TIDMSML
RNS Number : 5729N
Strategic Minerals PLC
30 September 2021
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.
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 projects prospective for
battery materials, is pleased to announce its unaudited interim
profit for the half year ended 30 June 2021.
Financial Highlights
-- Interim six-month pre-tax profit of US$388,000 (H1 2020:
US$261,000) reflecting reduced overheads in and a reduction in
impairment charges.
-- After tax profit for the interim six months of US$207,000 (H1 2020 US$77,000).
-- US$48,000 of share-based payment expense for the interim
six-month period reflects the final charge relating to options
which expired 30 June 2021.
-- During the period, Southern Minerals Group received a
US$50,000 Covid-19 government grant which was used to partially
offset direct payroll costs.
-- Unrestricted cash and cash equivalents at 30 June 2021 were
US$734,000 (31 Dec 2020: US$833,000).
Corporate Highlights
-- Maintenance of uninterrupted operations at Cobre despite the impact of Covid -19.
-- Access to the Cobre magnetite stockpile rolled over for the 9th time
Commenting, John Peters, Managing Director of Strategic Miners,
said:
"The first half of 2021 has again been globally trying.
Continued prudent management has seen the Company maintain and
improve underlying operations to produce a strong result for the
period.
"With the post balance date granting of a conditional Program
for Environment Protection and Rehabilitation ("PEPR") for mining
of the Paltridge North deposit at the Leigh Creek Copper Mine
project, the Company is looking forward to getting into operations,
subject to procuring suitable finance, next year. While the
conditions associated with the PEPR were broadly in line with the
Company's expectations, they have required a more "in depth"
description of the planned mine which has, due to the increased
copper price, slightly increased the planned mine area, providing
for economic recovery of an additional 600 tonnes of metal. This
has pushed planned production into the first quarter of 2022.
"Discussions on financing the Leigh Creek Copper Mine project
continue and the Company hopes to bring firm news on this to the
market in the near future.
"The Company has progressed the Redmoor project on a limited
basis and has actively, in conjunction with NRG Capital, progressed
discussions with potential investors/joint venture partners.
"It is the Board's view that the second half of the year will
also prove profitable resulting in an overall profit for the 2021
financial year. This view is based on expected continued demand at
Cobre, and the reduction in the charge for share-based payments
which were reflecting the options which expired at 30 June
2021.
"The Board looks forward to securing finance for the Leigh Creek
Copper Mine project and progressing the Redmoor project."
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 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. The project has been 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.
CHAIRMAN'S STATEMENT
I am pleased with the Company's achievements, in what has been a
particularly challenging period for Strategic Minerals and the
world.
Financial results
The Company continued its underlying profitable performance in
the first half of 2021, when many businesses were forced to shut
down operations due to the pandemic. This is a credit to both our
local management and the management team as a whole. The
combination of challenges, associated with our dealings with CV
Investments LLC ("CVI" or "CV Investments") at Cobre and the
general impact on development processes associated with the impact
of the Covid-19 pandemic, has slowed our progress on projects and
access to capital to drive these projects forward. However, the
Company expects cash flow and profitability to improve dramatically
as full-scale production commences at the Leigh Creek Copper Mine
in 2022 subject to funding.
Unrestricted cash on hand at 30 June 2021 was US$734,000.
Corporate overheads and amortisation of US$775,000 were down
significantly on the same period last year (H1 2020: US $902,000),
reflecting a general tightening of costs and minimal legal fees
associated with CVI arbitration during this period.
Strategic Focus
Despite a reduction in sales compared to last year, current
sales levels at the Cobre operations continue to cover operating
costs and allowed the Company some scope to continue its strategic
investment focus on investments in metals such as Nickel, Copper
and Tin/Tungsten which it expects are likely to see significant
price improvements over the next three to five years driven by
battery/electronic vehicle demand.
On the back of this strategy, the Company continues to invest in
development programmes, particularly those associated with Leigh
Creek Copper Mine (copper) and Redmoor (tin/tungsten/copper
focused).
