TIDMREG
RNS Number : 2162I
Rare Earths Global Limited
01 July 2013
29 June 2013
Rare Earths Global Limited
("REG" or the "Group")
Full Year Results
Rare Earths Global Limited (AIM: REG), a leading mining services
group focused on the extraction, separation, refinement and trading
of rare earth elements, oxides and other related products, today
releases its full year results for the year ended 31 December
2012.
Highlights
* Successful listing on the London Stock Exchange's
Alternative Investment Market in March 2012;
* GBP 6.4 million fund raising;
* Commencement of the Group's trading division;
* Revenue RMB 88.4 million (2011: RMB 260.6 million);
* Non-GAAP normalised loss before tax RMB 598
thousand(1) (2011: profit before tax RMB 59.2
million);
* Acquisition of the remaining 39% Pingyuan Sanxie Rare
Earth Smelting Co Ltd ("Sanxie Plant") from Grace
Coast Limited in July 2012;
* Impairment on goodwill and other intangibles of RMB
100 million
* Significant fall in rare earth oxide prices during
the year, ranging from 44% to 73% depending on the
types of elements;
* Significant changes to legislation in China regarding
rare earth production and supply.
(1) Refer to the reconciliation on page 5 for the calculation of
non-GAAP normalised loss.
Commenting on the results, Simon Ong, CEO of Rare Earths Global
Limited, said: "2012 has been a challenging year for REG. The
progress we had hoped to make has been severely hampered by large
falls in rare earth oxide prices; delays in the period of
confirmations of production and export quotas from the Chinese
Government; and, implementation of increased regulation and control
by Ministry of Commerce People's Republic of China ("MOFCOM") as a
result of the first Chinese White Paper on the Rare Earths market.
Looking forward we will hope to use 2013 to consolidate and
strengthen our business in China while looking for opportunities to
export our skills and technical expertise to the rest of the
world."
- Ends -
For further information:
Rare Earths Global Limited
Simon Ong, Chief Executive Tel: +86 755 8633
Officer 6388
Brian Ho, Finance Director www.rareearthsglobal.com
Charles Stanley Securities
Nominated Adviser & Broker
Dugald J. Carlean / Carl Tel: +44 (0) 20
Holmes 7149 6000
www.csysecurities.com
Business Review
The rare earth industry in China has gone through extraordinary
changes in the last 12 months. As set out in our Interim Results
published on 25 September 2012, as a result of the Chinese
Government's White Paper on rare earth ("the White Paper")
published on 20 June 2012, the Ministry of Industry and Information
Technology ("MIIT") released a statement which recommended that
mixed rare earth mines in China will need to produce a minimum of
20,000 metric tonnes a year and smelters will have to ensure annual
output of at least 3,000 tonnes. At the time of our Interim
Results, it was predicted that up to a third of China's 23 mines
and 99 smelting companies would fail to meet the new regulations,
resulting in China reducing its mining of the 17 elements by about
one-fifth.
The Board of REG could not be certain as to how rapidly these
changes would be effected in legislation. In reality, the White
Paper and comments by MIIT have meant that all production of rare
earth in China has been materially affected as the Government looks
more closely at regulating the industry within China in an attempt
to create fewer market participants, prevent illegal smuggling and
help underpin falling rare earth prices. Indeed, in October 2012,
the Chinese Government took the unprecedented step of halting
production of Inner Mongolia Baotou Steel Rare-Earth (Group)
High-tech Co., China's leading rare earth producer for 3 months in
a vain attempt to stall falling prices.
It has become more difficult to secure meaningful production
quotas in the rare earth industry in China. There continue to be
delays from the Government in providing production quotas for a
number of separation and smelting plants including REG despite our
plant at Sanxie being compliant and fully operational and all
relevant documentation having been filed with the authorities.
Unfortunately, given the current circumstances, we cannot be
certain when the production quota will be confirmed for the current
year.
The events of the past year have demonstrated the growing
importance the Chinese Government places on rare earth oxides
("REO") production and the efficient control and regulation of the
domestic market. The Board continues to believe that demand for
REO's in the medium and long term will increase and that the
outlook for the REO industry is positive. However, the short term
is increasingly uncertain. Global rare earth prices remain weak
(down by up to 80% in 2012) and we cannot say with any significant
confidence that this downward trend in prices is showing any sign
of reversing. This should all be considered in context when taking
into account the weak Chinese export data for rare earths for the
first 4 months of 2013.
The Board continues to work on different options to ensure that
REG deals with these short term issues. However, the Board believes
that the primary short term goal is to secure the production quota
for 2013 and begin work on increasing capacity at its separation
plant in Sanxie to meet the minimum requirements. The Board has
taken the first steps to increase production at its Sanxie plant by
appointing consultants to work with local and national government
to secure ongoing production quotas and provide guidance on the
work programme needed to comply with the MIIT requirements. As a
result of this, the Sanxie Plant has been and will be required to
cease production periodically during 2013 meaning that revenues for
the current year from the separation and smelting division will be
materially lower than in previous year and significantly weighted
to the second half of 2013. The Board believes that this short term
drop in revenues is an absolute necessity in order to secure the
long term future of the separation business. We will update
shareholders in more detail in due course.
