TIDMSNRP
RNS Number : 6172D
Strategic Natural Resources PLC
31 March 2014
31 March 2014
STRATEGIC NATURAL RESOURCES PLC
("SNR" or the "Company")
Unaudited interim results for the six months ended
31 December 2013
Strategic Natural Resources PLC (AIM: SNRP), the 74 per cent.
owner of coal exploration and mining assets located near Indwe in
the Eastern Cape Province of South Africa, today announces its
unaudited interim results for the six month period ended 31
December 2013. SNR intends to announce audited accounts for the 12
month period ending 30 June 2014 by 31 December 2014 and publish
its 2014 Annual Report and Accounts by the same date.
Key items:
-- first shipment of thermal grade coal exported from the
Elitheni mine in September 2013, demonstrating the success of the
logistics and infrastructure from Indwe to the Port of East London
and generating maiden revenues of GBP699,000;
-- losses of GBP12.6 million (six months ended 31 December 2012: GBP1.1 million loss)
-- significant impairment of previously capitalised development
costs due to suspension of mining activities at the Elitheni
mine;
-- net assets as at 31 December 2013 were GBP1.416 million (31
December 2012: GBP15.02 million)
-- discussions with the Company's primary lender and major creditors are on-going; and
-- discussions continue with potential strategic investors.
For further information, please contact:
Strategic Natural Resources PLC
+44 (0) 20 3328
Andy Brennan, Chairman 5656
Gabriel Ruhan, Chief Executive Officer +27 (0) 41 368 9650
Allenby Capital Limited_Nominated Adviser
and Joint Broker
+44 (0) 20 3328
Nick Naylor/Mark Connelly/James Reeve 5656
For further information about Strategic Natural Resources PLC
please visit www.snrplc.co.uk
Chairman's Statement
I am reporting on recent developments at the Company and on our
unaudited interim results for the 6 month period ended 31(st)
December, 2013.
Coal Operations
The first sales cargo of coal from the Elitheni mine was shipped
in September 2013, which generated first revenue for the business
and demonstrated the functionality of the mine's infrastructure,
logistics and port export capability.
However, mining operations at the Elitheni Mine have been and
remain temporarily suspended pending an improvement in
international coal prices and proper re-capitalisation of the
business.
Elitheni received a winding up petition from a group of
creditors 29(th) November, 2013 with the amounts disputed by the
Company. Having contested the claims submitted, the Court petition
was withdrawn with both parties agreeing to arbitration to be held
on 28(th) April - 1(st) May 2014. Elitheni management remain
confident that the arbitration ruling will be favourable
notwithstanding the fact that funds are set aside with the Court in
South Africa to cover the full amount under dispute.
Strategy
Our strategy remains unchanged and is as follows:
-- secure agreement with a strategic investor or investors to
repay current debt and provide adequate funding for on-going mining
development and proving up of further coal reserves and resources
in our licence areas;
-- recommence and enhance financially viable production levels at the Elitheni mine;
-- advance a coal fired power station strategy partnership with
the Industrial Development Corporation ("IDC") in South Africa and
agree a profitable supply agreement;
-- explore and develop a local domestic coal market in the Eastern Cape; and
-- progress drilling on the strategically important Phase 5 area.
Funding
Considerable time and effort has been invested since April 2013
in attempting to secure the right strategic investment for the
Company.
As part of this process, there has been significant interest
from several parties including reputable international coal trading
companies and especially from companies in India, one of the main
likely markets for Elitheni's grade of coal.
Despite various discussions and negotiations getting to advanced
stages, no deal has yet been agreed. The continuing depressed
international coal price remains a deterrent to both economic
production activity and potential investors who remain cautious on
the sector.
Since December 2013 the Company has been in detailed
negotiations with a private investment vehicle which expressed an
interest in making a material equity investment in SNR. Whilst
outline commercial terms had been provisionally agreed, the
investment vehicle has yet to satisfactorily demonstrate proof of
funding to progress the deal. Whilst discussions are continuing
there can be no guarantee that this deal will be successfully
concluded.