Cobre Operations
During the first six months of 2021, the management at our Cobre
operations continued their excellent adaption to the challenges
associated with the disruption to world markets arising from the
Covid-19 pandemic. As an essential service, they were permitted the
opportunity to continue trading and modified arrangements to ensure
that a contactless service, protecting both our clients and our
personnel, was provided.
The first half of the year also saw the receiver for CV
Investments, against which our subsidiary has a substantial claim,
report on assets secured to date. While these assets are
substantive, whether the Company will receive any funds from this
claim will be subject to the final result of the receivership of CV
Investments which is ongoing.
Leigh Creek Copper Mine ("Leigh Creek" or "LCCM")
The significant work conducted at Leigh Creek throughout 2020
and the first 6 months of 2021, which resulted in a draft PEPR
being submitted and a feasibility study being completed, has moved
the project along to the point where it currently awaits the final
sign off of the formal PEPR and the capital to commence operations.
The strong performance of the copper price in recent times has
improved the project's potential profitability and the Board feels
confident that 2022 will see full scale production re-commence at
Leigh Creek.
Redmoor Tin-Tungsten Project ("Redmoor")
2020 saw the finalisation of payment on the acquisition of the
balance of Redmoor. With the project fully in the Company's control
and with the overhang associated with repayment removed, the
Company appointed an external consultant, NRG Capital, to assist in
progressing the Redmoor project.
During the first 6 months of 2021, the Company has continued to
work with NRG Capital and those parties that have expressed
interest in the Redmoor project to achieve a way forward, which
will see the market value the size and potential of the Redmoor
resource and reflect this in the Company's share price.
Safety
The Company focuses on safety issues and continues to maintain a
high level of performance when it comes to safety. SML and its
subsidiaries have had no reportable environmental or personnel
incidents recorded in the period.
The first half of 2021, was a challenging environment in which
to operate and 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 2021 and pushing onto a
brighter 2022.
Alan Broome AM
Non-Executive Chairman
30 September 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months 6 months
to to Year to
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Continuing operations
Revenue 1,511 1,645 3,025
Other revenue - 47 -
Cost of sales (286) (314) (562)
_________ _________ _________
Gross profit 1,225 1,378 2,463
Overhead expenses (698) (902) (1,705)
Other Income - - 155
Amortisation (77) - (152)
Depreciation (6) (6) (15)
Share based payment (48) (149) (176)
Impairment charge - (17) -
Foreign exchange gain/(loss) (2) (43) (46)
_________ _________ _________
Profit from operations 394 261 524
Finance expense (2) - (65)
Lease Interest (4) - (9)
_________ _________ _________
Profit/ (loss) before taxation 388 261 450
Income tax (expense)/credit (181) (184) (236)
_________ _________ _________
Profit for the period 207 77 214
_________ _________ _________
Profit for the period attributable
to:
Owners of the parent 207 77 214
_________ _________ _________
Other comprehensive income
Exchange gains/(losses) arising
on translation
of foreign operations (145) (359) 876
_________ _________ _________
Total comprehensive (loss)/ Income 62 (282) 1,090
_________ _________ _________
Total comprehensive (loss)/income
attributable to:
Owners of the parent 62 (282) 1,090
_________ _________ _________
Profit/ (loss) per share attributable to the ordinary equity holders
of the parent:
Continuing activities - Basic c0.13 c0.05 c0.14
- Diluted c0.13 c0.05 c0.14
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
6 months
to
6 months
to 30 June Year to
30 June 2020 31 December
2021 (Unaudited) 2020
(restated,
(Unaudited) Note 2) (Audited)
$'000 $'000 $'000
Assets
Non-current assets
Intangible Asset 600 549 616
Deferred Exploration and evaluation
costs 5,240 4,390 5,026
Other Receivables 151 137 155
Property, plant and equipment 7,363 6,453 7,351
Right of Use Assets 150 - 78
_________ _________ _________
13,504 11,529 13,226
_________ _________ _________
Current assets
