TIDMSML
RNS Number : 8682N
Strategic Minerals PLC
28 September 2023
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
28 September 2023
Strategic Minerals plc
("Strategic Minerals", "SML", the "Group" or the "Company")
Interim Results
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing
mineral company actively developing critical minerals focused
projects, is pleased to announce its unaudited interim profit for
the half year ended 30 June 2023.
Financial Highlights
-- Maintained operating profitability with interim six-month
pre-tax profit of US$54,000 (H1 2022: US$248,000) despite reduced
sales in the period.
-- Continued after tax profit for the interim six months of
US$38,000 (H1 2022: US$127,000) consistent with the drop in sales
and tight control of overheads being maintained.
-- Through its wholly owned subsidiary, Cornwall Resources
Limited ("CRL"), the Company lodged claims with the Deep Digital
Cornwall project for US$114,000, with US$45,000 received in the
first week of July.
-- US$347,000 invested in development projects during the period
- Leigh Creek Copper Mine ("LCCM") US$188,000 and Redmoor Tin and
Tungsten Mine ("Redmoor") US$159,000.
-- Unrestricted cash at 30 June 2023 was US$129,000 (31 Dec
2022: US$341,000), prior to the receipt of the US$45,000 DDC claim
in the first week of July.
Corporate Highlights
In light of the reduced income from Cobre, management and
Directors' cash remunerations have continued to be adjusted to
ensure maintenance of cash balances at prudent operating levels.
Currently, cash balances at the end of September are expected to be
in line with the 30 June 2023 balance but to ensure these balances
remain at reasonable operating levels for the remainder of the
year, the Board is in advanced discussions with at least one
supportive counterparty to provide a short-term working capital
facility.
During the quarter, Shipleys LLP assumed the role of the
Company's auditor after Jeffreys Henry vacated the position, due to
staffing losses. This situation impacted a number of our AIM peers.
However, the Company, with a highly organised and professional
effort from Shipleys, was able to complete the audit before 30 June
and meet the standard regulatory deadline.
As reported in the last quarterly RNS, Jeff Harrison,
Non-Executive Board member, retired as a Board member at the end of
April 2023 with no replacement appointed yet.
June Quarter Cobre Sales
In line with the "Update on Projects" released on 14 July 2023,
there will be no June Quarter report this year, or in the future.
However, to maintain reporting to shareholders on the sales at
Cobre, s ales comparisons on quarterly and annual periods to 30
June 2023, along with associated volume details, are shown in the
table below:
Tonnage Sales (US$'000)
---
Year 3 months to June 12 months to 3 months to 12 months to
June June June
2023 4,162 23,856 367 1,898
2022 10,711 38,825 666 2,429
2021 12,130 48,964 740 2,890
Commenting, John Peters, Managing Director of Strategic
Minerals, said:
"The Company continues to respond to the impact on Cobre sales
from the dip in US economic growth. In line with this, the Company
has maintained a tight control on overheads and is looking to
source short term funding to ensure adequate cash balances are
available for planned operations, thus avoiding unnecessary
dilution.
" The recent significant investment secured by Cornish Lithium
("CL") has focused attention on the revival in Cornish mining and
helps to highlight the underlying value of the Redmoor project. CRL
continues to work together with CL on the Deep Digital Cornwall
project, we congratulate them and look forward to continuing
collaborations with them.
"Despite the disappointment of not achieving grant funding on
the first attempt, the CRL team made a significant, credible
submission which has provided valuable experience for its
subsequent application. Engagement continues with both Cornwall
Council and other local stakeholders. Recent encouraging
discussions with various parties leave us confident of
progress.
"The sterling effort of our auditors, Shipleys, and of our CFO,
Karen Williams, in masterfully executing the Company's audit,
despite substantial time constraints, should be applauded.
"The Board looks forward to a more active period of news flow
during the final quarter of 2023."
For further information, please contact:
+61 (0) 414 727
Strategic Minerals plc 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
Charlie Bouverat
NOTES TO EDITORS
Strategic Minerals 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
September 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 late September 2022, an updated
PEPR, addressing the conditions associated with the July 2021
approval, was approved.
