2 Sep 2013 07:10
Version 10 - 1 September 2013
2 September 2013
STRATEGIC NATURAL RESOURCES PLC
("SNR" or the "Company")
Audited results for the sixteen months ended 30 June 2013
Strategic Natural Resources Plc (AIM: SNRP), the 74 per cent. owner of coal exploration and mining assets located near Indwe in the Eastern Cape Province of South Africa, announces its audited results for the sixteen months ended 30 June 2013.
On 16 January 2013 the Company announced that it had changed its accounting reference date from 28 February to 30 June. The Company is announcing its audited figures for the sixteen months ended 30 June 2013 and is publishing its 2013 Annual Report and Accounts.
Highlights:
· Mining operations commenced in the last quarter of 2012
· All logistics and infrastructure required to transport coal mined at the Elitheni mine to the port fully in place
· First sales cargo of Elitheni coal currently being loaded into vessel at the Port of East London
· Increase in non current assets from £6.2m to £24.8m reflect significant investment in mining activities; losses for the period of £4.0m
· Exclusive discussions with an international coal trader at an advanced stage with regard to a potential strategic investment in the Company
Gabriel Ruhan, Chief Executive Officer of SNR, said:
"The last sixteen months have seen a significant transformation in our business, moving from pure exploration into project commissioning and then in to coal mining operations, with our first revenues imminent. This has taken a significant effort from all involved with many challenges faced and overcome during what proved to be a difficult and problematic project start-up and commissioning phase.
"The year ahead presents exciting challenges as we seek to ramp up coal production, deliver regular sales cargoes and improve operating efficiency in the current environment of low international coal prices. We are also working to secure the right funding to enable us to begin unlocking the strategic value within the business. Obviously without such new funding we will need to look at other ways of funding our operations and satisfying our creditors
"I look forward to the business making significant progress towards its strategic objectives during the next financial year."
For further information, please contact:
Strategic Natural Resources plc Andy Brennan, Chairman Gabriel Ruhan, CEO | +44 (0)20 3328 5656 |
Allenby Capital Limited - Nominated Adviser and Broker Nick Naylor/Mark Connelly/James Reeve | +44 (0) 20 3328 5656 |
FTI Consulting Ben Brewerton/Oliver Winters | +44 (0) 20 7831 3113 |
For further information about Strategic Natural Resources plc please visit www.snrplc.co.uk
Chairman's Statement
I have the pleasure in presenting Strategic Natural Resources Plc's 2013 Financial Statements and a summary of activities over the sixteen months ended 30 June 2013.In February 2013 we announced the following important changes to the boards of Strategic Natural Resources Plc ("SNR" or the "Company") and our 74% owned subsidiary, Elitheni Coal (Pty) Limited ("Elitheni"):
Mr. Barry Nel and Mr. Bertus Steenkamp resigned from the boards of both companies and Mr. David Nel resigned as CEO of SNR to focus exclusively on managing the operations at Elitheni as its CEO.Mr. Don Nicolson was appointed Executive Vice Chairman whilst Mr. Gabriel Ruhan was appointed CEO of SNR and also subsequently to the board of Elitheni, where Mr. Niall Mellon was appointed Executive Chairman.Mr. Richard Latham, founding Chairman stepped down to become a Non-Executive Director.
Shareholders will be aware from my statement of 31 May 2013 accompanying our unaudited interim results for the period to 28 February 2013 that, arising from key delivery targets being missed due to engineering and commissioning issues at our mine near Indwe in the Eastern Cape Province of South Africa (the "Elitheni Mine"), a full operational and management review was instigated by newly appointed CEO, Mr. Gabriel Ruhan.As a result of this review and under Mr. Ruhan's supervision, appropriate changes have been made to the Elitheni Mine infrastructure and personnel, with further enhancements planned over the coming months. I am pleased to report that these changes have resulted in a tangible improvement in operations to date.
Coal Operations
I am very pleased to announce that following on from improvements to our mining operations, including wash plant yields, road and rail logistics, our first coal export shipment from the Elitheni Mine will be dispatched from the Port of East London within approximately seven days from the date of this report. The achievement of this important milestone enables the Company to commence initial revenue generation and will be followed by regular coal shipments in the coming financial year.However and as already highlighted in my half yearly report, the current depressed worldwide price of coal is a strong disincentive to investing further capital to ramp up our production capability beyond the levels possible with our current investment plans. Consequently, our focus will be on maximising the cost efficiency and productivity of the current mining capability whilst further developing mine planning to enable the Company to be in a position to increase coal production capacity when international coal prices improve. Whilst at current price levels our profit is marginal at best, we believe it is essential to continue mining operations to establish our position as a coal producer with tremendous potential, given our significant coal resources and infrastructure advantages in the Eastern Cape and at the Port of East London.Development of what we perceive to be a potentially valuable local sales market is being explored by the Board, with a number of interesting options under consideration. Shareholders will already be aware that we have signed an important off-take agreement to supply coal from the Elitheni Mine to an Eastern Cape major bio ethanol plant, scheduled to be operational in late 2015.In relation to development of exports we continue to enjoy tremendous support from ransnet, port operator of East London, who plan to provide a dedicated terminal at the Port of East London for our coal, following the successful installation of an R70m mobile crane to cater for our containers.
