REG - BlueRock DiamondsPLC - Final Results <Origin Href="QuoteRef">BRD.L</Origin> - Part 2
30/06/2017 07:06
- Part 2: For the preceding part double click ID:nRSd6696Ja
- - (296,955) - (296,955) (289,104) (586,059)
Other comprehensive income:
Foreign exchange movements - - - - (518,026) (518,026) (182,009) (700,035)
Total comprehensive loss - - - (296,955) (518,026) (814,981) (471,113) (1,286,094)
Transactions with shareholders:
Extinguish convertible loan note reserve (293,818) - - 293,818 - - - -
Issue of share capital - 235,192 1,183,079 - - 1,343,066 - 1,343,066
Share issue expenses - - (75,205) - - - - -
Issue of share options - - - 34,339 - 34,339 - 34,339
Total transaction with shareholders: (293,818) 235,192 1,107,874 328,157 - 1,377,405 - 1,377,405
Balance at 31 December 2016 - 556,796 2,443,826 (1,828,598) (332,160) 839,864 (817,386) 22,478
Company
Balance at 1 January 2016 293,818 321,604 1,335,952 (688,557) - 1,262,817 - 1,262,817
Profit for year - - - 525,883 - 525,833 - 525,833
Total comprehensive loss - - - 525,883 - 525,833 - 525,833
Transactions with shareholders:
Extinguish convertible loan note reserve (293,818) - - 293,818 - - - -
Issue of share capital - 235,192 1,183,079 - - 1,418,271 - 1,418,271
Share issue expenses - - (75,205) - - (75,205) - (75,205)
Issue of share options - - - 34,339 - 34,339 - 34,339
Total transaction with shareholders: (293,818) 235,192 1,107,874 328,157 - 1,377,405 - 1,377,405
Balance at 31 December 2016 - 556,796 2,443,826 165,483 - 3,166,055 - 3,166,055
Convertible loan note reserve £ Share capital £ Share premium £ Retained losses £ Foreign exchangereserve £ Total attributable to equity holders of the Group / Company £ Non-controlling interest £ Total equity £
Consolidated
Balance at 1 January 2015 149,600 315,250 1,245,934 (1,007,879) 10,732 713,637 (206,996) 506,641
Loss for period - - - (851,921) - (851,921) (200,807) (1,052,728)
Other comprehensive income:
Foreign exchange movements - - - - 175,134 175,134 61,530 236,664
Total comprehensive loss - - - (851,921) 175,134 (676,787) (139,277) (816,064)
Transactions with shareholders:
Issue of convertible loan notes 144,218 - - - - 144,218 - 144,218
Issue of shares - 6,354 90,018 - - 96,372 - 96,372
Total transaction with shareholders: 144,218 6,354 90,018 - - 240,590 - 240,590
Balance at 31 December 2015 293,818 321,604 1,335,952 (1,859,800) 185,866 277,440 (346,273) (68,833)
Company
Balance at 1 January 2015 149,600 315,250 1,245,934 (377,216) - 1,333,568 - 1,333,568
Loss for period - - - (311,341) - (311,341) - (311,341)
Total comprehensive profit - - - (311,341) - (311,341) - (311,341)
Transaction with shareholders:
Issue of convertible loan notes 144,218 - - - - 144,218 - 144,218
Issue of shares - 6,354 90,018 - - 96,372 - 96,372
Total transaction with shareholders: 144,218 6,354 90,018 - - 240,590 - 240,590
Balance at 31 December 2015 293,818 321,604 1,335,952 (688,557) - 1,262,817 - 1,262,817
The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements.