CHAIRMAN'S STATEMENT
It is well documented that 2022 and the first half of 2023 has
been a difficult time on AIM. Despite this uncertainty, I am
pleased that the Company has been able to maintain profitable
trading, despite a significant drop in sales at Cobre. This is a
particularly challenging period for markets, and the world, but I
have faith that Strategic Minerals is well placed to weather this
storm and that the Board and Management will help the Company
capitalise on the valuable assets it has secured and developed.
Financial results
The Company continued its underlying profitable performance in
the first half of 2023, when many businesses succumbed to cash flow
and profitability impacts arising from the pandemic overhang,
Ukraine war and evaporation of funding support on the AIM
market.
With the drop in sales at Cobre and coupled with a challenging
equity market environment, the Company's ability to secure funding
to progress its development projects and general development
processes have been impacted. Adjustments to operations have been
made with the Company successfully reducing overheads by 13% in the
first half of the year before allowing for capitalisation of
director fees associated with projects.
Unrestricted cash on hand at 30 June 2023 was US$129,000 with a
further US$45,000 re-imbursement from the DDC project dropping into
the Company's account in the first week of July. However, in
acknowledging the need to maintain prudent cash flow, the Company
is seeking short-term debt financing. It is considered that this is
the least dilutive approach to maintain prudent operating cash
levels, at this time.
Strategic Focus
The current drop in sales at Cobre has caused a greater focus on
bringing strategic investors (Joint venture/purchasers) to the
table in relation to both Redmoor and LCCM. Significant efforts
have been made in this area for over a year and more recent
interactions have been particularly positive in relation to
Redmoor.
Cobre Operations
During the first six months of 2023, sales at Cobre were still
profitable despite a significant fall in sales compared to prior
periods, due to its major client suspending orders. Adjustments
were made in personnel hours and SMG continues to deal with
enquiries in relation to its magnetite product, although increased
transport costs, caused by higher oil prices, does impact potential
new sales.
The first half of the year also saw the receiver for CV
Investments making progress towards the first distribution in
relation to the Receivership, however, it now appears that any
payment to SMG will not be a material amount.
Leigh Creek Copper Mine ("LCCM")
Currently, the Company is working with two unrelated parties who
have expressed an interest in the sulphide exploration potential of
the project. These parties have signed confidentiality agreements,
accessed our data room and have undertaken their own due diligence,
although no site visit has been undertaken as yet.
Additionally, we have recently been approached by a party that
is proposing an alternative approach to treating the copper oxide
and we are currently investigating the feasibility of this
approach.
Redmoor Tin-Tungsten Project ("Redmoor")
After feedback received on our comprehensive application for
grant funds from the Shared Prosperity Fund ("SPF"), the CRL team,
under tight time frame requirements, resubmitted a revised grant
application which is currently being assessed, alongside other
applications, by Cornwall and Isles of Scilly Council ("CIoS").
During the second half of 2023, the team at Redmoor have/are
intending to undertake:
-- Historic relogging and sampling on Redmoor's library of
14,000m of drill core which is expected to add to the understanding
of the geology and mineral resource at Redmoor and potentially add
to the existing JORC (2012) resource through additional sampling
and modelling, without the need for expensive drilling.
-- Follow-up and expansion on work completed as part of Deep
Digital Cornwall, with target generation and infill sampling
underway.
-- Continued research and negotiation in consolidating and
expanding CRL's mineral rights footprint in the highly prospective
Cornwall region
-- Collaboration with other parties on agreements which will utilise CRL's expertise and IP
-- To work with an interested party currently accessing the CRL
data room, answering further questions and providing requested
information.
-- Follow up on the revised grant funding application lodged in
early August and prepare for the proposed scope of works, and work
to maximise the potential for a positive funding decision.
-- Attendance, by CRL's Project Manager and Senior Geologist, at
the Society of Economic Geologists ("SEG") Conference in London and
hosting the SEG field trip afterwards to Redmoor, as part of a
wider Cornwall field trip of industry professionals.
-- Attendance, by CRL's Project Manager and Senior Geologist, at
the Cornish Mining Conference in Falmouth and hosting a related
site visit by industry professionals.
