23 Oct 2008 12:43
Company Registration No. 5249946 (England and Wales)
23 October 2008
For Immediate Release
STRATEGIC NATURAL RESOURCES PLC
Interim Results for the 6 months ended 31 August 2008
Strategic Natural Resources PLC ("SNR" or "the Company"; AIM: SNR), the developer of natural resources assets, initially in South Africa, announces its interim results for the six months ended 31 August 2008.
Highlights:
Profit for the period of £4.1m, after tax and minority interests and one off gain of £4.3m on the sale of 26% of Elitheni Coal (Pty) Limited
Reduced headline loss for the period, excluding one off gain, of £189,000 (2007: £314,000)
Headline loss per share down to 0.29p (2007: 0.57p)
Commencement of mining and extraction of saleable coal at Elitheni mine site
Prospecting rights over 119,000 ha of land adjacent to existing prospecting area applied for
Confirmation of a 97.2 Mt in-situ coal resource
For further information please contact:
| Strategic Natural Resources Plc | HB Corporate | First City Financial Ltd | |
| Jeremy Metcalfe, CEO | Rod Venables/ James Reeve | Allan Piper | |
| +44 20 7793 5616 | +44 20 7510 8600 | +44 20 7242 2666 |
STRATEGIC NATURAL RESOURCES PLC
Interim results for the 6 months ended 31 August 2008
Chairman's Statement
I have pleasure in presenting our interim financial statements for the six months ending 31 August 2008. The Group continues to invest in drilling and mine development activities as evidenced by our expanding resource base.
As anticipated the Group made a profit during the period as a result of recognizing the sale of a 26 per cent. interest in Elitheni Coal (Pty) Limited ("Elitheni") to its broad-based black economic empowerment ("BBEE") partners, led by Vuwa Investments. The reported profit after tax and minority interests is £4.1m compared with a loss of £314,000 during the same period last year.
The one-off gain on disposal of 26 per cent. of Elitheni recognized by our subsidiary Acharnian Mining Limited amounts to £4.3m. Excluding this one-off gain, the Group recorded a loss of £189,000 which comprises administrative expenses less net interest income. In addition, the Group invested £639,000 during the period in drilling and exploration costs. These costs have been capitalised.
We therefore report earnings per share of 6.37p in contrast to a loss of 0.57p per share over the corresponding period last year. The headline loss per share, which excludes the one-off gain, was 0.29p per share.
On 18 August 2008, the Company announced that it had performed the first blast at its Elitheni mine site to remove overburden from the outcropping coal seam. On 29 August 2008, the Company performed another controlled blast to fracture the coal exposed as a result of the first blast. This has resulted in approximately 1,900 tonnes of saleable coal being exposed. The first extracted coal was crushed and graded in equipment commissioned in early September. This coal will be used for bulk sampling and beneficiation purposes and will be delivered to a number of trial customers.
On 10 September 2008, SNR announced that it had submitted a further new order prospecting rights application for 119,000 ha of private farm and state-owned land adjacent to Elitheni's current prospecting rights in the Eastern Cape coalfields. The new area has been dubbed 'Project Indlovu' which is the local Xhosa word for 'Elephant'. The Company has taken the decision to more than treble the potential prospecting area under its control in response to recent discussions and negotiations with IPSA Group PLC for the offtake of its coal as well as in response to pipeline deals the Company is working on and hopes to report on in the New Year.
On 14 October 2008, the Group announced that its consultant geologist, Golder Associates Africa Pty Limited had confirmed an in-situ coal resource of 97.2 Mt , an increase of 140 per cent. since our last resource statement in May 2008. The resource of 97.2 Mt comprises 44.5 Mt of measured resource, 26.3 Mt of indicated resource and 26.4 Mt of inferred resource. Based on this, Elitheni's Mining Engineering Consultant, Rudi Gerber, conservatively estimates 52 Mt of extractable coal.
During the coming months the Company will support Elitheni in its move from prospecting to coal extraction under the mining permit we already hold. The Phase 1 and 2 mining rights application was submitted in November 2007 and is expected to be granted shortly.