Strategy
Our key strategic objectives are as follows:
• Finalise an agreement with a strategic investor to repay current debt and provide adequate funding for on-going development and proving up of further coal reserves and resources in our license areas. We recently granted exclusivity to one party and they are continuing their due diligence. We will make further announcements as appropriate.
• Maintain and enhance financially viable production levels at the Elitheni Mine.
• Advance a coal fired power station strategy partnership and agree a profitable supply agreement.
• Explore and develop a local domestic coal market in the Eastern Cape.
• Progress drilling on the strategically important Phase 5 area.
Community Involvement
We are pleased to advise that SNR, through Elitheni, continues to actively engage with the local community and has been involved in creation of the following initiatives:
• Completion of the Elitheni Children's Home of Hope, which is for the Orphaned and Vulnerable Children (OVC) as a result of HIV/AIDS in the area.
• Facilitating the development of local supporting businesses thus creating job opportunities.
• Providing computers and training in local rural schools and assisting with improvements to local access roads and provision of a sports field.
Financial results
The audited financial results for the period to June 2013 reflect the transformation of the company during the year of transformation with just under 300% increase in non-current assets from £6.167 million to £24.821 million, primarily in plant, mine infrastructure and containers. As part of the funding to meet this increase, borrowings and lease funding increased to £11.546 million.The losses incurred comprise predominately general administrative costs at a corporate and senior management level, which have increased by some 77% to £3.980 million for the sixteen month period ended 30 June 2013.Some £19.864 million has been introduced to the business in the form of a combination of equity, lease financing and debt from Land Consultants Limited.
Funding
We are currently facing acute working capital constraints and I am thankful to our suppliers and partners for their continued support. This should be alleviated in the short term by the imminent export consignment. However the Group still faces debt repayments within one month of £7.0 million and as previously disclosed we continue to be in exclusive negotiations with an international coal trader. Whilst there is no formal agreement in place I am confident that an agreement can be concluded before we are required to make the debt repayment.Looking forwards, the ongoing working capital requirement of the Group is highly dependent upon prevailing coal prices and operational efficiency. As a board we continue to monitor these closely and take action as required. Going concern is disclosed in more detail in note 1.
Outlook
The last sixteen months have seen significant developments and changes for our Company, bringing with it achievements, challenges and lessons.Strategically, the business is in a strong place with significant coal resources, 266 million tonnes on 6% of our licence area, and 34 million tonnes of probable reserves to date. We have excellent infrastructure to access export markets through the Port of East London with additional future potential at the Port of Coega in Port Elizabeth. The Board believes that the potential for future significant coal sales to the domestic market in South Africa is strong as is the possibility of a mine mouth power station being built at the Elitheni Mine.Operationally, we now have a working mine with proved up infrastructure to port, first coal sales revenue imminent and with production capacity ramp up potential should coal sales prices improve.In the near future, we hope to be able to conclude an agreement with a strategic investor which will strengthen our financial capability. Discussions with our preferred strategic investor are progressing well and we remain confident that a deal will be concluded with the right partner shortly. Clearly, if a deal cannot be concluded, then the Company will need to find alternative financing sources (being debt or equity) to fund its continuing operations and meet it liabilities as they fall due. The Board is grateful for the continuing support being shown by its primary lender, LCL.Finally I would like to thank my fellow Directors, for their unstinting support since my appointment as Chairman in February and I look forward with confidence to the development and expansion of our business over the coming years.
