TIDMPAR
RNS Number : 4562K
Paragon Resources PLC
30 July 2013
Paragon Resources PLC
("Paragon" or the "Company")
(AIM: PAR; ISDX: PA)
Final Results for the 17 Month Period to 31 May 2013
& Appointment of Director
30 July 2013
Final Results
The Board of Paragon is pleased to announce its final results
for the 17 month period to 31 May 2013. These can be found in full
below. The Company's Annual Reports and Accounts have been
published on the Company's website, www.paragon-resources.com in
accordance with its articles of association, and can be downloaded
by shareholders.
Appointment of Director
Further to the announcements of 15 May and 21 June 2013, Daniel
Cassiano-Silva was appointed a director of the Company on 29 July
2013. He will be a non-executive director.
Information Under Schedule 2 of the AIM Rules
Daniel Lawrence Cassiano-Silva, aged 35
Current Directorships Directorships held in past five
years
Speciality Minerals Corporation HAMC Minerals Limited
Limited
Highland African Mining Company HAMC Investments Limited
Limited
African Speciality Minerals Holding
Limited
HAMC Project Services (PTY) Limited
Highland African Mining Company
Limitada
Mr Cassiano-Silva owns 18,754 Paragon 0.05p ordinary shares.
For further information, please contact:
Paragon Resources plc Allenby Capital Limited
Simon Hunt (Nominated Adviser and Broker)
(Chairman) Nick Harriss/Jeremy Porter/James
+44 7733 337 755 Reeve
www.paragon-resources.com +44 20 3328 5656
www.allenbycapital.com
-------------------------- ---------------------------------
Chairman's statement
Dear Shareholder,
I joined the Board of Paragon as independent non-executive
chairman on 10 September 2012 at a challenging time for the Group.
The Group had significant assets in its resources and a Lender and
Shareholder who believed in the Group and its prospects. It also
faced significant milestones, particularly regarding the production
ramp-up of the new Marropino process plant, the success of which
would determine the future viability of the Group as a producer of
Ta(2) O(5) concentrate.
The Group was principally funded during 2012 and early 2013 by
loans provided by Richmond, with such loans being encapsulated in
the Secured Loan Facility entered into on 22 November 2012. This
was a lending facility of last resort, with very onerous terms, but
which provided the funding that was assessed as necessary based on
management's plans at that time to complete the ramp-up of
operations at Marropino, provide funding for the Group's operations
in the DRC and also the initial development of the Morrua and
Mutala concessions. Without the Secured Loan Facility, the Company
would undoubtedly have been wound up in the latter part of
2012.
The challenge of the production ramp-up at Marropino proved to
be an insurmountable obstacle. In January and early February 2013
the operational management completed an update to its forecast
production for Ta(2) O(5) concentrate during 2013, following very
low production of Ta(2) O(5) concentrate in December 2012 and
January 2013. This update showed that, due to the mining path for
the Marropino pit, the grade of the ore available for processing
would be significantly lower than was previously budgeted. Further,
continuing difficulties were being experienced in the completion of
the remedial work on the new process plant. The combination of
these factors led the Group to Default under the terms of the
Secured Loan Facility due to the fact that, on a forecast basis,
the Group would need access to more funding than was available
under the Secured Loan facility. Despite significant effort to
renegotiate the terms of the Secured Loan facility with the Lender,
Default was enforced on HAMCM (the borrower under the Secured Loan
Facility) and the Group lost control of its Ta(2) O(5) Operations
with effect from 22 March 2013. The disposal process of HAMCM under
the terms of the Secured Loan Facility was completed at the end of
June 2013, with no additional funds due to, or from, the Group.
Following the enforcement of HAMCM's Default and in order for
the Company to continue in operation, the Group completed the
Settlement Agreement with, amongst other, Richmond and HAMCM on 10
April 2013. This provided for a final separation of Paragon and its
remaining subsidiaries from Richmond and HAMCM and allowed Paragon
to regain control of its bank accounts, without which the Company
would have been wound up immediately.
The Board then faced the difficult decision of either winding up
the Company and discharging its obligations to its creditors from
its available cash resources, or attempting to implement a new
strategy which may provide a return to existing Shareholders in the
future. Following the Board's review, it concluded that the best
prospects for the Company were to adopt a new Investing Policy
focused on the agricultural sector. Shareholders provided the
necessary approval at the 2013 EGM for such a new policy, along
with the necessary authorities for the Company to raise additional
funding through the issue of new Ordinary Shares. The change of the
Company's name from Noventa Limited to Paragon Resources PLC was
also approved at this EGM.
I am now working on various matters to make the Company suitable
for future investment in Ordinary Shares which will be necessary
for the Company to implement its Investing Policy. We have overcome
many hurdles already, but the major challenge we face today is to
obtain releases from certain long term Ta(2) O(5) concentrate
supply contracts which remained with the Group following HAMCM's
Default. I remain optimistic that we will obtain releases from
these contracts on acceptable terms. There can however be no
guarantee that we will be successful, and if we are not, I can see
no realistic alternative other than to wind the Company up.
If we are successful in obtaining the releases from the Ta(2)
O(5) concentrate supply contracts, I believe we will be able to
raise additional funding for working capital purposes and to allow
us to commence implementing our Investing Policy. We have a strong
and experienced Board with skills in the agricultural sector and
Africa in general, where we are in the early stages of assessing
potential projects and investments.
This is a challenging time for the Company but where I believe
there is great potential once we have overcome the hurdles. I
believe we are working towards a new Company which will develop
into a major player in the agricultural sector. I hope this will
provide some reward to our Shareholders who have endured the
difficulties of the past years.
S Hunt
Executive Chairman
Directors' report
The Directors present their annual report on the affairs of the
Group, together with the financial statements for the seventeen
month period ended 31 May 2013 and the auditor's report
thereon.
Except where otherwise noted, amounts are presented in this
Directors' report in United States Dollars.
Terms used in this report are defined in the section of this
report entitled 'Terms used in this report'.
1. Listing details
Paragon Resources PLC (formerly Noventa Limited) is a Jersey
company with Ordinary Shares quoted on the AIM Market of the London
Stock Exchange under symbol PAR (formerly NVTA) and on the ISDX
Growth Market operated by ICAP Securities & Derivatives
Exchange Limited under symbol PA.P (formerly NV). The Company's
Ordinary Shares also were listed on the Toronto Stock Exchange
under symbol NTA between 23 December 2010 and 8 March 2012 when the
Company completed a voluntary de-listing. On the TSX, Noventa had
'Designated Foreign Issuer' status. The Company's CRPS traded on
ISDX.
2. CHANGE IN FINANCIAL YEAR END
As permitted by Jersey Law and the AIM Rules, the Company
changed its financial year end from 31 December to 31 May with
effect from 31 May 2013.
3. Principal activities AND INVESTING POLICY
As at the date of this report, the Company is an Investing
Company on AIM. The Company's Investing Policy, as approved by
Shareholders at the 2013 EGM is as follows:
"Investing Policy
The Directors intend initially to seek to acquire a direct
and/or an indirect interest in projects and assets in the
agricultural sector. However they will consider opportunities in
the wider natural resources sector where these are ancillary or
complimentary to the agricultural projects or assets that the
Company may acquire in the future. The Company will focus on
opportunities in Africa and Asia but will also consider, on a
limited basis, possible opportunities anywhere in the world.
The Company may invest by way of purchasing quoted or unquoted
shares in appropriate companies, outright acquisition or by the
acquisition of assets, including the intellectual property, of a
relevant business, or by entering into partnerships or joint
venture arrangements or by providing loan funding. Such investments
may result in the Company acquiring the whole or part of a company
or project (which in the case of an investment in a company may be
private or listed on a stock exchange, and which may be
pre-revenue), and such investments may constitute a minority stake
in the company or project in question. The Company will not have an
external investment manager, and investment decisions will be made
by the Directors after receiving appropriate professional
advice.
The Company may be both an active and a passive investor
depending on the nature of the individual investments. Although the
Company intends to be a medium to long-term investor, the Directors
will place no minimum or maximum limit on the length of time that
any investment may be held and therefore shorter term disposal of
any investments cannot be ruled out.
There will be no limit on the number of projects into which the
Company may invest, and the Company's financial resources may be
invested in a number of propositions or in just one investment,
which may be deemed to be a reverse takeover pursuant to Rule 14 of
the AIM Rules. The Company will carry out an appropriate due
diligence exercise on all potential investments and, where
appropriate, with professional advisers assisting as required. The
Board's principal focus will be on achieving capital growth for
Shareholders.
Investments may be in all types of assets and there will be no
investment restrictions within the overall policy.
The Company will require additional funding as investments are
made and new opportunities arise. The Directors may offer new
Ordinary Shares by way of consideration as well as cash, thereby
helping to preserve the Company's cash resources for working
capital. The Company may in appropriate circumstances, issue debt
securities or otherwise borrow money to complete an investment. The
Directors do not intend to acquire any cross-holdings in other
corporate entities that have an interest in the Ordinary
Shares."
The Company became an Investing Company on 25 March 2013
following the enforcement of HAMCM's Default under the terms of the
SLF, which resulted in the Company and Group ceasing to be involved
in the Ta(2) O(5) Operations, its former principal activity.
4. BUSINESS AND FINANCIAL REVIEW
4.1. Overview
The seventeen month period ended 31 May 2013 was a very
challenging period for the Company and Group during which, despite
all efforts being made, the Group proved unable to ramp up
production from the Marropino Mine. The production shortfalls
against plan, both actual and forecast, eventually led to the
Group's loss of control of its Ta(2) O(5) Operations on 22 March
2013 following the enforcement of HAMCM's Default under the SLF, a
last recourse secured lending facility provided to the Group by
Richmond on 22 November 2012. The Company is now an Investing
Company focussed on the agricultural sector and has no further
involvement with, or economic interest in, the Ta(2) O(5)
Operations. In the immediate term, the Company and Group are
working to resolve certain legacy matters related to the Ta(2) O(5)
Operations in order to make the Company suitable for additional
investment to implement the Investing Policy.
4.2. The Ta(2) O(5) Operations
On 4 May 2012 the Group commenced the full commissioning of its
new processing plant at the Marropino Mine in Mozambique. The new
plant was initially expected to be fully commissioned during the
latter part of 2011. Delays in the construction originating from,
inter alia, the time it took the Company to obtain necessary
funding during 2011, industry procurement delays in South Africa
during the summer of 2011 and the effects of Cyclone Funso in
January and February 2012 postponed the final commissioning to May
2012. The initial ore processing through the wet and dry processing
elements identified certain issues, mainly involving flow control
in the water and slurry circuits. These initial problems were
rectified during the first half of June and ore was re-introduced
into the plant from 19 June 2012, initially at approximately 60
tons per hour, building up to 100 tons per hour by the end of June.
Further issues, principally related to design failings, remedial
work on existing equipment and installation of new equipment were
subsequently identified which again limited the supply of ore to
the plant. Work on the remediation of these issues was delayed due
to funding shortages as the Group finalised the terms of the SLF.
The initial funds were drawn down under the SLF on 23 November 2012
and the Group re-commenced the Marropino plant ramp-up from that
date. The revised ramp-up profile, reflecting the delay in receipt
of new funding under the SLF, was included in the budget which
formed the basis of the new monies to be made available under the
SLF. Production volumes for December 2012 and January 2013 were,
however, significantly below this plan, reflecting a combination of
factors including, but not limited to:
1. unreliable electricity supply;
2. adverse weather conditions experienced in the rainy season;
3. new customs regulations which delayed the import of goods and
equipment into Mozambique and consequently the delivery of
necessary materials to the Marropino Mine;
4. the relatively low recovery rates in the new plant;
5. frequent shutdowns of the new and old processing plants at
Marropino while the remedial work was carried out; and
6. the relatively low grade of ore available for processing in these months.
Further and due to the above, while some progress was being
made, the remedial work necessary to improve production from the
new processing plant continued to be behind schedule. The
combination of these factors led operational management to update
its previous production forecast for 2013 which, in the short term,
showed a significant decrease in production volumes. The Board
reviewed the factors leading to the revised production assessment
and the options available to the Group. Of critical importance in
the forecast in the short to medium term was a decrease in the ore
grade available to be mined from the Marropino pit. This lower ore
grade forecast resulted from the internally updated mining plan,
which was subsequently independently verified. Under this updated
mining plan, the average ore grade that would be available for
processing during 2013 was lower (at 180 ppm) than the average for
the Marropino pit resources (which is 223 ppm). On the basis that
the Group could only process ore at this lower grade from
Marropino, the maximum monthly output of the new processing plant,
assuming all other factors remained equal, would be restricted to
approximately 40,000 lbs contained Ta(2) O(5) per month. When
combined with the existing production shortfalls arising in
December 2012 and January 2013, and the continued difficulties
experienced by the Group in achieving any sustained increased
output from the new plant, this monthly production level would be
insufficient to meet the financial covenant tests under the SLF and
would further result in an additional short to medium term funding
requirement for the Group. Under the terms of the SLF, HAMCM was
required to deliver to the Lender a certificate of compliance (the
'Certificate') on a monthly basis to confirm that the Group could
deliver its business plan within the remaining available funding
under the SLF. Due to the factors noted above, HAMCM was unable to
deliver the Certificate due on 10 February 2013 and accordingly
entered Default under the SLF.
The Board and Richmond worked extensively to negotiate a viable
solution that would enable HAMCM to stay within the terms of the
SLF, or for those terms to be relaxed. After considerable effort no
such solution was found and on 15 March 2013 the Lender served
notice on HAMCM for immediate repayment of the outstanding amounts
under the SLF (which was approximately $55.0m including all
penalties) while also enforcing the security interests available to
it. As a result of the enforcement of Default, and the Company's
inability to obtain additional funding to discharge the outstanding
repayment obligations under the SLF, the Group lost control of the
HAMCM Group effective on midnight of the 22 March 2013, the date on
which the Group ceased to be involved with the Ta(2) O(5)
operations. The process of the disposal of the HAMCM Group was
organised on behalf of Richmond (acting in its capacity as Security
Trustee) by Euro Pacific Canada Inc., a full service IIROC
registered brokerage headquartered in Toronto, Canada and
specializing in foreign markets and securities. The disposal
process was completed on 24 June 2013 with no bids having been
made.
The Ta(2) O(5) Operations are presented as discontinued
operations in the Group financial statements as required by IFRS 5,
Non-current assets held for sale and discontinued operations. The
net loss from discontinued operations of $11,698,000 is computed
utilising the accounting records of the HAMCM Group (which
comprised the majority of the Ta(2) O(5) Operations), prepared on
an IFRS basis until 22 March 2013, the date on which the Group lost
control over the HAMCM Group. While the accounting records for the
HAMCM Group are available to the Group for the period during which
it controlled these companies, and the Board is satisfied that the
records accurately reflect the results and cash flows of these
operations, the Group no longer has access to the underlying
documents that support the transactions and balances recorded in
the accounting records for the HAMCM Group. Accordingly, while the
Group is able to derive and present the results of the discontinued
operations as required by IFRS 5, the Company's auditor is unable
to access the underlying documents to perform their audit on the
amounts reported for these operations. Their audit report is
accordingly qualified in respect of the discontinued
operations.
4.3. The Settlement Agreement
Following the enforcement of HAMCM's Default under the SLF, the
Board faced the difficult decision of whether to wind the Company
up, or attempt to identify a new investing policy which may provide
some return in the future to existing Shareholders. Of particular
concern to the Board was the security interest agreement that the
Lender (Richmond) held over the bank accounts of the Company which,
if not released, would have prevented the Company from continuing
in operation. Accordingly the Board focussed its efforts on
negotiating terms with Richmond whereby this security interest
agreement would be released. On 10 April 2013, the Surviving
Paragon Group signed the Settlement Agreement with Richmond, HAMCM
and each of HAMCM's subsidiary companies, the principal terms of
which were:
-- all balances due to and from the Surviving Paragon Group and
each of Richmond and the HAMCM Group were discharged in full by the
payment from the Company to Richmond of $165,000 in cash and the
assumption by the Company of certain amounts payable by HAMCM
amounting to approximately $22,000;
-- any amounts due by SMC's customers for the sale of Ta(2) O(5)
concentrate, amounting in aggregate to approximately $176,000 (as
at 31 May 2013), will, if recovered in cash, be due to
Richmond;
-- Mr L Bechis, Mr F F Fernandez-Torres and Mr J L N de Barros
resigned on 10 April 2013 from the Board of Directors of each
company in the Surviving Paragon Group without any further payments
due to them from any of the Surviving Paragon Group companies;
-- Paragon and HAMCJ were immediately released from the security
interests held by the Lender over their bank accounts. The security
interest over the bank accounts of SMC will be released at a date
no later than 8 August 2013;
-- save in the event of fraud, all claims that each party to the
Settlement Agreement may have against the other parties were waived
in full.
Following the Settlement Agreement, the Company had no further
economic interest, or obligation, in respect of the HAMCM Group
except for any Excess Sale Amount which might have arisen from the
disposal of the HAMCM Group under the terms of the security
interest agreements granted to the Lender under the terms of the
SLF. The disposal process was completed on 24 June 2013 with no
Excess Sale Amount due to the Group.
4.4. Funding during the period
4.4.1. Loan funding
Funding for operations during the period was principally
obtained from Richmond under three lending facilities, namely the
Loan, the Facility and the SLF. Details on these lending facilities
are provided in note 24 to the financial statements. The total new
money made available to the Group under these lending facilities
during the period was $36,923,000. Following the Default and
Settlement Agreement referred to above, none of these facilities
are currently available to the Group.
4.4.2. Equity Finance Facility
The Group raised a further $718,000 before issue expenses
through the issue of 38,000,000 new Ordinary Shares under the EFF
on 18 March 2013. After expenses the Company received net proceeds
of approximately $671,000 for the Company's general working capital
purposes.
The Company entered into the EFF with Darwin on 1 March 2013.
Darwin is majority owned by funds managed by Henderson Volantis.
The EFF agreement with Darwin and Henderson Volantis provides the
Company with a facility of up to GBP5 million which (subject to
certain limited restrictions) can be drawn down at any time until
28 February 2016. The amount that can be drawn at any time under
the EFF is dependent on a number of conditions as described more
fully below and, based on the current trading volumes and price of
the Company's Ordinary Shares, will be significantly below the
remaining available amount under the EFF.
The timing and floor subscription price of any draw down is at
the sole discretion of the Company. The Company is under no
obligation to make a draw down and may make drawdowns at its
discretion, up to the total value of the EFF, by way of issuing
subscription notices to Darwin. Following delivery of a
subscription notice, Darwin will subscribe and the Company will
allot to Darwin new Ordinary Shares. The subscription price for any
Ordinary Shares to be subscribed by Darwin under a subscription
notice will be the average of the three lowest Volume Weighted
Average Prices ("VWAP") of the Ordinary Shares over the 15 trading
days following the subscription notice. The Company is also obliged
to specify in each subscription notice a minimum price below which
Ordinary Shares will not be issued to Darwin. The Company will have
the right (with the consent of Darwin) to modify that minimum price
at any time during the relevant Pricing Period. The number of
Ordinary Shares which may be issued under any individual
subscription notice may be up to the lower of 25 per cent of the
Company's issued share capital following completion of the relevant
subscription, or four times the average daily trading volume of the
Company's Ordinary Shares over the 15 trading days preceding the
issue of the relevant subscription notice. This may be reduced in
certain circumstances, including where the minimum price is not
maintained. The maximum amount of a subscription notice may not
exceed GBP500,000 without Darwin's permission. Darwin is entitled
to a commission of up to 5 per cent of amounts subscribed but may
agree with the Company in lieu thereof for the subscription price
for the Ordinary Shares to be discounted by 5 per cent.
There is also an over-allotment facility available to the
Company, under which the Company may authorise Darwin, at Darwin's
discretion, to increase the amount of the draw down by up to the
aggregate undrawn amount under the EFF. Darwin may direct
allotments under the EFF to its parent fund, Henderson Volantis.
Darwin and the Company may mutually agree at the end of the pricing
period to a variation of subscription price. This may allow for a
larger subscription via any over-allotment facility authorised by
the Company.
The issuance of a subscription notice is conditional upon the
satisfaction of certain subscription notice conditions which have
been agreed between Darwin and the Company. Any subscription notice
which the Company may issue will only be valid to the extent that
it has the requisite shareholder authority to issue the maximum
number of Ordinary Shares that Darwin may be required to subscribe
under the relevant subscription notice.
Darwin and the Company may terminate the EFF agreement if
certain conditions are not met.
In conjunction with the EFF, the Company entered into a warrant
agreement with Darwin dated 1 March 2013 to subscribe for up to 1%
of the issued Ordinary Shares at that date (i.e. warrants over
1,196,589 Ordinary Shares), such warrants to be exercisable at 30%
premium to the average VWAP over the subsequent 5 trading days
(which was 2.0 GBp), subject to certain conditions, at any time
prior to the expiry of 36 months from the date of the warrant
agreement.
4.5. Voluntary delisting from the TSX
On 8 March 2012 the Company completed its voluntary delisting
from the TSX on which it was listed from 23 December 2010. The
Company listed on the TSX to provide access to a broader investor
base. The relatively small shareholder base and trading volumes on
the TSX coupled with the compliance costs and administrative
responsibilities in maintaining the TSX listing compared to the
Company's AIM listing no longer being justifiable were the
principal factors leading to the voluntary delisting.
4.6. Investing Company and current developments
Following the enforcement of HAMCM's Default under the SLF, on
25 March 2013 the Company became an Investing Company on AIM. The
Settlement Agreement provided the initial conditions to allow the
Company to continue in existence by providing the Company
unrestricted access to its cash balances. Following the Settlement
Agreement and at the 2013 EGM, Shareholders approved the Company's
new Investing Policy (details of which are provided in section 3 of
this Directors' report) focussing on the agricultural sector.
Further to this clear investing mandate, Shareholders also provided
the Directors with authorities to allot, free from pre-emption
rights, up to 600,000,000 new Ordinary Shares and approved a
re-organisation of the Company's share capital (as more fully
described in note 32.2 to the financial statements) which reduced
the par value of the Company's Ordinary Shares and permits the
Company to issue new Ordinary Shares for cash (the Company
previously having been unable to do so as the market price of the
Company's Ordinary Shares on AIM had fallen below their par value).
The Company's name was also changed to Paragon Resources PLC from
Noventa Limited (effective 20 June 2013) to reflect more clearly
the nature of the Company's activities following the approval of
the Company's new Investing Policy at that EGM.
Subsequent to the 2013 EGM, the Directors have focussed their
efforts on discharging, or renegotiating the terms, of certain of
the Company and Group's outstanding obligations. These efforts are
needed to prepare the Company for it to be suitable for new
investment which is required to both implement the Investing Policy
and provide funds for working capital purposes. The principal
actions completed to the date of this report are (1) the issue of
14,547,722 new Ordinary Shares to discharge outstanding liabilities
with a carrying value of approximately $120,000 as at 31 May 2013,
therefore preserving the Company's available cash balances, (2) the
renegotiation of terms with certain suppliers of the Company to
reduce the level of services provided where possible and to reduce
the fees charged, where appropriate compensating the supplier by
the issue of warrants over Ordinary Shares in the Company (refer to
note 32.3 of the financial statements), and (3) the amendment to
the terms and conditions of the CRPS on 24 July 2013 to permit the
Company, at its absolute discretion, to redeem the
outstanding CRPS and the related CRPS Dividend through the issue
of new Ordinary Shares, such a redemption being anticipated in July
or in early August 2013 .
The Company is also in advanced discussions with the Group's
customers to obtain releases from two long term Ta(2) O(5)
concentrate supply contracts under which the Group is no longer
able to fulfil its obligations (refer to notes 31 and 4 to the
financial statements and section 5 of this Directors' report).
Without these releases, the Directors believe that the Company will
be unable to raise the additional funding it needs and accordingly
will cease to be a going concern. The Directors believe that the
releases will be obtained before the end of August 2013 on terms
which are acceptable to the Company.
Subject to obtaining the releases from the long term Ta(2) O(5)
contracts noted above, and having consulted with the Company's
financial advisors, the Directors believe that they will have a
reasonable possibility of being able to raise the initial funding
of approximately $307,000 (being approximately GBP200,000) needed
to support the working capital requirements of the Group. As at the
date of this report, the Directors are exploring certain
acquisition opportunities, albeit these are at an early stage and
no terms have been agreed.
5. RISK ASSESSMENT
The following table summarises the principal risks and
uncertainties faced by the Group as at the date of this report, and
the actions taken to mitigate these risks:
Area: Description of risk: Examples of mitigating activities:
Ta(2) O(5)
supply * The Group, through SMC as the supplier and the * The Directors are in advanced discussions with both
contracts Company as guarantor, has two long term Ta(2) O(5) customers to obtain releases from these supply
concentrate supply contracts which it is no longer contracts and believe that it is possible that such
able to fulfil following the loss of control over the releases will be obtained in the necessary timeframe.
Ta(2) O(5) Operations and the limited financial While there can be no guarantee that the Directors
resources available to the Group. As more fully will be successful in negotiating releases on
described in notes 4 and 31, the Group's customers acceptable terms, it should be noted that the Group
have certain rights under the governing laws of the has no assets other than those recognised in its
contracts to claim for damages suffered through the audited balance sheet. Accordingly, while the
Group's non-performance under the contracts. If such customers have undisputed claims for damages under
a claim were made by either customer, the Company the contracts, any such claims would not result in a
would in all likelihood become insolvent and need to cash payment from the Group in excess of the Group's
be wound up. The Directors further believe that the available cash balances which, at the date of this
Company needs to obtain releases from both of the report, are approximately $123,000.
Ta(2) O(5) supply contracts by the end of August 2013
for the Company to be able to continue in operation
utilising its available cash balances while providing
sufficient time to raise additional funding (refer
below) and to commence implementing its Investing
Policy. Accordingly, unless the Group and Company
obtain releases from both contracts before the end of
August 2013, in all likelihood the Company will cease
to be a going concern. Further details are provided
in note 3.1 to the financial statements.
Availability
of * In order for the Company to commence implementing the * The Company's Board has experience of operating in
Finance Investing Policy and to provide funds for working the agricultural sector and in Africa in general
capital, it will require additional funding. Subject where the Board has commenced exploring potential
to prevailing market conditions, the Directors investment opportunities. The Board believes, based
anticipate that the Company will look to raise the on consultation with its financial advisors, and
funding it requires through one or a combination of a subject to satisfactorily resolving the Ta(2) O(5)
placing of Ordinary Shares, an open offer to supply contract discussions outlined above, that it
Shareholders and the EFF. The amount of funding is reasonably possible that the financing will be
required will depend on the nature of the investment available on terms that are acceptable to the Group.
opportunities identified by the Directors. Minimum
funding of approximately $307,000 (being
approximately GBP200,000) is required for funding
working capital for a period of 12 months from the
date of this report. There can be no guarantee that
the Company will be successful in raising the funding
it requires.