Financial Results
For the financial year ended 31 December 2012, the Group
recorded turnover of approximately RMB 88,413,000 (2011: RMB
260,632,000), which mainly comprises of a turnover of (i)
approximately RMB 57,695,000 from sales and separation of rare
earth oxides (2011: RMB241,332,000); (ii) approximately RMB
8,543,000 from provision of mining management services (2011:RMB
19,366,000); and (iii) approximately RMB 22,176,000 (2011:nil)
representing income from trading of rare earth oxides.
The Group's total turnover decreased by 66% from last year being
attributable primarily to the decrease in sales volume of REO, a
decline in average selling prices, and reduction of revenue from
mining management service, which was partially offset by the
commencement of the trading business in 2012.
Following the rapid growth of rare earth market in 2011, the
price of products fell materially in the reporting period. The
Group's net loss was approximately RMB 166,743,000 (2011:net profit
of RMB 48,153,000). The Group has turned to loss from profit
because a number of factors: (i) as the business environment had
deteriorated compared with the time when acquisition of the
business was made in 2011, the Group recorded a full impairment of
goodwill of RMB 97.1 million and impairment on the intangible
assets and prepayment of approximately RMB 2.9 million and RMB 3.9
million respectively during the year based on the management's
projection about the future market; The Group also recorded a
provision for inventory of RMB 15.8 million during the year mainly
due to the substantial reduction of rare earth products' prices
during the year which continues subsequent to the end of the
reporting period. (ii) the increase in share-based payments
expenses of approximately RMB 27.8 million (2011:nil) and (iii) the
increase in finance cost recognized in the consolidated statement
of comprehensive income from approximately RMB 2.4 million in last
financial year to approximately RMB 6.8 million in the reporting
period. (iv) change in fair value of financial assets through
profit and loss amounted to a loss of RMB 9.8 miilion (2011: gain
of RMB321 thousand). The loss per share was RMB 2.6 (2011: earnings
per share of RMB 47 cents).
A reconciliation from loss before tax to normalized loss is
shown below:
2012
RMB'000
Losses before tax report under
IFRS (165,475)
Adjusted for:
Share-based payment expenses 27,824
Impairment loss on goodwill 97,115
Impairment loss on other intangible
assets 2,885
Impairment loss on prepayments 3,895
Provision for inventories 15,898
Change in fair value of financial
assets at fair value through
profit and loss 9,754
Legal and professional fee
related to listing exercise 7,506
Normalised losses for the year
before tax (598)
==========
As at 31 December 2012, the Group recorded total assets of
approximately RMB 165,358,000 (as at 31 December 2011:
approximately RMB 282,743,000), and recorded total liabilities of
approximately RMB 204,063,000 (as at 31 December 2011:
approximately RMB 178,900,000). The Group's net liabilities value
as at 31 December 2012 was approximately RMB 38,705,000 as compared
to net assets of approximately RMB 103,843,000 as at 31 December
2011. The decrease in the Group's net asset value was mainly
attributable to the impairment of goodwill, other intangible
assets, inventory and prepayment, and the reduction of revenue as
explained above.
Divisional Review
Separation & Smelting
During the year, the Group sold approximately 89 tonnes of REO,
down by about 89% compared with that in 2011. Turnover from the
separation and smelting business decreased by approximately 76%
from RMB241,333,000 last year to RMB57,695,000. As production cost
remained high, coupled with low product price, gross profit margin
dropped from 27% last year to 19% before provision for inventories
of RMB 15,898,000. Taking into account the provision for
inventories, the separation and smelting segment recorded a segment
loss of about RMB 4,664,000, compared to a profit of RMB 64,249,000
last year.
As set out above, the declining sales were a direct result of
the drop in ROE prices and not being able to secure a production
quota during the period under review and the lack of confidence in
the Chinese rare earth market following the release of the White
Paper. As set out above, the Board are now working with third
parties to ensure that a production quota for 2013 is secured and
that the plant makes the necessary initial changes to allow it to
increase its capacity to ensure it meets any new regulations.
Mining Services
The total turnover of the Group's mining management service
decreased by 56% from RMB 19,366,000 last year to RMB 8,543,000 in
2012. Gross profit margin dropped slightly from 58% in 2011 to 51%
in 2012. The drop in mining services revenue is again a result of
falling rare earth prices and a decrease in production from the
Kexin mine. The income generated mainly relates to pure consultancy
income received during the year rather than any revenue share. The
Company is hopeful of adding to the current consultancy agreements
it has during the year and will keep shareholders updated in due
course.
Trading
Trading commenced in April 2012 with revenue of RMB 22,176,000
and gross profit of RMB 3,222,000, a 15% margin. As it became clear
that no export quota would be forthcoming during 2012 the trading
operation was scaled back significantly mainly relying on trading
of rare earth that had already been exported. During the period
under review key relationships were developed with rare earth
trading desks in Korea and Taiwan and we hope to be able to develop
these further in the future once our export quota is confirmed.
