TIDMSML
RNS Number : 3605D
Strategic Minerals PLC
21 June 2023
This Announcement contains inside information for the purposes
of the UK version of the market abuse regulation (EU No. 596/2014)
as it forms part of United Kingdom domestic law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR").
21 June 2023
STRATEGIC MINERALS PLC
("Strategic Minerals" or the "Company")
Financial Results for the Year Ended 31 December 2022
A full copy of the Company's annual report and accounts
(including tables and/or diagrams referred to in this release) is
available through the Investor Centre of the Company's website (
https://www.strategicminerals.net/investors/reports-and-circulars.html
).
Copies of the Annual Report and accounts for the year ended 31
December 2022, will be posted today to shareholders, who have
elected to receive a hard copy , and on the Company's website.
The Annual General Meeting will be held this year on Tuesday 18
July 2023 at 10am in the offices of our auditor's Shipleys LLP, 10
Orange Street, Haymarket, London, WC2H 7DQ. The notice of meeting
and proxy voting forms will be posted today to shareholders, who
have elected to receive a hard copy, and on the Company's
website.
Financial Highlights
-- 2022 Group before tax profit was $0.372m (2021: $0.257m)
-- Net Cash generated from operating activities for 2022 was $0.774m (2021: $0.610m).
-- Unrestricted cash position of the Group on 31 December 2022 was $0.341m (2021: $0.611m).
Operational Highlights
-- In March 2022, after rolling over for a 10(th) year and,
after many years of lobbying, management secured a longer-term
access to the Cobre magnetite stockpile with it now being extended
until 31 March 2027.
-- July 2022 saw Cobre customer sales prices progressively increased by 20%.
-- In the last quarter of 2022, sales to Cobre's largest client
significantly reduced due to recessionary concerns impacting the US
west coast construction industry. While we are confident of their
return as a client, we are unsure of timing due to a large
stockpile of our material that they have on site.
-- The July price increase partially offsets the lower fourth
quarter sales and Cobre still produced respectable 2022 annual
sales of $2.446m (2021: $2.611m).
-- During 2022, the receiver for CV Investments LLC ("CVI")
indicated that they would not accept Southern Minerals Group's
("SMG") substantial arbitrated award against CVI and were likely to
use the fact that CVI's funds arose from a fraud to rank SMG's
claim, along with other creditors, behind equity holders
-- In January 2022, LCCM submitted, to the South Australian
government, a revised Program for Environment Protection and
Rehabilitation ("PEPR") for copper oxide operations at the Mountain
of Light plant at Leigh Creek. This PEPR was approved at the
beginning of July 2022.
-- In late December 2022, an application for a new PEPR relating
to planned mining of transitional ore at Paltridge North was
submitted. This is being sought as part of LCCM's expected 2023
re-opening of operations at Mountain of Light at Leigh Creek,
subject to funding. The new PEPR encompasses much of the
information in the previous PEPR plus additional information the
South Australian Department of Energy and Mining ("DEM") required
in relation to the treatment of transitional copper sulphide ore
expected to be mined as the planned pit reaches greater depth.
Accordingly, it is not expected that approval of this PEPR will be
as protracted.
-- Throughout 2022, Cornwall Resources Limited ("CRL") continued
work on the Deep Digital Cornwall project, led by the University of
Exeter's Camborne School of Mines, in which CRL and Cornish Lithium
are delivery partners. Funding of the bulk of the work has been
provided by the European Regional Development Fund, through HM
Ministry of Housing, Communities and Local Government. The project
is expected to complete in June 2023.
-- The inclusion of both Tungsten and Tin on the UK Government's
critical minerals list, in July 2022, has opened up grant-based
funding opportunities with which to progress the Redmoor project to
a market acceptable "pre-feasibility" stage. The likelihood of
funding has been further enhanced by the US Government instructing
its defence contractors that their products must be free of
Tungsten sourced from China or Russia (currently supplying 90% of
the world market) and current indications that the US is about to
classify the UK as a domestic source and, hence, eligible for
government grants to develop critical minerals such as Tungsten and
Tin.
-- The Company's strategy to focus on metals and minerals likely
to benefit from expected supply and demand imbalances has been
validated in both 2022 and early 2023 as commodity prices,
especially for copper and tin show strong growth and have market
analysts predicting even stronger future price growth.
For further information, please contact:
+61 (0) 414
Strategic Minerals plc 727 965
John Peters
Managing Director
Website: www.strategicminerals.net
Email: info@strategicminerals.net
Follow Strategic Minerals on:
Vox Markets: https://www.voxmarkets.co.uk/company/SML/
Twitter: @SML_Minerals
LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc
+44 (0) 20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Broker
Matthew Johnson
Ewan Leggat
Charlie Bouverat
Notes to Editors
Strategic Minerals plc is an AIM-quoted, profitable operating
minerals company actively developing projects tailored to materials
expected to benefit from strong demand in the future. It has an
operation in the United States of America along with development
projects in the UK and Australia. The Company is focused on
utilising its operating cash flows, along with capital raisings, to
develop high quality projects aimed at supplying the metals and
minerals likely to be highly demanded in the future.
In September 2011, Strategic Minerals acquired the distribution
rights to the Cobre magnetite tailings dam project in New Mexico,
USA, a cash-generating asset, which it brought into production in
2012 and which continues to provide a revenue stream for the
Company. This operating revenue stream is utilised to cover company
overheads and invest in development projects aimed at supplying the
metals and minerals likely to be highly demanded in the future.
In May 2016, the Company entered into an agreement with New Age
Exploration Limited and, in February 2017, acquired 50% of the
Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds
from the Company's investment were utilised to complete a drilling
programme that year. The drilling programme resulted in a
significant upgrade of the resource. This was followed in 2018 with
a 12-hole 2018 drilling programme has now been completed and the
resource update that resulted was announced in February 2019. In
March 2019, the Company entered into arrangements to acquire the
balance of the Redmoor Tin/Tungsten project which was settled on 24
July 2019 by way of a vendor loan which was fully repaid on 26 June
2020.
In March 2018, the Company completed the acquisition of the
Leigh Creek Copper Mine situated in the copper rich belt of South
Australia and brought the project temporarily into production in
April 2019. In July 2021, the project was granted a conditional
approval by the South Australian Government for a Program for
Environmental Protection and Rehabilitation (PEPR) in relation to
mining of its Paltridge North deposit and processing at the
Mountain of Light installation. In early January 2022, an updated
PEPR, addressing the conditions associated with the July 2021
approval, was lodged.
STRATEGIC MINERALS PLC
HIGHLIGHTS
FOR THE YEARED 31 DECEMBER 2022
Financial Highlights
-- 2022 Group before tax profit was $0.372m (2021: $0.257m)
-- Net Cash generated from operating activities for 2022 was $0.774m (2021: $0.610m).
-- Unrestricted cash position of the Group on 31 December 2022 was $0.341m (2021: $0.611m).
Operational Highlights
-- In March 2022, after rolling over for a 10(th) year and,
after many years of lobbying, management secured a longer-term
access to the Cobre magnetite stockpile with it now being extended
until 31 March 2027.
-- July 2022 saw Cobre customer sales prices progressively increased by 20%.
-- In the last quarter of 2022, sales to Cobre's largest client
significantly reduced due to recessionary concerns impacting the US
west coast construction industry. While we are confident of their
return as a client, we are unsure of timing due to a large
stockpile of our material that they have on site.
-- The July price increase partially offsets the lower fourth
quarter sales and Cobre still produced respectable 2022 annual
sales of $2.446m (2021: $2.611m).
-- During 2022, the receiver for CV Investments LLC ("CVI")
indicated that they would not accept Southern Minerals Group's
("SMG") substantial arbitrated award against CVI and were likely to
use the fact that CVI's funds arose from a fraud to rank SMG's
claim, along with other creditors, behind equity holders
-- In January 2022, LCCM submitted, to the South Australian
government, a revised Program for Environment Protection and
Rehabilitation ("PEPR") for copper oxide operations at the Mountain
of Light plant at Leigh Creek. This PEPR was approved at the
beginning of July 2022.
-- In late December 2022, an application for a new PEPR relating
to planned mining of transitional ore at Paltridge North was
submitted. This is being sought as part of LCCM's expected 2023
re-opening of operations at Mountain of Light at Leigh Creek,
subject to funding. The new PEPR encompasses much of the
information in the previous PEPR plus additional information the
South Australian Department of Energy and Mining ("DEM") required
in relation to the treatment of transitional copper sulphide ore
expected to be mined as the planned pit reaches greater depth.
Accordingly, it is not expected that approval of this PEPR will be
as protracted.
-- Throughout 2022, Cornwall Resources Limited ("CRL") continued
work on the Deep Digital Cornwall project, led by the University of
Exeter's Camborne School of Mines, in which CRL and Cornish Lithium
are delivery partners. Funding of the bulk of the work has been
provided by the European Regional Development Fund, through HM
Ministry of Housing, Communities and Local Government. The project
is expected to complete in June 2023.
-- The inclusion of both Tungsten and Tin on the UK Government's
critical minerals list, in July 2022, has opened up grant-based
funding opportunities with which to progress the Redmoor project to
a market acceptable "pre-feasibility" stage. The likelihood of
funding has been further enhanced by the US Government instructing
its defence contractors that their products must be free of
Tungsten sourced from China or Russia (currently supplying 90% of
the world market) and current indications that the US is about to
classify the UK as a domestic source and, hence, eligible for
government grants to develop critical minerals such as Tungsten and
Tin.
-- The Company's strategy to focus on metals and minerals likely
to benefit from expected supply and demand imbalances has been
validated in both 2022 and early 2023 as commodity prices,
especially for copper and tin show strong growth and have market
analysts predicting even stronger future price growth.
This Report and Financial Statements for the year ended 31
December 2022 ("Annual Report") contains 'forward-looking
information', which may include, but is not limited to, statements
with respect to the future financial and operating performance of
Strategic Minerals Plc, its subsidiaries, production and
exploration operations and affiliated companies, the future price
of magnetite/iron ore, the estimation of mineral resources, the
realisation of mineral resource estimates, costs of production,
capital and exploration expenditures, costs and timing of the
development of new deposits, costs and timing of the development of
new mines, costs and timing of future exploration, requirements for
additional capital, governmental regulation of mining operations
and exploration operations, stockpile and tailings dam operations,
timing and receipt of approvals, licenses, permits, conversions and
ongoing approvals to operate exploration activities, stockpile and
tailings dam operations under the United States of America,
Australia and other applicable mineral legislation and
environmental legislation, environmental risks, title disputes or
claims, limitations of insurance coverage and the timing and
possible outcome of pending litigation and regulatory matters.
Often, but not always, forward-looking statements can be
identified by the use of words such as 'plans', 'expects', 'is
expected', 'budget', 'scheduled', 'estimates', 'forecasts',
'intends', 'anticipates' or 'believes', or variations (including
negative variations) of such words and phrases, or state that
certain actions, events or results 'may', 'could', 'would', 'might'
or 'will' be taken, occur or be achieved. Forward- looking
statements involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance, or
achievements of Strategic Minerals Plc and/or its subsidiaries,
investment assets and/or its affiliated companies to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements.
Such factors include, among others, general business, economic,
competitive, political and social uncertainties; the actual results
of current exploration activities; stockpile processing/tailings
dam operations; conclusions of economic evaluations and studies;
fluctuations in the value of UK pounds sterling relative to the
United States Dollar, Australian Dollar and other foreign
currencies; changes in project parameters as plans continue to be
refined; future prices of magnetite/iron ore; possible variations
of ore grade or recovery rates; failure of plant, logistics
providers, equipment or processes to operate as anticipated;
accidents, labour disputes and other risks of the mining industry;
political instability, insurrection or war; the effect of illness
on labour force availability and turnover; delays in obtaining
governmental approvals or financing or in the completion of
development or construction activities. Although Strategic Minerals
Plc has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those
described in forward-looking statements, there may well be other
factors that cause actions, events or results to differ from those
currently anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the
date of this Annual Report and Strategic Minerals Plc disclaims any
obligation to update any forward-looking statements, whether as a
result of new information, future events, or results or otherwise.
There can be no assurance that forward-looking statements will
prove to be accurate, as actual results and future events could
differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on
forward-looking statements due to the inherent uncertainty
therein.
CHAIRMAN'S REPORT
FOR THE YEARED 31 DECEMBER 2022
I am pleased to present Strategic Minerals Plc's Annual Report
for the year ended 31 December 2022.
Despite a difficult year and a final quarter drop in sales to
SMG's major client, the Group maintained an after-tax profit of
$0.084m (2021: $0.156m).
The Group had unrestricted cash of $0.341m as of 31 December
2022 (2021: $0.611m).
The Board and Management have set the Company on a strategic
path reflecting both the expected relative performance of different
metal ores and the limited size of the Company's balance sheet.
Implementation of the strategy commenced in 2016 when the Company
invested into the Redmoor Tin and Tungsten project ("Redmoor") as
it considered the long-term demand and supply outlook for tin and
tungsten compelling. Initially, the Company owned 50% of Cornwall
Resources Limited (CRL), the holder of the Redmoor asset, and,
subsequently, moved to full ownership of CRL (March 2019).
The attraction to tin and tungsten reflected the key role these
metals were expected to play in the electrification of transport
vehicles, advanced robotics, renewable energy and advanced
computation & IT. With restrictions on existing tin production
in Myanmar and Indonesia, coupled with continued strong demand for
electronics, the price of tin is expected to continue its,
generally, upwards trajectory:
Spot Tin Prices Since Full Acquisition of Redmoor
US$ Per
Tonne
Currently, market sentiment is very bullish on the future of tin
prices with some forecasting prices of between US $50,000 and
$80,000 per tonne or higher.
Whilst tungsten's price has not appreciated as spectacularly as
tin as yet, there has a been a steady growth in prices and it is
considered that this will continue in the future. Irrespective, the
current tungsten price is already above the forecast prices used by
the Board when considering the acquisition of the balance of the
Redmoor project.
Source: Bloomberg - Tungsten APT Priced in USD per MTU
In 2017, at a time when the Company was enjoying significantly
higher Cobre revenues, the Board, whilst recognising the
longer-term intrinsic value of Redmoor, felt that the Company would
strategically benefit from the development of a second near-term
cash generating project, bridging the gap between its operating
asset and the delivery of Redmoor. The Board's analysis of the
market indicated that copper, in particular, appeared to present
the best long-term demand and supply characteristics the Board's
strategy revolved around. In line with this focus, the Company
began negotiations for the acquisition of a suitably sized copper
project likely to generate a second, near-term income stream.
Ultimately, this led to the Company, in 2018, acquiring Leigh Creek
Copper Mine Pty Ltd ("LCCM"). This has strategically set the
Company up as follows:
The identification of an exposure to copper has proven timely
with prices having moved further than predicted at the time when
LCCM was acquired. There is not expected to be a retraction in
pricing with Goldman Sachs metals strategist Nicholas Snowdon
recently calling a US $15,000 a ton copper price in 2025 on the
basis that "We are in a supercharged, synchronised global demand
surge. Chinese demand remains very strong, growing at 4% this year,
underpinned by strength in infrastructure investment, strong
completion phase in the property sector, and also strong recovery
in consumer led sectors."
Copper Average Quarterly Prices Per Tonne
The remnants of the Global Pandemic contributed to making 2022 a
difficult year, especially in relation to project development. The
Company continued its modified operating procedures to ensure the
protection of all stakeholders (employees, Directors, clients,
local communities). Through adaption of contactless operating
procedures at the Cobre magnetite stockpile, the Company's wholly
owned subsidiary, Southern Minerals Group ("SMG"), has been able to
maintain continuous contactless operations throughout the pandemic
and its aftermath. The close working relationship, and the
commitment to the highest levels of safety in operations, resulted
in SMG securing access to the Cobre magnetite stockpile until 31
March 2027.
During 2022, SMG continued to work with the court appointed
receiver for CV Investments ("CVI") in relation to SMG's arbitrated
$21.9m claim against CVI, for their unfulfilled sales contract.
Disappointingly, the likelihood of recovery on the claim has been
significantly reduced due to CVI's assets being considered as
"proceeds of crime" and, therefore, their distribution not being
subject to normal creditor/equity standings. Post financial year
end, SMG has agreed to reduce its claim to costs and anticipates
that there will be a resolution for a considerably smaller amount
in 2023.
In January 2022, LCCM responded to the July 2021 conditional
Program for Environmental and Protection and Rehabilitation
("PEPR") approval for planned extraction of copper oxide from its
Paltridge North deposit to be processed at the Mountain of Light
plant, Leigh Creek. Subsequently, the PEPR was made unconditional
at the beginning of July 2022. At the time of this report, the
Company considers that, subject to securing finance, operations at
LCCM will re-commence in 2023. It should be noted that a "cloned"
PEPR was also submitted, in December 2022, to allow mining of
transitional material at the base of the proposed Paltridge North
open pit. This PEPR is expected to be approved in the first half of
2023. These ores are projected to represent approximately one third
of copper sales from Paltridge North. A subsequent PEPR will be
required in the future for proposed mining of the Lynda/Lorna Doone
holdings and the cost and timing of this PEPR have been
incorporated into the Company's financial modelling of the
project.
The Company has continued to market both Redmoor and LCCM at an
asset level and has utilised external consultants to attempt to
locate suitable investment/operating partners. This process remains
ongoing, and Management and the Board continue to follow up on and
develop discussions with a number of entities. Just before
Christmas in 2022, the Company signed a non-binding offer of debt
finance with a resources focused fund which was subject to due
diligence. However, while LCCM passed the technical due diligence,
recent substantial increases in mining costs resulted in lending
ratios being breached and the financing not proceeding despite
continued projected profitability.
The Cornish mining revival continued to gather pace in 2022. We
consider CRL to represent a significant asset in this regional play
and its recent extension of arrangements provides the time to
develop this fully to the best benefit of shareholders. The global
significance of the deposit at Redmoor (inferred resource of 11.7mt
at a tin equivalent (SnEq) of 1.17%) was further reinforced, in
July 2022, when both Tungsten and Tin were included in the UK
Critical Minerals List. This has opened the way for CRL to seek
grant funding for progressing the Redmoor project to
pre-feasibility stage. There have been encouraging recent
developments in the US involving both defence contractors having to
source Tungsten supplies from non-Chinese/Russian suppliers by 2026
and current indications that the US will deem the UK a "domestic"
supplier, thus providing access for UK projects to US government
funding.
The Board's first priority continues to be the safety and health
of our teams and the continued resilience of the Group's
operations. Despite challenges, our Cobre operations remain strong.
. The Company believes that, subject to finance, it is in a
position to move forward with operations at LCCM and, subsequently,
further exploration and development of Redmoor. As confidence
returns to the commodity markets, the underlying valuation of the
Company's assets continue to build and remain strong. The continued
cashflow from our Cobre asset, extension of Cobre access until
2027and the developed nature of our projects, places the Company in
a solid position to benefit from improved international commodity
prices.
I consider that the developments around Redmoor and the
potential commencement of a second income stream will see a
significant improvement in the market's perception of the value of
the Company and I look forward to working with my fellow Directors
and the staff of the Company to ensure that the 2023 financial year
delivers.
Finally, I would like to acknowledge the support of our
shareholders, suppliers and other stakeholders and I look forward
to your continued support during 2023 and beyond.
Alan Broome AM
Chairman
STRATEGIC MINERALS PLC
STRATEGIC REPORT
FOR THE YEARED 31 DECEMBER 2022
The Directors of the Company and its subsidiaries (which
together comprise the Group) present their Strategic Report on the
Group for the year ended 31 December 2022.
Financial Performance
The Company and the Group's reporting currency is US dollars
reflecting that, previously, the Group's revenues, expenses, assets
and liabilities were predominately in US currency and, currently,
the bulk of revenues continue to be sourced in US dollars.
The Group recorded a profit before tax of $0.372m (2021:
$0.257m) despite a dip in Cobre magnetite sales in the last
quarter.
Throughout 2022, despite residual changes in the market
environment from the global pandemic, the Company was able to
continue Cobre operations, largely without impact.
The Board continued to maintain tight discipline on Group
overheads with 2022 seeing another 11.1% reduction to $1.546m
compared to $1.745m in 2021. The Board and management continue
their policy to ensure overheads and administration costs are
appropriately in line with cash flows from operations. These group
overheads reflected both capitalised remuneration $0.160m and
reduced activity associated with preparing to recommence larger
scale operations at both Leigh Creek and Redmoor.
SMG incurred a tax expense of $0.291m (2021: $0.101m) for the
year. The lower level of taxation in 2021 reflected SMG's capacity
to write off, for tax purposes, its acquisition of a new loader
purchased during the year. However, the remainder of the Group
continues to generate tax losses.
