REG - BlueRock DiamondsPLC - Final Results <Origin Href="QuoteRef">BRD.L</Origin> - Part 3
30/06/2017 07:06
- Part 3: For the preceding part double click ID:nRSd6696Jb
Gain on modification extinguishment of debt (147,802) -
Fair value of embedded derivative 292,839 -
Loss on disposal of asset 2,397 -
Fees receivable by the Group auditors:
Fees - audit of financial statements 23,500 21,500
Fees - audit of accounts of subsidiary of the company 9,579 8,927
33,079 30,427
6. Finance costs
Group2016£ Group2015£
Interest on borrowings (note 18) 60,229 35,086
Other interest - 1,785
60,229 36,871
7. Acquisition of subsidiary
In July 2016, BlueRock Diamonds PLC completed the acquisition of Diamond Resources (Pty) Limited by acquiring 100 per cent
of its issued share capital. The transaction is the acquisition of the entire identifiable assets and liabilities of the
third party. The following table summarises the consideration paid for the Company, the fair value of the assets acquired,
liabilities assumed and the non-controlling interest at the acquisition date:
Net asset value at acquisition Fair value adjustment Fair value
£ £ £
Amounts recognised of identifiable assets acquired and liabilities assumed:
Rehabilitation deposit 13,925 - 13,925
Inventories 17,068 (8,705) 8,363
Trade and other payables (497) - (497)
Total identifiable assets 21,791
Goodwill 11,035
Total consideration 32,826
The inventory acquired totalling £8,363 relating to the Diamond Resources (Pty) Limited is recognised at the fair value at
the date of acquisition. There are no non-controlling interests. Please see note 8 for further discussion on the goodwill
movements.
At the year end the Group's investment in Diamond Resources (Pty) Limited has been fully impaired, this is due to there
being minimal future economic benefits expected to be obtained and is discussed further in note 8.
8. Goodwill
£
Cost
At 1 January 2016 -
Recognised on acquisition of a subsidiary 11,035
At 31 December 2016 11,035
Accumulated impairment losses
At 1 January 2016 -
Impairment charge (11,035)
At 31 December 2016 (11,035)
Carrying amount
At 31 December 2016 -
8. Goodwill (continued)
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units ("CGUs") that are
expected to benefit from that business combination. There is only considered to be one CGU in the Group which is the mining
of diamonds in the Kimberley region South Africa.
Determining whether goodwill is impaired requires an estimation of the value in use of the CGUs to which goodwill has been
allocated. The Directors assessment during 2016 confirmed there were minimal future economic benefits expected in the near
term from Diamond Resources (Pty) Limited. All inventory held in the Group was sold during the second half of 2016, in
addition the speculative assets obtained in the Northern Cape do not have sufficient studies completed to confirm the
existence of viable projects. Therefore the Directors at this point deem it prudent to impair the goodwill initially
recognised on acquisition of the Group.
9. Property, plant and equipment
Group
2016 2015
Cost / Valuation£ Accumulated depreciation£ Carrying Value£ Cost / Valuation£ Accumulated depreciation£ Carrying Value£
Mine infrastructure 67,086 (14,765) 52,321 58,854 (19,038) 39,816
Motor vehicles 17,475 (4,284) 13,191 7,283 (4,337) 2,946
Plant and machinery 869,749 (151,947) 717,802 590,127 (155,154) 434,973
Total 954,310 (170,996) 783,314 656,264 (178,529) 477,735
Reconciliation of property, plant and equipment - Group - 2016
Opening balance Additions Cost on disposal £ Depreciation on disposal £ Depreciation £ FX revaluation £ Total £
£ £
Mine infrastructure 39,816 10,098 - - (14,765) 17,172 52,321
Motor vehicles 2,946 14,380 - - (4,284) 149 13,191
Plant and machinery 434,973 303,838 (35,156) 16,043 (152,209) 150,313 717,802
477,735 328,316 (35,156) 16,043 (171,258) 167,634 783,314
Reconciliation of property, plant and equipment - Group - 2015
Opening balance Additions Cost on disposal £ Depreciation on disposal £ Depreciation £ FX revaluation £ Total £
£ £
Mine infrastructure 25,845 34,833 - - (13,036) (7,826) 39,816
Motor vehicles 4,187 1,558 - - (2,220) (579) 2,946
Plant and machinery 424,613 191,152 - - (95,302) (85,490) 434,973
454,645 227,543 - (110,558) (93,895) 447,735
10. Mining Rights and Mining Rehabilitation
Opening balance Additions Depreciation £ FX revaluation £ Total £
£ £
Mining Rights 63,403 - - 24,080 87,483
Mining Rehabilitation 77,961 21,944 - 28,888 128,793
141,364 21,944 - 52,968 216,276
For further details on the mining rehabilitation provision see note 19.