The Company is also in discussions with, and is currently
carrying out due diligence on, two other unconnected potential
investors who have shown a keenness to take up significant
shareholdings by way of a subscription of new shares and an equity
credit line, the proceeds of which will be used to pay legitimate
creditors pending procurement of the appropriate strategic
investment for the Company.
In addition, short term funding is being sought to undertake a
detailed bank feasibility study of the resource at the Elitheni
mine to properly underpin the application for significant grant
funding from the IDC in South Africa.
Discussions with our primary lender, Land Consultants Limited
("LCL") continue with a view to reaching agreement for further
deferral of SNR's GBP8 million loan which is currently due for
repayment at the end of June 2014. Consideration is also being
given by both parties to the conversion of interest payments due
into new SNR shares.
Financial results
During the 6 month period ended 31 December 2013, the Company
made a loss of GBP12.619 million (loss of GBP1.139 million for the
6 month period ended 31 December 2012). The increase in this loss
is primarily due to three factors: the additional corporate
overhead supporting the significantly increased operational
activities leading to the first shipment of thermal grade coal in
September 2013; the subsequent restructuring of both the management
and operations of the mine which lead to the mine entering into a
care and maintenance phase pending receipt of additional funding -
which in turn resulted in the Board making a large impairment
provision; and the weakening of the Rand by over 15% in the 6 month
period (over 25% in the 12 month period to 31 December 2013).
As a result of the first shipment in September 2013, SNR was
pleased to recognise the first revenue. The associated cost of
sales against this revenue was greater, reflecting the additional
underlying production costs required at the mine before it is fully
operational. Directors fees and expenses are included within
administration expenses but it is noted that their payment has been
deferred since February 2013.
The largest negative impact to the results has been the
impairment to Property, Plant and Equipment. As previously
disclosed, all development costs associated with the establishment
of the mine were capitalised and were to be amortised over the
anticipated life expectancy of the Elitheni Mine and the underlying
mining resources. Whilst the underlying mining resources remain, it
is acknowledged that production has temporarily ceased at the mine
until further funding is secured and hence it was considered
necessary to impair a large portion of the capitalised development
costs. In addition, equipment at the mine which is now considered
redundant for current mine operations due to a change in the mining
strategy have also been impaired. All other assets within Property,
Plant and Equipment have been depreciated in accordance to our
accounting policies as disclosed in the accounts for the 16 month
period ended 30 June 2013.
Due to the on-going litigation against SNR and Elitheni, the
Board have undertaken a review of the trade and other receivables
balance of GBP1.643 million (2012: GBP2.929 million), which
consists of both operational deposits and deposits made against
litigation claims and based on legal advice have made a provision,
within non-current liabilities for a portion of the deposits.
As discussed above, discussions with our primary lender, LCL
continue with a view to reaching agreement for further deferral of
SNR's GBP8 million loan currently due for repayment at the end of
June 2014. The loan is classified within "Current Liabilities"
Post Period Events
On 26(th) March 2014, SNR received a winding up petition, from
the lawyers of London Commodity Brokers ("LCB"). LCB are claiming
an amount of circa US$1.15 million pursuant to the contractual
arrangements put in place under the Trasteel off-take
agreement.
The Company disputes the amount claimed by LCB and has been in
discussions with LCB concerning the amount due and settlement
terms. The board of SNR is disappointed that a winding up petition
has been filed by LCB but remains optimistic that a settlement can
be reached. The winding up petition is due to be heard at the
Companies Court at 10.30 am on 12 May 2014.
On 27(th) March, SNR was advised by Elitheni that it had
received a court order made by the High Court of South Africa
seeking to attach SNR's ultimate holding in Elitheni, to the
applicant, Thelo Rolling Stock Leasing (Pty) Ltd ("Thelo").