The Company continued to invest heavily in moving both the Leigh
Creek Copper Mine and Redmoor Tin and Tungsten projects forward. In
2022, the Company invested $0.717m in such activities (2021:
$1.1152m).
Cash at the end of the year was $0.341m (2021: $0.611m).
PROJECT REVIEW AND ACTIVITIES
Cobre Performance
In 2022, Cobre sales revenue dipped 6.5%. Despite this, 2022
continued to be a profitable year for domestic sales with a total
of 36,282 short wet tons of magnetite being sold which resulted in
gross sales of $2.446m compared to 2021 when 42,637 short wet tons
were sold for $2.611m.
After a number of years lobbying, and after demonstrating our
successful implementation of contactless operations during the
pandemic, we successfully gained a 5-year extension of access to
the magnetite stockpile at Cobre. This is a great credit to the
President of Southern Minerals Group ("SMG") our 100% owned
subsidiary.
In July 2022, prices at Cobre were progressively increased by
20%. It was the first price increase for a number of years and did
not appear to affect underlying demand for the magnetite product.
However, in the last quarter of 2022, our major client at Cobre
suspended purchases due to uncertainty associated with a potential
of a US recession and the impact this may have on the west coast of
America's construction industry. The Company does expect that the
major client will return at some point but, as yet, that has not
occurred and timing is difficult to gauge as the client had a
substantial stockpile of our material at their plant site.
The Receiver for CV Investments is expected to make a
distribution to claimants in 2023. However, the Receiver has
indicated its distribution is likely to treat CV Investment's
assets as proceeds of crime and hence the normal creditor/equity
relationships are not likely to apply and hence there is
considerable doubt on receiving any distribution from the Receiver.
In light of this, post balance sheet date, SMG agreed to reduce its
claim in line with costs incurred. Accordingly, any payment in 2023
is expected to be small.
SMG continues to have an exemplary safety record and has
developed an enviable culture that reinforces the highest of safety
standards.
Leigh Creek Copper Mine Pty Ltd ("LCCM")
In 2018, the Company invested in the LCCM project, a
historically mined copper oxide deposit, as part of its desire to
acquire a near term cash flow project exposed to minerals and
metals expected to benefit in the future from supply and demand
imbalances. Therein providing the Company with a second income
stream.
Since acquisition, the Company has invested in a temporary
restart of operations to test existing operating capacity and in
preparing and submitting a Programme for Environmental Protection
and Rehabilitation ("PEPR") in relation to its Paltridge North
deposit. The PEPR was conditionally approved in 2021 and LCCM
undertook the work required to convert the conditional PEPR to
unconditional with additional information being lodged in January
2022.
In July 2022, an unconditional PEPR for the extraction and
treatment of copper oxide material at the Paltridge North deposit
was issued. The material planned to be extracted at Paltridge North
is predominately copper oxide but becomes a transitional copper
sulphide ore at the lower part of the planned pit. The regulatory
authorities required further details on the treatment of such
material and in response an additional PEPR, largely cut and paste
of the unconditional PEPR with data addressing the peculiarities of
handling transitional ore, was lodged late in December 2022.
In line with the approval of the unconditional PEPR, the Company
followed up on parties interested in funding the project at the
asset level with a view to a full restart in 2023, subject to
finance. A further PEPR will be required for the proposed future
mining of the Lynda/Lorna Doone deposits and work on this is
expected to be undertaken during the mining and processing of ore
from Paltridge North. The cost and expected timing of these have
been incorporated into the Company's financial modelling of the
project.
LCCM has three approved Mining Leases that cover a number of
copper oxide deposits, including Lorna Doone, Lynda, Mountain of
Light (Rosmann East and Paltridge North) and the Mount Coffin
deposit. All the Mineral Resources are contained within the Mining
Leases. They contain a JORC 2012 total resource in the Inferred and
Indicated categories of 3.61mt @ 0.69% copper for 24,900 of copper
metal forms the base of the project and includes the following
Resource category breakdown.
Inferred Indicated Total Resource
Deposit Tonnes Copper Tonnes Copper Tonnes Copper Copper
Grade Grade Grade Metal
(tonnes)
-------- -------- ---------- ------- ---------- ------- ----------
Paltridge
North 41,000 0.49% 879,000 0.82% 920,000 0.81% 7,400
-------- -------- ---------- ------- ---------- ------- ----------
Lynda - - 1,349,000 0.65% 1,349,000 0.65% 8,800
-------- -------- ---------- ------- ---------- ------- ----------
Lorna Doone 66,000 0.68% 1,280,000 0.65% 1,346,000 0.65% 8,700
-------- -------- ---------- ------- ---------- ------- ----------
Total 107,000 0.61% 3,508,000 0.69% 3,615,000 0.69% 24,900
-------- -------- ---------- ------- ---------- ------- ----------
An existing heap leach and Kennecott cone-based copper
processing facility is located at the Mountain of Light deposit
(adjacent to Rosmann East and nearby Paltridge North) and was
successfully operated for a short period in 2019 to test its
capacity to resume full time operations.
The region around the project has excellent infrastructure with
a modern town (Leigh Creek), sealed airstrip, sealed and
all-weather roads, power and water utilities.
In addition to the Mining Leases, two approved Exploration
Leases, covering an area of 686km(2) in the northern Flinders
Ranges, are included in the project. These provide excellent
opportunities for exploration of new copper oxide resources.
The underlying demand and supply factors for copper, that formed
the cornerstone of the Board's decision to invest in LCCM, began to
be widely recognised in the market during 2021 and 2022. This was
reflected in the average copper price in 2022 being USD $3-99 lb.
Given that the acquisition of LCCM was based on a copper price of
USD $3-00 lb, the current copper price of over USD $3-50 lb has
significantly improved the underlying valuation of LCCM as detailed
in the Company's RNS of 9 November 2020.
The Board continues to consider that the Company's share price
does not fully reflect its underlying asset values. Accordingly, in
order to progress the Leigh Creek Copper Mine project, funding at
the asset level is being sought.
In 2023, the Company expects to receive the unconditional PEPR
for the Paltridge North transitional sulphide ores, secure external
funding/joint venturing of the project and re-commence production
at Paltridge North
Cornwall Resources Limited - Redmoor Tin and Tungsten
Project
After having become a 50% owner in the Redmoor Tin and Tungsten
Project in 2016, SML moved to full control of Cornwall Resources
Limited ("CRL"), the holder of Project, in 2019. The move to
acquire the balance of CRL was based on the Board's perception of
the value of the acquisition and its preference to secure full
control of such a key asset before the market became fully aware of
its potential.
This 2019 resource update demonstrated that the overall inferred
resource had increased from the previously assessed 4.5m tonnes at
a tin equivalent ("SnEq") of 1.00% to 11.7m tonnes at 1.17% SnEq.
The result was a 200% increase in contained metal, 160% in resource
tonnes and a 0.17% rise in the tin equivalent grade.
Not only has the resource been significantly expanded but, as
shown in the diagram following, the mineralisation has been
discovered in discrete locations giving rise to the ability to
tailor mining and processing to preferred mineralisation at the
time of extraction.
During 2022, CRL concentrated on the role it played in the Deep
Digital Cornwall ("DDC") programme undertaken by Cambourne School
of Mines. In this programme, the Redmoor exploration licence area
was, and currently continues to, be used as a field laboratory for
collection of geochemical and geophysical data, which also provided
CRL with information relevant to a number of new prospects within
its Mineral Rights. This work was largely (80%) funded by a grant,
although timing of payment claims has impacted working capital.
Prior to commencing the DDC work, an initial historic review of
parts of CRL's mineral resource area identified multiple
prospective targets for tin and copper to the west of the Redmoor
deposit (shown in the following map as Target Tip Valley). This
included historic drill intercepts report up to 1.26% tin over 2.55
m in core, and 0.23% tin in percussion samples.
In February 2021, CRL commenced a trenching and auger
exploration programme aimed at testing the area to the west of its
existing drilled resource. The sampling of material from this
programme was undertaken in three stages;
1) 10m spaced auger sampling (117 samples).
2) Excavation of three trenches, which were then channel sampled and analysed (84 samples).
3) Additional 1m spaced auger sampling, where topographic
constraints meant that safe access for mechanical excavation of
trenches was not possible (81 samples).
Three of the anomalies identified by the auger sampling were
followed up by the excavation of three trenches, totalling 169m in
length, to a depth of 1m. CRL's geologists sampled the trench wall
material as channel samples, typically as 2m intervals. Samples
were analysed by ALS Loughrea using method ME-MS89L.
A 20m wide zone, that includes values significantly anomalous
for tin, was identified in trench CRT01. This zone is shown, as 2m
sample intervals, in the following table.
Trench Sample From To Interval Sn Cu W
no. (m) (m) (m) % % %
CRT01 CRL004411 4.00 6.00 2.00 0.17 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004410 6.00 8.00 2.00 0.03 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004409 8.00 10.00 2.00 0.38 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004408 10.00 12.00 2.00 0.01 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004407 12.00 14.00 2.00 0.03 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004406 14.00 16.00 2.00 0.02 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004405 16.00 18.00 2.00 0.02 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004404 18.00 20.00 2.00 0.27 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004403 20.00 22.00 2.00 0.37 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
CRT01 CRL004402 22.00 24.00 2.00 0.06 0.01 0.00
----------- ------ ------ --------- ----- ----- -----
The other two trenches, CRT02 and CRT03, did not show
significant tin, copper, or tungsten grades; however anomalous
levels of pathfinder elements were seen, which may indicate the
presence of a mineralising system.
Close-spaced auger sampling was undertaken to test the fourth
auger anomaly. This target could not be tested by mechanical
backhoe due to steep topography associated with its location on the
edge of the Target Tip Valley. CRL believes this area represents an
extension of the sheeted vein system that hosts the resource at
Redmoor.
Auger samples were taken at a 1m spacing from an average depth
of 50cm using a Stihl powered auger. These samples identified
unexpectedly high tin grades, and local elevated tungsten values.
The work identified a widespread anomalous level of tin across the
north flank of the Target Tip Valley, defining a 60m long anomaly
greater than 1,000 ppm (0.1%) tin, and with peak value of 0.87%
tin. Tungsten featured a peak value of 0.20%. These results are
shown in the following table:
Traverse Sample no. East North RL m Sn Cu W
% % %
Traverse
1 CRL003731 234883.61 70618.87 113.26 0.35 0.03 0.04
------------ ---------- --------- ------- ----- ----- -----
Traverse
1 CRL003732 234883.15 70619.68 113.49 0.56 0.05 0.06
------------ ---------- --------- ------- ----- ----- -----
Traverse
1 CRL003733 234882.75 70620.45 113.78 0.87 0.05 0.08
------------ ---------- --------- ------- ----- ----- -----
Traverse
1 CRL003734 234882.38 70621.33 114.10 0.70 0.05 0.06
------------ ---------- --------- ------- ----- ----- -----
Traverse
1 CRL003735 234881.95 70622.21 114.45 0.44 0.05 0.20
------------ ---------- --------- ------- ----- ----- -----
The high tin levels identified were followed up by hand-pitting.
Two sites with peak values were excavated, to verify the soil
profile and seek any evidence of disturbed ground or surface
contamination. CRL's geologists observed the presence of decomposed
shale, believed in-situ, with blocky vein-style quartz fragments
containing clasts of wall-rock, in the pit base. Strike extensions
from this location align with a man-made cutting in the hillside,
interpreted by CRL as past small-scale open-cut mining.
Following on from the close-spaced auger sampling, CRL conducted
a short program of hand-excavated pits to verify the geology ahead
of potential future drilling. Two pits were excavated, and both
were channel sampled. Hand pitting was utilised due to steep
terrain. Four samples were taken which were analysed by ALS
Laboratories Loughrea using method ME-MS89L.
Pit Sample From To Interval Sn Cu W
no. (m) (m) (m) % % %
CRT04 CRL003618 0.00 1.00 1.00 0.68 0.03 0.05
----------- ----- ----- --------- ----- ----- -----
CRT04 CRL003619 1.00 2.00 1.00 0.27 0.06 0.03
----------- ----- ----- --------- ----- ----- -----
CRT04 CRL003620 2.00 2.60 0.60 0.43 0.04 0.04
----------- ----- ----- --------- ----- ----- -----
CRT05 CRL003621 0.00 1.00 1.00 0.17 0.04 0.01
----------- ----- ----- --------- ----- ----- -----
The pits contain decomposed shale, with blocky vein-style quartz
fragments containing clasts of wall-rock, in the pit base. The
results above confirm the presence of in-situ mineralisation, which
is considered by CRL to constitute a strong tin exploration target.
The CRT04 result with a 2.6m interval averaging 0.46% tin, 0.04%
copper and 0.04% tungsten, is a clear example of mineralisation
near-surface.
On the back of this work, CRL has submitted an application for a
General Permitted Development Order ("GPDO") planning authorization
from Cornwall Council for a potential drill programme at Redmoor,
to the west of the current resource. This is aimed at identifying
near surface tin and to test this highly prospective target's
depth. Exploration of this tin target and adjacent areas, is
intended to verify the projected westward continuation of the
Redmoor Sheeted Vein System (SVS) orebody. If confirmed, this has
the potential to significantly increase the proportion of tin, and
total tonnage of a future resource. The proximity of the
exploration area to surface is likely to further enhance project
economics.
While Management and the Board recognised, early, the strategic
importance of the Cornish mining area, it was during 2022 that the
UK Government issued its Critical Minerals list identifying both
Tungsten and Tin as two of the Critical Minerals that were needed
for the country's future development. This and the continued
success of Cornish Metals, post its AIM IPO, highlights the
potential of mineral resources in the South West of the UK.
The Board and Management considers that CRL holds a significant
asset at a time when the regional potential of the area and its
recent extension of the exploration licence, until 2037, provides
the time to develop this fully to the best benefit of
shareholders.
Increases in commodity prices, notably tin and copper, have
impacted very positively on the economics of the Redmoor project.
This, combined with the world class standing of the Redmoor
deposit, augurs well for valuation in the future. In the Company's
last Redmoor scoping study report, October 2020, commodity prices
used were Tin $20,000 a ton (currently c$28,000 a tonne), Tungsten
$30,000 a ton (currently c$32,500 MTU) and Copper $3.18 lb
(currently c$3.90). Accordingly, internal analysis shows a
significant increase upon the previously reported after tax NPV @
8% of $91m and the IRR of 23.4%.
In 2023, the Company anticipates completing the Deep Digital
Cornwall work and, subject to external financing, undertaking
further drilling at Redmoor, to test the western extension/near
surface tin identified in the trenching and augur work conducted in
2021. At the same time, the Company will continue discussions with
third parties about involvement in the development of Redmoor and
is encouraged by recent interest in Redmoor in line with the US
government instructing its defence contractors to not use Chinese
or Russian sourced Tungsten from 2026 and the potential for Redmoor
to be deemed a "domestic" supply for US government purposes.,
opening a door to US government funding.
Safety
The Company is pleased to report that, during 2022, there were
no safety incidents (2021: nil) across its operations in United
States, England, and Australia.
Board and Management Changes
There has been no change to the composition of the Board during
2022 and the current Board does not currently envisage a need for
change. Management changes have been made in line with normal
operations although all such changes are based around consultancy,
rather than direct employment contracts.
Key Risks and Uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. Strategic Minerals
regularly reviews the principal risks that face the business and
assesses appropriate responses to mitigate and, where possible,
eliminate potential adverse impact. There is the possibility that
if more than one event occurs, that the overall effect of such
events would compound the possible adverse effects on the
Group.
Our principal risks and uncertainties are as follows:
Commodity prices and currency risk
Although the Group's main income stream at Cobre is focused on
localised markets, which minimises the impact of global commodity
prices, the value of its development projects can still be subject
to changes in global commodity prices. Fluctuations in commodity
markets are affected by numerous factors beyond the Group's
control, including global demand and supply, international economic
trends, currency exchange fluctuations, expectations for inflation,
speculative activity, consumption patterns and global or regional
political events. The aggregate effect of these factors is
impossible to predict. Fluctuations in commodity prices, over the
long term, may adversely impact the returns of the Group's
investments. The Group monitors commodity prices and structures its
portfolio of assets with commodities that are likely to appreciate
in the medium to long term.
The Group reports its results in US Dollars, whilst the
functional currency of the parent company from which the Group
derives the majority of its funding is Pound Sterling. This may
result in additions to the Group's reported costs. Fluctuations in
exchange rates between currencies in which the Group invest,
reports, or derives income may cause fluctuations in its financial
results that are not necessarily related to the Group's underlying
operations. The Group converts funds to a currency in which funds
will be utilised on an as needed basis.
Funding risk
Strategic Minerals needs funds, both to manage its working
capital requirements and fund new and existing projects, as the
Company seeks to grow. If the Company is not able to obtain
sufficient financial resources, it may not be able to develop new
and existing projects. There can be no assurance that such funds
will continue to be available on reasonable terms, or at all in the
future. The Directors regularly review cash flow expenditure
requirements and the cash flow generated from its Cobre operation
to ensure the Group can meet financial obligations as and when they
fall due. In 2023, uncertain capital markets have restricted access
to both debt and equity markets. At present, the company has been
preparing to access short term financing ahead of a likely raise in
the second half of the year. The Board continues to expect that the
Company will be able to raise funds when needed but has had to
alter timing to suit market sentiment.
Reserve and resource risk
The Mineral reserve and resource relating to CRL and LCCM are
only estimates and no assurance can be given that the estimated
reserves and resources will be recovered or that they will be
recovered at the rates estimated. Reserve and resource estimates
are based on sampling and, consequently, are uncertain because the
samples may not be representative. Reserve and resource estimates
may require revision (up or down) based on future actual production
experience. The discovery of mineral deposits is dependent upon a
number of factors including the technical skill of the exploration
personnel involved.
The commercial viability of a mineral deposit, once discovered,
is also dependent upon a number of factors, including the size,
grade and proximity to infrastructure, metal prices and government
regulations, including regulations relating to royalties, allowable
production, importing and exporting of minerals, and environmental
protection. There can be no guarantee that a mineral deposit will
be economically viable. The Group undertakes studies in order to
mitigate this risk.
License and Permitting risk
The exploration, developing and mining of resources is, usually,
governed by licensing and permitting requirements issued,
generally, by governments. These normally cover limited periods and
risk may be attached to whether governments permit these periods to
be extended or institute "new" conditions on their usage. While
this is true for all resource projects it has significant
application to SML's two, pre-production assets, namely;
a) LCCM - The PEPR permitting process provides risk, both to
costs and timing of projects. While the PEPR for mining copper
oxide material from Paltridge North is unconditional, at the time
of writing, the variation to encapsulate the transitional ore
expected at the bottom of the planned Paltridge North pit has also
been submitted and is pending approval. There is also a need for a
PEPR for the Lynda/Lorna Doone deposit. Allowance for these
undertakings is reflected in our internal plans and valuations but
it is acknowledged that risks to the overall projects value may
arise from variations to expectations around the granting of these
PEPRs.
b) Redmoor - As the planned Redmoor Tin and Tungsten project is
not as advanced as LCCM, its progress is still dependent on
obtaining and maintaining appropriate approvals. Ultimately, a
mining license will need to be obtained. However, for the present,
the principal focus is in obtaining drilling approval to prove up
resources. The timing of such approvals may impact the effective
valuation of such assets.
Customer risk
The level of profitability of the Group is currently dependant
on the performance of the Company's Cobre operation in the United
States. The Cobre operation has a number of major customers and
should one or more of these customers choose to not to purchase
product it may have a substantial impact on the performance of the
Group. The Group continues to look for additional customers at
Cobre to address this risk and in addition will develop other
projects such as Leigh Creek Copper Mine to reduce the risk of
dependence on any one customer.
Operational and Environmental risk
Mining operations are subject to hazards normally encountered in
exploration, development, and production. These include unexpected
geological formations, rock falls, flooding, dam wall failure and
other incidents or conditions which could result in damage to plant
or equipment, people, or the environment and which could impact any
future production throughput. Although it is intended to take
adequate precautions to minimise risk, there is a possibility of a
material adverse impact on the Group's operations and its financial
results. The Group will develop and maintain policies appropriate
to the stage of development of its various projects. In 2020, as a
safeguard to both our clients and staff, amendments were made to
operational procedures to ensure that delivery of material was
contactless. These procedures have continued in 2021 and 2022.
Strategic risk
Significant and increasing competition exists for mineral
acquisition opportunities throughout the world. As a result of this
competition, the Group may be unable to acquire rights to exploit
additional revenue generative assets such as Cobre and attractive
mining development properties such as CRL and LCCM on terms it
considers acceptable. Accordingly, there can be no assurance that
the Group will acquire any interest in additional operations that
would yield reserves or result in commercial mining operations. The
Group expects to undertake sufficient due diligence to help ensure
opportunities are subjected to proper evaluation.