Consolidated and Company Statement of Cash Flows
Group Company Group Company
Year ended 31 December 2016£ Year ended 31 December 2016£ Year ended 31 December 2015£ Year ended 31 December 2015£
Cash flows from operating activities Notes
Cash used in operations 21 (223,487) 780,252 (701,522) (398,371)
Net cash used in operating activities (223,487) 780,252 (701,522) (398,371)
Investing activities
Purchase of property, plant and equipment 9 (350,260) - (227,543) -
Acquisition of Diamond Resources pty Limited 7 (32,826) (32,826) - -
Proceeds on disposal of property, plant and equipment 19,113 - - -
Purchase of non-current assets - - (7,004) -
Increase in loan advanced to group company - (2,140,925) - (243,126)
Net cash used in investing activities (363,973) (2,173,751) (234,547) (243,126)
Financing activities
Proceeds on share issues 16 1,343,066 1,343,066 91,373 91,373
Proceeds on convertible loan notes issue 18 - - 450,000 450,000
Finance charge on convertible loan notes 18 60,229 60,229 35,086 35,086
Increase in short term loan - - 50,715 -
Net cash from financing activities 1,403,295 1,403,295 627,174 576,459
Net change in cash and cash equivalents 815,835 9,796 (308,895) (65,038)
Cash and cash equivalents at the beginning of the year 175,755 164,267 247,986 229,305
Foreign exchange reserve (700,035) - 236,664 -
Cash and cash equivalents at the end of the year 14 291,555 174,063 175,755 164,267
The annexed notes form an integral part of and should be read in conjunction with these consolidated financial statements.
Notes to the Consolidated and Company financial statements
1. Presentation of Annual Report and Accounts
The annual report and accounts have been prepared in accordance with International Financial Reporting Standards, as
adopted by the EU (IFRS) and the Companies Act 2006 applicable to companies reporting under IFRS. The annual report and
accounts have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below.
They are presented in British Pounds Sterling (Pounds) which is also the functional currency of the Group.
The consolidated financial statements for the year ended 31 December 2016 were approved and authorised for use by the Board
of Directors on 29 June 2017.
BlueRock Diamonds Plc is incorporated in England and Wales with company number 08248437 with registered office, 4th Floor,
Reading Bridge House, George Street, Reading, Berkshire, RG1 8LS
1.1 Basis of preparation
Basis of consolidation
The consolidated annual report and accounts incorporate the annual report and accounts of the Group and its operating
subsidiaries Kareevlei Mining Pty Ltd and Diamond Resources Pty Ltd which are controlled by the Group.
The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a
reporting date of 31 December.
The results of subsidiaries are included in the consolidated annual report and accounts from the effective date of
acquisition to the effective date of disposal.
Adjustments are made when necessary to the annual report and accounts of subsidiaries to bring their accounting policies in
line with those of the Group.
All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the
Group's interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling
interests are allocated to the non-controlling interest even if this results in a debit balance being recognised for
non-controlling interest.
Transactions which result in changes in ownership levels, where the Group has control of the subsidiary both before and
after the transaction are regarded as equity transactions and are recognised directly in equity.
The difference between the fair value of consideration paid or received and the movement in non-controlling interests for
such transactions is recognised in equity attributable to the owners of the parent.
Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining investment is measured to
fair value with the adjustment to fair value recognised in profit or loss as part of the gain or loss on disposal of the
controlling interest.
Goodwill
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred
in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of
assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity
interest issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or
loss as incurred.
Goodwill (continued)
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest
in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree over the net of the
acquisition-date amounts of the identifiable assets acquires and the liabilities assumed.
Goodwill is not amortised but is reviewed for impairment annually. For the purpose of impairment testing, goodwill is
allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination.
Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than
the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset
in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.
On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the
determination of the profit or loss on disposal.
Going concern
As at 31 December 2016, the Group had accumulated losses of £1,828,598 (2015: £1,859,800).
The Group's consolidated cash balance at 31 December 2016 was £291,555 (2015: £175,755). The Group's capital management
policy is to raise sufficient funding to finance the Group's near term expansionary operational and development activities.
In June 2017 an additional £360,000 was raised through a share issue to new and existing shareholders and in June 2017,
secured a new loan facility of £310,000. Management believe that this will be sufficient to meet the Group working capital
requirements for the 12 months from the date of approval of the Annual Report and Accounts.
On that basis the Directors have adopted the going concern basis in preparing this Annual Report and Accounts which does
not include any adjustment to the carrying amount or classification of assets and liabilities that would occur if the Group
was unable to continue as a going concern.
Management has reviewed the forecast of cash flows for 12 months from the date of approval. While management is confident
that the Group will meet its obligations through its operations, it has obtained confirmation from a significant
shareholder to provide financial support should the projections not hold.