Inventories 4 6 3
Trade and other receivables 335 477 330
Cash and cash equivalents 734 533 833
Prepayments 7 16 16
_________ _________ _________
1,080 1,032 1,182
_________ _________ _________
Total Assets 14,584 12,561 14,408
_________ _________ ____ _____
Equity and liabilities
Share capital 2,770 2,551 2,770
Share premium reserve 49,010 48,552 49,010
Share options reserve 88 692 272
Merger reserve 21,300 21,300 21,300
Warrant Reserve 153 - 153
Foreign exchange reserve 64 (1,026) 209
Other reserves (23,023) (23,023) (23,023)
Accumulated loss (36,700) (37,723) (37,139)
_________ _________ _________
Total Equity 13,662 11,323 13,552
_________ _________ ____ _____
Liabilities
Non-Current Liabilities
Provision for Mining Royalties - - -
Lease Liabilities 19 - 22
Environmental Liability 429 387 439
_________ _________ _________
448 387 461
_________ _________ _________
Current liabilities
Income Tax Payable 17 492 21
Trade and other payables 335 359 316
Lease Liabilities 122 - 58
_________ _________ _________
474 851 395
_________ _________ _________
Total Liabilities 922 1,238 856
_________ _________ ____ _____
Total Equity and Liabilities 14,584 12,561 14,408
_________ _________ ____ _____
CONSOLIDATED STATEMENT OF CASH FLOW
6 months 6 months
to to Year to
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cash flows from operating activities
Profit/ (loss) after tax 207 77 214
Adjustments for:
Depreciation of property, plant,
and equipment 6 6 15
Amortisation of Right of Use asset 77 - 152
Impairment of deferred exploration
and expenditure - 17 -
Finance expense 2 - 65
Income Tax expense 181 184 236
(Increase) / decrease in inventory (1) (3) -
(Increase) / decrease in trade and
other receivables (125) (256) 746
(Increase) / decrease in prepayments 9 18 116
Increase / (decrease) in trade and
other payables 91 (92) (171)
Increase /(decrease) in prepaid
income tax - - (98)
Income tax paid (177) - (522)
Share based payment expense 48 149 176
_________ _________ _________
Net cash flows from operating activities 318 100 929
_________ _________ _________
Investing activities
Increase in PPE Development Asset (202) (96) (251)
Sale of tenements - 80 -
Receipt of research and development
incentive - 595 41
Increase in deferred exploration
and evaluation (131) (96) (348)
_________ _________ _________
Net cash used in investing activities (333) 483 (558)
_________ _________ _________
Financing activities
Net proceeds from issue of equity
share capital - 1,485 2,256
Proceeds from borrowings - 68 -
Finance expenses paid - (96) -
Lease Payments (88) - (176)
Repayment of borrowings - (2,026) (2140)
_________ _________ _________
Net cash from financing activities (88) (569) (60)
_________ _________ _________
Net increase / (decrease) in cash
and cash equivalents (103) 13 311
Cash and cash equivalents at beginning
of period 833 519 519
Release of restricted cash - - -
Exchange gains / (losses) on cash
and cash equivalents 4 1 4
_________ _________ _________
Cash and cash equivalents at end
of period 734 533 833
_________ _________ ____ _____
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
2020 2,203 47,415 21,300 - 543 (23,023) (667) (37,800) 9,971
_______ _______ _______ _______ _______ _______ _______ _______ _______
Profit for
the year - - - - - - - 214 214
Foreign
exchange
translation - - - - - - 876 - 876
_______ _______ _______
Total
comprehensive
income/(loss)
for the year - - - - - - 876 214 1090
Share based
payments - - - - 176 - - - 176
Transfer - - - - (447) - - 447 -
Shares issued
in the year 567 1,865 - 153 - - - - 2,585
Share issue
costs - (270) - - - - - - (270)
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
31 December
2020 2,770 49,010 21,300 153 272 (23,023) 209 (37,139) 13,552
Profit for
the year - - - - - - - 207 207
Foreign
exchange
translation - - - - - - (145) - (145)
_______ _______ _______
Total
comprehensive
income for
the year - - - - - - (145) 207 62
Share based
payments - - - - 48 - - - 48
Transfer - - - - (232) - - 232 -
Shares issued
in the year - - - - - - - - -
Share issue
costs - - - - - - - - -
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at
30 June 2021 2,770 49,010 21,300 153 88 (23,023) 64 (36,700) 13,662
_______ _______ _______ _______ _______ _______ _______ _______ _______
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 2021 comprise the Company and its subsidiaries (together
referred to as the "Group").