Uninsurable risk
The Group may become subject to liability for accidents,
pollution, and other hazards against which it cannot insure or
against which it may elect not to insure because of prohibitive
premium costs or for other reasons, such as amounts which exceed
policy limits.
Product risk
The Group has a contract for access to magnetite iron ore at the
Cobre operation until March 2027. There is a risk that the supplier
may terminate the agreement, after this time, in which case the
Group would no longer have product to sell. The Group's proactive
approach in securing access for the next five years has minimised
the impact this risk may have on future operations and the Group's
management actively engages with its supplier throughout the year
to proactively address any concerns that the supplier may
raise.
An off-take arrangement is in place for the LCCM project which
is subject to minimum product specifications. During 2019 the
company was able to produce at specification material in its
retreatment of heaps thereby substantially reducing the product
specification risk.
Dependence on key personnel risk
The Group and Company are dependent upon the executive and local
management teams. Whilst it has entered into contractual agreements
with the aim of securing the services of these personnel, the
retention of their services cannot be guaranteed. The development
and success of the Group depends on the Company's ability to
recruit and retain high quality and experienced staff. The loss of
the service of key personnel or the inability to attract additional
qualified personnel as the Group grows could have an adverse effect
on future business and financial conditions. The Group incentivises
executives and management with market-based remuneration packages,
short term and long-term incentive schemes.
Climate Change Risk
While climate change considerations can seriously impact
resource companies, the Company considers that there is little
downside risk from these considerations, given the metals and
minerals in its portfolio, and that these climate change
considerations are likely to impact positively on commodity prices
for both copper and tin.
Coronavirus Pandemic Risk
While the implications of the COVID-19 pandemic appear to be
mitigating, it remains difficult to predict its future impact given
the evolving nature of this issue and the varying reactions of
governments around the world. The Board and management are
continually reviewing the potential implications and undertakes
contingency planning reviewing actions it may take to mitigate the
risk. At the Company's Cobre operation, the Company continues to
implement a policy whereby drivers of trucks picking up material do
not exit the vehicle on site and screens have been put up for the
transfer of documents to protect staff. The working at home policy
introduced in 2019 continues, at the Company's operations in the
United Kingdom and Australia, in line with those country
requirements. The company continues to actively talk with advisors
and potential partners to move the Company's projects forward,
although this is predominately being undertaken remotely.
Ongoing War Risk
The Russian invasion of the Ukraine continues to raise the
possibility of a global conflict. To date, these actions have
generally, positively impacted on resource prices relevant to SML.
However, there is risk, that global economic growth may be severely
curtailed, and this would, ultimately, have a negative impact on
the demand for resources.
Key Performance Indicators
The Board monitors the activities and performance of the Group
on a regular basis. The principal KPI's monitored by the Company
are domestic sales of product from Cobre, the cash position of the
Group, the investment in project activities, the share price of the
Company and the health, safety and environmental incidents of the
Group.
The sales of domestic product at Cobre dipped in the fourth
quarter, as sales to the largest client were reduced. Despite this,
sales in 2022 were lower than last year but a healthy $2.446m
(2021: $2.611m).
The unrestricted cash position of the group as of 31 December
2022 was $0.341m which decreased from $0.611m from the previous
year. This drop in cash reflects the operating profit generated
during the year, less the investments made into the LCCM and
Redmoor projects as detailed in the Group Statement of Cash
Flows.
The share price of the Company at year end was 0.25p (2021:
0.30p). Directors have indicated their confidence in the future
performance of the Company through on market acquisition of
shares.
The group did not have any health and safety or environmental
incidents during the year. (2021: nil)
Strategy
In early 2016, the Company adopted a strategy emphasising both
an operating and investment strategy which is continued today.
The Operating Strategy is centred on maintaining and improving
cash flows from the Company's magnetite stockpile at the Cobre mine
in New Mexico, USA, whilst also limiting corporate overheads in
line with this profitability, thus ensuring operating
self-sufficiency.
The Investment Strategy is built around investment in projects
that relate to metals expected to increase in demand and price over
the medium term.
The Company is well positioned to execute its plans to restart
full LCCM product subject to sourcing funding and commencing a
Pre-Feasibility Study at Redmoor.
Outlook and Prospects
The Company continues to maintain controls on its overheads, is
focused on restarting production at Leigh Creek in 2023, securing
and expanding Cobre's profitable domestic sales and progressing the
Redmoor Tin and Tungsten mine to a "pre-feasibility" stage.
The Board is confident that the outlook for the Company is
encouraging having weathered testing times in both 2021 and 2022.
The Company is actively pursuing non-dilutive funding approaches,
both joint venture and debt style, to progress both LCCM and
Redmoor. The low holding cost of these projects, the low level of
debt in the Company and the now extended access to the Cobre
magnetite stockpile, with its associated cash flow, provides the
Company the flexibility, when considering financing options, to
extract maximum value from these investments.
Current expectations are that funding for LCCM can be sourced so
that production can commence later in 2023. Regarding the Redmoor
project, expected time frames here are longer with the next goal
being the preparation of a pre-feasibility study to be followed by
a bankable feasibility study. Each study is expected to take two to
two and a half years to complete, and the Company believes it may
be able to access grant funding to assist in the completion of the
pre-feasibility study.
The robust performance of commodity prices, notably Copper and
Tin, have provided some optimism for the Company, although these
have not, as yet, been reflected in market valuations of the
Company's shares. While Covid-19 continues to impact developmental
operations, the Board considers that the impact is not likely to
significantly impact the 2023 year's operations. A more detailed
analysis of the impact of COVID 19 is include as part of the
corporate governance statement.
Directors' section 172 statement
Section 172 of the Companies Act 2006 requires Directors to take
into consideration the interests of stakeholders and other matters
in their decision making. The Directors continue to have regard to
the interests of the Company's employees and other stakeholders,
the impact of its activities on the community, the environment and
the Company's reputation for good business conduct, when making
decisions. In this context, acting in good faith and fairly, the
Directors consider what is most likely to promote the success of
the Company for its members in the long term. We explain in this
annual report, and referenced below, how the Board engages with
stakeholders.
Likely consequence of any decision in the long term
The Chairman's Statement, Strategic Report Business Strategy and
the Corporate Governance Statement set out the Company's long-term
rationale and strategy.
Interests of employees
The Employee section of the Company's Corporate Governance
Statement sets out the Company's approach to the interests of its
employees.
Foster business relationships with suppliers, customers, and
others
The Company's approach to business relationships with
stakeholders and shareholders are set out in the Company's
Corporate Governance Statement.
Community and environment
The Company's approach to the community is set out in the
Corporate Governance Statement.
Maintain high standards of business conduct
The Corporate Governance Statement sets out the Board and
Committee structures and extensive Board and Committee meetings
held during 2022, together with the experience of executive
management and the Board and the Company's policies and
procedures.
Act fairly between shareholders
The Corporate Governance Statement sets out the process the
Company follows to ensure it all shareholder interests are
preserved and enhanced.
Principal Decisions made by the Board
We define principal decisions as both those that have long-term
strategic impact and are material to the Group, but also those that
are significant to our key stakeholder groups. In making the
following principal decisions, the Board considered the outcome
from its stakeholder engagement, the need to maintain a reputation
for high standards of business conduct and the need to act fairly
between the members of the Company:
(a) Commitment to creation of a second income stream at Leigh Creek
The Board considers the creation of a second income stream to
the Company, particularly where the asset is owned and controlled
by the Company, of extremely strategic importance to the Company.
However, given the deterioration in the Company's share price, it
has taken the strategic view that the progress of the Leigh Creek
Copper Mine into production needs to be funded at the asset level
either by debt or equity. Accordingly, the Board and Management
have concentrated efforts in sourcing funding at the LCCM
level.
(b) Debt management
Apart from lease liabilities associated with funding equipment
at SMG, the Board has repaid all debts and, at present, does not
wish to place a commitment of this nature on its balance sheet,
despite the recent extension of access to operations at Cobre.
c) Progression of Redmoor Tin and Tungsten Project
The Board continues to focus its attention on securing the
progress of the Redmoor project with minimal parent dilution and
considers that the placement of Tin and Tungsten on the UK critical
minerals list is likely to provide an opportunity for the Company
to access government grant funding to help achieve this aim. Should
grant funding be forthcoming, this does not preclude the Company
looking for an appropriately resourced joint venture partner that
could assist in the completion of feasibility studies.
d) Limiting of Equity Raises in Line with Investment in Value Added Project Progression
The Board has adopted a policy of seeking to limit Strategic
Minerals plc's capital raisings, and hence shareholder dilution, as
much as possible and to, generally, ensure that the bulk of funds
raised are for value added purposes/projects.
e) Commitment to funding operating costs from Cobre cash flows
The Board has adopted a long running strategic objective to
maintain corporate overheads within after tax cash flow generated
from its Cobre operations. In this manner, any dilutive equity
issues are directed at, potentially, value accretive investments to
progress projects.
In making the above principal decisions, the Directors believe
that they have considered all relevant stakeholders, potential
impact and conflicts, the Company's business model and its
long-term strategic objectives, and have acted accordingly to
promote the success of the Company for the benefit of its members
as a whole.
The Strategic Report was approved and authorised for issue by
the Board of Directors and was signed on its behalf by:
John Peters
Managing Director
19 June 2023
STRATEGIC MINERALS PLC
REPORT OF DIRECTORS
FOR THE YEARED 31 DECEMBER 2022
The Directors present their report and the audited financial
statements for Strategic Minerals Plc ("the Company") and its
wholly owned subsidiaries ("the Group") for the year ended 31
December 2022.
PRINCIPAL ACTIVITIES, BUSINESS REVIEW AND FUTURE
DEVELOPMENTS
The Company is a public limited company registered in the UK
whose registered office is 27/28 Eastcastle Street, London, W1W
8DH.
The principal activity of the Company is a holding company. The
principal activity of the Group is the exploration, development,
and operation of mining projects.
A review of the Group's business during the financial year and
its likely development is given in the preceding Chairman's Report
and Strategic Review.
RESULTS AND DIVIDS
The Group recorded a profit after taxation for the year of
$84,000 (2021 $156,000).
The Directors do not propose to recommend any distribution by
way of dividend for the period ended 31 December 2022.
DIRECTORS
The Directors who served the Company during the period and prior
to the release of this report were as follows:
Current Directors
Alan Broome AM (appointed 2 July 2015)
John Peters (appointed 21 January 2015)
Peter Wale (appointed 12 July 2016)
Jeffrey Harrison (appointed 7 February 2018, resigned 25(th) April 2023)
DIRECTORS' INTEREST IN SHARES AND OPTIONS
The persons who held office during the year or at the year-end
had the following interests in share capital and options of the
Company as detailed below.
Director Shares held Shares held Shares held
at reporting 31 December 2022 31 December 2021
date
------------------- -------------- ------------------ ------------------
John Peters 81,000,000 81,000,000 74,000,000
Peter Wale 80,767,266 80,767,266 80,767,266
Alan Broome AM 9,172,319 9,172,319 9,172,319
Jeffrey Harrison
(resigned 25(th)
April 2023) 1,669,642 1,669,642 1,669,642
DIRECTORS' INTEREST IN SHARES AND OPTIONS (continued)
The following are the options held as at the reporting date and
as at 31 December 2022 for all Directors:
Director Options held Options held Options held Exercise Performance Expiry Grant
at reporting 31 December 31 December Price milestone Date Date
date 2022 2021 pence 5-day VWAP
pence
------------------ ------------- ------------- ------------- ------------- ------------ ----------- -----------
Alan Broome AM - - 5,000,000 5.00 10.00 30/06/2022 15/02/2018
John Peters - - 7,500,000 5.00 10.00 30/06/2022 15/02/2018
Peter Wale - - 5,000,000 5.00 10.00 30/06/2022 15/02/2018
Jeffrey Harrison
(resigned 25(th)
April 2023) - - 2,500,000 5.00 10.00 30/06/2022 9/08/2018
DIRECTORS' REMUNERATION AND SERVICE CONTRACTS
Under their respective service contracts, the officers of the
company received fees as detailed in the Directors' Remuneration
table in Note 6.
SUBSTANTIAL SHAREHOLDERS
As at 31 May 2023 shareholdings of 3% or more of the issued
share capital notified to the Company were:
Number of 0.1p ordinary shares Percentage of issued share capital
Charles and Alexandra Manners 91,130,742 4.52
RAB Capital (Phillip Richards) 81,000,000 4.02
John Peters 81,000,000 4.02
Peter Wale 80,767,266 4.01
Based on the total issued share capital of 2,015,964,616.
POLITICAL CONTRIBUTIONS
There were no political contributions made by the Group during
the year ended 31 December 2022 (2021: Nil).
INFORMATION TO SHAREHOLDERS - WEBSITE
The Company has its own website (www.strategicminerals.net) for
the purposes of improving information flow to shareholders, as well
as to potential investors.
GOING CONCERN
The Directors have given careful consideration to the Group and
Parent Company's (together "the Group") ability to continue as a
going concern through review of cash flow forecasts prepared by
management for the period to 31 December 2024, and a review of the
key assumptions on which these are based and sensitivity
analysis.
The Group's forward commitments include corporate overhead,
which is actively managed in line with cash generated from the
Cobre asset and costs associated with keeping exploration licences
and mining leases current.
Group forecasts are based on Management's expectations of a
recovery in sales, in the second half of 2023 and 2024, to 2021
levels. For the purposes of the consideration of the Group's
ability to operate as a going concern, only non-discretionary
expenditure on projects is included in the cash flow forecasts.
The Company forecasts that in order to have sufficient funds to
meet all operating costs until December 2024, the Group is reliant
on cash being generated from the Cobre asset in line with forecast
and a capital raise would be required no later than the last
quarter of 2023.
However, the Board considers additional funds will be required
to progress the development of the Leigh Creek Copper Mine and
Redmoor projects. It is the intention of the group that the LCCM
asset will be developed during 2023 and Management are actively
pursuing such funding and envisage that this will be sourced at the
asset level.
As the Group is reliant on cash being generated from the Cobre
asset in line with forecast, Management has performed reverse
stress testing which shows that a 5% reduction in forecast sales
would result in a cash deficit in July 2023, without management
taking mitigating actions within their control. The Group does not
currently have offtake agreements with customers, therefore there
is uncertainty as to whether forecast sales will be met.
These conditions indicate a material uncertainty which may cast
significant doubt as to the Group's ability to continue as a going
concern and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
If further funds are required, the Directors have reasonable
expectation based on the ability of the Company to raise funds in
the past that the Group will have access to sufficient resources by
way of debt or equity markets to meet all non-discretionary
expenditure. Consequently, the consolidated financial statements
have been prepared on a going concern basis.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern
INDEMNITY OF OFFICERS
The Group currently maintains insurance to cover against legal
action brought against its directors and officers. It evaluates on
the appointment of new directors whether an indemnity from the
Company for the actions of previous directors is warranted.
However, the Group may purchase and maintain, for any Director or
officer, insurance against any liability in the near future pending
the evolution and complexity of any further new projects undertaken
by the Company.
FINANCIAL RISK MANAGEMENT
Refer to Note 3 to the financial statements for further
details.
EVENTS AFTER THE OF THE REPORTING PERIOD
Refer to Note 24 to the financial statements for further
details.
PUBLICATION OF ACCOUNTS ON COMPANY WEBSITE
Financial statements are published on the Company's website. The
maintenance and integrity of the website is the responsibility of
the Directors. The Directors' responsibility also extends to the
financial statements contained therein.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS
So far as the Directors, at the time of approval of their
report, are aware:
-- there is no relevant audit information of which the Group's auditors are unaware; and
-- the Directors have taken all steps that they ought to have
taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the auditors are
aware of that information.
AUDITORS
Shipleys LLP were appointed as Group Auditors to fill the casual
vacancy that arose after the resignation of Jeffreys Henry in March
2023 and BDO in December 2022.
In accordance with section 489 of the Companies Act 2006, a
resolution proposing that Shipleys LLP be appointed as auditors of
the Group will be put to the Annual General Meeting.
By order of the Board
John Peters
Director
19 June 2023
STRATEGIC MINERALS PLC
STATEMENT OF DIRECTORS' RESPONSIBILITIES
FOR THE YEARED 31 DECEMBER 2022
Directors' responsibilities
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
are required to prepare the group and company financial statements
in accordance with UK adopted international accounting standards.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the
profit or loss of the group and company for that period.
In preparing these financial statements, the directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with UK
adopted international accounting standards subject to any material
departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company's
transactions and disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
STRATEGIC MINERALS PLC
CORPORATE GOVERNANCE STATEMENT
Board of Directors
The aim of the Board is to function at the head of the Group's
management structures, leading and controlling its activities and
setting a strategy for enhancing shareholder value. Regular
meetings are held to review the Group's forward planning. The Board
currently consists of a Non-Executive Chairman, a Managing
Director, and an Executive Director.
The Directors recognise the importance of sound corporate
governance commensurate with the size and nature of the Company and
the interests of its shareholders and, in 2018, formally adopted
The QCA Corporate Governance Code (the 'QCAC") after noting that it
had, effectively, implemented its content in its previous
arrangements.
In addition to the details provided below, governance
disclosures can be found at the company's website at
www.strategicminerals.net
Principle 1: Establish a strategy and business model which
promote long-term value for shareholders
The Board has developed and enunciated a strategy and business
model as detailed on the Company's website at
https://www.strategicminerals.net/company/strategy .
The Board considers the Company's strategy provides a framework
for medium to longer term growth in shareholder value.
The major risks to the Company's overall strategy stem from the
potential failure to maintain access to the Cobre magnetite
stockpile and overextending its cash requirements.
With respect to the exposure to operating cash flow only from
the Cobre magnetite stockpile, the Board actively embarked on a
search for a near term cash flow asset in our preferred mineral
suite. With the addition of Leigh Creek Copper Mine, the Board
feels it has, to a large extent, mitigated this risk, although it
has now developed a new risk associated with the re-commencement of
operations at Leigh Creek Copper Mine. Again, Management and the
Board have sought to address such concerns through ensuring that
sufficient resources are allocated to the project to give it the
greatest chance of success.
In relation to cash flow management of the Company, Management
and the Board closely monitor existing and expected cash flow
resources and plans for committing these to project development and
covering of corporate overheads. Additional to this, the Board
regularly is in contact with market participants to ensure that
sufficient interest is maintained in the market and that the
Company can, generally, raise funding as required.
A consideration of broader risks of the Company can also be
found at pages 9 to11 of this report and the financial instruments
note 3 of these financial statements.
Principle 2: Seek to understand and meet shareholder needs and
expectations
Shareholder input and communication has been actively sought by
the Board through direct contact with shareholders at both the
Annual General Meeting, shareholder information evenings (sometimes
combined with the Annual General Meeting), monitoring of social
media platforms, regular RNS releases, interviews on both Proactive
Investors and Vox Markets (including occasional shareholder Q &
A sessions) and direct one on one meetings with larger investors.
At all times, due regard is given to the price sensitive nature of
comments.
All shareholders are encouraged to attend the Company's Annual
General Meeting and investors have access to current information on
the Company through its website and via the
info@strategicminerals.net email address.
Principle 3: Take into account wider stakeholder and social
responsibilities and their implications for long-term success
As the Company is involved in the mining industry, the Board is
highly cognisant of its responsibility not only to shareholders but
in the broader community. As such, it has adopted a policy to
ensure adequate community consultation is undertaken in the areas
where we operate. Notably, in New Mexico USA, Cornwall UK and Leigh
Creek Australia, communication with local residents and active
involvement in the community has been encouraged. Additionally, the
Company has a policy to, where possible, employ local residents
when undertaking operations. To date, this has proven highly
successful with all locations recording either none or extremely
low levels of community dissent.
Principle 4: Embed effective risk management, considering both
opportunities and threats, throughout the organisation
The management of the business and the execution of the Group's
strategy are subject to a number of risks. The Company regularly
reviews the principal risks that face the business and assesses
appropriate responses to mitigate and, where possible, eliminate
potential adverse impact.
The Board is constantly undertaking a review of risk and, as a
mining company, has adopted and engendered a safety culture within
the Company to ensure that personnel safety is considered above
financial reward.
Information in relation to the Key Risks and Uncertainties that
are relevant to the group are set on page 9-11 of this report.
Board Committees
The Board has established separate sub-committees around audit
(chaired by Alan Broome AM) and remuneration within the Company
(chaired by Alan Broome AM) shared by the entire Board, excluding
the Managing Director. Additionally, a separate safety
sub-committee (chaired by Alan Broome AM) operated in 2022 with
both Alan Broome AM and Jeffrey Harrison (resigned 25(th) April
2023) comprising its membership.