Implementation
of the * Paragon became an Investing Company on 25 March 2013. * The Company's Board has experience of operating in
Company's The Company is under an obligation to make an the agricultural sector and in Africa in general. The
Investing acquisition, or acquisitions, which constitute a Board has further commenced exploring potential
Policy reverse takeover under the AIM Rules or otherwise, to acquisition opportunities and believes that suitable
implement its Investing Policy within twelve months investments may be made, subject to obtaining the
of becoming an Investing Company (i.e. by 24 March necessary funding, within the timeframe prescribed by
2014), failing which the Company's Ordinary Shares the AIM Rules.
will be suspended from trading on AIM. If the
Company's Investing Policy has not been implemented
within 18 months of it becoming an Investing Company
(i.e. 24 September 2014) then admission of the
Company's Ordinary Shares to trading on AIM would be
cancelled.
* There can be no guarantee that the Company will be
able to identify or agree suitable terms for future
acquisitions or projects. Accordingly, there is a
risk that the Company's shares may be suspended from
trading or its admission to AIM may be cancelled.
6. Going concern
The financial statements are prepared on a going concern basis.
Details of the Director's assessment of the going concern status of
the Company and certain related material uncertainties are provided
in note 3.1 to the financial statements.
7. DIRECTORS
7.1. Directors in office
The Directors who held office during the period and until the
date of these accounts, including changes between 1 January 2012
and the date of this report were:
Director Position Date of appointment / cessation of office in the period 1 January
2012 to the date of this
report
S D Hunt Executive Chairman(1) Appointed 10 September 2012
F F Fernandez-Torres Chief Executive Officer Resigned 10 April 2013
J L N de Barros Chief Financial Officer Appointed 6 August 2012, resigned 10 April 2013
D L Cassiano-Silva Non-Executive Director Appointed 29 July 2013
J N Allan Non-Executive Director Resigned 9 April 2012
L Bechis Non-Executive Director(2) Resigned 10 April 2013
I D Benning Non-Executive Director Resigned 31 January 2012
L G Berglund Non-Executive Director Resigned 19 March 2012
G Coltman Non-Executive Director Resigned 9 April 2012
T Eggers Non-Executive Director Resigned 31 July 2012
E J Martin Non-Executive Director Resigned 31 July 2012
D A Sheeran Non-Executive Director Appointed 6 August 2012
(1) Mr S D Hunt was appointed as a Director and Non-Executive Chairman of
the Company on 10 September 2012; he assumed the position of Executive
Chairman on 10 April 2013.
(2) Mr L Bechis was the Interim Non-Executive Chairman until 10 September
2012 when Mr S D Hunt assumed the position of Non-Executive Chairman.
Mr L Bechis remained on the Board of the Company as a Non-Executive Director
until his resignation on 10 April 2013.
7.2. Directors' interests
As at the date of this report, the interests of the Directors
and their related entities in the Ordinary Shares of the Company
were:
Ordinary Shares held
D L Cassiano-Silva 18,754
=====================
7.3. Directors emoluments
Details of the nature and amount of emoluments payable by the
Group for the services of its Directors during the financial period
are shown in the table below.
Total 17 Total 12 months ended 31
months ended 31 May December
Directors fees Salaries Other benefits 2013 (6) 2011 (6)
US$000 US$000 US$000 US$000 US$000
S D Hunt (1) 98 - - 98 -
F F Fernandez-Torres - 314 76 390 162
E F Kohn TD (2) - - - - 390
P Lawless - - - - 229
J L N de Barros (5) - 216 40 256 -
J N Allan (3) 5 - - 5 18
L Bechis 91 - - 91 7
I D Benning (3) - - (3) 13
L G Berglund 5 - - 5 14
K Chung - - - - 6
G Coltman 9 - - 9 36
T Eggers 11 - - 11 12
T Griffiths - - - - 21
L Heymann (4) - - - - 9
E J Martin 18 - - 18 29
D A Sheeran 15 - - 15 -
249 530 116 895 946
=============== ========= =============== ===================== ==========================
(1) The services of Mr S D Hunt as Chairman of the Company are provided under a letter of appointment
dated 31 August 2012 between the Company and Mr S D Hunt. Mr S D Hunt is entitled to receive
an additional annual fee for his role as chairman of the Remuneration and Nomination and the
Audit and Risk committees of the Company (the 'A&RC and R&NC Fees'). Mr S D Hunt is further
entitled to additional fees if his monthly work on the affairs of the Company exceeds 4 days
per month (the 'Additional Fees'). The Additional Fees and the A&RC and R&NC Fees are invoiced
by Cornerstone Capital Limited, a company controlled by Mr S D Hunt.
(2) The services of Mr E F Kohn TD were provided by Barons Financial Services SA under a service
agreement with the Company.
(3) The services of Mr J N Allan were provided by Ekasure Limited under a service agreement with
the Company.
(4) The services of M L Heymann were provided by Hains Engineering Company Limited under a service
agreement with the Company.
(5) Mr J L N de Barros was appointed to the Board of the Company on 6 August 2012, having held
the position of Chief Financial Officer since 5 September 2011. His emoluments for the financial
period ended 31 December 2011 from his employment with the Company were $92,000.
(6) This table shows the cash equivalent value of amounts paid to Directors in either currency
or Ordinary Shares in the Company as compensation for services rendered. It does not show
the accounting value attributed to share options granted in the period. This information is
provided in aggregate in note 10 to the financial statements.
7.4. Directors' share options, warrants and bonus shares
Aggregate emoluments disclosed above in the section entitled
'Directors' emoluments' do not include any amounts for the value of
options, warrants or bonus shares granted to or held by the
Directors or their related entities.
No warrants or options were granted to or exercised by the
Directors in the current or preceding financial period nor did any
bonus shares vest. Details of options, warrants and bonus shares
for Directors and their related entities who served during the
current financial period are as follows:
Date from
1 January Lapsed / 31 May Exercise which
Director 2012(1) terminated 2013(2) price GBp exercisable Expiry date
F F Fernandez-Torres 50,000 - 50,000 27.4 February 2012 August 2018
50,000 - 50,000 27.4 August 2012 August 2018
50,000 - 50,000 27.4 February 2013 August 2018
50,000 (50,000) - 27.4 August 2013 August 2018
---------- ----------- ---------
200,000 (50,000) 150,000
---------- ----------- ---------
September
J L N de Barros 25,000 - 25,000 24.0 March 2012 2018
September
25,000 - 25,000 24.0 September 2012 2018
September
25,000 - 25,000 24.0 March 2013 2018
September
25,000 (25,000) - 24.0 September 2013 2018
---------- ----------- ---------
100,000 (25,000) 75,000
---------- ----------- ---------
J N Allan (3) 50,000 - 50,000 0.0 Share price to No expiry
reach 300.0p
on a 30 day
moving average
---------- ----------- ---------
I Benning 24,280 - 24,280 27.4 Exercisable August 2018
---------- ----------- ---------
G Berglund 24,280 - 24,280 27.4 Exercisable August 2018
September
K Chung 24,280 - 24,280 102.1 Exercisable 2017
---------- ----------- ---------
January
G Coltman 24,280 - 24,280 102.1 Exercisable 2017
---------- ----------- ---------
T Eggers 24,280 - 24,280 27.4 Exercisable August 2018
---------- ----------- ---------
January
T J Griffiths 24,280 - 24,280 102.1 Exercisable 2017
---------- ----------- ---------
October
E J Martin 50,000 - 50,000 80.0 Exercisable 2016
24,280 - 24,280 27.4 Exercisable August 2018
---------- ----------- ---------
74,280 - 74,280
---------- ----------- ---------
569,960 (75,000) 494,960
========== =========== =========
(1) Or date of appointment if later.
(2) Or date of cessation of appointment, if earlier.
(3) These instruments are held by Ekasure Limited, a company in which Mr J N Allan has a beneficial
interest.
7.5. Directors' indemnities
The Company has made qualifying third party indemnity provisions
for the benefit of its Directors which remain in force at the date
of this report.
8. Sub-committees of the board
The Company had two sub-committees during the year:
- The Audit and Risk Committee
- The Remuneration and Nomination Committee
Each committee operates under a charter approved by the Board
detailing their role, structure, responsibilities and membership
requirements. Each committee comprises a majority of Non-Executive
Directors and is chaired by a Non-Executive Director. Other
committees may be formed from time to time to deal with specific
matters.
The Audit and Risk Committee and the Remuneration and Nomination
Committee currently comprise one Non-Executive Director, Mr S D
Hunt (Chairman).
The membership of the sub-committees of the Board is incomplete
following the changes in the composition of the Board after the
enforcement of HAMCM's Default under the SLF. The charter for the
sub-committees is under review to reflect the new focus of the
Company and Group and its reduced scale of operations.
9. SUBSTANTIAL SHAREHOLDINGS
To the best of the knowledge of the Directors and executive
officers of the Company, except as set out in the table below,
there are no persons who, as of 30 June 2013, are the direct or
indirect beneficial owners of, or exercise control or direction
over 3% or more of the Ordinary Shares in issue of the Company.
Number of
Ordinary
Shares % Holding
T Allan (1) 15,962,380 9.27
J Allan (2) 13,194,663 7.66
Highland African Ventures Limited (3) 3,968,653 2.30
(1) Includes 10,323,584 Ordinary Shares held by Apex Utilities Limited,
a company in which Mr T Allan has a beneficial interest.
(2) These Ordinary Shares are held by Ekasure Limited, a company in which
Mr J Allan has a beneficial interest.
(3) Highland African Ventures Limited is owned by a trust whose trustee
is Sanne Trust Company Limited and Mr R J Fleming is one of the potential
beneficiaries. As at the date of this report Sanne Trust Company Limited
has a total interest, including through Highland African Ventures Limited,
in a total of 5,660,443 Ordinary Shares (3.29% of the issued Ordinary
Shares). As at the date of this report Mr R J Fleming has an interest,
including through Highland African Ventures Limited, in a total of 5,518,653
Ordinary Shares (3.20% of the issued Ordinary Shares).
10. DIVIDENDS
The Directors do not recommend the payment of a final dividend
for the 17 month period ended 31 May 2013 (12 month period ended 31
December 2011: $nil). No interim dividends were paid (12 month
period ended 31 December 2011: $nil). Amounts are reported in the
financial statements for net distributions to shareholders as more
fully described in note 26.3.6 to the financial statements. These
net distributions arise from the accounting treatment prescribed
under IFRS and do not represent dividends as such term is defined
under Jersey Law.
11. SUPPLIER PAYMENT POLICY
The Group's policy is to settle terms of payment with suppliers
when agreeing the terms of each transaction, ensure that suppliers
are made aware of the terms of payment and abide by the terms of
payment. Trade creditors of the Group at 31 May 2013 were
equivalent to 25 days' (2011 - 31 December 2011 45 days')
purchases, based on the average daily amount invoiced by suppliers
during the year from continuing operations.
12. POLITICAL AND CHARITABLE CONTRIBUTIONS
The Company did not make any political or cash charitable
contributions during the current or preceding financial period.
13. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
Details of events subsequent to the balance sheet date which are
considered by the Directors to be material and require disclosure
in these financial statements are provided in note 32 to the
financial statements.
14. Transactions with related parties
Transactions with related parties of the Company and Group are
shown in note 30 to the financial statements.
15. Statement of directors' responsibilities
The Directors are responsible for preparing the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
IFRSs as adopted by the European Union. The financial statements
are required by law to give a true and fair view of the state of
affairs of the Company and Group and of the profit or loss of the
Company and Group for that period.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the Company and
Group's financial position, financial performance and cash flows.
This requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and presentation
of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
IFRSs. However, Directors are also required to:
- properly select and apply accounting policies;
- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
- make an assessment of the Company's ability to continue as a going concern.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and Group and enable them to
ensure that the financial statements comply with the Companies
(Jersey) Law 1991, as amended. They are also responsible for
safeguarding the assets of the Company and Group and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Jersey, the Channel Islands
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
16. Independent Auditor and statement of provision of
information to the Independent Auditor
Deloitte LLP have expressed their willingness to continue in
office as independent auditor of the Company and a resolution to
re-appoint them will be proposed at the forthcoming Annual General
Meeting.
The Directors who held office at the date of approval of this
Directors' report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
auditor is not aware; and each Director has taken all the steps
that he ought to have taken as a Director to make himself aware of
any relevant audit information and to establish that the Company's
auditor is aware of that information.
17. Additional information
Additional information on the Company can be found on the
Company's website at www.paragon-resources.com.
S Hunt D Cassiano-Silva
Executive Chairman Non-Executive Director
and Chairman of the 29 July 2013
Audit and Risk Committee
29 July 2013
Independent auditor's report to the members of Paragon Resources
PLC
We have audited the Group and Company financial statements (the
'financial statements') of Paragon Resources PLC (formerly Noventa
Limited) for the 17 month period ended 31 May 2013 which comprise
the Consolidated and Company statements of profit and loss and
other comprehensive income, the Consolidated and Company statements
of financial position, the Consolidated and Company statements of
changes in equity, the Consolidated and Company cash flow
statements and the related notes 1 to 46. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards ('IFRSs') as
adopted by European Union.
This report is made solely to the Company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of Directors and auditor
As explained more fully in the Statement of Directors'
responsibilities section of the Directors' report, the Directors
are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's and the Company's circumstances and have
been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and
non-financial information in the annual report to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Basis for qualified opinion on financial statements
The audit evidence available to us was limited due to
restrictions placed on the scope of our work as a result of the
Group losing control of the HAMCM Group on 22 March 2013, following
HAMCM's Default under the Secured Loan Facility. As a result we did
not have access to the financial records or Management of the HAMCM
Group during the course of the audit and have therefore been unable
to obtain sufficient appropriate audit evidence concerning the loss
on discontinued operations of $11,698,000 and certain other related
disclosures as described in note 13.
Qualified opinion on financial statements
In our opinion, except for the possible effects of the matters
described in the Basis for Qualified Opinion paragraph:
-- the financial statements give a true and fair view of the
state of the Group's and of the Company's affairs as at 31 May 2013
and of the Group's loss and the Company's profit for the year then
ended;
-- the financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Jersey) Law 1991.
Emphases of matter - going concern and uncertain outcome of
supply contract negotiations
In forming our opinion on the financial statements, which is not
modified in this respect, we draw your attention to the disclosures
made in note 3.1 to the financial statements in relation to going
concern and to the disclosures made in note 31.1 and note 42.3 in
relation to the uncertain outcome of negotiations to obtain
releases from certain Ta(2) O(5) supply contracts.
A subsidiary of the Company is the counterparty to two long term
Ta(2) O(5) supply contracts and, following the Group losing control
of the HAMCM group on 22 March 2013, is no longer able to fulfil
its obligations under these contracts. The Company has guaranteed
the subsidiary's obligations in respect of these contracts. The
Directors are in discussions with the customers to obtain releases
from the Group's and Company's obligations under these contracts
without requiring any net outflow of economic benefits. However, if
they are unable to do so and if the customers were to seek damages
from the Group for non-performance, the amounts involved could be
highly material. The extent to which any claims are ultimately made
against the Group and, if they are, the ultimate outcome of such
claims cannot be reliably estimated, and consequently no provision
for any liability that may result has been made in the Group or
Company only financial statements.
Following the Group losing control of the HAMCM Group, the
Company and Group do not have any revenue generating assets and its
remaining cash balances are insufficient to enable the Company and
Group to continue in operation for the next twelve months. In
addition, if discussions to obtain releases from its obligations
under the Ta(2) O(5) supply contracts are unsuccessful, the Group
is unlikely to have sufficient assets to satisfy any material
claims that may be made. These conditions, along with other matters
explained in note 3.1 to the financial statements, indicate the
existence of a material uncertainty which may cast significant
doubt on the Company's and the Group's ability to continue as a
going concern. The financial statements do not include the
adjustments that would result if the Company and Group were unable
to continue as a going concern.
Matters on which we are required to report by exception
In respect solely of the limitations on our work relating to
discontinued operations referred to above:
-- we were unable to determine whether adequate accounting records have been kept;
-- we have not obtained all the information and explanations
that we require for our audit; and
-- adequate returns for our audit have not been received from
HAMCM group, which has not been visited by us.
We have nothing to report to you in connection with our duty to
report to you if the financial statements are not in agreement with
the accounting records and returns.
David Paterson
for and on behalf of Deloitte
LLP
Chartered Accountants and
Recognized Auditor
London, United Kingdom
29 July 2013
Consolidated statement of profit or loss and other comprehensive
income
17 month period ended
31 May 12 month period ended
2013 31 December 2011
(represented - note 13)
Note US$000 US$000
CONTINUING OPERATIONS
Administrative expenses (2,520) (5,775)
Impairment of property, plant and equipment - (22)
Loss on disposal of property, plant and equipment (4) -
Operating loss (2,524) (5,797)
Net finance income / (expense) 11 1,311 (3,581)
---------------------- ------------------------
Investment revenues 5,287 3,207
Finance costs (3,976) (6,788)
---------------------- ------------------------
Loss before taxation (1,213) (9,378)
Taxation 12 - -
---------------------- ------------------------
Loss for the period from continuing operations 7 (1,213) (9,378)
DISCONTINUED OPERATIONS
Loss for the period from discontinued operations 13 (11,698) (45,350)
Loss for the period (12,911) (54,728)
OTHER COMPREHENSIVE (LOSS) / INCOME
Foreign currency translation (loss) / gain on foreign
operations (201) 4
TOTAL COMPREHENSIVE LOSS FOR THE FINANCIAL PERIOD (13,112) (54,724)
====================== ========================
US cents US cents
LOSS PER SHARE
Basic and diluted loss per share from continuing operations 14.2 (1.0) (16.4)
====================== ========================
Basic and diluted loss per share from continuing and
discontinued operations 14.1 (10.3) (95.9)
====================== ========================
The loss for the current and preceding financial periods and
total comprehensive loss are wholly attributable to equity holders
of the parent company.
Consolidated statement of financial position
31 May
2013 31 December 2011
Note US$000 US$000
Non-current assets
Intangible assets 15 - -
Property, plant and equipment 16 - 7,212
Deferred tax asset 18 - -
Other receivables 20 - 1,809
- 9,021
---------- -----------------
Current assets
Inventories 19 - 2,282
Trade and other receivables 20 238 5,307
Cash and cash equivalents 28 191 7,873
---------- -----------------
429 15,462
---------- -----------------
Total assets 429 24,483
---------- -----------------
Current liabilities
Trade and other payables 21 340 6,920
Convertible redeemable preference share dividend 22 506 109
Current tax liabilities - 16
Short-term provisions 25 41 575
Derivative financial liabilities 23 2 12
889 7,632
---------- -----------------
Net current (liabilities) / assets (460) 7,830
---------- -----------------
Non-current liabilities
Convertible redeemable preference share liability 22 3,759 3,501
Long-term provisions 25 - 281
---------- -----------------
3,759 3,782
---------- -----------------
Total liabilities 4,648 11,414
---------- -----------------
Net (liabilities) / assets (4,219) 13,069
========== =================
Share capital 26 2,015 1,556
Share premium 121,715 121,483
Shares to be issued reserve 26 13 46
Convertible redeemable preference share reserve 22 617 617
Merger reserve 26 8,858 8,858
Translation reserve 26 - 13
Accumulated losses (137,437) (119,504)
---------- -----------------
(Deficit) / equity attributable to equity holders of the parent (4,219) 13,069
========== =================
The financial statements of Paragon Resources PLC, registered
number 95036, were approved by the Board of Directors and
authorised for issue on 29 July 2013. Signed on behalf of the Board
of Directors by:
S Hunt, Director D Cassiano-Silva, Director
Executive Chairman Non-Executive Director
29 July 2013 29 July 2013
Consolidated statement of changes in
equity
Convertible
Shares redeemable
to be preference
Share Share issued share Merger Translation Retained Total
capital premium reserve reserve reserve reserve losses Equity
Notes US$000 US$000 US$000 US$000 US$000 US$000 US$000 US$000
Balance at 1
January 2011 324 84,542 55 - 8,858 9 (70,530) 23,258
Total
comprehensive
income /
(loss) for
the period - - - - - 4 (54,728) (54,724)
Share-based
payments 10 517 (9) 480 998
Issue of share
capital 974 30,800 - - - - - 31,774
Expenses
incurred in
issuing share
capital - (2,446) - - - - - (2,446)
Issue of CRPS 22 - - - 1,804 - - - 1,804
Allocation of
expenses
incurred in
issuing CRPS 22 - - - (110) - - - (110)
Redemption of
CRPS 22 248 7,510 - (1,077) - - 5,274 11,955
Fair value of
derivative
warrants
released on
exercise 23 - 560 - - - - - 560
------------- -------- -------- ------------ -------- ------------ ---------- ---------
Balance at 31
December 2011 1,556 121,483 46 617 8,858 13 (119,504) 13,069
Total
comprehensive
loss for the
period - - - - - (201) (12,911) (13,112)
Share-based
payments - - (13) - - - 29 16
Issue of share
capital 459 279 (20) - - - - 718
Expenses
incurred in
issuing share
capital - (47) - - - - - (47)
Net capital
distribution 26 - - - - - - (5,051) (5,051)
Recycled to
loss from
discontinued
operations - - - - - 188 - 188
Balance at 31
May 2013 2,015 121,715 13 617 8,858 - (137,437) (4,219)
============= ======== ======== ============ ======== ============ ========== =========
Consolidated cash flow statement
17 month period ended 31 May
2013 12 month period ended 31 December 2011
(represented - note 13)
US$000 US$000
Cash flows from operating activities
Loss for the period from continuing
operations (1,213) (9,378)
Adjustments for:
Depreciation 1 20
Impairment of property, plant and equipment - 22
Loss on disposal of property, plant and
equipment 4 -
Share based payment expense 29 648
Foreign exchange loss (68) 437
Finance costs 3,976 6,788
Investment revenues (5,287) (3,207)
----------------------------- ---------------------------------------
Operating cash flows before movements in
working capital and provisions (2,558) (4,670)
Decrease / (increase) in trade and other
receivables 255 (233)
Decrease in trade and other payables and
short term provisions (355) (62)
Net cash used in operating activities by
continuing operations (2,658) (4,965)
----------------------------- ---------------------------------------
Net cash used in operating activities by
discontinued operations (17,707) (18,823)
----------------------------- ---------------------------------------
Net cash used in operating activities (20,365) (23,788)
----------------------------- ---------------------------------------
Cash flows from investing activities
Interest received 79 115
Proceeds from disposal of property, plant and
equipment - 3
Acquisition of property, plant and equipment (5) (8)
Net cash from investing activities by
continuing operations 74 110
----------------------------- ---------------------------------------
Net cash used in investing activities by
discontinued operations (19,016) (31,952)
----------------------------- ---------------------------------------
Net cash used in investing activities (18,942) (31,842)
----------------------------- ---------------------------------------
Cash flow from financing activities
Proceeds from issue of new Ordinary Shares 718 32,220
Ordinary Share issue expenses (47) (2,446)
Proceeds from issue of CRPS - 11,904
CRPS issue expenses - (728)
Proceeds from new unsecured borrowings 24,640 -
Unsecured borrowings issue expenses (840) -
Repayment of unsecured borrowings (24,640) -
Interest paid (2,335) (490)
Net cash (outflow) / inflow from financing
activities from continuing operations (2,504) 40,460
----------------------------- ---------------------------------------
Net cash inflow from financing activities
from discontinued operations 33,615 -
----------------------------- ---------------------------------------
Net cash inflow from financing activities 31,111 40,460
----------------------------- ---------------------------------------
Net decrease in cash and cash equivalents (8,196) (15,170)
Effect of exchange rates on cash and cash
equivalents including discontinued
operations 514 (353)
----------------------------- ---------------------------------------
Cash and cash equivalents at beginning of
period 7,873 23,396
----------------------------- ---------------------------------------
Cash and cash equivalents at end of period 191 7,873
============================= =======================================
Notes to the consolidated financial statements
1. GENERAL INFORMATION
Paragon Resources PLC (formerly Noventa Limited) is a company
incorporated in Jersey, the Channel Islands under the Companies
(Jersey) Law 1991, as amended, with registered number 95036.
Further details, including the address of the registered office,
are given in the section of this report entitled 'Company
information and advisers'. The nature of the Group's operations and
its principal activities are set out in the Directors' report. A
list of the significant investments in subsidiaries and associate
companies held directly and indirectly by the Company during the
period and at the period end, including the name, country of
incorporation, operation and ownership interest is given in note
30.
The financial statements have been prepared in accordance with
IFRSs as adopted by the European Union as required by the AIM Rules
and the ISDX Rules.
The financial information is a consolidation of the Company and
its subsidiaries. These financial statements are presented in
United States Dollars because that is the currency of the primary
economic environment in which the Group operated for the periods
presented. Foreign operations are included in accordance with the
policies set out in note 3.
Effective from 31 May 2013, the Company and its subsidiaries at
that date changed their financial year end from 31 December to 31
May. Accordingly these financial statements present the results and
cash flows of the Company and Group for the seventeen month period
commencing 1 January 2012 and ending on 31 May 2013. The Company
and Group's preceding financial statements were issued for the
twelve month period ended 31 December 2011 from which the
comparative information in these financial statements is
extracted.
2. ADOPTION OF NEW AND REVISED STANDARDS AND INTERPRETATIONS
In the current period, no new and revised Standards and
Interpretations have been adopted that have affected the amounts
reported or disclosed in these financial statements.
2.1 New Standards and Interpretations adopted with no
significant effect on the financial statements
The following new and revised Standards and Interpretations have
been adopted in these financial statements. Their adoption has not
had any significant impact on the amounts reported in these
financial statements, but may impact the accounting for future
transactions and arrangements.
IAS 12 Amendment 2010 Deferred tax - recovery of underlying
assets
IFRS 7 Amendment 2010 Disclosures - transfers of financial
assets
2.2 New Standards and Interpretations in issue but not yet effective
At the date of authorisation of these financial statements, the
following Standards and Interpretations are in issue but not yet
effective (and in some cases had not yet been adopted by the
EU):
IAS 1 Amendment 2011 Presentation of items of other
comprehensive income
IAS 19 Amendment 2011 Employee benefits
IAS 27 Amendment 2011 Separate financial statements
IAS 28 Amendment 2011 Investment in associates and
joint ventures
IAS 32 Amendment 2011 Offsetting financial assets and
financial liabilities
IFRS 10, IFRS 12 and IAS Amendment 2012 Investment entities
27
IFRS 1 Amendment 2012 Government loans
IFRS 7 Amendment 2011 Disclosures - offsetting financial
assets and financial liabilities
IFRS 9 New 2009, Amendment Financial instruments
2010 and 2011
IFRS 10 New 2011 Consolidated financial statements
IFRS 11 New 2011 Joint arrangements
IFRS 12 New 2011 Disclosure of interest in other
entities
IFRS 13 New 2011 Fair value measurement
IFRIC 20 New 2011 Stripping costs in the production
phase of a surface mine
Improvements to IFRS Amendments 2012 Annual improvements to IFRSs
2209-2011
The Directors do not anticipate that the adoption of these
Standards and Interpretations will have a material impact on the
Group's financial statements in the period of initial
application.
3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared on a historical cost
basis, except for certain financial instruments and share based
payments. Historical cost is generally based on the fair value of
the consideration given in exchange for the assets acquired. The
principal accounting policies adopted are set out below in this
note.