2. 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 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 considered 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 30 September 2022, and a review of the key
assumptions and sensitivity analysis on which these are based.
The Group has continued to monitor costs during 2021 to reduce
its overhead expenditure and is maintaining vigilance in preserving
cash in response to depressed market conditions due to Covid-19 and
its associated impact on commodity prices and capital markets. As
at 30 June 2021, the Group had US$0.73m of cash on hand.
The forecasts show that through the Group's operations at Cobre,
there are sufficient funds until the end of our forecast period, 30
September 2022, to meet all operational costs. However, additional
funds will be required to progress the development of the Leigh
Creek Copper Mine and Redmoor projects. Management is actively
pursuing such funding and envisage that this will be sourced at the
asset level.
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 6% reduction in forecast sales
would result in a cash deficit in November 2021, without management
taking mitigating actions within their control. In addition,
management has assumed that the annual renewal of the Group's
access permit will be rolled over in March 2022, as it has on each
occasion since entering into the underlying access agreement.
In the event the Cobre offtake permit rollover is not received
or there is a significant reduction in forecast sales, there is
potential for a material uncertainty to arise which may cast
significant doubt as to the Group and parent Company'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.
In the event that the further funds are required, the Directors
have reasonable expectation that the Group will have access to
sufficient resources by way of debt or equity markets.
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 01
January 2021:
IBOR Reform and In August 2020, the IASB issued amendments to IFRS
its Effects on 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. These amendments
Financial Reporting complement those made in 2019 ('IBOR - phase 1')
- Phase 2 and focus on the effects on entities when an existing
interest rate benchmark is replaced with a new
benchmark rate as a result of the reform.
The group has assessed the impact of these new accounting
standards and amendments and does not believe they will have a
material impact on the financial statements.
Change in accounting policy
Under the terms of the various agreements in relation to the
LCCM, the Company has the following royalties:
-- 3.5% royalty to the South Australian state government
-- 1.0% royalty on tons of copper sold at LME prices over the life of the project and
-- $A100,000 following 3,000 tonnes of copper sales from the project.
At acquisition of LCCM, the Group recognised the estimated fair
value of the above mining royalties in the financial statements as
a liability. In subsequent reporting periods the liability has been
fair valued with any change in fair value being recognised in the
income statement. The calculation of the liability is dependent on
inherently judgemental estimates over future copper prices, and the
timing and volume of copper sold.
During 2020 the Group has opted to retrospectively change the
accounting policy so that the royalties are not presented
separately as liabilities, but the fair value of the asset on
initial recognition is adjusted to factor potential cash outflows
from the royalties. This is on the basis that the new policy
provides users of the financial statements more relevant and
reliable information in which to assess the value of the LCCM
asset.
The impact of this change in accounting policy is to reduce 2019
non-current liabilities and non-current assets by $424,000. There
is no income statement impact. The June 2020 accounts have been
restated to reflect this change.
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 2021.
(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 five 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.
-- Australia - This segment holds the Central Australian Rare
Earths Pty Ltd tenements in Australia and incurs all related
operating costs.
