REG - Arc Minerals Limited - Half-year Report
31 December 2019
Arc Minerals Ltd
('Arc' or the 'Company')
Interim Results
The Company is pleased to announce its unaudited financial results for the six months ended 30 September 2019.
The Interim Results are set out in the following pages.
For more information visit www.arcminerals.com.
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
**ENDS**
Contacts
Arc Minerals Ltd
Nick von Schirnding (Chairman)
+44 (0) 20 7917 2942
SP Angel (Nominated Adviser & Broker)
Ewan Leggat / Soltan Tagiev
+44 (0) 20 3470 0470
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 September 2019
Six Months to
30 Sep
2019
Six Months to
30 Sep
2018
(Unaudited)
(Unaudited)
Notes
£ 000's
£ 000's
Other operating income
-
Administrative expenses
(944)
(1,193)
Gain on purchase of shares Casa Mining Ltd
-
199
Share based payments
(138)
(180)
Operating loss
(1,082)
(1,174)
Impairment - Casa Mining Ltd
(15,000)
-
Loss before tax
(16,082)
(1,174)
Income tax expense
-
-
Loss for the period from continuing operations
3
(16,082)
(1,174)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
(872)
305
Other comprehensive income for the period, net of tax
(872)
305
Total comprehensive income for the period
(16,954)
(869)
Attributable to:
Owners of the parent
(14,954)
(869)
Loss per share from continuing and discontinued operations attributable to the owners of the parent during the period
(expressed in pence per share)
Basic
3
(2.26)
(0.23)
Group Statement of Financial Position
as at 30 September 2019
As at
30 Sep
2019
As at
30 Sep
2018
(Unaudited)
(Unaudited)
Notes
£ 000's
£ 000's
ASSETS
Non-current assets
Intangible assets
5
2,831
24,298
Fixed assets
6
3,475
2,674
Investments
4
370
192
Available for sale financial investments
7
-
6,936
Total non-current assets
6,676
34,100
Current assets
Inventories - Zamsort Limited
261
847
Trade and other receivables
175
306
Available for sale financial investments
7
12,719
-
Cash and cash equivalents
105
484
Total current assets
13,260
1,637
TOTAL ASSETS
19,936
35,737
LIABILITIES
Non-current liabilities
Long term payables
8
(2,357)
(2,792)
Total non-current liabilities
(2,357)
(2,792)
Current liabilities
Trade and other payables
(1,597)
(2,246)
Available for sale financial liabilities
10
(1,946)
-
Total current liabilities
(3,543)
(2,246)
TOTAL LIABILITIES
(5,900)
(5,038)
NET ASSETS
14,036
30,699
EQUITY
Share capital
9
-
-
Share premium
50,581
45,076
Share based payments reserve
1,458
1,333
Foreign exchange reserve
1,285
1,054
Retained earnings
(40,520)
(17,431)
Non-controlling interest
1,232
667
TOTAL EQUITY
14,036
30,699
GROUP STATEMENT OF CHANGES IN EQUITY
for the period ended 30 September 2019
Share
capital
Share premium
Foreign exchange reserve
Share based payment reserve
Retained earnings
Non-controlling
interest
Total
equity
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
As at 1 April 2018
-
38,324
749
1,333
(16,257)
1,318
25,467
Profit/(loss) for the period
-
-
-
(1,174)
-
(1,174)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
-
-
305
-
-
-
305
Other comprehensive income for the period
-
-
305
-
-
-
305
Total comprehensive income for the period
-
-
305
-
(1,174)
-
(869)
Share capital issued net of share issue costs
-
6,572
-
-
-
-
6,572
Share based payments
-
180
-
-
-
-
180
Non-controlling interest in Zamsort at acquisition
-
-
-
-
-
845
845
Share of loss for the period
-
-
-
-
-
(171)
(171)
Non-controlling interest of Casa purchased during the period
-
-
-
-
-
(1,325)
(1,325)
Total transactions with owners, recognised directly in equity
-
6,752
305
-
(1,174)
(651)
5,232
As at 30 September 2018
-
45,076
1,054
1,333
(17,431)
667
30,699
As at 1 April 2019
-
50,222
2,157
1,320
(24,438)
696
29,957
Profit/(loss) for the period
-
-
-
-
(16,082)
-
(16,082)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
-
-
(872)
-
-
-
(872)
Other comprehensive income for the period
-
-
(872)
-
-
(872)
Total comprehensive income for the period
-
-
(872)
-
(16,082)
-
(16,954)
Share capital issued net of share issue costs
-
287
-
-
-
-
287
Warrants exercised
-
72
-
-
-
-
72
Share based payments granted
-
-
-
138
-
-
138
Increase of NCI in Zamsort
-
-
-
-
-
536
536
Total transactions with owners, recognised directly in equity
-
359
-
138
-
536
1,033
As at 30 September 2019
-
50,581
1,285
1,458
(40,520)
1,232
14,036
GROUP CASH FLOW STATEMENT
for the period ended 30 September 2019
As at
30 Sep
2019
As at
30 Sep
2018
(Unaudited)
(Unaudited)
£ 000's
£ 000's
Cash flows from operating activities
Loss before tax
(16,082)
(1,174)
Depreciation
36
-
Impairment
15,000
-
Share based payments
138
180
Gain on acquisition of Casa Mining Ltd
-
(199)
Operating loss before changes in working capital
(908)
(1,193)
Decrease in trade and other receivables
415
331
Increase in trade and other payables and available for sale liabilities
100
1,065
Net cash used in operating activities
(393)
203
