boreholes not yet included. The Company has also commissioned a detailed bulk sample washability assessment on the coal to assess the metallurgical and other properties inherent within the coal.

It is anticipated the results of the collective studies will be completed by the third quarter of 2010 and subject to the successful findings anticipated, the company will be able to progress plans to conclude negotiations with Transnet (the national ports authority and rail freight carrier) as well as conclude agreements for the export offtake of the product before the end of the year.

Strategic Natural Resources PLC ("SNR") remains committed to supplying IPSA with coal for Independent Power Producer ("IPP") generation in the Eastern Cape of South Africa and the Directors continue to believe in the viability of this strategy, especially in light of recent announcements in South Africa concerning the intention of the Government of South Africa to conclude IPP contracts in 2010. This is in conjunction with a 25% year on year approved price increase for national electricity provider, Eskom, which was announced by the South African electricity regulator in its multi-year price determination on 24 February 2010. As further coal resources are proved, SNR will be able to increase its commitment to supply coal to the IPP market.

Given the delays in developing the IPP market and the time needed to obtain the necessary permissions and construct power generation plant, the Directors have agreed to focus in the short and medium term on both the local steam market and the development of an export strategy.

I am delighted that David Nel has taken up the post of CEO and I am convinced that we shall soon be reaping the benefits of his vision and enthusiasm. The SNR management and the Elitheni team have all put in huge amounts of effort into the development of the Group over the last financial year, for which I offer whole-hearted thanks on behalf of all our shareholders.

 

R. H. R. Latham

Chairman

 

Date: 7 July 2010

 

 

 

 

 

 

 

STRATEGIC NATURAL RESOURCES PLC

 

 

SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 28 FEBRUARY 2010

 

	Notes	Year to 28.02.10	Year to 28.02.09
		£'000	£'000
Administration expenses	5	(502)	(664)
Other income	7	-	2,217
Operating (loss)/profit		(502)	1,553
Finance income	8	104	157
Finance expense	9	(38)	(11)
(Loss)/profit before tax		(436)	1,699
Income tax expense	10	-	-
(Loss)/profit for the year
Attributable to shareholders in SNR		(375)	1,781
Attributable to minority interest	3.4	(61)	(82)
		(436)	1,699
Other comprehensive income for the year:
Exchange differences on translation of foreign operations		93	10
Attributable to shareholders in SNR		69	(6)
Attributable to minority interest		24	16
Total comprehensive (loss)/income for the year		(343)	1,709
Attributable to shareholders in SNR		(306)	1,775
Attributable to minority interest	3.4	(37)	(66)
		(343)	1,709
(Loss)/earnings per share from both total and continuing operations
Basic and diluted (pence per share)	11	(0.54)	2.74

 

 

 

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

 

STRATEGIC NATURAL RESOURCES PLC

SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2010

		28 February 2010					28 February 2009
	Notes	£'000					£'000
Assets
Non-current assets
Property, plant and equipment	13	265					152
Intangible assets	14	3,693					3,026
Total non-current assets		3,958					3,178
Current assets
Trade and other receivables	16	95					65
Loan note	17	2,301					2,209
Cash and cash equivalents	18	414					369
Total current assets		2,810					2,643
Total assets		6,768					5,821
Equity and liabilities
Capital and reserves
Issued capital	19	749					650
Share premium		4,158					3,337
Translation reserve		103					34
Retained earnings		692					1,067
Equity attributable to equity holders of the parent		5,702					5,088
Minority interest	3.4	415					452
Total equity		6,117					5,540
Non-current liabilities
Other Financial liabilities	20	32					55
Provisions	20	91					67
Total non-current liabilities		123					122
Current liabilities
Other Financial liabilities	20	409					27
Trade and other payables	20	119					132
Total current liabilities		528					159
Total liabilities		651					281
Total equity and liabilities		6,768					5,821

 

These financial statements were approved by the Board on 7 July 2010.

 

R Latham E Shaw

Director Director

 

The accompanying accounting policies and notes form an integral part of these financial statements. Company registration number is 5249946.

 

STRATEGIC NATURAL RESOURCES PLC

 

SUMMARISED COMPANY STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2010

 

		28 February					28 February
		2010					2009
		£'000					£'000
	Notes
Assets
Non-current assets
Investments	15	405					405
Trade and other receivables	16i	3,583					-
Total non-current assets		3,988					405
Current assets
Trade and other receivables	16ii	66					2,985
Cash and cash equivalents	18	231					257
Total current assets		297					3,242
Total assets		4,285					3,647
Equity and liabilities
Capital and reserves
Issued capital	19	749					650
Share premium		4,158					3,337
Retained earnings		(690)					(434)
Total equity		4,217					3,553
Current liabilities
Trade and other payables	20	68					94
Total liabilities		68					94
Total equity and liabilities		4,285					3,647

 

These financial statements were approved by the Board on 7 July 2010.

 

 

 

R Latham E Shaw

Director Director

 

 

The accompanying accounting policies and notes form an integral part of these financial statements. Company registration number is 5249946.