11. Investment in subsidiary
Name of company Holding 2016 Carrying amount 2016
% £
Kareevlei Mining Proprietary Limited 74 5
Diamond Resources Pty Limited 100 -
Name of subsidiary Location Net gain/(loss) after tax (2016) R Net gain/(loss) after tax (2016) £ Net loss after tax (2015) R Net loss after tax (2015) £
Kareevlei Mining Proprietary Limited Northern Cape Province in South Africa (22,239,761) (1,111,940) (15,881,405) (772,350)
Diamond Resources Pty Limited Northern Cape Province in South Africa 3,710 185 - -
Details of minority
The most significant element of the Mining Charter is the ownership requirement which stipulates that mines must commit to
obtaining 26 per cent effective ownership by Historically Disadvantaged South Africans ("HDSAs") (being the meaningful
participation of HDSAs in the ownership, voting rights, economic interest and management control of mining entities) by
2014.
BlueRock's subsidiary, Kareevlei Mining Proprietary Limited, is 26 per cent owned by Ghaap Mining Proprietary Limited, a
Kimberley based company. Ghaap Mining Proprietary Limited is a South African private company wholly owned by Mr. William
Alexander van Wyk who, in terms of South African legislation is considered to qualify as an HDSA.
11. Investment in subsidiary (continued)
On 15 June, 2017 the Broad Based Socio-Economic Empowerment Charter for the South African mining and minerals industry,
2017, (the '2017 Charter') was announced and gazetted in South Africa. The 2017 Charter aims to introduce far-reaching,
new, and in some cases, radical measures and requirements on the industry.
The Group is compliant with the preceding Charter, and if the 2017 Charter is implemented, certain changes will be required
to maintain compliance, primarily in respect of: (i) the increased mandatory Black Economic Empowerment shareholding which
is currently set at 26%, but is proposed to be increased to 30%, and (ii) in the required make-up of management
demographics. The Chamber of Mines of South Africa has publicly rejected the unilateral development and imposition of the
2017 Charter and plans to take legal action on behalf of the industry to interdict the implementation of the 2017 Charter
on a number of grounds.
Summary of Group's interest in subsidiary
2016 2015
R £ R £
Total assets 19,566,045 1,168,094 15,753,858 681,628
Total liabilities (72,222,940) (4,311,714) (46,530,992) (2,013,274)
Capital 30,417,134 2,031,679 14,895,730 559,298
Loss 22,239,761 1,111,941 15,881,404 772,348
- - - -
12. Inventories
2016 2015 2016 2015
Group Group Company Company
£ £ £ £
Diamonds on hand 2,202 50,665 - -
2,202 50,665 - -
13. Trade and other receivables
2016 2015 2016 2015
Group Group Company Company
£ £ £ £
Prepayments 2,073 2,016 2,073 2,016
VAT 53,952 5,591 5,995 5,230
Other receivables 75,972 16 366,982 212,662
Intercompany balances - - 3,643,428 1,502,503
131,997 7,623 4,018,478 1,722,411
The intercompany balance is a loan to Kareevlei Mining Proprietary Limited that bears interest at the Nedbank Limited prime
variable overdraft rate or unsecured loans to corporate customers and is repayable on demand.
The carrying value of all trade and other receivables including the loan to group company is considered a reasonable
approximation of fair value.
The other receivables consist of amount due from Mark Poole.
14. Cash and cash equivalents
Cash and cash equivalents consist of:
2016 2015 2016 2015
Group Group Company Company
£ £ £ £
Cash on hand 7 442 - -
Bank balances 291,548 175,313 174,063 164,267
291,555 175,755 174,063 164,267
15. Share based payments
The share options held by each Director and the exercise prices at 31 December 2016 are as follows:
Director Number of ordinary shares subject to share options Tranche 1 Tranche 2 Tranche 3 Tranche 4
Number Exercise price (pence) Number Exercise price (pence) Number Exercise price (pence) Number Exercise price (pence)
P. Beck 315,251 - - 157,625 40 157,626 55 - -
T. Leslie 372,876 57,625 18 157,625 40 157,626 55 - -
A. Markgraaff 372,876 57,625 18 157,625 40 157,626 55 - -
A. Waugh 776,091 - - - - - - 776,091 11
Total 1,837,094 115,250 472,875 472,878 776,091
The following share options were exercised during the year to 31 December 2016:
On 12 January 2016 Andre Markgraaff exercised 100,000 share options at an exercise price of 18 pence per Ordinary Share.