The Annual Report and Accounts have been sent to all
shareholders on Saturday 29(th) June along with the AGM Notice both
of which are available on the Company's website at:
www.rareearthsglobal.com. The AGM will be held at 9.30am on 16
August 2013 at the offices of Proton Invest Holdings Ltd.,7 Floor,
10 Block Shenzhen Software Park Keji Middle 2nd Road, Nanshan
District, Shenzhen, Guangdong, P.R.China 518000.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
2011 2012
RMB RMB
Revenue 260,632,537 88,413,496
Cost of sales and services (181,040,651) (87,929,148)
-------------- --------------
Gross profit 79,591,886 484,348
Other income 121,759 363,725
Changes in fair values of
financial assets at fair value
through profit or loss 321,000 (9,754,000)
Selling and distribution costs (3,860,973) (1,436,947)
Administrative expenses (14,631,959) (44,474,099)
Other expenses - (103,895,441)
Finance costs (2,389,210) (6,762,924)
-------------- --------------
Profit (loss) before tax 59,152,503 (165,475,338)
Income tax expense (10,999,637) (1,268,129)
-------------- --------------
Profit (loss) for the year 48,152,866 (166,743,467)
-------------- --------------
Other comprehensive expense
Exchange differences arising
on translation - (89,658)
-------------- --------------
Total comprehensive income
(expense) for the year 48,152,866 (166,833,125)
-------------- --------------
Profit (loss) for the year
attributable to:
Owners of the Company 28,582,697 (168,219,581)
Non-controlling interests 19,570,169 1,476,114
-------------- --------------
48,152,866 (166,743,467)
Total comprehensive income
(expense) for the year
attributable to:
Owners of the Company 28,582,697 (168,309,239)
Non-controlling interests 19,570,169 1,476,114
-------------- --------------
48,152,866 (166,833,125)
EARNINGS (LOSS) PER SHARE
Basic 0.47 (2.60)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2012
2011 2012
RMB RMB
ASSETS
Non-current Assets
Other receivables 3,000,000 -
Prepaid lease payments 3,537,090 3,456,770
Property, plant and equipment 25,403,960 21,438,148
Deposit paid for acquisition of
property, plant and equipment 8,000,000 11,000,000
Goodwill 97,115,400 -
Other intangible assets 4,319,198 -
------------ -------------
Total non-current assets 141,375,648 35,894,918
------------ -------------
Current Assets
Inventories 56,920,646 47,477,468
Trade and other receivables and
prepayments 46,872,992 73,504,836
Prepaid lease payments 80,320 80,320
Bank balances and cash 23,892,468 8,400,314
Financial assets at fair value
through profit or loss 13,601,000 -
------------ -------------
Total current assets 141,367,426 129,462,938
------------ -------------
Total Assets 282,743,074 165,357,856
------------ -------------
EQUITY AND LIABILITIES
Capital and Reserves
Share capital 29,500,430 426,985
Reserves 39,253,111 (39,844,947)
------------ -------------
Equity attributable to owners
of the Company 68,753,541 (39,417,962)
Non-controlling interests 35,089,922 712,944
------------ -------------
Total Equity (Deficit) 103,843,463 (38,705,018)
------------ -------------
Non-current Liabilities
Deferred taxation liabilities 4,574,366 2,888,292
Amount due to related parties - 100,074,846
Bank borrowing 8,380,000 -
------------ -------------
Total non-current liabilities 12,954,366 102,963,138
------------ -------------
Current Liabilities
Trade and other payables and accruals 18,596,259 22,231,758
Amounts due to related parties 140,065,998 68,071,568
Bank borrowing 2,320,000 8,450,000
Taxation payable 4,962,988 2,346,410
------------ -------------
Total current liabilities 165,945,245 101,099,736
------------ -------------
Total Equity and Liabilities 282,743,074 165,357,856
------------ -------------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Retained
profits Share Non-
Share (accumulated Other options Translation controlling
Share premium losses) reserves reserve reserves Sub-total interests Total
capital
RMB RMB RMB RMB RMB RMB RMB RMB RMB
At 1 January
2011 341,445 - (1,728,586) 2,036,000 - - 648,859 15,349,450 15,998,309
Profit and
comprehensive
income for the
year - - 28,582,697 - - - 28,582,697 19,570,169 48,152,866
Capital
injection 29,158,985 - - - - - 29,158,985 - 29,158,985
Recognition of
call option - - - 10,363,000 - - 10,363,000 - 10,363,000
Capital
contribution
from
non-controlling
interests of
a subsidiary - - - - - - - 170,303 170,303
------------- ------------ -------------- -------------- ----------- ------------ -------------- ------------- --------------
At 31 December
2011 29,500,430 - 26,854,111 12,399,000 - - 68,753,541 35,089,922 103,843,463
Loss for the
year - - (168,219,581) - - - (168,219,581) 1,476,114 (166,743,467)
Other
comprehensive
expense - - - - - (89,658) (89,658) - (89,658)
------------- ------------ -------------- -------------- ----------- ------------ -------------- ------------- --------------
Total
comprehensive
expense for the
year - - (168,219,581) - - (89,658) (168,309,239) 1,476,114 (166,833,125)