Andy BrennanChairman
31 August 2013
Group
| 16 months ended 30 June 2013 £'000 | 12 months ended 29 February 2012 £'000 | |
RevenueOther income |
- 66 |
- - | |
Administrative expenses | (4,131) | (2,053) | |
Administrative expenses |
|
(4,065) |
(2,053) |
Finance income | 87 | 60 | |
Finance expense | (2) | (10) | |
Loss for the period before taxation Taxation |
|
(3,980) - |
(2,003) - |
Loss for the period after taxation |
(3,980) |
(2,003) | |
Other comprehensive income: Exchange differences on translating foreign operations |
732 |
97 | |
Total comprehensive loss for the 16 months | (3,248) | (1,906) | |
Total comprehensive loss attributable to: Owners of the parent |
(2,586) |
(1,490) | |
Non-controlling interest | (662) | (416) | |
(3,248) | (1,906) | ||
Loss attributable to: Owners of the parent |
(3,128) |
(1,562) | |
Non-controlling interest | (852) | (441) | |
Basic and diluted earnings per share | (3,980) | (2,003) | |
Basic and diluted (pence per share) | (1.85) | (1.40) |
Group Company
| 30 June 2013 £'000 | 29 February 2012 £'000 | 30 June 2013 £'000 | 29 February 2012 £'000 | |
Assets Non-Current Assets Property, plant and equipment |
|
22,957 |
656 |
- |
- |
Intangibles | 1,864 | 5,511 | - | - | |
Investments | - | - | 405 | 405 | |
Other receivables | 184 | 1,134 | - | - | |
Current Assets | 25,005 | 7,301 | 405 | 405 | |
Loans to group companies | - | - | 21,157 | 10,436 | |
Deferred expenditure | 985 | - | - | - | |
Inventories | 237 | - | - | - | |
Other financial assets | 380 | 638 | - | - | |
Trade and other receivables | 680 | 1,074 | 91 | 23 | |
Cash and cash equivalents | 1,058 | 743 | 600 | 592 | |
3,340 | 2,455 | 21,848 | 11,051 | ||
Total Assets | 28,345 | 9,756 | 22,253 | 11,456 | |
Equity and Liabilities Capital and reserves Issued capital |
|
1,711 |
1,191 |
1,711 |
1,191 |
Share premium | 18,475 | 10,691 | 18,475 | 10,691 | |
Share option reserve Foreign currency translation reserve | 502
740 | 92
199 | 502
- | 92
- | |
Accumulated loss | (6,239) | (3,111) | (6,653) | (1,534) | |
15,189 | 9,062 | 14,035 | 10,440 | ||
Non-controlling interest | (1,154) | (493) | - | - | |
Liabilities | 14,035 | 8,569 | 14,035 | 10,440 | |
Non-Current Liabilities Finance lease obligation |
|
3,650 |
8 |
- |
- |
Provisions | 160 | 75 | - | - | |
Current Liabilities | 3,810 | 83 | - | - | |
Other financial liabilities | 6,847 | - | 6,847 | - | |
Finance lease obligation | 1,089 | 17 | - | - | |
Trade and other payables | 2,564 | 1,087 | 1,371 | 1,016 | |
10,500 | 1,104 | 8,218 | 1,016 | ||
Total Liabilities | 14,310 | 1,187 | 8,218 | 1,016 | |
Total Equity and Liabilities | 28,345 | 9,756 | 22,253 | 11,456 | |
These financial statements were approved by the Board on 30 August 2013.
GM Ruhan MW Rosslee
Chief Executive Officer Finance Director
Statement of Changes in Equity
For the 16 months ended 30 June 2013
Share capital £'000 |
Share premium £'000 |
Total share capital £'000 |
Foreign currency translation reserve £'000 |
Share option reserve £'000 |
Total reserves £'000 |
Accumu- lated loss £'000 | Total attributable to equity holders of the group/ company £'000 |
Non- controlling interest £'000 |
Total equity £'000 | |
Group | ||||||||||
Balance at 1 March 2011 | 1,091 | 8,891 | 9,982 | 127 | - | 127 | (1,549) | 8,560 | (77) | 8,483 |
Loss for the year | - | - | - | - | - | - | (1,562) | (1,562) | (441) | (2,003) |
Other comprehensive income | - | - | - | 72 | - | 72 | - | 72 | 25 | 97 |
Total comprehensive loss for the | ||||||||||
year | - | - | - | 72 | - | 72 | (1,562) | (1,490) | (416) | (1,906) |
Issue of shares | 100 | 1,800 | 1,900 | - | - | - | - | 1,900 | - | 1,900 |
Share option charge | - | - | - | - | 92 | 92 | - | 92 | - | 92 |
Total contributions by and | ||||||||||
distributions to owners of company | ||||||||||
recognised directly in equity | 100 | 1,800 | 1,900 | - | 92 | 92 | - | 1,992 | - | 1,992 |
Balance at 1 March 2012 | 1,191 | 10,691 | 11,882 | 199 | 92 | 291 | (3,111) | 9,062 | (493) | 8,569 |
Loss for the period | - | - | - | - | - | - | (3,128) | (3,128) | (852) | (3,980) |
Other comprehensive income | - | - | - | 541 | - | 541 | - | 541 | 191 | 732 |
Total comprehensive loss for | ||||||||||
the period | - | - | - | 541 | - | 541 | (3,128) | (2,587) | (661) | (3,248) |
Issue of shares | 520 | 8,296 | 8,816 | - | - | - | - | 8,816 | - | 8,816 |
Share issue cost | - | (511) | (511) | - | - | - | - | (511) | - | (511) |
Share option charge | - | - | - | - | 410 | 410 | - | 410 | - | 410 |