-- 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 2021 Head Segment
United Development
(Unaudited) SMG Office Australia Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,511 - - - - - 1,511
Cost of sales (286) - - - - - (286)
_______ _______ _______ _______ _______ _______ _______
Gross profit 1,225 - - - - 1,225
Overhead expenses (311) (247) (136) (4) - - (698)
Management fee
income/(expense) (200) 201 - - (1) -
Share based payments - (48) - - - - (48)
Amortisation (77) - - - - - (77)
Depreciation (6) - - - - - (6)
Lease Interest (4) - - - - - (4)
Foreign exchange
gain/(loss) - (201) (105) - - 304 (2)
_______ _______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 627 (295) (241) (4) - 303 390
_______ _______ _______ _______ _______ _______ _______
Finance Expense - - - - (2) - (2)
_______ _______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 627 (295) (241) (4) (2) 303 388
_______ _______ _______ _______ _______ _______ _______
Inter
6 Months to 30 June 2020 Head Segment
(Unaudited) SMG Office Australia Development Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,645 - - - - 1,645
Other Revenue 47 - - - - 47
Cost of sales (314) - - - - (314)
_______ _______ _______ _______ _______ _______
Gross profit 1,378 - - - 1,378
Overhead expenses (516) (237) (135) (14) - (902)
Management fee income/(expense) (450) 441 - 9 -
Share based payments - (149) - - - (149)
Depreciation (6) - - - - (6)
Impairment of DEE - - (17) - - (17)
Foreign exchange gain/(loss) - 145 (23) - (165) (43)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) from operations 406 200 (175) (14) (156) 261
_______ _______ _______ _______ _______ _______
Segment profit /(loss) before taxation 406 200 (175) (14) (156) 261
_______ _______ _______ _______ _______ _______
Intra
Year to 31 December
2020 Head Segment
United Development
(Audited) SMG Office Australia Kingdom Asset Elimination Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Revenues 3,025 - - - - - 3,025
Cost of sales (562) - - - - - (562)
_______ _______ _______ _______ _______ _______ _______
Gross profit 2,463 - - - - 2,463
Other Income - - - 155 - - 155
Overhead expenses (821) (614) (233) (37) - - (1,705)
Management fee
income/(expense) (630) 631 - - (1) -
Share based payments - (176) - - - - (176)
Amortisation- right
of use asset (152) - - - - - (152)
Depreciation (15) - - - - - (15)
Lease Interest (7) - - (2) - - (9)
(Loss)/ gain on
intercompany loans - (485) - - - 485 -
Foreign exchange
gain/(loss) - 156 360 - - (562) (46)
_______ _______ _______ _______ _______ _______ _______
Segment profit
/(loss) from operations 838 (488) 127 116 - (78) 515
_______ _______ _______ _______ _______ _______ _______
Finance Expense - (33) (28) - (4) - (65)
_______ _______ _______ _______ _______ _______ _______
Segment profit
/(loss) before
taxation 838 (521) 99 116 (4) (78) 450
_______ _______ _______ _______ _______ _______ _______
As at 30 June 2021 Head
(Unaudited) SMG Office Australia United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - - 131 202 333
_______ _______ _______ _______ ______ _______
Reportable segment assets 1,166 57 86 5,298 7,977 14,584
_______ _______ _______ _______ ______ _______
Reportable segment liabilities 227 78 68 37 512 922
_______ _______ _______ _______ _______ _______
As at 30 June 2020 Head
(Unaudited) SMG Office Australia United Kingdom Development Asset Total
$'000 $'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 16 80 96 192
_______ _______ _______ _______ ______ _______
Reportable segment assets 1,066 95 15 4,414 6,971 12,561
_______ _______ _______ _______ ______ _______
Reportable segment liabilities 591 121 93 14 419 1,238
_______ _______ _______ _______ _______ _______
As at 31 December 2020 Head
(Audited) SMG Office Development Asset Australia United Kingdom Total
$'000 $'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 251 - 348 599
_______ _______ ______ _______ _______ _______
Reportable segment assets 839 433 7,975 70 5,091 14,408
_______ _______ ______ _______ _______ _______
Reportable segment liabilities 174 115 474 37 56 856
_______ _______ _______ _______ _______ _______
External revenue by Non-current assets
location of customers by
location of assets
30 June 30 June 30 June 30 June
2021 2020 2021 2020
$'000 $'000 $'000 $'000
United States 1,511 1,645 275 171
United Kingdom - - 5,305 4,391
Australia - - 7,924 6,967
_______ _______ _______ _______
1,511 1,645 13,504 11,529
_______ _______ _______ _______
Revenues from Customer A totalled $244,683 (2020: $281,805),
which represented 15% (2020: 17%) of total domestic sales in the
United States, Customer B totalled $673,560 (2020: $$795,125) which
represented 43% (2020: 48%). Customer C totalled $523,027 (2020:
$$471,371) which represented 33% (2020: 27%).