In spite of the difficult times in the banking sector worldwide, we believe that the Group can continue developing the mining activities of Elitheni, alongside its BBEE partners. With the under-resourced power sector in South Africa as our main target market for coal sales, we believe that Elitheni is well-placed to continue its development as planned. It is also notable that to date no other commercial coal mining operations of any scale have been developed in the Eastern Cape leaving Elitheni as the sole supplier of coal for the power industry serving the southern half of South Africa.
R. H. R. Latham
Chairman
Date: 23 October 2008
STRATEGIC NATURAL RESOURCES PLC
CONDENSED CONSOLIDATED INCOME STATEMENT
| | Notes | Unaudited | Unaudited | Audited |
| | | Six months | Six months | Year |
| | | to 31.08.08 | to 31.08.07 | to 29.02.08 |
| | | £’000 | £’000 | £’000 |
| | | | | |
| Administrative expenses | | (265) | (332) | (730) |
| | | | | |
| Profit on sale of investment | 3 | 4,309 | - | - |
| | | | | |
| Finance income | | 81 | 18 | 71 |
| | | | | |
| Finance expense | | (5) | - | (8) |
| | | | | |
| Profit / (loss) before tax | | 4,120 | (314) | (667) |
| | | | | |
| Tax expense | 4 | - | - | - |
| | | | | |
| Profit / (loss) for the period | | 4,120 | (314) | (667) |
| | | | | |
| Profit / (loss) attributable to: | | | | |
| Equity shareholders | | 4,139 | (314) | (667) |
| Minority interests | | (19) | - | - |
| | | 4,120 | (314) | (667) |
| | | | | |
| Earnings / (loss) per share | 5 | 6.37p | (0.57p) | (1.11p) |
| (basic and diluted) | | | | |
| | | | | |
| | | | | |
| Other financial information: | | | | |
| Headline EPS | 5 | (0.29p) | (0.57p) | (1.11p) |
| | | | | |
CONDENSED CONSOLIDATED STATEMENT of RECOGNISED INCOME and EXPENSE
| | Notes | Unaudited Six months to 31.08.08 | Unaudited Six months to 31.08.07 | Audited Year to 29.02.08 |
| | | £’000 | £’000 | £’000 |
| | | | | |
| Profit / (loss) for the period | | 4,120 | (314) | (667) |
| | | | | |
| Exchange differences on | | (20) | 15 | 40 |
| translation of overseas | | | | |
| operation | | | | |
| | | | | |
| Total recognised income | 9 | 4,100 | (299) | (627) |
| /(expense) for the period | | | | |
| | | | | |
| Attributable to equity | | 4,119 | (299) | (627) |
| shareholders | | | | |
| Attributable to minority | | (19) | - | - |
| interests | | | | |
| | | 4,110 | (299) | (627) |
STRATEGIC NATURAL RESOURCES PLC
CONDENSED CONSOLIDATED BALANCE SHEET
| Notes | Unaudited | Unaudited | Audited | |
| as at | as at | as at | ||
| 31.08.08 | 31.08.07 | 29.02.08 | ||
| £'000 | £'000 | £'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Property, plant and equipment | 155 | 62 | 121 | |
| Intangible assets | 6 | 2,643 | 1,131 | 1,964 |
| 2,798 | 1,193 | 2,085 | ||
| Current assets | ||||
| Trade and other receivables | 217 | 129 | 77 | |
| Loan note | 7 | 4,251 | - | - |
| Cash and cash equivalents | 1,058 | 2,533 | 1,417 | |
| 5,526 | 2,662 | 1,494 | ||
| Total assets | 8,324 | 3,855 | 3,579 | |
| Equity and liabilities | ||||
| Equity attributable to shareholders | ||||
| of the parent | ||||
| Share capital | 8 | 650 | 650 | 650 |
| Share premium | 3,337 | 3,378 | 3,337 | |
| Translation reserve | 20 | 15 | 40 | |
| Profit and loss reserve | 3,425 | (361) | (714) | |
| 7,432 | 3,682 | 3,313 | ||
| Minority interest | 507 | - | - | |
| Total equity | 9 | 7,939 | 3,682 | 3,313 |
| Non-current liabilities | ||||
| Trade and other payables | 70 | 22 | 48 | |
| Current liabilities | ||||
| Trade and other payables | 315 | 151 | 218 | |
| Total liabilities | 385 | 173 | 266 | |
| Total equity and liabilities | 8,324 | 3,855 | 3,579 |
STRATEGIC NATURAL RESOURCES PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