3.1 Going concern
As at the date of this report the Company and Group has
available cash balances of approximately $123,000. Although the
available cash balances are sufficient for the immediate needs of
the Company and Group, they are insufficient to enable the Company
to continue in operation for a period of twelve months from the
date of this report or to fund the Company's preliminary activities
under the new Investing Policy. To remain a going concern, the
Company will need to access additional sources of funding which in
all likelihood will involve the issue of additional new Ordinary
Shares through one or a combination of a placing, an open offer or
drawdown(s) on the EFF. The attractiveness of the Company's
Ordinary Shares as an investment opportunity will depend on a
number of factors, including but not limited to, the quality and
experience of its management team, the nature of the projects it
identifies and the anticipated return available to Shareholders
once existing obligations are discharged. In this latter respect,
it is fundamental that the Company has no priority claims on the
cash flows it may derive from its future projects other than for
claims that arise from those future projects (e.g. trade and other
payables) or from the funding of those projects (e.g. project
specific loan or other funding). Accordingly, and for the Company
to be a viable Investing Company suitable for new equity
investment, the Board believes that the Company and Group's
potential cash obligations arising from its two long term Ta(2)
O(5) concentrate supply contracts must be extinguished through the
mutual release of the parties to those contracts from all past and
future obligations. The Directors believe that the Company needs to
obtain releases from both of the Ta(2) O(5) supply contracts by the
end of August 2013 for the Company to be able to continue in
operation utilising its available cash balances while providing
sufficient time to raise additional funding (refer below). As at
the date of this report, the Directors are in advanced discussions
with both counterparties to the long term Ta(2) O(5) concentrate
supply contracts, and the Directors believe that it is possible
that these supply contracts will be terminated in the short term
without any cash outflow from the Group or Company. There can
however be no certainty that the Company will obtain releases from
both of the long term Ta(2) O(5) concentrate supply contracts, or
whether the terms of any such releases will be acceptable to the
Company. If the Company is unable to obtain releases from either or
both of the long term Ta(2) O(5) concentrate supply contracts on
acceptable terms, the Directors will in all likelihood need to
propose a resolution to the Shareholders for the winding up of the
Company at the 2013 AGM. The Directors acknowledge that there is
therefore a material uncertainty over the Company's ability to
obtain the necessary releases from the supply contracts in the
timeframe permitted by the Company's available cash balances.
Further detail on the long term Ta(2) O(5) concentrate supply
contracts and the potential cash exposure to the Company is
provided in note 31.1.
Subject to the Company successfully obtaining releases from the
long term Ta(2) O(5) concentrate supply contracts, the Directors
believe that there is a reasonable possibility that the Company
will be able to access funding in the short term to allow the
Company to continue in operation and permit the Directors to
identify appropriate investment opportunities leveraging off the
considerable experience of the Board. The Directors, having
consulted with the Company's financial advisers believe that the
initial funding of approximately $307,000 (being approximately
GBP200,000) which is expected to be required to permit the Company
to continue in operation for a period up to twelve months from the
date of this report will be available under terms that are
acceptable to the Company. There can however be no certainty that
funding will be available, or if available, whether the terms will
be acceptable to the Company. The Directors acknowledge that there
is therefore a material uncertainty over the Company's ability to
raise the necessary funding in the timeframe required.
As a result of the above factors, the Directors acknowledge that
material uncertainties exists which may cast significant doubt on
the Company and the Group's ability to continue as a going concern
and, therefore, to realise its assets and discharge its liabilities
in the normal course of business. Nevertheless after making
enquiries, and considering the uncertainties described above, the
Directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational
existence for the foreseeable future. For these reasons, they
continue to adopt the going concern basis in preparing the annual
report and financial statements.
As a consequence of these material uncertainties the auditor has
issued an audit report that is not modified but includes an
emphasis of matter paragraph on going concern.
3.2 Basis of consolidation
The Consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 May for periods commencing after 1
January 2012 and to 31 December for prior periods. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
The results of subsidiaries incorporated or disposed in the year
are included in the consolidated statement of profit or loss from
the effective date of incorporation or up to the effective date of
disposal, as appropriate. Where necessary, adjustments are made to
the financial statements of subsidiaries to bring the accounting
policies used into line with the IFRS compliant policies applied by
the Group. All intra-group transactions, balances, income and
expenses are eliminated on consolidation.
Where the Group loses control of a subsidiary, the profit or
loss on disposal is calculated as the difference between (i) the
aggregate of the fair value of the consideration received and the
fair value of any retained interest and (ii) the previous carrying
amount of the assets (including goodwill), less liabilities of the
subsidiary and any non-controlling interests at the date of loss of
control. Amounts previously recognised in other comprehensive
income in relation to the subsidiary are accounted for (i.e.
reclassified to profit or loss or transferred directly to retained
earnings) in the same manner as would be required if the relevant
assets or liabilities were disposed of. Details of subsidiaries
incorporated, disposed, or over which the Company lost control in
the period are provided in note 30.
3.3 Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents either (1) amounts receivable
for goods provided in the normal course of business, net of
discounts, value added tax and other sales-related taxes, or (2)
interest income.
All of the Group's revenue (other than for interest income)
derived from the sale of goods arising in operations which were
discontinued during the period ended 31 May 2013. Revenue was
recognised when all of the following conditions were satisfied:
- the Group had transferred to the buyer the significant risks
and rewards of ownership of the goods, being principally the right
to process the material and derive profits or losses therefrom and
the risk of loss through damage to the material;
- the Group retained neither continuing managerial involvement
to the degree usually associated with ownership nor effective
control over the goods sold;
- the amount of revenue could be measured reliably;
- it was probable that the economic benefits associated with the
transaction would flow to the Group; and
- the costs incurred or to be incurred in respect of the
transaction could be measured reliably.
With respect to Ta(2) O(5) concentrate sales arising from
discontinued operations, the above policy resulted in the
recognition of revenue when the Ta(2) O(5) concentrate crossed ship
rails on destination to the final customers as the Group's offtake
agreements established delivery on either a CFR or CIF basis as
defined under INCOTERMS 2010. Both of these delivery terms transfer
the risks and rewards of ownership of the product to the buyer when
the product is loaded onto a maritime vessel on destination to the
customer. The amount of revenue initially recognised was based on
an independent third party pre-shipment assay which established the
weight and concentration of the Ta(2) O(5) concentrate shipped. The
Group's customers were entitled to perform a post shipment assay
when the product arrived at its destination. Generally the final
amount payable to the Group was determined based on an average of
the pre and post shipment assay results. Historically the variances
between the pre and post shipment assays were not significant and
the Group recorded adjustments to the amount of revenue recognised
in the period when the post shipment assay became available. In the
event that variances were significant and the post shipment assay
was available before the Group published its financial statements,
the adjustment to revenue was treated as an adjusting post
balance sheet event and recorded in the period during which the
Group shipped the product to its customer, being the period in
which revenue was initially recognised. As at 31 May 2013 the
results of all post shipment assays on product dispatched to the
Group's customers have been received and no further adjustments
will be made to revenue recorded for discontinued operations.
3.4 Operating loss
Operating loss is stated before investment revenues, finance
costs and taxation.
3.5 Foreign currency
The individual financial statements of each group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each group company are expressed in United States
Dollars, which is the functional currency of the Company during the
periods presented, and the presentation currency for the
consolidated financial statements. The Company's functional
currency changed to GBP subsequent to the period end with effect
from 1 June 2013.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the dates of the transactions. At
each balance sheet date, monetary assets and liabilities that are
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 are recognised in profit or loss in the
period in which they arise.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in equity
in the translation reserve. As at 31 May 2013, all companies in the
Group had the US$ as their functional currency.
3.6 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for
their intended use or sale, are added to the cost of those assets,
until such time as the assets are substantially ready for their
intended use or sale. The Group incurred relevant borrowing costs
for the construction of the new processing plant at Marropino which
is a qualifying asset as defined under IAS 23, Borrowing costs.
Capitalisation of these borrowing costs ceased from 22 March 2013
when the Group lost control of its subsidiary company, HAMCL which
owned and operated the Marropino processing plant.
All other borrowing costs are recognised in profit or loss in
the period in which they are incurred.
3.7 Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non-market based vesting conditions. Details regarding
the determination of the fair value of equity-settled share-based
transactions are set out in note 27.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
equity instruments that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number of equity
instruments expected to vest as a result of the effect of
non-market based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to accumulated losses.
3.8 Employee Benefit Trust
Transactions of the EBT are treated as being those of the
Company and are consolidated with the Company and Group. Where loan
advances to the EBT by the Company and Group are deemed not to be
recoverable, the loan receivable balance is impaired to the
Statement of comprehensive loss under the policy described below
for impairment of financial assets in note 3.15.1.2.
3.9 Employee benefits
3.9.1 Short term employee benefits
Short-term employee benefits include salaries and wages,
short-term compensated absences and bonus payments. The Group
recognises a liability and corresponding expense for short-term
employee benefits when an employee has rendered services that
entitle him / her to the benefit.
3.9.2 Post-employment benefits
The Group does not contribute to any defined retirement plan for
its employees, either defined contribution or defined benefit.
Social security payments to state schemes, which arose in
discontinued operations in Mozambique and South Africa, were
charged to profit and loss as they were incurred.
3.10 Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
3.10.1 Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit / (loss) as reported
in the Consolidated statement of profit and loss and other
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 never taxable or deductible. The Group's
liability for current tax is calculated using tax rates and laws
that have been enacted or substantively enacted by the balance
sheet date. As at 31 May 2013 the companies in the Group are all
subject to tax at 0% taxation rate in Jersey.
3.10.2 Deferred tax
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary difference arises
from the initial recognition of 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 arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Group is able to
control the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date 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 is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited to profit and loss,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current tax assets and liabilities on a net basis.
3.11 Intangible assets
Intangible assets relate entirely to operations which were
discontinued during the period ended 31 May 2013. Acquired
intangible assets, such as Mining Concessions and qualifying
exploration and evaluation expenditure, were recognised at cost,
less accumulated amortisation and impairment losses. Where
applicable, in accordance with IFRS 6, Exploration for and
Evaluation of Mineral Resources, all costs incurred prior to
obtaining the legal right to undertake exploration and evaluation
activities on a project were written off as incurred. Exploration
and evaluation costs arising following the acquisition of a right
to explore a specific area or evaluate a mineral resource were
capitalised, pending determination of the technical feasibility and
commercial viability of the project, or upon termination of such
right. This expenditure included:
- geological studies;
- exploratory drilling;
- trenching and sampling;
- costs associated with evaluating the technical feasibility and
commercial viability of exploiting the mineral resource; and
- an appropriate allocation of administrative and other general
overheads directly attributable to those mineral resources.
If the Group subsequently determined that the mineral resource
was not technically feasible or commercially viable, the
expenditure was written off to profit and loss in the period in
which this assessment was made.
3.12 Property, plant and equipment
Property, plant and equipment are recognised at cost less
accumulated depreciation and impairment losses. Mining asset costs
previously categorised as deferred exploration and evaluation costs
in intangible assets, were transferred into property, plant and
equipment once technical feasibility and commercial viability had
been determined. On commencement of commercial production the costs
of mining assets were amortised in accordance with the depreciation
policy described below.
The Group recognises in the carrying amount of an item in
property, plant and equipment, the cost of replacing part of such
an item when that cost is incurred if it is probable that the
future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other
costs are recognised in profit and loss as an expense when
incurred.
Depreciation is charged to profit and loss on a straight-line
basis in order to write off the cost of property, plant and
equipment, less estimated residual value over the estimated useful
economic lives of each component of property, plant and equipment.
The Group considers this to be a reasonable approximation to
depreciation of the assets over the proven and probable reserves on
a unit of production basis. Where components of property, plant and
equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
The estimated useful lives are as follows:
Mining assets:
-Plant 2 - 10 years
-Mining equipment 4 years
-Vehicles 4 years
Office, furniture and equipment 5 years
Computer equipment 3 years
Buildings 10 years
Assets in the course of construction are not depreciated.
Gains or losses on disposal are determined by comparing the
proceeds with the carrying amount of the asset. The net amount is
included in profit and loss for the period.
3.13 Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets 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 the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs. As at 31 December 2011, the Group had one
significant cash generating unit being the Marropino / Mutala cash
generating unit comprising the Marropino and Mutala mining
concessions with their associated mining and processing equipment.
This cash generating unit is part of the operations which were
discontinued in the period ended 31 May 2013.
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 cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in
profit and loss because the Group does not record any assets at a
revalued amount.
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 cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in profit and
loss.
3.14 Inventories
All inventories related to operations which were discontinued in
the period ended 31 May 2013. Inventories were stated at the lower
of cost and net realisable value. Cost comprises direct costs and
an appropriate share of overheads that had been incurred in
bringing the inventories to their present location and condition
(based on normal operating capacity). Cost was calculated on a
weighted average cost method. Net realisable value is the estimated
selling price in the ordinary course of business, less the
estimated costs of completion and disposal, or value in use.
Finished product consisted of saleable Ta(2) O(5)
concentrate.
Work-in-progress was Ta(2) O(5) concentrate that was awaiting
final aggregation or that was "locked up" within the final
processing plant.
Spare parts and consumables represented items used within the
production process on a recurring basis, such as diesel,
explosives, pump impellers and other spare parts.
3.15 Financial instruments
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
3.15.1 Financial Assets
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within
the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except
for those financial assets classified as at FVTPL, which are
initially measured at fair value.
Financial assets are classified into the following specified
categories: financial assets at 'FVTPL', 'held-to-maturity'
investments, 'available-for-sale' financial assets and 'loans and
receivables'. The classification depends on the nature and purpose
of the financial asset and is determined at the time of initial
recognition. The Company and Group currently only have financial
assets in the category of loans and receivables.
3.15.1.1 Loans and receivables
Trade receivables, loans, bank balances, cash in hand and other
receivables that have fixed or determinable payments that are not
quoted in an active market are classified as 'loans and
receivables'. Loans and receivables are measured at amortised cost
using the effective interest method, less any impairment. Interest
income is recognised by applying the effective interest rate,
except for short-term receivables when the recognition of interest
would be immaterial.
The effective interest method is a method of calculating the
amortised cost of a financial instrument 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 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 instrument, or,
where appropriate, a shorter period, to the net carrying amount on
initial recognition.
3.15.1.1.1 Trade receivables
Trade receivables are non-interest bearing and are stated at
their nominal amount that is usually the original invoiced amount
less provisions made for bad and doubtful receivables. Estimated
irrecoverable amounts are based on the ageing of the receivable
balances and historical experience. Individual trade receivables
are written off when management deems them not to be
collectible.
3.15.1.1.2 Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and in hand,
short-term deposits, and other short-term investments that are
highly liquid and can be readily converted into cash.
3.15.1.2 Impairment of financial assets
Financial assets are assessed for indicators of impairment at
each balance sheet date. 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 financial asset, the
estimated future cash flows of the investment have been
affected.
For loans and receivables carried at amortised cost, the amount
of the impairment is the differences between the asset's carrying
amount and the present value of estimated future cash flows,
discounted at the financial asset's original effective interest
rate.
The carrying amount of the financial asset is reduced through
the use of an allowance account. When a financial asset is
considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off
are credited against the allowance account. Changes in the carrying
amount of the allowance account are recognised in profit or
loss.
If in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through profit and loss to
the extent that the carrying amount of the investment at the date
the impairment is reversed does not exceed what the amortised cost
would have been had the impairment not been recognised.
3.15.1.3 Derecognition of financial assets
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. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
3.15.2 Financial liabilities and equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangement.
3.15.2.1 Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of the Company after deducting all of its
liabilities. Equity instruments issued by the Group are recognised
at the proceeds received, net of direct issue costs and adjustments
required to comply with applicable accounting standards for
compound instruments (refer to note 3.15.2.2 and 3.15.2.4).
3.15.2.2 Compound instruments
The component parts of compound instruments (such as CRPS,
convertible loan notes or warrants issued with Ordinary Shares
where the warrants do not meet the definition of equity
instruments) issued by the Group are classified separately as
financial liabilities and equity in accordance with the substance
of the contractual arrangement. At the date of issue, the fair
value of the liability component is estimated. For CRPS and
convertible loan notes, this amount is recorded as a liability on
an amortised cost basis using the effective interest method until
extinguished upon conversion or at the instrument's maturity date.
For derivative warrants, the fair value of the warrants is measured
at each reporting date, or exercise date, with changes in fair
value credited or charged to profit and loss within finance costs.
The equity component is determined by deducting the amount of the
liability component on initial measurement from the fair value of
the compound instrument as a whole. This is recognised and included
in equity and is not subsequently re-measured.
3.15.2.3 Financial liabilities
Financial liabilities are classified as either financial
liabilities 'at FVTPL' or 'other financial liabilities'.
3.15.2.3.1 Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when the
financial liability is either held for trading or it is designated
as at FVTPL.
A financial liability is classified as held for trading if:
- it has been incurred principally for the purpose of
repurchasing it in the near term; or
- on initial recognition it is 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 liabilities at FVTPL are stated at fair value, with
any gains or losses arising on re-measurement recognised in profit
and loss. The Group and Company issued certain warrants which fall
within the category of FVTPL (refer to note 3.15.2.4).
3.15.2.3.2 Other financial liabilities
Other financial liabilities are initially measured at fair
value, net of transaction costs.
Other financial liabilities are subsequently measured at
amortised cost using the effective interest method, with interest
expense recognised on an effective yield basis.
3.15.2.3.3 Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or they
expire.
3.15.2.4 Derivative financial instruments
Derivative financial instruments are initially recognised at
fair value at the date a derivative contract is entered into and
are subsequently remeasured to their fair value at each balance
sheet date. The resultant gain or loss is recognised in profit or
loss. Other than warrants and the Amended Subscription Agreement,
the Group does not have any derivative instruments.
For derivative warrants the Company and Group estimates the fair
value of the instruments on initial recognition using a
Black-Scholes pricing model. Where the warrants were issued as part
of the Company's fundraisings and are directly related to Ordinary
Shares issued by the Company, this fair value is 'carved out' of
the proceeds received from the issue of Ordinary Shares and
recorded within current liabilities. Where warrants are issued for
other purposes, including warrants issued to Darwin Strategic
Limited as arrangements fees for the EFF, the initial fair value is
charged to profit and loss unless the warrants are issued as part
of a transaction with a Shareholder in that capacity, in which case
the initial fair value is charged directly to equity as a deemed
capital distribution. The pricing model is updated at each
reporting date, or exercise date, with changes in fair value
recorded in profit and loss within finance costs. Upon exercise the
fair value of the warrants is recorded to the share premium
account.
For the Amended Subscription Agreement, which is a conditional
forward sale of equity instruments in the Company at a fixed price
in GBP which is not the functional currency of the Company, the
instrument is initially recorded at fair value, with the related
credit recorded directly to equity as a deemed capital contribution
from a Shareholder in that capacity. The valuation is updated at
each reporting date with changes in fair value recorded in profit
and loss within finance costs. Upon termination of the Amended
Subscription Agreement asset, the fair value at that date was
charged to equity as a deemed capital distribution.
3.15.2.5 Embedded derivatives
Derivatives embedded in other financial instruments or other
host contracts are treated as separate derivatives where their
risks and characteristics are not closely related to those of the
host contract and the host contracts are not measured at FVTPL.
Where the embedded derivative is closely related to the host
contract it is initially recorded at fair value with the fair value
included in the carrying value of the host contract and is not
subsequently re-measured. The Group has not identified any embedded
derivatives which are not closely related to the host contract.
3.16 Leases
Leases that transfer substantially all the risks and reward of
ownership are classified as finance leases. All other leases are
classified as operating leases. As at 31 May 2013 the Group does
not have any leases. During the periods presented in these
financial statements, the Group was counterparty to certain
operating lease contracts.
Rentals payable under operating leases are charged to income on
a straight-line basis over the term of the relevant lease.
3.17 Provisions
The Group recognises a provision when it has a present legal or
constructive obligation as a result of a past event, and it is
probable that the Group will be required to settle the obligation
and the amount concerned can be estimated reliably. Provisions are
measured based on the best estimate of the expenditure required to
settle the present obligation at the reporting date. Where the
effect of the time value of money is material, the amount of the
provision is discounted to present value using a pre-tax rate that
reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. The
increase in the amount of the provision as a result of the passage
of time is recorded in the Consolidated statement of comprehensive
loss for the year.
Where the Group provided for rehabilitation of mining sites and
the Group anticipated the expenditure at the commencement of
exploration, the provision was recorded with a corresponding
increase in the carrying value of property, plant and
equipment.
4. Critical accounting judgEments and key sources of estimation uncertainty
In the application of the Group's accounting policies which are
described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both current and future periods.
The effect on the financial statements of changes in estimates in
future periods could be material.
4.1 Critical judgments in applying the Group's accounting policies
The following are the critical judgements, other than for the
going concern assumption (refer to note 3.1) that the Directors
have made in the process of applying the Group's accounting
policies and that have the most significant effect on the amounts
recognised in the financial statements.
4.1.1 Obligations arising from Ta(2) O(5) concentrate supply contracts
SMC is the counterparty to two long term Ta(2) O(5) concentrate
supply contracts, further details of which are provided in note 31.
SMC is no longer able to supply Ta(2) O(5) concentrate to the
Group's customers under these contracts because (1) it no longer
has access to supply of Ta(2) O(5) concentrate from the Marropino
Mine following the enforcement of HAMCM's Default under the SLF,
and (2) it does not have the resources to enable it to procure
Ta(2) O(5) concentrate from other sources for onwards supply to the
Group's customers because the price it would have to source
material at significantly exceeds the amount it can realise from
the sale of the material at the contract prices. Further, and until
the Group and Company obtain releases from the supply contracts,
the Directors believe that the Company will be unable to raise
additional finance which might allow it to satisfy its obligations
under the contracts in part or in full. Under the governing law of
both of SMC's supply contracts the customer is legally entitled to
seek compensation for damages arising from the non-performance by
SMC of its obligations under the relevant contract. Accordingly,
SMC has no viable solution by which it can satisfy its Ta(2) O(5)
supply obligations under the contracts and the Ta(2) O(5) supply
contracts are onerous contracts for SMC and the Group. Further, the
Company has guaranteed SMC's performance under both contracts and
accordingly the contracts are onerous on the Company.
The Directors believe, following extensive discussions with the
customers, that it is possible for SMC and the Company to obtain
releases from all past and future obligations under the contracts
without requiring an outflow of economic benefits (other than as
already recorded in these financial statements). Should this
assessment prove to be incorrect, and if the customers were to seek
damages from the Group for non-performance under the contracts, the
amounts involved could be highly material and the Directors believe
that the Group's assets would be insufficient to satisfy the claims
made. The Directors are further of the opinion that the Company
would not be able to raise additional funding to satisfy the claims
and accordingly the Company, and Group, would in all likelihood
become insolvent and would need to be wound up.
Due to the uncertain outcome of these discussions and the wide
range of potential financial outcomes the ultimate outcome of this
matter cannot presently be reliably estimated, and consequently no
provision for any liability that may result has been made in either
the Group or Company only financial statements.
4.1.2 Release of short-term provisions
In the 12 month period ended 31 December 2010, the Company and
Group recorded a short term provision of $124,000 for amounts
invoiced to the Company relating to the Marropino process plant
upgrade programme. The invoiced amounts were disputed by the
Company due to the quality of the work completed by the supplier.
The supplier ceased to be engaged by the Group at the same time.
While the Company has never received a formal credit note for the
invoices raised, the supplier has never requested payment of the
outstanding amounts. Further, if any request for payment is
received in the future, the Directors believe that the Company will
be successful in defending any claim. Due to the passage of time
and the factors noted above, the Directors are now of the opinion
that it is no longer probable that an outflow of resources will be
required to settle these invoiced amounts and accordingly are of
the opinion that the conditions of IAS 37:14 for the continuing
recognition of a provision are no longer met. The short term
provision has therefore been released to profit and loss, within
discontinuing operations.
4.2 Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the balance sheet date, 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.
4.2.1 Warrants
Certain warrants issued by the Group are classified as
derivative financial liabilities as the warrants were issued in a
currency other than the functional currency of the Company. At each
reporting date the fair value of the warrants is measured using a
Black-Scholes valuation model, with changes in the fair value of
the warrants recorded in profit and loss within finance
income/expense. The valuation is sensitive to the inputs in the
valuation model, some of which require judgment. The warrants do
not create any obligation on the Company or Group other than to
deliver Ordinary Shares in the Company for a fixed price at the
option of the holder, over the life of the warrants. Further
details are provided in note 23.2.
5. REVENUE
An analysis of the Group's revenue from continuing operations is
as follows:
17 month period ended 31 May
2013 12 month period ended 31 December 2011
(represented - note 13)
US$000 US$000
Bank interest 79 115
============================ ======================================
Total revenue for each period is presented in note 13.
6. SEGMENT INFORMATION
Until 22 March 2013 the Directors considered that the primary
reporting format for the Group was by business segment. The
Directors considered there to be two business segments, being (1)
the mining, extraction, production and distribution of Ta(2) O(5)
concentrate, undertaken from the Marropino Mine in Mozambique, and
(2) the Ta(2) O(5) purchasing activities undertaken by the Group in
association with local partners in the DRC (such activities having
commenced in the current reporting period). All administrative
expenditure of the Group was allocated to these segments. The Group
lost control over both of these operations on 22 March 2013 due to
enforcement of HAMCM's Default under the terms of the SLF (refer to
note 13). The directly identifiable income, expenditure and cash
flows related to these operations are presented within discontinued
operations (refer to note 13). Following the Settlement Agreement
with Richmond (refer to the section of the Directors' report
entitled 'Business review'), and subsequent approval by the
Company's shareholders at the 2013 EGM held on 19 June 2013 of a
new Investing Policy, the Company has become an Investing Company.
All income and expenditure for continuing activities is now
allocated to this activity which accounts for all of the Group's
assets and liabilities as at 31 May 2013.
7. LOSS FOR THE PERIOD FROM CONTINUING OPERATIONS
17 month period ended 31 May
2013 12 month period ended 31 December 2011
(represented - note 13)
US$000 US$000
Loss for the period from continuing
operations has been arrived at after
charging/(crediting):
Depreciation of property, plant and equipment 1 20
Impairment of property, plant and equipment - 22
Loss on disposal of property, plant and 4 -
equipment
Share-based incentive expense (note 27) 29 648
Exchange (gain) / loss (68) 437
Staff costs (note 9) 695 617
Operating lease rentals 11 -
============================= =======================================
8. AUDITOR'S REMUNERATION
The analysis of the auditor's remuneration is as follows:
17 month period ended 31 May 12 month period ended
2013 31 December 2011
US$000 US$000
Fees payable to the Company's auditor for the audit of the
Company's accounts (1) 71 149
Fees payable to the Company's auditor and their associates for
other services to the Group:
The audit of the Company's subsidiaries - 31
---------------------------- ---------------------
Total audit fees 71 180
---------------------------- ---------------------
Audit related assurance services - 28
Corporate finance services - 300
---------------------------- ---------------------
Total non-audit fees - 328
---------------------------- ---------------------
71 508
============================ =====================
Of which relating to:
Continuing operations 71 477
Discontinued operations - 31
---------------------------- ---------------------
71 508
============================ =====================
(1) Included within fees payable for the audit of the Company's accounts
for the current period is $36,000 relating to the finalisation of the
audit for the 12 month period ended 31 December 2011. The audit fee
payable for the audit of the Company's accounts for the 17 month period
ended 31 May 2013 is $35,000.