On 12 January 2016 Riaan Visser exercised 180,500 share options at an exercise price of 14 pence per Ordinary Share (the
share price of the company on this date was 19p).
The following share options were exercised during the year to 31 December 2015:
On 27 July 2015 Paul Beck exercised 157,625 share options at an exercise price of 18 pence per Ordinary Share.
On 27 July 2015 Riaan Visser exercised 450,000 share options at an exercise price of 14 pence per Ordinary Share (the share
price of the company on this date was 26p).
15. Share based payments (continued)
Further details of the share capital and share premium generated from the exercise of share options is seen in note 16.
Movements in the number of share options outstanding and their related weighted average prices are as follows:
31 December 2016 31 December 2015
Average exercise price in pence per share Number of options Average exercise price in pence per share Number of options
Outstanding at the beginning of the year 34 4,121,131 32 4,728,756
Granted 11 776,091 - -
Lapsed 31 1,261,002 - -
Exercised 15 280,500 15 607,625
Outstanding at the end of the year 29.2 3,355,720 34 4,121,131
Exercisable at the end of the year 29.2 3,355,720 34 4,121,131
Options are valued at date of grant using the Black-Scholes option pricing model. The fair value per option of options
granted during the period and the assumptions used in the calculation are shown below:
Year ended31 December 2016
Pricing model used Black-Scholes
Weighted average share price at grant date (pence) 13.5
Weighted average exercise price (pence) 11
Weighted average contractual life (years) 5
Share price volatility (%) 50%
Dividend yield (%) 0%
Risk-free interest rate (%) 0.56%
There were no share options granted in 2015. The total share-based payment expense for the year ended 31 December 2016 was
£34,339 (2015: £nil) in relation to share options.
16. Share capital and share premium issued
2016 2015 2016 2015
Group Group Company Company
£ £ £ £
55,679,580 (2015: 32,160,444) ordinary issued share capital of 1p each 556,796 321,604 556,796 321,604
Share premium 2,443,826 1,335,952 2,443,826 1,335,952
3,000,622 1,657,556 3,000,622 1,657,556
In the year ended 31 December 2016 the following Ordinary share issues occurred:
Date of issue Details of issue Number of ordinary shares Share capital£ Share premium£
At 1 January 2016 32,160,444 321,604 1,335,952
12 January 2016 Exercise of Share Options 280,500 2,805 40,466
28 April 2016 Placing and Equity Issue 6,363,636 63,637 636,363
2 November 2016 Placing and Equity Issue 16,875,000 168,750 506,250
Issue costs - - (75,205)
At 31 December 2016 55,679,580 556,796 2,443,826
17. Trade and other payables
2016Group£ 2015Group£ 2016Company£ 2015Company£
Trade payables 260,117 24,657 29,637 2,993
Corporation tax payables 90,566 - 90,566 -
Accrued expenses 37,025 168,762 29,851 24,750
Directors loan account 25,974 50,715 - -
413,682 244,134 150,054 27,743
An amount of £192,736 is included within trade payables for amounts claimed as being due to companies related to the former
director of the company CB Visser. In 2015, an amount of £139,685 was recorded in accrued expenses for these companies.
These amounts are disputed in full by the Company. See note 26 for further details.
The Directors' current account in 2016 of £25,974 (2015: £50,715) relates to amounts claimed by RV but disputed in full by
the Company. See note 26 for further details.
18. Borrowings
On 16 October 2014, the Group resolved to create up to £450,000 of convertible loan stock. £400,000 of this was drawn down
immediately "Convertible Loan 1".
The remaining £50,000 was drawn down by the Group on the 27 May 2015 "Convertible Loan 2".
On 2 October 2015, the Group resolved to create an additional amount of convertible loan stock of £400,000 of this the full
amount was drawn down immediately "Convertible Loan 3".