-- Hosting, in September 2023, a visit from HM Treasury which is
part of a wider south west England visit to UK mining projects. The
objective is to feedback to Government a better understanding of
the extent of mining activities in the UK, as well as how best the
Government can assist in the development of the returning
industry.
-- Hosting a local community update event in October 2023.
Safety
The Company has a strong focus on safety issues and continues to
maintain a high level of performance when it comes to safety. In
the first half of 2023, there was an incident involving an employee
receiving a "jolt" from a pothole at the Cobre pit. As a
precaution, the employee was sent home for the afternoon and
returned to work the next morning.
Again, I would like to take this opportunity to thank my fellow
Directors, our management and staff in New Mexico, South Australia
and Cornwall, along with our advisers, for their support and hard
work on our behalf during the period. Additionally, I would like to
thank our clients, contractors, suppliers and partners for their
continued backing.
I look forward to further progressing our key strategic goals in
2023 and pushing onto a brighter 2024.
Alan Broome AM
Non-Executive Chairman
28 September 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months
to to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Continuing operations
Revenue 782 1,329 2,446
Raw materials and consumables used. (137) (256) (494)
_________ _________ _________
Gross profit 645 1,073 1,952
Other income 1 - 13
Overhead expenses (457) (637) (1,252)
Amortisation (116) (139) (278)
Depreciation (8) (16) (16)
Share based payment - (12) (12)
Foreign exchange gain/(loss) (6) (5) (17)
_________ _________ _________
Profit from operations 59 264 390
Finance expense (4) -
Lease Interest (5) (12) (18)
_________ _________ _________
Profit/ (loss) before taxation 54 248 372
Income tax (expense)/credit (16) (121) (288)
_________ _________ _________
_________ _________ _________
Profit for the period attributable
to:
Owners of the parent 38 127 84
_________ _________ _________
Other comprehensive income
Exchange gains/(losses) arising
on translation
of foreign operations 22 (902) (1,027)
_________ _________ _________
_________ _________ _________
Total comprehensive (loss)/income
attributable to:
Owners of the parent 60 775 (943)
_________ _________ _________
Profit/ (loss) per share attributable to the ordinary equity
holders of the parent:
Continuing activities - Basic c0.02 c0.08 c0.05
- Diluted c0.02 c0.08 c0.05
CONSOLIDATED STATEMENT OF FINANCIAL 6 months 6 months
POSITION to to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Assets
Non-current assets
Intangible Asset 533 553 544
Deferred Exploration and evaluation
costs 5,367 4,886 4,983
Other Receivables 133 139 136
Property, plant and equipment 8,203 7,301 8,223
Right of Use Assets 469 568 544
_________ _________ _________
14,705 13,447 14,470
_________ _________ _________
Current assets
Inventories 5 2 5
Trade and other receivables 391 435 319
Income Tax prepaid 13 - 88
Cash and cash equivalents 129 430 341
Prepayments - 1 25
_________ _________ _________
538 868 779
_________ _________ _________
Total Assets 15,243 14,315 15,248
_________ _________ ____ _____
Equity and liabilities
Share capital 2,916 2,916 2,916
Share premium reserve 49,387 49,397 49,387
Share options reserve - - -
Merger reserve 21,300 21,300 21,300
Warrant Reserve - 153 -
Foreign exchange reserve (1,312) (1,209) (1,334)
Other reserves (23,023) (23,023) (23,023)
Accumulated loss (36,365) (36,512) (36,403)
_________ _________ _________
Total Equity 12,903 13,012 12,843
_________ _________ ____ _____
Liabilities
Non-Current Liabilities
Lease Liabilities 230 317 305
Provisions 1,166 405 1,191
_________ _________ _________
1,396 722 1,496
_________ _________ _________
Current liabilities
Income Tax Payable 148 6 261
Trade and other payables 580 309 366
Lease Liabilities 216 266 282
_________ _________ _________
944 581 909
_________ _________ _________
Total Liabilities 2,340 1,303 2,405
_________ _________ ____ _____
Total Equity and Liabilities 15,243 14,315 15,248