------------- ------------ -------------- -------------- ----------- ------------ -------------- ------------- --------------
Equity-settled
share based
payment - - - - 27,824,313 - 27,824,313 - 27,824,313
Capital
reorganisation (29,115,297) - - 29,115,297 - - - - -
Issuance of
shares
for acquisition
of
non-controlling
interest in a
subsidiary 25,480 71,092,754 - (102,242,142) - - (31,123,908) (35,853,092) (66,977,000)
Issuance of
subscription
shares 16,372 64,534,244 - - - - 64,550,616 - 64,550,616
Transaction
costs
attributable
to shares
issued (1,113,285) - - - - (1,113,285) - (1,113,285)
------------- ------------ -------------- -------------- ----------- ------------ -------------- ------------- --------------
At 31 December
2012 426,985 134,513,713 (141,365,470) (60,727,845) 27,824,313 (89,658) (39,417,962) 712,944 (38,705,018)
------------- ------------ -------------- -------------- ----------- ------------ -------------- ------------- --------------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
2011 2012
RMB RMB
OPERATING ACTIVITIES
Profit (loss) for the year 59,152,503 (165,475,338)
Adjustments for:
Depreciation of property, plant
and equipment 3,397,895 4,074,516
Amortisation of prepaid lease payments 80,320 80,320
Amortisation of other intangible
assets 1,434,157 1,434,157
Finance costs recognised in profit
or loss 2,389,210 6,762,924
Interest income (58,076) (30,088)
Loss on disposal of property, plant
and equipment 78,312 411,880
Impairment loss on goodwill - 97,115,400
Impairment loss on other intangible
assets - 2,885,041
Impairment loss on prepayments - 3,895,000
Provision for inventories - 15,897,778
Share-based payment expenses - 27,824,313
Changes in fair values of financial
assets at fair value through profit
and loss (321,000) 9,754,000
------------- --------------
Operating cash flows before movements
in working capital 66,153,321 4,629,903
Increase in inventories (49,568,462) (6,454,600)
Increase in trade and other receivables
and prepayments (4,476,502) (27,526,844)
(Decrease) increase in trade and
other payables and accruals (10,248,521) 3,635,499
------------- --------------
Cash generated from (used in) operations 1,859,836 (25,716,042)
Interest received 58,076 30,088
Income tax paid (7,214,174) (5,570,781)
------------- --------------
NET CASH USED IN OPERATING ACTIVITIES (5,296,262) (31,256,735)
------------- --------------
INVESTING ACTIVITIES
Proceeds from disposal of property,
plant and equipment - 46,000
Payments for property, plant and
equipment (10,788,082) (566,584)
Deposit paid for acquisition of
property, plant and equipment (8,000,000) (3,000,000)
------------- --------------
NET CASH USED IN INVESTING ACTIVITIES (18,788,082) (3,520,584)
------------- --------------
FINANCING ACTIVITIES
Proceeds from issuance of shares 29,158,985 64,550,616
Expenses on issuance of shares - (1,113,285)
Interest paid (1,218,903) (1,941,672)
New bank borrowing raised 10,700,000 -
Repayment of bank borrowing - (2,500,000)
Capital contribution from non-controlling
interest of a subsidiary 170,303 -
Advance from related parties 64,106,488 35,908,113
Repayment to related parties - (18,503,307)
Repayment to non-controlling interests (9,975,500) =
Cash considerations paid for acquisition
of a subsidiary (51,300,000) (30,000,000)
Cash considerations paid for acquisition
of additional
interest in a subsidiary - (27,025,642)
------------- --------------
NET CASH FROM FINANCING ACTIVITIES 41,641,373 19,374,823
------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 17,557,029 (15,402,496)
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 6,335,439 23,892,468
Effect of foreign exchange rate
changes - (89,658)
------------- --------------
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR
represented by bank balances and
cash 23,892,468 8,400,314
------------- --------------
GROUP RESTRUCTURING
Rare Earths Global Limited (the "Company") was incorporated in
the Cayman Islands on 8 February 2012. In preparation for the
listing of the Company's shares on the London Stock Exchange's
market for smaller and growing companies ("AIM") in March 2012, the
Group executed the following restructuring transaction (the
"Restructuring"). The Company became the holding company of
Dressport Limited ("Dressport") and its subsidiaries pursuant to a
share exchange agreement relating to the sale and purchase of
shares in Dressport dated 7 March 2012 (the "Share Exchange
Agreement"). The Company acquired the entire equity interest in
Dressport from its shareholders by means of share exchange whereby
60,994,790 ordinary shares of the Company were issued to the
shareholders of Dressport, at par credited as fully paid, in
exchange for all the outstanding ordinary shares (50,829) of
Dressport. The share exchange was conducted with a ratio of 1,200
shares of the Company to one share of Dressport on a pro-rata
basis. Thereafter, the Company has become the holding company of
Dressport and its subsidiaries.