5. Operating Loss
6 months 6 months
to to Year to
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Operating gain/loss is stated
after charging/(crediting):
Other Income - - (155)
Directors' fees and emoluments 222 146 307
Depreciation 6 6 15
Equipment rental 63 131 134
Amortisation of Right of use
assets 77 - 152
Equipment maintenance 34 21 36
Auditors' remuneration - - 74
Salaries, wages, and other staff
related costs 211 260 495
Legal, professional and consultancy
fees 85 273 396
Impairment charge - 17 -
Lease Interest 4 - 9
Finance Fee 2 - 65
Foreign exchange 2 43 46
Share based payments 48 149 176
Other expenses 83 71 263
6. Intangible assets - exploration and evaluation costs
6 months 6 months
to to Year to
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Cost
Opening balance for the period 5,026 4,567 4,567
Additions for the period 131 129 285
Interest and Borrowing Costs - - -
Research and development incentive - - (41)
Sale of mineral rights - (80) -
Sale of mineral rights (reclassified
to income) - 80
Foreign exchange difference 83 (209) 152
Impairment Charge (17) -
Impairment Charge (reclassified
to expense) (i) - - (17)
_______ _______ _______
Closing balance for period 5,240 4,390 5,026
_______ _______ _______
i) The Company has recognised an impairment charge in relation
to the CARE in 2019.Expenses incurred in 2020 and 2021 have been
expensed.
7. Property, plant and equipment
Development Plant and
Asset Machinery Total
$'000 $'000 $'000
Group
Cost
At 1 January 2020 (audited)(i) 5967 735 6,702
Additions 96 - 96
Foreign exchange difference (105) (6) (111)
________ ________ ________
At 30 June 2020 (unaudited) 5,958 729 6,687
Additions for period 155 - 155
Foreign exchange difference 715 33 748
________ ________ ________
At 31 December 2020 (audited) 6,828 762 7,590
________ ________ ________
Additions 202 - 202
Foreign exchange difference (176) (9) (185)
_______ ________ _______-
At 30 June 2021 (Unaudited) 6,854 753 7,607
________ ________ ________
Depreciation
At 1 January 2020 (audited) - (228) (228)
Charge for the period - (6) (6)
Foreign exchange difference - -
________ ________ ________
At 30 June 2020 (unaudited) - (234) (234)
Charge for the period - (9) (9)
Foreign exchange difference - 4 4
________ ________ ________
At 31 December 2020 (audited) - (239) (239)
________ ________ ________
Charge for the period - (6) (6)
Foreign exchange difference - 1 1
________ ________ ________
As at 30 June 2021 (unaudited) - (244) (244)
________ ________ ________
Carrying Value
As at 30 June 2020 (unaudited) 5,958 495 6,453
________ ________ ________
As at 31 December 2020(audited) 6,828 523 7,351
________ ________ ________
As at 30 June 2021 (unaudited) 6,854 509 7,363
________ ________ ________
i) During 2020 the Group has opted to retrospectively change the
accounting policy so that the royalties are not presented
separately as liabilities, but the fair value of the asset on
initial recognition is adjusted to factor potential cash outflows
from the royalties. This is on the basis that the new policy
provides users of the financial statements more relevant and
reliable information in which to assess the value of the LCCM
asset. The impact of this change in accounting policy is to reduce
2019 non-current liabilities and non-current assets by $424,000.
There is no income statement impact.
8. Loans and borrowings
Loan R&D Loan CRL
Tax Incentive Acquisition Total
$'000 $'000 $'000
Cost $'000 $'000 $'000
As at 1 January 2020 (audited) 419 1,692 2,111
Loan Advance 68 - 68
Loan repayments (447) (1579) (2,026)
Interest accrued 27 33 60
Interest paid (43) (53) (96)
Foreign exchange difference (24) (93) (117)
________ ________ ________
As at 30 June 2020 (unaudited) - - -
________ ________ ________
As at 31 December 2021 (audited) - - -
________ ________ ________
As at 30 June 2021 (unaudited) - - -
________ ________ ________
Loan CRL Acquisition
In July 2019 SML entered into a Convertible Note with NAE to
finalise the purchase of CRL.