1.2 Significant judgements and sources of estimation uncertainty
The consolidated financial statements have been prepared using the significant accounting policies and measurement bases
summarised below:
In the application of the Group's accounting policies the Directors are required to make estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ
from those estimates.
Significant 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 key areas are summarised below:
Rehabilitation provision
Estimates and assumptions are made in determining the amount attributable to the rehabilitation provision. These deal with
uncertainties such as legal and regulatory framework, timing and future costs. The carrying value of the rehabilitation
provision is disclosed in note 19.
Significant judgements and sources of estimation uncertainty (continued)
Useful lives of property, plant and equipment
Depreciation rates detailed below are considered by management to fairly reflect the expected useful lives of the
respective asset categories. The property, plant and equipment accounting policy provides further detail.
Impairment of non-current assets
The outcome of on-going exploration, and therefore whether the carrying value of the machinery and equipment and funds in
trust will ultimately be recovered, is inherently uncertain.
The ability of the Group to realise the carrying values of these assets is contingent upon production or discovery of
economically recoverable mineral reserves, the on-going title to the resource properties, the ability of the Group to
finance the development of the properties and on the future profitable production or proceeds from the property. The
success of the Group's mineral exploration properties is also influenced by significant risks, including legal and
political risks and future diamond prices.
The Directors make the judgements necessary to implement the Group's policy with respect to capitalisation of these assets
and consider them for impairment at least annually with reference to indicators in IAS 36. If an indication exists, an
assessment is made of the recoverable amount. The recoverable amount is the higher of value in use (being the net present
value of expected future cash flows) and fair value less costs to sell. Value in use is estimated based on operational
forecasts for advanced stage projects with key inputs that include diamond resources, diamond prices, production levels
including grade and tonnes processed, production costs and capital expenditure. However, because of the above-mentioned
uncertainties, actual future cash flows could materially differ from those estimated. The carrying values of property,
plant and equipment are set out in note 9.
Valuation of assets and liabilities
Management uses valuation techniques to determine the fair value of financial instruments (where active market quotes are
not available) and non-financial assets. This involves developing estimates and assumptions consistent with how market
participants would price the instrument. Management bases its assumptions on observable data as far as possible but this is
not always available. In that case management uses the best information available. Estimated fair values may vary from the
actual prices that would be achieved in an arm's length transaction at the reporting date (see note 28).
In the process of applying the Group's accounting policies, management make various judgements that can significantly
affect the amounts recognised in the financial statements. The critical judgements are considered to be the following:
Deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group's
future taxable income against which the deductible temporary differences can be utilised. Note 24 provides further detail.
There is a key judgement in that the amounts potentially involved are uncertain of recovery.
1.3 Property, plant and equipment
The cost of an item of property, plant and equipment is recognised as an asset when:
· it is probable that future economic benefits associated with the item will flow to the company; and
· the cost of the item can be measured reliably.
Property, plant and equipment is initially measured at cost.
Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred
subsequently to add to or replace part of it. If a replacement cost is recognised in the carrying amount of an item of
property, plant and equipment, the carrying amount of the replaced part is derecognised.
Property, plant and equipment (continued)
Mining infrastructure, which includes evaluation and development costs capitalised prior to commencement of production, are
depreciated using a unit of production method based on the carats produced over the estimated economically recoverable
reserves.
Motor vehicles and plant and machinery are depreciated on the straight line basis over their expected useful lives to their
estimated residual value.
Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses.
The useful lives of items of property, plant and equipment have been assessed as follows:
Item Average useful life
Mining infrastructure Unit of production method
Motor vehicles 5 years
Plant and machinery 3 years
The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If
the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of
another asset.
The gain or loss arising from the de-recognition of an item of property, plant and equipment is included in profit or loss
when the item is derecognised. The gain or loss arising from the de-recognition of an item of property, plant and equipment
is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.
1.4 Mining Rights
Mining rights are recognised at cost, including any directly attributable transaction costs. The amortisation charge for
each period is recognised on a 'units of production' method.
1.5 Mining exploration and development costs
During the exploration phase of operations, all costs are expensed in the consolidated statement of comprehensive income as
incurred.