Given the composition of the Board and the size of the Company,
it is felt a separate Nomination Committee is not yet warranted.
However, as the Company's operations expand, the Board will monitor
this aspect of operations and will respond accordingly. The Board
collectively undertakes the function of such a committee and where
conflicts arise the Directors exclude themselves from voting on
such matters.
Further information on the Company's Remuneration, Safety and
Audit Committees and their policies are set out under Principle 9
below.
Member details of the sub committees as at the date of this
report are:
Members Remuneration Committee Safety Committee Audit Committee
Mr Alan Broome AM - Non-Executive Chairman Chair Chair Chair
Mr Peter Wale - Executive Director
Mr John Peters - Managing Director
Principle 5: Maintaining the Board as a well-functioning,
balanced team led by the chair
There are currently three (3) Board Directors (one of which are
non-executive) and the Board considers that, at this time, this is
appropriate to the Company's current level of operations, although
this is reviewed formally at least annually. The Board is
considered well balanced in that:
- Mr Alan Broome AM, the Non-Executive Independent Chairman,
provides a sounding board for corporate strategy, a wealth of
mining experience, is a metallurgist by training and is highly
experienced in corporate governance. As such Alan is not involved
with the day-to-day operations of the Company and provides guidance
at the Board level. It is Management (notably John Peters and Peter
Wale) who have the responsibility to formulate overall strategy,
propose it to the Board, adjust the strategy for Board feedback and
then enact the approved strategy.
- John Peters, the Managing Director, brings in-depth strategic
management and investment banking experience. His practical
management has helped to focus the Company and its consultants on
the overall strategy while managing the hands on, day to day
management.
- Peter Wale, the Executive Director, provides an invaluable
bridge to shareholders providing insights into shareholder
requirements as well as monitoring and handling media aspects.
Peter, along with John Peters, manage the Company's interface with
shareholders, media and the investment community. Peter has also
undertaken an executive role in the management of Cornwall
Resources Limited.
All Directors are encouraged to use their independent judgement
and to challenge all matters, whether strategic or operational.
The Company notes that the QCA Code also recommends that the
Board include at least two Independent non-executive directors.
Following the resignation of Jeffrey Harrison, the Board will
consider the need for appointment of additional independent
non-executive director as the Group's scale and complexity
grows
Attendance at Board and Committee Meetings
The Board aims to meet at least eight times a year and as
required from time to time to consider specific issued required for
decision by the board.
The Company held 6 Board meetings and a number of sub-committee
meetings during the reporting period and the number of meetings
attended by each of the Directors of the Company during the year to
31 December 2022 were:
Director Capacity Board Meetings Remuneration Committee Audit Committee Safety Committee
A Broome AM Non-Executive 6 1 2 2
J Peters Executive 6 n/a n/a n/a
P Wale Executive 6 1 2 n/a
J Harrison Non-Executive 5 1 2 2
The directors attended all board meetings and committee meetings
that they were eligible and required to attend, with the exception
of J Harrison who was an apology at one meeting.
Directors' conflict of interest
The Company has effective procedures in place to monitor and
deal with conflicts of interest. The Board is aware of the other
commitments and interests of its Directors, and changes to these
commitments and interests are reported to and, where appropriate,
agreed with the rest of the Board.
Time Commitment of Directors.
The Managing Director is employed by the Group on a full-time
basis, whereas Mr Wale (Executive Director) and the Non- Executive
Directors are remunerated on fixed fee part time basis and are
remunerated for hours over and above their normal duties.
Principle 6: Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
Biographies for the Directors can be found in the 'Board of
Directors and Corporate Management' section of the company website
at https://www.strategicminerals.net/company/our-team.html
The Board is not dominated by one person or group of people.
The Board undertakes regular reviews of its capacity to guide
the Company in seeking to implement the Company's strategy. The
appointment of Jeff Harrison in February 2018 illustrates how the
Board, realising the need to increase its collective mining
operational experience added a fourth Director with such skills.
The Board also reviews periodically the appropriateness and
opportunity for continuing professional development whether formal
or informal.
Independent advice
All Directors are able to take independent professional advice
in the furtherance of their duties, if necessary, at the Company's
expense. In addition, the Directors have direct access to the
advice and services of the Company Secretary, Chief Financial
Officer, Company's NOMAD, lawyers and auditors.
Re-election of Directors
The Company's Articles of Association require that one-third of
the Directors must stand for re-election by shareholders annually
in rotation and that any new Directors appointed during the year
must stand for election at the AGM immediately following their
appointment.
Principle 7: Evaluate the Board performance based on clear and
relevant objectives, seeking continuous improvement
Given the size of the Company and the small but critical nature
of the roles of the Directors, board performance measures have not
been independently developed. The Company relies upon the market
and shareholder feedback to assess the Board's performance.
Principle 8: Promote a culture that is based on ethical values
and behaviours
The Directors recognise that their decisions regarding strategy
and risk will impact the corporate culture of the Company as a
whole and that this will impact the performance of the Company. The
Board seeks to embody and promote a corporate culture that is based
on sound ethical values as it believes the tone and culture set by
the Board impacts all aspects of the Company, including the way
that employees and other stakeholders behave.
The Company has adopted a code for Directors' and employees'
dealings in securities which is appropriate for a company whose
securities are traded on AIM and is in accordance with the
requirements of the Market Abuse Regulation which came into effect
in 2016.
The formation of the Safety Committee and the manner in which
options are allocated to Directors and key management/consultants
has created a team environment in which the running of the company
is aligned with medium to longer term shareholder goals.
These measures enable the Company to determine that ethical
values and behaviours are recognised and respected.
Principle 9: Maintain governance structures and processes that
are fit for purpose and support good decision-making by the
Board
As a resource development company, the Board considers the
crucial governance structures and processes revolve around Safety
and Audit.
Safety Committee
Safety is a critical matter, particularly given the capacity for
harm to employees and consultants. The purpose of the Safety
committee is to ensure that our vision, to provide a safe workplace
where no harm comes to anyone, is applied at all of the Company's
locations and that a culture of Safety purveys throughout the
organisation.
The Company believes that all reasonable efforts should be
undertaken to ensure incidents are prevented, management have
ultimate accountability for health and safety but everyone on site
has a responsibility to ensure no one comes to harm and employees
have the responsibility to stop any job or activity they believe is
unsafe and could cause harm to people.
The Safety Committee attempts to monitor, and report to the full
Board, on the achievement of the Company in devoting the necessary
resources needed to create a working environment, both physically
and supervisorial, in which our people and others under our
influence and control can work without sustaining injury or
suffering ill health; ensuring no business target takes priority
over health and safety; using risk assessments to identify hazards
and unsafe behaviours and introduce actions to reduce the risk to
acceptable levels; investigating and reporting all accidents and
dangerous occurrences and preventing future incidents; setting
safety targets with the aim of preventing incidents and accidents
and communicate the performance to all employees; ensuring all
employees are competent to carry out the tasks assigned to them by
providing the relevant information, instruction, training and
supervision required; encouraging everyone to contribute to working
safely and preventing accidents; designing, constructing, operating
and maintaining all equipment, buildings and structures to ensure a
safe operation; and comply with all current legislation and codes
of practice.
Audit Committee
The purpose of the Audit Committee is to provide formal and
transparent arrangements for considering how to apply the financial
reporting and internal control principles set out in the QCAC and
to maintain an appropriate relationship with the Company's
auditors. The key terms are as follows:
- to monitor the integrity of the financial statements of the
Company and Group, and any formal announcement relating to the
Company's performance.
- to monitor the effectiveness of the external audit process and
make recommendations to the Board in relation to the appointment,
re-appointment and remuneration of the external auditors;
- to keep under review the relationship with the external
auditors including (but not limited to) their independence and
objectivity;
- to keep under review the effectiveness of the Company's
financial reporting and internal control policies and systems;
- to review key judgements and estimates relating to the
impairment assessment of project assets - LCCM, CRL and
- to assess the ability of the group to remain a going
concern.
Further details of board committees are given under Principle 5
above.
Securities Trading
The Company has adopted a share dealing code for dealings in
shares by Directors and senior employees which is compliant with
the Market Abuse Regulation (EU) No 596/2014 ("MAR") and
appropriate for an AIM company. The Directors will comply with MAR
and AIM Rule 21 relating to dealings and will take all reasonable
steps to ensure compliance by persons discharging managerial
responsibility ("PDMR") and persons closely associated with
them.
Suitability of governance structures
The Board intends that the Company's governance structures
evolve over time in parallel with its objectives, strategy and
business model to reflect the development of the Company.
Principle 10: Communicate how the Company is governed and is
performing by maintaining a dialogue with shareholders and other
relevant stakeholders
The Directors believe a healthy dialogue exists between the
Board, the Company's shareholders and other stakeholders. The Board
regularly has reports on shareholder feedback through summary of
social media comments, shareholder information evenings and
undertakes site visits and customer visits throughout the year.
In addition, all shareholders are encouraged to attend the
Company's Annual General Meeting. The outcomes of all shareholder
votes are disclosed in a clear and transparent manner via a
regulatory information service, such as RNS of the London Stock
Exchange.
The Company includes historical annual reports, notices of
general meetings and RNS announcements over the last five years on
its website. The Company lists contact details on its website and
on all announcements released via RNS, should shareholders wish to
communicate with the Board.
The Company will include, when relevant, in its annual report,
any matters of note arising from the audit or remuneration
committees.
Impact on the Group of Covid-19
The global, social and economic impact of Covid-19 have been
significant. Uncertainty remains as to the long-term implications
of the pandemic as the Company continues to closely monitor
governmental guidance in our various locations.
The Directors recognise that the current macro-economic
environment continues to result in limited or more expensive
sources of funding. However, as per its adoption of a going concern
concept for the financial statements, the Board considers that
funding required to maintain operations is available but notes that
development capital may need to be deferred.
Operations at Cobre continue to be adjusted to ensure
contactless supply to our customers.
The Company's early efforts to reduce costs and has enabled the
Company to best position itself to manage any longer-term impacts
of the pandemic although the Company continues to focus on near
term fiscal, operational and regulatory matters.
The Group will consequently carefully review any capital asset
investment decisions and take further action to reduce costs if
necessary. As the risk of Covid 19 continues the priority for the
Company remains the safety, health and wellbeing of our employees
and wider stakeholders.
STRATEGIC MINERALS PLC
AUDIT COMMITTEE REPORT
This report addresses the responsibilities, the membership, and
the activities of the Audit Committee in 2022 up to the approval of
the 2022 Annual Report and 2022 year-end Financial Statements.
Responsibilities
The main responsibilities of the Audit Committee are the
following:
1) monitor the integrity of the annual and interim financial statements;
2) Review the effectiveness of financial and related internal
controls and associated risk management;
3) Manage the relationship with our external auditors including
plans and findings, independence, and assessment regarding
reappointment.
Membership
Members of the Audit Committee are Alan Broome AM, Peter Wale
(Chairman) and Jeffrey Harrison. (Resigned 25(th) April 2023)
Activities in 2022
With regard to the 2022 year-end Audit, the committee has
reviewed the following key audit matters:
1.Going Concern
The Directors have given careful consideration to the Group and
Parent Company's (together "the Group") ability to continue as a
going concern through review of cash flow forecasts prepared by
management for the period to 31 December 2024, and a review of the
key assumptions on which these are based and sensitivity
analysis.
The Group's forward commitments include corporate overhead,
which is actively managed in line with cash generated from the
Cobre asset and costs associated with keeping exploration licences
and mining leases current.
Group forecasts are based on Management's expectations of a
recovery in sales, in the second half of 2023 and 2024, to 2021
levels. For the purposes of the consideration of the Group's
ability to operate as a going concern, only non-discretionary
expenditure on projects is included in the cash flow forecasts.
The Company forecasts that in order to have sufficient funds to
meet all operating costs until December 2024, the Group is reliant
on cash being generated from the Cobre asset in line with forecast
and a capital raise would be required no later than the last
quarter of 2023.
However, the Board considers additional funds will be required
to progress the development of the Leigh Creek Copper Mine and
Redmoor projects. It is the intention of the group that the LCCM
asset will be developed during 2023 and Management are actively
pursuing such funding and envisage that this will be sourced at the
asset level.
As the Group is reliant on cash being generated from the Cobre
asset in line with forecast, Management has performed reverse
stress testing which shows that a 5% reduction in forecast sales
would result in a cash deficit in July 2023, without management
taking mitigating actions within their control. The Group does not
currently have offtake agreements with customers, therefore there
is uncertainty as to whether forecast sales will be met.
These conditions indicate a material uncertainty which may cast
significant doubt as to the Group's ability to continue as a going
concern and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
If further funds are required, the Directors have reasonable
expectation based on the ability of the Company to raise funds in
the past that the Group will have access to sufficient resources by
way of debt or equity markets to meet all non-discretionary
expenditure. Consequently, the consolidated financial statements
have been prepared on a going concern basis.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern
2) Impairment Assessments
The Committee has reviewed the judgements surrounding the
impairment assessments required under IAS36 for LCCM and IFRS6 for
CARE and CRL.
CARE: The Group reduced the carrying amount of the asset to
nil in 2019 and recognised an impairment loss. During
2021 all tenements have been relinquished to the Western
Australian government.
CRL: The Redmoor projects are early-stage exploration projects.
The Committee is satisfied that results from exploration
activity provide sufficient evidence of the continued
prospectivity of the asset. Accordingly, no impairment
indicators have been identified.
LCCM: The Committee is satisfied that the fair value of the
Development Asset is greater than or equal to its carrying
value, therefore no impairment is provided.
The assessment of the financial model for the project
included review of the following key elements.
i) Mineable reserves over life of project
ii) Forecasted Copper pricing
iii) Capital and operating cost assumptions to deliver
the mining schedule
iv) Foreign exchange rates
v) Discount rate
Conclusion
In 2023 and beyond, the Committee will continue to adopt the new
reporting and regulatory requirements and ensure that the system of
internal controls is both maintained and regularly reviewed for
improvement. The Committee will also continue to review group
assets for triggers that may indicate impairment and closely
monitor the financial risks faced by the business and progress made
towards mitigating these.
For and on behalf of the Audit Committee
Alan Broome AM
19 June 2023
Chair of Audit Committee
STRATEGIC MINERALS PLC
REMUNERATION COMMITTEE REPORT
This remuneration report has been prepared by the Remuneration
Committee and approved by the Board. The report for 2022 sets out
the details of remuneration for the Directors and discloses the
amounts paid during the year.
Membership
Members of the of the Remuneration Committee are Alan Broome AM
(Chairman) Peter Wale and Jeffrey Harrison (resigned 25(th) April
2023). Other Directors are invited to attend as appropriate
provided they do not have a conflict of interest. The aim of the
Remuneration Committee is to attract, retain and motivate the
executive management of the Company and to offer the opportunity
for employees to participate in share option schemes to incentivise
employees to enhance shareholder value.
Director Remuneration
Compensation for Directors who held office during the year is as
follows:
2022 Share
Directors' Salary and Consultancy based
fees fees payments Total
2022 2022 2022 2022
$'000 $'000 $'000 $'000
A Broome AM 12 58 3 73
J Peters 13 117 5 135
J Peters - Capitalised Fee* - 65 - 65
P Wale 40 - 3 45
P Wale - Capitalised Fee* 60 - - 59
J Harrison 12 24 - 36
J Harrison -Capitalised Fee** - 36 - 36
Total 137 300 11 448
2021 Share
Directors' Salary and Consultancy based
fees Fees payments Total
2021 2021 2021 2021
$'000 $'000 $'000 $'000
A Broome AM 13 60 16 89
J Peters 13 193 23 229
P Wale 110 - 16 126
J Harrison 13 26 3 42
J Harrison - Capitalised Fee** - 22 - 22
Total 149 301 58 508
During 2022 an entity associated with John Peters purchased on
market shares - 2,000,000 @.2975p and 5,000,000@.3499p.
*During 2022, J Peters and P Wale provided extended director
services to CRL and LCCM. This expenditure is capitalised as part
of Deferred Exploration and Evaluation Expenditure or the
Development Asset.
**J Harrison provides consultancy services for CRL. This
expenditure is capitalised as part of Deferred Exploration and
Evaluation Expenditure.
Details of other Director related party transactions are
detailed at Note 23.
J Peters is the highest paid director in 2022 and 2021.
It should be noted that the Directors of the Company have, since
becoming Directors, not sold any shares outright and that, as at
the date of this report, all implied gains on options have not
materialised and implied losses exist.
Going forward into 2023 and beyond, the Committee and I will
remain focused on ensuring that reward at the Company continues to
be closely aligned with the delivery of long-term shareholder
value.
For and on behalf of the Remuneration Committee
Alan Broome AM
19 June 2023
Chair of Remuneration Committee
STRATEGIC MINERALS PLC
INDEPENT AUDITOR'S REPORT
FOR THE YEARED 31 DECEMBER 2022
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF STRATEGIC MINERALS
PLC
Opinion on the financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the Parent Company's affairs as at 31
December 2022 and of the Group's profit for the year then
ended;
-- the Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards;
-- the Parent Company financial statements have been properly
prepared in accordance with UK adopted international accounting
standards and as applied in accordance with the provisions of the
Companies Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
We have audited the financial statements of Strategic Minerals
plc (the 'Parent Company') and its subsidiaries (the 'Group') for
the year ended 31 December 2022 which comprise of the Consolidated
statement of comprehensive income, the Consolidated and Company
statements of financial position, the Consolidated and the Company
statements of cash flows, the Consolidated and the Company
statements of changes in equity and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the
preparation of the Group and Parent Company financial statements is
applicable law and UK adopted international accounting standards
and, as regards the Parent Company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor's responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Independence
We are independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's
Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
Material uncertainty related to going concern
We draw attention to note 1 to the financial statements which
indicates that the Group's ability to continue as a going concern
is reliant upon cash generated from the Cobre asset and is also
dependent on raising near term funding to progress the development
of the Leigh Creek Copper Mine and Redmoor projects and provide
working capital. As stated in note 1, these conditions, along with
other matters set out in note 1, indicate a material uncertainty
exists that may cast significant doubt on the Group and Parent
Company's ability to continue as a going concern. Our opinion is
not modified in respect of this matter.
We identified going concern as a key audit matter based on our
assessment of the significance of the risk and the effect on our
audit strategy.
Our evaluation of the Directors' assessment of the Group and the
Parent Company's ability to continue to adopt the going concern
basis of accounting and our audit procedures in response to this
key audit matter included the following:
-- We obtained and reviewed the Directors' assessment with
regards to going concern and audited the key assumptions used by
management in assessing the going concern status.
-- We have obtained and assessed the Directors' cash flow
forecasts based on our knowledge of the business, including
considering potential risks and uncertainties associated with the
Group.
-- We compared recent sales information to the Directors'
forecast including the impact of the continued loss of one of the
groups major customers.
-- We have carried out sensitivity analysis testing and reverse
stress testing on the forecasts to test the assumptions central to
the LCCM asset carrying value .
-- We discussed with Management and the Board the Group's
strategy to obtain further capital to fund its development plans
and non-discretionary expenditure as required.
-- We have obtained and reviewed post year-end board minutes to
confirm the group's ability to secure short-term financing as is
required.
-- We reviewed and considered the adequacy of the disclosure
within the financial statements relating to the directors'
assessment of the going concern basis of preparation and the
disclosure of the material uncertainties.
In auditing the financial statements, we have concluded that the
Directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report.
Overview
100% (2021: 100%) of Group revenue
Coverage 99% (2021: 99%) of Group total assets
Key audit matters 2022 2021
Going Concern P P
Carrying value of property, plant, P P
and equipment - Leigh Creek development
asset
Carrying value of exploration P P
and evaluation assets
Revenue recognition
Management override of controls
---------------------------------------------------------
Group financial statements as a whole
Materiality
$152,000 (2021: $220,000) based on 1.0%
(2021: 1.5%) of Total Assets.
---------------------------------------------------------
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group's system of internal
control, and assessing the risks of material misstatement in the
financial statements. In particular, we looked at areas where the
Directors' made subjective judgements, which involved making
assumptions and considering future events that are inherently
uncertain, such as their going concern assessment. We also
addressed the risk of management override of internal controls,
including assessing whether there was evidence of bias by the
Directors that may have represented a risk of material
misstatement.
In assessing the risk of material misstatement to the Group
financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, our
Group audit scope focused on the Group's principal operating
locations being Australia (Leigh Creek Copper Mine Pty Ltd,
"LCCM"), USA (Strategic Minerals Group LLC, "SMG") and the United
Kingdom (Cornwall Resources Limited "CRL" and Strategic Minerals
Plc "SML, Parent Company").