Total contributions by and | ||||||||||
distributions to owners of | ||||||||||
company recognised directly | ||||||||||
in equity | 520 | 7,785 | 8,305 | - | 410 | 410 | - | 8,715 | - | 8,715 |
Balance at 30 June 2013 | 1,711 | 18,475 | 20,186 | 740 | 502 | 1,242 | (6,239) | 15,189 | (1,154) | 14,035 |
Statement of Cash FlowsFor the 16 months ended 30 June2013
Group Company
| 16 months ended 30 June 2013 £'000 | 12 months ended 29 February 2012 £'000 | 16 months ended 30 June 2013 £'000 | 12 months ended 29 February 2012 £'000 | |
Cash flows from operating activities Cash generated from (used) in operations |
|
(1,678) |
(2,958) |
(1,048) |
(1,465) |
Finance income | 87 | 60 | 1,222 | 208 | |
Finance expense Net cash from operating activities | (2)
(1,593) | (10)
(2,908) | (747)
(573) | -
(1,257) | |
Cash flows from investing activities Purchase of property, plant and equipment |
|
(13,008) |
(586) |
- |
- |
Disposal of property, plant and equipment |
|
66 |
5 |
- |
- |
Drilling and exploration costs |
|
- |
(1,172) |
- |
- |
Loans advanced to group companies |
- |
- |
(14,570) |
(2,146) | |
Net cash from investing activities |
(12,942) |
(1,753) |
(14,570) |
(2,146) | |
Cash flows from financing activities Proceeds on share issue net of issue costs |
|
8,304 |
1,900 |
8,304 |
1,900 |
Proceeds from other financial liabilities |
6,847 |
- |
6,847 |
- | |
Repayment of finance lease liabilities |
(301) |
(32) |
- |
- | |
Net cash from financing activities |
14,854 |
1,868 |
15,151 |
1,900 | |
Total cash and cash equivalent movement for the period |
315 |
(2,793) |
8 |
(1,503) | |
Cash and cash equivalents at the beginning of the period |
743 |
3,536 |
592 |
2,095 | |
Total cash and cash equivalents at the end of the period |
19 |
1,058 |
743 |
600 |
592 |
Presentation Of Consolidated Annual Financial Statements
The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the European Union ("IFRS's"), IFRIC Interpretations, and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated annual financial statements have been prepared on the historical cost basis, except for the measurement of available-for-sale financial instruments at fair value, and incorporate the principal accounting policies set out below. They are presented in pounds sterling.These accounting policies are consistent with the previous period. Below is an extract of those policies relevant to the financial statement presented above and all figures are in £'000's unless otherwise stated.
1. Going Concern
As at 26 August 2013 the Group had cash reserves of £73k. Based upon projections this will fund operations for 2 weeks, creditors are currently being carefully managed and credit terms extended. The export shipment is expected to leave port within one week and the proceeds of £1.0 million will be used to settle overdue creditors and provide short term working capital. The loan from LCL has a repayment of £7.0 million which is due on 30 September 2013. The Group currently does not have the funds to settle this when it falls due and will need to raise further funds to settle this.In the event that funds cannot be raised before this date, the Group will be in default. The loan is secured on the wash plant, stockpiles and 8% of the shares of Elitheni and LCL have the option to convert the loan into shares in the company. LCL has indicated that they remain supportive of the Group but no formal extension or waiver has been granted to date.The development of operations requires further external funding and exclusive negotiations continue with an international coal trader, but no formal agreement has been reached.On this basis the Directors remain confident that sufficient funds can be raised in the necessary time frame. Should further funding not be available the Group may not be able to realise its assets and discharge its liabilities in the normal course of business. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.
2. Segmental Information
IFRS 8 requires operating segments to be reported on the basis of internal reports that are regularly reviewed by the chief operating decision maker who is considered to be the Board of Directors.The following tables provide an analysis of the operating results, total assets and liabilities, capital expenditure and depreciation for 2013 and 2012 for each segment. The Group has only two operating activities, being the development of the coal mining asset in South Africa and the registered office function in the UK.
