REG - BlueRock DiamondsPLC - Interim Results
20 September 2018
BlueRock Diamonds PLC ("BlueRock" or the "Company")
Interim results for the six months ended 30 June 2018
BlueRock Diamonds, the AIM listed diamond mining company, which owns and operates the Kareevlei Diamond Mine in the Kimberley region of South Africa, is pleased to announce its interim results for the six months ended 30 June 2018. The interims will be available today for download from www.bluerockdiamonds.co.uk.
Operational Highlights
· 81% increase y-o-y in production for H1 2018 to 73,028 tonnes (H1 2017: 40,343 tonnes)
· Production now approaching 1,500 tonnes a day
· Turnover increased by 269% to £556,000 (H1 2017: £151,000)
· Losses reduced to £789,000 (H1 2017: £1,348,000)
· Production commenced at second kimberlite pipe "KV1" which has a 40% higher Inferred Mineral Resource grade than KV2
· Average grade continues to increase; average for the period was 3.17 carats per hundred tonnes ("cpht") (H2 2017: 2.68cpht, H1 2017: 2.26cpht)
· Average value per carat remains steady at US$340 (2017: US$362) with Kareevlei ranking in the top ten kimberlite mines in the world
Chairman's Statement
This has been an active period which has culminated in our re-stabilisation of production as we continue to work towards our objective of achieving sustainable profitability from mining operations at our Kareevlei Diamond Mine in the Kimberly region of South Africa.
Production Volumes
I am pleased to report encouraging production figures for this period of 73,028 tonnes, up 81% year-on-year (H1 2017: 40,343 tonnes). This has been achieved despite the seasonal downturn due to the rainy season always experienced in the first half of each year, aggravated by the now rectified crusher fault which resulted in a halt in production in June.
Post-period end, all issues with the crushing circuit have now been resolved and we are operating at approximately 50% increase in throughput with average tonnes processed per day approaching 1,500 tonnes. Processed volume in a standard 20-day month should reach 30,000 tonnes.
We continue to modify our crushing circuit following the installation of a second cone crusher to achieve the required consistency and begin to create the stockpile necessary to lessen the impact of the rainy season. Plant capacity has increased through the extension of our 24-hour five-day week pattern. We intend to move towards a six and ultimately seven day working week during 2019 although we already work some Saturdays when the maintenance schedule allows.
Pit Development
During the period, we began development of the KV1 pipe, the second of five known kimberlite pipes at Kareevlei, in order to benefit from the higher inferred grade of KV1 and to provide flexibility of supply of ore to the plant. 10 metres of the non-diamond bearing calcrete cap has been mined to waste, which allows for the higher Inferred Mineral Resource grade of KV1 to be reached sooner than in KV2 where only 7 meters of the calcrete cap was mined to waste. The first ore in level 1 kimberlite (10m to 20m below surface) is being processed now, yet it is too early to extrapolate any meaningful conclusions at this stage.
We have started to develop a larger push back in KV1, which will entail a number of months of waste blasting so that we can access the next level of kimberlite. Whilst the waste removal is taking place we will be processing the level 1 ore from KV1. We continue to define our pit development plan to enable us to mine KV1 and KV2 in tandem in the most efficient manner and to optimise the strip ratio required in order to achieve the maximum returns.
Grade
As expected, our average grade continues to increase as we mine lower into the kimberlite body, reaching 3.12cpht in the first half from KV2. The increased grade arises from processing ore from the sub 20m level of KV2, which at times has reached over 6cpht on a weekly basis. When the next level of waste has been stripped and we start to mine more consistently at lower levels, we would expect the grade to increase to the inferred pit grade of 4.5cpht or higher.
We have just started processing the calcretised kimberlite at around 10m in KV1. KV1 has an inferred grade of 6.3cpht, some 40% higher than the inferred grade of 4.5cpht in KV2 (as defined by Zstar, our competent person). Processing of KV1 ore is at an early stage but based on our experience of KV2, we would expect that the level 1 kimberlite should yield an average grade of between 50% and 60% of the inferred grade.
Value per carat
Our value per carat is consistently above the estimate provided by Zstar; the average for the first six months of 2018 was US$340 per carat compared with the Zstar estimate of US$232. The higher value reflects the quality of our diamonds and the coarseness of our production. As our production continues to grow, as does our reputation for producing high quality diamonds, and we remain in the top ten in the world in terms of average value per carat.