| Notes | Unaudited | Unaudited | Audited | |
| Six months | Six months | Year to | ||
| to 31.08.08 | to 31.08.07 | 29.02.08 | ||
| £'000 | £'000 | £'000 | ||
| Net cash outflow from | 10 | (326) | (324) | (574) |
| operating activities | ||||
| Cash flows from investing | ||||
| activities | ||||
| Interest received | 29 | 18 | 71 | |
| Drilling and exploration costs | (639) | (286) | (763) | |
| Purchase of minority interest | - | - | (359) | |
| Cash received from sale of | 636 | - | - | |
| minority interest | ||||
| Plant additions | (44) | (16) | (84) | |
| Net cash outflow from | (18) | (284) | (1,135) | |
| investing activities | ||||
| Cash flows from financing | ||||
| activities | ||||
| Proceeds from issue of shares (net of costs) | - | 3,528 | 3,487 | |
|
| ||||
| Repayment of loans | - | (522) | (522) | |
| Proceeds from finance leases | - | - | 43 | |
| Interest paid | (5) | - | (8) | |
| Repayment of finance leases | (10) | (5) | (14) | |
| Net cash (outflow) / inflow from | (15) | 3,001 | 2,986 | |
| financing activities | ||||
| (Decrease) / increase in cash | (359) | 2,393 | 1,277 | |
| and cash equivalents | ||||
| Reconciliation and analysis of | ||||
| change in cash | ||||
| (Decrease) / increase in cash | (359) | 2,393 | 1,277 | |
| during the period | ||||
| Cash and cash equivalents | 1,417 | 140 | 140 | |
| at start of period | ||||
| Cash and cash equivalents | 1,058 | 2,533 | 1,417 | |
| at end of period |
STRATEGIC NATURAL RESOURCES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 August 2008
1. Basis of preparation
This interim statement is unaudited and does not constitute Statutory Accounts within the meaning of Section 240 of the Companies Act 1985. Statutory Accounts for the year ended 29 February 2008 have been filed with the Registrar of Companies. The auditors have made a report on those Statutory Accounts under Section 235 of the Companies Act 1985. The auditors' reports were unqualified and did not contain a statement under Section 237 (2) of the Companies Act 1985. The financial information contained in this interim statement has been prepared in accordance with all International Reporting Standards ('IFRS') in force and is expected to apply to the Group's results for the year ending 28 February 2009 and on interpretations of those Standards released to date.
2. Accounting policies
This interim statement has been prepared in accordance with the Group's IFRS accounting policies. These policies were set out in the Group's financial statements for the year ended 29 February 2008.
3. Profit on sale of investment
The profit on sale of investments represents the profit arising on the sale of 26% of Elitheni Coal (Pty) Limited ("Elitheni"). On 26 June 2008, the Company's wholly owned subsidiary, Acharnian Mining Limited, completed the sale of 26 per cent. of its interest in Elitheni for a total consideration of £4.835m of which ZAR 10m (£636,000) has been received. The balance is payable in two tranches - £3.3m is payable no later than 12 December 2008 and £900,000 is payable no later than 31 May 2009. The deferred consideration is secured against the shares acquired and attracts interest at 2.25 per cent. over LIBOR (see note 7).
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 per cent. 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.
4. 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 (see note 3 above) will qualify for relief under the substantial shareholding provisions and accordingly no tax will become payable on the gain. Losses carried forwards which may be available for offset against income in future periods are estimated at £62,000 in the UK and ZAR 4.5m 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 £384,000.