The loan term for all convertible loan stock is for 5 years maturing on 16 October 2019 and carries a zero coupon (nil
interest).
The Group had in issue 3 convertible loan stocks of £850,000 which were fully drawn down by the end of 2015. On 2 November
2016 a fund rise took place and the convertible loan stocks were materially revised and became "Convertible Loan 4".
The terms of the convertible loan note have been amended such that the conversion price has been reduced to 5p (2015: 11p)
and the term has been extended to 16 October 2021 (2015: 16 October 2019) and it has been agreed that the convertible loan
note will not be convertible until 1 November 2017 and for the following 6 months until 1 May 2018 only under an orderly
marketing arrangement. The convertible loan note has also been amended to include an anti-dilution clause which provides a
mechanism for weighted conversion price revisions should additional funds be raised below the prevailing conversion price.
This option to convert the loan into shares has been treated as a separate financial instrument, as an embedded derivative.
This is due to a clause in the updated convertible loan note agreement which will require the Company to issue a variable
number of shares if future fundraising over life of the convertible loan note raises additional funds at a price per
Ordinary share of less than 5p.
In addition if the Company sells its interest in its subsidiary undertaking before the final repayment date for
consideration equivalent to or greater than 120% of the loan note outstanding then the notes will become redeemable and a
20% premium will be payable to the note holder.
Management have carried out an assessment of the terms of the convertible loan and have judged that the instrument consists
of two components:
· a loan instrument; held at amortised cost
18. Borrowings (continued)
· an embedded redemption feature (payable on a sale of the Group's interest for consideration greater than 120% of the
loan note value). The embedded derivative should be recognised separately as a derivative financial instrument at fair
value through profit and loss (FVTPL). Management have reviewed the terms of the embedded derivative and have determined
that the derivative has an insignificant value.
Due to the modification of the convertible loan note agreement, the equity element previously recognised has been
extinguished. Subsequently an embedded derivative liability has been recognised as discussed in the accounting treatment
above.
A fair value exercise to determine the value of the three components was undertaken by the Directors at the date the
convertible loan was initially drawn down.
The fair value of the host loan instrument (including the embedded redemption feature) has been valued as the residual of:
a) The fair value of the first draw down on 16 October 2014 is discounted at a commercially applicable rate of 9.25%.
The fair values of the draw downs on 27 May 2016 and 2 October 2016 have been discounted at a commercially applicable rate
of 10.5%.
b) The residual amount between the transaction price of the loan and the fair value of the liability has been allocated
to an equity reserve.
31 December 2016£
Convertible loan 583,548
Embedded derivative 292,839
876,387
The embedded derivate attached to the convertible loan stock are treated as financial instruments held at fair value
through profit and loss. As a result, a gain of £7,664 has been recognised in the income statement as operating costs
representing the fair value adjustment. This has been calculated as the difference between the convertible option value at
grant date of the convertible loan £300,503 and the fair value of the option at 31 December 2016 of £292,839.
The movement on each loan liability component can be summarised as follows:
Convertible loan 1£ Convertible loan 2£ Convertible loan 3£ Convertible loan 4£ Total£
Balance at 1 January 2016 287,256 34,592 274,275 - 596,123
Issued on 2 November 2016 - - - 574,352 574,352
Finance charge: unwinding the discount factor 22,916 3,151 24,966 9,196 60,229
Embedded derivative - - - 300,503 300,503
Fair value adjustment to embedded derivative - - - (7,664) (7,664)
Extinguished on 2 November 2016 (310,172) (37,743) (299,241) - (647,156)
Balance at 31 December 2016 - - - 876,387 876,387
Equity component at 1 January 2016 143,000 18,018 132,800 - 293,818
Extinguished on 2 November 2016 (143,000) (18,018) (132,800) - (293,818)
Equity component at 31 December 2016 - - - - -
19. Provisions
Reconciliation of provisions - Group - 2016
2016Group 2015Group
£ £
Balance at 1 January 81,718 72,993
Movement 31,080 8,725
Balance at 31 December 112,798 81,718
The provision for environmental rehabilitation closure cost was independently assessed by Ndi Mudau of NDI Geological
Consulting Services. The closure cost assessment reports over the Remainder of the Farm No. 113 (Skietfontein), Portion of
Portion 2 (Kareeboompan) of the Farm 142, Portion 1 (Westhoek) of the Farm 113, and Portion 2 (Klipvlei) of the Farm 113.