Elitheni is discussing this Court Order with its South African
legal advisers and is in discussions with Thelo regarding the
repayments of amounts due to them. Preliminary legal advice is that
the Court Order may not be valid.
Under the terms of the Court Order, SNR has 30 days, from 25(th)
March, 2014, in which to enter a Notice of Intention to Oppose and
SNR intends to serve such notice.
Outlook and Going Concern
We continue to face acute working capital constraints and are
grateful for the support and tolerance of the majority of our
creditors. Likewise, we are grateful to our main lender, LCL, who
remain supportive and are considering a further deferral of our
GBP8m bridging loan facility, due for repayment by 30 June 2014.
Should such further deferral be granted by LCL, it would greatly
assist our continuing efforts to secure longer term funding,
parallel to which consideration is also being given by both parties
to the conversion of interest payments into new SNR shares.
The cash position as at 31 December 2013 was GBP12k which is
insufficient to pay creditors as they fall due. Further to the
period end there has been cash recovered from the balance sheet
that was used to meet critical current creditors. If new sources of
funding are not forthcoming in the near future, there is doubt that
the business will be able to continue as a going concern. Should
this be the case the Company's shares would likely be suspended
from trading on AIM until such time that the Company could continue
as a going concern.
Whilst the Company's ability to continue as a going concern is
dependent on securing adequate funding for the business, the Board
is confident that:
-- we hold an extremely valuable asset in the relatively densely
populated Eastern Cape area with significant logistical, rail and
shipping advantages;
-- the recent serious power outages in the Eastern Cape provides
a serious stimulus, to both local government and commercial
interests, to accelerate construction of a coal fired power station
to address power shortages; and
-- despite current funding obstacles, the strategic potential of
the business remains strong and, whilst there can be no guarantee,
the Board remains optimistic that an acceptable funding package can
be secured.
Andy Brennan
Chairman
31 March 2014
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(unaudited)
For the six months ended 31 December 2013
Unaudited Unaudited
six months six months
Notes to 31.12.2013 to 31.12.2012
GBP'000 GBP'000
Revenue 699
Cost of Sales (1,025)
Gross Profit / (Loss) (326)
Administration expenses (2,734) (1,258)
Impairment 4 (7,140)
Other income 4 10
Operating (Loss) (10,196) (1,248)
Finance income - 30
Finance expense (672) (73)
(Loss) before tax (10,868) (1,291)
Income tax expense - -
(Loss) for the year
Attributable to shareholders
of SNR (8,290) (977)
Attributable to non-controlling
interest (2,578) (314)
(10,868) (1,291)
Other comprehensive income for
the year
Exchange differences on translation
of foreign operations (1,751) 152
Total comprehensive (loss) for
the year (12,619) (1,139)
Attributable to shareholders
of SNR (9,586) (864)
Attributable to non-controlling
interest (3,033) (275)
(12,619) (1,139)
(Loss) per share from both total
and continuing operations
Basic and diluted (pence per
share) 3 (4.8p) (0.6p)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(unaudited)
As at 31 December 2013
Company registration number 5249946
Unaudited Unaudited
Notes as at as at
31.12.2013 31.12.2012
GBP'000 GBP'000
Assets
Non-current assets
Property plant and equipment 4 12,068 9,893
Intangibles 4 1,683 4,896
Total non-current assets 13,751 14,789
Current assets
Inventory 163 -
Trade and other receivables 1,642 2,929
Loan note 653 638
Cash and cash equivalents 12 1,700
Total current assets 2,470 5,267
Total assets 16,221 20,056
Equity and liabilities
Capital and reserves
Issued capital 1,711 1,701
Share premium 18,475 18,351
Share option reserve 502 92
Translation reserve (557) 376
Retained (deficit)/earnings (14,528) (4,618)
Equity attributable to equity
holders of parent 5,603 15,902
Non-controlling interest (4,187) (882)
Total equity 1,416 15,020
Non-current liabilities
Financial liabilities 2,661 41
Provisions 961 57
Total non-current liabilities 3,622 98
Current liabilities