The consolidated financial statements of the Group have been
prepared using the principles of merger accounting involving
Dressport and its subsidiaries, as if the group structure under the
Restructuring have been in existence since their respective dates
of incorporation.
The immediate parent company of the Company is City Group
Limited (incorporated in the British Virgin Islands) and its
ultimate controlling party is Mr. Simon Ong.
The consolidated financial statements are presented in Renminbi,
which is also the functional currency of the Company.
Dressport is a limited company incorporated in the British
Virgin Islands on 25 May 2010. On 20 July 2010, Dressport acquired
60% equity interests of Pingyuan Sanxie Rare Earth Smelting Company
Limited ("Sanxie") from Mr. Tong Man Tak. The acquisition of the
60% equity interest of Sanxie was accounted using the acquisition
method. On 25 July 2012, the Group acquired an additional 39%
equity interest of Sanxie.
BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
Going concern
In preparing the consolidated financial statements for the year
ended 31 December 2012, the management has assessed the liquidity
position and going concern of the Group in light of the fact that
the Group has incurred a loss of RMB166,743,467 for the year ended
31 December 2012 and had net liabilities of RMB38,705,018 as at 31
December 2012. The loss was mainly the result of the non-cash
impairment loss on goodwill of RMB97,115,400, the lack of
production and sales since the final quarter of 2012 and the
significant reduction in the market price of rare earth oxides.
The Group has limited external borrowings. Furthermore, although
there were substantial amounts due to related parties falling due
in 2013; subsequent to the year end, the Group has entered into
agreements to extend the settlement date of such amounts. The Group
entered into supplemental agreements with Mr. Ong, a director and
controlling shareholder of the Company, and Mr. Tong, a shareholder
of the Company, for the extension of the borrowings of
RMB31,356,164 and RMB66,104,358, respectively, to a maturity date
of 31 March 2015.
The Group regularly produces cash flow statements and forecasts;
and sensitivities are run for different scenarios including, but
not limited to, future operating performance subject to obtaining
the approval of production quota, changes in prices of rare earth
oxides and different production rates from the Group's producing
assets. As of the date of this report, the Group is still uncertain
whether it will be granted any production quota by the regulators
in the PRC for fiscal 2013. Notwithstanding the above
uncertainties, the Directors believe that the Group's forecasts and
projections, taking account of reasonably possible changes in
economic assumptions, show that the Group will be able to meet in
full its contractual commitments and financial obligations for the
foreseeable future.
For the above reasons, the Directors believe that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, the consolidated
financial statements for the year ended 31 December 2012 have been
prepared on a going concern basis.
SIGNIFICANT ACCOUNTING POLICIES
Statement of compliance
The Group's consolidated financial statements have been prepared
in accordance with IFRS as issued by the International Accounting
Standards Board.
Basis of preparation
The consolidated financial statements have been prepared on the
historical cost basis except for certain financial instruments that
are measured at fair values, as explained in the accounting
policies below. Historical cost is generally based on the fair
value of the consideration given in exchange for goods.
The principal accounting policies are set out below.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). Control is achieved where the Company has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities.
Income and expenses of subsidiaries acquired or disposed of
during the year are included in the consolidated statement of
comprehensive income from the effective date of acquisition and up
to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies into
line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are
eliminated in full on consolidation.
Non-controlling interests in subsidiaries are presented
separately from the Group's equity therein.
Allocation of total comprehensive income to non-controlling
interests
Total comprehensive income and expense of a subsidiary is
attributed to the owners of the Company and to the non-controlling
interests even if this results in the non-controlling interests
having a deficit balance.
Changes in the Group's ownership interests in existing
subsidiaries
Changes in the Group's ownership interests in existing
subsidiaries that do not result in the Group losing control over
the subsidiaries are accounted for as equity transactions. The
carrying amounts of the Group's interests and the non-controlling
interests are adjusted to reflect the changes in their relative
interests in the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair value
of the consideration paid or received is recognised directly in
equity and attributed to owners of the Company.
Business combinations
Acquisitions of businesses are accounted for using the
acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of the assets transferred
by the Group, liabilities incurred by the Group to the former
owners of the acquiree and the equity interests issued by the Group
in exchange for control of the acquiree. Acquisition-related costs
are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and
the liabilities assumed are recognised at their fair value, except
that:
- deferred tax assets or liabilities and assets or liabilities
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
- liabilities or equity instruments related to share-based
payment arrangements of the acquiree or share-based payment
arrangements of the Group entered into to replace share-based
payment arrangements of the acquiree are measured in accordance
with IFRS 2 Share-based Payment at the acquisition date; and
- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard.