 

 

STRATEGIC NATURAL RESOURCES PLC

 

SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 28 FEBRUARY 2010

 

		Year ended		Year ended
		28.2.10		28.2.09
	Notes	£'000		£'000
Cash flows from operating activities
Cash used in operations	21	(827)		(599)
Interest received		12		48
Interest paid		(38)		(11)
Net cash used in		(853)		(562)
operating activities
Cash flows from investing activities
Drilling and exploration costs	14	(300)		(1062)
Purchase of plant and equipment	13	(131)		(72)
Disposals	13	-		10
Cash received from sale of minority interest	7	-		636
Net cash used in investing activities		(431)		(488)
Net cash outflow before financing activities		(1,284)		(1,050)
Cash flows from financing activities
Issue of shares (net of costs)		920		-
Issue of loan note		409		-
Proceeds from finance leases		-		20
Repayment on finance leases		-		(18)
Net cash generated from financing activities		1,329		2
Increase/(decrease) in cash		45		(1,048)
and cash equivalents
Cash and cash equivalents at start of year		369		1,417
Cash and cash equivalents at end of year		414		369

 

The accompanying accounting policies and notes form an integral part of these financial statements. Company registration number is 5249946.

 

 

 

 

 

STRATEGIC NATURAL RESOURCES PLC

 

SUMMARISED COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 28 FEBRUARY 2010

 

 

		Year ended		Year ended
		28.2.10		28.2.09
	Notes	£'000		£'000
Cash flows from operating activities
Cash used in operations	21	(381)		(321)
Interest received		-		25
Net cash used in operating activities		(381)		(296)
Cash flows from investing activities
Loans to subsidiaries		(565)		(588)
Net cash used in investing activities		(565)		(588)
Net cash outflow before financing activities		(946)		(884)
Cash flows from financing activities
Issue of shares (net of costs)		920		-
Net cash generated from financing activities		920		-
Decrease in cash		(26)		(884)
and cash equivalents
Cash and cash equivalents at start of year		257		1,141
Cash and cash equivalents at end of year		231		257

 

The accompanying accounting policies and notes form an integral part of these financial statements. Company registration number is 5249946.

 

 

 

 

STRATEGIC NATURAL RESOURCES PLC

 

SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 2010

 

	Attributable to equity holders of the Company
	Share	Share	Foreign	Retained	Total		Minority	Total
	Capital	premium	Currency	earnings			Interest	equity
			Reserve
	£'000	£'000	£'000	£'000	£'000		£'000	£'000
Balance at 1.3.08	650	3,337	40	(714)	3,313		-	3,313
Profit/(loss) for year to 28.02.09	-	-	-	1,781	1,781		(82)	1,699
Exchange differences	-	-	(6)	-	(6)		16	10
Total recognised income and expense	-	-	(6)	1,781	1,775		(66)	1,709
for the year
Sale of Minority interest	-	-	-	-	-		518	518
Balance at 28.2.09	650	3,337	34	1,067	5,088		452	5,540
Balance at 1.3.09	650	3,337	34	1,067	5,088		452	5,540
Loss for year to 28.02.10	-	-	-	(375)	(375)		(61)	(436)
Exchange differences	-	-	69	-	69		24	93
Total recognised income and expense	-	-	69	(375)	(306)		(37)	(343)
for the year
Allotment of shares	99	860	-	-	959		-	959
Share issue costs	-	(39)	-	-	(39)		-	(39)
Balance at 28.2.10	749	4,158	103	692	5,702		415	6,117

 

 

 

 

 

STRATEGIC NATURAL RESOURCES PLC

 

SUMMARISED COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 28 FEBRUARY 2010

 

		Share	Share	Retained	Total
		Capital	premium	earnings
		£'000	£'000	£'000	£'000
Balance at 1.3.08		650	3,337	(276)	3,711
Loss for the year to 28.2.09		-	-	(158)	(158)
Total recognised income		-	-	(158)	(158)
and expense for the year
Balance at 28.2.09		650	3,337	(434)	3,553
Balance at 1.3.09		650	3,337	(434)	3,553
Loss for the year to 28.2.10		-	-	(256)	(256)
Total recognised income		-	-	(256)	(256)
and expense for the year
Allotment of shares	99		860	-	959
Share issue costs	-		(39)	-	(39)
Balance at 28.2.10	749		4,158	(690)	4,217

 

 

STRATEGIC NATURAL RESOURCES PLC

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 28 FEBRUARY 2010

 

 

1 Nature of operations

 

The principal activity of Strategic Natural Resources PLC and its subsidiary entities ('the Group') is the acquisition and development of natural resource assets. During the year under review, all of the Group's activities were located in South Africa.

 

2 General information

 

Strategic Natural Resources PLC is the Group's ultimate parent company. It is incorporated and domiciled in England and Wales. The address of Strategic Natural Resources PLC is given on the information page. Strategic Natural Resources PLC shares are traded on the AIM market of The London Stock Exchange PLC.

 

3 Summary of accounting policies

 

3.1 Basis of preparation

 

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

 

The consolidated financial statements of Strategic Natural Resources PLC have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs") as adopted by the EU, IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets.

 

3.2 Going concern

 

As set out in notes 7 and 17, the loan note issued by the Company's subsidiary, Acharnian Mining Limited, which was due to be settled by 31 May 2009, remains unsettled. Accordingly, the directors have decided to raise additional finance and since the year-end, £2.9m before expenses has been raised by the issue of new equity in April 2010.

 

Following the issue of new equity in April 2010, the directors have concluded, after preparing cash flow forecasts, that the Company and the Group has sufficient working capital for the foreseeable future, although as with most junior mining companies, new funds will be needed to fully exploit the Group's plans.