_________ _________ ____ _____
CONSOLIDATED STATEMENT OF CASH FLOW
6 months
to 6 months to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cash flows from operating
activities
Profit/ (loss) after tax 38 127 84
Adjustments for:
Depreciation of property, plant,
and equipment 8 16 16
Amortisation of Right of Use
asset 116 139 278
Finance expense - 4 -
Income Tax expense 16 121 288
(Increase) / decrease in inventory - 2 (1)
(Increase) / decrease in trade
and other receivables (149) 12 212
(Increase) / decrease in prepayments 25 3 (19)
Increase / (decrease) in trade
and other payables 213 48 (42)
Increase /(decrease) in prepaid
income tax 75 - (25)
Income tax paid (53) (52) (27)
Share based payment expense - 12 11
_________ _________ _________
Net cash flows from operating
activities 289 432 775
_________ _________ _________
Investing activities
Increase in PPE Development
Asset (188) (253) (490)
Increase in PPE - - -
Increase in deferred exploration
and evaluation asset (159) (201) (226)
_________ _________ _________
Net cash used in investing
activities (347) (454) (717)
_________ _________ _________
Financing activities
Net proceeds from issue of
equity share capital - - -
Lease Payments (146) (151) (320)
_________ _________ _________
Net cash from financing activities (146) (151) (320)
_________ _________ _________
Net increase / (decrease)
in cash and cash equivalents (204) (173) (262)
Cash and cash equivalents at
beginning of period 341 611 611
Exchange gains / (losses) on
cash and cash equivalents (7) (8) (8)
_________ _________ _________
Cash and cash equivalents
at end of period 129 430 341
_________ _________ _________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Warrant Share Initial Foreign
Share premium Merger Warrant options Re-structure Exch. Retained Total
capital reserve Reserve Reserve reserve Reserve reserve earnings equity
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at
1 January
2022 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/(loss)
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
Profit for
the period - - - - - - - 38 38
Foreign
exchange
translation - - - - - - 22 - 22
_______ _______ _______
Total
comprehensive
income for
the year - - - - - - 22 38 60
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
30 June 2023 2,916 49,387 21,300 - - (23,023) (1,312) (36,365) 12,903
_______ _______ _______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the
parent Company.
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
1. General Information
Strategic Minerals Plc ("the Company") is a public company
incorporated in England and Wales. The consolidated interim
financial statements of the Company for the six months ended 30
June 2023 comprise the Company and its subsidiaries (together
referred to as the "Group").
2. 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 March 2025, 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 March 2025, the Group is reliant on
cash being generated from the Cobre asset in line with forecast and
a funding by way of debt/equity or a combination of both would be
required in 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 Q1 2024 and management are actively
pursuing such funding and envisage that this will be sourced at the
asset level.
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.
New standards, interpretations, and amendments effective 1 July
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.
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.
3. 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 period to 30 June 2023.
(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.
(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.
(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
vi) Estimated project commencement date.
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.
(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.
Judgements
(a) 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.
(b) 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.
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.