The financial provision was calculated in accordance with Regulation 54 of the Minerals and Petroleum Resources Development
Act 2002 (Act 28 of 2002) and is dated 12 February 2016.
20. Commitments
Operating leases - as lessee (expense)
Minimum lease payments due 2016Group 2015Group 2016Company 2015Company
£ £ £ £
- within one year 26,960 16,360 - -
- in second to fifth year inclusive 181,053 51,903 - -
- later than five years 26,746 - - -
234,759 68,263 - -
Operating lease payments represent rentals payable by the Group for certain of its mining properties. Leases are negotiated
for an average term of seven years and rentals are fixed for an average of three years. No contingent rent is payable.
21. Cash used in operations
2016 2015 2016 2015
Group Group Company Company
£ £ £ £
(Loss)/profit before taxation (495,493) (1,053,699) 525,883 (311,341)
Adjustments for non-cash items:
Depreciation and amortisation 171,258 110,558 - -
Embedded derivative charge 292,839 - 292,839 -
Shares issued in lieu of company debt - 5,000 - 5,000
Share based payment expense 34,339 - 34,339 -
Impairment on acquisition of Diamond Resources pty Limited 32,826 - 32,826 -
Foreign exchange revaluation of fixed assets (220,602) 93,894 - -
Movements in provisions 31,080 8,725 - -
Changes in working capital:
(Increase)/decrease in trade and other receivables (124,374) 28,105 (155,144) (80,861)
Increase/(decrease) in trade and other payables 6,177 132,931 49,509 (11,169)
Decrease/(increase) in inventories 48,463 (27,036) - -
(223,487) (701,522) 780,252 (398,371)
22. Contingent Liabilities
There were no contingent liabilities as at 31 December 2016.
23. Staff numbers and costs
2016Group 2016Company 2015Group 2015Company
£ £ £ £
Directors' fees (see note 26) 28,833 28,833 29,500 29,500
Staff salaries 70,230 - 82,182 -
99,063 28,833 111,682 29,500
The table above relates to the directors remuneration who are key management personnel of the Group.
Average employee, directors and contractor numbers 2016Number 2015Number
Directors 3 2
Administration and production 23 23
26 25
24. Tax expense
2016Group 2015Group
£ £
Current tax 90,566 (971)
Deferred tax - -
Income tax expense / (credit) for the year 90,566 (971)
\Factors affecting the tax charge for the year:The tax assessed for the year is higher than the UK corporation tax rate of 20% (2015: 20%) as explained below:
(Loss) / profit before tax (495,493) (816,064)
UK rate of taxation 20% 20%
(Loss) / profit before tax multiplied by the UK rate of taxation (99,099) (163,213)
Effects of:
Difference in rates (South African tax) 90,699 (36,115)
Expenses not deductible for tax purposes 120,559 179
Unutilised losses - 163,034
Utilised losses brought forward (103,155) -
Other 81,562 35,144
Tax expense / (credit) 90,566 (971)
The Group has gross tax losses and temporary differences of 2016: £nil (2015: £515,775) for which no deferred tax asset has
been recognised.
25. EPS (Earnings per share)
Group2016 Group2015
£ £
Profit attributable to ordinary shareholders (814,981) (676,787)
Weighted average number of shares 39,466,581 31,787,878
Basic earnings per share (0.02) (0.02)
Weighted average number of shares after dilution 39,466,581 31,971,978
Fully diluted earnings per share (0.02) (0.02)
Share options granted to directors that have an anti-dilutive effect on the diluted earnings per share calculation have not
been included.
26. Related parties
Relationships
Director and Indirect shareholder - John Kilham (John's Kilham's wife is a shareholder)Shareholder and Director - John KilhamShareholder and Director - John Kilham Kgalagadi Engineering & Mining Supplies (Pty) LtdKgalagadi Geoservices (Pty) LtdKgalagaadi Asset Management (Pty) Ltd
Minority Interest - William van Wyk Kgalagadi Engineering & Mining Supplies (Pty) LtdGhaap Mining (Pty) Ltd
Director - Christiaan Breytenbach Visser Lexican Holdings (Pty) Ltd
Kleinkor Sewentien (Pty) Ltd
Shareholder - Mark Poole Bluerock Diamond
Shareholder's Daughter - Emma Poole Bluerock Diamond
Related party balances
Loan account - Owing by related party 2016 2015 2016 2015
Group Group Company Company
£ £ £ £
Kareevlei Mining Proprietary Limited - - 3,643,428 1,502,503
As disclosed in Note 23, details of the Directors remuneration for the financial year are set out below:
CB Visser - Received fees of £6,000 (2015: £24,000)
A Waugh - Received fees of £22,833 ((2015: £nil)
The Directors' current account 2016: £25,974 (2015: £50,715) is a short term deposit provided to the group to use as
working capital see note 17.