Audit related assurance services in the twelve month period
ended 31 December 2011 comprised (1) services provided to the Group
in connection with the statutory solvency statements required to be
made by the Directors to comply with Jersey Law for the purposes of
payment of the quarterly dividend on the CRPS; (2) statutory
services relating to the Share Consolidation; and (3) the review of
the accounting treatment of specific transactions. Corporate
finance services related to procedures completed by Deloitte LLP in
respect of the Company's business plan in May to August 2011. The
audit of the Company's subsidiaries related to HAMCL and HAMCPS,
both of which are no longer controlled by the Group following the
enforcement of HAMCM's Default under the terms of the SLF.
Fees payable to Deloitte LLP and their associates for non-audit
services to the Company are not required to be disclosed because
the Group financial statements disclose such fees on a consolidated
basis.
9. STAFF
17 month period ended 31 May 12 month period ended
2013 31 December 2011
No. No.
The average monthly number of employees in the Group during the
period were:
Executive directors 2 1
Management 1 2
Administration 28 24
Operational 349 468
---------------------------- ---------------------
380 495
============================ =====================
Of which relating to:
Continuing operations 3 3
Discontinued operations 377 492
---------------------------- ---------------------
380 495
============================ =====================
17 month period ended 31 May 12 month period ended
2013 31 December 2011
US$000 US$000
Staff costs (including executive Director's emoluments) comprise:
Salaries and wages 8,713 6,724
Social security costs 193 145
Share based payments expense 30 188
---------------------------- ---------------------
8,936 7,057
============================ =====================
Of which relating to:
Continuing operations 695 617
Discontinued operations 8,241 6,440
---------------------------- ---------------------
8,936 7,057
============================ =====================
Staff costs exclude non-executive Director's emoluments and fees
payable for the service of certain Directors whose services are
provided by third party companies and associated share-based
payment expense. Information on these fees and expenses are
provided in notes 10 and 30.
10. REMUNERATION OF DIRECTORS AND KEY MANAGEMENT
17 month period ended 31 May 12 month period ended
2013 31 December 2011
US$000 US$000
Remuneration of Directors and other key management personnel
is detailed below:
Directors' emoluments 792 501
Directors' compensation for loss of office - 151
Directors' share-based payment expense 16 218
Directors' other benefits 116 69
Other key management emoluments 300 284
Other key management share-based payment expense 12 47
Other key management other benefits 36 116
----------------------------- ----------------------
1,272 1,386
============================= ======================
Of which relating to:
Continuing operations 944 1,018
Discontinued operations 328 368
----------------------------- ----------------------
1,272 1,386
============================= ======================
Directors' emoluments reported above include fees payable for
the services of non-executive Directors and certain Directors whose
services are provided by third party companies and share-based
payment expense. Details are provided in note 30.
The highest paid Director in the period was Mr F F
Fernandez-Torres (2011 - Mr E Kohn TD), who received aggregate
payments and benefits with a cash value amounting to $390,000 (2011
- cash value amounting to $390,000).
11. NET FINANCE INCOME / (EXPENSE)
17 month period ended 31 May 12 month period ended
2013 31 December 2011
(represented - note 13)
US$000 US$000
Interest income on bank deposits 79 115
Change in fair value of derivative assets (note 23) 4,036 -
Change in fair value of derivative liabilities (note 23) 1,172 3,092
----------------------------- ------------------------
Investment revenues 5,287 3,207
Interest expense on CRPS (note 22) (870) (941)
Debt arrangement expenses - (116)
Interest expense on unsecured loans provided by Richmond (2,266) -
Amortisation of loan arrangement fees and transaction costs
arising
on unsecured loans provided by Richmond (840) -
Charge arising on redemption of CRPS (note 22) - (5,731)
Finance costs (3,976) (6,788)
Net finance income / (expense) 1,311 (3,581)
============================= ========================
12. TAXATION
17 month period ended 31 May 12 month period ended
2013 31 December 2011
(represented - note 13)
US$000 US$000
Current tax
Tax - -
============================= ========================
The Group's continuing operations are all tax resident in Jersey
and are subject to Jersey corporate income taxation at the rate of
0% (2010: 0%). Accordingly there is no difference between the
statutory tax rate applicable to the Group from continuing
operations and the effective tax rate. Disclosures relating to
discontinued operations are provided in note 13.
13. LOSS FOR THE PERIOD FROM DISCONTINUED OPERATIONS
As described more fully in the section of the Directors' report
entitled 'Business and financial review', on 22 March 2013 the
Group lost control of HAMCM and its subsidiary undertakings as a
result of the Group being unable to repay the amounts outstanding
on the SLF at that date of $54,640,000. This amount became
repayable following the enforcement by Richmond of HAMCM's Default
under the SLF which led to an Early Repayment Event. The HAMCM
Group carried out all of the Group's Ta(2) O(5) mining, processing
and purchasing operations in Mozambique and the DRC. As a result of
this loss of control, the Group also ceased to be involved in the
distribution and sale of Ta(2) O(5) concentrate (which was
undertaken through SMC) with effect from that date. The process of
the disposal of the HAMCM Group was organised on behalf of Richmond
(acting in its capacity as Security Trustee) by Euro Pacific Canada
Inc., a full service IIROC registered brokerage headquartered in
Toronto, Canada and specializing in foreign markets and securities.
The disposal process was completed on 24 June 2013 with no payments
due to the Group.
The Ta(2) O(5) Operations represented the major business segment
of the Group and accordingly, as required by IFRS 5, the results of
the Ta(2) O(5) Operations are presented as discontinued operations
within the Consolidated statement of profit or loss and other
comprehensive income. Cash flows pertaining to the Ta(2) O(5)
Operations are presented separately in the Consolidated cash flow
statement. The results of operations and cash flows reported for
the period ended 31 December 2011 have been re-presented for these
discontinued operations as required by IFRS 5.
The results of the discontinued Ta(2) O(5) Operations, which
have been included in the Consolidated statement of profit or loss
and other comprehensive income, were as follows:
Period ended
22 March 12 month period ended
2013 (1) 31 December 2011
US$000 US$000
Loss from Ta(2) O(5) Operations:
Revenue (2) 4,131 5,614
Expenses (3) (24,240) (51,465)
Share of loss of associated companies (note 17) (300) -
Investment revenues (4) 78 533
Finance expense (15,810) (12)
Loss before taxation (36,141) (45,330)
Taxation (21) (20)
------------- ----------------------
Loss after tax from discontinued operations in the period (5) (36,162) (45,350)
Gain on loss of control of discontinued operations:
Gain on de-recognition of discontinued operations (6)(7) 24,464 -
------------- ----------------------
Net loss attributable to discontinued operations (attributable to owners of
the Company) (11,698) (45,350)
============= ======================
(1) Represents the period from 1 January 2012 to 22 March 2013.
(2) Represents revenue derived through the sale of goods realised by SMC
from the onwards sale of Ta(2) O(5) concentrate purchased exclusively
from the HAMCM Group. Revenue by destination of the Group's customers
was $1,108,000 (12 month period ended 31 December 2011: $578,000) to
one customer in the United States of America and $3,024,000 (12 months
ended 31 December 2011: $5,036,000) to a separate customer in Thailand.
Total revenue for the Group during the 17 month period ended 31 May 2013
from continuing and discontinuing operations, including investment revenues,
was $4,288,000 (12 month period ended 31 December 2011: $5,739,000).
(3) Included within expenses are charges recorded for the impairment of property,
plant and equipment of $13,000 (12 month period ended 31 December 2011:
$31,776,000).
(4) Included within investment revenues is a credit of $3,196,000 (12 month
period ended 31 December 2011: $524,000) arising from borrowing costs
capitalised in the period arising on qualifying expenditure incurred
within discontinued operations..
(5) Taxation in both periods presented relates to provisions for corporation
tax in Mozambique in the respective period. Net deferred tax recorded
to profit and loss was $nil in each period.
(6) An accounting gain of $24,464,000 arose on the loss of control of the
HAMCM Group, being the carrying amount of the HAMCM Group's net liabilities
as at 22 March 2013 of $24,652,000, less $188,000 of foreign currency
translation losses previously accumulated within the foreign currency
translation reserve. Included within the HAMCM Group's net liabilities
as at 22 March 2013 was $54,640,000 payable to Richmond under the SLF
as at that date. No tax charge or gain arose on the discontinuance of
the Ta(2) O(5) Operations.
(7) Cash and cash equivalents held by the HAMCM Group as at 22 March 2013
was $2,252,000, the de-recognition of which is reported within the Consolidated
cash flow statement within 'Net cash used in investing activities by
discontinued operations'.
Lack of access to underlying accounting support and audit
evidence
The net loss from discontinued operations of $11,698,000 is
computed utilising the accounting records of the HAMCM Group (which
comprised the majority of the Ta(2) O(5) Operations), prepared on
an IFRS basis until 22 March 2013, the date on which the Group lost
control over the HAMCM Group. While the accounting records for the
HAMCM Group are available to the Group for the period during which
it controlled these companies, and the Board is satisfied that the
records accurately reflect the results and cash flows of these
operations, the Group no longer has access to the underlying
documents that support the transactions and balances recorded in
the accounting records for the HAMCM Group. Accordingly, while the
Group is able to derive and present the results of the discontinued
operations as required by IFRS 5, including the results of the
HAMCM Group, the Company's auditor is unable to access the
underlying documents to perform their audit on the amounts reported
within these operations for the HAMCM Group for the period 1
January 2012 to 22 March 2013. Their audit report is therefore
qualified in respect of the discontinued operations.
In addition to the amounts included in this note 13, the
principal amounts and disclosures in these financial statements
that reflect the results and transactions of the HAMCM Group, and
accordingly the discontinued operations, for which the Group is no
longer able to access the supporting documentary evidence are:
-- The foreign currency translation loss arising during the period of $201,000;
-- The amounts attributed to discontinued operations in the Consolidated cash flow statement;
-- The amounts and number of employees attributed to
discontinued operations in notes 9 and 10;
-- The movements in intangible fixed assets and property, plant
and equipment in notes 15 and 16 and the movements in the taxation
and long term provisions in note 25.1 and note 25.2; and
-- The disclosures in respect of Associate Companies in note 17.
14. LOSS PER SHARE
There is no difference between the diluted loss per share and
the basic loss per share presented as the Group is loss making in
all periods presented.
14.1 From continuing and discontinued operations
The calculation of basic and diluted loss per share from continuing and discontinued
operations is based on the following data:
17 month period ended 31 May 12 month period ended
2013 31 December 2011
(represented - note 13)
Loss for the period - US$ 12,911,000 54,728,000
Weighted average number of shares (1) (2) 125,025,404 57,041,073
----------------------------- ------------------------
Basic and diluted loss per share - US Cents 10.3 95.9
============================= ========================
(1) The denominator for the purpose of calculating basic and diluted loss
per share has been adjusted in the twelve month period ended 31 December
2011 for the Share Consolidation.
(2) The weighted average number of Ordinary Shares for both periods presented
excludes 1,743,928 shares held by the EBT.
14.2 From continuing operations
The calculation of basic and diluted loss per share from
continuing operations is based on the following data:
17 month period ended 31 May 12 month period ended
2013 31 December 2011
(represented - note 13)
Loss for the period - US$ 12,911,000 54,728,000
Adjustments to exclude loss for the period from
discontinuing operations - US$ (11,698,000) (45,350,000)
----------------------------- ------------------------
Loss from continuing operations - US$ 1,213,000 9,378,000
----------------------------- ------------------------
Weighted average number of shares (1) 125,025,404 57,041,073
----------------------------- ------------------------
Basic and diluted loss per share - US Cents 1.0 16.4
============================= ========================
(1) The denominators used are calculated on the same basis as detailed above
for basic and diluted loss per share from continuing and discontinuing
operations.
14.3 Potentially dilutive instruments
Subsequent to the period end the Company issued 14,547,722 new
Ordinary Shares on 20 June 2013 in settlement of certain
obligations to suppliers of the Group (refer to note 21 and 32).
Instruments that could be dilutive in future periods if the Group
realises a net profit are disclosed in note 26.3.4.
15. INTANGIBLE ASSETS
Morrua Marropino Mutala Other exploration and evaluation Total
US$000 US$000 US$000 US$000 US$000
Cost
At 1 January 2011 2,494 454 - - 2,948
Additions 56 - 8 375 439
-------- ---------- ------- --------------------------------- --------
At 31 December 2011 2,550 454 8 375 3,387
Additions 617 - 6 11 634
Adjustment for discontinued operations (3,167) (454) (14) (386) (4,021)
-------- ---------- ------- --------------------------------- --------
At 31 May 2013 - - - - -
-------- ---------- ------- --------------------------------- --------
Amortisation and impairment
At 1 January 2011 (2,494) (454) - - (2,948)
Impairment in the period (56) - (8) (375) (439)
-------- ---------- ------- --------------------------------- --------
At 31 December 2011 (2,550) (454) (8) (375) (3,387)
Impairment in the period (8) - (5) - (13)
Adjustment for discontinued operations 2,558 454 13 375 3,400
At 31 May 2013 - - - - -
-------- ---------- ------- --------------------------------- --------
Net book value
-------- ---------- ------- --------------------------------- --------
At 31 May 2013 - - - - -
-------- ---------- ------- --------------------------------- --------
At 31 December 2011 - - - - -
======== ========== ======= ================================= ========
During 2012 the Group completed a drilling programme at Morrua
comprising nineteen infill drill holes where gaps existed in
previous drilling programmes and three confirmatory drill holes. In
total, approximately 2,000 metres of core samples were extracted
which, when analysed by the external laboratory, confirmed Ta(2)
O(5) grades materially in line with previous results reported by
the Group. This work represents substantially all of the increase
in intangible assets reported above. All intangible assets were
held by HAMCL which ceased to be controlled by the Group on 22
March 2013.
16. PROPERTY, PLANT AND EQUIPMENT
Assets under Office furniture,
construction Mining assets equipment and computers Buildings Total
US$000 US$000 US$000 US$000 US$000
Cost
At 1 January 2011 3,548 14,795 584 1,631 20,558
Additions 30,139 5,190 208 - 35,537
Disposals - - (27) - (27)
Transfers (945) 166 129 650 -
Exchange differences - - (41) - (41)
At 31 December 2011 32,742 20,151 853 2,281 56,027
Additions 12,228 986 246 279 13,739
Disposals - - (22) - (22)
Adjustment for
discontinued operations (44,437) (21,137) (1,006) (3,093) (69,673)
Transfers (533) - - 533 -
Exchange differences - - (24) - (24)
At 31 May 2013 - - 47 - 47
------------------------- -------------- ------------------------ ---------- ---------
Depreciation and
impairment
At 1 January 2011 (484) (14,248) (441) (1,628) (16,801)
Charge for the year - (555) (124) (22) (701)
Eliminated on disposals - - 5 - 5
Impairment (26,248) (4,323) (278) (510) (31,359)
Transfers - 22 (22) - -
Exchange differences - - 41 - 41
At 31 December 2011 (26,732) (19,104) (819) (2,160) (48,815)
Charge for the year - (505) (55) (52) (612)
Eliminated on disposals - - 15 - 15
Adjustment for
discontinued operations 26,732 19,609 789 2,212 49,342
Exchange differences - - 23 - 23
------------------------- -------------- ------------------------ ---------- ---------
At 31 May 2013 - - (47) - (47)
------------------------- -------------- ------------------------ ---------- ---------
Carrying amount
------------------------- -------------- ------------------------ ---------- ---------
At 31 May 2013 - - - - -
========================= ============== ======================== ========== =========
At 31 December 2011 6,010 1,047 34 121 7,212
========================= ============== ======================== ========== =========
At 31 May 2013, the Group had no contractual commitments for the
acquisition of property, plant and equipment (31 December 2011: the
Group had contractual commitments amounting to $2,665,000,
principally related to the new processing plant at the Marropino
Mine and associated mining equipment and infrastructure).
Included within additions to the cost of 'Assets under
construction' for the 17 month period ended 31 May 2013 is
$3,196,000 (12 months ended 31 December 2011: $524,000) of interest
capitalised from borrowings at the weighted average effective
interest rate applicable to these borrowings of 25.506 (12 months
ended 31 December 2011: 15.028%).
As required by IAS 36, Impairment of assets, the Group completed
an impairment review of its property, plant and equipment as at 31
December 2011 resulting in an impairment charge of $31,359,000.
Further details of the impairment review undertaken are included in
note 4.1.1 to the financial statements for the year ended 31
December 2011. All of the Group's material assets property, plant
and equipment assets were held by companies in the HAMCM Group.
Following the enforcement of HAMCM's Default under the terms of the
SLF, the Ta(2) O5 Operations ceased to be controlled by the Group
and the impairment calculations have not been updated in the
current period.
17. Associate companies
The Group, along with local partners, established two companies
registered in the Katanga province in the DRC, being (1) African
Speciality Metal SP.R.L in which the Company had an interest, as at
22 March 2013, in 50.0% of the quota capital and (2) Tantale et
Niobium du Tanganika SP.R.L, a 75% subsidiary of ASM in association
with Cominière, a DRC state owned company. Through these companies
the Group secured interests in two exploration licenses in areas of
known tantalum and tin mineralisation while also obtaining tantalum
trading rights. ASM's initial activities included sourcing
ethically produced Ta(2) O(5) concentrate from local mining
co-operatives, utilising the iTSCi "bag and tag" scheme. The
initial production of Ta(2) O(5) concentrate commenced during
Quarter 4-2013.
These investments were accounted for as associated companies,
with their carrying value recorded at the initial investment of the
Group to acquire participation rights in ASM, less the Group's
50.0% share of the loss incurred by these companies in the period
(based on unaudited consolidated financial statements of the ASM
Group). The Group lost control of the ASM Group on 22 March 2013
following the enforcement of HAMCM's Default under the SLF. The
carrying value of 'Investments in Associates' at that date was $nil
due to the losses incurred in ASM to that date exceeding the
Group's interest in ASM represented by the initial investment
made.
18. DEFERRED TAX ASSETS
31 May 31 December 2011
2013
US$000 US$000
Deferred tax asset - 41,789
Allowance - (41,789)
-------- -----------------
- -
============================= =================
The deferred tax asset as at 31 December 2011, which was fully
provided for, related to the accumulated tax losses incurred by the
Group's discontinued operations in Mozambique and timing
differences on fixed assets in the same tax jurisdiction.
19. INVENTORIES
31 May 31 December 2011
2013
US$000 US$000
Spare parts and consumables - 1,712
Finished goods - 570
-------- -----------------
- 2,282
====================================== =================
20. TRADE AND OTHER RECEIVABLES
31 May 31 December 2011
2013
US$000 US$000
Non-current assets
Other receivables - 1,809
------- -----------------
Current assets
Trade receivables 176 2,527
Other receivables - 2,484
Prepayments 62 296
------- -----------------
238 5,307
------- -----------------
238 7,116
======= =================
The balance recorded within 'Trade receivables' of $176,000 is
due from the sale of Ta(2) O(5) concentrate prior to the
enforcement of HAMCM's Default under the SLF. Under the terms of
the Settlement Agreement (refer to section 4.3 of the Directors'
report) any amount recovered from the Group's customers is due to
Richmond with the obligation recorded within 'Other payables'
(refer to note 21).
21. TRADE AND OTHER PAYABLES
31 May 31 December 2011
2013
US$000 US$000
Trade payables 157 6,713
Other payables 183 207
340 6,920
======= =================
Included within trade payables is $nil (31 December 2011:
$3,482,000) of amounts payable for the purchase of items of
property, plant and equipment. Included within other payables is
$176,000 which is due to Richmond if the Group is successful in
recovering amounts due from its customers (refer to note 20).
All other amounts included within 'Trade and other payables' are
stated at their invoiced value or the Directors best estimate of
the expected amounts payable for liabilities accrued but not yet
invoiced. Subsequent to the period end, on 20 June 2013, the
Company issued 14,547,722 new Ordinary Shares in full and final
settlement of obligations of the Company and Group with a carrying
value of $120,000 as at 31 May 2013 and 20 June 2013. In accordance
with IFRIC 19, the difference between the fair value of the
Ordinary Shares on the date they were issued of $158,000 and the
carrying value of the discharged obligations at that date of
$120,000, being $38,000, was charged to profit and loss.
22. Convertible redeemable preference shares
22.1 Carrying value
The following summarises the movements in the CRPS liability and
equity components during the periods presented:
Liability Equity Total
US$000 US$000 US$000
At 1 January 2011 - - -
Initial measurement 10,100 1,804 11,904
Allocation of issue expenses (832) (148) (980)
Share based payments credit - 38 38
Interest accrued at effective interest rate 940 - 940
Interest paid in cash (374) - (374)
Charge arising on redemption 5,731 - 5,731
Redemption of 1,794,215 CRPS including outstanding CRPS Dividend (11,955) (1,077) (13,032)
---------- -------- ------------
At 31 December 2011 3,610 617 4,227
Interest accrued at effective interest rate 870 - 870
Interest paid in cash (215) - (215)
At 31 May 2013 4,265 617 4,882
========== ======== ============
31 May 31 December
2013 2011
US$000 US$000
Included within
Current liabilities 506 109
Non-current liabilities 3,759 3,501
Convertible redeemable preference share reserve 617 617
-------- ------------
4,882 4,227
======== ============
22.2 Initial measurement and redemption in 2011
In March 2011 the Group secured the placing of 2,822,290 CRPS at
a price of $4.218 per CRPS raising gross proceeds of $11,904,000.
Expenses of $980,000 were incurred, of which $728,000 was settled
in cash and $252,000 through the issue of warrants to the placing
agents over 168,985 Ordinary Shares at a subscription price of
210.5 pence per Ordinary Share. On 1 October 2011, 1,794,215 CRPS
were redeemed through the issue of 18,686,422 new Ordinary Shares
and a further 470,987 new Ordinary Shares were issued in payment of
the related CRPS Dividend, the value of which was $190,000.
Under the terms of the CRPS (as amended on 28 September
2011):
-- the CRPS have a nominal value of GBP1.00 each;
-- each CRPS is convertible at any time at the holders' request
into one Ordinary Share in the Company;
-- the Company can give notice of redemption at any time at the
Issue Price. If an early redemption notice is issued, the holder of
the CRPS can issue a conversion notice at any date prior to the
stipulated redemption date;
-- subject to Jersey Law and in particular the Company being
solvent at the redemption date, the CRPS will be mandatorily
redeemed on 11 April 2016, with a total redemption value (excluding
CRPS Dividends) of $4,336,000;
-- the CRPS carry the CRPS Dividend of 10% of the CRPS Issue
Price, which accrues quarterly and is payable, subject to Jersey
Law in arrears within 10 calendar days of each of 31 March, 30
June, 30 September and 31 December; and
-- to the extent that the Company cannot lawfully pay the CRPS
Dividend or redeem the CRPS, which is the case when the Directors
are unable under Jersey Law to conclude that the Company is solvent
at the date of payment or redemption, then the CRPS Dividend or
redemption is deferred until the date at which it can lawfully be
paid.
While in legal form the CRPS are part of the Capital Stock of
the Company (note 26), the CRPS include components with liability
and equity features as defined under IFRS. IAS 32, 'Financial
Instruments: Presentation', requires the Group to identify the
equity and liability component parts of the instrument and assign a
value to each. The material components were identified in the 12
months ended 31 December 2011 as the host debt contract, a Company
call option to prepay the liability and a holder call option to
convert to Ordinary Shares. The fair value of the host debt
component was determined at the present value of the contractual
stream of future cash flows (including both preference dividend
payments and redemption amount) discounted at the market rate of
interest that would have applied to an instrument of comparable
credit quality with substantially the same cash flows, on the same
terms, but without the conversion feature. The relevant market
interest rate applicable to the Company was estimated at 14%. The
Company's prepayment call option was valued using the Montis
Convertibles Model. The Company's prepayment call option was
determined to be closely related to the host debt contract and was
not required to be fair valued separately from the host contract in
future periods. The liability component is subsequently measured at
amortised cost using the effective interest rate method and an
effective interest rate of 15.028%. The equity component is not
re-measured.
The redemption of 1,794,215 CRPS on 1 October 2011 was accounted
for under IAS 32:AG35 as an amendment to the terms of the CRPS to
make conversion more attractive by offering a favourable conversion
ratio in the event of conversion under the redemption offer as
extended by the Company. The difference between the fair value of
the consideration that the CRPS holder would have received under
the initial terms (i.e. 1 new Ordinary Share per CRPS with a fair
value of 25.0p at the date the redemption offer was extended) and
the fair value of the consideration that the CRPS holder received
under the revised terms (i.e. 10.4 new Ordinary Shares per CRPS
with a fair value of GBP2.604 or $4.218 at the date the redemption
offer was extended), measured at the date when the terms were
amended was recognised as a fair value loss of $5,731,000 in profit
and loss for the twelve months ended 31 December 2011.
22.3 CRPS Dividend
The Company has been unable to pay the CRPS Dividend for the
period commencing 1 April 2012 to the date of this report in
accordance with Jersey Law. As at 31 May 2013, $506,000 (31
December 2011: $109,000) was outstanding for the CRPS Dividend
recorded within current liabilities.
22.4 Amendment to the terms and conditions of the CRPS subsequent to the period end
As discussed more fully in note 32.4, on 24 July 2013 the terms
and conditions of the CRPS were amended to permit the Company to
discharge its obligations in respect of the CRPS, including the
CRPS Dividends due, through the Special Redemption. The Company
intends to redeem the outstanding CRPS through the Special
Redemption by the end of August 2013. Subsequent to the Special
Redemption, the Company will have no further obligations in respect
of the CRPS.
23. Derivative financial INSTRUMENTS
23.1 Derivative financial assets
On 19 August 2011 the Company entered into the Subscription
Agreement with Richmond pursuant to which Richmond conditionally
agreed with the Company to subscribe for 17,500,000 Subscription
Shares at the Subscription Price of 25.0 pence each in two equal
tranches on the First Subscription Date, being 30 November 2011,
and the Second Subscription Date, being 31 December 2011. The
amount of these subscriptions could be scaled back at the Company's
election and would be so scaled back by the Company to the extent
that there were valid applications from participants under the
Proposed Open Offer of 17,500,000 new Ordinary Shares at 25.0 pence
each. As compensation for entering the Subscription Agreement, and
subject to Richmond fulfilling its obligations contained therein,
the Company agreed to grant Richmond the Subscription Warrants,
being 17,500,000 warrants over new Ordinary Shares in the Company
exercisable at 25.0 pence per Ordinary Share until 31 December
2013. The purpose of this arrangement was to ensure that the
Company received the maximum proceeds which could be raised if the
Proposed Open Offer was to be subscribed for in full with the
Subscription Agreement operating as an underwriting of the Proposed
Open Offer.