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-controlling
interests in the acquiree, and the fair value of the acquirer's
previously held equity interest in the acquiree (if any) over the
net of the acquisition-date amounts of the identifiable assets
acquired and the liabilities assumed.
Non-controlling interests that are present ownership interests
and entitle their holders to a proportionate share of the entity's
net assets in the event of liquidation may be initially measured
either at fair value or at the non-controlling interests'
proportionate share of the recognised amounts of the acquiree's
identifiable net assets. The choice of measurement basis is made on
a transaction-by-transaction basis. Other types of non-controlling
interests are measured at their fair value or another measurement
basis required by another Standard.
Where the consideration transferred by the Group in a business
combination includes assets or liabilities resulting from a
contingent consideration arrangement, the contingent consideration
is measured at its acquisition-date fair value and considered as
part of the consideration transferred in a business combination.
Changes in the fair value of the contingent consideration that
qualify as measurement period adjustments are adjusted
retrospectively, with the corresponding adjustments made against
goodwill. Measurement period adjustments are adjustments that arise
from additional information obtained during the "measurement
period" (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition
date.
The subsequent accounting for changes in the fair value of the
contingent consideration that do not qualify as measurement period
adjustments depends on how the contingent consideration is
classified. Contingent consideration that is classified as equity
is not remeasured at subsequent reporting dates and its subsequent
settlement is accounted for within equity. Contingent consideration
that is classified as an asset or a liability is remeasured at
subsequent reporting dates in accordance with IAS 39, or IAS 37
Provisions, Contingent Liabilities and Contingent Assets, as
appropriate, with the corresponding gain or loss being recognised
in profit or loss.
Where the Group acquires an interest in an entity which upon
acquisition will be a non-wholly owned subsidiary, and as part of
the acquisition, also enters into a written put option with the
seller that permits the seller to put their remaining interest in
the acquired entity to the Group at a specific price, a gross
obligation is recognised at an amount equal to the present value of
the amount that could be required to be paid to the counterparty.
Changes in the measurement of the gross obligation due to the
unwinding of the discount that the Group could be required to pay
are recognised in profit or loss. The Group will reclassify the
liability to equity if the put option expires or is
unexercised.
Goodwill
Goodwill arising on an acquisition of a business is carried at
cost less any accumulated impairment losses, if any, and is
presented separately in the consolidated statement of financial
position.
For the purposes of impairment testing, goodwill is allocated to
each of the cash-generating units (or groups of cash-generating
units) that is expected to benefit from the synergies of the
combination.
A cash-generating unit to which goodwill has been allocated is
tested for impairment annually, or more frequently whenever there
is an indication that the unit may be impaired. For goodwill
arising on an acquisition in a reporting period, the
cash-generating unit to which goodwill has been allocated is tested
for impairment before the end of that reporting period. If the
recoverable amount of the cash-generating unit is less than the
carrying amount of the unit, the impairment loss is allocated to
reduce the carrying amount of any goodwill allocated to the unit,
and then to the other assets of the unit pro rata on the basis of
the carrying amount of each asset in the unit. Any impairment loss
for goodwill is recognised directly in profit or loss in the
consolidated statement of comprehensive income. An impairment loss
recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the
attributable amount of goodwill is included in the determination of
the amount of profit or loss on disposal.
Accounting for business combination involving entities under
common control
The consolidated financial statements incorporate the financial
statements items of the combining entities or businesses in which
the common control combination occurs as if they had been combined
from the date when the combining entities or businesses first came
under the control of the controlling party.
The net assets of the combining entities or businesses are
consolidated using the existing book values from the controlling
party's perspective. No amount is recognised in respect of goodwill
or excess of acquirer's interest in the net fair value of
acquiree's identifiable assets, liabilities and contingent
liabilities over cost at the time of common control combination, to
the extent of the continuation of the controlling party's
interest.
The consolidated statement of comprehensive income includes the
results of each of the combining entities or businesses from the
earliest date presented or since the date when the combining
entities or businesses first came under the common control, where
this is a shorter period, regardless of the date of the common
control combination.
The comparative amounts in the consolidated financial statements
are presented as if the entities or businesses had been combined at
the end of the previous reporting period or when they first came
under common control, whichever is shorter.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
sold and services provided in the normal course of business, net of
discounts and sales related taxes. Revenue is not reduced for
export duties related to overseas sales.
The Group's revenues are principally from sales of rare earth
metals and products to customers in the People's Republic of China
(the "PRC") and overseas. The Group recognises revenue when goods
have been delivered and title has passed, at which point the Group
has transferred to the buyers the significant risks and rewards of
ownership of the goods, retains neither continuing managerial
involvement to the degree usually associated with ownership nor
effective control over the goods sold, the amount of revenue can be
measured reliably, it is probable that the economic benefits
associated with the transaction will flow to the Group, and the
costs incurred or to be incurred in respect of the transaction can
be measured reliably.
Service income including that from mining management services is
recognised when services are provided.
Interest income from a financial asset is recognised when it is
probable that the economic benefits will flow to the Group and the
amount of income can be measured reliably. Interest income from a
financial asset is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to that asset's net carrying amount on initial
recognition.