The Directors' loan account 2016: £25,974 (2015: £50,715) represent amounts claimed by CB Visser. In addition, included in
the accounts are amounts totalling £192,736 claimed by CB Visser as being owed to companies that are related to CB Visser.
This amount was included in the financial statements in 2015, but as they had not been disclosed as being related parties
at that time, were included in accrued expenses. The Company has taken legal advice and been advised that based on
currently available information all claims made by CB Visser are without merit. It is intended to write off these
balances.
Further, Kareevlei Mining made consultancy payments of £5,755 (2015: £3,731) to Kgalagadi Geoservices (Pty) Limited
("Kgalagadi Geoservices"). Also, payments totalling £23,185 (2015: £15,680) relating to equipment rental were made to
Kgalagadi Geoservices. During the year John Kilham was the Chief Technical Officer of BlueRock, is sole director and
shareholder of Kgalagadi Geoservices.
Kareevlei Mining also made payments on a monthly basis totalling of £6,719 (2015: £4,842) to Kgalagadi Asset Management
(Pty) Limited ("Kgalagadi Asset Management") for office and sorting plant rental. John Kilham was Chief Technical Officer
of BlueRock and is sole director and shareholder of Kgalagadi Asset Management.
As part of the fundraising completed on the 2 November 2016 additional convertible loan notes for £75,000 were issued to
one of the Group's substantial shareholders (see note 18).
The Group has agreed to acquire a crusher from Kgalagadi Geoservices (Pty) Limited ("Kgalagadi Geoservices"), a company
controlled by Mr Kilham for ZAR630,000 (approximately £36,000) payable in cash in three equal monthly instalments
commencing on 1 February 2017. The crusher was previously being rented by the Group. The Group has also agreed to pay Mr
Kilham a further sum of ZAR 539,000 (approximately £30,000).
Mr Poole holds £725,000 of convertible secured loan notes and his daughter, Emma Poole holds a further £200,000.
27. Risk management
Capital risk management
The Group's capital management objectives are:
· to safeguard the Group's ability to continue as a going concern and provide access to adequate funding for its
exploration and development project so that it continues to provide returns and benefits to shareholders;
· to support the Group's growth; and
· to provide capital for the purpose of strengthening the Group's risk management capability.
The Group actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Group including planned exploration work and capital efficiency, projected profitability, projected operating cash flows and projected capital expenditures. Management regards total equity as capital and reserves, for capital management purposes If additional equity funding should be required, the Group
may issue new shares.
Financial risk management
The Group's activities expose it to a variety of financial risks: market risk (including currency risk and cash flow
interest rate risk), credit risk and liquidity risk.
Liquidity risk
The Group's risk to liquidity is a result of the funds available to cover future commitments. The Group manages liquidity
risk through an ongoing review of future commitments and credit facilities. The maximum amount payable under the terms of
the convertible loan note is disclosed in note 18.
Credit risk
Credit risk consists mainly of cash deposits and cash equivalents. The Group only deposits cash with major banks with high
quality credit standing and limits exposure to any one counter-party.
The credit risk on receivables from subsidiaries is significant and their recoverability is dependent on the discovery and
successful development of economic reserves by these subsidiaries undertakings. Given the nature of the Group's business
significant amounts are required to be invested in exploration activities. The Directors manage this risk by reviewing
expenditure plans and budgets in relation to projects. This review ensures that any expenditure is value-enhancing and as a
result the amounts receivable will be recoverable subject to successful discovery and development of economic reserves. The
maximum credit exposure of the Group as at 31 December 2016 was £4,010,410 (2015: £1,715,165).
Foreign exchange risk
Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the may group use forward contracts. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity's functional currency.