Costs of production
The management team has concentrated on reducing costs of production in order to reduce the breakeven point and hence to improve the long-term profitability of the mine. At the current levels of production, the mine is expected to run profitably. Nevertheless, the challenge that we are facing currently is the need to develop KV1 and to catch up on stripping of waste from KV2 in order to start to mine at the lower depth levels, which are expected to yield a higher grade.
Claims from a former Director
Mr Visser, the former CEO of BlueRock Diamonds, applied to the court for a liquidation order in January 2018. Our legal advice throughout the process has been that his claims have no merit. In order to remove any uncertainty, the Board decide to provide security to the court for the full amount of the claim in return for which Mr Visser agreed to remove his liquidation application from the court roll. Mr Visser will have the opportunity to initiate ordinary course recovery proceedings within a timeframe which is yet to be agreed.
Financing
In March 2018, the company raised £500,000 at a price of 1.5p a share together with a two-year warrant at 3p a share in order to part finance the establishment of KV1 and to provide working capital. A further £350,000 was raised in May 2018 at a price of 1.2p a share in order to continue the expansion into KV1.
Since the period end, the Company has entered into a loan agreement with Adam Waugh and Paul Beck, the Company's CEO and Chairman respectively, for an amount of £231,400, in order to provide sufficient funds to provide the security to the court in relation to the claims made by Mr Visser. It is the Board's intention to repay or refinance this loan as soon as is practicable.
Outlook
The second half of 2018 has started well with daily production figures since the reconfiguration of the crushing circuit now consistently at target levels. The development work we are conducting at KV2 will provide us with good quality high grade kimberlite in 2019 whilst we look forward to the results from our new pipe at KV1 with enthusiasm.
Paul Beck
Non-executive Chairman
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.
For further information, please visit BRD's website www.bluerockdiamonds.co.uk or contact:
BlueRock Diamonds PLC
Adam Waugh, CEO
David Facey, FD
awaugh@bluerockdiamonds.co.uk
SP Angel (NOMAD and Joint Broker)
Stuart Gledhill / Lindsay Mair/Caroline Rowe
Tel: +44 (0)20 3470 0470
SVS Securities (Joint Broker)
Tom Curran / Ben Tadd
Tel: +44 (0) 20 3700 0100
St Brides Partners Ltd (Financial PR)
Lottie Wadham / Juliet Earl
Tel: +44 (0)20 7236 1177
Notes to editors:
BlueRock Diamonds is an AIM-listed diamond producer which operates the Kareevlei Diamond Mine near Kimberley in South Africa which produces diamonds of exceptional quality and ranks in the top ten in the world in terms of average value per carat. The Kareevlei licence area covers 3,000 hectares and hosts five known diamondiferous kimberlite pipes. As at 3 September 2018, it was estimated that the remaining Inferred Mineral Resource from the three kimberlite pipes (KV1, KV2 and KV3) represents a potential inground value of circa US$124 million at a current average run of mine diamond value of US$362/carat. The Company is currently focused on a target of consistently producing ore at a rate in excess of 25,000 tonnes a month while increasing the average recovered grade by mining deeper into KV2 (Inferred Mineral Resource grade of 4.5cpht) and commencing production from KV1 (Inferred Mineral Resource grade of 6.3cpht).
