Xtract Regulatory News (XTR)

30 Sep 2014 07:00



1. General information

Xtract Resources PLC ("Xtract") is a company incorporated in England and Wales under the Companies Act 2006. The Company's registered address is 4th Floor, 2 Cromwell Place, South Kensington, London SW7 2JE. The Company's ordinary shares are traded on the AIM market of the London Stock Exchange. The Company invests and engages in the management, financing and development of early stage resource assets.

2. Accounting policies

Basis of preparation

Xtract prepares its annual financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU).

The consolidated interim financial information for the period ended 30 June 2014 presented herein has been neither audited nor reviewed. The information for the period ended 31 December 2013 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006 but has been derived from those accounts. The auditor's report on those accounts was not qualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006 but did draw attention by way of emphasis to the significant uncertainty around the going concern assumption. As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Reporting'.

The interim financial information is presented in pound sterling and all values are rounded to the nearest thousand pounds (£'000) unless otherwise stated.

The interim consolidated financial information of the Group for the six months ended 30 June 2014 was authorised for issue in accordance with a resolution of the directors on 29 September 2014.

Going concern

The Group has begun generating cash inflows from its revenues generated from the Chepica mine in Chile. These operations are currently generating a small positive cash flow.

In addition, the Group holds 7,371,365 million Global Oil Shale shares with a market value of £1,769,000 as at 30 June 2014. On 10 July 2014, 5 million shares were disposed of for a consideration of £1,189,000, while the Group retains 2,371,365 million shares, with an additional 1.5 million shares to be allotted immediately prior to GOS listing on a stock exchange or other market.

 The Group has also entered into a SEDA backed loan agreement, which enables the Group to draw up to £3.0 million (US$5.0 million). At the balance sheet date, facilities of £2.8 million (US$S4.7 million) remain undrawn.

Therefore, the Directors continue to adopt the going concern basis of accounting in preparing this financial information.

2. Accounting policies (continued)

Investment in Subsidiary

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group's interest in the relevant associate.

Changes in accounting policy

The accounting policies applied are consistent with those adopted and disclosed in the Group Consolidated financial statements for the year ended 31 December 2013, except for the changes arising from the adoption of new accounting pronouncements detailed below.

The following accounting amendments and interpretation became effective in the current reporting period:

Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

IAS 36 Amendments Recoverable Amount Disclosures for non-Financial Assets

IFRIC 21 Levies

None of the above standards had any material impact on the financial statements.

New Accounting policies:

Finance Leases

The Group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.

Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in the finance lease obligation. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Non-current assets under finance leases are depreciated over the useful life of the asset, under the reasonable expectation that the group will obtain ownership of the leased asset at the end of the lease term.

2. Accounting policies (continued)

Reclamation cost and mine closure provision

The Group records a liability and corresponding asset for the present value of the estimated costs of legal and constructive obligations for future site reclamation and closure where the liability is probable and reasonable estimate can be made of the obligation. The estimated present value of the obligation is reassessed on an annual basis or where new material information becomes available. Increases or decreases to the obligation usually arise due to change in legal or regulatory requirements, the extent of environmental remediation required, methods of reclamation, cost estimates, or discount rates. The present value is determined based on current market assessments of the time value of money using discount rates specific to the country in which the reclamation site is located and is determined as the risk- free rate of borrowing approximated by the yield on sovereign debt for that country, with a maturity approximating the end of mine life.

Revenue recognition

Revenue is measured at the fair value of the consideration receivable and represents the amounts receivable for goods and services provided in the normal course of business, net of trade discounts and volume rebates, and value-added tax. Interest is recognised in profit and loss, using the effective interest rate method.

3. Business segments

Segmental information

For management purposes, the Group has been organised into three operating divisions: Oil & Gas exploration, Investment and Mining Exploration. These divisions have been the basis on which the Group reports its primary segment information.