Intra
6 Months to 30
June 2023 Head Segment
United Development
(Unaudited) SMG Office Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 782 - - - - 782
_______ _______ _______ _______ _______ _______
Gross profit 782 - - - - 782
Other Income 1 - - - - 1
Raw materials/consumables (137) - - - - (137)
Overhead expenses (242) (215) - - - (457)
Management fee
income/(expense) (200) 197 - 3 -
Share based payments - - - - - -
Amortisation (116) - - - - (116)
Depreciation (8) - - - - (8)
Foreign exchange
gain/(loss) - 78 - - (84) (6)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 80 60 - - (81) 59
_______ _______ _______ _______ _______ _______
Lease Interest (4) (1) (5)
Finance Expense - - - - - -
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 76 60 (1) - (81) 54
_______ _______ _______ _______ _______ _______
Intra
6 Months to 30
June 2022 Head Segment
United Development
(Unaudited) SMG Office Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,329 - - - - 1,329
_______ _______ _______ _______ _______ _______
Gross profit 1,329 - - - 1,329
Raw materials/consumables (256) - - - - (256)
Overhead expenses (281) (380) (6) - 30 (637)
Management fee
income/(expense) (200) 206 - (6) -
Share based payments - (12) - - - (12)
Amortisation (139) - - - - (139)
Depreciation (16) - - - - (16)
Foreign exchange
gain/(loss) - 63 - - (68) (5)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 437 (123) (6) - (44) 264
_______ _______ _______ _______ _______ _______
Lease Interest (10) (2) (12)
Finance Expense - - - (4) - (4)
_______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 427 (123) (8) (4) (44) 248
_______ _______ _______ _______ _______ _______
Intra
Year to 31 December
2022 Head Segment
United Development
(Audited) SMG Office Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 2,446 - - - - 2,446
_______ _______ _______ _______ _______ _______
Total Revenue 2,446 - - - 2,446
Othe Revenue - - 13 - - 13
Raw Materials/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 - (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
_______ _______ _______ _______ _______ _______
As at 30 June 2023 Head
(Unaudited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 159 188 347
_______ _______ _______ ______ _______
Reportable segment assets 901 42 5,517 8,783 15,243
_______ _______ _______ ______ _______
Reportable segment liabilities 690 359 86 1205 2340
_______ _______ _______ _______ _______
As at 30 June 2022 Head
(Unaudited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 201 253 454
_______ _______ _______ ______ _______
Reportable segment assets 1,181 160 5,068 7,906 14,315
_______ _______ _______ ______ _______
Reportable segment liabilities 651 172 31 449 1,303
_______ _______ _______ _______ _______
As at 31 December 2022 Head
(Audited) SMG Office United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 226 490 717
_______ _______ _______ _______ _______
Reportable segment assets 1,166 84 5,185 8,813 15,428
_______ _______ _______ _______ _______
Reportable segment liabilities 910 220 41 1,233 2,405
_______ _______ _______ _______ _______
External revenue by Non-current assets
location of customers by
location of assets
30 June 30 June 30 June 30 June
2023 2022 2023 2022
$'000 $'000 $'000 $'000
United States 782 1,329 535 648
United Kingdom - - 5,387 4,905
Australia - - 8,783 7,894
_______ _______ _______ _______
782 1,329 14,705 13,447
_______ _______ _______ _______
Revenues from Customer A totalled $273,114 (2022: $188,315),
which represented 35% (2022: 14%) of total domestic sales in the
United States, Customer B totalled $nil (2022: $506,503) which
represented 0% (2022: 38%) and Customer C totalled $417,642 (2022:
$ 436,587) which represented 53% (2022: 33%).
5. Operating Loss
6 months 6 months
to to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Operating gain/loss is stated
after charging/(crediting):
Other Income (1) - (13)
Directors' fees and emoluments 86 197 276
Equipment rental 2 2 3
Equipment maintenance 13 12 33
Fees payable to the company's
auditor for the - - 74
audit of the parent company and
consolidated financial statements
Non- Audit Services - - 15
Salaries, wages, and other staff
related costs 203 248 485
Legal, professional and consultancy
fees 82 96 198
Other Expenses 71 82 168
_______ _______ _______
Overhead Expenses 457 637 1,252
_______ _______ _______
Lease Interest 5 12 18
Finance Fee - 4 -
Foreign exchange 6 5 18
Amortisation of Right of use
assets 116 139 278
Depreciation 8 16 16
Share based payments - 12 11
_______ _______ _______
Total 591 825 1,580
_______ _______ _______
6. Intangible assets - exploration and evaluation costs