Cash flows used in investing activities
Additions to intangible assets
(1,002)
(2,268)
Additions to property, plant and equipment
(360)
(410)
Investment in available-for-sale financial investments
(181)
(236)
Net cash used in investing activities
(1,543)
(2,914)
Cash flows from financing activities
Proceeds from issue of ordinary shares net of share issue cost
72
2,389
Long term payables
743
630
Net cash inflow from financing activities
815
3,019
Net increase/(decrease) in cash and cash equivalents
(1,121)
308
Cash and cash equivalents at beginning of period
1,226
176
Cash and cash equivalents at end of period
105
484
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the period ended 30 September 20191. Basis of preparation
The condensed consolidated interim financial statements have been prepared under the historical cost convention and on a going concern basis and in accordance with International Financial Reporting Standards and IFRIC interpretations adopted for use in the European Union ("IFRS") and those parts of the BVI Business Companies Act applicable to companies reporting under IFRS.
The condensed consolidated interim financial statements contained in this document do not constitute statutory accounts. In the opinion of the directors, the condensed consolidated interim financial statements for this period fairly presents the financial position, result of operations and cash flows for this period.
The Board of Directors approved this Interim Financial Report on 30 December 2019
Statement of compliance
The condensed consolidated interim financial statements have been prepared in accordance with the requirements of the AIM Rules for Companies. As permitted, the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in preparing these interim condensed consolidated interim financial statements. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2019, which have been prepared in accordance with IFRS as adopted by the European Union.
Accounting policies
The condensed consolidated interim financial statements for the period ended 30 September 2019 have not been audited or reviewed in accordance with the International Standard on Review Engagements 2410 issued by the Auditing Practices Board. The figures were prepared using applicable accounting policies and practices consistent with those adopted in the statutory annual financial statements for the year ended 31 March 2019. In addition, consideration has been given to IFRS 15 and IFRS 9 which both are effective since 1 April 2019.
Associates
Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The Group's investment in associates includes any goodwill identified on acquisition.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.
The Group's share of post-acquisition profit or loss is recognised in the statement of comprehensive income, and its share of post-acquisition movements in other comprehensive income is recognised in the other comprehensive income section of the statement of comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amounts of the associate and its carrying value and recognises the amount adjacent to 'share of profit/(loss) of associates' in the statement of comprehensive income.
Gains and losses resulting from upstream and downstream transactions between the group and its associates are recognised in the Group's financial statements only to the extent of unrelated investor's interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
Dilution gains and losses arising in investments in associates are recognised in the statement of comprehensive income.
2. Financial Risk Management
Risks and uncertainties
The Board continually assesses and monitors the key risks of the business. The key risks that could affect the Group's medium-term performance and the factors that mitigate those risks have not substantially changed from those set out in the Group's 2019 Annual Report and Financial Statements, a copy of which is available from the Group's website: www.arcminerals.com. The key financial risks are market risk, including currency risk, and liquidity.
3. Loss per share
Six Months to
30 Sep
2019
Six Months to
30 Sep
2018
(Unaudited)
(Unaudited)
Notes
£ 000's
£ 000's
Loss from Continuing Operations
(16,082)
(1,174)
Weighted average number of ordinary shares used in calculating basic loss per share (000's)
709,921
510,002
Basic & diluted loss per share (expressed in pence)
(2.26)
(0.23)
As the inclusion of the share options would result in a decrease in the earnings per share, they are considered to be anti-dilutive and, as such, a diluted loss per share is not included.
4. Investment in Associates
Set out below are the associates of the Group.
Zaco
Total
£ 000's
£ 000's
1 April 2018
-
-
Additions
192
192
30 September 2018
192
192
1 April 2019
331
331
Additions
39
39
30 September 2019
370
370
Further information about the assets of Zaco Limited is included in the 2019 Annual Report.