The Company was unable to complete the Proposed Open Offer
within the anticipated timeframe due, inter alia, to the necessary
regulatory approvals taking longer than the Board had originally
anticipated. Further, the Company had not issued the Subscription
Shares due to Richmond on the First Subscription Date within the
necessary timeframe following the subscription date, nor had
Richmond enforced its subscription rights over those Ordinary
Shares. Accordingly, from 6 November 2011 the Subscription
Agreement was not enforceable by either the Company, or Richmond.
In order for the Proposed Open Offer to remain available to
existing shareholders, and to re-instate the Subscription Agreement
on the mutually understood terms between the Company and Richmond,
the Subscription Agreement Variation was agreed on 9 January 2012
such that, inter alia, the Proposed Open Offer and the Amended
Subscription Agreement timetable were harmonised. As consideration
for varying the terms of the Subscription Agreement, the Company
separately varied the terms of the Subscription Warrants such that
the warrants were capable of exercise until 31 December 2014. All
other terms remained the same. In addition, the Company issued
Richmond with the Fees warrants, being 90,907 warrants over new
Ordinary Shares as re-imbursement for legal fees incurred in
connection with the Subscription Agreement at the contractually
agreed rate of four warrants per GBP1 of expenses incurred
(collectively with the Subscription Warrants the 'Total
Subscription Warrants'). In order for the Company to obtain the
funds from the Proposed Open Offer / Subscription Agreement in the
timeframe initially contemplated, the Company and Richmond
separately entered into the Loan as more fully described in note
24. At the date of the Subscription Agreement Variation, the
Company and Richmond anticipated that the Proposed Open Offer would
be completed during February 2012.
The Amended Subscription Agreement is classified as a derivative
financial instrument under IAS 39, Financial Instruments, because
it is a Company put option over Ordinary Shares which may result in
the issue of a fixed number of new Ordinary Shares in the Company
for a variable amount of US$ functional currency cash. Due to the
short time period anticipated between the Amended Subscription
Agreement being entered into on 9 January 2012 and the anticipated
Proposed Open Offer completion date of no later than 28 February
2012, the fair value of the instrument at inception was determined
at its intrinsic value measured at the difference between the
Subscription Price and the market price of the Company's Ordinary
Shares on 9 January 2012 of 15.7 pence multiplied by the number of
Subscription Shares and converted to US$ at the US$:GBGBP exchange
rate on the date of 1.5419. The fair value determined was
$2,523,000 which was recorded as a derivative financial asset and a
capital contribution from Richmond in its capacity as a shareholder
in the Company at that date (refer to note 26.3.6).
Effective 31 July 2012, the Amended Subscription Agreement and
the Total Subscription Warrants were terminated in connection with
the re-financing of the Group by Richmond and the provision of the
Amended Loan, the Amended Facility and the SLF (refer to note 24).
The fair value at that date of the related derivative asset at its
intrinsic value measured at the difference between the Subscription
Price and the market price of the Company's Ordinary Shares on 31
July 2012 of 1.14 pence multiplied by the number of Subscription
Shares and converted to US$ at the US$:GBGBP exchange rate on the
date of 1.5707 was $6,559,000 which was released to 'Accumulated
losses' as a deemed distribution to Richmond. The change in fair
value between 9 January 2012 and 31 July 2012 of $4,036,000 was
credited to profit and loss within investment revenues.
The Total Subscription Warrants are classified as derivative
financial liabilities under IAS 39 because the warrants are issued
in GBGBP which is not the functional currency of the Company. Refer
to note 23.2.
23.2 Derivative financial liabilities
Derivative financial liabilities represents warrants issued by
the Company, or to be issued subject to certain conditions being
met, which are classified as derivative financial liabilities
because the warrants are issued, or are expected be issued, in
GBGBP which is not the functional currency of the Company.
Warrants falling within this category were issued by the Group
in September 2009 (the '2009 warrants'), twice in September 2010
(the 'September 2010 warrants - 1' and the 'September 2010 warrants
- 2', together the 'September 2010 warrants'), once in October
2010, once in December 2010 (collectively the '2010 warrants') and
once in April 2011 (the '2011 warrants') as part of fundraisings
secured in September 2009 and September 2010. In January 2012 a
further 17,500,000 warrants were committed to be issued (subject to
certain conditions being met) and a further 90,907 warrants were
issued in connection with the Amended Subscription Agreement (being
the Total Subscription Warrants - refer to note 23.1). A further
1,196,589 warrants were issued in March 2013 in connection with the
EFF entered into between the Company and Darwin on 28 February 2013
as more fully described in Business review section of the
Directors' report (the '2013 warrants'). Upon initial recognition
of the 2009 warrants, 2010 warrants and 2011 warrants, the fair
value of the warrants was 'carved out' of the funds received from
shareholder investment and recorded within derivative financial
liabilities. Upon initial recognition of the Total Subscription
Warrants, the warrants' initial fair value of $1,163,000 was
treated as a reduction in the deemed capital contribution from
Richmond arising from the recognition of derivative financial
assets related to the Amended Subscription Agreement. Upon initial
recognition of the 2013 warrants, the initial fair value of $12,000
was expensed to profit and loss with finance costs. At each
reporting date the fair value of the warrants is measured, with
changes in the fair value of the warrants recorded in profit and
loss within finance costs. At each exercise date, the derivative
liability fair value of the warrants exercised is recorded to the
Share premium account. The warrants do not create any obligation on
the Company other than to deliver Ordinary Shares in the Company
for a fixed price (360p per Ordinary Share for the September 2009
warrants subsequent to the Share Consolidation, 200p per Ordinary
Share for the 2010 and 2011 warrants subsequent to the Share
Consolidation, 25p per Ordinary Share for the Total Subscription
Warrants and 2p per Ordinary Share for the 2013 warrants), at the
option of the holder, for 18 months from the date of issuance of
the September 2009 warrants, 2 years from the date of issuance of
the September 2010 warrants, until 31 December 2014 for the Total
Subscription Warrants and until 27 February 2016 for the 2013
warrants. The warrants do not therefore expose the Company or Group
to any risks, other than fair value risks, as at the balance sheet
date. The September 2009 warrants expired unexercised in April
2011; the 2010 warrants and the 2011 warrants, which could have
resulted in the issue of respectively 1,670,630 and 248,829 new
Ordinary Shares in the Company expired unexercised in September
2012. The Total Subscription Warrants were terminated by mutual
agreement with Richmond effective 31 July 2012 as part of the
re-financing of the Company by Richmond and the provision of the
Amended Loan, the Amended Facility and the SLF (refer to note 24).
As at 31 May 2013, the only warrants outstanding which fall within
the category of derivative financial instruments are the 2013
warrants.
Movements in the number of Ordinary Shares that could be issued
if outstanding warrants are exercised are as follows:
2009 2010 2011 Total Subscription 2013
warrants warrants warrants Warrants warrants Total
No. No. No. No. No. No.
At 1 January 2011 468,750 1,945,883 - - - 2,414,633
Issued in the period - - 248,829 - - 248,829
Exercised in period - (275,253) - - - (275,253)
Expired in the period (468,750) - - - - (468,750)
----------- ------------ ---------- ------------------------ ---------- -------------
At 31 December 2011 - 1,670,630 248,829 - - 1,919,459
Issued in the period - - - 17,590,907 1,196,589 18,787,496
Terminated in the period - - - (17,590,907) - (17,590,907)
Expired in the period - (1,670,630) (248,829) - - (1,919,459)
----------
At 31 May 2013 - - - - 1,196,589 1,196,589
=========== ============ ========== ======================== ========== =============
Movements in the fair value of the warrants derivative financial
liability are:
17 month period ended 12 month period
31 May ended 31 December
2013 2011
US$000 US$000
At beginning of period 12 3,218
Fair value on initial recognition recorded to profit and
loss (1) 12 -
Fair value on initial recognition recorded to equity (note
26.3.6) 1,162 446
Change in fair value recorded to profit and loss (1) (1,184) (3,092)
Credited to the Share premium account on exercise of
warrants - (560)
---------------------- ---------------------
At end of period 2 12
====================== =====================
(1) The total credit to profit and loss for derivative financial liabilities of $1,172,000 (12
months ended 31 December 2011: credit $3,092,000) comprises these two items (note 11).
The fair value of warrants at the relevant period ends has been
determined using a Black Scholes valuation model with the following
inputs:
At 31 May At 31 December
2013 2011
2013
warrants 2010 and 2011 warrants
Weighted average share price - GBP pence(1) 0.47 16
Weighted average exercise price - GBP pence(1) 2 200
Expected volatility(2) 92% 143%
Risk-free rate 0.28% 0.41%
Expected dividend yield 0% 0%
US$/GBP exchange rate 1.53 1.55
Fair value per warrant - US Cents 0.2 0.6
Fair value of warrants - US$000 2 12
========== =======================
(1) The weighted average share price and weighted average exercise price
for the 2010 and 2011 warrants have been adjusted for the Share Consolidation.
(2) The volatility assumption has been determined based on the historic volatility
of the Company's Ordinary Share price adjusted for periods of abnormal
volatility where appropriate.
24. Borrowings
During the 17 month period ended 31 May 2013, the Group obtained
US$ denominated loan funding provided by Richmond as Lender under
three loan agreements, namely the Loan, the Facility and the
Secured Loan Facility, details of which are provided below.
24.1 The Loan
The Loan was provided to the Company on 10 January 2012 and was
repayable on the earlier of the completion of the Proposed Open
Offer by the Company or 31 December 2012. The Loan amount was
$6,800,000, it was unsecured and was non-interest bearing if it was
repaid by 31 December 2012. In consideration for the provision of
the Loan, the Company granted Richmond the Loan Warrants being
warrants over 1,750,000 new Ordinary Shares in the Company,
exercisable at 38.853 US$ cents before 31 December 2014. The terms
of the Loan were varied by mutual agreement between Richmond and
the Company as part of the re-financing of the Group such that the
Amended Loan carried an annual interest rate of 25.0% with effect
from 1 August 2012 calculated daily on an actual/360 basis and
matured on the earlier of 31 August 2012 and the completion of the
SLF, or such later date as Richmond might agree. Richmond agreed to
extend the maturity date for the Amended Loan to the completion of
the SLF. The Amended Loan carried a 30% repayment penalty on the
outstanding balance in the event that the Company chose not to
proceed with the SLF. The Loan Warrants were cancelled under the
Amended Loan. The Loan was initially recorded at fair value of
$6,653,000 utilising an effective interest rate of 15% per annum
(being the rate of interest applicable on the Loan in the event
that it was not repaid by the repayment date) and a term to 28
February 2012 (being the date by which the Loan was expected to be
repaid from the proceeds of either the Proposed Open Offer or the
Amended Subscription Agreement (refer to note 23.1)). The
difference between the Loan proceeds received of $6,800,000 and the
Loan's fair value was satisfied in part by the issue of the Loan
Warrants with a fair value of $115,000 and in part by a deemed
capital contribution from Richmond of $32,000 (note 26.3.6). The
cash amount repayable on the Amended Loan as at 23 November 2012
when it was settled from the initial proceeds drawn down under the
SLF was $7,343,000. The finance cost charged on the Loan and the
Amended Loan was $690,000 of which $543,000 related to interest
accruing under the Amended Loan and $147,000 related to the
amortisation of the initial fair value adjustment to the Loan
carrying value.
24.2 The Facility
The Facility was provided to the Company on 11 May 2012 and was
repayable on 31 July 2012. The Facility was initially for up to
$10,000,000, it was unsecured, carried an interest rate of 24% per
annum calculated daily on an actual/360 basis and the arrangement
Fee of $700,000. On 31 July 2012 the terms of the Facility were
varied by mutual agreement between Richmond and the Company as part
of the re-financing of the Group such that the available balance on
the Amended Facility increased to $16,000,000, the interest rate
increased to 25% per annum and the maturity date was extended to
the earlier of 31 August 2012 and the completion of the SLF, or
such later date as Richmond might agree. Richmond agreed to extend
the maturity date for the Amended Facility to the completion of the
SLF and further increased the amount available under the Amended
Facility to $17,840,000. The Amended Facility carried a 30%
repayment penalty on the outstanding balance in the event that the
Company chose not to proceed with the SLF. The cash amount
repayable on the Amended Facility as at 23 November 2012 when it
was settled from the initial proceeds drawn down under the SLF was
$19,416,000. The finance cost charged on the Facility and the
Amended Facility was $2,416,000 of which $1,576,000 related to
interest accruing under the Facility and $840,000 related to the
amortisation of the Fee and legal expenses incurred in connection
with the Facility.
24.3 The Secured Loan Facility
The Group, through HAMCM, entered into the SLF on 22 November
2012. The SLF was for a principal amount of up to $42,245,000
together with separate facilities for the payment of legal fees and
transactional costs and for the capitalisation of interest, fees
and expenses. $26,900,000 of the principal amount was allocated for
the refinancing of the Existing Facilities (i.e. the Amended Loan
and the Amended Facility) of which US$26,759,000 was drawn down on
23 November 2012 when the Existing Facilities were settled and
US$141,000 was cancelled in accordance with the terms of this
facility. The balance of US$15,345,000, being new funds, could be
drawn down in agreed tranches (subject to certain conditions being
met) and was available for varying periods depending on which
tranche was being utilised. $9,680,000 of the new funds was drawn
down by the Group until 22 March 2013. A further facility of up to
$1,200,000 was available for the payment of Richmond's legal fees
and other transaction costs, of which $707,000 was utilised. This
facility excluded the Group's legal fees and other transaction
costs which amounted to $790,000.
Interest on the SLF accrued on a daily basis at a rate of 25%
per annum and was payable quarterly in arrears, commencing 31 March
2013. Interest accrued during 2012 was added to the principal
balance of the SLF on 31 December 2012 in accordance with its
terms. Interest payments could be deferred and capitalised (subject
to the Company not being in breach of the terms of the SLF) for up
to ten quarters during the facilities' term at the Company's
request, commencing on the quarter ended 31 March 2013, but subject
to an additional charge of 3% of the outstanding balance of the SLF
at the end of each quarter in which a deferral was requested.
Interest charged on the SLF between 22 November 2012 and 22 March
2013 was $2,989,000 and no interest deferral fees were charged. The
SLF was subject to arrangement and loan fees totalling $1,896,000
which were added to the principal balance of the SLF on the first
drawdown (i.e. 23 November 2012).
The capital, deferred interest, fees and other outstanding
amounts on the SLF were due for repayment on 31 December 2016. Any
prepayment of the amounts due would be subject to a 30% prepayment
fee.
HAMCM was the holding company for the Group's operating
subsidiaries and affiliates in Mozambique, South Africa and DRC.
The Lender was granted security interests (e.g. mortgage, charge,
lien or pledge, as appropriate depending on the type of asset,
location of the asset and jurisdiction of incorporation) over
substantially all of the assets of HAMCM and its subsidiaries. In
addition, the Lender was granted security interests over the entire
issued share capital of HAMCM and the bank accounts of the Group,
including those held by the Company and other subsidiary companies
not directly controlled by HAMCM.
The SLF contained a number of covenants regarding the
operational, financial, corporate and legal status of the Group, as
well as terms relating to the payment of interest and capital sums
due under the SLF. During the period to 30 April 2013 the Group's
agreed budget against which the financial covenants were to be
tested was to be updated for the actual results and performance of
the Group (the 'Covenant Grace Period'). During the Covenant Grace
Period, no Default would be deemed to have occurred as a result of
non-compliance with the financial covenants, although HAMCM was
still required to assess on a forecast basis whether it would
require additional funds over and above the amounts remaining to be
drawn on the SLF and provide a compliance certificate confirming
whether this was the case to the Lender. Accordingly, if HAMCM's
funding requirements increased and the Group was unable to find
additional sources of finance then Default was still possible
during this Covenant Grace Period. Following a detailed revision to
the Group's forecast production in late January and early February
2013, HAMCM was unable to provide the compliance certificate for
the month of January 2013 by the required date of 10 February 2013
and HAMCM entered into Default on that date. This detailed revision
to forecast production levels was completed following lower than
budget production levels in December 2012 and January 2013 which
reflected a combination of factors including, but not limited
to:
1. unreliable electricity supply;
2. adverse weather conditions experienced in the rainy season in Mozambique;
3. new customs regulations that delayed the import of goods and
equipment into Mozambique and consequently the delivery of
necessary materials to the Marropino Mine;
4. the relatively low recovery rates in the new processing plant;
5. frequent shutdowns of the new and old processing plants at
Marropino while remedial work was carried out, such work being
behind schedule; and
6. the relatively low grade of ore available for processing in
these months, and expected in future months.
The Lender and the Group worked extensively to address the
factors leading to the Default to assess whether any solution could
be found which would enable HAMCM to stay within the terms of the
SLF, or for those terms to be relaxed. In the situation that
Default was not remedied (in accordance with the terms of the SLF),
then the Lender had the right to demand immediate repayment of all
monies owed under the SLF and an additional charge of 30% of the
total amount then outstanding under the SLF would arise. No viable
solution could be found to the factors causing the Default and
accordingly, on 15 March 2013, the Lender served notice on HAMCM
for repayment (by 22 March 2013) of the outstanding amounts under
the SLF while also enforcing the security interests available to
it. An early repayment fee arose of $12,609,000 with the total
amount due for repayment under the Secured Loan Facility totalling
$54,640,000 due by 22 March 2013. The Group was unable to raise the
necessary funds to repay the SLF and as a result of the enforcement
of Default, HAMCM and its subsidiaries were made available for sale
(refer to section of the Directors' report entitled 'Business
review') for further details).
The SLF included other terms which were subject to Ordinary
Shareholder approval at a general meeting of the Ordinary
Shareholders, or Preference Shareholder approval at a class meeting
of the Preference Shareholders, principally relating to (1) the
terms under which outstanding balances on the SLF could be
converted into Ordinary Shares of the Company, (2) the terms under
which, in an event of Default, 95% of the ordinary shares of HAMCM
could be sold to the Lender for the amount outstanding on the SLF
at that date, with a put option available to the Group, or a call
option available to the Lender, over the remaining 5% of the
ordinary shares of HAMCM exercisable at respectively $1,000,000 and
$1,500,000, and (3) the deferral of the cash payment of the CRPS
Dividend and capital on the CRPS until 1 January 2017. Failure to
obtain the necessary Shareholder approval for these terms would
have resulted in additional fees totalling up to 40% of the
outstanding balance of the SLF at the date of the relevant
meetings. The necessary meetings were not held due to HAMCM's
Default prior to the meeting circulars being remitted to
Shareholders and accordingly these matters were neither approved
nor rejected by Shareholders and no such fees arose.
25. PROVISIONS
25.1 Short term provisions
Movements in the short term provisions were:
Taxation provisions Other provisions Total Provisions
US$000 US$000 US$000
At 1 January 2011 221 124 345
Charged to profit and loss 222 - 222
Reclassified from Current tax liabilities 19 19
Payments made in the period (42) - (42)
Foreign exchange loss 31 - 31
-------------------- ----------------- -----------------
At 31 December 2011 451 124 575
Charged / (released) to profit and loss 217 - 217
Reclassified from other current liabilities - 41 41
Adjustment for discontinued operations (660) (123) (783)
Foreign exchange loss (8) (1) (9)
-------------------- ----------------- -----------------
At 31 May 2013 - 41 41
==================== ================= =================
Taxation provisions represented probable taxation liabilities
and penalties arising in the Mozambique operations which were
discontinued during the period and were subsequently transferred to
the purchaser of the HAMCM Group.
Other provisions represent liabilities arising from contractual
arrangements of the Company under which the Company has potential
obligations to indemnify the third party against costs or losses
incurred. $123,000 of such provisions were released in the period
as more fully described in notes 4.1.2 and 31.2. The Company
anticipates that any cash outflow arising from short term
provisions will be realised in 2013 and 2014 but remains optimistic
that part, or all, of the short term provisions will not result in
cash outflows for the Company and may be written back in future
periods.
25.2 Long term provisions
31 May
2013 31 December 2011
US$000 US$000
At beginning of period 281 269
Unwinding of discounted amount 15 12
Adjustment for discontinued operations (296) -
------- -----------------
At end of period - 281
======= =================
The provision related to the anticipated costs to be incurred in
rehabilitating the open pit and surrounding area at Marropino once
the mineral ore body had been fully exploited. The Group no longer
retains any obligations for these rehabilitation costs following
the loss of control of HAMCL.
26. SHARE CAPITAL, RESERVES, CALL OPTIONS OVER EQUITY, CAPITAL
RISK MANAGEMENT AND NET CAPITAL DISTRIBUTION
26.1 Share capital
31 May
2013 31 December 2011
GBP GBP
Authorised
3,000,000,000 Ordinary Shares of GBP0.008 each (2011: 212,500,000 Ordinary Shares of
GBP0.008) 24,000,000 1,700,000
7,000,000 Preference Shares of GBP1.00 each (2011: 7,000,000 Preference Shares of
GBP1.00
each) 7,000,000 7,000,000
----------- -----------------
31,000,000 8,700,000
=========== =================
GBP000 GBP000
Issued, called up and fully paid
157,689,658 Ordinary Shares of GBP0.008 each (2011: 119,658,819 Ordinary Shares of
GBP0.008
each) 1,261 957
1,028,075 Preference Shares of GBP1.00 each (2011: 1,028,075 Preference Shares of
GBP1.00
each) 1,028 1,028
----------- -----------------
2,289 1,985
=========== =================
Details of changes in the Company's capital structure subsequent
to 31 May 2013, including changes to the nominal value of the
Company's Ordinary Shares and the creation of a new category of
Deferred Shares, are included in note 32.
26.2 Ordinary Shares
26.2.1 Rights
The Company has one class of Ordinary Shares which carry no
right to fixed income. Each Ordinary Share carries the right to one
vote at the general meetings of the Company.
26.2.2 Share Consolidation
On 11 March 2011, the Company completed the Share Consolidation
being the 20:1 share consolidation of the Company's GBP0.0004
Ordinary Shares into GBP0.008 Ordinary Shares.
26.2.3 Shares in issue
The table below presents a reconciliation of the Company's
Ordinary Shares in issue. For transactions and balances prior to 11
March 2011 the number of Ordinary Shares has been adjusted for the
Share Consolidation and is presented at the post consolidation
amounts:
17 month period ended 31 May 2013 12 month period ended 31 December 2011
Issue price GBp Issue price
No. No. GBp
New Ordinary Shares issued for cash:
September 2010 Additional
Subscription - Final tranche - - 497,658 132
August 2011 Placing - - 73,600,000 25
Share options exercised - - 172,250 80
Warrants exercised - - 275,253 200
EFF drawdown 38,000,000 1.25 - -
New Ordinary Shares issued for
services including bonus shares 30,839 40.00 735,597 23 to 238
Redemption of CRPS including CRPS
Dividend outstanding - - 19,157,409 25
=================== -------------------- ===================
Ordinary Shares issued in the period 38,030,839 94,438,167
At beginning of period 119,658,819 25,220,652
--------------------
At end of period 157,689,658 119,658,819
=============== ====================
Details of new Ordinary Shares issued subsequent to the period
end are provided in note 32.
26.2.4 Allotment authorities
Pursuant to the allotment authorities granted to the Directors
subsequent to the period end at the 2013 EGM, the Directors were
authorised to allot up to 600,000,000 new Ordinary Shares free from
pre-emption rights. As at the date of this report, 14,547,722 new
Ordinary Shares and 8,676,790 new warrants over Ordinary Shares
have been issued by the Company from these allotment authorities.
Further details are provided in note 32.
26.3 Preference Shares
26.3.1 Rights
The Company has one class of Preference Shares which carry the
right to a fixed preferential dividend at a percentage rate per
annum, determined by the Board at the date of issue and payable in
preference to any dividend in respect of any other class of shares.
The Board may provide that different preferential dividends apply
to different Preference Shares; in such an event all Preference
Shares will be treated as one and the same class. Other than for
the preference dividend the Preference Shares do not confer any
further rights of participation in the profits of the Company.
The Preference Shares do not carry voting rights at the general
meetings of the Company, except in circumstances where the business
of the meeting includes consideration of a resolution which
directly or adversely varies any of the rights attached to the
Preference Shares, in which case the Preference Shareholders may
vote in respect of such a resolution.
On winding up of the Company or other return of capital, the
assets of the Company will be applied to repaying holders of the
Preference Shares in priority to holders of the Ordinary
Shares.
Preference Shares may be redeemed by the Company under the terms
of redemption of the Preference Shares determined by the Board at
the date of issue, or as amended by resolution approved at a
meeting of the relevant Preference Shareholders.
Preference Shares may be converted into Ordinary Shares of the
Company under the terms of conversion of the Preference Shares
determined by the Directors at the date of issue, or as amended by
resolution approved at a meeting of the relevant Preference
Shareholders.
26.3.2 Preference Shares in issue
The table below presents a reconciliation of the Company's CRPS
in issue.
17 month period ended 31 May 2013 12 month period ended 31 December 2011
Price GBp Price
No. No. GBp
March 2011 Placing of CRPS - - 2,822,290 263.1
Redemption of CRPS - - (1,794,215) 263.1
Movement in Preference Shares in the
period - 1,028,075
At beginning of period 1,028,075 -
--------------------------
At end of period 1,028,075 1,028,075
================= ==========================
Further details on the CRPS are provided in note 22. As
discussed more fully in note 32.4, on 24 July 2013 the terms and
conditions of the CRPS were amended to permit the Company to
discharge its obligations in respect of the CRPS, including the
CRPS Dividends due, through the Special Redemption. The Company
intends to redeem the outstanding CRPS through the Special
Redemption by the end of August 2013. Subsequent to the Special
Redemption, the Company will have no further obligations in respect
of the CRPS.
26.3.3 Reserves
26.3.3.1 Shares to be issued reserve
As at 31 May 2013 the Company had obligations to deliver 51,425
Ordinary Shares (31 December 2011: 133,689 Ordinary Shares) to
former Directors and employees in consideration for services
rendered with a fair value at the date the services were rendered
of $13,000 (31 December 2011 - $46,000). The compensation expense
for the services received was included in profit and loss for the
year ended 31 December 2011, with the related obligation recognised
in the 'Shares to be issued' reserve. Movements in this reserve in
the 17 month period ended 31 May 2013 relate to shares issued in
the period against obligations as at 31 December 2011, or
extinguishment of the obligations through mutual agreement with the
counterparty to whom the Ordinary Shares were due.
26.3.3.2 Convertible redeemable preference shares reserve
The CRPS issued by the Company during the year ended 31 December
2011 include an equity component (note 22). The fair value of the
debt component and associated embedded derivatives was determined
at the date of issue and recorded within liabilities, with the fair
value of the equity component recorded directly to equity in the
'Convertible redeemable preference shares' reserve. Upon redemption
of CRPS through conversion into Ordinary Shares, amounts relating
to the converted CRPS contained in the Convertible redeemable
preference share reserve are reclassified to the Share premium
account. Upon redemption of the CRPS, amounts relating to the
redeemed CRPS contained in the Convertible preference share reserve
will be extinguished.
26.3.3.3 Merger reserve
The merger reserve was created when the Company acquired 100% of
the issued Ordinary Share capital of HAMCJ under the terms of the
share-for-share agreement signed on 11 January 2007. The
transaction was accounted for as a reverse takeover.