The Group's reportable segments under IFRS 8 are therefore as follows:

· Investment and other - Corporate;

· Mining Exploration- Mining Production Segment since March 2014;

· Oil & Gas Exploration- of the Group's interests in Turkey, the Netherlands and Denmark (Segment discontinued in 2012,with further costs in 2013);

Segment results

Segment results

3. Business segments (continued)

Segment results

Year ended 31 December 2013

The accounting policies of the reportable segments are the same as the Group's accounting policies which are described in the Group's latest annual financial statements. Segment results represent the profit earned by each segment without allocation of the share of profits of associates, central administration costs including directors' salaries, investment revenue and finance costs, and income tax expense. This is the measure reported to the Group's Board for the purposes of resource allocation and assessment of segment performance.

4. Tax

At 30 June 2014 the Group has no deferred tax assets or liabilities.

5. Loss per share

The calculation of the basic and diluted loss per share is based on the following data:

Where a loss has occurred, basic and diluted earnings per share are the same because the outstanding share options and warrants are anti-dilutive.

6. Financial assets available for sale

Details of the Group's available-for-sale investments as at 30 June 2014 are as follows:

7. Property, plant and equipment

8. Deferred Exploration Cost

Investment in Chepica Project

9. Current Liabilities

10. Equity Swap Agreement

On 12 December 2013, the Company and YAGM entered into an equity swap agreement calculated by reference to 411,899,316 of the Subscription Shares (the "Swap Shares"). In return for a payment by the Company to YAGM of £500,000 (the "Swap Payment"), twelve monthly settlement payments in respect of such payment will be made by YAGM to the Company, or payments may be made by the Company to YAGM , based on a formula related to the difference between the prevailing market price (as defined in the Equity Swap Agreement) of Ordinary Shares in any month and a 'benchmark price' that is 10% above the a price per share equal to 95% of the closing price of the trading day preceding the execution of the Subscription Agreement. Thus the monthly payments received by the Company in respect of the Swap Payment will be dependent on the future price performance of the Ordinary Shares.

YAGM and company may mutually agree to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances. YAGM may elect to terminate the Equity Swap Agreement and accelerate the payments due under it in certain circumstances.

11. Share capital

12. Cash flows from operating activities

13. Related party transactions

Transactions between Group companies, which are related parties, have been eliminated on consolidation and are therefore not disclosed. The only other transactions which fall to be treated as related party transactions are those relating to the remuneration of key management personnel, which are not disclosed in the Half Yearly Report, and which will be disclosed in the Group's next Annual Report.

Directors Transactions

Lion Mining Finance Limited, a company in which Colin Bird is a Director and shareholder has provided administrative and technical services to the Company amounting to £36,000 plus VAT in the year. The amount of £14,400 was outstanding as at 30 June 2014 (2013: None).

As at 30 June 2014, loans from directors amounted to £40,000 (31 December 2014 £ Nil). These loans are interest free and repayable by mutual agreement.

14. Acquisition of subsidiary undertaking

On 24 February 2014, the Company acquired from Polar Star Mining Corporation the entire issued share capital of its wholly owned subsidiary, Polar Mining (Barbados) Limited, the parent company of Minera Polar Mining Chile Limitada, a Chilean incorporated entity with a 15% direct interest and earn in option to acquire the remaining 85% interest in the Chépica gold and copper mine together with 100% of the Mejillones Phosphate project in Chile. The total consideration of the acquisition was £1,808,000.

The net assets acquired and goodwill arising are as follows:-

The assessment of the fair values of the assets and liabilities is provisional, and will be reviewed prior to the completion of the Group Consolidated financial statements for the year ending 31 December 2014.

15. Events after the balance sheet date

On 10 July 2014 the Company sold 5 million shares in Global Oil Shale Group ('GOS') at 23.77 pence per share, for a total consideration of £1,189,000.

The Company was initially issued 6,000,000 shares in GOS at a subscription price of 12p, in December 2012, as part of the disposal of the Julia Creek oil shale tenements in Queensland, Australia with an additional 1,371,365 in December 2013 at 40p. The Company therefore retains a total of 2,371,365 shares and as per the agreement would be allotted a further 1,500,000 shares immediately prior to a listing of GOS shares on a stock exchange or market.

30 September 2014