LCCM, SMG, CRL and SML were regarded as being significant
components of the Group, which were selected, based on their size
and risk characteristics and were subject to full scope audits.
The remaining components of the Group were considered
non-significant, and these components were principally subject to
analytical review procedures.
The audits of each component were performed in the United
Kingdom and were conducted by the Group engagement team .
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified, including those which had the greatest
effect on: the overall audit strategy, the allocation of resources
in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In addition to the matter identified in the material uncertainty
related to going concern section above we determined that the
following were key audit matters.
Key audit matter How the scope of our audit
addressed the key audit matter
Carrying value The carrying value Our procedures in relation
of Leigh Creek of the Group's to management's assessment
development asset Property, plant of the carrying value of LCCM
and equipment - included, but were not limited
Refer to note Development asset to the following:
2 and 11 of the amounted to US$7.8
Financial million and * We reviewed Management's assessment of indicators of
statements represents impairment for LCCM and considered the requirements
for further capitalised of IAS36 Impairment of assets ("IAS 36").
information. development
expenditure on
the Leigh Creek * We reviewed the license documentation, confirmed that
Copper Mine valid licenses exist, discussed with management the
("LCCM"), current renewal position of licenses which were due
("Development to expire and assessed if the Group is in compliance
asset"). with license terms.
Management are
required to assess * We challenged the key estimates and assumptions
at least annually, applied in the valuation model. This included the
whether there is following:
any indication
that the Group's
development assets * Comparing the key inputs in the current year
may be impaired. impairment model against the prior year model and
Management are enquired of management the rationale for any changes
required to in inputs used.
perform
a detailed
assessment * Comparing forecast copper pricing against market
if there are pricing.
indicators
of potential
impairment. * Comparing foreign exchange rate assumptions to market
forecasts.
The assessment
of the recoverable
value of the * Assessing the methodology applied and the consistency
Development of the fair value less cost to sell method used
asset requires against the requirements of IAS 36, and tested the
significant mathematical accuracy and integrity of management's
judgment model.
and estimates to
be made by
management
- in particular * We reviewed management's sensitivity analysis and
regarding the performed our own sensitivity analysis and stress
inputs testing with the assistance of Shipleys financial
applied in the modelling expert.
models including;
forecast copper
prices, exchange
rates production
and reserves, Key observation:
discount
rates, operating Based on our audit procedures
and development carried out we can confirm
costs and forecast that the LCCM asset is not
project impaired.
commencement
date.
The carrying value
of the Leigh Creek
development asset
is therefore
considered
a key audit matter
given the level
of judgment and
estimation
involved.
------------------- ----------------------------------------------------------------------------
Key audit matter How the scope of our audit
addressed the key audit matter
Carrying value The Group's Our procedures included, but
of exploration capitalised were not limited to the following:
and evaluation exploration
assets expenditure * We reviewed management's current Impairment
in Cornwall Resources assessment report for CRL in accordance with the
Refer to note Limited ("CRL") requirements of IFRS 6. This included performing the
9 of the amounted to $5.2m following procedures:
Financial statements at year-end.
for further
information. The Directors have * We reviewed the Group's licence documentation to
assessed whether confirm that the Group has valid tenure over its area
there are any of interest.
indications
that these assets
may be impaired * We discussed with management the exploration activity
in accordance with undertaken during the year to assess if there are any
the requirements facts or circumstances that would indicate that the
of IFRS 6 Exploration project is uneconomical or unlikely to be developed.
for and Evaluation
of Mineral Resources
("IFRS 6"). * We obtained budgets, cash-flow forecasts and minutes
of meetings to confirm that there is an intention to
Due to the value continue to explore the project area.
attributed to the
assets and the
significant level
of judgement involved Key observation:
in the impairment
analysis, the Based on the work performed
carrying we found management's assessment
value of Exploration of the carrying value of CRL
and Evaluation to be appropriate.
assets is considered
to be a key audit
matter.
---------------------- ----------------------------------------------------------------------
Key audit matter How the scope of our audit
addressed the key audit matter
Revenue recognition There is a presumed Our procedures included, but
risk of fraud and were not limited to the following:
Refer to note error in revenue
1 of the recognition . * We carried out procedures to test revenue and to
Financial statements consider whether the application of the revenue
for further information. recognition policy was appropriate.
* We carried out revenue cut of testing to ensure that
revenue was recognised within the correct accounting
period.
Key observation:
Based on the work performed
we can conclude that revenue
Management override has been recognised in the
of controls correct accounting period
There is a presumed and is not materially misstated.
risk that Management
is able override
controls. We have reviewed journal adjustments
and the rationale behind them
and have considered whether
these have been subject to
potential management bias.
Key observations:
From our procedures carried
out no adverse issues were
identified with regards to
management override of controls.
---------------------- ---------------------------------------------------------------
Our application of materiality
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability
that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent
of testing needed. Importantly, misstatements below these levels
will not necessarily be evaluated as immaterial as we also take
account of the nature of identified misstatements, and the
particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality
for the financial statements as a whole and performance materiality
as follows:
Group financial statements Parent company financial
statements
2022 2021 2022 2021
$ $ $ $
-------------- --------------- ---------------- -----------------
Materiality 152,000 220,000 88,000 136,000
-------------- --------------- ---------------- -----------------
Basis for 1% of Total 1.5% of Total 1% of Total 1.5% of Total
determining Assets Assets Assets Assets
materiality
-------------- --------------- ---------------- -----------------
Rationale We consider total assets The Parent Company is
for the benchmark to be the most significant a holding company which
applied determinant of the Group's performs fund raising
financial performance activities and incurs
as the Group has invested other administrative
significantly in its expenditure. As the strategic
Development and Exploration focus of the Company
assets and these are is monetising its asset
considered to be the base, we have determined
key value driver for that an asset based materiality
the Group. is the appropriate basis
of materiality.
------------------------------- -----------------------------------
Performance
materiality 114,000 165,000 66,000 102,000
-------------- --------------- ---------------- -----------------
Basis for We use a different level of materiality (performance
determining materiality) to determine the extent of our
performance testing for the audit of the financial statements.
materiality Performance materiality is set based on the
audit materiality as adjusted for the judgements
made as to the entity risk and our evaluation
of specific risk of each audit areas having
regard to the internal control environment.
Performance materiality was set at 75% of the
above materiality level.
--------------------------------------------------------------------
Component materiality
We set materiality for each component of the Group based on a
percentage of between 50% and 60% (2021: 50% and 70%) of Group
materiality dependent on the size and our assessment of the risk of
material misstatement of that component. Component materiality
ranged from $76,000 to $91,200 (2021: $110,000 and $154,000). In
the audit of each component, we further applied performance
materiality levels of 75% (2021: 75%) of the component materiality
to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them
all individual audit differences in excess of $7,600 (2021:
$4,000). We also agreed to report differences below this threshold
that, in our view, warranted reporting on qualitative grounds.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the financial statements and our auditor's
report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact. We
have nothing to report in this regard.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work
performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and
matters as described below.
Strategic In our opinion, based on the work undertaken
report and in the course of the audit:
Directors' * the information given in the Strategic report and the
report Report of the directors' for the financial year for
which the financial statements are prepared is
consistent with the financial statements; and
* the Strategic report and the Report of the directors'
have been prepared in accordance with applicable
legal requirements.
In the light of the knowledge and understanding
of the Group and Parent Company and its environment
obtained in the course of the audit, we have
not identified material misstatements in the
strategic report or the Directors' report.
Matters We have nothing to report in respect of the following
on which matters in relation to which the Companies Act
we are required 2006 requires us to report to you if, in our
to report opinion:
by exception
* adequate accounting records have not been kept by the
Parent Company, or returns adequate for our audit
have not been received from branches not visited by
us; or
* the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors' remuneration
specified by law are not made; or
* we have not received all the information and
explanations we require for our audit.
------------------------------------------------------------------------
Responsibilities of Directors
As explained more fully in the Statement of directors'
responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the
Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group's and the Parent Company's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the
Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor's report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including
fraud is detailed below:
-- Holding discussions with the Directors and the Audit
Committee and considering any known or suspected instances of
non-compliance with laws and regulations or fraud;
-- Making enquiries of Directors as to whether there was any
correspondence from regulators in so far as the correspondence
related to the Financial Statements;
-- Reviewing minutes from board meetings of those charges with
governance to identify any instances of non-compliance with laws
and regulations;
-- Gaining an understanding of the laws and regulations relevant
to the Group and Parent Company and the industry in which it
operates, through discussion with management and our knowledge of
the industry. These included the listing rules, the financial
reporting framework, UK Companies Law, tax legislation and
environmental regulations in the UK, USA and Australia;
-- Communicating relevant identified laws and regulations and
potential fraud risks to all engagement team members and remaining
alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit;
-- Agreeing the financial statement disclosures to underlying supporting documentation;
-- Assessing the susceptibility of the Group and Parent Company
financial statements to material misstatement, including how fraud
might occur by making enquiries of the Directors and the Audit
Committee during the planning and execution phases of our audit. We
considered the area in which fraud might occur was in the
management override of controls. In response our procedures
included, but were not limited to;
o Addressing the risk of fraud through management override of
controls by testing the appropriateness of a sample of journal
entries where we considered there to be a higher risk of potential
fraud and other adjustments, assessing whether the judgements made
in making accounting estimates specifically those in the key audit
matters section of the report are indicative of a potential bias,
and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of
business;
o Testing the consolidation entries for consistency and
appropriateness of application
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising that
the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the further
removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities . This description forms part of our auditor's report.
Use of our report
This report is made solely to the Parent Company's members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to
the Parent Company's members those matters we are required to state
to them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the
Parent Company's members as a body, for our audit work, for this
report, or for the opinions we have formed.
Shane Moloney (Senior Statutory Auditor)
For and on behalf of
Shipleys LLP
Statutory Auditor
London
19 June 2023
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
Year to Year to
31 December 31 December
Note 2022 2021
$'000 $'000
Revenue 4 2,446 2,611
Raw materials and consumables used (494) (524)
________ ________
Gross profit 1,952 2,087
Other Income 5 13 -
Overhead expenses 5 (1,546) (1,745)
Other expenses 5 (29) (63)
________ ________
Profit (Loss) from operations 390 279
________ ________
Finance Expense 5 - (7)
Lease Interest 5 (18) (15)
________ ________
Profit (loss) before taxation 372 257
Income tax charge 7 (288) (101)
________ ________
Profit (loss) for the period attributable
to the owners of the parent 84 156
Other comprehensive income
Items that may be reclassified subsequently
to profit or loss:
Exchange gain arising on translation of
foreign operations (1,027) (516)
________ ________
Total comprehensive income (loss) attributable
to the owners of the parent (943) (360)
________ ________
Profit (loss) per share attributable to the ordinary equity
holders of the parent:
Basic 8 c0.05 c0.10
Diluted 8 c0.05 c0.10
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes $'000 $'000
Assets
Non-current assets
Other Intangible Asset 9 544 582
Exploration and evaluation assets 9 4,983 5,228
1,
Property, plant, and equipment 11 8,223 7,485
Right of Use Assets 18 584 717
Other Receivables 13 136 145
________ ________
14,470 14,157
Current assets
Inventories 12 5 4
Trade and other receivables 13 319 485
Income tax prepayment /refund 7 88 63
Prepayments 13 25 6
Cash and cash equivalents 14 341 611
________ ________
779 1,169
________ ________
Total Assets 15,248 15,326
________ ________
Equity and liabilities
Share capital 19 2,916 2,916
Share premium reserve 19 49,387 49,387
Share options reserve 20 - 97
Merger reserve 21,300 21,300
Foreign exchange reserve (1,334) (307)
Warrant reserve 19 - 153
Other reserves (23,023) (23,023)
Retained earnings (36,403) (36,748)
________ ________
Total Equity 12,843 13,775
________ ________
Liabilities
Non-current Liabilities
1,
Provision 16 1,191 421
Lease Liabilities 18 305 420
________ ________
1,496 841
Current liabilities
Income Tax payable 7 261 -
Trade and other payables 15 366 408
Lease Liabilities 18 282 302
________ ________
909 710
________ ________
Total Liabilities 2,405 1,551
________ ________
Total Equity and Liabilities 15,248 15,326
________ ________
These financial statements were approved and authorised for
issue by the Board of Directors on 19 June 2023
and were signed on its behalf by:
John Peters
Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
2022 2021
Notes $'000 $'000
Assets
Non-current assets
Investments in subsidiary undertakings 10 4,142 4,523
Loans to subsidiary undertakings 10 4,634 4,483
________ ________
8,776 9,006
________ ________
Current assets
Trade and other receivables 13 17 21
Cash and cash equivalents 14 9 40
________ ________
26 61
________ ________
Total Assets 8,802 9,067
________ ________
Equity and liabilities
Share capital 19 2,916 2,916
Share premium reserve 19 49,387 49,387
Share options reserve 20 - 97
Merger reserve 21,300 21,300
Foreign exchange reserve (1,378) (1,257)
Warrant Reserve 19 - 153
Retained earnings (65,469) (64,891)
________ ________
Total Equity 6,756 7,705
________ ________
Liabilities
Non -Current Liabilities
Loans from Subsidiary undertakings 16 1,919 1,221
Current liabilities
Trade and other payables 15 127 141
________ ________
Total Liabilities 2,046 1,362
________ ________
Total Equity and Liabilities 8,802 9,067
________ ________
As permitted by Section 408 of the Companies Act 2006, the
statement of comprehensive income of the parent Company is not
presented as part of these financial statements. The parent Company
made a loss for the year of $839,000 (2021: $633,000).
These financial statements were approved and authorised for
issue by the Board of Directors on 19 June 2023
and were signed on its behalf by:
John Peters
Director
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Notes Year to Year to
31 December 31 December
2022 2021
$'000 $'000
Cash flows from operating activities
Profit/(loss) 84 156
Adjustments for:
Depreciation of property, plant and equipment 11 16 52
Amortisation of Right of Use Asset 18 278 158
Finance expense - 7
Income Tax expense 7 288 101
Decrease in inventory (1) (1)
Decrease (increase) in trade and other
receivables 212 161
Decrease (increase) in prepayments (19) 10
(Decrease)/ increase in trade and other
payables (42) 92
Decrease/ (increase) in prepaid income
tax (25) (63)
Income tax paid (27) (121)
Share based payment expense 20 11 58
________ ________
Net cash generated from/ (used in) operating
activities 775 610
________ ________
Investing activities
Increase in PPE development asset 11 (490) (584)
Receipt of research and development incentive - -
Increase in exploration and evaluation
assets 9 (226) (564)
Increase in PPE 11 - (4)
________ ________
Net cash used in investing activities (717) (1,152)
________ ________
Financing activities
Net proceeds from issue of equity share
capital 19 - 523
Lease payments 18 (320) (195)
________ ________
Net cash generated from financing activities (320) 328
________ ________
Net increase (decrease) in cash and
cash equivalents (262) (214)
Cash and cash equivalents at beginning
of year 611 833
Effects of exchange rate changes on the
balance of cash
held in foreign currencies (8) (8)
________ ________
Cash and cash equivalents at end of
year 14 341 611
________ ________
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Notes Year to Year to
31 December 31 December
2022 2021
$'000 $'000
Cash flows from operating activities
Profit / (loss) (839) (633)
Adjustments for:
Foreign exchange on investment in subsidiary
undertakings 10 381 (41)
Charge to receivables from subsidiary
undertakings 10 326 11
(Increase)/decrease in trade and other
receivables (254) 204
Increase(decrease) in trade and other
payables (15) 26
Decrease (increase) in prepayments - -
Share based payment expense 11 58
________ ________
Net cash used in operating activities (390) (375)
________ ________
Investing activities
Receipts from (advances) to subsidiary
undertakings 366 (497)
________ ________
Net cash used in investing activities 366 (497)
________ ________
Financing activities
Net proceeds from issue of equity share
capital 19 - 523
________ ________
Net cash generated from financing activities - 523
________ ________
Increase/(decrease) in cash and cash
equivalents (24) 349
Cash and cash equivalents at beginning
of year 40 394
Effects of exchange rate changes on the
balance of cash held in foreign currencies (7) (5)
________ ________
Cash and cash equivalents at end of year 14 9 40
________ ________
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Initial Foreign
Share premium Merger Warrant options Restructure exchange Retained Total
capital reserve Reserve Reserve reserve Reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January
2021 2,770 49,010 21,300 153 272 (23,023) 209 (37,139) 13,552
_______ _______ _______ _______ _______ _______ _______ _______ _______
Loss for the
year - - - - - - - 156 156
Foreign exchange
translation - - - - - - (516) - (516)
_______ _______ _______
Total comprehensive
income/(loss)
for the year - - - - - - (516) 156 (360)
Share based
payments - - - - 60 - - - 60
Transfer - - - - (235) - - 235 -
Shares issued
in the year 146 405 - - - - - - 551
Share issue
costs - (28) - - - - - - -
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2021 2,916 49,387 21,300 153 97 (23,023) (307) (36,748) 13,775
Profit for
the year - - - - - - - 84 84
Foreign exchange
translation - - - - - - (1,027) - (1,027)
_______ _______ _______
Total comprehensive
income for
the year - - - - - - (1,027) 84 (943)
Share based
payments - - - - 11 - - 11
Transfer - - - (153) (108) - - 261 -
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2022 2,916 49,387 21,300 - - (23,023) (1,334) (36,403) 12,843
_______ _______ _______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the
parent Company.
The accompanying accounting policies and notes form an integral
part of these financial statements.
STRATEGIC MINERALS PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Share Share Foreign
Share Premium Merger Warrant Options exchange Retained Total
capital Reserve reserve Reserve Reserve reserve Earnings Equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January 2020 2,770 49,010 21,300 153 272 (1,153) (64,493) 7,859
Loss for the
year - - - - - - (633) (633)
Foreign exchange
translation - - - - - (104) - (104)
_______ _______ _______
Total comprehensive
loss for the
year (104) (633) (737)
Share based payments - - - - 60 - - 60
Transfer - - - - (235) - 235 -
Shares issued
in the year 146 405 - - - - - 551
Share issue costs - (28) - - - - - (28)
_______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2021 2,916 49,387 21,300 153 97 (1,257) (64,891) 7,705
Loss for the
year - - - - - - (839) (839)
Foreign exchange
translation - - - - - (121) - (121)
_______ _______ _______
Total comprehensive
profit for the
year (121) (839) (960)
Share based payments - - - - 11 - - 11
Transfer - - - (153) (108) - 261 -
_______ _______ _______ ______ _______ _______ _______ _______
Balance at
31 December
2022 2,916 49,387 21,300 - (1,378) (65,469) 6,756
_______ _______ _______ - _______ _______ _______ _______
All comprehensive income is attributable to the owners of the
parent Company.
The accompanying accounting policies and notes form an integral
part of these financial statements.
Share capital is the amount subscribed for shares at nominal
value.
Share premium reserve represents the excess of the amount
subscribed for share capital over the nominal value of these shares
net of share issue expenses.
Merger reserve arises from the 100% acquisition of Ebony Iron
Pty Limited in September 2011 and LCCM In April 2018 whereby the
excess of the fair value of the issued ordinary share capital
issued over the nominal value of these shares is transferred to
this reserve, in accordance with section 612 of the Companies Act
2006.
Share option reserve relates to increases in equity for services
received in equity-settled share-based payment transactions and on
the grant of share options.
Initial restructure reserve consists of an adjustment arising
from the Group reorganisation in 2011 being the formation of a new
holding Company for Iron Glen Holdings Limited by way of a share
for share issue and is the difference between consideration given
and net assets of the Company at the date of acquisition.
The group foreign exchange reserve occurs on consolidation of
the translation of the subsidiaries balance sheets at the closing
rate of exchange and their income statements at the average
rate.
The company foreign exchange reserve recognises the exchange
differences arising on translating the closing net assets of the
Company at the closing rate at the balance sheet date, and the
results of Company's operations at average exchange rate for the
year.
Warrants reserve represents the value of warrants issued.
Warrants reserve is non-distributable and will be transferred to
share premium account upon the exercise of warrants. The balance of
warrants reserve in relation to the unexercised warrants at the
expiry of the warrants period will be transferred to retained
earnings.
Retained earnings represent the cumulative loss of the Group
attributable to equity shareholders.
STRATEGIC MINERALS PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2022
1. Significant accounting policies
Basis of preparation
In preparing these financial statements the presentational
currency is US dollars. As the entire group's revenues and majority
of its costs, assets and liabilities are denominated in US dollars
it is considered appropriate to report in this currency.
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented, unless otherwise
stated.