Cost of sales and services
Cost of goods sold primarily consists of cost of purchase, cost
of conversion and other costs incurred in bringing the inventories
to their present location and condition for sales.
Cost of services primarily consists of costs of labor and
materials used to render the services.
Property, plant and equipment
Property, plant and equipment including building held for use in
the production or supply of goods or services, or for
administrative purposes are stated in the consolidated statement of
financial position at cost less subsequent accumulated depreciation
and accumulated impairment losses, if any.
Depreciation is recognised so as to write off the cost of items
of property, plant and equipment, less their residual values over
their estimated useful lives, using the straight line method. The
estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of
any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised in
profit or loss.
Prepaid lease payments
Prepaid lease payments represent up-front payments to acquire
leasehold land interests and are stated at cost and amortised over
the period of the lease on a straight-line basis.
Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are
recognised separately from goodwill and are initially recognised at
their fair value at the acquisition date (which is regarded as
their cost).
Subsequent to initial recognition, intangible assets with finite
useful lives are carried at costs less accumulated amortisation and
any accumulated impairment losses. Amortisation for intangible
assets with finite useful lives is provided on a straight-line
basis over their estimated useful lives. (see the accounting policy
in respect of impairment losses on tangible and intangible assets
below).
Impairment losses on tangible and intangible assets other than
goodwill
At the end of the reporting period, the Group reviews the
carrying amounts of its tangible and intangible assets with finite
useful lives to determine whether there is any indication that
those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is estimated
in order to determine the extent of the impairment loss, if any.
Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs. Where a reasonable
and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and consistent
allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or a cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or the cash-generating unit) is
reduced to its recoverable amount. An impairment loss is recognised
immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (or cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (or the cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit
or loss.
Foreign currencies
The Group's presentation currency and the functional currency of
all of its operations is the Renminbi ("RMB") as this is the
principal currency of the economic environment in which it
operates.
In preparing the financial statements of each individual group
entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recorded in the
respective functional currency (i.e. the currency of the primary
economic environment in which the entity operates) at the rates of
exchanges prevailing on the dates of the transactions. At the end
of the reporting period, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at that date.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are recognised
in profit or loss in the period in which they arise.
Government grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received.
Government grants are recognised in profit or loss on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate.
Government grants that are receivable as compensation for
expenses or losses already incurred or for the purpose of giving
immediate financial support to the Group with no future related
costs are recognised in profit or loss in the period in which they
become receivable.
Retirement benefit costs
Payments to state-managed retirement benefit schemes and the
Mandatory Provident Fund Scheme are recognised as an expense when
employees have rendered service entitling them to the
contributions.
Borrowing costs
borrowing costs not relating to qualifying assets are recognised
in the consolidated statement of comprehensive income in the period
which they are incurred.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from 'profit before tax' as reported
in the consolidated statement of comprehensive income because it
excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are not taxable
or tax deductible. The Group's liability for current tax is
calculated using tax rates that have been enacted or substantively
enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the
carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax base used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised for all deductible
temporary difference to the extent that it is probable that taxable
profits will be available against which those deductible temporary
differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither
the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences associated with investments in subsidiaries, except
where the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not be reversed in the foreseeable future. Deferred tax assets
arising from deductible temporary differences associated with such
investments are only recognised to the extent that it is probable
that there will be sufficient, taxable profits against which to
utilise the benefits of the temporary differences and they are
expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the
end of the reporting period and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply in the period in which the
liability is settled or the asset is realised, based on tax rate
(and tax laws) that have been enacted or substantively enacted by
the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects
the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or
settle the carrying amount of its assets and liabilities.
Current and deferred tax is recognised in profit or loss, except
when it relates to items that are recognised in other comprehensive
income or directly in equity, in which case, the current and
deferred tax are also recognised in other comprehensive income or
directly in equity respectively.
Inventories
Inventories are stated at the lower of cost and net realisable
value. Costs of inventories are calculated using the weighted
average method. Net realisable value represents the estimated
selling price for inventories less all estimated costs of
completion and costs necessary to make the sale.
Financial instruments
Financial assets and financial liabilities are recognised in the
consolidated statements of financial position when a group entity
becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets or financial
liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial
liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets
or financial liabilities at fair value through profit or loss are
recognised immediately in profit or loss.
Financial assets
The Group's financial assets are classified into financial
assets at fair value through profit or loss ("FVTPL") and loans and
receivables. The classification depends on the nature and purpose
of the financial assets and is determined at the time of initial
recognition.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash receipts
(including all fees and point paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial asset, or, where appropriate, a shorter period to the net
carrying amount on initial recognition.
Interest income is recognised on an effective interest basis for
debt instruments other than those financial assets classified as at
FVTPL.
Financial assets at fair value through profit or loss
Financial assets at FVTPL include financial assets held for
trading.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling in the near term; or
- it is a part of a portfolio of identified financial
instruments that the Group manages together and has a recent actual
pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging instrument.