SML made an initial payment totalling AUD $300,000 and entered
into an 11-month payment schedule for the balance of AUD $2,700,000
(US$1,858,000). A payment of AUD $300,000 (US$206,000) was paid on
or around 31 October 2019. During the six months to 30 June 2020
the remaining principal of AUD $2,400,000 (US$1,579,000) was repaid
along with interest of AUD $80,000 (US$53,000).
Loan R&D tax incentive
In September 2019 SML entered into a loan agreement against the
anticipated receipt of a Research and Development Tax Incentive
(RDTI) from the Australian Tax Office. A drawdown on the loan of
$68,000 occurred in February 2020 while the principal of $447,000
and interest of $43,000 was paid in May 2020 which fully
extinguished the debt.
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 6 months
to to Year to
30 June 30 June 31 December
2021 2020 2020
(Unaudited) (Unaudited) (Audited)
$'000 $'000 $'000
Weighted average number of shares
- Basic 1,573,956,203 1,485,627,639 1,573,956,203
Weighted average number of shares
- Diluted 1,573,956,203 1,557,127,639 1,573,956,203
Earnings for the period $207,000 $77,000 $214,000
Earnings per share in the period
- Basic c0.13 c0.05 c0.14
Earnings per share in the period
- Diluted c0.13 c0.05 c0.14
11. Share capital and premium
30 June 30 June 30 June 30 June
2021 2021 2020 2020
No $'000 No $'000
Allotted, called up
and fully paid
Ordinary shares 1,909,297,949 51,780 1,734,297,948 51,103
____________ ____________ ____________ ____________
Share options and warrants
The number of options as at 30 June 2021 and a reconciliation of
the movements during the half year are as follows:
Granted
as at 31 Granted
Date of December as at 30 Exercise Date of Date of
Grant 2020 Expired June 2021 price vesting expiry
15.02.18 38,500,000 (38,500,000) - 3.75p 01.01.21 30.06.21
15.02.18 17,500,000 - 17,500,000 5.00p 01.01.22 30.06.22
09.08.18 - - - 2.75p 01.04.20 30.06.20
09.08.18 10,750,000 (10,750,000) - 3.75p 01.01.21 30.06.21
09.08.18 4,750,000 - 4,750,000 5.00p 01.01.22 30.06.22
____________ ____________ ____________
71,500,000 (49,250,000) 22,250,000
____________ ____________ ____________
Warrants
The number of warrants as at 30 June 2021 and a reconciliation
of the movements during the half year are as follows:
Granted
as at 31 Granted
December as at 30 Exercise Date of Date of
2020 Expired June 2021 price vesting expiry
03.12.20 175,000,000 - 175,000,000 1.00p 03.12.20 30.12.22
12. Post balance date events
In July 2021 LCCM was granted a conditional approval from the
Department of Energy and Mining of South Australia ("DEM") for its
Programme for Environmental Protection and Rehabilitation ("PEPR")
on the Paltridge North deposit.
DEM approved the PEPR application subject to reviewing:
-- LCCM's final plans for identifying and managing Potentially Acid Forming ("PAF") material.
-- The cover design for Paltridge North Waste Rock Dump ("WRD") and heap leach pads.
-- Visual amenity associated with the Paltridge North WRD.
-- Plans for post completion of surface water management structures.
-- Continued liaison with Traditional Owners of the land.
-- The groundwater monitoring programme which is to be submitted
to and approved by the Minister of Water Resources.
As part of the approval, the DEM requires:
-- An environmental security deposit of AUD$3.7m and a Native
Vegetation Fund contribution of AUD$81k.
To a large extent, the conditions associated with the approval
were as expected and reflected the comprehensive nature of LCCM's
PEPR application. Whilst the bond requirement is larger than
catered for in the Company's financial modelling of the project,
the Company is comfortable with this level given the current
overall amount of funding being sought to fund the project.
Copies of this interim report will be made available on the
Company's website, www.strategicminerals.net.
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END
IR URVRRAOUKOAR
(END) Dow Jones Newswires
September 30, 2021 06:59 ET (10:59 GMT)
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