These financial statements have been prepared in accordance with
International Financial Standards and UK adopted international
accounting standards in conformity with the requirements of the
Companies Act 2006.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment
in applying the Group's accounting policies. The areas where
significant judgments and estimates have been made in preparing the
financial statements and their effect are disclosed in note 2.
The financial statements have been prepared on a historical cost
basis, except for the acquisition of LCCM and the valuation of
certain investments which have been measured at fair value, not
historical cost.
Going concern basis
The Directors have given careful consideration to the Group and
Parent Company's (together "the Group") ability to continue as a
going concern through review of cash flow forecasts prepared by
management for the period to 31 December 2024, and a review of the
key assumptions on which these are based and sensitivity
analysis.
The Group's forward commitments include corporate overhead,
which is actively managed in line with cash generated from the
Cobre asset and costs associated with keeping exploration licences
and mining leases current.
Group forecasts are based on Management's expectations of a
recovery in the second half of 2023 and 2024 to 2021 levels. For
the purposes of the consideration of the Group's ability to operate
as a going concern, only non-discretionary expenditure on projects
is included in the cash flow forecasts.
The Company forecasts that in order to have sufficient funds to
meet all operating costs until December 2024, the Group is reliant
on cash being generated from the Cobre asset in line with forecast
and a capital raise would be required no later than the last
quarter of 2023.
However, the Board considers additional funds will be required
to progress the development of the Leigh Creek Copper Mine and
Redmoor projects. It is the intention of the group that the LCCM
asset will be developed during 2023 and Management are actively
pursuing such funding and envisage that this will be sourced at the
asset level.
As the Group is reliant on cash being generated from the Cobre
asset in line with forecast, Management has performed reverse
stress testing which shows that a 5% reduction in forecast sales
would result in a cash deficit in July 2023, without management
taking mitigating actions within their control. The Group does not
currently have offtake agreements with customers, therefore there
is uncertainty as to whether forecast sales will be met.
These conditions indicate a material uncertainty which may cast
significant doubt as to the Group's ability to continue as a going
concern and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
If further funds are required, the Directors have reasonable
expectation based on the ability of the Company to raise funds in
the past that the Group will have access to sufficient resources by
way of debt or equity markets to meet all non-discretionary
expenditure. Consequently, the consolidated financial statements
have been prepared on a going concern basis.
The financial report does not include adjustments relating to
the recoverability and classification of recorded
asset amounts or to the amounts and classification of
liabilities that might be necessary should the Group not continue
as a going concern.
N ew standards, interpretations, and amendments effective 01
January 2022:
A number of new and amended standards and interpretations issued
by IASB have become effective for the first time for financial
periods beginning on (or after) 1 January 2022 and have been
applied by the Group in these financial statements. None of these
new and amended standards and interpretations had a significant
effect on the Group because they are either not relevant to the
Group's activities or require accounting which is consistent with
the Group's current accounting policies.
New standards, interpretations, and amendments effective 01
January 2023:
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods and which have not been
adopted early.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
De-facto control exists in situations where the company has the
practical ability to direct the relevant activities of the investee
without holding the majority of the voting rights. In determining
whether de-facto control exists the company considers all relevant
facts and circumstances, including:
- The size of the company's voting rights relative to both the
size and dispersion of other parties who hold voting rights,
- substantive potential voting rights held by the company and by
other parties,
- other contractual arrangements and
- historic patterns in voting attendance.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Investment in joint arrangements
The Group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
The group classifies its interests in joint arrangements as
either:
-- Joint ventures: where the group has rights to only the net assets of the joint arrangement.
-- Joint operations: where the group has both the rights to
assets and obligations for the liabilities of the joint
arrangement.
In assessing the classification of interests in joint
arrangements, the Group considers:
-- The structure of the joint arrangement
-- The legal form of joint arrangements structured through a separate vehicle
-- The contractual terms of the joint arrangement agreement
-- Any other facts and circumstances (in any other contractual arrangements).
The Group accounts for its interests in joint ventures initially
at cost in the consolidated statement of financial position.
Subsequently joint ventures are accounted for using the equity
method where the Group's share of post-acquisition profits and
losses and other comprehensive income is recognised in the
consolidated statement of profit and loss and other comprehensive
income (except for losses in excess of the Group's investment in
the associate unless there is an obligation to make good those
losses).
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the joint venture. The investor's share in
the joint ventures' profits and losses resulting from these
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for an investment in a joint venture above the
fair value of the Group's share of the identifiable assets,
liabilities and contingent liabilities acquired is capitalised and
included in the carrying amount of the investment in joint venture.
Where there is objective evidence that the investment in a joint
venture has been impaired the carrying amount of the investment is
tested for impairment in the same way as other non-financial
assets.
The Group accounts for its interests in joint operations by
recognising its share of assets, liabilities, revenues, and
expenses in accordance with its contractually conferred rights and
obligations. In accordance with IFRS 11 Joint Arrangements, the
Group is required to apply all of the principles of IFRS 3 Business
Combinations when it acquires an interest in a joint operation that
constitutes a business as defined by IFRS 3.Where there is an
increase in the stake of the joint venture entity from an associate
to a subsidiary and the acquisition is considered as an asset
acquisition and not a business combination in accordance with
IFRS3, this step up transaction is accounted for as the purchase of
a single asset and the cost of the transaction is allocated in its
entirety to that asset with no gain or loss recognised in the
income statement. The step-up acquisition of CRL in 2019 has been
accounted for as a purchase of a single asset and the cost of the
transaction is allocated in its entirety to that balance sheet.
Listed equity investments
Listed equity investments in an active market are usually valued
at the mid-price on the valuation date.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method under IFRS3 Business Combinations
("IFRS3"). The cost of the business combination is measured as the
aggregate of the fair values (at the date of exchange) of assets
given, liabilities incurred or assumed, and equity instruments
issued by the Group and the Company in exchange for control of the
acquiree. The acquiree's identifiable assets, liabilities and
contingent liabilities that meet the relevant conditions for
recognition are recognised at their fair values at the acquisition
date. Goodwill arising on acquisition is recognised as an asset and
initially measured at cost, being the excess of the fair value of
the consideration paid over the Group's interest in the fair value
of the identifiable assets, liabilities and contingent liabilities
acquired. If the Group's interest in the fair value of the
acquiree's identifiable assets, liabilities and contingent
liabilities exceeds the cost of the business combination, the
excess is recognised immediately in profit or loss. Transaction
costs incurred directly in connection with business combinations
are expensed.
Impairment of non-financial assets (excluding inventories)
Other non-financial assets are subject to impairment tests
whenever events or changes in circumstances indicate that their
carrying amount may not be recoverable. Where the carrying value of
an asset exceeds its recoverable amount (i.e., the higher of value
in use and fair value less costs to sell), the asset is written
down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest Group of assets to which it belongs for which there are
separately identifiable cash flows: its cash generating units
('CGUs').
Impairment charges are included in the statement of
comprehensive income, except to the extent they reverse gains
previously recognised in other comprehensive income.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised over their useful economic
lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual or legal rights. The amounts ascribed to such
intangibles are arrived at by using appropriate valuation
techniques (see section related to critical estimates and
judgements below).
An intangible asset was recognised in the acquisition of Leigh
Creek Copper Mine Pty Ltd and represents the fair value of the
offtake agreement that was in place at acquisition date (Refer note
9).
Exploration and evaluation assets
The Group has continued to apply the 'successful efforts' method
of accounting for Exploration and Evaluation ("E&E") costs,
having regard to the requirements of IFRS 6 'Exploration for the
Evaluation of Mineral Resources'.
The successful efforts method means that only the costs which
relate directly to the discovery and development of specific
mineral reserves are capitalised. Such costs may include costs of
license acquisition, technical services and studies, exploration
drilling and testing but do not include costs incurred prior to
having obtained the legal rights to explore the area. Under
successful efforts accounting, exploration expenditure which is
general in nature is charged directly to the statement of
comprehensive income and that which relates to unsuccessful
exploration operations, though initially capitalised pending
determination, is subsequently written off. Only costs which relate
directly to the discovery and development of specific commercial
mineral reserves will remain capitalised and to be depreciated over
the lives of these reserves. Exploration and evaluation costs are
capitalised within intangible assets. Costs incurred prior to
obtaining legal rights to explore are expensed immediately to the
statement of comprehensive income.
All lease and licence acquisition costs, geological and
geophysical costs and other direct costs of exploration, evaluation
and development are capitalised as intangible or property, plant
and equipment according to their nature. Intangible assets comprise
costs relating to the exploration and evaluation of properties
which the Directors consider to be unevaluated until reserves are
appraised as commercial, at which time they are transferred to
tangible assets as 'Developed mineral assets' following an
impairment review and depreciated accordingly. Where properties are
appraised to have no commercial value, the associated costs are
treated as an impairment loss in the period in which the
determination is made. Management considers all tenements relating
to each project to represent one asset when undertaking their
impairment assessment.
Property, plant, and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant, and
equipment so as to write off their carrying value over their
expected useful economic lives. It is provided at the following
rates:
-- Plant and machinery (except screening equipment) - 5 to 10 years straight line basis
-- Screening Equipment - on a unit of production basis
-- Mining assets - on a unit of production basis
The carrying value of property, plant and equipment assets is
assessed annually and any impairment is to the statement of
comprehensive income.
Investments in subsidiaries - company only
Investments in subsidiaries are stated at cost less provision
for any impairment in value.
If circumstances indicate that impairment may exist, investments
in subsidiary undertakings of the Company are evaluated using
market values, where available, or the discounted expected future
cash flows of the investment.
If these cash flows are lower than the Company's carrying value
of the investment an impairment charge is recorded in the
Company.
Loans to subsidiaries - company only
Loans to subsidiaries are stated at cost less provision for
expected credit losses ("ECL's).
The Company recognises an ECL's on intercompany loans, based on
management's assessment and understanding of the credit risk
attaching to each asset, changes in the level of credit risk
between periods and an assessment of the scenarios under which
management expect the assets to be repaid.
Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held
on call with under 90 days maturity with banks.
Revenue
Revenue from the sale of magnetite is recognised when the group
passes control of the product to the customer, and it is probable
the group will receive the funds. Control is considered to have
passed when the goods are passed to the buyer, being the point of
leaving the mine gate for domestic sales to the US markets. This is
point in time when revenue is recognised.
Where a contract allows the group to advance bill ahead of
delivery, a contract liability in relation to the outstanding
performance obligation is only recognised on the date when payment
is received. In those cases, the entity recognises revenue only
after it transfers the goods to the buyer.
Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of cost and net realisable value. Cost comprises all
costs of purchase, costs of conversion and other costs incurred in
bringing the inventories to their present location and
condition.
Taxation
Income tax
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the same
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the statement of financial
position date.
Deferred tax
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries where the Group is able to
control the timing of the reversal of the difference and it is
probable that the difference will not reverse in the foreseeable
future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised. The Group
has not recognised any deferred tax at balance date.
When an asset or liability is raised the amount of the asset or
liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to
apply when the deferred tax liabilities/(assets) are
settled/(recovered).
Fair values
The carrying amounts of the financial assets and liabilities
such as cash and cash equivalents, receivables and payables of the
Group at the statement of financial position date approximated
their fair values, due to the relatively short-term nature of these
financial instruments.
Share-based compensation
The fair value of the employee and suppliers' services received
in exchange for the grant of options and warrants is recognised as
an expense. The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options and
warrants granted, excluding the impact of any non-market vesting
conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the
number of options and warrants that are expected to vest. At each
statement of financial position date, the entity revises its
estimates of the number of options and warrants that are expected
to vest. It recognises the impact of the revision to original
estimates, if any, in the statement of comprehensive income, with a
corresponding adjustment to equity.
The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and
share premium when the options and warrants are exercised.
The fair value of share-based payments recognised in the
statement of comprehensive income is measured by use of the Black
Scholes model or other appropriate models, which takes into account
conditions attached to the vesting and exercise of the equity
instruments. The expected life used in the model is adjusted; based
on management's best estimate, for the effects of
non-transferability, and exercise restrictions. The share price
volatility percentage factor used in the calculation is based on
management's best estimate of future share price behaviour and is
selected based on past experience.
Equity instruments
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from proceeds.
The fair value of warrants is credited to warrants reserve. The
warrants reserve is non-distributable and will be transferred to
share premium account upon the exercise of warrants. The balance of
the warrants reserve in relation to unexercised warrants at the
expiry of the warrants period will be transferred to accumulated
profits.
Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the Directors' best estimate of the expenditure
required to settle the obligation at the statement of financial
position date and are discounted to present value where the effect
is material.
Provisions for decommissioning costs are recognised in
accordance with IAS 37 Provisions, Contingent Liabilities and
Contingent Assets. Provisions are recorded at the present value of
the expenditures expected to be required to settle the Group's
future obligations. Provisions are reviewed at each reporting date
to reflect the current best estimate of the cost at present value.
Any change in the date on which provisions fall due will change the
present value of the provision. Any change in the present value of
the estimated future expenditure is reflected and adjusted against
the provision and development asset, unless the asset to which the
provision relates has been impaired, in which case the reversal of
the provision is taken through the Consolidated statement of
comprehensive income. The increase in restoration provisions, owing
to the passage of time, is charged to the Consolidated statement of
comprehensive income as a finance expense .
Financial instruments
Non-derivative financial instruments comprise trade and other
receivables, cash and cash equivalents, loans and borrowings, and
trade and other payables.
Non-derivative financial instruments are recognised initially at
fair value plus any directly attributable transactions costs and
are subsequently carried at amortised cost.
A financial instrument is recognised when the Group becomes a
party to the contractual provisions of the instrument. Financial
assets are derecognised if the Group's contractual rights to the
cash flows from the financial assets expire or if the Group
transfers the financial assets to another party without retaining
control or substantially all risks and rewards of the asset.
Regular purchases and sales of financial assets are accounted for
at trade date, i.e., the date that the Group commits itself to
purchase or sell the asset. Financial liabilities are derecognised
if the Group's obligations specified in the contract expire or are
discharged or cancelled.
Financial assets
All financial assets other than an immaterial investment in
listed equity shares, which are measured at fair value through
profit or loss, are classified as financial assets at amortised
cost. The Group determines the classification of its financial
assets at initial recognition.
The Group's financial assets include cash and cash equivalents,
trade receivables and other receivables.
The Company's financial assets include cash and cash equivalents
and loans receivable due from subsidiaries.
The Company recognises a loss allowance for expected credit
losses ("ECL") on intercompany loans which are measured at
amortised cost. The amount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument.
If the credit risk on a financial instrument has increased
significantly since initial recognition, the loss allowance is
equal to the lifetime expected credit losses. If the credit risk
has not increased significantly, the loss allowance is equal to the
twelve month expected credit losses.
The Group applies the IFRS 9 simplified approach to measuring
credit losses using a lifetime expected credit loss provision for
trade receivables.
Further details of the reviews undertaking during the year are
set out in Note 3 below.
Financial liabilities
Financial liabilities refer to trade payables, other payables
and loans and borrowings (including the host borrowing in a
convertible instrument) and are initially recognised at fair value
net of any transaction costs directly attributable to the issue of
the instrument. Such liabilities are subsequently measured at
amortised cost using the effective interest rate method.
All loans and borrowings which are financial instruments are
initially recognised at the present value of cash payable to the
lender (including interest). After initial recognition they are
measured at amortised cost using the effective interest rate
method. The effective interest rate amortisation is included in
finance costs in the income statement.
Where there is a significant modification to a financial
liability, the financial original liability is de-recognised, and a
new financial liability is recognised at fair value in accordance
with the Group's policy.
Convertible loan notes are assessed in accordance with IAS 32
Financial Instruments: Presentation to determine whether the
conversion element meets the fixed-for-fixed criterion. Where this
is met, the instrument is accounted for as a compound financial
instrument with appropriate presentation of the liability and
equity components. Where the fixed-for-fixed criterion is not met,
the conversion element is accounted for separately as an embedded
derivative which is measured at fair value through profit or loss.
On issue of a convertible borrowing, the fair value of embedded
derivative is determined, and the residual is recorded as a host
liability initially at fair value and subsequently at amortised
cost. Issue costs are apportioned between the components based on
their respective carrying amounts when the instrument was issued.
The finance costs recognised in respect of the convertible
borrowings includes the accretion of the liability.
Foreign currencies
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. The functional currency of the
Company is deemed to be GBP. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the reporting
date. Exchange differences arising on the retranslation of
unsettled monetary assets and liabilities are recognised
immediately in profit or loss, except for foreign currency
borrowings qualifying as a hedge of a net investment in a foreign
operation, in which case exchange differences are recognised in
other comprehensive income and accumulated in the foreign exchange
reserve along with the exchange differences arising on the
retranslation of the foreign operation.
On consolidation, the results of overseas operations are
translated into US Dollars at rates approximating to those ruling
when the transactions took place. All assets and liabilities of
overseas operations, including goodwill arising on the acquisition
of those operations, are translated at the rate ruling at the
reporting date. Exchange differences arising on translating the
opening net assets at opening rate and the results of overseas
operations at actual rate are recognised in other comprehensive
income and accumulated in the foreign exchange reserve.
On disposal of a foreign operation, the cumulative exchange
differences recognised in the foreign exchange reserve relating to
that operation up to the date of disposal are transferred to the
consolidated statement of comprehensive income as part of the gain
or loss on disposal.
Management of capital
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The principal liabilities of the Group arise in respect
of the costs of financing working capital as inventory is built up
prior to sale.
The Board receives periodic cash flow projections as well as
information on cash balances. The Board will not commit to material
expenditure prior to being satisfied that sufficient funding is
available to the Group to finance the planned programmes.
Research and Development Tax Incentive (RDTI)
The Group's policy is that any RDTI should be recognised as a
government grant, in accordance with IAS20 Accounting for
Government Grants. This means it will be recognised as part of
profit before tax, either as income or as a reduction of the
associated costs.
Where the Group capitalises development costs, then the RDTI
amounts received that relate to these costs will be offset against
the capitalised development costs or deferred exploration
expenditure as the case may be.
Leases
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
- Leases of low-value assets; and
- Leases with a duration of twelve months or less
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
- Amounts expected to be payable under any residual value
guarantee.
- The exercise price of any purchase option granted in favour of
the Group if it is reasonably certain to assess that option;
- Any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of termination option
being exercised.
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
- Lease payments made at or before commencement of the
lease;
- Initial direct costs incurred; and
- The amount of any provision recognised where the Group is
contractually required to dismantle, remove, or restore the leased
asset
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it re-assesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
Government Grants
Government grants received on capital expenditure are generally
deducted in arriving at the carrying amount of the asset purchased.
Grants for revenue expenditure are netted against the cost incurred
by the Group. Where retention of a government grant is dependent on
the Group satisfying certain criteria, it is initially recognised
as deferred income. When the criteria for retention have been
satisfied, the deferred income balance is released to the
consolidated statement of comprehensive income or netted against
the asset purchased.
2. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year are discussed below.
Estimates
(a) Carrying value of intangible assets
Management assesses the carrying value of the exploration and
evaluation assets for indicators of impairment based on the
requirements of IFRS 6 which are inherently judgemental. This
includes ensuring the Group maintains legal title, assessment
regarding the commerciality of reserves and the clear intention to
move the asset forward to development.
i) The Redmoor projects are early-stage exploration projects and
therefore Management have applied judgement in the period as to
whether the results from exploration activity provide sufficient
evidence to continue to move the asset forward to development.
There are no indicators of impairment for the Redmoor project in
the 31 December 2022 financial year.
Further detail regarding the carrying value of exploration and
evaluation can be found in note 9.
(b) Share based payments
The fair value of share-based payments recognised in the
statement of comprehensive income is measured by use of the Black
Scholes model after taking into account market-based vesting
conditions and conditions attached to the vesting and exercise of
the equity instruments. The expected life used in the model is
adjusted based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future
share price behaviour based on past experience. Further details are
given in Note 21.
(c) Carrying value of amounts owed by subsidiary undertakings.
IFRS9 requires the parent company to make certain assumptions
when implementing the forward- looking expected credit loss model.
This model is required to be used to assess the intercompany loan
receivables from its subsidiaries for impairment. Arriving at an
expected credit loss allowance involved considering different
scenarios for the recovery of the intercompany loan receivables,
the possible credit losses that could arise and probabilities for
these scenarios.
The following were considered: the exploration project risk, the
future sales potential of product, value of potential reserves and
the resulting expected economic outcomes of the project. Further
details are given in Note 10.
(d) Carrying Value of Development Assets
Management assesses the carrying value of Development assets for
indicators of impairment based on the requirements of IAS36 which
are inherently judgemental.