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2018
Consolidated Statement of Financial Position
Note
As at
30 June
2018
Unaudited
£
As at
30 June
2017
Unaudited
£
As at
31 December 2017
Audited
£
Assets
Non-current assets
Property, plant and equipment
5
734,829
821,415
830,701
Mining assets
5
496,632
255,179
352,642
1,231,461
1,076,594
1,183,343
Current assets
Inventories
6
65,848
15,930
103,951
Trade and other receivables
7
29,737
44,311
6,361
Cash and cash equivalents
8
244,217
106,347
268,128
399,802
166,588
378,440
Total assets
1,571,263
1,243,182
1,561,783
Equity and liabilities
Equity Attributable to Equity Holders of the Parent
Share capital
10
2,023,242
679,096
1,398,242
Share premium
10
2,901,620
2,656,728
2,811,536
Retained losses
(3,521,204)
(2,352,940)
(2,579,999)
Foreign exchange reserve
(65,578)
(279,982)
(390,441)
1,338,080
702,902
1,239,338
Non-controlling interest
(1,331,500)
(1,071,106)
(1,195,696)
6,580
(368,204)
43,642
Liabilities
Current liabilities
Trade and other payables
11
393,133
632,757
371,298
Borrowings
12
25,283
-
34,723
Non-current liabilities
Embedded derivative
12
70,354
72,451
113,333
Borrowings
12
870,660
761,531
850,505
Provisions
13
205,252
144,647
148,282
1,564,682
1,611,386
1,518,141
Total equity and liabilities
1,571,263
1,243,182
1,561,783
Consolidated Statement of Comprehensive Income
Note
6 months ended
30 June
2018
Unaudited
£
6 months ended
30 June
2017
Unaudited
£
12 months ended 31 December 2017
Audited
£
Revenue
555,842
150,551
945,924
Other income
782
-
446
Operating expenses
(1,345,341)
(901,660)
(2,294,489)
Operating loss
(788,717)
(751,109)
(1,348,119)
Finance charges
(44,953)
(30,186)
(82,384)
Change in fair value of financial instruments designated at FVTPL
42,979
-
179,506
Foreign exchange (loss) / gain
3
(503,240)
(85,869)
71,468
Loss before taxation
(1,293,931)
(867,164)
(1,179,529)
Taxation
-
(7,134)
(22,008)
Total loss for the period
(1,293,931)
(874,298)
(1,201,537)
Other Comprehensive Income:
Exchange differences on translating foreign operations
439,004
70,511
(78,760)
Total comprehensive loss, net of tax
(854,927)
(803,787)
(1,280,297)
Total comprehensive loss, net of tax attributable to:
Owners of the parent
(719,123)
(550,067)
(901,987)
Non-controlling interest
(135,804)
(253,720)
(378,310)
(854.927)
(803,787)
(1,280,297)
Earnings per share - from continuing activities
Basic and diluted
15
(0.01)
(0.01)
(0.01)
Consolidated Statement of Changes in Equity
Share capital
Share premium
Retained losses
Foreign exchange reserve
Total attributable to equity holders of the Group
Non-controlling interest
Total equity
£
£
£
£
£
£
£
Balance at 1 January 2017:
556,796
2,443,826
(1,828,598)
(332,160)
839,864
(817,386)
22,478
Loss for the period
-
-
(602,245)
-
(602,245)
(272,053)
(874,298)
Other comprehensive income:
Foreign exchange movements
-
-
-
52,178
52,178
18,333
70,511
Total comprehensive loss:
-
-
(602,245)
52,178
(550,067)
(253,720)
(803,787)
Transactions with shareholders:
Issue of share capital
122,300
243,700
-
-
366,000
-
366,000
Share issue expenses
-
(30,798)
-
-
(30,798)
-
(30,798)
Issue of share options
-
-
77,903
-
77,903
-
77,903
Total transactions with shareholders:
122,300
212,902
-
-
413,105
-
413,105
Balance at 30 June 2017 (unaudited):
679,096
2,656,728
(2,352,940)
(279,982)
702,902
(1,071,106)
(368,204)
Balance at 1 July 2017:
679,096
2,656,728
(2,352,940)
(279,982)
702,902
(1,071,106)
(368,204)
Loss for the period
-
-
(241,461)
-
(241,461)
(85,778)
(327,239)
Other comprehensive income:
Foreign exchange movements
-
-
-
(110,459)
(110,459)
(38,812)
(149,271)
Total comprehensive loss:
-
-
(241,461)
(110,459)
(351,920)
(124,590)
(476,510)
Transaction with shareholders:
Issue of share capital
719,146
205,852
-
-
924,998
-
924,998
Share issue expenses
-
(51,044)
-
-
(51,044)
-
(51,044)
Issue of share options
-
-
14,402
-
14,402
-
14,402
Total transactions with shareholders:
719,146
154,808
14,402
-
888,356
-
888,356
Balance at 31 December 2017
1,398,242
2,811,536
(2,579,999)
(390,441)
1,239,338
(1,195,696)
43,642
Balance at 1 January 2018:
1,398,242
2,811,536
(2,579,999)
(390,441)
1,239,338
(1,195,696)
43,642
Loss for the period
-
-
(1,043,987)
-
(1,043,987)
(249,944)
(1,293,931)
Other comprehensive income:
Foreign exchange movements
-
-
-
324,863
324,863
114,141
439,004
Total comprehensive loss:
-
-
(1,043,987)
324,863
(719,124)
(135,803)
(854,927)
Transaction with shareholders:
Issue of share capital
625,000
225,000
-
-
850,000
-
850,000
Share issue expenses
-
(134,916)
-
-
(134,916)
-
(134,916)
Issue of share options
-
-
102,782
-
102,782
-
102,782