 

3.3 Accounting standards

 

The Group has adopted the following new and amended IFRSs as of 1st March 2009:

 

·; IAS 1 (revised) 'Presentation of financial statements' - effective 1st January 2009. The revised standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity in a statement of comprehensive income. As a result the Group has elected to present the 'Statement of comprehensive income' in two statements: the 'Consolidated income statement' and a 'Consolidated statement of comprehensive income'. Only one comparative period has been presented for the balance sheet as there are no retrospective restatements of any figures from applying the amended IAS 1. As the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

·; IFRS 7 (amendment) 'Financial instruments - Disclosures' - effective 1st January 2009. The amendment requires enhanced disclosure about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy.

·; IFRS 8 'Operating Segments' - effective 1st January 2009. The standard requires disclosure of information about the Group's operating segments and also about the Group's businesses and the geographical area in which it operates.

 

 

The following new standards, amendments to standards or interpretations have been issued but are not effective for the financial year beginning on 1 March 2010 and have not been early adopted.

 

·; IFRS 9 'Financial Instruments' - effective 1st January 2013

·; IFRIC 14 (amendments) 'Prepayments of a Minimum Funding Requirement' - effective 1st January 2011

·; IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' - effective 1st July 2010

·; IFRS 2 (amendments) 'Group Cash-settled Share-based Payment Transactions' - effective 1st January 2010

·; IAS 24 (revised 2009) 'Related Party Disclosures' - effective 1st January 2011

 

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. The Group does not intend to apply any of these pronouncements early.

 

 

3.4 Basis of consolidation

 

These financial statements consolidate those of the Company and its subsidiary undertakings drawn up to 28 February 2010.

 

Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from its activities. The Group obtains and exercises control through voting rights.

 

Unrealised gains on transactions between the Group and subsidiary entities are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiary entities have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

 

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the acquired company, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the entity prior to acquisition. On initial recognition, the assets and liabilities of the acquired entity are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group accounting policies. Investments in subsidiaries and joint ventures are stated at cost less impairment in the balance sheet of the Company.

 

The minority interest shown in the consolidated statement of comprehensive income and the consolidated statement of financial position represents the 26% interest owned by minority shareholders in the Group's operating subsidiary, Elitheni Coal (Pty.) Ltd.

3.5 Foreign currency translation

 

The financial information is presented in pounds sterling, which is also the functional currency of the parent company.

 

In the separate financial statements of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of remaining balances at year-end exchange rates are recognised in the Statement of Comprehensive Income in administrative expenses.

 

In the consolidated financial statements, all separate financial statements of subsidiary entities, originally presented in a currency different from the Group's presentation currency, have been converted into sterling. Assets and liabilities have been translated into sterling at the closing rate at the balance sheet date. Income and expenses have been converted into sterling at the average rates over the reporting period. Any differences arising from this procedure have been charged / (credited) to the Translation Reserve.

 

3.6 Income and expense recognition

 

Revenue is recognised upon the performance of services and delivery of goods or transfer of risk to the customer. No revenues were recorded during the current year.

 

Operating expenses are recognised in the Statement of Comprehensive Income upon utilisation of the service or at the date of their origin. All other income and expenses are reported on an accruals basis.

 

3.7 Borrowing costs

 

All borrowing costs are expensed as incurred except where the costs are directly attributable to specific construction projects, in which case the interest cost is capitalised as part of those assets.

 

3.8 Plant and equipment

 

Plant and equipment is stated at cost, net of accumulated depreciation and any provision for impairment. No depreciation is charged during the period of construction.

 

Depreciation is calculated to write down the cost or valuation less estimated residual value of all plant and equipment by equal annual instalments over their estimated useful economic lives. The periods generally applicable are:

 

Plant and equipment 3 to 15 years

Fixtures and fittings 3 years

Motor vehicles 5 years

 

Material residual values are updated as required, but at least annually, whether or not the asset is revalued. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

 

3.9 Intangible assets (comprising development and exploration work)

 

An intangible asset is recognised when it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity and that the cost of the asset can be measured reliably. Intangible assets are recognised at cost, their carrying value is cost less accumulated depreciation and any impairment losses.

 

Drilling, exploration and mine development costs are capitalised as intangible fixed assets to the extent that there is a reasonable degree of certainty that there will be a future income stream from the project which has a positive net present value over the expected life of the project. The costs will be amortised over the life of the mine when production commences.

 

3.10 Impairment of plant and equipment and intangible assets

 

At each balance sheet date, the Group reviews the carrying amount of its plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the Statement of Comprehensive Income, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the Statement of Comprehensive Income, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

3.11 Taxation

 

Current income tax assets and liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the period. All changes to current tax assets or liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income.

 

Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. However, in accordance with the rules set out in IAS 12, no deferred taxes are recognised in respect of non-tax deductible goodwill. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.

 

Deferred tax liabilities are provided for in full with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided that they are enacted or substantially enacted at the balance sheet date.

 

Deferred tax is provided on differences between the fair value of assets and liabilities acquired in an acquisition and the carrying value of the assets and liabilities of the acquired entity and on the differences relating to investments in a subsidiary unless the temporary difference can be controlled and will probably not reverse in the foreseeable future.