South Africa £'000 | United Kingdom £'000 |
Total £'000 | |
16 month period to 30 June 2013 Administrative expenses |
(2,784) |
(1,281) |
(4,065) |
Finance income | 27 | 60 | 87 |
Finance expense | (2) | - | (2) |
Loss before taxation Taxation Loss after taxation | (2,759) - (2,759) | (1,221) - (1,221) | (3,980) - (3,980) |
Total assets |
27,249 |
1,096 |
28,345 |
Total liabilities | 6,092 | 8,218 | 14,310 |
Capital expenditure and expenditure on intangible asset Plant and equipment |
19,837 |
- |
19,837 |
Year to 29 February 2012 Administrative expenses |
(1,436) |
(617) |
(2,053) |
Interest income | 23 | 37 | 60 |
Interest expense | (10) | - | (10) |
Loss before taxation Taxation Loss after taxation | (1,423) - (1,423) | (580) - (580) | (2,003) - (2,003) |
Total assets |
7,667 |
2,089 |
9,756 |
Total liabilities | 1,116 | 71 | 1,187 |
Capital expenditure and expenditure on intangible asset Plant and equipment |
586 |
- |
586 |
Intangible asset | 1,172 | - | 1,172 |
3. Administrative Expenses
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Included within administrative | ||||
expenses are the following | ||||
expenses: | ||||
Impairment on loans to group | ||||
companies | - | - | 3,849 | - |
Impairment on other financial | ||||
assets | 326 | - | - | - |
Depreciation on property, | ||||
plant and equipment | 33 | 49 | - | - |
Payroll and social security | 2,153 | 969 | 883 | 775 |
Legal and professional | 931 | 115 | 761 | - |
Office costs and general | ||||
overhead | 584 | 430 | - | - |
Foreign exchange gains | 40 | 392 | 22 | - |
Fees paid to the auditors: | ||||
in respect of the parent | ||||
company audit in respect of the subsidiary | 33 | 33 | 33 | 33 |
company audits | 30 | 20 | - | - |
4. Loss Per Share
Group Company
2013 |
2012 |
2013 |
2012 | |
Basic loss per share From continuing operations (pence per share) |
(1.85) |
(1.40) |
- |
- |
The basic and diluted loss 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. In accordance with IAS 33 as the Group is reporting a loss for both this and the preceding year the contingently issuable shares are not considered dilutive because their exercise would have the effect of reducing the loss per share.The weighted number of shares in issue is 169,391,988 (2012: 113,899,295).
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Reconciliation of profit (loss) for the 16 months to basic earnings Loss per income statement |
(3,980) |
(2,003) |
- |
- |
Adjusted for: Amount due to non-controlling interest |
852 |
441 |
- |
- |
Amounts attributable to equity shareholders of parent |
(3,128) |
(1,562) |
- |
- |
Diluted loss per share From continuing operations (pence per share) |
(1.85) |
(1.40) |
- |
- |
Diluted earnings per share is equal to earnings per share because there are no dilutive potential ordinary shares in issue.
5. Property, Plant And Equipment
Group | 2013 | 2012 | ||||
Accumu- |
Accumu- | |||||
lated | lated | |||||
depreci- | Carrying | depreci- | Carrying | |||
Cost | ation | value | Cost | ation | value | |
Buildings |
208 |
(7) |
201 |
- |
- |
- |
Plant and | ||||||
machinery | 4,781 | (500) | 4,281 | 778 | (176) | 602 |
Coal containers | 4,500 | (213) | 4,287 | - | - | - |
Mining asset | 724 | - | 724 | - | - | - |
Capital work- | ||||||
in-progress | 13,390 | - | 13,390 | - | - | - |
Other non- | ||||||
current assets | 191 | (117) | 74 | 138 | (84) | 54 |
Total | 23,794 | (837) | 22,957 | 916 | (260) | 656 |
6. Intangibles
6. | |||||||
Group | 2013 | 2012 | |||||
Accumu- |
Accumu- | ||||||
lated | lated | ||||||
amortis- | Carrying | amortis- | Carrying | ||||
Cost | ation | value | Cost | ation | value | ||
Exploration costs 1,864 |
- |
1,864 |
5,511 |
- |
5,511 | ||
Reconciliation of intangibles - Group - 2013 | |||||||
Foreign | |||||||
exchange | |||||||
Opening | move- | ||||||
balance | Transfers | ments | Total | ||||
Intangible assets under | |||||||
development | 5,511 | (2,693) | (954) | 1,864 | |||
Opening | Foreign exchange move- | |||
balance | Additions | ments | Total | |
Intangible assets under development |
4,553 |
1,172 |
(214) |
5,511 |
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.Exploration and evaluation assets are reclassified from intangibles assets when the evaluation procedures have been completed and production activities commenced. The company commenced with its production build-up activities during September/October of this financial year and therefore costs capitalised as an intangible in accordance with IFRS 6 have been reclassified to a mining asset in property plant and equipment.
7. Trade And Other Receivables
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Trade receivables |
146 |
2 |
- |
- |
Other receivables and prepayments | 17 | 1,048 | 15 | 14 |
Deposits | 409 | - | 15 | - |
VAT | 108 | 24 | 61 | 9 |
Current | 680 | 1,074 | 91 | 23 |
Included in the Group's prior year other receivables balance is deferred expenditure. Also included in other receivables in the prior year, are amounts paid to Ducanet as deposits to secure the purchase for some of the mining equipment required for the initial development of Elitheni Mine.
Group Company
2013 |
2012 |
2013 |
2012 | |
£'000 | £'000 | £'000 | £'000 | |
Other receivables Non-current |
184 |
- |
- |
- |
The non-current receivables relates to a secured deposit on the purchase of the coal containers.