Financial assets at FVTPL are measured at fair value, with
changes in fair value arising from remeasurement recognised
directly in profit or loss in the period in which they arise. The
net gain or loss recognised in profit or loss incorporates any
dividend or interest earned on the financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Subsequent to initial recognition, loans and receivables
(including trade and other receivables, and bank balances and cash)
are carried at amortised cost using the effective interest method,
less any identified impairment losses (see accounting policy on
impairment of loans and receivables below).
Impairment of loans and receivables
loans and receivables are assessed for indicators of impairment
at the end of each reporting period. Financial assets are impaired
where there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the loans and
receivables, the estimated future cash flows of the loans and
receivables have been affected.
Objective evidence of impairment could include:
- significant financial difficulty of the issuer or counterparty; or
- breach of contract, default or delinquency in interest or principal payments; or
- it becoming probable that the borrower will enter bankruptcy
or financial re-organisation; or
- the disappearance of an active market for that financial asset
because of financial difficulties.
For certain categories of financial asset, such as trade and
other receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a
collective basis. Objective evidence of impairment for a portfolio
of receivables could include the Group's past experience of
collecting payments and observable changes in national or local
economic conditions that correlate with default on receivables.
an impairment loss is recognised in profit or loss when there is
objective evidence that the asset is impaired, and is measured as
the difference between the asset's carrying amount and the present
value of the estimated future cash flows discounted at the
financial asset's original effective interest rate.
The carrying amount of the loans and receivables is reduced by
the impairment loss directly for all financial assets with the
exception of trade and other receivables, where the carrying amount
is reduced through the use of an allowance account. Changes in the
carrying amount of the allowance account are recognised in profit
or loss. When a trade or other receivable is considered
uncollectible, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are
credited to profit or loss.
if, in a subsequent period, the amount of impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment losses was recognised, the
previously recognised impairment loss is reversed through profit or
loss to the extent that the carrying amount of the asset at the
date the impairment is reversed does not exceed what the amortised
cost would have been had the impairment not been recognised.
Financial liabilities and equity instruments
Debt and equity instruments issued by a group entity are
classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity
instrument.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the group after deducting all of its
liabilities.
Effective interest method
The effective interest method is a method of calculating the
amortised cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
(including all fees and points paid or received that form an
integral part of the effective interest rate, transaction costs and
other premiums or discounts) through the expected life of the
financial liability, or, where appropriate, a shorter period, to
the net carrying amount on initial recognition.
Interest expense is recognised on an effective interest basis
other than those financial liabilities classified as at FVTPL, of
which the interest expense is included in net gains or losses.
Financial liabilities
Financial liabilities including trade and other payables, bank
borrowing and amounts due to related parties are subsequently
measured at amortised cost, using the effective interest
method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Derivative financial instruments
Derivatives are initially recognised at fair value at the date
the derivative contracts are entered into and are subsequently
remeasured to their fair value at the end of each reporting period.
The resulting gain or loss is recognised in profit or loss
immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in
profit or loss depends on the nature of the hedge relationship.
Embedded derivatives
Derivatives embedded in non-derivative host contracts are
treated as separate derivatives when they meet the definition of a
derivative, their risks and characteristics are not closely related
to those of the host contracts and the host contracts are not
measured at FVTPL.
Derecognition
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity.
On derecognition of a financial asset in its entirety, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable and the cumulative gain or
loss that had been recognised in other comprehensive income and
accumulated in equity is recognised in profit or loss.
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or expire.
The difference between the carrying amount of the financial
liability derecognised and the consideration paid and payable is
recognised in profit or loss.
Share-based payment transactions
Equity-settled share-based payment transactions
The fair value of employee services received determined by
reference to the fair value of share options granted at the grant
date is expensed on a straight-line basis over the vesting period,
with a corresponding increase in equity (share optionsreserves). At
the end of the reporting period, the Group revises its estimates of
the number of options that are expected to ultimately vest. The
impact of the revision of the original estimates during the vesting
period, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a
corresponding adjustment to share options reserve. When share
options are exercised, the amount previously recognised in share
options reserve is transferred to share premium. When the share
options are forfeited after the vesting date or are still not
exercised at the expiry date, the amount previously recognised in
share options reserve will continue to be held in share options
reserve.
Share options granted to financial advisors
Share options issued in exchange for goods or services are
measured at the fair values of the goods or services received,
unless that fair value cannot be reliably measured, in which case
the goods or services received are measured by reference to the
fair value of the share options granted. The fair values of the
goods or services received are recognised as expenses, with a
corresponding increase in equity (share options reserve), when the
Group obtains the goods or when the counterparties render services,
unless the goods or services qualify for recognition as assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR URSRROBANOUR
Rare Earths (LSE:REG)
過去 株価チャート
から 5 2024 まで 6 2024
Rare Earths (LSE:REG)
過去 株価チャート
から 6 2023 まで 6 2024