 

Changes in deferred tax assets and liabilities are recognised as a component of tax expense in the Statement of Comprehensive Income, except where they relate to items that are charged or credited directly to equity in which case the related deferred tax is also charged or credited directly to equity.

 

3.12 Financial assets

 

The Group's financial assets include cash and cash equivalents, trade and other receivables and loan notes.

 

Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as money market instruments and bank deposits.

 

Receivables and loan notes are non-derivative financial assets with fixed or determinable payment dates that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. Receivables are measured initially at fair value and subsequently re-measured at amortised cost using the effective interest method, less provision for impairment. Any impairment is recognised in the Statement of Comprehensive Income.

 

Trade receivables and loan notes are provided against when objective evidence is received that the Group will not be able to collect all amounts due to it in accordance with the original terms. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated cash flows.

 

3.13 Financial liabilities

 

The Group's financial liabilities include current and non-current trade and other payables.

 

Financial liabilities are obligations to pay cash or other financial instruments and are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value, at the current time the Group have not entered into any held for trading financial instruments and so do not have any instruments at fair value through profit or loss. All transaction costs are recognised immediately in the Statement of Comprehensive Income. All other financial liabilities are recorded initially at fair value, net of direct issue costs.

 

Financial liabilities are subsequently recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance expense in the Statement of Comprehensive Income. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are charged to the Statement of Comprehensive Income on an accruals basis using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

 

A financial liability is derecognised only when the obligation is extinguished, that is when the obligation is discharged, cancelled or expires.

 

3.14 Restoration, rehabilitation and environmental costs

 

An obligation to incur restoration, rehabilitation and environmental costs arises when environmental disturbance is caused by the development or ongoing production of a mining property. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are charged against profits over the life of the operation, through the amortisation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and charged against profits as extraction progresses.

 

Changes in the measurement of a liability relating to the decommissioning of plant and other site preparation work that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If the increase in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the Statement of Comprehensive Income.

 

If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

 

3.15 Social and labour plan costs

 

An obligation to incur social and labour costs to uplift the community arises in terms of a Social and Labour Works Programme submitted to the Department of Minerals and Energy, committing to the upliftment in areas like, human resources development programmes, local economical developments, formation of trusts to drive community projects, small, medium and micro enterprise development and community development.

 

Such costs arising from the uplifting of the community, discounted to their present value, are provided for and capitalised at the date of the granting of the mining right and as soon as the constructive obligation to incur such costs arises.

 

These costs are charged against profits over the first five years of the mining right, through the amortisation of the asset and the unwinding of the discount on the provision.

 

Changes in the measurement of a liability relating to the social and labour plan that results from changes in the estimated timing or amount of the cash flow, or a change in the discount rate, are added to, or deducted from, the cost of the related asset in the current period. If the increase in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the Statement of Comprehensive Income.

 

If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

 

3.16 Equity

 

Equity comprises the following:

 

●"Share capital" represents the nominal value of equity shares.

●"Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.

●"Foreign Currency reserve" represents the differences arising from translation of investments in overseas subsidiaries.

●" Retained Earnings" represents cumulative retained profits / (losses).

●"Minority interest" represents the minority's interest in the net assets of the entity in which the minority has a shareholding.

 

3.17 Share based payments

 

Consideration received in respect of the sale of equity instruments to the minority interest was compared with the fair value of those of those equity instruments in accordance with IFRS 2 "Share Based Payments" and IFRIC 8 "Scope of IFRS 2". Any differences arising between the consideration and fair value would be recognised as a share based payment charge.

 

3.18 Pensions

 

During the period under review, the Group did not operate or contribute to any pension schemes (2009 - nil).

 

3.19 Key assumptions and estimates

 

The Group makes estimates and assumptions concerning the future. The resulting estimates will, by definition, seldom equal the related actual results. The Board has considered the critical accounting estimates and assumptions used in the financial statements and concluded that the main area of significant risk which may cause material adjustment to the carrying value of assets and liabilities within the next financial year is in respect of the assumptions used to value plant, machinery and drilling and exploration costs. These assets and assumptions are periodically examined by the directors to determine to whether or not impairment indicators exist.

 

Another important assumption relates to the repayment of the loan notes and the interest arising thereon, details of which are set out in note 17. The directors anticipate that the loan note plus interest owing will be paid in full but a 50% provision has nevertheless been made recognising the credit risks associated with these instruments.

 

A further important area requiring estimates and assumptions is deferred tax. At 28 February 2010, no recognition has been made of the potential deferred tax asset arising from the Group's trading losses to date in view of the uncertainty regarding both the timing of the reversing of the asset and the tax rate which will apply when the reversing occurs.

 

As set out in note 20(3), the loan from Ulitorque was repaid after the year-end and as a result no fair value was attributed to the option as in the opinion of the directors the terms of the loan were modified during the year and therefore the option element lapsed.

 

3.20 Segment reporting

 

The Group's only operating activities at present are the coal mining activity in South Africa and the head office function in the UK

 

The measurement policies used by the Group for segment reporting under IFRS 8 are the same as those used in the financial statements.

 

4 Segment analysis

The Group has adopted IFRS 8 'Operating Segments' with effect from 1 March 2009. IFRS 8 requires operating segments to be reported on the basis of internal reports that are regularly reviewed by the Board.