8. Cash And Cash Equivalents
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Cash and cash equivalents consist of: | ||||
Bank balances | 631 | 743 | 600 | 412 |
Short-term deposits | 103 | - | - | 180 |
Other cash and cash equivalents | 324 | - | - | - |
1,058 | 743 | 600 | 592 | |
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.
GuaranteesIncluded in the bank balances is an investment account that is ceded to ABSA Bank for £73,233 (2012: £69,558) to cover environmental guarantees issued to the Department of Minerals and Energy and credit facilities with major suppliers and service providers.
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Environmental Guarantees issued to the Department of Minerals and Energy: Guarantee number 48380706988 |
5 |
5 |
- |
- |
Guarantee number 48380708366 | 6 | 6 | - | - |
Guarantee number 48380900597 | 55 | 55 | - | - |
Guarantee number 48380904166 | 3 | 3 | - | - |
Guarantee number 53451203398 | 3 | - | - | - |
Other guarantees in favour of: Guarantee number 53451201923: Transnet Port Terminals Limited |
67 |
- |
- |
- |
Guarantee number 53451202895: Eskom Holdings Limited |
117 |
- |
- |
- |
Guarantee number 53451204043: Transnet SOC Limited |
67 |
- |
- |
- |
323 | 69 | - | - | |
Total available facilities Guarantees |
400 |
400 |
- |
- |
Credit cards | 25 | 10 | - | - |
425 | 410 | - | - |
9. Share Based Payments
The company operates an equity-settled share based remuneration schemes for directors and senior employees. Under the approved scheme, options vest based on pre-determined share-prices and currently all options issued will vest when the published mid-market closing price of a Share is 30 pence or higher per Share for a minimum of 10 consecutive dealing days (being days on which the London Stock Exchange is open for the transaction of business), during the period starting on the Date of Grant and ending before the tenth anniversary of the Date of Grant. Of the total number of options outstanding Nil (2012: Nil) had vested and were exercisable.
Share Option Group | 2013 Number | 2013 Weighted average exercise price (p) | 2012 Number | 2012 Weighted average exercise price (p) |
Outstanding at the beginning of the 16 months |
5,630,541 |
16.625 |
- |
- |
Granted during the period | 8,449,000 | 25.931 | 5,630,541 | 16.625 |
14,079,541 | 22.209 | 5,630,541 | 16.625 |
2013 - GrantsThese options have been valued on the basis of the vesting probability over a 30 day period as well as taking into consideration the probability of the vesting conditions being met over the next 3 to 10 years, the period over which the options could vest. An independent technical expert determined the respective value after running some 5 000 iterations under a Monte Carlo simulation based on the underlying Black-Scholes method on a weighted average over the vesting period. The weighted average fair value of each option granted during the period was 13.18p.
2012 - Grants
The exercise price of options outstanding was 16.625p and their weighted average contractual life was 7.92 years (2012: 9.25 years). The weighted average fair value of each option granted during the year was 8.02p.
Equity-settled | 2013 | 2012 |
Option pricing model used |
Black-Scholes |
Black-Scholes |
Weighted average share price at grant date | ||
(in pence) | 26.38 | 16.6 |
Exercise price (in pence) | 30 | 30 |
Weighted average contractual life (in days) | 3,676 | 4,197 |
Share price at date of grant (in pence) | 26.4 | 16.6 |
Contractual life (in days) | 3,676 | 4,197 |
Expected volatility | 115% | 75% |
Expected dividend growth rate | 0% | 5% |
Risk-free interest rate | 2% | 2% |
The volatility assumption, measured at the standard deviation of expected share price returns, is based on a statistical analysis of daily share prices over the last three years.