Zaco is a Zambian-registered company, owned 47.5% by Unico Minerals Limited (42.5% at 31 March 2019). Unico is a wholly-owned subsidiary of Arc. The Chairman of Arc has been appointed Chairman of Zaco. There were no operations during the period.
Subsequent to 30 September 2019 the Company purchased an additional 5% of Zaco which increased its interest to 52.5%. Zaco results will be consolidated in future.
5. Intangible Assets
Zamsort
Zamsort
Casa
Total
Goodwill
Deferred Exploration Costs
Deferred Exploration Costs
£ 000's
£ 000's
£ 000's
£ 000's
As at 30 September 2018
2,557 (ii)
974
20,767
24,298
As at 30 September 2019
-
2,831
- (i)
2,831
(i) Reclassified as Available For Sale Financial Investments (Note 7)
(ii) As noted below allocated to Deferred Exploration
Zamsort Limited
Zamsort is involved in the exploration for minerals in the Republic of Zambia. On 1 April 2018 the Company held a 14% interest in Zamsort at a cost of £546,000. The Company acquired equity control on 5 June 2018.
Consideration - £5,332,000
In May 2017 in exchange for a 14% equity interest in Zamsort the Company agreed to convert £546,000 (US$828,472) of US$1,200,000 Secured Loan Notes issued to the Company in 2015 by Zamsort;
On 15 May 2018 the Company issued 102,083,333 shares with an imputed cost of £3,072,708 to acquire a further 35% interest in Zamsort, thereby increasing its interest to 49%;
On 5 June 2018 the Company issued 17,500,000 shares with an imputed cost of £770,000 to acquire a 6% interest in Zamsort, thereby increasing its interest to 55%, a controlling interest;
On 18 June 2018 the Company issued 12,000,000 shares with an imputed cost of £509,400 to acquire a 6% interest in Zamsort, thereby increasing its interest to 61%;
On 11 July 2018 the Company issued 10,000,000 shares with an imputed cost of £420,000 to acquire a 5% interest in Zamsort, thereby increasing its interest to 66%;
The acquisition resulted in Goodwill of £671,000 as follows:
£ 000s
Net assets acquired:
Cash and cash equivalents
62
Intangible assets
Fixed assets, net
Inventory
218
2,753
507
Trade and other receivables
151
Trade and other payables
(385)
Shareholder loans
(1,655)
Total net assets acquired
1,651
Total Consideration for 6% of Zamsort shares (49% - 55%)
Fair value of the associate at the Second Acquisition Date
770
809
Fair Value of Non-Controlling interest at the Second Acquisition Date
743
Less: Fair value of Zamsort
(1,651)
Goodwill
671
Goodwill has been allocated to Deferred exploration
Non-controlling interest:
The non-controlling interests of Zamsort Limited at the date of acquisition were measured at the fair value of these interests. This fair value was estimated by the consideration offered by the Company to acquire the controlling interest.
Impact of acquisitions on the results of the Group:
During the six months ended 30 September 2019 the net loss of the Group included the net loss of Zamsort of £342,000. Group revenue during the period includes £Nil from Zamsort.
The financial statements of Zamsort Limited for the six months ended 30 June 2019 have been consolidated in these results. Between 1 July 2019 and 30 September 2019 Zamsort incurred deferred exploration expenditures of £822,000 and fixed asset expenditures of £54,000 financed in part from funds advanced by Arc Minerals Limited (£513,000) and the minority shareholder (£220,000). As these expenditures were material in value, the consolidated financial statements have been adjusted to incorporate these transactions in accordance with IFRS 10 Consolidated Financial Statement.
6. Fixed Assets
Processing Plant
Mining Equipment
Motor Vehicles
Furniture & Fittings
Total
£ 000's
£ 000's
£ 000's
£ 000's
£ 000's
Cost
At 1 April 2019
3,249
215
91
43
3,598
Disposals
-
-
-
-
-
Additions
350
-
-
10
360
Foreign exchange
(217)
(6)
(3)
(3)
(229)
At 30 September 2019
3,382
209
88
50
3,729
Depreciation
At 1 April 2019
-
(172)
(42)
(25)
(239)
Disposals
-
21
-
-
21
Depreciation
-
(13)
(11)
(12)
(36)
At 30 September 2019
-
(164)
(53)
(37)
(254)
Cost
At 1 April 2018
-
-
-
-
-
Additions - Acquisition Zamsort
2,407
378
188
38
3,091
At 30 September 2018
2,407
378
188
38
3,011
Depreciation
At 1 April 2018
-
-
-
-
-
Additions - Acquisition Zamsort
-
(271)
(43)
(23)
(337)
At 30 September 2018
-
(271)
(43)
(23)
(337)
NBV - 30 September 2019 3,382 45 35 13 3,475
NBV - 30 September 2018 2,407 107 145 15 2,674
7. Available for Sale Financial Investments
Casa
Andiamo
Šturec
Total
£ 000's
£ 000's
£ 000's
£ 000's
As at 30 September 2018
-
392
6,544
6,936
As at 30 September 2019
6,719 (i)
-
6,000
12,719
(i) Reclassified from Intangible assets (Note 5); an Impairment charge for Casa Mining Ltd in the amount of £15,000,000 has been reported during the period. On 13 November 2019 the Company announced a conditional sale of Casa; the impairment charge has been estimated based on the terms of that transaction. Further details are provided in Note 10.