At 31 December 2016, if the pound sterling had weakened/strengthened by 12% against the South African Rand with all other
variables held constant, post-tax loss for the year would have been £181k lower (2015: £94k) or £142k higher (2015: £74k),
mainly as a result of foreign exchange gains or losses on translation of South African Rand denominated trade receivables
and intragroup borrowings. The exchange rates used for conversion of foreign monetary items were - 2016: 16.75, 2015:
23.11.
27. Risk management (continued)
Market risk
As the Group has commenced diamond sales, the profitability of mining operations is directly related to the prevailing
diamond price. Historically, diamond prices have been volatile and are affected by numerous factors which the Group is
unable to control or predict, including world production levels, international economic trends, industrial and consumer
demand, currency exchange fluctuations, seasonality, speculative activity and political events.
The Group realises US Dollars for its diamond sales, and reports its results in Pounds Sterling. Should the South African
Rand strengthen against the Pound, the costs of the Group's mining operations, which are largely denominated in South
African Rand, may be adversely affected. Should the US Dollar weaken against the Pound, the Group's revenues may be
reduced.
Should market prices for raw materials, services and equipment, such as diesel or mining equipment increase, the Group's
results may be adversely affected. The Group seeks to obtain the best rate for each product or service, taking into account
price, service quality and reliability.
Summary of assets and liabilities by category
The carrying amounts of the financial assets and liabilities as recognised at the statement of financial position date of
the years under review may also be categorised as follows:
Group Group Company Company
2016 2015 2016 2015
Loans and receivables £ £ £ £
Cash and cash equivalents 291,555 175,755 174,063 164,267
Trade and other receivables 75,972 16 366,982 212,662
367,527 175,771 541,045 376,929
Financial liabilities held at amortised cost
Trade and other payables 323,115 244,134 59,489 27,743
Borrowings 583,548 646,838 583,548 596,123
906,663 890,972 643,037 623,866
Group Group Company Company
2016 2015 2016 2015
£ £ £ £
Financial liabilities measured at fair value through profit and loss
Embedded derivative 292,839 - 292,839 -
292,839 - 292,839 -
28. Fair value measurement of financial instruments
Financial liabilities measured at fair value in the statement of financial position are grouped into three Levels of a fair
value hierarchy. The three Levels are defined based on the observability of significant inputs to the measurement, as
follows:
· Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
· Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
· Level 3: unobservable inputs for the asset or liability.
28. Fair value measurement of financial instruments (continued)
The following table shows the Levels within the hierarchy of financial assets and liabilities measured at fair value on a
recurring basis as at each period end:
2016 2015 2016 2015
Group Group Company Company
Financial liabilities held at amortised cost £ £ £ £
Convertible loan 1 - 287,256 - 287,256
Convertible loan 2 - 34,592 - 34,592
Convertible loan 3 - 274,275 - 274,275
Convertible loan 4 583,548 - 583,548 -
583,548 596,123 583,548 596,123
Measurement of fair value of financial instruments
The Group's management team perform valuations of financial items for financial reporting purposes, including Level 3 fair
values. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of
maximising the use of market-based information.
Convertible loan notes (Level 3)
The estimated fair value of the convertible loan notes is categorised within Level 3 of the fair value hierarchy. The fair
value estimate has been determined using a present value technique. The present value of convertible loan 1 is estimated by
discounting the contractual cash flows at 9.25%, convertible loans 2 and 3 at 10.5% and convertible loan 4 at 10%. The
discount rate has been determined using the interest rate that the entity would pay an unrelated party at the reporting
date, adjusted to reflect the redemption feature.
The most significant input is the discount rate of 9.25% 10% and 10.5%.
29. Events after the reporting period
Director Dealings
Adam Waugh was granted 1,670,387 new share options with an exercise price of 5p in January 2017. These are exercisable
after a 5 year period from the date of issue. The total number of ordinary shares subject to share options for Adam Waugh
after the new share options is 2,446,478.
Loan facility
The Group has agreed an unsecured loan facility of £150,000 with Tim Leslie, Paul Beck and Mark Poole. Tim Leslie and Paul
Beck are Directors and Mark Pool is a major shareholder. The loan is to provide extra working capital as a result of
unusually high rainfalls causing delays. Tim Leslie and Mark Poole's maximum contribution is £62,500 and for Segar
Properties (Hyde Park) Limited, wholly owned by Paul Beck is £25,000. All contributions have a six month term and a coupon
of 10% per annum payable at the end of the term.