6 months 6 months
to to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cost
Opening balance for the period 4,983 5,228 5,228
Additions for the period 236 201 400
Grant Reimbursement (69) (123) (174)
Research and development incentive (8) - -
Foreign exchange difference 225 (420) (471)
_______ _______ _______
Closing balance for period 5,367 4,886 4,983
_______ _______ _______
7. Property, plant and equipment
Development Plant and
Asset Machinery Total
$'000 $'000 $'000
Group
Cost
At 1 January 2022 (audited) 7,027 746 7,773
Additions 253 - 253
Foreign exchange difference (403) (18) (421)
________ ________ ________
At 30 June 2022 (unaudited) 6,877 728 7,605
Additions for period 237 - 237
Bond Uplift 797 797
Foreign exchange difference (104) (5) (109)
________ ________ ________
At 31 December 2022 (audited) 7,807 723 8,530
________ ________ ________
Additions 188 - 188
Foreign exchange difference (193) (7) (200)
_______ ________ _______-
At 30 June 2023 (Unaudited) 7,802 716 8,518
________ ________ ________
Depreciation
At 1 January 2022 (audited) - (288) (288)
Charge for the period - (16) (16)
Foreign exchange difference -
________ ________ ________
At 30 June 2022 (unaudited) - (304) (304)
Charge for the period - - -
Foreign exchange difference - (3) (3)
________ ________ ________
At 31 December 2022 (audited) - (307) (307)
________ ________ ________
Charge for the period - (8) (8)
Foreign exchange difference - - -
________ ________ ________
As at 30 June 2023(unaudited) - (315) (315)
________ ________ ________
Carrying Value
As at 30 June 2023 (unaudited) 7,802 401 8,203
________ ________ ________
As at 31 December 2022(audited) 7,807 416 8,223
________ ________ ________
As at 30 June 2022 (unaudited) 6,877 424 7,301
________ ________ ________
8. 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.
Office Lease Plant, Machinery
and Vehicles Total
$'000 $'000 $'000
Right of Use Assets $'000 $'000 $'000
As at 1 January 2022 (audited) 20 697 717
Additions - - -
Amortisation(capitalised) (9) (1) (10)
Amortization - (139) (139)
________ ________ ________
As at 30 June 2022 (unaudited) 11 557 568
________ ________ ________
Additions - 167 167
Amortisation(capitalised) - (2) (2)
Amortization (10) (139) (149)
________ ________ ________
As at 31 Dec 2022 (Audited) 1 583 584
________ ________ ________
Additions - - -
Amortisation(capitalised) - - -
Amortization (1) (115) (116)
________ ________ ________
As at 30 June 2023 (unaudited) - 469 469
________ ________ ________
Office Lease Plant, Machinery
and Vehicles Total
Lease Liabilities
As at 1 January 2022 (audited) 22 700 722
Additions - - -
Interest Payments 1 11 12
Lease Payments (5) (146) (151)
________ ________ ________
As at 30 June 2022 (unaudited) 18 565 583
________ ________ ________
Additions - 167 167
Interest Payments 1 6 7
Lease Payments (15) (155) (170)
________ ________ ________
As at 31 Dec 2022 (Audited 4 583 587
________ ________ ________
Interest Payments - 5 5
Lease Payment (4) (142) (146)
________ ________ ________
As at 30 June 2023 (unaudited) - 446 446
________ ________ ________
Lease Liability June June December
2023 2022 2022
Current 216 266 282
Non-Current 230 317 305
________ ________ ________
446 583 587
________ ________ ________
9. Dividends
No dividend is proposed for the period.
10. Earnings per share
Earnings per ordinary share have been calculated using the
weighted average number of shares in issue during the relevant
financial year as provided below.
6 months
to 6 months to Year to
30 June 30 June 31 December
2023 2022 2022
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Weighted average number of
shares - Basic 1,593,558,030 1,593,558,030 1,593,558,030
Weighted average number of
shares - Diluted 1,593,558,030 1,593,558,030 1,593,558,030
Earnings for the period $38,000 $127,000 $84,000
Earnings per share in the
period - Basic c0.02 c0.08 c0.05
Earnings per share in the
period - Diluted c0.02 c0.08 c0.05
11. Share capital and premium
30 June 30 June 30 June 30 June
2023 2023 2022 2022
No $'000 No $'000
Allotted, called up
and fully paid
Ordinary shares 2,015,964,616 52,303 2,015,964,616 52,303
____________ ____________ ____________ ____________
Share options and warrants
As at 30 June 2023 all share options and warrants have
expired.
Copies of this interim report will be made available on the
Company's website, www.strategicminerals.net.
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END
IR UBAARORUKUAR
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
Strategic Minerals (LSE:SML)
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