26.3.3.4 Translation reserve
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing at the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising are taken to
the 'Translation reserve'. The Translation reserve was eliminated
on 22 March 2013 upon the loss of control of all of the Group's
subsidiary companies with functional currencies other than US$.
26.3.4 Call options over Ordinary Shares
Call options over Ordinary Shares represent instruments issued
by the Company which may result in the Company issuing Ordinary
Shares, such as warrants, share options and CRPS. Where these
instruments were issued prior to the Share Consolidation, the
conversion terms of the instruments have been altered to require
the conversion of 20 instruments to acquire one new Ordinary Share
in the Company.
The following table summarises the principal terms under which
Ordinary Shares of the Company could be issued in respect of
options, warrants, bonus shares and CRPS outstanding at 31 May
2013.
Number of Ordinary Number exercisable Weighted average
Shares adjusted at period end exercise price
for Share adjusted for Share adjusted for Share Expiry
Consolidation Consolidation Consolidation Date Comments
Options issued by
employee share 50,000 at GBP23.00
option plans in
2007 51,184 51,184 1,184 at GBP0.008 2017 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in
2008 6,180 6,180 GBP23.00 2018 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in
2009 - 1 81,953 81,953 GBP3.20 2019 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in
2009 - 2 172,250 172,250 GBP0.80 2013 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued
outside of the
share option plans
- 2009 100,000 100,000 GBP0.80 2016 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Warrants 2009 - 1 579,298 - GBP0.80 2016 Share price to
reach GBP5.00 on a
30 day moving
average for the
warrants to be
exercisable.
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Warrants 2009 - 2 56,500 56,500 GBP0.80 2016 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Bonus shares 2009 150,000 - - No expiry Share price to
reach GBP3.00 on a
30 day moving
average for the
bonus shares to
vest.
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in
2010 100,000 100,000 GBP0.80 2019 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued
outside of share
option plans - 2010 97,120 97,120 GBP1.08 2017 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Warrants 2011 3,966,137 3,966,137 GBP0.25 2013 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in
2011 230,000 230,000 GBP0.28 2018 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued
outside of share
option plans in
2011 97,120 97,120 GBP0.27 2018 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Options issued by
employee share
option plans in 2021 and
2012 125,000 75,000 GBP0.16 2022 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Warrants 2013 1,196,589 1,196,589 GBP0.02 2016 None
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
Convertible 1,028,075 1,028,075 $4.218 2015 Subject to Jersey
redeemable Law, the CRPS were
preference shares redeemable by the
Company in cash in
April 2016 if the
instruments were
not converted into
Ordinary Shares
prior to this
date. As discussed
more
fully in note
32.4, the Company
expects to redeem
the CRPS by the
end of August 2013
through
the issue of
approximately
172,237,380 new
Ordinary Shares
pursuant to the
Special
Redemption.
--------------------- -------------------- ------------------- ------------------- ---------- -------------------
8,037,406 7,258,108
==================== ===================
26.3.5 Capital risk management
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns. The Directors
consider that the capital structure of the Group consists of the
Company's Ordinary Shares and CRPS net of retained losses.
The Group's Board of Directors reviews the capital structure
when funding is required. As part of the review, the Board of
Directors considers the cost of capital and the risks associated
with each class of capital.
26.3.6 Net capital distribution
As discussed more fully in notes 23 and 24.1, the initial
recognition and subsequent termination of the Amended Subscription
Agreement and the Total Subscription Warrants, and the initial
recognition of the Loan and the termination of the Loan Warrants
include elements which are accounted for under IFRS as transactions
with Richmond in its capacity as a shareholder at the time. The net
capital distribution arising from these transactions in the period
is derived as follows:
US$000
Capital contribution arising on initial recognition of
the Amended Subscription Agreement 2,523
Capital distribution arising on initial recognition of
the Total Subscription Warrants (1,163)
Capital contribution arising on initial recognition of
the Loan 32
--------
Net capital contribution arising on initial recognition
of the above items 1,392
--------
Capital distribution arising on termination of the Amended
Subscription Agreement (6,559)
Capital contribution arising on termination of the Total
Subscription Warrants 1
Capital contribution arising on termination of the Loan
Warrants 115
--------
Net capital distribution arising on termination of the
above items (6,443)
--------
Net capital distribution in the period 5,051
========
These transactions have no cash impact on the Company or Group
and the net capital distribution in the period offsets amounts
credited to profit and loss (within finance income / expense)
during the current reporting period.
27. SHARE BASED PAYMENTS
A summary of all options, warrants and other call options over
Ordinary Shares in the Company is provided in note 26.3.4.
Subsequent to the Share Consolidation, the conversion or issue
terms of all options, warrants and bonus shares were adjusted to
require twenty options, warrants or bonus shares to be exercised to
acquire one Ordinary Share in the Company. All amounts presented in
this note reflect the number of Ordinary Shares that could be
issued if the options, warrants or bonus shares are exercised, or
become exercisable.
27.1 Equity-settled share options and warrants
The Company has a share option scheme for all employees of the
Group - the Share Plan. Until June 2009, options were granted to
employees and certain Directors, exercisable at a price equal to
the average quoted market price of the Company's Ordinary Shares on
the 30 days preceding the date of grant. Generally the options were
granted annually with vesting over one, two, three and four years,
subject to certain production related performance criteria being
met, and the employee remaining in continued employment with the
Group. Subsequent to June 2009, options have been granted on an ad
hoc basis to certain employees and Directors of the Group at the
recommendation of the Chairman or Chief Executive Officer. If the
options remain unexercised after a period of ten years from the
date of grant the options expire. Options are forfeited if the
employee leaves the Group before the options vest, unless certain
conditions apply. On the retrenchment of staff, options vest in
full immediately.
The Group also issues options under the terms of the Share Plan
which do not have performance conditions, and have either no
service period or a service period of up to two years. These
options are granted to Directors and key management.
Further options and warrants over Ordinary Shares in the Company
are issued to Directors for services rendered and certain service
providers. These instruments are not granted under the terms of the
Share Plan.
In the year ended 31 December 2007 the Company issued options to
a Director through the EBT. No options have been granted by the EBT
since 2007.
27.2 Charge in the period
The total charge recorded in profit and loss for share based
payments in the 17 month period ended 31 May 2013 was $16,000 (12
months ended 31 December 2011: $734,000), of which $29,000 (12
months ended 31 December 2011: $648,000) relates to continuing
operations and credit $13,000 (12 months ended 31 December 2011:
$86,000) relates to discontinued operations. No further amounts
were recorded for share based payments in the current period. In
the prior period, a further $50,000 was recorded to Property, plant
and equipment, $717,000 was charged to the Share premium account
and $252,000 was recorded as issue expenses for the CRPS and
allocated pro-rata between the carrying value of the equity and
liability components of these instruments (refer to note 22).
Of the amount charged to profit and loss in the current period,
$29,000 (12 month period ended 31 December 2011: $266,000) arises
from share options issued to certain employees and Directors of the
Group under the Share Plan (2011: arises from the issuance of share
options to certain employees and Directors of the Group, under the
Share Plan, or through options outside of the Share Plan or through
the issuance of warrants over Ordinary Shares to third party
suppliers under service agreements). The remaining $13,000 credit
(12 months ended 31 December 2011: charge of $468,000) arose on the
write off of obligations to deliver Ordinary Shares to Directors
existing as at 31 December 2011 (12 months ended 31 December 2011:
Ordinary Shares issued to Directors as contractual Directors' fees
and consultancy fees, employee and Directors sign on bonuses,
salary payments made in Ordinary Shares under employment contracts
or payments made in Ordinary Shares under service agreements from
third party suppliers). The amount charged to Property, plant and
equipment in the prior period related to payments made in Ordinary
Shares under service agreements from third party suppliers. The
number of Ordinary Shares issued in these cases is determined based
on the contractual amounts due, and relevant market prices for the
Company's Ordinary Shares. The amount recorded is therefore the
contractual amount due. The amount charged to the Share Premium
account of $717,000 in the prior period and the amount recorded as
issue expenses for the CRPS of $252,000 related to the issuance of
warrants over Ordinary Shares to third party suppliers under
service agreements.
27.3 Summary of share options, warrants and bonus shares
accounted for as share based payments
Details of the number of Ordinary Shares that may be issued to
satisfy share options, warrants and bonus shares which are
accounted for as share based payments are as follows:
Options(1) Warrants(2) Bonus Shares(3)
Weighted Weighted Weighted
average average average
exercise exercise exercise
price price price Total
No. GBP No. GBP No. GBP No.
At 1 January 2011 908,597 257.6 1,035,796 122.5 150,000 - 2,094,393
Granted in the
period 402,120 27.9 4,151,805 33.0 - - 4,553,925
Lapsed in the
period (15,704) 821.3 - - - - (15,704)
Terminated in the
period (102,825) 92.1 - - - - (102,825)
Exercised in the
period (4) (172,250) 80.0 - - - - (172,250)
At 31 December
2011 1,019,938 205.0 5,187,601 50.1 150,000 - 6,357,539
Granted in the
period 150,000 13.0 - - - - 150,000
Lapsed in the
period (8,450) 310.0 (585,666) 194.2 - - (594,116)
Terminated in the
period (100,681) 23.4 - - - - (100,681)
At 31 May 2013 1,060,807 194.2 4,601,935 25.8 150,000 - 5,812,742
============ ============ ========== ========= ========== =========== ============
(1) As at 31 May 2013, options over 716,567 new Ordinary Shares (31 December 2011: 675,698) are
in issue by the Share Plan, 50,000 (31 December 2011: 50,000) are in issue by the EBT and
294,240 (31 December 2011: 294,240) are in issue outside of these schemes. The expense recorded
in profit and loss during the 17 month period ended 31 May 2013 for share options was $29,000
(12 months ended 31 December 2011: $41,000).
(2) Warrants were awarded in 2010 and 2011 to the Company's brokers and placing agents as consideration
for services due for the placing of Ordinary Shares or CRPS in the Company and have no future
service or performance conditions. The fair value of all such warrants awarded during 2011
was $1,194,000, of which $717,000 was expensed to the Share premium account, $252,000 was
allocated pro-rata to the liability and equity components of the CRPS (note 22) and $225,000
was expensed to profit and loss.
(3) 450,000 bonus shares were issued in 2009 as turnaround incentives to Barons Financial Services
Limited and Ekasure Limited. The bonus shares vest in equal tranches of 150,000 (100,000 bonus
shares to Barons Financial Services Limited and 50,000 bonus shares to Ekasure Limited) if
the share price of the Company achieves a 30 day moving average of 120p, 200p and 300p. 150,000
bonus shares vested during 2010 when the Ordinary Share price of the Company reached 200p
on a 30 day moving average. The compensation expense for bonus shares was expensed in full
during 2009.
(4) Ordinary Shares were issued on the exercise of share options on 2 March 2011 when the Company's
Ordinary Share price was 265 pence.
Details of exercisable share options, warrants and bonus shares
which are accounted for as share based payments are as follows:
Options Warrants Bonus
Shares
Weighted Weighted Weighted
average average average
exercise exercise exercise
price price price Total
No. GBP No. GBP No. GBP No.
At 1 January
2011 755,937 273.6 456,498 176.4 - - 1,212,435
Granted in the
year 102,120 32.4 4,151,805 33.0 - - 4,253,925
Vested from
prior years 50,000 80.0 - - - - 50,000
Terminated in
the year (25,000) 80.0 - - - - (25,000)
Exercised in
the year (172,250) 80.0 - - - - (172,250)
At 31 December
2011 710,807 279.1 4,608,303 47.2 - - 5,319,110
Granted in the
period 75,000 13.0 - - - - 75,000
Vested from
prior periods 225,000 26.3 - - - - 225,000
Lapsed in the
period - - (585,666) 194.2 - - (585,666)
At 31 May 2013 1,010,807 203.1 4,022,637 25.8 - - 5,033,444
========== ========= ========== ========= ====== ========= ============
The outstanding and exercisable options, warrants and bonus
shares that are accounted for as share based payments could result
in the issue of new Ordinary Shares at the following prices:
Total Exercisable
31 May 31 December 2011 31 May 31 December 2011
2013 No. 2013 No.
Price - GBp Expiry No. No.
2,300 2017 56,180 56,180 56,180 56,180
310 2019 81,953 91,084 81,953 81,953
210.5 2012 - 168,985 - 168,985
190 2012 - 399,998 - 399,998
130 2017 29,280 45,963 29,280 45,963
103 2017 72,840 72,840 72,840 72,840
80 2016 - 2019 1,008,048 1,008,048 428,750 428,750
27.4 2018 - 2021 247,120 297,120 247,120 97,120
25 2013 3,966,137 3,966,137 3,966,137 3,966,137
24.2 2021 75,000 100,000 75,000 -
16 2021 100,000 - 50,000 -
7 2022 25,000 - 25,000 -
0.8 2017 1,184 1,184 1,184 1,184
0.00 None 150,000 150,000 - -
---------- ----------------- ---------- -----------------
5,812,742 6,357,539 5,033,444 5,319,110
========== ================= ========== =================
The following instruments have been issued during the current
and preceding financial periods:
Total fair value at grant
Expiry Exercise price date
Grant date date GBP Number US$000
17 month period ended
31 May 2013:
Share Plan - Issue 12 24 March 2012 2022 7.0 50,000 3
Share Plan - Issue 11 1 January 2012 2021 16.0 100,000 13
150,000 16
========== ============================
12 month period ended
31 December 2011:
Share Plan - Issue 10 5 September 2011 2021 24.2 100,000 23
Share Plan - Issue 9 19 August 2011 2021 27.4 200,000 62
Share Plan - issue 8 1 August 2011 2021 130.0 5,000 7
Other - Issue 4(1) 19 August 2011 2021 27.4 97,120 23
August 2011 placing
warrants(1) 25 August 2011 2013 25.0 3,966,137 942
April 2011 CRPS placing
warrants(1) 11 April 2011 2012 210.5 168,985 252
January 2011 warrants(1) 1 January 2011 2012 130.0 16,683 24
----------
4,553,925 1,333
========== ============================
(1) These instruments have no performance conditions and the total fair value
was recorded in the year of grant.
The fair value of options and warrants granted has been
determined using a Black Scholes valuation model with the following
inputs:
Share Plan - issue 12 Share Plan - issue 11
Weighted average share price - GBp (3) 7.0 16.0
Weighted average exercise price - GBp (3) 7.0 16.0
Expected volatility - %(2) 113.2 104.2
Expected life - years(1) 2.5 2.0
Risk free rate - % 0.50 0.33
Expected dividend yield - % - -
====================== ======================
August 2011 April 2011
Share plan - Share plan - Share plan - Other - placing CRPS placing January 2011
Issue 10 Issue 9 Issue 8 Issue 4 warrants warrants warrants
Weighted
average
share price
- GBp (3) 24.2 27.4 130.0 27.4 25.0 237.6 130.0
Weighted
average
exercise
price - GBp
(3) 24.2 27.4 130.0 27.4 25.0 210.5 130.0
Expected
volatility
- %(2) 117 116 143 114 118 71 143
Expected
life -
years(1) 2 3 2 1.5 2 1.5 2.0
Risk free
rate - % 0.59 0.84 0.99 0.58 0.65 1.19 0.99
Expected - - - - - - -
dividend
yield - %
============= ============= ============= ============= ============= ============= =============
(1) Where relevant, the expected life used in the model has been adjusted based on management's
best estimate for the effects of non-transferability, exercise restrictions and behavioural
considerations.
(2) The volatility assumption has been determined based on the historical volatility of the Company's
Ordinary Share price, where applicable adjusted for periods of abnormal volatility.
(3) Where relevant, the weighted average share price and weighted average exercise price have
been adjusted for the Share Consolidation of the Company's Ordinary Shares.
28. FINANCIAL INSTRUMENTS
Details of the capital risk management policy of the Group are
provided in note 26 to the financial statements. Details of the
significant accounting policies and methods adopted, including the
criteria for recognition, the basis of measurement and the basis on
which income and expenses are recognised, in respect of each class
of financial asset, financial liability and equity instrument are
disclosed in note 3.
This note provides further information on the financial
instruments of the Group.
28.1 Financial risk management objectives
The Group manages the risks arising from its operations, and
financial instruments at Board level. The Board has overall
responsibility for the establishment and oversight of the Group's
risk management framework and to ensure that the Group has adequate
policies, procedures and controls to manage successfully the
financial risks that the Group faces.
While the Group does not have a written policy relating to risk
management of the risks arising from any financial instruments
held, the close involvement of the Executive Chairman in the day to
day operations of the Group ensures that risks are monitored and
controlled in an appropriate manner for the size and complexity of
the Group. Financial instruments are not traded, nor are
speculative positions taken. The principal risks that the Group
faces as at 31 May 2013 with an impact on financial instruments are
summarised below. Risks which were relevant to the Group in prior
periods and before the enforcement of HAMCM's Default under the
terms of the SLF are discussed in the Group's 31 December 2011
financial statements. Further details by class of financial
instrument are described later in this note.
The Group's key financial market risks arise from changes in
foreign exchange rates ('currency risk'). To a lesser extent the
Group is exposed to interest rate risk and liquidity risk.
28.1.1 Currency risk
The Group is exposed to foreign currency exchange risk mainly
between the US$ and GBP. The potential currency exposures are
transaction related in respect of:
-- operating costs incurred in currencies other than the
functional currency of operations; and
-- financial assets and liabilities denominated in currencies
other than the US$ functional currency of all Group companies as at
31 May 2013, such as bank balances and trade payable held in
currencies other than US$.
The Group's policy is to minimise transactional exposure through
maintaining detailed forecast cash flows by principal currency in
which cash inflows and outflows are made, allowing the Group to
retain funds in the relevant currencies to create natural hedges
against exchange fluctuations. This policy results in substantially
all of the Group's cash being held in GBP as at 31 May 2013. Due to
the change in nature of the Company and Group's operations
following the enforcement of HAMCM's Default under the terms of the
SLF, the Directors have re-assessed the functional currency of the
Company and have changed it from US$ to GBP with effect from 1 June
2013. The Directors also expect that the presentation currency of
the Company and Group will be changed from US$ to GBP with effect
from that date.
28.1.2 Credit risk
The Group principally has exposure to credit risk on its bank
balances. Where possible, this risk is managed through the
selection of bank counterparties based on the financial security of
the counterparty, credit assessment of customers and contractual
terms and conditions and monitoring. The Group has limited risk on
its trade receivables because these amounts, if recovered, are due
to Richmond under the terms of the Settlement Agreement, the
obligation for which is presented in Trade and other payables. If
the Group is unable to recover its trade receivables it has no
further obligation to Richmond.
28.1.3 Interest rate risk
The Group is, to a limited extent, exposed to interest rate risk
which arises principally from the Group's bank and cash
balances.
28.1.4 Liquidity risk
As at 31 May 2013 the Group has limited liquidity risk due to
its cash and bank balances exceeding its short term liabilities
which are required or permissible by law to be settled in cash.
Details of the liquidity position of the Group as at the date of
these financial statements, and its dependence on future financing
is provided in note 3.1.
28.2 Categories of financial instruments
Based on the application of the accounting policies with respect
to financial instruments, the amounts included in the relevant
balance sheet items represent the following categories of financial
instruments:
Fair value through profit Financial liabilities at
At 31 May 2013 Loans and receivables and loss amortised cost Total
US$000 US$000 US$000 US$000
Financial assets
Trade receivables 176 - - 176
Cash and cash equivalents 191 - - 191
---------------------- --------------------------- --------------------------- -------
367 - - 367
====================== =========================== =========================== =======
Financial liabilities
Trade and other payables - - 337 337
Convertible redeemable
preference share dividend - - 506 506
Derivative financial
liabilities - 2 - 2
Convertible redeemable
preference share
liability - - 3,759 3,759
- 2 4,602 4,604
====================== =========================== =========================== =======
Fair value through profit Financial liabilities at
At 31 December 2011 Loans and receivables and loss amortised cost Total
US$000 US$000 US$000 US$000
Financial assets
Non-current
Other receivables 1,809 - - 1,809
Current
Trade receivables 2,527 - - 2,527
Other debtors 2,484 - - 2,484
Cash and cash equivalents 7,873 - - 7,873
---------------------- --------------------------- --------------------------- -------
14,693 - - 14,693
====================== =========================== =========================== =======
Financial liabilities
Trade and other payables - - 6,871 6,871
Convertible redeemable
preference share dividend - - 109 109
Derivative financial
liabilities - 12 - 12
Convertible redeemable
preference share
liability - - 3,501 3,501
---------------------- --------------------------- --------------------------- -------
- 12 10,481 10,493
====================== =========================== =========================== =======
28.3 Classes of financial assets and liabilities
The Group analyses its financial instruments into the following
classes based on the differing risks to which the instruments
expose the Group:
Book Book
Value Value
31 May 31 December
2013 201
US$000 US$000
Trade receivables - 2,527
Other operating assets - 4,293
Bank balances and cash in hand 191 7,873
Total financial assets 191 14,693
======== =============
Short-term liabilities 161 6,871
Warrants 2 12
Convertible preference share liabilities 4,265 3,610
Total financial liabilities 4,428 10,493
======== =============
28.3.1 Fair value
For all classes except for the Convertible preference share
liabilities class the book value and fair value are the same. The
assumptions used by the Group to estimate the fair values of
financial instruments are summarised below:
-- For 'Trade receivables', 'Other operating assets' and
'Short-term liabilities' the fair value approximates to book value
because of the short maturities of these assets and
liabilities.
-- For 'Bank balances and cash in hand', the fair value has been
determined to approximate book value. The Group has no fixed rate
deposits exceeding one month as at each reporting date.
-- For 'Warrants' the fair value has been calculated using a
Black Scholes valuation model due to the short term of the
derivative instruments (a maximum of 34.5 months as at 31 May 2013
and 9.5 months as at 31 December 2011). The warrants are carried at
fair value and accordingly the book value and the fair value of the
warrants is the same. The fair values of the warrants are derived
from inputs other than quoted prices that are observable for
warrants, either directly (i.e. as prices) or indirectly (i.e.
derived from prices) and they are therefore categorized within
level 2 of the fair value hierarchy set out in IFRS 7.
-- For 'Convertible preference share liabilities' the fair value
has been determined at $568,000 based on the market capitalisation
of the Company at 31 May 2013 and the percentage ownership to held
by the Preference Shareholders once the Company has implemented the
Special Redemption.
28.3.2 Trade receivables
The balance at 31 May 2013 comprises trade receivables from the
sale of Ta(2) O(5) concentrate, less the Group's obligation to
remit any amounts recovered from its existing trade receivables to
Richmond in accordance with the Settlement Agreement (refer to
notes 20 and 21) (the balance at 31 December 2011 comprises trade
receivables from the sale of Ta(2) O(5) concentrate). This class
does not subject the Group to any risks as at 31 May 2013 because
the Group has no obligation to make payments to Richmond if it is
unsuccessful in recovering amounts from its customers.
All amounts included in 'Trade receivables' are past due at 31
May 2013 and the Group does not hold any security against the
receivables in 'Trade receivables' other than customary legal title
over the Ta(2) O(5) concentrate until the Group's customers make
final payment. This is established under the Group's supply
contracts and international shipping terms applicable to the supply
terms established which are either CIF or CFR as defined in
INCOTERMS 2010.
28.3.3 Other operating assets
The Group has no assets in this class as at 31 May 2013. The
balance at 31 December 2011 principally comprised recoverable input
IVA assets in Mozambique and VAT recoverable assets in South
Africa. These assets were principally subject to credit risk, the
maximum exposure being the carrying value of the class. Credit risk
arose due to changes in the credit rating of the counterparty and,
where applicable, the counterparty Government's ability and
willingness to pay balances due to the Company.
Included in the 'Other operating assets' were receivables which
were provided against with a total allowance of $950,000 as at 31
December 2011. All assets in the 'Other operating assets' class
were either recovered in cash during the 17 month period ended 31
May 2013 or ceased to be controlled (and were de-recognised) by the
Group upon the enforcement of HAMCM's Default under the terms of
the SLF.
28.3.4 Bank balances and cash in hand
All amounts are carried at amortised cost, and, other than cash
in hand, are interest bearing assets, with interest rates arranged
with counterparty financial institutions based on commercial
negotiations, reflecting the term, currency and amount of each
deposit. As at 31 May 2013 and 31 December 2011 all bank balances
were held in current accounts or deposit accounts with a maturity
of less than one month.
The principal risk arising for 'Bank balances and cash in hand'
is credit risk in terms of counterparty default. The maximum amount
subject to credit risk is the carrying value of this class. In the
current economic climate, the Group actively manages this risk
through the monitoring of the credit status of the counterparty
financial institutions. As at the balance sheet date the Group's
assets in 'Bank balances and cash in hand' are held with the
following banks, which are all high quality financial
institutions:
31 May
2013 31 December 2011
Banker Location of funds US$000 US$000
Deutsche Bank Jersey 191 6,277
Standard Bank Mozambique - 820
First National Bank South Africa - 669
Other (including cash in hand) - 107
-------- -----------------
Total 191 7,873
======== =================
'Bank balances and cash in hand' is also subject to the risk of
changes in foreign currency exchange rates. The impact of changes
in foreign currency exchange rates on the carrying value of 'Bank
balances and cash in hand' is shown along with all other financial
instruments, in the foreign currency sensitivity analysis
below.
28.3.5 Short-term liabilities
'Short term liabilities' represents trade and other payables
arising in the normal course of business and certain obligations
due by the Group for services provided in the completion of the
Marropino process plant where the contractual liability was
incurred by the Company (31 December 2011: represents trade and
other payables arising in the normal course of business and amounts
due for property, plant and equipment). As at 31 May 2013, interest
is due on certain of the obligations included in this class which
are past due at a rate of approximately $9.71 per day (31 December
2011: no interest is chargeable on any of the items included in
'Short term operating liabilities'). The obligations accruing
interest and other obligations recorded at 31 May 2013 totalling
$120,000 were settled by the Group on 20 June 2013 through the
issuance of 14,547,722 new Ordinary Shares (refer to note 21).
In the financial statements for the 12 month period ended 31
December 2011, the Short-term liabilities class further included
$109,000 accrued for the CRPS Dividend due for the three months
ended 31 December 2011 which was discharged in cash in January
2012. Due to the change in the risk profile of the CRPS Dividend on
the Group's cash balances, the CRPS Dividend is now included within
the Convertible preference share liability class. The comparatives
have been represented accordingly.
The principal risks associated with 'Short-term liabilities' are
liquidity risk and the risk of changes in foreign currency exchange
rates. The impact of these risks is shown in the sections below
respectively on liquidity risk and foreign currency sensitivity
analysis along with all other financial instruments of the
Group.
28.3.6 Warrants
'Warrants' contains warrants issued by the Company which are
classified as derivative financial liabilities as the warrants are
issued in a currency other than the functional currency of the
Company. Further details are provided in note 23.2. The warrants do
not create any obligation on the Company other than to deliver
Ordinary Shares in the Company for a fixed price in GBP over the
life of the warrants at the call of the holder. 'Warrants' does not
therefore expose the Company or Group to any risks, other than
changes in fair value, as at the balance sheet date.