During the year ended 31 March 2019 the Company sold its interest in Andiamo.
8. Long Term Payables
Group
Group
2019
2018
Long term payables
£ 000's
£ 000's
Shareholder loan
2,357
1,257
Deferred consideration
-
1,535
2,357
2,792
The shareholder loan represents a loan from the 34% minority shareholder in Zamsort Limited. The Company has also provided a loan to Zamsort on similar terms which had a balance on the reporting date of £4,196,000.
The deferred consideration (USD 2,000,000) was incurred by Casa Mining Ltd when that Company purchased for cancellation the shares held by the controlling shareholder. The liability is non-recourse to Arc; it is unsecured, non-interest bearing and due for payment in January 2020. It is included in Available for sale financial liabilities. (Refer to Note 10).
9. Share Capital
The authorised share capital of the Company and the called up and fully paid amounts at 30 September 2019 were as follows:
A) Authorised
£ 000's
Unlimited ordinary shares of no par value
-
B) Called up, allotted, issued and fully paid
Number
of shares
Nominal
value
As at 1 April 2019
705,937,551
-
Additions:
4 July 2019, at 2.8p(i)
1,414,000
-
8 July 2019, at 2.5p(ii)
1,200,000
-
22 July 2019, at 2.8p(iii)
1,671,144
-
29 July 2019, at 4.78p(iv)
3,849,680
-
29 July 2019, at 2.4p(v)
1,041,667
-
22 August 2019, at 4.5p(iv)
1,563,728
-
As at 30 September 2019
716,677,770
-
(i) Issued as consideration for the acquisition of an additional 5% equity stake in Zaco Ltd, increasing Arc's interest in Zaco from 42.5% to 47.5%.
(ii) Issued to a service provider as consideration for consulting services in the amount of GBP 30,000; subject to a lock-in period of 12 months.
(iii) Issued pursuant to an exercise of warrants for cash consideration of GBP 46,792.
(iv) Issued pursuant to the Drill for Equity programme as first announced on 29 July 2019 whereby the Company's drilling contractor in Zambia has agreed to receive payment for 50% of total drilling costs by way of shares in Arc. Shares issued under the Drill for Equity Programme are subject to certain share trading restrictions which are monitored by Arc.
(v) Issued pursuant to an exercise of warrants for cash consideration of GBP 25,000.
10. Post Balance Sheet Events
On 13 November 2019, the Company announced that it had entered into a binding Sale and Purchase Agreement to sell Arc's entire 99.43% equity interest in Casa Mining Ltd for consideration of up to USD 9.8m (the "Consideration"), subject to final due diligence being completed. The transaction is expected to close no later than 24 January 2020.
At closing the Purchaser as controlling shareholder of Casa will assume responsibility for its liabilities which were £1,907,000 as of 30 September 2019 and which are classified as Available for sale financial liabilities. Effective from the closing date these liabilities will no longer be included in Arc accounts.
The Consideration is comprised of the following:
(i) Cash of USD 1,800,000;
(ii) Cash of USD 2,500,000 when the 3,000,000-ounce inferred resource of the Misisi Project (which is majority-owned by Casa) has been increased to 6,000,000 ounces;
(iii) Cash of USD 2,500,000 when the inferred resource of the Misisi Project has been increased from 6,000,000 ounces to 9,000,000 ounces;
(iv) Cash of USD 3,000,000 when the inferred resource of the Misisi Project has been increased from 9,000,000 ounces to 12,000,000 ounces;
The Company has recorded an impairment charge of £15,000,000 against its investment in Casa. This is an estimate and subject to adjustment as future developments at the Misisi Project become known.
11. Other Matters
The condensed consolidated interim financial statements set out above do not constitute the Group's statutory accounts for the period ended 30 September 2019 or for earlier periods but are derived from those accounts where applicable.
A copy of this interim statement is available on the Company's website: www.arcminerals.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR BGBDDSDXBGCB
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