The following are the key assumptions used in this assessment of
Carrying value.
i) Mineable reserves over life of project
ii) Forecasted Copper pricing
iii) Capital and operating cost assumptions to deliver the mining schedule
iv) Foreign exchange rates
v) Discount rate
If the carrying amount of the Development asset exceeds the
recoverable amount, the asset is impaired. The Group will reduce
the carrying amount of the asset to its recoverable amount and
recognise an impairment loss. The assessment is carried out twice
per year - end of half year reporting period and end of annual
reporting period.
The assessment of the recoverable amount was conducted on the
basis that funding is obtained and the following assumptions
apply:
2022 Analysis 2021 Analysis
Copper price US (average) $4.02/lb $4.41/lb
AUD/USD exchange rate (average) 0.6688 0.6500
Discount Rate after-tax 8% 11%
Commencement of Project;
Paltridge North July 23 July 22
Lynda Lorna Doone April 24 April 23
First Sales November 23 November 22
The NPV based on these assumptions was $24.68m (2021:
$22.5m)
The carrying value of the asset is sensitive to market changes
in key assumptions. Since the project was acquired at fair value in
2018, there has been significant movement in copper prices, the
AUD/USD exchange rate and the expected project commencement
date.
Management has conducted sensitivity analysis on these key
variables to ascertain the level at which each key variable is
required to be to reduce the expected after tax NPV to the current
carrying value ($7.80m). Results of these analyses are that the key
project assumptions would have to change to, holding the other
variables constant:
Copper price US $2.93/lb
AUD/USD exchange rate 0.9611
Discount Rate after-tax 52%
While Management does not expect the extreme swings in key
variables required to return the project NPV to the carrying value
in the Company's books, sensitivities were conducted on individual
key variables with the results as follows:
Variable Change NPV Impact USD
Copper price average -10% -$6.3m
AUD/USD exchange rate average +5% -$1.9m
Discount Rate after-tax +2% -$1.07m
Operating Costs +10% -$3.3m
(e) Determination of incremental borrowing rate for leases
Under IFRS 16, where the interest rate implicit in the lease
cannot be readily determined the incremental borrowing rate is
used. The incremental borrowing rate is defined as the rate of
interest that a lessee would have to pay to borrow, over a similar
term and with a similar security, the funds necessary to obtain an
asset of a similar value to the cost of the right-of-use asset in a
similar economic environment.
The Group has continued to apply a borrowing rate of 6% to the
Plant and Machinery Asset- the interest expense is $7,297 (2021:
$11,500) and the initial liability for the 2 year lease which was
renewed in 2021 is $297,400 (2021: $297,400).
At a borrowing rate of 5%- the interest expense is $6,025 (2021:
$9,700)
At a borrowing rate of 7%- the interest expense is $8,592.
(2021: $13,200)
The lease was renewed again in March 2023. The liability for
this renewal is $150,114 and was taken up on 31 December 2022 at a
borrowing rate of 9.75%
Office Lease
The Group has continued to apply a borrowing rate of 5% to the
Office lease - the interest expense is $550 (2021: $1,500) and the
initial liability was $56,500.
At a borrowing rate of 3%- the interest expense is $330 (2021:
$1,000)
At a borrowing rate of 7%- the interest expense is $765 (2021:
$2,200)
As at February 2023, the lease is paid on a month-to-month
basis.
Car lease
The Group has continued to apply a borrowing rate of 6% to the
Car lease - the interest expense is $188 (2021: $500) and the
initial liability is $10,800.
At a borrowing rate of 5%- the interest expense is $156.
At a borrowing rate of 7%- the interest expense is $219.
The lease was renewed again in Feb 2023 for 5 years. The
liability for this renewal is $17,375 was taken up on 31 December
2022 at a borrowing rate of 6%
Refer to Note 18 for details in relation to lease
arrangements.
Judgements
(f) Investments in subsidiaries
Investment in subsidiaries comprises of the cost of acquiring
the shares in subsidiaries.
If an impairment trigger is identified and investments in
subsidiaries are tested for impairment, estimates are used to
determine the expected net return on investment. The estimated
return on investment takes into account the underlying economic
factors in the business of the Company's subsidiaries including
estimated recoverable reserves, resources prices, capital
investment requirements, and discount rates among other things.
Refer to Note 10 for further details in respect of the
recoverability of the investment in subsidiaries.
(g) Contingent consideration as part of Asset acquisition
Judgement was required in determining the accounting for the
contingent consideration payable as per of the CRL acquisition. The
group has an obligation to pay A$1m on net smelter sales arising
from CRL production reaching A$50m and a further A$1m on net
smelter sales arising from CRL production reaching A$100m.
Whilst a possible obligation exists in relation to the
consideration payable, given the early stage of the project it was
concluded that at reporting date it is not probable that an outflow
of resources embodying economic benefits will be required to settle
the obligation. Therefore, in accordance with IAS 37, a contingent
liability, relating to this possible obligation is disclosed in
Note 21.
(h) Contingent consideration -LCCM Bond Payable
Judgement was required in determining the accounting for the
contingent consideration payable for the LCCM Environmental Bond,
as determined by the Government of South Australia under the July
2022 PEPR. The group has an obligation to pay a A$1.440m bond prior
to commencement of authorised operations at the LCCM site. The bond
addresses future liabilities resulting from operations as described
in the PEPR.
Whilst a possible obligation exists in relation to the
consideration payable, given the project is not in operation, it
was concluded that at reporting date it is not probable that an
outflow of resources embodying economic benefits will be required
to settle the obligation. Therefore, in accordance with IAS 37, a
contingent liability, relating to this possible obligation is
disclosed in Note 21.
3. Financial instruments - Risk management
The Group is exposed to the following financial risks:
-- Credit risk
-- Foreign exchange risk
-- Commodity price risk
-- Liquidity risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies, and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies, and
processes for managing those risks or the methods used to measure
them from last year unless otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are:
-- Trade and other receivables
-- Cash and cash equivalents
-- Restricted cash
-- Trade and other payables
-- Lease liabilities
-- Borrowings
A summary of the financial instruments held by category is
provided below:
Financial assets
Financial assets at
Amortised cost
2022 2021
Group $'000 $'000
Cash and cash equivalents 341 611
Trade and other receivables 290 435
_______ _______
Total financial assets 631 1,046
_______ _______
Financial liabilities
Financial liabilities
at
amortised cost
2022 2021
Group $'000 $'000
Trade and other payables 250 279
Lease Liability 587 722
_______ _______
Total financial liabilities 837 1,001
Financial assets at Amortised cost
2022 2021
Company $'000 $'000
Cash and cash equivalents 9 40
Amounts owed by subsidiary undertakings 4,634 4,483
_______ _______
Total financial assets at Amortised cost 4,643 4,523
_______ _______
Financial liabilities at Amortised cost
2022 2021
Company $'000 $'000
Trade and other payables 54 45
Amounts owed to subsidiary undertakings 1,919 1,221
_______ _______
Total financial liabilities at Amortised cost 1,973 1,266
_______ _______
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The overall objective of the Board is to
set policies that seek to reduce risk as far as possible without
unduly affecting the Group's competitiveness and flexibility.
Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. It is Group policy, implemented locally, to
assess the credit risk of new customers before entering contracts.
Such credit assessments are taken into account by local business
practices. Further disclosures regarding trade and other
receivables, which follow IFRS 9 including expected credit losses,
are provided for in Note 13.
The Company is exposed to credit risk through amounts due from
its subsidiary undertakings. Refer to Note 1 for details on the
credit loss allowance made.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. For banks and
financial institutions, only independently rated parties with
minimum rating "A" are accepted.
Foreign exchange risk
Foreign exchange risk arises when individual Group entities
enter into transactions denominated in a currency other than their
functional currency. The Group's policy is, where possible, to
allow Group entities to settle liabilities denominated in their own
functional currency (being Pound Sterling, US dollar and Australian
dollar) with the cash generated from their own operations where
possible in that currency. Where Group entities have liabilities
denominated in a currency other than their functional currency (and
have insufficient reserves of that currency to settle them), cash
already denominated in that currency will, where possible, be
transferred from elsewhere within the Group.
The parent Company maintains US dollar and pounds sterling bank
accounts, whilst subsidiaries may hold either these currency
accounts or their local currency.
All receivables and payables are settled at the prevailing spot
rate; no forward contracts or other hedging instruments are
currently entered into. The Board monitors the total foreign
exchange risk on a periodic basis but given the major in and out
flows of cash are in US dollars there is a natural hedge in place
which minimises the overall exposure.
Foreign exchange risk (continued)
As of 31 December, the net exposure to foreign exchange risk was
as follows:
US dollar Sterling Australian dollar Total
2022 2021 2022 2021 2022 2021 2022 2021
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Group
Net foreign currency financial assets/(liabilities)
______ ______ ______ ______ ______ ______ ______ ______
Total net exposure (213) (33) 64 191 (56) (113) (205) 45
______ ______ ______ ______ ______ ______ ______ ______
The effect of a 20% strengthening of the Sterling and Australian
Dollar against US Dollar at the reporting date on the corresponding
net financial assets carried at that date would, all other
variables held constant, have resulted in an increase in the
post-tax profit for the year of US$3,000 (2021: US$16,000) and an
increase of the net assets of US$3,000. A 20% weakening in the
exchange rate would, on the same basis, have decreased post-tax
profit and decreased net assets by US$3,000 (2021: US$16,000).
Functional currency of individual entity
Sterling Total
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Company
Net foreign currency financial assets/(liabilities)
_______ _______ _______ _______
Total net exposure (45) (5) (45) (5)
_______ _______ _______ _______
Commodity price risk
Typically, the sale of magnetite to the export market, as
opposed to US domestic customers, is priced by reference to the
market quoted Platts IODEX 62% Fe CFR China price over which the
Group has no influence. There were no exports of product in the
2022 year. As domestic sales prices are determined more by local
supply/demand factors and transportation costs, they do not,
generally fluctuate with changes in global prices, hence, there is
no significant exposure to market price risks expected in the
coming year.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. To achieve this aim, it seeks to maintain cash balances
to meet expected requirements for a period of at least 30 days.
Liquidity risk (continued)
The Board receives periodic cash flow projections as well as
information regarding cash balances. The Group does not have any
overdraft or credit lines in place. The liquidity risk of each
Group entity is managed centrally by the finance function.
The following table sets out the contractual maturities
(representing undiscounted contractual cash-flows) of financial
liabilities:
Between Between Between
Group Up to 3 3 and 12 1 and 2 2 and 5 Over
Months Months Year Years 5 years
At 31 December 2022 $'000 $'000 $'000 $'000 $'000
Trade and other payables 250 - - - -
Bond payable -
Lease Liabilities 71 212 172 133 -
_______ _______ _______ _______ _______
Total 321 212 172 133 -
_______ _______ _______ _______ _______
Between Between Between
Group Up to 3 3 and 12 1 and 2 2 and 5 Over
Months months Year years 5 years
At 31 December 2021 $'000 $'000 $'000 $'000 $'000
Trade and other payables 279 - - - -
Lease Liabilities 76 227 169 251 -
_______ _______ _______ _______ _______
Total 355 227 169 251 -
_______ _______ _______ _______ _______
Between Between Between
Company Up to 3 3 and 12 1 and 2 2 and 5 Over
Months months year years 5 years
At 31 December 2022 $'000 $'000 $'000 $'000 $'000
Trade and other payables 54 - - - -
Loans from subsidiary undertakings - 1,919 - - -
_______ _______ _______ _______ _______
Total 54 1,919 - - -
_______ _______ _______ _______ _______
Between Between Between
Company Up to 3 3 and 12 1 and 2 2 and 5 Over
Months months year years 5 years
At 31 December 2021 $'000 $'000 $'000 $'000 $'000
Trade and other payables 45 - - - -
Loans and borrowings - 1,221 - - -
_______ _______ _______ _______ _______
Total 45 1,221 - - -
_______ _______ _______ _______ _______
Capital Disclosures
The Group monitors "adjusted capital" which comprises all
components of equity (i.e., share capital, share premium, merger
reserve, and retained earnings).
The Group's objectives when maintaining capital are:
-- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
-- to provide an adequate return to shareholders by pricing products with the level of risk.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and adjusts it in
the light of changes in economic conditions and the risk
characteristics of the underlying assets.
4. Segment information
The Group has four main segments during the period:
-- Southern Minerals Group LLC (SMG) - This segment is involved
in the sale of magnetite to both the US domestic market and
historically transported magnetite to port for onward export
sale.
-- Head Office - This segment incurs all the administrative
costs of central operations and finances the Group's operations. A
management fee is charged for completing this service and other
certain services and expenses.
-- Development Asset - This segment holds the Leigh Creek Copper
Mine Development Asset in Australia and incurs all related
operating costs.
-- United Kingdom - The investment in the Redmoor project in
Cornwall, United Kingdom is held by this segment.
Factors that management used to identify the Group's reportable
segments.
The Group's reportable segments are strategic business units
that carry out different functions and operations and operate in
different jurisdictions.
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision maker has been identified as the board
and management team which includes the Board and the Chief
Financial Officer.
Measurement of operating segment profit or loss, assets, and
liabilities
The Group evaluates segmental performance on the basis of profit
or loss from operations calculated in accordance with International
Accounting Standards.
Segment assets exclude tax assets and assets used primarily for
corporate purposes. Segment liabilities exclude tax liabilities.
Loans and borrowings are allocated to the segments in which the
borrowings are held. Details are provided in the reconciliation
from segment assets and liabilities to the Group's statement of
financial position.
SMG Head United Development Intra Total
Office Kingdom Asset Segment
Elimination
2022 2022 2022 2022 2022 2022
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 2,446 - - - - 2,446
Total Revenue 2,446 - - - - 2,446
Other Revenue 13 13
Raw Materials
and consumables (494) - - - - (494)
Overhead
expenses (563) (684) (33) - 29 (1,251)
Management
fee income/(expense) (250) 253 - - (3) -
Share based
payments - (11) - - - (11)
Amortisation-
right of
use asset (278) - - - - (278)
Depreciation (16) - - - - (16)
(Loss)/ gain
on intercompany
loans/investments - (707) - - 707 -
Foreign exchange
gain/(loss) - (65) - - 46 (19)
_______ _______ _______ _______ _______ _______
Segment
profit /(loss)
from operations 845 (1,214) (20) - 779 390
_______ _______ _______ _______ _______ _______
Lease Interest (16) - (2) - - (18)
Finance - - - - - -
Expense
_______ _______ _______ _______ _______ _______
Segment
profit /(loss)
before taxation 829 (1,214) (22) - 779 372
_______ _______ _______ _______ _______ _______
SMG Head United Development Intra Total
Office Kingdom Asset Segment
Elimination
2021 2021 2021 2021 2021 2021
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 2,611 - - - - 2,611
Total Revenue 2,611 - - - - 2,611
Raw Materials
and consumables (524) - - - - (524)
Overhead
expenses (678) (910) (8) - 61 (1,536)
Management
fee income/(expense) (398) 396 - - 2 -
Share based
payments - (58) - - - (58)
Amortisation-
right of
use asset (158) - - - - (158)
Depreciation (52) - - - - (52)
(Loss)/ gain
on intercompany
loans/investments - 29 - - (29) -
Foreign exchange
gain/(loss) - (478) - - 473 (5)
_______ _______ _______ _______ _______ _______
Segment
profit /(loss)
from operations 801 (1,021) (8) - 507 279
_______ _______ _______ _______ _______ _______
Lease Interest (12) - (3) - - (15)
Finance
Expense - - - (7) - (7)
_______ _______ _______ _______ _______ _______
Segment
profit /(loss)
before taxation 789 (1,079) (11) (7) 565 257
_______ _______ _______ _______ _______ _______
SMG Head Office Development Asset Australia United Kingdom Total
As at 31 December 2022 $'000 $'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 490 - 226 717
_______ _______ ______ _______ _______ _______
Reportable segment assets 1,166 84 8,813 - 5,185 15,428
_______ _______ ______ _______ _______ _______
Reportable
segment liabilities 910 220 1,233 - 41 2,405
_______ _______ _______ _______ _______ _______
SMG Head Development United Australia Total
Office Asset (restated) Kingdom
As at 31 December $'000 $'000 $'000 $,000 $'000 $'000
2021
Additions to non-current
assets - - 584 - 568 1,152
_______ _______ ______ _______ _______ _______
Reportable segment
assets 1,603 82 8,108 - 5,533 15,326
_______ _______ ______ _______ _______ _______
Reportable segment
liabilities 795 185 505 - 66 1,551
_______ _______ _______ _______ _______ _______
External revenue Non-current assets
by location of customers by location of assets
2022 2021 2022 2021
$'000 $'000 $'000 $'000
United States 2,466 2,611 658 802
United Kingdom - - 5,004 5,258
Australia - - 8,807 8,097
_______ _______ _______ _______
2,466 2,611 14,469 14,157
_______ _______ _______ _______
Revenues from Customer A totalled $500,000 (2021: $486,000),
which represented 20% (2021: 18%) of total domestic sales in the
United States, Customer B totalled $818,000 (2021: $1,059,000)
which represented 33% (2021: 40%) of total sales and Customer C
totalled $880,000 (2021: $885,000) which represented 36% (2021:
33%). There were no export sales in the year (2021: Nil).
5. Profit/(loss) before tax
Group Year to Year to
31 December 31 December
Costs by nature 2022 2021
Notes $'000 $'000
Operating Profit/(loss) is stated after charging:
Other Income (i) 13 -
Directors' fees and emoluments 6 276 428
Fees payable to the company's auditor for the 111
audit of the parent company and consolidated financial statements 74
Non-Audit Services 15 13
Staff costs 6 485 481
Depreciation 16 52
Amortisation of right-of -use assets 278 158
Equipment rental (ii) 3 116
Equipment maintenance 33 60
Legal, professional and consultancy fees 198 169
Travelling and related costs - -
Other expenses 173 158
________ ________
Overhead Expenses 1,546 1,745
Foreign exchange (gain)/loss 18 5
Share based payments charge 11 58
Finance Fee - 7
Lease Interest 18 15
________ ________
1,580 1,830
________ ________
(i) During 2022, CRL hired mud mats on a casual basis to a non- related party.
(ii) Equipment hire includes a number of short-term rentals.
6. Directors and employees
Group Year to Year to
31 December 31 December
Staff costs during the year 2022 2021
$'000 $'000
Directors' remuneration expense including consultancy fees 276 428
Directors' fees capitalised including consulting fees 161 22
Wages and salaries including consulting fees for management 485 481
Share based payments 11 58
________ ________
Total staff costs 933 989
________ ________
Government Grants - Payroll Support
Included in wages expense for 2021 is a $50k US government grant
relating to supporting the payroll of SMG's employees. The Group
elected to present this government grant as a reduction of the wage
expense. SMG does not have any unfulfilled obligations relating to
this program. The grant was originally given as a loan to SMG;
however, the loan has been forgiven.
The average number of people (including Directors) employed by
the Group during the year was:
2022 2021
Number Number
Total 11 11
________ ________
Company Year to Year to
31 December 31 December
2022 2021
Staff costs during the year $'000 $'000
Directors' remuneration including consultancy fees 252 364
Directors' fees capitalised including consulting fees 161 22
Wages and salaries - -
Share based payments 11 58
________ ________
Total staff costs 448 444
________ ________
The average number of people (including Directors) employed by
the Company during the year was:
2022 2021
Number Number
Total 4 4
________ ________
7. Taxation
Year to Year to
31 December 31 December
2022 2021
$'000 $'000
Current tax expense - Overseas Tax (USA) 288 101
________ ________
288 101
________ ________
Reconciliation of effective tax rates $'000 $'000
Profit(loss) before tax 372 257
Tax using UK domestic rates of corporation
tax of 19% (2020 - 19%) 71 49
Effect of
Expenses not deductible for tax / (nontaxable
income) 46 (81)
Capital allowance in excess of depreciation - (96)
Allowable deductions (30)
(Over)/under provisions in respect of previous
years 27 17
Losses (utilised)/carried forward 98 191
Difference in overseas tax rates 76 21
________ ________
288 101
________ ________
The Group has net tax payable of $0.173m (2021: receivable
$0.63m)
The Group has unused losses to carry forward of $24,855,873
(2021:$24,308,505). No deferred tax asset has been recognised for
losses as their full recovery is not probable in the foreseeable
future.
Different tax rates applied in overseas jurisdictions reflect
the different tax rates applicable in the various jurisdictions in
which the Group operates. The current tax expense and over
provision in respect of prior year relates to operations in the
USA. The combined state, federal and branch rate of corporate tax
in USA is approx.29%.