The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2010 and 2009 for each geographic segment. The Group has only two operating activities, being the development of the coal mining asset in South Africa and the head office function in the UK.

Year to 28.02.10	South	UK	Inter-group	Total
	Africa		Elimination
	£'000	£'000	£'000	£'000
Administrative expenses	(439)	(343)	-	(782)
Exchange differences	280	-	-	280
	(159)	(343)	-	(502)
Interest income	12	142	(50)	104
Interest expense	(38)	-	-	(38)
Loss before taxation	(185)	(201)	(50)	(436)
Taxation	-	-	-	-
Loss after taxation	(185)	(201)	(50)	(436)
Total assets	4,170	4,597	(1,999)	6,768
Total liabilities	2,583	67	(1,999)	651
Capital expenditure and expenditure on intangible asset:
Plant and equipment	131	-	-	131
Intangible asset	300	-	-	300
Year to 28.02.09	South	UK	Inter-group	Total
	Africa		Elimination
	£'000	£'000	£'000	£'000
Administrative expenses	(420)	(244)	-	(664)
Profit on sale of minority interest	-	2,217	-	2,217
Interest income	22	195	(60)	157
Interest expense	(71)	-	60	(11)
(Loss) / profit before taxation	(469)	2,168	-	1,699
Taxation	-	-	-	-
(Loss) / profit after taxation	(469)	2,168	-	1,699
Total assets	3,301	3,904	(1,384)	5,821
Total liabilities	1,571	94	(1,384)	281
Capital expenditure and expenditure on intangible asset:
Plant and equipment	72	-	-	72
Intangible asset	1,062	-	-	1,062

 

5 Administrative expenses			Year to	Year to
			28.02.10	28.02.09
			£'000	£'000
Included within administrative expenses are the following expenses:
Payroll and social security			389	338
Legal and professional			127	130
Office costs and general overheads			247	253
Foreign exchange gains			(280)	(99)
Fees paid to the auditors:
in respect of the parent company audit			17	19
in respect of non-statutory audit (2010 zero 2009 13)			-	13
in respect of subsidiary company audits			2	10
			502	664
6 Employment costs			Year to	Year to
			28.02.10	28.02.09
			£'000	£'000
a) Total remuneration
Aggregate remuneration of all			367	305
employees and directors
Social security costs			22	33
			389	338
Number of employees			15	18
Directors' remuneration
R Latham			21	19
J Metcalfe			31	29
B Nel			109	83
D Nel			92	61
E Shaw			26	24
P Earl			16	14
R MacDonnell			16	14
			311	244

 

No other emoluments or pension contributions were paid to or on behalf of directors (2009 - nil). All key management positions are held by directors.

 

7 Other income

 

In the prior year other income comprises the profit on sale of investments which arose from the sale of 26% of Elitheni Coal (Pty.) Ltd. On 26 June 2008, the Company's wholly owned subsidiary, Acharnian Mining Ltd, exchanged contracts for the sale of 26% of its interest in Elitheni Coal (Pty.) Limited for a total consideration of £4.835m of which ZAR 10m (£636,000) has been received. The balance of £4.2m was originally payable in two tranches, £3.3m by 12 December 2008 and £0.9m by 31 May 2009. The repayment date of the tranche due by 12 December 2008 was subsequently extended to 31 May 2009. All of the £4.2m is now repayable on demand. The deferred consideration is secured against the shares sold and attracts interest at 2.25% over LIBOR (see note 17).

 

The purchasers of the 26% interest have advised the Company that as a result of the contraction in the capital debt markets they have not yet obtained finance for the £4.2m balance owing. Following representations made by the purchasers, the directors anticipate that the £4.2m balance owing, plus the interest accrued at the balance sheet date of £402k will be paid in full but have none-the-less decided to make a provision of 50% (£2.3m) against the amounts owing.

 

The interest recognised in finance income in the year is £92k (2009 - £110k) after a provision of 50%.

 

No share based payment charge under IFRS 2 arises on this transaction since the fair value of the consideration received is considered to be the same as the fair value of the equity sold.

 

The sale agreement refers to the possibility that the purchasers of the 26% interest in Elitheni may, at some time in the future and subject to the agreement of the Company, convert their interest in Elitheni into ordinary shares in the Company. No terms for a conversion have been agreed as at the date of these financial statements and accordingly no fair value is deemed to exist in respect of conversion rights which may be agreed in the future.

 

8 Finance income			Year to	Year to
			28.02.10	28.02.09
			£'000	£'000
Interest received on bank deposits			12	48
Loan interest receivable (net			92	109
of provision - see note 7)
			104	157

 

The loan interest is due from the minority shareholders in respect of the deferred consideration (see note 7). The interest rate on the loan is based on six month and twelve month LIBOR plus 2.25%.

 

9 Finance expense			Year to	Year to
			28.02.10	28.02.09
			£'000	£'000
Interest paid on finance leases			10	11
Loan note interest (see note 20)			28	-
			38	11

 

10 Tax expense

 

No taxation is due to be paid in respect of the results for the periods covered by these financial statements. The directors anticipate that the gain arising on the sale of the investment will qualify for relief under the substantial shareholding provisions and accordingly no tax will become payable on the gain. Losses carried forward which may be available for offset against income in future periods are estimated at £406k in the UK and ZAR 21m / £1.6m in South Africa. No deferred tax asset has been recognised in respect of these losses owing to uncertainty over the timing of when the losses will be utilised. If a deferred tax asset was recognised, the carrying value of the asset is estimated at £465k (2008 - £142k).