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
The share-based remuneration | ||||
expense comprises: | ||||
Equity-settled schemes | 410 | 92 | 410 | 92 |
Share based payment | ||||
transferred to reserve | 410 | 92 | 410 | 92 |
10. Other Financial Liabilities
Group Company
2013 |
2012 |
2013 |
2012 | |
£'000 | £'000 | £'000 | £'000 | |
Held at amortised cost Convertable loan note |
6,847 |
- |
6,847 |
- |
This loan related to funding received from Land Consultants Limited ("LCL") for the development of the Coal Mine. This loan bears interest at a fixed rate of 20% per annum accrued daily compounded quarterly. On each drawdown, interest is accrued at 20% for a minimum of 6 months and thereafter compounded quarterly.This loan is secured by a special notarial bond over the washing plant, a general notarial bond for stockpiles of coal (if any), a basic guarantee by the Company in favour of LCL, in terms of which the Company will guarantee repayment under the LCL loan, but limited to what is recovered by the lender under the bonds and 8% of the shares held by Acharnian Mining Limited in the Elitheni Coal Proprietary Limited. This loan is repayable by 30 September 2013.The lender has the right, for a period of 12 months from any drawdown date, to convert all or any part of the outstanding loan into ordinary shares of Strategic Natural Resources plc at a strike price of £0.25 (twenty five pence) per share. The value ascribed to these conversion options are considered to be immaterial and as such no adjustments have been made in the financial statements to take into account the equity component of the loan should a conversion be effected. Current liabilities
At amortised cost 6,847 - 6,847 -
11. Finance Lease Obligation
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Minimum lease payments due - within one year |
1,436 |
21 |
- |
- |
- in second to fifth year inclusive | 2,916 | 9 | - | - |
- later than five years | 1,564 | - | - | - |
5,916 | 30 | - | - | |
less: future finance charges Present value of minimum lease payments | (1,173)
4,743 | (5)
25 | -
- | -
- |
Present value of minimum lease payments due - within one year |
1,089 |
17 |
- |
- |
- in second to fifth year inclusive | 3,650 | 8 | - | - |
4,739 | 25 | - | - | |
Non-current liabilities |
3,650 |
8 |
- |
- |
Current liabilities | 1,089 | 17 | - | - |
4,739 | 25 | - | - |
Included in the finance lease liability is an amount of £3.9 million (2012: £Nil) in respect of the capitalised containers. These containers are leased in terms of a finance lease where the lease term is for the major part of the useful life of these containers. The lease period is 6 years versus the useful life of 7 years. The finance lease payments are discounted at a rate linked to prime interest rate over the period of the operating lease of 6 years. The lease payment is £92k per month.Included in the finance lease liability is an amount of £36k (2012: £15k) which relates to motor vehicles sold, to Mr CM Msutu during the current financial year. The liability is still in the name of the Company although the asset has been sold. These finance lease liabilities bear interest at an average rate of 9.5% per annum and is repaid in monthly instalments of £1.3k. The average lease term is 2 - 5 years.Included in the finance lease liability is an amount of £556327 (2012: £Nil) which relates to the continuous miner. This liability bears interest at 12.15% annually and is repaid in equal monthly instalments of £41k. The lease term is 24 months.The company's obligations under finance leases are secured by the lessor's charge over the leased assets.
12. Provisions
Reconciliation of provisions - Group - 2013Foreign | |||||
Utilised | currency | ||||
Opening | during | exchange | |||
balance | Additions | the year | difference | Total | |
Environmental rehabilitation Social and labour commitments |
32 43 |
111 - |
- (10) |
(7) (9) |
136 24 |
75 | 111 | (10) | (16) | 160 | |
Reconciliation of provisions - Group - 2012
Opening balance |
Additions |
Utilised during the year |
Unwind discount | Foreign currency exchange difference |
Total | |
Environmental | ||||||
rehabilitation | 21 | 12 | - | - | (1) | 32 |
Social and | ||||||
labour | ||||||
commitments | 81 | - | (39) | 6 | (5) | 43 |
102 | 12 | (39) | 6 | (6) | 75 |
Environmental rehabilitation provision
The 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.
Social and labour commitments
The 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 upliftment 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.
13. Trade And Other Payables
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | |
Trade payables |
1,795 |
1,087 |
550 |
969 |
Commission payable | 657 | - | - | 11 |
Other payables | 112 | - | 821 | 36 |
2,564 | 1,087 | 1,371 | 1,016 |
Included in other paybles of the Company an amount of £719k which relates to cash owed by Elitheni Coal with regards to the LCL facility drawdown.
14 Cash Generated From (Used In) Operations
Group Company
2013 £'000 |
2012 £'000 |
2013 £'000 |
2012 £'000 | ||
Loss before taxation |
(3,980) |
(2,003) |
(5,120) |
(1,260) | |
Adjustments for: | |||||
Depreciation and | |||||
amortisation | 10 | 33 | 50 | - | - |
Interest received | 4 | (87) | (60) | (1,222) | (208) |
Finance expense | 5 | 2 | 10 | 747 | |
Impairment loss | 326 | - | 3,849 | - | |
Movements in provisions | 85 | (26) | - | - | |
Share option charges | 411 | 92 | 411 | 92 | |
Unrealised foreign | |||||
currency exchange | |||||
differences | - | 304 | - | - | |
Movement in reserves | - | 14 | - | - | |
Changes in working capital: | |||||
Inventories | (237) | - | - | - | |
Trade and other receivables | 394 | (1,004) | (69) | (6) | |
Deferred expenditure | 149 | (1,134) | - | - | |
Other financial assets | (69) | (16) | - | - | |
Trade and other payables | 1,479 | 815 | 356 | (83) | |
Security deposit | (184) | - | - | - | |
(1,678) | (2,958) | (1,048) | (1,465) | ||
15 Commitments
The Group, through its interest in its subsidiary company, Elitheni Coal Proprietary Limited ('Elitheni') is engaged in developing the mining licence owned by Elitheni. As part of the mining license terms the Group has committed to a social development programme with a minimum spend of £63k over 5 years.