8. Earnings per share
Earnings per ordinary share have been calculated using the
weighted average number of shares in issue during the relevant
financial year. The weighted average number of shares in issue
during the year was 1,593,558,030 (2021:1,593,558,030). Fully
diluted earnings are based on 1,593,558,030 (2021: 1,593,558,030)
shares and the profit for the financial period was $0.84m (2021:
$0.156m).
9. Intangible Assets
Group Other
intangible
Exploration and evaluation assets asset Total
Cost $'000 $'000 $'000
At January 2021 6,148 29,388 32,536
Additions for the year 564 - 564
Grant reimbursement (196) - (196)
Research and development incentive (65) - (65)
Foreign exchange difference (101) (34) (135)
________ ________ ________
At 31 December 2021 6,350(i) 26,354(ii) 32,704
________ ________ ________
At 1 January 2022
Additions in the year 400 - 400
Grant reimbursement (174) - (173)
Research and Development Refund - - -
Foreign exchange difference (471) (38) (508)
________ ________ ________
At 31 December 2022 6,105(i) 26,316(ii) 32,421
________ ________ ________
Amortisation and impairment
At 1 January 21 (1,122) (25,772) (26,894)
Impairment of exploration and evaluation costs (iii) - - -
________ ________ ________
At 31 December 2021 (1,122) (25,772) (26,894)
At 1 January 2022 (1,122) (25,772) (26,894)
________ ________ ________
At 31 December 2022 (1,122) (25,772) (26,894)
________ ________ ________
Net book value
At 31 December 2020 5,026 616 5,642
________ ________ ________
At 31 December 2021 5,228 582 5,810
________ ________ ________
At 31 December 2022 4,983 544 5,527
________ ________ ________
Exploration and evaluation assets
(i) Exploration and evaluation ("E&E") costs as at 31
December 2022 are the costs associated with the exploration
tenements in the UK held by Cornwall Resources Ltd ('CRL').
Other intangible asset
(ii) An intangible asset arises from the contractual
relationship entered into by Southern Minerals Group LLC ('SMG'),
an entity wholly owned by Ebony Iron Pty Limited, with a third
party for the rights to a magnetite stockpile held at that party's
Cobre mine in New Mexico, USA. The intangible asset was fully
amortised at the end of 31 December 2017.
An intangible asset arises from the contractual relationship
entered into by LCCM with a third party for an offtake agreement
over the Leigh Creek Copper mine.
10. Investments
Investment subsidiaries
Company Loans to Shares
subsidiary in subsidiary
Undertakings Undertakings
(ii) (i) Total
Cost $'000 $'000 $'000
At 1 January 2021 6,510 51,264 57,774
Movement in the year 704 - 704
Foreign exchange difference (56) (38) (94)
_________ _________ _________
At 31 December 2021 7,158 51,226 58,384
_________ _________ _________
At 1 January 2022 7,158 51,226 58,384
Movement in the year 759 - 759
Foreign exchange difference (759) (381) (1,140)
At 31 December 2022 7,158 50,845 58,003
_________ _________ _________
Impairment
At 1 January 2021 (2,703) (46,703) (49,406)
Charge for the year (11) - (11)
Foreign exchange difference 39 - 39
_________ _________ _________
At 31 December 2021 (2,675) (46,703) (49,378)
At 1 January 2022 (2,675) (46,703) (49,378)
Charge for the year (326) - (326)
Foreign exchange difference 477 - 477
_________ _________ _________
At 31 December 2022 (2,524) (46,703) (49,227)
_________ _________ _________
Carrying Value
At 31 December 2021 4,483 4,523 9,006
_________ _________ _________
At 31 December 2022 4,634 4,142 8,776
_________ _________ _________
(i) Shares in subsidiary undertakings are assessed for
impairment and are carried at the net asset position of the
subsidiary. Refer Note 1 for further information in respect to the
accounting policy.
(ii) Loans provided to subsidiary undertakings which are
interest free and repayable on demand. The Directors do not expect
to call for repayment of these loans in the foreseeable future. The
loans are expected to be repaid by future revenues generated from
the Group's assets in USA, UK and Australia. Loans to subsidiary
undertakings are assessed for impairment in accordance with IFRS9.
Under IFRS9, provisions for impairment of loans in subsidiary
undertakings is based on an expected credit loss assessment (refer
note 1 for further detail).
IFRS9 requires the parent company to make assumptions when
implementing the forward- looking expected credit loss model. This
model is required to be used to assess the intercompany loan
receivables from its subsidiaries for impairment. The model also
assesses the Investment in Subsidiaries for impairment.
Arriving at an expected credit loss allowance involved
considering different scenarios for the recovery of the
intercompany loan receivables, the possible credit losses that
could arise and probabilities for these scenarios and an assessment
of the net asset position of the subsidiary.
The following were considered, the exploration project risk, the
future sales potential of product, value of potential reserves and
the resulting expected economic outcomes of the project.
Refer Note 1 for further information in respect to the
accounting policy and Note 2 (c) in relation to the accounting
judgements.
Investment in subsidiaries
2022 2021
Company $'000 $'000
Investments in subsidiary undertakings - CRL 4,142 4,523
_________ _________
4,142 4,523
_________ _________
Holdings of more than 20%
The Company holds more than 20% of the share capital of the
following companies:
Subsidiary undertakings Country Principal Class %
of of
Incorporation Activity share Owned
Central Australian Rare Australia
Earths Pty Ltd (ii) Exploration and development Ordinary 100%
Iron Glen Holdings Pty Australia
Limited (ii) Holding Company Ordinary 100%
Southern Minerals Group
LLC (i) USA (iii) Sale of magnetite Ordinary 100%
Australia
Ebony Iron Pty Limited (ii) Holding Company Ordinary 100%
Leigh Creek Copper Mine Australia
Pty Ltd (i) (ii) Exploration and development Ordinary 100%
Australia
Iron Glen Pty Ltd (ii) Dormant Company Ordinary 100%
United Kingdom
Cornwall Resources Limited (iv) Exploration and development Ordinary 100%
(i) Held by Ebony Iron Pty Limited
(ii) Registered office - 3 Laundess Avenue, Panania NSW 2213
(iii) Registered office - 303 Fierro Road, Hanover, New Mexico, USA, 88041
Registered office - 10 John St, London WC1N2EB
11. Property, plant, and equipment
Development Asset Plant and Machinery Total
Group $'000 $'000 $'000
Cost
At 1 January 2021 6,828 762 7,590
________ ________ ________
Additions in the year 584 4 588
Foreign exchange difference (385) (20) (405)
________ ________ _______
At 31 December 2021 7,027 746 7,773
Additions 490 - 490
Bond Uplift 797 - 797
Foreign exchange difference (507) (23) (530)
________ ________ ________
At 31 December 2022 7,807 723 8,530
________ ________ ________
Depreciation
At 1 January 2021 - (239) (239)
Charge in the year - (52) (52)
Foreign exchange difference - 3 3
________ ________ ________
At 31 December 2021 - (288) (288)
Charge in the year - (16) (16)
Foreign exchange difference - (3) (3)
________ ________ ________
At 31 December 2021 - (307) (307)
________ ________ ________
Carrying value
At 31 December 2020 6,828 523 7,351
________ ________ ________
At 31 December 2021 7,027 458 7,485
________ ________ ________
At 31 December 2022 7,807 416 8,223
________ ________ ________
12. Inventories
2022 2021
$'000 $'000
Finished goods held for sale 5 4
________ ________
5 4
________ ________
No inventories have been written off to profit or loss in the
year (2021: Nil).
13. Trade, other receivables, and prepayments
2022 2021
Group $'000 $'000
Current
Trade receivables 218 190
Less: provision for impairment of trade receivables - -
_________ _________
218 190
Other receivables 72 245
VAT/GST Receivable 29 50
________ ________
319 485
________ ________
Prepayments 25 6
________ ________
Non-Current
Rehabilitation bond 136 145
________ ________
136 145
________ ________
Company
Current
Prepayments - 3
VAT/GST Receivable 17 18
________ ________
17 21
________ ________
The Group's trade receivables are derived from magnetite
customers at Cobre, whose credit quality is assessed by considering
the customers financial position, experience, and other factors.
There are no significant concentrations of credit risk, whether
through exposure to individual customers, specific industry sectors
and/or regions. Within 60 days of the year end, the Group had
collected 100% of the trade receivables outstanding at 31 December
2022. The Group did not recognise any impairment and believes that
credit risk is limited as customers pay within a short period of
time. Other receivables in 2022 includes $71k receivables from the
University of Exeter being a reimbursement due under the Deep
Digital Cornwall Project, which were received in full by end of
April 2023 .The Group applies the IFRS 9 simplified approach to
measuring credit losses using a lifetime expected credit loss
provision for trade receivables. Based on the assessment, the
carrying value of trade receivables, classified at amortised cost,
approximated the fair value.
14. Cash and cash equivalents
2022 2021
Group $'000 $'000
Bank current accounts - unrestricted 341 611
________ ________
Cash and cash equivalents in the statement
of cash flows 341 611
________ ________
Cash and cash equivalents (continued)
2022 2021
Company $'000 $'000
Bank current accounts - unrestricted 9 40
________ ________
Cash and cash equivalents in the statement of cash flows 9 40
________ ________
The Group's balances are held with well-known and highly rated
UK, USA, and Australian banks.
15. Trade and other payables
2022 2021
Group $'000 $'000
Trade payables 226 256
Other payables 24 23
Accruals 116 129
________ ________
366 408
________ ________
Company
Trade payables 54 45
Other payables - -
Accruals 73 96
________ ________
127 141
________ ________
Book values approximate to fair value at 31 December 2022 and
2021.
16. Trade and other payables
Provision for environmental Liability (1) Total
$'000 $'000
Group
At 1 January 2021 439 439
________ ________
Finance Charges 7 7
Foreign exchange (25) (25)
At 1 January 2022 421 421
________ ________
Bond Uplift 797 797
Finance Charges - -
Foreign exchange (27) (27)
________ ________
At 31 December 2022 1,191 1,191
________ ________
(1) LCCM's operations are subject to specific environmental
regulations. The Group has assessed the environmental
rehabilitation provision arising from these regulations and has
recognised an amount, which reflects the fair value of such
liabilities.
Non-Current Liabilities
2022 2021
$'000 $'000
Company
Loans to Subsidiary Undertakings 1,919 1,221
________ ________
1,919 1,221
________ ________
17. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using the tax rate applicable for losses
in the relevant jurisdiction. However, the deferred tax asset as at
31 December 2022 was nil (2021: nil) as the tax losses were not
expected to be recovered in the foreseeable future (see note 7 for
details).
18. Leases
The Group has leases for an office, plant and machinery and a
vehicle. Each lease is reflected on the balance sheet as a
right-of-use asset and a lease liability. The Group classifies its
right-of-use assets in a consistent manner to its property, plant
and equipment (see Note 11).
Right of Use Asset
Plant, machinery,
Office Lease and vehicles Total
$'000 $'000 $'000
Group
At 1 January 2021 40 38 78
Additions - 822 822
Amortisation (capitalised) (20) (5) (25)
Amortisation - (158) (158)
________ ________ ________
At 31 December 2021 20 697 717
________ ________ ________
Group
At 1 January 2022 20 697 717
Additions - 167 167
Amortisation (capitalised) (19) (3) (22)
Amortisation - (278) (278)
________ ________ ________
At 31 December 2022 1 583 584
________ ________ ________
Lease Liabilities
Office Plant, machinery, and vehicles Total
$,000 $'000 $'000
Group
As at 1 January 2021 40 40 80
Additions - 822 822
Interest payments 2 13 15
Lease Payments (20) (175) (195)
________ ________ ________
As at 01 January 2022 22 700 722
Additions - 167 167
Interest expense 1 17 18
Lease payments (19) (301) (320)
________ ________ ________
At 31 December 2022 4 583 587
________ ________ ________
Lease Liabilities are presented in the Statement of financial
position as follows :
2022 2021
$,000 $'000
Group
Current 282 302
Non-Current 305 420
________ ________
Total 587 722
________ ________
The table below describes the nature of the Group's leasing
activities by type of right-of-use asset
recognised on balance sheet:
Right of No of Right Range of No of leases
Use Asset of Use assets remaining with extension
leased term options
Office lease 1 less than -
1 year
Plant and
Machinery 5 1-4 years 1
Motor Vehicle 1 5 years -
19. Share Capital and Premium
Share
Number Issue Price Capital Share Premium Total
$,000 $,000 $'000
At 1 January 2021 Ordinary shares
(par value of 0.1 pence each) 2,015,964,616 2916 49,387 52,303
Share Issue(ii) 106,666,667 0.375p 146 405 551
Issue Costs on Placement (28) (28)
_ _________ _______ _______ _______
At 31 December 2021 Ordinary shares of 0.1 pence
each 2,015,964,616 2916 49,387 52,303
__ _______ _______ _______ _______
At 31 December 2022 Ordinary shares of 0.1 pence
each 2,015,964,616 2916 49,387 52,303
__ _______ _______ _______ _______
No director options (2021: nil) were exercised during the
year.
(i) During 2021 the Company issued 106,666,667 shares at 0.375
pence raising $551,000 (GBP400,000). Issue costs on this placement
were $28,000 (GBP19,300)
During 2020, the Company issued 175,000,000 shares. As part of
this issue the Company also issued 175,000,000 warrants. Each share
had a warrant attached which entitled the holder to subscribe for
one new Ordinary Share at a price of 1.0p per share with an expiry
date of 30 December 2022.
Number of outstanding warrants at 31 December 2022 and a
reconciliation of their movements during the year were:
Date of Granted Issued Cancelled Granted Exercise Exercise Period
grant at 31.12.21 / Exercised at 31.12.22 price
From To
03.12.20 175,000,000 - 175,000,000 - 1.00p 03/12/20 30/12/22
The estimated fair value of options issued is calculated by
applying the Black-Scholes option pricing model.
The assumptions used in the calculation were as follows:
Share price at date of grant 0.42p
Exercise Price 1.00p
Expected Volatility 75.7%
Expected Dividend nil
Contractual Life 2.7 years
Risk free rate 0.189%
Estimated fair value of each option 0.1115p
The expected volatility was determined based on the historic
volatility of the Company's shares.
The risk-free rate of interest for a 2-year term is estimated to
be 0.0189% United Kingdom Sovereign Curve.
The options expired on 30 December 2022 and the value of the
outstanding options at 31 December 2022 is $nil (2021: $153,000).
In December 2022 the balance of the warrants reserve in relation to
the unexercised warrants at the expiry of the warrants period was
transferred to retained earnings.
20. Share based payments.
The Group has a share-ownership compensation scheme for senior
executives of the Group whereby senior executives may be granted
options to purchase ordinary shares in the Company. There were nil
(2021: nil) options issued to directors and senior executives
during the year and 22,250,000 options lapsed (2021: 49,250,000)
during the year.
The options and warrants carry neither rights to dividends nor
voting rights at shareholders meetings.
Options
Number of outstanding options at 31 December 2022 and a
reconciliation of their movements during the year were:
Date of grant Outstanding at Issued Lapsed Outstanding at Exercise price Exercise Period
31.12.21 31.12.22
From To
15.02.18 17,500,000 (i) - (17,500,000) - 5.00p 15.02.18 30.06.22
09.08.18 4,750,000 (i) - (4,750,000) - 5.00p 09.08.18 30.06.22
_________ _________ _________ _________
22,250, 000 - (22,250,000) -
(i) Market based vesting condition of 10.0p volume weighted
average share price over 5 consecutive days.
All options outstanding at 31 December 2021 expired on 30(th)
June 2022.
There were nil options outstanding at 31 December 2022.The
options outstanding at 31 December 2021 had an exercise price
5.00p, a weighted average exercise price of 5.00p and a remaining
weighted average contractual life of 181 days. The weighted average
exercise price of warrants and option lapsed, cancelled or
exercised during the year was 1.00p (2021: 1.00).
The value of the options at 31 December 2022 is nil (2021:
$97,000)
21. Commitments
(a) Capital expenditure commitments.
At 31 December 2022, no capital commitments existed (2021:
Nil).
(b) Exploration commitments
So as to maintain current rights to tenure of exploration
tenements, the group is required to outlay amounts in respect of
tenement rent to the relevant governing authorities and to meet
certain annual exploration expenditure commitments. Other than for
standard rent and licence fees, the group has flexibility over the
life of the tenement to meet exploration expenditure commitments.
The expected timing of outlays (exploration expenditure, rent and
licence fees) which arise in relation to granted tenements and are
as follows:
2022 2021
Group $'000 $'000
due within one year 304 305
due after one year and within five years 1,303 1,283
due after five years 1,939 1,889
________ ________
3,546 3,477
________ ________
(c) Other commitments
As part of the terms of agreement in relation to the purchase of
CRL, the company had a commitment of AUD $1m on net smelter sales
arising from CRL production reaching $A50m and a further $A1m on
net smelter sales arising from CRL production reaching $A100m.
Given the asset is in still in the exploration phase, these
milestone events triggering deferred consideration payments are
considered to be uncertain.
As part of the PEPR, the company has an obligation to pay a
A$1.440m bond prior to commencement of authorised operations at the
LCCM site. The bond addresses future liabilities resulting from
operations as described in the PEPR.
Whilst a possible obligation exists in relation to the
consideration payable, given the project is not in operation, it
was concluded that at reporting date that the payment is considered
to be uncertain.
When the payments become probable, the group will raise a
liability.
22. Controlling party
There is no ultimate controlling party of the Group.
23. Related party transactions
Director and key management personnel remuneration has been
disclosed in Note 6.
Directors interest in Shares and Options have been disclosed in
the Directors Remuneration Report.
J Harrison is a director of the group and was consultant to CRL
during 2022. Fees paid by CRL for services provided by J Harrison's
associated entity, during this period were $35,874 (2021:
$23,000)
The Group paid $183,391(2021: $192,787) of John Peters'
Directors remuneration to an associated entity. Of this amount
$122,261 (2021: $128,572) was paid by the Company and $61,130
(2021: $64,215) was paid by a subsidiary company Iron Glen Holdings
Pty Ltd. The amount outstanding at year end payable to the
associated entity was $37,428 (2021: $32,250)
The Group paid $57,780 (2021: $60,027) of Alan Broome's
Directors remuneration to an associated entity The amount
outstanding at year end payable to the associated entity was
$17,013 (2021: $14,882)
The Group paid $23,588 (2021 $25,745) of Jeffrey Harrison's
Directors remuneration to an associated entity. No amount was
outstanding at year end (2021: nil)
There were no other relevant transactions with Directors or
other related parties.
24. Events after the reporting period
-- SMG's major client has not, as yet, returned.
-- The debt funder for LCCM has withdrawn their non-binding
offer due to rising mineral costs causing breaches to their lending
ratios, despite LCCM profitability being strong.
-- Reduced cash flows likely to require short term debt funding
ahead of a likely raise in the second half of the year
-- Interest in grant-based funding at Redmoor has grown from
both the UK Shared Prosperity Funds and US government's interest in
securing Tungsten not sourced from China or Russia
-- SMG took the decision to reduce the claim on CVI to costs of
US $160,000 which was accepted by the Receiver. It appears that the
Receiver is now likely to make a distribution in 2023, although it
is anticipated that this will be a fraction of a dollar for each
claim.
Competent Persons Statement
The information in this report that relates to Redmoor Project
is based on information compiled and reviewed by Paul Gribble
C.Eng. a Fellow of the Institute of Materials, Minerals and Mining
(FIMMM), and who is Principal Geologist of Geologica UK
(Geologica). Paul Gribble has sufficient experience which is
relevant to the style of mineralisation and type of deposit under
consideration and to the activity which he is undertaking to
qualify as a Competent Person as defined in the 2012 Edition of the
'Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves'. Paul Gribble is also a Competent
Person as defined in the Note for Mining and Oil & Gas
Companies which form part of the AIM Rules for Companies.
The information in this report that relates to the LCCM project
is based on information compiled by Mr. David Larsen, who is a
Member of the Australian Institute of Geoscientists (Member No.
1976). Mr. Larsen is the Principal Geologist at Terra Consulting
Pty Ltd and is a consultant to the Company. He has sufficient
experience relevant to the style of mineralisation and type of
deposit under consideration and to the activity he is undertaking
to qualify as a Competent Person, as defined in the 2012 Edition of
the Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves (JORC 2012) and a qualified person as
defined in the AIM Note for Mining and Oil & Gas Companies
which forms part of the AIM Rules for Companies. Mr. Larsen has
over 30 years' Australia and international experience in
exploration, mining geology and resource estimation for gold, base
metals and iron ore deposits.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
FR DZGZVRGDGFZM
(END) Dow Jones Newswires
June 21, 2023 02:00 ET (06:00 GMT)
Strategic Minerals (AQSE:SML.GB)
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