A subsequent decision to develop a mine property within an area of interest is based on the exploration results, an
assessment of the commercial viability of the property, the availability of financing and the existence of markets for the
product. Once the decision to proceed to development is made, development and other expenditures relating to the project
are capitalised and carried at cost with the intention that these will be depreciated by charges against earnings from
future mining operations over the relevant life of mine on a units of production basis. Expenditure is only capitalised
provided it meets the following recognition requirements:
· completion of the project is technically feasible and the Group has the ability to and intends to complete it;
· the project is expected to generate future economic benefits;
· there are adequate technical, financial and other resources to complete the project; and
· the expenditure attributable to the development can be measured reliably.
No depreciation is charged against the property until commercial production commences. After a mine property has been
brought into commercial production, costs of any additional work on that property are expensed as incurred, except for
large development programmes, which will be deferred and depreciated over the remaining life of the related assets.
1.5 Mining exploration and development costs (continued)
Exploration costs are capitalised as an intangible asset until technical feasibility and commercial viability of extraction
of reserves are demonstrable, when the capitalised exploration costs are re-classed to property, plant and equipment.
Exploration costs include an allocation of administration and salary costs (including share based payments) as determined
by management.
Prior to reclassification to property, plant and equipment, exploration and evaluation assets are assessed for impairment
and any impairment loss recognised immediately in the statement of comprehensive income.
1.6 Investment in subsidiaries
Company annual report and accounts
In the Company's accounts, the investment in subsidiaries is carried at cost less any accumulated impairment.
The cost of an investment in subsidiaries is the aggregate of the fair value of assets given, liabilities incurred or
assumed and equity instruments issued by the Company at the date of exchange.
1.7 Inventories
Inventories, which include rough diamonds, are stated at the lower of cost of production on the weighted average basis or
estimated net realisable value. Cost of production includes direct labour, other direct costs and related production
overheads. Net realisable value is the estimated selling price in the ordinary course of business less marketing costs. Net
realisable value also incorporates costs of processing in the case of the ore stockpiles. Consumable stores are stated at
the lower of cost on the weighted average basis or estimated replacement value. Work in progress is stated at raw material
cost including allocated labour and overhead costs.
1.8 Revenue
Revenue is measured at the fair value of consideration receivable.
Revenue comprises net invoiced diamond sales to customers excluding VAT. Diamond sales are made through a competitive
tender process and recognised when significant risks and rewards of ownership are transferred to the buyer, costs can be
measured reliably and receipt of future economic benefits is probable. This is deemed to be the point at which the tender
is awarded.
1.9 Income Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other
comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to
the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit,
which differs from profit or loss in the financial statements. Calculation of current tax is based on tax rates and tax
laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of
assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill,
or on the initial recognition of an asset or liability unless the related transaction is a business combination or affects
tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided
if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur
in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates and laws that are expected to apply
to their respective period of realisation, provided those rates and laws are enacted or substantively enacted by the end of
the reporting period.
Income taxes (continued)
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary
difference will be utilised against future taxable income. This is assessed based on the Group's forecast of future
operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any unused
tax loss or credit. Deferred tax liabilities are always provided for in full.
Deferred tax assets and liabilities are offset only when the Group has a right and intention to set off current tax assets
and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a
component of tax income or expense in profit or loss, except where they relate to items that are recognised in other
comprehensive income or directly in equity, in which case the related deferred tax is also recognised in other
comprehensive income or equity, respectively.
1.10 Mining Rehabilitation asset
The estimated cost of environmental rehabilitation is based on current legal requirements and existing technology. A
provision is raised based on the present value of the estimated costs. These costs are included in the cost of the related
asset. The capitalised assets are depreciated in accordance with the accounting policy for property, plant and equipment.
1.11 Financial instruments
Initial recognition and measurement
Financial instruments are recognised initially when the Group becomes a party to the contractual provisions of the
instruments.
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial
measurement of the instrument.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements
entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Management considers that the Group's financial liabilities comprise trade and other payables.