 

11 (Loss)/earnings per share

 

The basic and diluted (loss)/earnings per share has been calculated by dividing the result for the respective year attributable to shareholders by the weighted average number of shares in issue during the relevant year.

			Year to	Year to
			28.02.10	28.02.09
(Loss) / profit attributable to			£(375,000)	£1,781,000
equity shareholders of the Company
Average number of shares in issue			69,929,000	65,000,000
Basic and diluted EPS			(0.54p)	2.74p
Headline EPS			(0.54p)	(0.62p)

 

Headline EPS for the year to 28.02.09 excludes the profit of £2.2m recognised on the sale of a 26% interest in Elitheni Coal (Pty.) Limited (see note 7).

 

12 Parent company's result for the period

 

As permitted by Section 408 of the Companies Act 2006, the parent company's income statement is not shown separately in the financial statements. The loss for the period was £256k (29 February 2009 - loss £158k).

 

13 Property, plant and	Plant	Fixtures	Motor	Total
equipment	and	and	vehicles
	equipment	fittings
	£'000	£'000	£'000	£'000
Net book value at 1.3.08	32	21	68	121
Additions	34	13	25	72
Disposals	-	-	(10)	(10)
Depreciation	(10)	(8)	(18)	(36)
Exchange adjustments	2	1	2	5
Net book value at 28.2.09	58	27	67	152
Additions	131	-	-	131
Depreciation	(19)	(9)	(21)	(49)
Exchange adjustments	11	6	14	31
Net book value at 28.2.10	181	24	60	265

 

The motor vehicles have been financed by hire purchase.

 

14 Intangible assets				£'000
At 1 3 08				1,964
Drilling and exploration costs				1,062
during year
At 28.2.09				3,026
Drilling and exploration costs				300
during year
Exchange adjustment				367
At 28.2.10				3,693

 

The intangible asset represents the directors' estimate of the fair value of the coal mining licence and the development and exploration work which has been undertaken at the site in South Africa.

 

When the mine is in economic production, these costs associated with bringing the mine into production will be amortised over the expected useful life of the mine. No amortisation has been charged in the current or prior year since the production from the mine has been negligible.

 

15 Investments			28.2.10	28.2.09
			£'000	£'000
At cost			405	405

 

On 13 December 2006, the Company acquired 100% of the issued share capital of Acharnian Mining Ltd, a company incorporated in the British Virgin Islands, company number 1056886. Acharnian Mining Ltd owns 74% (2009 - 74%) of the issued share capital of Elitheni Coal (Pty.) Ltd, a company incorporated in South Africa, company number 2001/002173/07.

 

16 Trade and other receivables			28.2.10	28.2.09
			£'000	£'000
a) Group
Trade receivables			20	6
Other receivable and prepayments			65	45
Vat recoverable			10	14
			95	65
b) Company i)Non Current
Amount due from subsidiary			3,583	-
ii) Current Other receivables and prepayments			62	46
Vat recoverable			4	8
Amount due from subsidiary			-	2,931
			66	2,985

 

All trade and other receivables are short-term. The carrying value of all trade and other receivables is considered a reasonable approximation of fair value.

 

The amount due from subsidiary is repayable on demand and bears interest at 3 month LIBOR plus 1.5%.

 

17 Loan note

 

The loan note represents the instrument under which the deferred consideration arising on the sale of the Group's 26% interest in Elitheni Coal (Pty.) Ltd is owing and secured. The loan note comprises two loan notes:

 

a) Payable on demand (initially payable by 12 December 2008) - £3.3m. Interest is payable at 6 month LIBOR plus 2.25%. This loan note is secured on 21% of the share capital of Elitheni.

 

b) Payable on demand - £0.9m. Interest is payable at 12 month LIBOR plus 2.25%. This loan note is secured on 5% of the share capital of Elitheni.

 

The balance owing at the year-end in respect of accrued interest amounts to £402k (2009 - £219k).

 

As set out in note 7, the directors have made a 50% provision against the amount owing on the loan notes and the accrued interest.

 

			28.02.10	28.02.09
			£'000	£'000
Loan notes - principal			4,199	4,199
Add: accrued interest			402	219
Less provision			(2,300)	(2,209)
Balance net of provision			2,301	2,209

 

18 Cash and cash equivalents

 

Cash and cash equivalents in the Group and the Company comprise cash and short term bank deposits held in interest bearing accounts, accessible at between 1 and 30 days notice.

 

19 Share capital

 

The share capital of the Company consists of fully paid ordinary shares with a par value of 1p. All shares are equally eligible to receive dividends and the repayment of capital and represent one vote at the shareholders' meeting of the Company.

			28.02.10	28.02.09
Shares issued and fully paid
At beginning of the year			65,000,000	65,000,000
Shares issued during the year			9,938,333	-
At end of the year			74,938,333	65,000,000
Value			£749,383	£650,000

Since the year end, the Company has raised £2.9m before expenses through a placing of 19,165,000 ordinary 1p shares at £0.15 each.