STRATEGIC NATURAL RESOURCES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 August 2008 - continued
5. Earnings / loss per share
The basic and diluted earnings / (loss) per share has been calculated by dividing the result for the respective period attributable to shareholders by the weighted average number of shares in issue during the relevant period.
| Six months | Six months | Year | |
| to 31.08.08 | to 31.08.07 | to 29.02.08 | |
| Profit / (loss) attributable to | £4,139,000 | (£314,000) | (£667,000) |
| equity shareholders of the Company | |||
| Average number of shares in issue | 65,000,000 | 55,625,000 | 60,287,000 |
| Basic and diluted earnings/loss per share | 6.37p | (0.57p) | (1.11p) |
| Headline loss per share | (0.29p) | (0.57p) | (1.11p) |
Headline loss per share excludes the profit on sale of investment of £4.3m (see note 3) arising on the sale of 26 per cent. of Elitheni.
| 6. Intangible assets (exploration costs) | £'000 |
| At 1 March 2008 | 1,964 |
| Drilling and exploration costs in period | 639 |
| Exchange adjustment | 40 |
| At 31 August 2008 | 2,643 |
When the mine is in production, these costs associated with bringing the mine into production will be amortised over the expected useful life of the mine.
7. Loan note
The loan note represents the instrument under which the deferred consideration arising on the sale of the Group's 26 per cent. interest in Elitheni is secured (see note 3). The loan note comprises two loan notes:
a) Payable no later than 12 December 2008 - £3.3m. Interest is payable at 6 month LIBOR plus 2.25 per cent. The loan note is secured on 21 per cent. of the share capital of Elitheni.
b) Payable no later than 31 May 2009 - £900,000. Interest is payable at 12 month LIBOR plus 2.25 per cent. The loan note is secured on 5 per cent. of the share capital of Elitheni.
STRATEGIC NATURAL RESOURCES PLC
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 August 2008 - continued
| 8. Share capital | £'000 |
| a) Authorised | |
| 500,000,000 ordinary shares of 1p each | 5,000 |
| b) Allotted, called up and fully paid | |
| 65,000,000 ordinary shares of 1p each | 650 |
9. Statement of changes in total equity
| | Attributable to equity holders of the Company | | | |||
| | Share Capital | Share premium | Translation reserve | Profit and loss reserve | Minority interest | Total equity |
| | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
| | | | | | | |
| At 1.03.08 | 650 | 3,337 | 40 | (714) | - | 3,313 |
| Profit / (loss) for the period | - | - | - | 4,139 | (19) | 4,120 |
| Translation adjustment | - | - | (20) | - | - | (20) |
| Total recognised income and expense in the period | - | - | (20) | 4,139 | (19) | 4,100 |
| Sale of minority interest | - | - | - | - | 526 | 526 |
| At 31.08.08 | 650 | 3,337 | 20 | 3,425 | 507 | 7,939 |
| | | | | | | |
10. Reconciliation of profit before tax to cash generated from operations
| Six months | Six months | Year | |
| to 31.08.08 | to 31.08.07 | to 29.02.08 | |
| £'000 | £'000 | £'000 | |
| Result for the period | 4,120 | (314) | (667) |
| Depreciation | 16 | 6 | 14 |
| Changes in working capital | (19) | 2 | 142 |
| Finance income | (81) | (18) | (71) |
| Finance expense | 5 | - | 8 |
| Exchange adjustment | (58) | - | - |
| Profit on sale of investment | (4,309) | - | - |
| Net cash outflow from | (326) | (324) | (574) |
| operating activities |
11. The Board of directors approved this interim statement on 23 October 2008. This interim statement has not been audited.
12. Copies of this statement are being sent to all shareholders. Otherwise, shareholders will be able to download a copy of the interim report from the Group's website www.snrplc.co.uk
Copies may also be obtained from the Company's registered office - 5th Floor, Prince Consort House, Albert Embankment, London SE1 7TJ.