Other financial liabilities 558 18
Trade and other payables 2,609 1,847
LCL Loan 8,016 3,073
Total current liabilities 11,183 4,938
Total liabilities 14,805 5,036
Total equity and liabilities 16,221 20,056
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
For the year ended 31 December 2013
Unaudited Unaudited
six months six months
Notes to 31.12.13 to 31.12.12
GBP'000 GBP'000
Cash flows from operating activities
Cash (used in)/from operations 5 (1,148) 106
Interest received - 30
Interest paid (672) (332)
Net cash from/(used in) operating
activities (1,820) (195)
Cash flows from investing activities
Purchase of plant and equipment (396) (7,039)
Disposals of plant and machinery - -
Net cash (used in) investing
activities (396) (7,039)
Net cash outflow before financing
activities (2,216) (7,234)
Cash flows from financing activities
Debt from external sources
and lease financing 1,169 3,073
Net cash generated from financing
activities 1,169 3,073
Increase/(decrease) in cash
and cash equivalents (1,047) (4,161)
Cash and cash equivalents at
start of period 1,059 5,861
Cash and cash equivalents at
end of period 12 1,700
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(unaudited)
For the six months ended 31 December 2013
Attributable to equity holders of the Company
Share Retained Non-controlling
Share Share option Translation accumulated interest Total
capital premium reserve reserve deficit Total GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
29 February
2012 1,191 10,691 92 199 (3,111) 9,062 (493) 8,569
Loss for
period (3,128) (3,128) (852) (3,980)
Other
comprehensive
income 541 541 191 732
Total
comprehensive
loss for
the period - - - 541 (3,128) (2,587) (661) (3,248)
Issue of
shares 520 8,296 8,816 8,816
Share issue
costs (511) (511) (511)
Share option
charge 410 410 410
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity 520 7,785 410 - - 8,715 - 8,715
Balance at
30 June 2013 1,711 18,475 502 740 (6,239) 15,189 (1,154) 14,035
Loss for
period (8,290) (8,290) (2,578) (10,868)
Other
comprehensive
income (1,296) (1,296) (455) (1,751)
Total
comprehensive
loss for
the period - - - (1,296) (8,290) (9,586) (3,033) (12,619)
Issue of
shares - - - -
Share issue
costs - - - -
Share option
charge - - - -
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity - - - -
Balance at
31 December
2013 1,711 18,475 502 (556) (14,528) 5,603 (4,187) 1,416
NOTES TO THE INTERIM STATEMENT
For the 6 months to 31 December 2013
1. Basis of preparation
These un-audited condensed consolidated interim financial
statements do not constitute statutory accounts within the meaning
of Section 434 of the Companies Act 2006. The comparative figures
for the six month period ended 31 December 2012 were derived from
the Statutory Accounts for the 16 month period ended 30 June 2013
which were approved on 30 August 2013. The auditors' report on
those accounts was unqualified with an emphasis of matter that
without obtaining further sources of funding, there may be
significant doubt on the Group's ability to continue as a going
concern. The auditors' report did not contain a statement under
section 498 (2) - (3) of the Companies Act 2006. These accounts
have been delivered to the Registrar of Companies in accordance
with Section 441 of the Companies Act 2006. The financial
information contained in this interim statement has been prepared
in accordance with all relevant International Financial Reporting
Standards ('IFRS') in force and is expected to apply to the Group's
results for the year ending 30 June 2014 and on interpretations of
those Standards released to date.
The Financial Statements have been prepared on a going concern
basis. The Group is reliant on its ability to successfully raise
further financing to settle existing debt and fund working capital
to achieve the future strategic direction. The Group is considering
a number of funding options including the issue of new equity to a
strategic partner and investors. Whilst these negotiations are
on-going, the Group does not have any binding agreements in place
at present but is confident that an investor will be secured in the
short term. If new sources of funding are not forthcoming in the
near future, then there is a strong probability that the business
will be unable to continue as a going concern.