28.3.7 Convertible preference share liabilities
This class contains the amortised cost of the CRPS liability
discussed more fully in note 22 and the amounts accrued for the
CRPS Dividend. The CRPS liability was repayable, subject to Jersey
Law, in April 2016 when the CRPS matured under their original
terms, at which date the principal amount repayable would have been
$4,336,000. In accordance with Jersey Law, the CRPS Dividend could
not be paid and accordingly payment was deferred until such time as
the Group could lawfully make payment (refer to note 22.3). As at
31 May 2013, the Convertible preference shares liabilities class
therefore did not expose the Company to cash flow risks. As
discussed more fully in note 32.4 the CRPS obligations, including
the CRPS dividend due, are now expected to be discharged in full
through the issue of new Ordinary Shares under the terms of the
Special Redemption by the end of August 2013. As at 31 December
2011, amounts relating to the CRPS Dividend were reported within
the 'Short-term liabilities' class. The CRPS Dividend accrual has
been reclassified due to a change in the financial risk profile of
the CRPS dividend.
28.3.8 Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group raises funds as and when required on the basis of
forecast expenditure and inflows. When funding is required, the
Group balances the costs and benefits of equity and debt financing.
When funds are received they are deposited with banks of high
standing in order to obtain competitive market interest rates.
Due to the current developments in the Group and in particular
(1) the transition to an Investing Company, (2) the settlement of
certain obligations as at 31 May 2013 amounting to $120,000 in
Ordinary Shares subsequent to 31 May 2013 (refer to note 21), (3)
the anticipated full and final settlement of the Company
obligations in respect of the CRPS, and (4) the Group's long term
Ta(2) O(5) concentrate supply contracts, liquidity as at 31 May
2013 is not representative of the liquidity of the Group as at the
date of this report. The Going Concern section of the note 3
provides further information on the planned future liquidity and
the Going Concern basis of the Group.
The Group's liabilities at the gross repayable amount are
contractually due as follows:
31 May
2013 31 December 2011
US$000 US$000
30 days 486 6,289
31 to 89 days 181 -
90 to 120 days - 424
1 to 2 years - 267
April 2016 4,336 4,336
-------- -----------------
Total 5,003 11,316
======== =================
The table above excludes $176,000 which may become payable to
Richmond in the event that the Group is successful in recovering
amounts from its customers (refer to notes 20 and 21) because of
the uncertainty in the amount and timing of such payment which will
only be made if the Group receives the amounts due from its
customers prior to payment.
28.3.9 Foreign currency sensitivity analysis
The Group's foreign currency assets and liabilities are exposed
to foreign currency transaction risk.
The following are the exchange rates applied by the Group to US$
for significant foreign currency assets and liabilities as at the
reporting period end:
31 May
2013 31 December 2011
GBP 0.65 0.65
South African Rand - 8.12
Mozambique Metical - 26.71
======= =================
The table below illustrates the hypothetical sensitivity of the
Group's reported profit and equity to a 10% increase and decrease
in the US$ exchange rate to GBP (31 December 2011: to a
simultaneous 10% increase and decrease in the US$ exchange rate to
GBP, South African Rand and Mozambique Metical) at the period-end
assuming that all other variables remain unchanged. 10% represents
the Directors' assessment of a reasonably possible change in the
relevant exchange rates. A positive number below indicates an
increase in profit and equity.
31 May 31 May 31 December 2011 31 December 2011
2013 2013
Income Equity Income Equity
US$ strengthens by 10% (15) (15) (496) (496)
US$ weakens by 10% 15 15 601 601
======= ======= ================= =================
The Group publishes its consolidated financial statements in US$
and, as a result, is was also subject to foreign currency exchange
translation risk in respect of the translation of the results and
underlying net assets of its non US$ functional currency entities
into US$. The impact of translation risk is not quantified in the
table above. All such non US$ functional currency entities ceased
to be controlled during the period following the enforecement of
HAMCM's Default under the terms of the SLF.
29. OPERATING LEASES
At the end of the reporting period the Group had commitments for
future minimum lease payments under non-cancellable operating
leases, which fall due as follows:
31 May
2013 31 December 2011
US$000 US$000
Within one year - 146
In the second to fifth years inclusive - 28
-------- -----------------
- 174
================================================= =================
Operating lease rentals recognised as an expense in profit and
loss for continuing operations are disclosed in note 7.
30. RELATED PARTIES
The following represents a list of the subsidiaries of the
Company as at 31 May 2013, all of which are 100% owned in the
Group:
Class of
Name Country of incorporation and operation Principal Activity shares held
Highland African Mining Company Limited Jersey Holding company Ordinary
Speciality Minerals Corporation Limited Jersey Marketing and Sales Ordinary
The following represents a list of the subsidiaries and associated companies of the Company
which ceased to be controlled, or beneficially owned, by the Company following the enforcement
of HAMCM's Default under the terms of the SLF security interest agreements during the period:
Country of
incorporation Principal Class of % of ownership
Name and operation Activity shares held interest(1) (2)
African
Speciality Mining and
Metal SP.R.L DRC trading Ordinary 50%
African
Speciality
Minerals
Holding
Limited Jersey Holding company Ordinary 100%
HAMC
Investments
Limited Jersey Holding company Ordinary 100%
HAMC Minerals
Limited Jersey Holding company Ordinary 100%
HAMC Project
Services (Pty)
Limited South Africa Support services Ordinary 100%
Highland
African Mining
Company
Limitada Mozambique Mining Ordinary 100%
Highland
African Mining
Company
Limited Jersey Holding company Ordinary 100%
Speciality
Minerals
Corporation Marketing and
Limited Jersey Sales Ordinary 100%
Tantale et
Niobium du
Tanganika
SP.R.L DRC Mining Ordinary 37.5%
(1) Includes direct and indirect holdings as appropriate
(2) The formal disposal process of HAMCM and its subsidiary and associate
companies was completed on 24 June 2013
Transactions between the Company and its subsidiaries, including those which ceased to be
controlled by the Group during the period, have been eliminated upon consolidation and are
therefore not disclosed in this note.
Details of transactions and balances during the current and prior period between the Group
and other related parties are detailed below. The amounts reported are the fair value of the
transaction in US$. Directors' fees and expenses are excluded unless they are invoiced to
the Group by means of a separate company. Remuneration of key management personnel, including
Directors, is shown in note 10 and the Directors' report.
Period ended 31 May Period ended 31 December
2013 2011
US$000 US$000
African Speciality Metal SP.R.L ('ASM')
Loans provided to ASM during the period (3) 2,034 -
Interest income during the period 53
Loans de-recognised during the period upon Default of HAMCM under
the SLF 2,087 -
Barons Financial Services SA (1)
Consulting fees - 406
Fees due for the services of Mr E Kohn TD as Chairman paid in cash - 226
Bonus paid in cash - 100
Funds advanced to the Company (representing expenditure incurred on
the Company's behalf and
recharged to the Company) - 395
Barons Financial Services Limited (1)
Fees due for the services of Mr E Kohn TD as Chairman paid in shares - 63
Barons Financial Services (UK) Limited (1)
Commission arising on fundraising on the same terms as those
provided to the Company's brokers - 175
Fair value of warrants over no (2011: 27,583) Ordinary Shares of
GBP0.008 issued to Barons
Financial Service Limited on the same terms as those provided to
the Company's brokers - 41
Bridgewater Pension Trustees Ltd (1)
Subscription of CRPS - 160
Carey Olsen (1)
Legal fees and expenses 117 751
Balance due to Carey Olsen at period end - 184
Cornerstone Capital Limited (1)
Fees due for the services of Mr S Hunt as Chairman 39 -
Declan Sheeran
Consulting fees (2) 44 25
Balance due to Declan Sheeran at period end - 3
Ekasure Limited (1)
Fees due for the services of Mr J Allan as Director 5 18
Consulting fees 112 600
Re-imbursement of expenses incurred on behalf of Noventa 11 26
Interest on late payment of amounts due 1 -
Balance due to Ekasure Limited at period end 108 154
Fleming Family & Partners (Liechtenstein) AG (1)
Subscription of CRPS - 240
Geoser Limitada
Consulting fees 89 50
Balance due to Geoser Limitada at period end - 6
Hains Engineering Company Limited
Consulting Fees - 7
KLM Consulting Services (Pty) Limited
Hydro-geological consulting fees - 58
Richmond Master Fund Limited
Subscription of new Ordinary Shares (1) - 5,082
Loans provided to the Company (1) 24,640 -
Loans repaid by the Company including interest due (1) (4) 26,759 -
Loans provided to HAMCM (5) 39,041 -
Arrangement fees charged on loans provided to the Company (1) 700 -
Arrangement fees charged on loans provided to HAMCM 1,896 -
Early Repayment Penalty fee on loans provided to HAMCM 12,609 -
Legal fees and expenses charged to the Company related to loans
provided (1) 140 -
Legal fees and expenses charged to HAMCM related to loans provided 707 -
Interest charged on loans provided to the Company (1) 2,119 -
Interest charged on loans provided to HAMCM 2,989 -
Loans de-recognised during the period upon Default of HAMCM under
the SLF 54,640 -
==================== =========================
(1) Transactions and / or balance relate to the Company.
(2) Of the consulting fees payable to Declan Sheeran, $29,500 was incurred
by the Company and $14,400 by HAMCM.
(3) Of the amounts advanced to ASM, $484,145 was advanced by the Company
and $1,550,000 was advanced by ASMHL, a 100% subsidiary of HAMCM.
(4) Loans repaid by the Company to Richmond were funded by the initial
$26,759,000 draw down on the SLF provided to HAMCM.
(5) Includes $26,759,000 drawn down to repay loans provided to the Company.
In addition to the amounts reported above for the twelve months
ended 31 December 2011, Mr F Fernandez-Torres subscribed for 32,000
new Ordinary Shares, Mr G Berglund subscribed for 400,000 new
Ordinary Shares, Mr J Allan (through Ekasure Limited) subscribed
for 40,000 new Ordinary Shares and Mr R Fleming subscribed for
1,400,000 new Ordinary Shares in the August 2011 Placing on the
same terms as those offered to all subscribers in the August 2011
Placing. Mr F Fernandez-Torres, Mr J Allan and Mr G Berglund were
Directors of the Company at that time. Mr R Fleming is a
significant shareholder in the Company.
Fleming Family & Partners (Liechtenstein) AG was a related
party of the Company by virtue of its trusteeship of a Trust with a
significant shareholding in the Company and of which Mr R J Fleming
is a potential beneficiary. Fleming Family & Partners
(Liechtenstein) AG has now been retired as trustee of this trust
and Sanne Trust Company Limited has been appointed. Bridgewater
Pension Trustees Ltd is a related party of the Company by virtue of
its relationship with Mr R J Fleming, who has a significant
shareholding in the Company.
Barons Financial Services SA, Barons Financial Services Limited,
Barons Financial Services (UK) Limited, Carey Olsen, Cornerstone
Capital Limited, Ekasure Limited, Geoser Limitada Hains Engineering
Company Limited and Richmond Master Fund Limited and Richmond
Partners Master Limited are related parties to the Group by virtue
of common current or former directorship / employment as
follows:
Related party Common Director/Employee
Richmond Master Fund Limited and Richmond Partners Master Limited Mr L Bechis (resigned 2013)
Barons Financial Services SA, Barons Financial Services Limited and Barons Financial
Services
(UK) Limited Mr E F Kohn TD (resigned 2011)
Carey Olsen Mr G Coltman (resigned 2012)
Cornerstone Capital Limited Mr S Hunt (appointed 2012)
Ekasure Limited Mr J N Allan (resigned 2012)
Geoser Limitada Mr D Sheeran (appointed 2012)
Hains Engineering Company Limited Mr L Heymann (deceased 2011)
KLM Consulting Services (Pty) Limited is a related party of the
Company by virtue of the close family relationship between Mr J
Allan and the owner director of KLM Consulting Services (Pty)
Limited.
African Speciality Metal SP.R.L is a related party of the
Company due to the 50.0% shareholding that the Company had in that
company as at 22 March 2013, the date on which the Group lost
control of this company following the Default of HAMCM under the
SLF. The results of operations of African Speciality Metal SP.R.L
are reported as an associate of the Company within discontinued
operations.
All related party transactions are transacted on an arm's length
basis, in accordance with standard commercial terms applicable to
the type of transaction.
31. CONTINGENT LIABILITIES
31.1 Ta(2) O(5) supply contracts
The Group has two long term supply contracts for Ta(2) O(5)
concentrate, one of which was renegotiated during 2011 and one of
which was renegotiated during 2012. The supply contracts are held
by SMC. The Company is a guarantor of SMC's delivery obligations
under each of the supply contracts.
As at the date of this report, SMC has a shortfall of deliveries
of approximately 286,000 lbs contained Ta(2) O(5) on one of the
contracts. SMC has further obligations to deliver 578,000 lbs
contained Ta(2) O(5) in 2013, and 250,000 lbs contained Ta(2) O(5)
per annum in 2014, 2015 and 2016. One contract contains options
exercisable at the buyers request covering annual deliveries of a
further 220,000 lbs contained Ta(2) O(5) in 2014 and 2015. A
further minimum 200,000 lbs of contained Ta(2) O(5) must be
delivered any time before the end of 2014 under one of the
contracts and a further minimum of 255,000 must be delivered before
the end of 2016 on the remaining contract. Further, one contract
also includes option rights over any additional production from any
of the concessions operated by HAMCL during the agreement life
(i.e. until 31 December 2015). The current spot price of Ta(2) O(5)
concentrate is c$125 per lb of Ta(2) O(5) . SMC's supply contracts
have multiple pricing points and are at a 41.0% to 49.0% discount
to the current spot price. Further, forecast spot prices for Ta(2)
O(5) concentrate are expected to exceed the price charged by SMC
over the period of the contracts based on the Roskill Information
Services Limited report entitled 'Tantalum: Market Outlook to
2016'. While market prices are expected to exceed contract prices
over the life of the contracts, only a small proportion of Ta(2)
O(5) concentrate is traded on the spot market and the market prices
are volatile and significantly affected by available supply and
demand. There are no exchange traded contracts for Ta(2) O(5) .
Most Ta(2) O(5) worldwide is supplied under off-take agreements
with refiners, the terms of which are generally confidential.
SMC is no longer able to supply Ta(2) O(5) concentrate to the
Group's customers because (1) it no longer has access to supply of
Ta(2) O(5) concentrate from the Marropino Mine following the
enforcement of HAMCM's Default under the SLF, and (2) it does not
have the resources to enable it to procure Ta(2) O(5) concentrate
from other sources for onwards supply to the Group's customers
because the price it would have to source material at significantly
exceeds, or is forecast to exceed, the amount it can realise from
the sale of the material at the contract prices. Accordingly, SMC
has no viable solution if current and expected market prices
prevail by which it can satisfy its Ta(2) O(5) supply obligations
under the contracts and the supply contracts are onerous on SMC
(and the Company as guarantor).
Under the governing law of both of SMC's supply contracts the
buyer is legally entitled to seek compensation for damages and / or
loss of profit arising from the non-performance by SMC of its
obligations under the contract. As at the date of these financial
statements, one of the Group's customers would be entitled to lodge
a claim against SMC for the damages and / or loss of profit arising
from the undelivered volumes to date. The buyers would further be
entitled to lodge claims against SMC at the end of each contract
year (i.e. 2013, 2014, 2015 and 2016). The exposure arising in
respect of such current and future claims, if lodged by the buyers,
could be in the range $nil to $130 million but the extent of the
Group's and Company's ultimate liability cannot reliably be
quantified because it depends on the buyer's individual
circumstances and the damages suffered, or profit lost, as a result
of SMC's failure to perform under the contracts during each
contract year as well as the Group's and Company's ability to
defend any claims that may be made.. As at 31 May 2013 and the date
of this report, the Group has amounts receivable from each of its
customers amounting in aggregate to $176,000. Under either contract
and if the buyer lodges a claim for non-performance against SMC,
the buyer has a general right of offset of the amounts due to SMC
against the corresponding non-performance claim. In all likelihood
the claims that the buyers may lodge against SMC will at least
match the value of these receivables and accordingly SMC is
unlikely to recover the receivables in cash. No provision has been
recorded against the receivables because the Group expects to at
least recover their value through offset against possible future
claims arising from the buyers. It should further be noted that, in
the event that the Group is successful in recovering its customer
receivables, it has an obligation to remit the funds received to
Richmond, such obligation being recorded within trade and other
payables. The net asset value of the customer receivables and
related amounts recorded in trade and other payables is accordingly
$nil (refer to notes 20 and 21). In the event that the Group
recovers its customer receivables through offset against claims
arising against the Group for non-performance under the contracts,
the Group has no further obligation to Richmond.
The Directors believe, following extensive discussions with the
customers, that it is possible for SMC and the Company to obtain
releases from all past and future obligations under the contracts
without requiring an outflow of economic benefits (other than the
offset of the trade receivables as discussed above). Should this
assessment prove to be incorrect, and if the customers were to seek
damages from the Group for non-performance under the contracts, the
amounts involved could be highly material and the Directors believe
that the Group's assets would be insufficient to satisfy the claims
made. The Directors are further of the opinion that the Company
would not be able to raise additional funding to satisfy the claims
and accordingly the Company, and Group, would in all likelihood
become insolvent and would need to be wound up.
Due to the uncertain outcome of these discussions and the wide
range of potential financial outcomes, the ultimate outcome of this
matter cannot presently be reliably estimated, and consequently no
provision for any liability that may result has been made in either
the consolidated or company only financial statements.
31.2 Disputed supplier invoices from 2010
In the 12 month period ended 31 December 2010, the Company and
Group were invoiced $124,000 for amounts relating to the Marropino
process plant upgrade programme. The invoiced amounts were disputed
by the Company due to the quality of the work completed by the
supplier. The supplier ceased to be engaged by the Group at the
same time. While the Company has not received a formal credit note
for the invoices raised, the supplier has never requested payment
of the outstanding amounts. Further, if any request for payment is
received in the future, the Directors believe that the Company will
be successful in defending any claim. No amounts are recognised as
at 31 May 2013 for the potential payment obligation of these
amounts.
32. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
32.1 New Investing Policy, change in name and modifications to the Company's Articles
On 19 June 2013 at the 2013 EGM, Shareholders approved the
Company's new Investing Policy (details of which are provided in
the section of the Directors' Report entitled 'Principal
activities') and the change in name for the Company from Noventa
Limited to Paragon Resources PLC to better reflect this new
Investing Policy. The Shareholders further approved certain minor
changes to the Company's Articles to streamline the operation of
the Board.
32.2 Share capital re-organisation and allotment authorities free from pre-emption rights
On 19 June 2013 at the 2013 EGM, Shareholders approved the
reorganisation of the Company's share capital by subdividing each
Ordinary Share (of GBP0.008 each) into sixteen Ordinary Shares (of
GBP0.0005 each) and then immediately re-designating fifteen of each
sixteen such Ordinary Shares into fifteen Deferred Share of
GBP0.0005 each. The Deferred Shares do not carry voting rights or a
right to receive a dividend. The holders of Deferred Shares do not
have the right to receive notice of any general meeting of the
Company, nor have any right to attend, speak or vote at any such
meeting. In addition, holders of Deferred Shares will only be
entitled to a payment (of an amount equal to the nominal value of
such share) on a return of capital or on a winding up of the
Company after each of the holders of Ordinary Shares has received a
payment of GBP100,000 in respect of each Ordinary Share.
Accordingly, the Deferred Shares have no economic value. The
Deferred Shares are not admitted to trading on any stock
exchange.
The reason for this reorganisation was to reduce the par value
of the Company's Ordinary Shares such that the Company would be
permitted to issue new Ordinary Shares for cash in the future. The
recent trading price of the Company's Ordinary Shares had been
below their previous par value and the Company was prohibited by
the Companies (Jersey) Law 1991 from issuing an Ordinary Share for
a value that is lower that its par value.
Following the re-organisation, the same aggregate number of
Ordinary Shares remained in issue (therefore preserving the
proportionate interests of Shareholders) but the par value of each
such Ordinary Share was reduced from GBP0.008 to GBP0.0005.
Shareholders further provided the Directors with allotment
authorities, free from pre-emption rights, over up to 600,000,000
new Ordinary Shares, such authorities expiring at the earlier of
fifteen months from the date of the EGM and the Annual General
Meeting of the Company to be held in 2014.
32.3 Issue of new Ordinary Shares and warrants
On 20 June 2013 the Company issued 14,547,222 new Ordinary
Shares to settle outstanding cash obligations of the Company
totalling approximately $120,000 as at 31 May 2013. Further details
are provided in note 21. The Company further granted warrants to
subscribe for 8,676,790 Ordinary Shares at 0.461p per share for a
period of 5 years to Allenby Capital Limited in consideration for a
reduction in the annual fees charged by that company for its
services.
32.4 Changes to the Terms and Conditions of the CRPS to permit
the redemption of the CRPS in exchange for new Ordinary Shares
On 24 July 2013 the terms and conditions of the CRPS were
amended at the Class Meeting of the Preference Shareholders to
permit the Company to redeem in full the outstanding CRPS,
including the related CRPS Dividends due, through the Special
Redemption. Pursuant to the amended terms, the Company, at its
election, can redeem the 1,028,075 CRPS outstanding (with a
redemption value of $4,336,000) and the related CRPS dividend due
as (which at the date of this report is approximately $576,000)
through the issue of such number of new Ordinary Shares as is
equivalent to the number of Ordinary Shares in issue immediately
prior to the Company electing to make the Special Redemption. The
Company anticipates that the Special Redemption will be implemented
by the end of August 2013 and expects to issue approximately
172,237,380 new Ordinary Shares to satisfy the Special Redemption.
Subsequent to the Special Redemption, the Company will have no
further obligations in respect of the CRPS.
Company statement of profit or loss and other comprehensive
income
17 month period ended 31 May
Note 2013 12 month period ended 31 December 2011
US$000 US$000
Administrative expenses (2,703) (5,940)
Impairment of investments in
subsidiary undertakings 38 (40,578) (136)
Impairment of property, plant and
equipment 39 - (22)
Loss on disposal of property, plant (4) -
and equipment
Write back / (provision) against
receivables from subsidiary
undertakings 42,559 (49,798)
Operating loss (726) (55,896)
Net finance income / (expense) 36 1,094 (3,617)
----------------------------- ---------------------------------------
Investment revenues 5,295 3,207
Finance costs (4,201) (6,824)
----------------------------- ---------------------------------------
Profit / (loss) before taxation 34 368 (59,513)
Taxation 37 - -
----------------------------- ---------------------------------------
Profit / (loss) for the financial
period and total comprehensive income
/ (loss) 368 (59,513)
============================= =======================================
All results derive from continuing operations in both financial
periods.
Company statement of financial position
31 May 31 December
2013 2011
Note US$000 US$000
Non-current assets
Investments in subsidiaries 38 - -
Property, plant and equipment 39 - -
Loans due from subsidiary undertakings 40 - -
---------- ------------
- -
---------- ------------
Current assets
Trade and other receivables 41 61 316
Loans due from subsidiary undertakings 40 - -
Cash and cash equivalents 191 6,262
---------- ------------
252 6,578
---------- ------------
Total assets 252 6,578
---------- ------------
Current Liabilities
Trade and other payables 42 164 695
Convertible redeemable preference share dividend 22 506 109
Loans due to subsidiary undertakings 42 - 2,361
Derivative financial liabilities 23 2 12
Short-term provisions 25 41 124
---------- ------------
713 3,301
---------- ------------
Net current (liabilities) / assets (461) 3,277
---------- ------------
Non-current liabilities
Convertible redeemable preference share liability 22 3,759 3,501
Total liabilities 4,472 6,802
---------- ------------
Net liabilities (4,220) (224)
========== ============
Equity
Share capital 26 2,015 1,556
Share premium 121,715 121,483
Shares to be issued 26 13 46
Convertible preference share reserve 26 617 617
Accumulated losses (128,580) (123,926)
---------- ------------
Total deficit (4,220) (224)
========== ============
The financial statements of Paragon Resources PLC, registered
number 95036, were approved by the Board of Directors and
authorised for issue on 29 July 2013.
Signed on behalf of the Board of Directors by:
S Hunt, Director D Cassiano-Silva, Director
Executive Chairman Non-Executive Director
29 July 2013 29 July 2013
Company statement of changes in equity
Notes Convertible
Share Share preference share Retained Total
capital premium Shares to be issued reserve losses Equity
US$000 US$000 US$000 US$000 US$000 US$000
At 1 January 2011 324 84,542 55 - (70,167) 14,754
- - - - (59,513) (59,513)
Total comprehensive
loss for the period 10 517 (9) - 480 998
Share-based payments 974 30,800 - - - 31,774
Issue of share
capital - (2,446) - - - (2,446)
Expenses incurred in
issuing share
capital - - - 1,804 - 1,804
Issue of CRPS 22 - - - (110) - (110)
Allocation of
expenses incurred
in issuing CRPS 22 248 7,510 - (1,077) 5,274 11,955
Redemption of CRPS 22 - 560 - - - 560
At 31 December 2011 1,556 121,483 46 617 (123,926) (224)
Total comprehensive
income for the
period - - - - 368 368
Share-based payments - - (13) - 29 16
Issue of share
capital 459 279 (20) - - 718
Expenses incurred in
issuing share
capital - (47) - - - (47)
Net capital
distribution 26 - - - - (5,051) (5,051)
At 31 May 2013 2,015 121,715 13 617 (128,580) (4,220)
========= ========= ==================== ==================== ========== =========
17 month period ended 31 May
2013 12 month period ended 31 December 2011
US$000 US$000
Cash flows from operating activities
Profit / (loss) for the period 368 (59,513)
Adjustments for:
Depreciation 1 20
Impairment of property, plant and equipment - 22
Loss on disposal of property, plant and
equipment 4 -
Impairment of investments in subsidiary
undertakings 40,578 136
(Write back) / provision against receivables
from subsidiary undertakings (42,559) 49,798
Foreign exchange (gain) / loss (65) 437
Share based payments 29 648
Finance income (5,295) (3,207)
Finance expense 4,201 6,824
Operating cash flows before changes in
working capital and provisions (2,738) (4,835)
Decrease / (increase) in trade and other
receivables 255 (233)
Decrease in trade and other payables and
short-term provisions (648) (62)
Net cash used in operating activities (3,131) (5,130)
----------------------------- ---------------------------------------
Cash flows from investing activities
Acquisition of property, plant and equipment (5) (8)
Acquisition of shares in subsidiary
undertakings (40,590) -
Proceeds from disposal of property, plant and
equipment - 3
Paid to subsidiary undertakings (63,724) (49,798)
Interest received 79 115
Net cash used in investing activities (104,240) (49,688)
----------------------------- ---------------------------------------
Cash flow from financing activities
Proceeds from issue of new shares 718 32,220
Share issue expenses (47) (2,446)
Received from subsidiary undertakings 103,711 735
Proceeds from issue of CRPS - 11,904
CRPS issue expenses - (728)
Proceeds from new unsecured borrowings 24,640 -
Unsecured borrowings issue expenses (840) -
Repayment of unsecured borrowings (24,640) -
Interest paid (2,335) (490)
Net cash inflow from financing activities 101,207 41,195
----------------------------- ---------------------------------------
Net (decrease) / increase in cash and cash
equivalents (6,164) (13,623)
Effect of exchange rates on cash and cash
equivalents 93 (409)
----------------------------- ---------------------------------------
Cash and cash equivalents at beginning of
period 6,262 20,294
----------------------------- ---------------------------------------
Cash and cash equivalents at end of period 191 6,262
============================= =======================================
Company cash flow statement
Notes to the Company financial statements
33. SIGNIFICANT ACCOUNTING POLICIES
The separate financial statements of the Company have been
presented as required by the Companies (Jersey) Law 1991, as
amended. As permitted by that Law, the separate financial
statements have been prepared in accordance with IFRSs as adopted
by the European Union.