Total transactions with shareholders:
625,000
90.084
102,782
-
811,522
-
811,522
Balance at 30 June 2018 (unaudited)
2,023,242
2,901,620
(3,521,204)
(65,578)
1,338,080
(1,331,500)
6,580
Consolidated Statement of Cash Flows
6 months ended
30 June
2018
Unaudited
£
6 months ended
30 June
2017
Unaudited
£
12 months ended
31 December 2017
Audited
£
Operating activities
Cash used in operations
14
(574,290)
(656,243)
(975,201)
Net cash used in operating activities
(574,290)
(656,243)
(975,201)
Investing activities
Purchase of property, plant and equipment
5
(280,223)
(210,454)
(441,107)
Net cash used in investing activities
(280,223)
(210,454)
(441,107)
Financing activities
Proceeds on share issue
10
790,885
335,202
1,147,157
Loan drawn down in the year
-
-
190,000
Loans repaid in the year
12
(20,616)
-
(180,000)
Borrowings
-
-
243,325
Proceeds from borrowings
-
343,877
-
Net cash received from financing activities
770,269
679,079
1,400,482
Net (decrease) / increase in cash and cash equivalents
(84,244)
(187,618)
(15,826)
Cash and cash equivalents at the beginning of the period
8
268,128
291,555
291,555
Foreign exchange differences
60,333
2,410
(7,601)
Cash and cash equivalents at the end of the period
8
244,217
106,347
268,128
Notes to the Interim Consolidated Financial Statements
1. Accounting policies
1.1 General information and basis of preparation
The condensed interim consolidated financial statements (the "interim financial statements") are for the six-month period ended 30 June 2018.
These interim financial statements have not been audited, and the financial information set out in this report does not constitute statutory accounts as defined by the Companies Act 2006. The comparative figures for the year ended 31 December 2017 were derived from the statutory accounts for the year to 31 December 2017, which have been delivered to the Registrar of Companies. Those accounts received an unqualified audit report which did not contain statements under sections 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 2006.
The interim financial statements have been prepared on the basis of the accounting policies set out in the December 2017 financial statements of BlueRock Diamonds plc and IAS 34 "Interim Financial Reporting" on a going concern basis. They are presented in sterling, which is also the functional currency of the parent company. They do not include all of the information required in annual financial statements in accordance with IFRS and should be read in conjunction with the consolidated financial statements of the Group for the period ended 31 December 2017.
The interim financial statements have been approved for issue by the Board of Directors on 18 September 2018.
1.2 Standards issued but not adopted
The following relevant new IFRS standards, amendments to standards and interpretations have been issued by the IASB, but are not effective for the financial year beginning on 1 January 2018 and have been adopted by the EU and have not been early adopted.
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 Company 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:
Standard
Key requirements
Effective date as adopted by the EU
IFRS 16
Leases - Introduces a single lessee accounting model and eliminates the previous distinction between an operating and a finance lease.
1 January 2019
2. Significant judgements and sources of estimation uncertainty
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 these estimates.
The judgements, estimates and assumptions applied in the interim financial statements including the key sources of estimation uncertainty were the same as those applied in the financial statements for the period ended 31 December 2017.
The estimates and underlying assumptions are reviewed on an ongoing 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.
3. Foreign exchange (loss) / gain
6 months ended 30 June
2018
£
Unaudited
6 months ended
30 June
2017
£
Unaudited
12 months ended
31 December
2017
£
Audited
Foreign exchange (loss) / gain
(503,240)
(85,869)
71,468
The foreign exchange (losses) / gains relate to translation differences on subsidiary balances that are translated into the reporting currency of the Company at the reporting date and do not constitute a movement through the other comprehensive income reserve.
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 in June 2018 were £1,231,461 (June 2017: £1,076,594; December 2017: £1,183,343)
All revenue consists of sales of diamonds in South Africa through auctions as is customary in the industry. The Company sells its diamonds through auctions run by CS Diamonds (Pty) Ltd.