2. Accounting policies
These condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies set out in
the Group's financial statements for the 16 month period ended 30
June 2013.
3. Loss per share
The basic and diluted loss per share has been calculated by
dividing the result for the respective period attributable to
shareholders by the weighted average number of shares in issue
during the relevant period.
Six months Six months
to 31.12.2013 to 31.12.2012
GBP'000's GBP'000's
(Loss) attributable to equity shareholders
of the parent company (8,290) (977)
Average number of shares in issue 171,061,583 170,103,333
Basic and diluted (loss) per share
(pence) (4.8p) (0.6p)
Headline loss per share (pence) (4.8p) (0.6p)
4. Property Plant and Equipment / Intangibles
a. Property Plant and Equipment
Mining Capital Buildings, Coal Other Total
Asset work in Plant Containers non-current
progress and machinery assets GBP'000
GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
Cost at 01.03. 2012 - - 778 - 138 916
Additions during
the period 10,439 480 4,703 4,500 129 20,251
Transfers from Intangibles 2,693 2,693
Disposals during
the period (66) (66)
Reclassification 258 244 (492) (10) -
Cost at 30.06.2013 13,390 724 4,989 4,500 191 23,794
Depreciation at 01.03.2012 - - 176 - 84 260
Charge for the period - - 259 238 92 589
Disposals during
the period - - (66) (66)
Exchange difference - - 72 (25) 7 54
Depreciation 30.06.2013 - - 507 213 117 837
Net book value 30.06.2013 13,390 724 4,482 4,287 74 22,957
Cost at 01.07.2013 13,390 724 4,989 4,500 191 23,794
Additions during
the year 198 160 38 396
Transfers from Intangibles -
Disposals during -
the year
Cost at 31.12.2013 13,588 884 5,027 4,500 191 24,190
Depreciation at 01.07.2013 507 213 117 837
Charge for year 310 306 4 620
Impairment 5,890 1,029 221 7,140
Disposals during
the year
Exchange difference 2,214 71 531 736 (27) 3,525
Depreciation 31.12.2013 8,104 71 2,377 1,476 94 12,122
Net book value 31.12.2013 5,484 813 2,650 3,024 97 12,068
Impairment, in accordance with IAS 36 has been performed on
three assets within property plant and equipment. Mining asset
consists of all development costs associated with the establishment
of the mine incurred in the 16 month period to 30 June 2013. These
costs were to be amortised over the anticipated life expectancy of
the Elitheni mine and the underlying mining resources. Whilst the
underlying mining resources remain, it is acknowledged that
production has temporarily ceased at the mine until further funding
is secured and hence it is considered necessary to impair a large
portion of the capitalised development costs. In addition,
equipment at the mine which is now considered redundant for current
mine operations due to a change in the mining strategy have also
been impaired.
b. Intangibles
GBP'000
At 29.02.12 5,511
Exchange adjustment (954)
Transfers to PPE (2,693)
At 30.06.13 1,864
Exchange adjustment (181)
Transfers to PPE -
At 31.12.13 1,683
5. Reconciliation of profit before tax to cash generated from operations
6 months 6 months
to 31.12.13 to 31.12.12
GBP'000 GBP'000
Result for the period (10,868) (1,291)
Depreciation 620 -
Impairment 7,140 -
Changes in working capital 427 638
Unrealised exchange adjustment 861 457
Finance income - (30)
Finance expense 672 332
Net cash inflow / (outflow) from operating
activities (1,148) 106
6. Approval
The Board of directors approved this interim statement on 31
March 2014. This interim statement has not been audited.
Shareholders will be able to download a copy of the second
interim report from the Group's website www.snrplc.co.uk. Copies
may also be obtained from the Company's registered office, 3 St
Helen's Place, London EC3A 6AB.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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