Non-current assets | £'000 2013 | ZAR'000 2013 | £'000 2012 | ZAR'000 2012 |
Security deposit (non-current) |
184 |
2,764 |
- |
- |
Trade and other receivables | 1,202 | 18,045 | 916 | 10,958 |
Cash and cash equivalents | 459 | 6,881 | 159 | 1,899 |
Other financial assets (current) | 54 | 804 | 2 | 25 |
Other financial liabilities | ||||
(non-current) | (4) | (55) | (9) | (104) |
Provisions | (97) | (1,462) | (75) | (894) |
Other financial liabilities (current) | (1,090) | (16,362) | (17) | (205) |
Trade and other payables | (1,916) | (28,749) | (79) | (948) |
Net financial assets (liabilities) | (1,208) | (18,134) | 897 | 10,731 |
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 exchange rate.It assumes a +/- 20% change of the sterling/ZAR exchange rate for the year ended 30 June 2013 (2012: 20%). Both of these percentages have been chosen to reflect the 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: | |
Net result for the year |
120 | |
Equity | 243 | |
If sterling had strengthened against the ZAR by the above percentages this would | ||
have had the following | impact: | |
Net result for the year |
(121) | |
Equity | (243) | |
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 riskThe 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 1.7% (2012: 1.6%) and for ZAR 4.0% (2012: 4.00%). If interest rates had been 1% point higher or lower during the period, the effect on net interest income would have been £42k (2012:£10k). Liquidity riskThe group's risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities.Further disclosure on cash flow and going concern is given in note 1.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.
Group At 30 June 2013 |
Less than |
Between 2 |
1 year | and 5 years | |
Finance lease obligation |
1,089 |
3,650 |
Other financial liabilities | 6,847 | - |
Trade and other payables | 2,564 | - |
At 29 February 2012 |
Less than 1 year |
Between 2 and 5 years |
Finance lease obligation |
17 |
9 |
Trade and other payables | 1,087 | - |
Company | ||
At 30 June 2013 | Less than 1 year | |
Other financial liabilities |
6,847 | |
Trade and other payables | 1,371 | |
At 29 February 2012 |
Less than 1 year | |
Trade and other payables |
1,016 |
Credit riskCredit 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.The Group assesses its trade receivables and loans and receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the Group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. In the current year the Group has not provided for any impairment on trade and other receivables.In the current financial year the Company provided for an impairment on intercompany receivables of £3.660 million (2012:£Nil).
17. Financial Assets By Category
The accounting policies for financial instruments have been applied to the line items below:Group - 2013 |
Loans and | |
receivables | Total | |
Security deposits |
184 |
184 |
Other financial assets | 380 | 380 |
Trade and other receivables | 680 | 680 |
Cash and cash equivalents | 1,058 | 1,058 |
2,302 | 2,302 | |
Group - 2012 | ||
Loans and receivables |
Total | |
Other financial assets |
638 |
638 |
Trade and other receivables | 1,074 | 1,074 |
Cash and cash equivalents | 743 | 743 |
2,455 | 2,455 | |
Company - 2013 | ||
Loans and receivables |
Total | |
Loans to group companies |
21,157 |
21,1578 |
Trade and other receivables | 91 | 91 |
Cash and cash equivalents | 600 | 600 |
21,848 | 21,848 | |
Company - 2012 | ||
Loans and receivables |
Total | |
Loans to group companies |
10,436 |
10,436 |
Trade and other receivables | 23 | 33 |
Cash and cash equivalents | 592 | 592 |
11,051 | 11,051 |
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.Trade and other receivables fall due for payment within 3 months from the balance sheet date other than the repayment terms of the loan note receivable.Loans to group companies were impaired by £3,660k during the period.
18. Financial Liabilities By Category
The accounting policies for financial instruments have been applied to the line items below:
Group 2013 | Financial liabilities at amortised cost | Total | |
Other financial liabilities | 6,847 | 6,847 | |
Trade and other payables | 2,564 | 2,564 | |
Finance lease obligations | 4,739 | 4,739 | |
14,150 | 14,150 | ||
Group 2012 | Financial liabilities at amortised cost | Total | |
Other financial liabilities | 25 | 25 | |
Trade and other payables | 1,087 | 1,087 | |
1,112 | 1,112 | ||
Company 2013 | Financial liabilities at amortised cost | Total | |
Other financial liabilities | 6,847 | 6,847 | |
Trade and other payables | 1,371 | 1,371 | |
8,218 | 8,218 | ||
Company 2012 | Financial liabilities at amortised cost | Total | |
Trade and other payables | 1,016 | 1,016 |
19. Capital Management And Procedures
The Group's capital management objectives are:
1. to ensure the Group's ability to continue as a going concern
• to increase the value of the assets of the Group; and
2. 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.