Convertible loan notes
The convertible loan notes are accounted for under the guidance of IAS 32, Financial Instruments: Presentation. These can
either be treated as compound instruments or stand alone instruments with an embedded derivative relating to the conversion
feature. When the instrument is treated as a compound instrument. The fair value of the liability portion of the
convertible loan notes is determined using a market interest rate on an equivalent non-convertible loan note. This amount
is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan notes. The
remainder of the proceeds are allocated to the conversion option, which is recognised and included in shareholders' equity,
net of tax effects and is not subsequently re-measured. In cases where the criteria for compound instrument are not met,
the host debt contract is valued initially at fair value and the embedded derivative is separately carried at fair value
through profit and loss.
Embedded derivatives
Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their
risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at
FVTPL.
Embedded derivatives (continued)
An embedded derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the
hybrid instrument to which the embedded derivative relates is more than 12 months and is not expected to be realised or
settled within 12 month. Other derivatives are presented as current assets or current liabilities.
Trade and other payables
Trade and other payables are not interest bearing and are recognised initially at fair value. Subsequently they are carried
at amortised cost.
Financial assets
The Group classifies its financial assets under the definitions provided in International Accounting Standard 39 (IAS 39)
Financial Instruments: Recognition and measurement, depending on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition. Management considers that the
Group's financial assets fall under the 'loans and receivables' category.
Loans between group companies
This includes loans between the holding company and its subsidiary which are recognised initially at fair value plus direct
transaction costs.
Loans to group companies are classified as loans and receivables.
Loans from group companies are subsequently classified as financial liabilities measured at amortised cost.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment. A provision for impairment is established when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
1.12 Cash and cash equivalents
Cash and cash equivalents consist of highly liquid instruments, such as bank deposits, certificates of deposit, time
deposits, treasury notes and other money market instruments, which have maturities from inception of less than three
months.
1.13 Operating expenses
Operating expenses are recognised in profit or loss upon utilisation of the service on an accruals basis.
1.14 Leases
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A
lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to
ownership.
Operating leases - lessee
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between
the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This
liability is not discounted.
1.15 Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that the
Group will be required to settle the obligation and a reliable estimate can be made of the amount of obligation. Where the
effect of discounting is material, provisions are discounted. The discount rate used is a pre-tax rate that reflects
current market assessment of the time value of money and, where appropriate, the risks specific to the liability.
1.16 Foreign currency transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the
exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses
resulting from the settlement of such transactions and from the remeasurement of monetary items denominated in foreign
currency at year-end exchange rates are recognised in profit or loss.
Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange
rates at the transaction date).
1.17 Foreign operations
In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currency
other than Pounds are translated into Pounds upon consolidation. The functional currency of the entities in the Group has
remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into Pounds at the closing rate at the reporting date. Income
and expenses have been translated into Pounds at the average rate over the reporting period. Exchange differences are
charged or credited to other comprehensive income and recognised in the currency translation reserve in equity. On disposal
of a foreign operation, the related cumulative translation differences recognised in equity are reclassified to profit or
loss and are recognised as part of the gain or loss on disposal.
1.18 Equity, reserves and dividend payments
Share capital represents the nominal value of shares that have been issued.
Share premium includes any premiums received on issue of share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium, net of any related income tax benefits.
Other components of equity include the following:
• Translation reserve - comprises foreign currency translation differences arising from the translation of financial
statements of the Group's foreign entities into Sterling.
• Retained earnings includes all current and prior period retained profits.
• Equity reserve represents the fair value, of the equity component of the convertible loans, assessed at initial drawdown
of the convertible loan.
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been
approved in a general meeting prior to the reporting date.
1.19 Share-based employee remuneration
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans are
cash-settled.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair
Share-based employee remuneration (continued)
values. Where employees are rewarded using share-based payments, the fair value of employees' services is determined
indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date
and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and
performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to
retained earnings. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected to vest.
Non-market vesting conditions are included in assumptions about the number of options that are expected to become
exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to
vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No
adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that
estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal
value of the shares issued are allocated to share capital with any excess being recorded as share premium.