 

20 Trade, other payables			28.02.10	28.02.09
and provisions			£'000	£'000
a) Group
i) Non-current
Hire purchase			32	55
ii) Non-current
Provisions
Social and labour commitments1			73	63
Environmental rehabilitation2			18	4
			91	67
iii) Current
Trade payables			49	68
Accruals			29	61
Payroll taxes			5	5
Hire purchase			36	27
Loan note3			409	-
			528	159
b) Company
Current
Trade payables			34	30
Accruals			29	61
Payroll taxes			5	3
			68	94

 

1The social and labour commitments provision recognises the obligation to incur social and labour costs in South Africa to uplift the community arising out of a Social and Labour Works Programme submitted to the Department of Minerals and Energy in South Africa. The uplifting covers areas such as human resources development programmes, local environmental developments, formation of trusts to drive community projects, small, medium and micro enterprise development and community development.

 

2The environmental rehabilitation provision represents an obligation to incur restoration, rehabilitation and environmental costs in South Africa when environmental disturbance is caused by the development and mining activities. A provision is recognised for the present value of such future costs. Provision is also made for the future costs relating to the decommissioning of the plant or other restoration work. It is anticipated that the cost of restoration and decommissioning will be incurred over the life of the mine. The provision is based on the estimated net costs to rehabilitate the mine on the assumption that third parties will attend to the rehabilitation of the mine, including Vat and a 10% contingency.

 

3On 17th June 2009 Elitheni Coal entered into a loan agreement with Ulitorque (Pty.) Limited, a private company registered in South Africa, the loan principal being ZAR4.5m (£320k). Under the loan agreement interest accrued and was compounded monthly on the basis of JIBAR plus a margin of 3.5 per cent. The loan agreement provided the lender with the opportunity to convert the outstanding balance due under the agreement into a 10 per cent equity interest in Elitheni 9 months after drawdown, or into new shares of the Company equal to such outstanding loan amount. In view of the conversion element, the loan contained contingently exercisable embedded derivatives. This loan was modified by the lender requesting repayment during the year, as result of which the contingently exercisableembedded derivative terminated, accordingly no adjustment to the carrying value was required. Subsequently the loan and accrued interest was repaid on 16th March 2010.

 

21 Reconciliation of (loss)/ profit before tax to cash used in operations

 

			Year to	Year to
			28.2.10	28.2.09
			£'000	£'000
a) Group
Result for the year			(436)	1,699
Depreciation			49	36
Changes in working capital			(69)	29
Deduct finance income			(104)	(157)
Deduct finance expense			38	11
Unrealised exchange adjustment			(305)	-
Profit on sale of investment			-	(2,217)
Net cash outflow from			(827)	(599)
operating activities

 

b) Company
Result for the year			(256)	(158)
Changes in working capital			(38)	22
Deduct finance income			(87)	(185)
Net cash outflow from			(381)	(321)
operating activities

 

22 Capital commitments

 

The Group, through its interest in its subsidiary company, Elitheni is engaged in developing the mining licence owned by Elitheni. At the balance sheet date and at the date of the approval of these financial statements, there were no outstanding commitments to make further investment in the development of the mine although the directors intend to continue investing funds to maximise the future income from the Group's mining assets.

 

23 Related party transactions

 

During the year, the Company paid £0.06m (2009 - £0.06m) to Independent Power Corporation PLC, a company of which P Earl and E Shaw are directors and shareholders, under a "Shared Services Agreement" for the provision of office and other administrative services.

 

The Company has made loans to its subsidiary, Acharnian, amounting to £3.58m at the balance sheet date (2009 - £2.93m) loan. Interest charged during the year amounted to £0.09m (2009 - £0.16m).

 

Acharnian has made loans to Elitheni amounting to £2.0m at the balance sheet date (2009 - £1.38m). Interest charged during the year amounted to £0.05m (2009 - £0.06m).

 

24 Financial assets and liabilities

The Group's financial instruments comprise cash and cash equivalents, loan note receivable, loan note payable and various items that arise directly from its operations such as trade receivables, trade payables and hire purchase liabilities.

 

The main purpose of these financial instruments is to finance the Group's operations.

 

The Board regularly reviews and agrees policies for managing the level of risk arising from the Group's financial instruments. These are summarised below.

 

Market risk

 

Foreign currency risk - The Group undertakes transactions principally in British pounds sterling and South African Rand. While the Group continually monitors its exposure to movements in currency rates, it does not utilize hedging instruments to protect against currency risk.

 

The functional currency of the Company is British pounds sterling. At 28 February 2010, cash balances amounting to £231k (2009 - £257k) were held in Sterling denominated accounts.

 

The functional currency of Elitheni is South African Rand ("ZAR"). At 28 February 2010, Elitheni held cash balances denominated in ZAR amounting to ZAR 2,168k / £183k (2009 - ZAR 1,594k / £112k).

 

ZAR denominated financial assets and liabilities at 28.2.2010, translated into British pounds Sterling at the closing rate, are as follows:

 

	ZAR'000	£'000
Trade and other receivables	344	29
Cash and cash equivalents	2,168	183
Other financial liabilities (non-current)	(379)	(32)
Provisions	(1,079)	(91)
Other financial liabilities (current)	(4,848)	(409)
Trade and other payables	(616)	(52)
Net financial liabilities	(4,410)	(372)

 

The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group's financial assets and financial liabilities and the sterling/ZAR and the sterling exchange rate.