The financial statements have been prepared on the historical
cost basis except for the measurement of certain financial
instruments, and share based payments. The principal accounting
policies adopted are the same as those set out in note 3 to the
consolidated financial statements, other than as noted below.
33.1 Borrowing costs
All borrowing costs are recognised in profit and loss in the
period in which they are incurred because the Company as a
stand-alone entity has not financed qualifying assets with loan
funding.
33.2 Investments in subsidiary undertakings
Investments are recorded at cost, less provision for impairment.
The Company includes within the carrying value of investments in
subsidiary undertakings the fair value of the consideration paid
for the subsidiary. Additional investment in the subsidiary
undertakings, in the form of capital subscriptions, capital
contributions or share based payment obligations assumed on behalf
of the subsidiary is added to the cost of the investment in the
period in which it arises.
34. PROFIT / (LOSS) BEFORE TAXATION
17 month period ended 31 May 12 month period ended 31 December 2011
2013
US$000 US$000
Profit / (loss) before taxation has been
arrived at after charging:
Depreciation 1 20
Impairment of investment in subsidiary
undertakings 40,578 136
Impairment of property, plant and equipment - 22
Loss on disposal of property, plant and 4 -
equipment
(Write back) / provision against receivables
from subsidiary undertakings (42,559) 49,798
Foreign exchange (gain) / loss (65) 437
Staff costs (note 35) 705 617
============================= =======================================
The auditor's remuneration for audit and other services is
disclosed in note 8 to the consolidated financial statements.
35. STAFF
17 month period ended 31 May 12 month period ended 31 December 2011
2013
The average monthly number of employees in
the period was:
Directors 2 1
Management 1 2
----------------------------- ---------------------------------------
3 3
============================= =======================================
US$000 US$000
Staff costs:
Directors 317 347
Management 346 168
Share based payments 42 102
----------------------------- ---------------------------------------
705 617
============================= =======================================
Staff numbers and staff costs exclude Non-Executive Directors
and Executive Directors for whom services are provided via service
agreements with third party companies. The aggregate charge arising
for Directors' services to the Company is:
17 month period ended 31 May 12 month period ended 31 December 2011
2013
US$000 US$000
Emoluments 527 411
Compensation for loss of office - 151
Other benefits 52 -
Share based payments 16 218
----------------------------- ---------------------------------------
595 780
============================= =======================================
36. NET FINANCE INCOME /(EXPENSE)
17 month period ended 31 May 12 month period ended 31 December 2011
2013
US$000 US$000
Interest income on loans to HAMCJ, a
subsidiary undertaking 977 952
Provision against irrecoverable interest (977) (952)
Interest income on loans to ASMHL, a former
subsidiary undertaking 8 -
Interest income on bank deposits 79 115
Change in fair value of derivative assets
(note 23) 4,036 -
Change in fair value of derivative
liabilities (note 23) 1,172 3,092
----------------------------- ---------------------------------------
Investment revenues 5,295 3,207
----------------------------- ---------------------------------------
Interest expense on loans from SMC, a
subsidiary undertaking (94) (37)
Interest expense on loans from HAMCM, a
former subsidiary undertaking (131) -
Interest expense on CRPS (870) (940)
Debt arrangement expenses - (116)
Interest expense on unsecured loans provided
by Richmond (2,266) -
Amortisation of loan arrangement fees and
transaction costs arising
on unsecured loans provided by Richmond (840) -
Charge arising on redemption of CRPS - (5,731)
Finance costs (4,201) (6,824)
----------------------------- ---------------------------------------
Net finance expense 1,094 (3,617)
============================= =======================================
The Company charges interest on receivable balances from Group
undertakings in accordance with the loan agreements in place with
the counterparty company. The interest is provided for if it is
considered to be irrecoverable.
37. TAXATION
With effect from the 2009 year of assessment Jersey abolished
the exempt company regime for existing companies. Profits arising
in the Company are subject to taxation at the rate of 0% in both
periods presented.
38. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
US$000
Cost
At 1 January 2011 75,414
Capital contribution 136
----------
At 31 December 2011 75,550
Subscription of ordinary shares in HAMCJ 40,590
Capital contribution (12)
----------
At 31 May 2013 116,128
----------
Provision for impairment
At 1 January 2011 (75,414)
Charge to profit and loss (136)
----------
At 1 January 2012 (75,550)
Charge to profit and loss (40,578)
----------
At 31 May 2013 (116,128)
----------
Net book value
----------
At 31 May 2013 -
==========
At 31 December 2011 -
==========
On 19 December 2012 the Company subscribed for 1,000 ordinary
shares of GBP0.001 each in the capital of its 100% directly owned
subsidiary undertaking, HAMCJ through the HAMCJ Subscription, for
the HAMCJ Subscription Price of $40,590,000. The HAMCJ Subscription
Price was satisfied by partial offset against amounts due by HAMCJ
to the Company (refer to note 40) in accordance with the Set Off
Agreement dated 19 December 2013 between the Company, HAMCJ and
SMC. The purpose of this subscription was to re-organise and
simplify the intercompany positions between the companies in the
Group.
Capital contributions represent increases or decreases in
investment arising from the grant, lapse or termination of share
options or Ordinary Shares to employees of subsidiary
undertakings.
Details of the Company's subsidiary undertakings are included in
note 30 to the financial statements.
39. PROPERTY, PLANT AND EQUIPMENT
Office furniture, equipment and computers
US$000
Cost
At 1 January 2011 58
Additions 8
Disposals (5)
------------------------------------------
At 31 December 2011 61
Additions 5
Disposals (19)
------------------------------------------
At 31 May 2013 47
------------------------------------------
Depreciation and impairment
At 1 January 2011 (21)
Charge for the year (20)
Impairment (22)
Eliminated on disposals 2
------------------------------------------
At 31 December 2011 (61)
Charge for the year (1)
Eliminated on disposals 15
------------------------------------------
At 31 May 2013 (47)
------------------------------------------
Net book value
------------------------------------------
At 31 May 2013 -
==========================================
At 31 December 2011 -
==========================================
40. LOANS DUE FROM SUBSIDIARY UNDERTAKINGS
At the balance sheet date amounts receivable from subsidiary
group companies (including the EBT) are:
31 May 31 December 2011
2013
US$000 US$000
Non-current
HAMCJ - 43,856
HAMCL - 50,736
HAMCPS - 82
EBT 1,270 1,270
-------- -----------------
1,270 95,944
Current
HAMCL - 8,034
-------- -----------------
- 8,034
-------- -----------------
Provision for irrecoverable amounts (1,270) (103,978)
-------- -----------------
- -
======== =================
Amounts repayable from HAMCJ (the 'HAMCJ Receivable') carried
interest of 1 month US LIBOR + 3.5% per annum charged on the
outstanding loan balances. Interest was fully provided for in the
period in which it arose due to uncertainty over the recoverability
of the outstanding loan balance. The HAMCJ Receivable was repaid on
19 December 2012 at which date it was recorded at $46,236,000. In
accordance with the Set Off Agreement, the repayment was satisfied
by offset against the Company's obligations to HAMCJ under the
HAMCJ Subscription (refer to note 38) and by the assignment to the
Company by HAMCJ of receivables due from SMC amounting to
$5,646,000. The amount receivable from SMC was further offset
against the Company's obligations to SMC at that date which
amounted to $5,471,000. The residual balance of $175,000 due from
SMC to the Company was satisfied in cash pursuant to the terms of
the Set Off Agreement. Subsequent to the Set Off Agreement, the
balances between each of HAMCJ, SMC and the Company were reduced to
$nil.
Amounts repayable from HAMCL (the 'HAMCL Receivables') did not
bear interest and were repayable either on demand, or in
instalments under agreed repayment terms contained in loan
agreements until 30 June 2020. The HAMCL Receivables were assigned
by the Company to HAMCM on 6 December 2012 for their estimated fair
value of $26,462,000. The fair value was calculated based on the
discounted cash flows expected to be generated by HAMCL (as a
standalone entity) in accordance with the Group's business plan as
at that date and a discount rate of 9.5%. The gross amounts due by
HAMCL to the Company at that date were $86,023,000. In accordance
with the settlement deed dated 6 December 2012 between the Company
and HAMCM, the amount due by HAMCM to the Company for the
assignment of the HAMCL Receivables was settled through offset
against $26,380,000 due from the Company to HAMCM and the payment
by HAMCM in cash of $82,000.
Amounts repayable from HAMCPS (the 'HAMCPS Receivable') did not
bear interest and had no fixed repayment terms. The HAMCPS
Receivable was repaid in full during the period through the
provision of goods and services by HAMCPS to the Company, or
payment of obligations on behalf of the Company incurred within
South Africa and Mozambique.
The loans receivable were provided for in full due to the losses
experienced by subsidiary undertakings and uncertainty over the
recoverability of the amounts. Movements in the provision accounts
during the periods were:
US$000
At 1 January 2011 53,962
Increase in allowance 50,750
Foreign exchange (734)
---------
At 31 December 2011 103,978
Net write back in allowance in the period (41,582)
Disposed on assignment of HAMCL Receivables (59,561)
Foreign exchange gain (1,565)
---------
At 31 May 2013 1,270
=========
41. TRADE AND OTHER RECEIVABLES
31 May 31 December 2011
2013
US$000 US$000
Other receivables - 36
Prepayments 61 280
------- -----------------
61 316
======= =================
42. FINANCIAL LIABILITIES, SHORT-TERM PROVISIONS AND CONTINGENT LIABILITIES
42.1 Trade and other payables
Trade and other payables in all periods presented principally
comprise amounts outstanding for Directors' fees, salaries, legal,
audit and other professional services, and ongoing costs. All other
amounts included within trade payable and other payables are stated
at their invoiced value or the Directors best estimate of the
expected amounts payable for liabilities accrued but not yet
invoiced. As discussed further in note 21, $120,000 of the amounts
outstanding as at 31 May 2013 was settled through the issue of new
Ordinary Shares subsequent to the period end.
42.2 Amounts due to subsidiary undertakings
Amounts due to subsidiary undertakings as at 31 December 2011 of
$2,361,000 were due to SMC and carried interest of 1 month US LIBOR
+ 2.5%. These amounts were settled on 19 December 2012 as discussed
in note 40.
42.3 Contingent liabilities
The Company has guaranteed the obligations of SMC in relation to
two long term supply contracts for Ta(2) O(5) concentrate. SMC is
no longer able to fulfil its obligations under these contracts and
negotiations are currently ongoing with the counterparties in order
to reach a settlement. Further details of SMC's and, via the
guarantees, the Company's exposure in respect of this matter are
provided in note 31.1.
43. FINANCIAL INSTRUMENTS
Details of the capital risk management policy, financial risk
management objectives and accounting policies for financial
instruments of the Company and Group are provided in notes 3 and 28
to the consolidated financial statements. Further information on
the financial instruments of the Company as at 31 May 2013 are
provided in note 28 to the consolidated financial statements, being
the amounts reported for the Group with the exception of $176,000
reported within 'Trade receivables' and 'Trade and other payables'
in note 28.2 and the 'Trade receivables' class discussed in note
28.3. Further details on the financial instruments of the Company
as at 31 December 2011 are provided in the financial statements for
the year then ended available at www.paragon-resources.com.
44. RELATED PARTY TRANSACTIONS
The transactions disclosed in footnotes 1, 2 and 3 to the table
in note 30 to the consolidated financial statements relate to the
Company. Balances and transactions with related parties that are
members of the Group as at each period end are shown in notes 38,
40 and 42. Details of interest charged to or by group companies is
shown in note 36.
45. ULTIMATE CONTROLING PARTY
The Directors are of the opinion that there is no controlling
party of the Company.
46. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
Details of events subsequent to the balance sheet date, all of
which relate to the Company, are included in note 32.
Company information and advisers
Country of incorporation Jersey, Channel Islands
Registration number 95036
Legal form Public listed company
Shares Listed AIM Market of the London Stock Exchange
RIC Code - PAR
ISDX Growth Market
Symbol - PA.P (Ordinary Shares); PC.P (CRPS)
Registered address Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Telephone: +44 (0)1534 869 403
Fax: +44 (0)1534 866 859
Email: companysecretary@noventa.net
Website: paragon-resources.com
Directors Mr S Hunt (Executive Chairman)
Mr A Beveridge (Non-Executive Director)
Mr D Cassiano-Silva (Non-Executive Director)
Mr D Sheeran (Non-Executive Director)
Company secretary FML Corporate Services Limited
Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Email: companysecretary@noventa.net
Auditor Deloitte LLP
2 New Street Square
London, EC4A 3BZ
England
Legal advisors Mourant Ozannes
22 Grenville Street
St. Helier
Jersey, JE4 8PX
Channel Islands
Bankers Deutsche Bank International
Limited
St. Paul's Gate
New Street
St. Helier
Jersey, JE4 8ZB
Channel Islands
Nominated advisor Allenby Capital Limited
3 St Helen's Place
London
EC3A 6AB
England
Corporate broker Allenby Capital Limited
3 St Helen's Place
London
EC3A 6AB
England
Terms used in this report
'2013 AGM' the 2013 Annual General Meeting of the Shareholders in
the Company, to be held in August 2013
'2013 EGM' the adjourned Extraordinary General Meeting of the Ordinary
Shareholders of the Company held on 19 June 2013 at 13.00
'AIM' AIM, a market operated by the London Stock Exchange
'AIM Rules' together, the rules published by the London Stock Exchange
governing the admission to, and the operation of, AIM for
companies (including the guidance notes thereto) and the
rules published by the London Stock Exchange from time-to-time
for Nominated Advisers
'Amended Facility' the unsecured lending facility provided to the Company
as more fully described in note 24.2
'Amended Loan' the unsecured lending facility provided to the Company
as more fully described in note 24.1
'Amended Subscription the Subscription Agreement as amended by the Subscription
Agreement' Agreement Variation
'Articles' the articles of association of the Company for the time
being
'ASM' African Speciality Metal SP.R.L, a company registered in
the New Trade and Companies Register of Lubumbashi, DRC
under number 2548; an associate company of the Group which
ceased to be controlled by the Group on 22 March 2013
'ASM Group' ASM and its subsidiary TaNb
'ASMHL' African Speciality Minerals Holding Limited, a company
registered in Jersey under company number 111690; an indirect
100% subsidiary of the Company which ceased to be controlled
by the Group on 22 March 2013
'Board' or 'Board the collective body of the Directors of the Company from
of Directors' time to time
'CIF' International commercial term meaning "Cost, Insurance
and Freight," whereby the quoted price includes all costs,
insurance and freight to bring the goods to the port of
destination from the port of departure
'CFR' International commercial term meaning "Cost and Freight,"
whereby the quoted price includes all costs and freight
to bring the goods to the port of destination from the
port of departure, but does not require the seller to procure
marine insurance against the risk of loss or damage to
the goods during transit
'Class Meeting of the meeting of Preference Shareholders held on 24 July
the Preference Shareholders' 2013 at which the terms and conditions of the CRPS were
amended to permit the Special Redemption
'Cominière' La Congolaise d'Exploitation Miniere Sprl, a DRC state
owned company with responsibility for managing certain
of the DRC's mineral assets including Ta(2) O(5)
'Company' or 'Paragon' Paragon Resources Plc, formerly Noventa Limited, a company
registered in Jersey under company number 95036
'Contained Ta(2) The amount of Ta(2) O(5) which is contained in a concentrate
O(5) '
'CRPS' or 'Preference convertible, redeemable preference shares of GBP1.00 each
Shares' in the Share Capital of the Company
'CRPS issue price' $4.281 per CRPS being the price at which the CRPS were
issued in March 2011
'CRPS Dividend' the annual coupon of 10% of the CRPS issue price, payable
quarterly (subject to Jersey Law) within 10 days of each
of 31 March, 30 June, 30 September and 31 December until
the final maturity date of the CRPS, being 11 April 2016
'Darwin' Darwin Strategic Limited, a company which is majority owned
by funds managed by the Henderson Volantis Capital team
'Default' a breach of the terms of the SLF which, if not remedied,
results in the Lender's ability to declare an Early Repayment
Event
'Deferred Shares' the deferred shares of GBP0.0005 each in the Share Capital
of the Company created at the 2013 EGM
'Directors' the directors of the Company
'DRC' the Democratic Republic of Congo
'Early Repayment an event, including a Default, which permitted the Lender
Event' under the SLF to demand repayment of the amounts outstanding
under the SLF within five business days
'EBT' the Noventa Employee Benefit Trust
'EFF' the Equity Finance Facility provided by Darwin as more
fully described in the section of the Directors' report
entitled Business review
'Existing Facilities' collectively the Amended Loan and the Amended Facility
'Facility' the unsecured lending facility provided to the Company
as more fully described in note 24.2
'Fee' the arrangement fee of 10% of the Facility
'Fees Warrants' warrants over 90,907 Ordinary Shares in the Company provided
to Richmond as repayment of Richmond's legal costs incurred
in connection with the Subscription Agreement
'First Subscription 30 November 2011
Date'
'FVTPL' Fair Value Through Profit and Loss as defined under IFRSs
'GBP' of 'GBP' Pound Sterling, legal currency of the United Kingdom
'Group' Paragon and its 100% direct and indirect subsidiary undertakings
from time to time, details of which are provided in note
30
'HAMCI' HAMC Investments Limited, a company registered in Jersey
under company number 111428; an indirect 100% subsidiary
of the Company until 22 March 2013
'HAMCJ' Highland African Mining Company Limited, a company registered
in Jersey under company number 80173; a 100% direct subsidiary
of the Company at the balance sheet dates
'HAMCJ Subscription' the agreement by which the Company agreed to subscribe,
and HAMCJ agreed to issue, 1,000 new ordinary shares of
GBP0.001 each in the capital of HAMCJ dated 19 December
2012
'HAMCJ Subscription $40,590,000, the subscription price for the HAMCJ Subscription
Price'
'HAMCL' Highland African Mining Company Limitada, a company registered
in the Company Registry, Maputo, Mozambique under company
number 13855; an indirect 100% subsidiary of the Company
which ceased to be controlled by the Group on 22 March
2013
'HAMCM' HAMC Minerals Limited, a company incorporated in Jersey
under company number 111407; an indirect 100% subsidiary
of the Company until 22 March 2013
'HAMCM Group' HAMCM and (1) its 100% direct and indirect subsidiaries,
HAMCI, ASMHL, HAMCL, HAMCPS and (2) its associate group,
the ASM Group
'HAMCPS' HAMC Project Services Proprietary Limited, a company registered
in South Africa under company number 2004/009/181/07);
an indirect 100% subsidiary of the Company until 22 March
2013
'IFRS(s)' International Financial Reporting Standards issued by the
International Accounting Standards Board
'IIROC' the Investment Industry Regulatory Organisation of Canada,
further details of which, including its role and mandate,
can be obtained from its website, www.iiroc.ca
'INCOTERMS 2010' International Commercial Terms 2010
'Investing Company' has the meaning ascribed to the definition of "investing
company" set out in the AIM Rules, that is, an AIM company
which has as its primary business or objective, the investing
of its funds in securities, businesses or assets of any
description
'Investing Policy' the investing policy adopted by the Company from 19 June
2013, further details of which are set out in the Principal
activities section of the Directors' report
'ISDX' the ISDX Growth Market operated by ICAP Securities and
Derivatives Exchange Limited
'ISDX Rules' the ISDX Growth Market Rules for Issuers that set out the
obligations and responsibilities in relation to companies
whose shares are admitted to ISDX as published and amended
by ICAP Securities and Derivatives Exchange Limited from
time to time
'ITRI' an organisation dedicated to supporting the tin industry
and expanding tin use, further details on which are available
at www.itri.co.uk
'iTSCI' ITRI Tin Supply Chain Initiative
'lb' Avoirdupois pound
'lbs' pounds
'Jersey Law' Companies (Jersey) Law 1991 (as amended)
'Lender' Richmond in its capacity as lender under the Loan, the
Facility and the SLF as appropriate
'Loan' the unsecured lending facility provided to the Company
as more fully described in note 24.1
'Loan Warrants' warrants over 1,750,000 Ordinary Shares in the Company
as more fully described in note 23.1 provided to Richmond
as consideration for the provision of the Loan
'Marropino Mine' the Mining Concession and associated infrastructure held
by HAMCL at Marropino, Zambezia Province, Mozambique
'Mining concession' land where the Group has a granted right to extract economic
minerals including, but not limited to Ta(2) O(5)
'Mining license' land where the Group has a granted right to explore for
economic minerals including, but not limited to Ta(2) O(5)
'Morrua' the Mining Concession and associated infrastructure held
by HAMCL at Morrua, Zambezia Province, Mozambique
'Mutala' the Mining Concession and associated infrastructure held
by HAMCL at Mutala, Zambezia Province, Mozambique
'Ordinary Shares' ordinary shares of GBP0.008 each in the capital of the
Company which were sub-divided into ordinary shares of
GBP0.0005 at the 2013 EGM
'Ordinary Shareholder(s)' holders of Ordinary Shares in the Company
'p' or 'GBp' pence, 100(th) of one Pound Sterling, legal currency of
the United Kingdom
'pa' per annum
'ppm' parts per million of Ta(2) O(5)
'Preference Shareholders' holders of Preference Shares in the Company
'Proposed Open Offer' the proposed open offer for 17,500,000 new Ordinary Shares
in the Company at 25.0p
'Richmond' Richmond Partners Master Limited, whose registered office
is Ugland House, 113 South Church, PO Box 309, George Town,
Grand Cayman, Cayman Islands, British West Indies
'Second Subscription 31 December 2011
Date'
'Security Trustee' Richmond acting as the trustee of the security package
provided to the Lender under the SLF
'Set Off Agreement' the agreement dated 19 December 2012 between the Company,
HAMCJ and SMC whereby amounts outstanding between these
companies was offset or repaid
'Settlement Agreement' the agreement between, amongst others, the Company, Richmond
and HAMCM dated 10 April 2013 described in the Company's
announcement of 11 April 2013
'Share Capital' the equity share capital of the Company from time to time,
currently comprising Ordinary Shares and Preference Shares
'Share Consolidation' the 20:1 consolidation of the Company GBP0.0004 Ordinary
Shares into GBP0.008 Ordinary Shares completed on 11 March
2011
'Shareholders' Ordinary Shareholders and Preference Shareholders
'Share Plan' the Noventa Unapproved Share Option Scheme
'SLF' or 'Secured the secured loan facility granted by Richmond to HAMCM
Loan Facility' and described in the Company's announcement of 23 November
2012 and more fully in note 24.3
'SMC' Speciality Minerals Corporation Limited, a company registered
in Jersey under company number 86577; a 100% direct subsidiary
of the Company at the balance sheet dates
'Special Redemption' the redemption of the CRPS, in full satisfaction of any
and all accrued rights, including, without limitation,
accrued but unpaid amounts in respect of CRPS Dividend,
in consideration for the allotment and issue by the Company
to the Preference Shareholders of new Ordinary Shares and
Deferred Shares in the Company; the aggregate number of
Ordinary Shares allotted and issued by the Company pursuant
to the Special Redemption was equal to the aggregate number
of Ordinary Shares in issue at the date the Company issued
the Special Redemption notice (i.e. and that immediately
after the Special Redemption, holders of Preference Shares
together held 50% of the enlarged Ordinary Share Capital
of the Company); the terms of the Special Redemption were
approved at the Class Meeting of the Preference Shareholders.
'Subscription Agreement' the agreement dated 19 August 2011 whereby Richmond conditionally
agreed to subscribe for the Subscription Shares at the
Subscription Price as more fully described in note 23.1
'Subscription Agreement the variation to the Subscription Agreement dated 9 January
Variation' 2012
'Subscription Shares' 17,500,000 new Ordinary Shares in the Company
'Subscription Price' 25.0 pence per Ordinary Share
'Subscription Warrants' warrants granted to Richmond over 17,500,000 new Ordinary
Shares in the Company exercisable at 25.0 pence as consideration
for the Subscription Agreement
'Surviving Paragon collectively the Company, HAMCJ and SMC
Group'
'Ta(2) O(5) ' Tantalum pentoxide
'Ta(2) O(5) concentrate' a processed product derived from ore containing Ta(2) O(5)
'Ta(2) O(5) Operations' the Group's Ta(2) O(5) mining, processing, purchasing and
distribution operations in Mozambique and the DRC over
which the Group lost control on 22 March 2013 following
the enforcement of HAMCM's Default under the SLF
'TaNb' Tantale et Niobium du Tanganika SP.R.L., a company registered
in DRC under number 2574; an member of the ASM Group which
ceased to be controlled by the Group on 22 March 2013
'Total Subscription collectively the Subscription Warrants and the Fees Warrants
Warrants'
'TSX' the Toronto Stock Exchange
'US$' or '$' US Dollar, legal currency of the United States of America
Cautionary note regarding forward looking statements
This document contains "forward-looking information" which may
include, but is not limited to, statements with respect to the
future financial or operating performance of the Company, its
subsidiaries, affiliated companies, joint ventures, and its
projects. Often, but not always, forward-looking statements can be
identified by the use of words such as "plans", "expects", "is
expected", "budget", "scheduled", "estimates", "forecasts",
"intends", "targets", "aims", "anticipates" or "believes" or
variations (including negative variations) of such words and
phrases, or may be identified by statements to the effect that
certain actions, events or results "may", "could", "would",
"should", "might" or "will" be taken, occur or be achieved.
Forward-looking statements involve known and unknown risks,
uncertainties and a variety of material factors, many of which are
beyond the Company's control which may cause the actual results,
performance or achievements of the Company, its subsidiaries,
affiliated companies and/or joint ventures to be materially
different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Readers are
cautioned that forward-looking statements may not be appropriate
for other purposes than outlined in this document.
Although the Company has attempted to identify important factors
that could cause actual actions, events or results to differ
materially from those described in forward-looking statements,
there may be other factors that cause actions, events or results to
differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date
of this document and, except as required by applicable law, the
Company disclaims any obligation to update any forward-looking
statements, whether as a result of new information, future events
or results or otherwise. There can be no assurance that
forward-looking statements will prove to be accurate, as actual
results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR WGUPUMUPWUBU
Paragon (LSE:PAR)
過去 株価チャート
から 5 2024 まで 6 2024
Paragon (LSE:PAR)
過去 株価チャート
から 6 2023 まで 6 2024