29. Events after the reporting period (continued)
Jubilee Agreement
The Group has entered into an agreement with Koedonza Olives CC ("Koedonza") to mine a 1.5 ha Kimberlite Pipe known as
Jubilee, in the Windsorton area, 40km to the North of Kimberley in the Northern Cape region of South Africa.
Convertible Loan
The convertible loan note facility was increased to £925K in November 2016. A debtor balance of £75K was recognised at the
year-end which was due from Mark Poole on convertible loan note. This has since been drawn down and received in February
2017.
Fundraising
On 1 June 2017 the Group successfully raised an aggregate of £366,000 (before expenses) via the issue of 12,200,000 new
ordinary shares of 1 pence each in the capital of the Group at a price of 3 pence per New Share. The proceeds of the
fundraising will be used to continue with the development of Kareevlei Mine as well as funding the Group's strategy of
adding to its current portfolio of diamond mining assets.
30. Ultimate controlling party
The Group considers that there is no ultimate controlling party.
31. Profit for the year
As permitted by section 408 of the Companies Act 2006, the parent company's profit and loss account has not been included
in these financial statements. The profit after taxation for the financial year for the parent company was £525,883 (2015:
loss of £311,341).
BlueRock Diamonds PLC
Annual Report and Financial Statements 31 December 2016
Notice of Annual General Meeting
Notice is given that the annual general meeting of the members of BlueRock Diamonds plc (the "Company") will be held at the
offices of Yellow Jersey PR Limited, 1st Floor, 30 Stamford Street, London, SE1 9LQ at 10.00a.m. (BST) on 4 August 2017 for
the purpose of considering and, if thought fit, passing the following resolutions.
Resolutions 1 to 4 will be proposed as ordinary resolutions and resolution 5 will be proposed as a special resolution.
Ordinary resolutions
1. To receive the report and accounts for to the year ended 31 December 2016.
2. To re-appoint André Markgraaff as a director, who shall retire from office at the end of the Annual General
Meeting and who, being eligible, offers himself for re-election.
3. To reappoint Grant Thornton UK LLP as auditors of the Company and to authorise the directors to fix their
remuneration.
4. In addition to all existing authorities granted to the directors of the Company (the "Directors") in respect of
the allotment of shares in the Company or the granting of rights to subscribe for or to convert any security into shares in
the Company ("Rights") but without prejudice to the proper exercise of such authorities, the Directors be and are generally
and unconditionally authorised in accordance with section 551 of the Company Act 2006 (the "Act") to exercise all the
powers of the Company to allot shares in the Company or grant Rights up to a maximum nominal value of £1,000,000:
Such authority shall expire at the end of the next annual general meeting of the Company save that the Company may, before
such expiry, make an offer or agreement which would, or might, require shares in the Company to be allotted or Rights to be
granted after such expiry and the Directors may allot shares in the Company or grant Rights in pursuance of such an offer
or agreement as if the authority conferred by this resolution had not expired.
Special resolution
5. In addition to all existing authorities granted to the Directors, the Directors be empowered, in accordance with
section 570 of the Act, to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the
authority conferred by resolution 6 as if section 561(1) of the Act did not apply to such allotment but without prejudice
to the prior exercise of such authorities, provided that this power shall be limited to the allotment of equity securities
up to a maximum nominal amount of £1,000,000.
These shall expire at the end of the next annual general meeting of the Company, save that the Company may, before such
expiry, make an offer or agreement which would, or might, require equity securities to be allotted after such expiry and
the Directors may allot equity securities in pursuance of such an offer or agreement as if the authority conferred by this
resolution had not expired.
By order of the Board
David Facey
Company Secretary
Registered Office:
4th Floor
Reading Bridge House
George Street
Reading
Berkshire
RG1 8LS
Date: 30 June 2017
Appointment of proxies
1. As a member of the Company, you are entitled to appoint a proxy to exercise all or any of your rights to attend,
speak and vote at the meeting and you should have received a proxy form with this notice of meeting. You can only appoint a
proxy using the procedures set out in these notes and the notes to the proxy form.
2. A proxy does not need to be a member of the Company but must attend the meeting to represent you. Details of how
to appoint the chairman of the meeting or another person as your proxy using the proxy form are set out in the notes to the
proxy form. If you wish your proxy to speak on your behalf at the meeting you must appoint your own choice of proxy (not
the chairman) and give your instructions directly to the relevant person.
3. You may appoint more than one proxy provided each proxy is appointed to exercise rights
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