It assumes a +/- 20 per cent. change of the sterling/ZAR exchange rate for the year ended 28 February 2010 (2009: 20 per cent.). Both of these percentages have been chosen to reflect the recent market volatility of the currencies concerned. The sensitivity analysis is based on the Group's foreign currency financial assets and liabilities.

 

If sterling had weakened against the ZAR by the above percentages this would have had the following impact:

	28.2.10	28.2.09
	£'000	£'000
Net result for the year	(37)	(94)
Equity	(75)	(70)

 

If sterling had strengthened against the ZAR by the above percentages this would have had the following impact:

	28.2.10	28.2.19
	£'000	£'000
Net result for the year	37	94
Equity	75	70

 

Exposures to foreign exchange rates vary during the year throughout the normal course of the Group's business. The above analysis is considered to be representative of the Group's exposure to currency risk.

 

Interest rate risk- The Group utilises cash deposits at variable rates of interest for short-term periods, depending on cash requirements. The rates are reviewed regularly and the best rate obtained in the context of the Group's needs. The results of the Group are not significantly affected by the level of interest income.

 

Interest earning balances were held in British pounds sterling and ZAR. The weighted average interest rate for British pounds sterling was 0.5 per cent. (2009: 1 per cent.) and for ZAR 1.5 per cent. (2009: 2.5 per cent.). If interest rates had been 1% point higher or lower during the year, the effect on net interest income would have been £10k (2009 - £15k)

 

Liquidity risk

In common with many exploration companies, the Company raises finance for its exploration and appraisal activities in discrete tranches to finance its activities for limited periods only. Further funding is raised as and when required. The Group's policy continues to be to ensure that it has adequate liquidity by careful management of its working capital.

 

Credit risk - Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions, trade receivables and other financial instruments.

 

Credit risk from balances with banks and financial institutions is managed by the Board. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty.

 

Counterparty credit limits are reviewed by the Board on a regular basis. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through potential counterparty failure.

 

The Group has exposure to counterparty risk in the form of the loan note referred to in note 17. As explained in note, 17, a provision of 50% has been made against the loan note since although the directors have not been advised that the loan will not be paid in full, the loan is overdue due to the delay in the counterparty obtaining funding. In the event that the loan note became uncollectable, a write-down of £2.3m would be required. However, the Company has security in the form of a charge over 26% of the shares in Elitheni and therefore if the loan note became uncollectable, the Company's interest in Elitheni would increase from 74% to 100%.

 

The recent difficulties in the debt market may, if they continue, affect the Group's ability to raise debt finance to fully exploit the Group's mining assets within the timetable desired.

 

Financial assets

The Group and Company held the following investments in financial assets:

	Group	Group	Company	Company
	28.2.10	28.2.09	28.2.10	28.2.09
	£'000	£'000	£'000	£'000
Trade receivables	20	6	-	-
Cash at bank and in hand	414	369	231	257
Loan note receivable	2,301	2,209	-	-
	2,735	2,584	231	257

 

Cash at bank and in hand comprise cash and short-term deposits held by the Group treasury function. The carrying amount of these assets is approximately their fair value.

 

Financial liabilities

The Group and Company held the following financial liabilities:

	Group	Group	Company	Company
	28.2.10	28.2.09	28.2.10	28.2.09
	£'000	£'000	£'000	£'000
Other financial liabilities	441	82	-	-
Trade and other payables	119	132	68	94
	560	214	68	94

 

Derivative financial instruments measured at fair value

IFRS 7.27A. The Group adopted the amendments to IFRS 7 Improving Disclosures about Financial Instruments effective from 1 March 2009. These amendments require the Group to present certain information about financial instruments measured at fair value in the statement of financial position. Neither the Group nor the Company had any derivative financial during either period.

 

25 Capital management and procedures

 

The Group's capital management objectives are:

 

a) to ensure the Group's ability to continue as a going concern;

b) to increase the value of the assets of the Group; and

c) to enhance shareholder value in the Company and returns to shareholders

 

The achievement of these objectives is undertaken by developing existing ventures and identifying new ventures for development. The Group will also undertake other transactions where these are deemed financially beneficial to the Company.

 

The directors continue to monitor the capital requirements of the Group by reference to expected future cash flows.

 

26 Post balance sheet date events

 

a) On 17th March 2010, the Company allotted 19,165,000 ordinary 1p shares for through a placing at 15p per share raising £2.9m before expenses.

 

b) As set out in note 20, the loan note was repaid on 16 March 2010.

 

27 Publication of non statutory accounts

 

The summary accounts set out above do not constitute statutory accounts as defined by Section 435 of the UK Companies Act 2006. The summarised consolidated and company statements of financial position at 28 February 2010 and the summarised consolidated statement of comprehensive income, consolidated and company statements of cash flows and consolidated and company statements of changes in equity for the year then ended have been extracted from the Group's 2010 statutory financial statements upon which the auditors' opinion is unqualified. The results for the year ended 28 February 2009 have been extracted from the statutory accounts for that period, which contain an emphasis of matter paragraph in respect of going concern. 

 

The annual report and accounts for 2010 together with the notice of the Annual General Meeting to be held on 4th August 2010 are being sent by post to all registered shareholders. Additional copies of the annual report and accounts are available from the Company's London office, Fifth Floor, Prince Consort House, 27-29 Albert Embankment, London SE1 7TJ.