2. New Standards and Interpretations
The following relevant new standards, amendments to standards and interpretations are mandatory for the first time for the
financial year beginning 1 January 2016, but had no significant impact on the Group:
Standard Key requirements Effective date as adopted by the EU
Amendment to IFRS 11, 'Accounting for Acquisitions of Interests in Joint Operations' Amends IFRS 11 Joint Arrangements to require an acquirer of an interest in a joint operation in which the activity constitutes a business (as defined in IFRS 3 Business 1 January 2016
Combinations) to: · apply all of the business combinations accounting principles in IFRS 3 and other IFRSs, except for those principles that conflict with the
guidance in IFRS 11· disclose the information required by IFRS 3 and other IFRSs for business combinations. The amendments apply both to the initial acquisition of
an interest in joint operation, and the acquisition of an additional interest in a joint operation (in the latter case, previously held interests are not remeasured).
Amendments to IAS 16 and IAS 38 Clarifies acceptable methods of depreciation and amortisation. 1 January 2016
Amendments to IAS 27 Amends IAS 27 Separate Financial Statements to permit investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in 1 January 2016
separate financial statements.
Amendments to IAS 1 Disclosure amendments 1 January 2016
New standards and interpretations (continued)
Standards issued but not yet effective
The following relevant new standards and amendments to standards and interpretations have been issued, but are not
effective for the financial year beginning on 1 January 2016, as adopted by the European Union, and have not been early
adopted:
IFRS 9 Financial Instruments - Replacement to IAS 39 and is built on a single classification and measurement approach for financial assets which reflects both the business model in which they are operated and their cash flow characteristics. 1 January 2018
IFRS 15 Revenue from contracts with customers - Introduces requirements for companies to recognise revenue for the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Also results in enhanced disclosure about revenue. 1 January 2018
IFRS 16 Leases - Introduces a single lessee accounting model and eliminates the previous distinction between an operating and a finance lease. 1 January 2019
IFRS 16
Leases - Introduces a single lessee accounting model and eliminates the previous distinction between an operating and a
finance lease.
1 January 2019
The Directors anticipate that the adoption of these standards and interpretations in future periods will have no material
impact on the financial statements of the Group when the relevant standards and interpretations come into effect. The
principal accounting policies applied in the preparation of these financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period.
Actual results may vary from the estimates used to produce these financial statements.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
Significant items subject to such estimates and assumptions include, but are not limited to:
· the cash generating unit that supports the carrying value of property, plant and equipment and mining assets being
£1.0m in total; and
· the intercompany receivable from Kareevlei Mining Proprietary Limited of £3.6m
Their recoverable amounts are supported by the potential value of the current portfolio of projects and their value is
underpinned by the economic benefit of future cash flows generated from the project portfolio.
The main risks and sensitivities impacting their recoverable amounts relate to the following:
· Decrease in rough diamond prices
· Reliability of mineral resource
· Exposure to movements in the prices of raw materials, equipment and services
3. Critical accounting judgements and key sources of estimation uncertainty (continued)
Valuation of embedded derivatives
The convertible bond note has two components and IAS 32 requires that as the number of shares to be converted is not fixed,
these be valued separately. IAS 39 requires the calculation of the fair value of the option at recognition and then fair
valued at the year end. The embedded derivative has been fair valued using the Black Scholes model which requires critical
judgements in order to ascertain the Group share price volatility. At the year end the fair value of the embedded
derivative was £292,839. Further details can be found in note 18.
Other areas
Other estimates include but are not limited to the allowance for doubtful accounts; useful lives for depreciation,
depletion and amortisation and fair value of financial instruments.
4. Segmental reporting
Operating segments are identified on the basis of internal reports about components of the Group that are regularly
reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their
performance.
The Group's operations relate to the exploration for, and development of mineral deposits in the Kimberley region of South
Africa and as such the Group has only one reportable segment. The non-current assets in the Kimberley region are £999,590.
All revenue consists of sales of diamonds in South Africa through auctions as is customary in the industry. The Group sells
its diamonds through auctions run by Flawless Diamonds.
5. Operating loss
Result from operating activities is stated after charging: Group2016£ Group2015£
Operational and direct costs 680,166 473,137
Depreciation 171,258 110,558
Operating Lease Rentals - Land, Buildings and Equipment 85,039 79,443
Staff costs (note 23) 70,230 82,182
Directors fee 14,873 29,500
Auditors fees (see below) 33,079 30,427
Share option charge 34,339 -
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