5. Property, plant and equipment
Cost / Valuation
30 June 2018
£
Accumulated depreciation
£
Carrying value
30 June 2018
£
Unaudited
Mine infrastructure
50,979
(12,527)
38,452
Motor vehicles
58,032
(5,329)
52,703
Plant and machinery
842,183
(198,509)
643,674
Mining assets
580,262
(83,630)
496,632
Total
1,531,456
(299,995)
1,231,461
Reconciliation of property, plant and equipment
Carrying value
1 January 2018
£
Audited
Additions
£
Depreciation
£
Disposals
£
FX revaluation
£
Carrying value
30 June 2018
£
Unaudited
Mine infrastructure
37,590
13,388
(10,085)
-
(2,441)
38,452
Motor vehicles
22,377
35,655
(3,730)
-
(1,599)
52,703
Plant and machinery
770,734
71,449
(144,452)
-
(54,057)
643,674
Mining assets
352,642
227,620
(4,901)
-
(78,729)
496,632
1,183,343
348,112
(163,167)
-
(58,097)
1,231,461
Included within mining assets is an amount £158,768 which relates to stripping costs associated with the KV1 pipe, the second of five known Kimberlite pipes at Kareevlei. Costs associated with the removal of waste overburden at the Group's open cast mine are classified as stripping costs within property, plant and equipment. The stripping asset is depreciated on a units-of-production basis.
6. Inventories
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Diamonds on hand
65,848
15,930
103,951
7. Trade and other receivables
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Prepayments
2,119
6,943
5,359
VAT
27,618
37,356
-
Other receivables
-
12
1,002
29,737
44,311
6,361
The carrying value of all trade and other receivables is considered a reasonable approximation of fair value.
8. Cash and cash equivalents
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Cash in bank and on hand
244,217
106,347
268,128
9. Share Based Payments
The Directors were granted share options under the share option agreements dated 19 August 2013. There were no amendments to the terms of the options granted during the period.
The share options held by current and former Directors as at 30 June 2018 and the exercise prices were as follows:
Director
Number of ordinary shares subject to share options
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 5
Number and Exercise Price (Pence)
P. Beck
2,751,392
-
-
992,096 - 2.25
992,096 - 1.25
767,200 - 1.75
T. Leslie
3,000,000
-
-
-
-
3,000,000 - 1.75
A. Waugh
9,281,958
776,091 - 11
1,670,387 - 5
3,417,740 - 2.25
3,417,740 - 1.25
-
D. Facey
4,127,088
-
-
2,063,544 - 2.25
2,063,544 - 1.25
-
Total
19,160,438
776,091
1,670,387
6,473,380
6,473,380
3,767,200
No share options were granted during the period to 30 June 2018.
Movements in the number of share options outstanding and their related weighted average prices are as follows:
30 June 2018
31 December 2017
30 June 2017
Average exercise price in pence per share
Number of options
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 period
4.4
22,502,955
29.2
3,555,720
29.2
3,555,720
Granted
-
-
2.11
20,308,238
5
2,227,182
Lapsed
-
-
(44)
(1,161,003)
-
-
Exercised
-
-
-
-
-
-
Outstanding at the period / year end
4.4
22,502,955
4.40
22,502,955
19.55
5,582,902
Exercisable at the period / year end
6.55
3,003,273
5
2,227,182
19.55
5,582,902
Options are valued at date of grant using the Black-Scholes option pricing model. No options were granted and valued during the period.
The total share-based payment expense for the period ended 30 June 2018 was £26,980 (June 2017: £77,903; December 2017: £92,305).
10. Share capital and share premium issued
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Number of Ordinary shares
202,324,242
67,879,580
139,824,242
Ordinary share capital of 1p per share
2,023,242
679,096
1,398,242
Share premium
2,901,620
2,656,728
2,811,536
4,924,862
3,335,824
4,209,778
In the period ended 30 June 2018 the following Ordinary share issues occurred:
Date of issue
Details of issue
Number of ordinary shares
Share capital
£
Share premium
£
At 1 January 2018
139,824,242
1,398,242
2,811,536
19 March 2018
Placing and equity issue
33,333,333
333,333
166,667
19 March 2018
Placing and equity issue expenses
-
-
(36,615)
12 April 2018
Warrant issue charges
-
-
(75,801)
31 May 2018
Placing and equity issue
29,166,667
291,667
58,333
31 May 2018
Placing and equity issue expenses
-
-
(22,500)
At 30 June 2018
202,324,242
2,023,242
2,901,620
On 19 March 2018, a placing and subscription raised £500,000 gross (£463,385 after expenses) via the issue of 33,333,333 new ordinary shares of 1 pence each in the capital of the Company at a price of 1.5 pence per New Share. Each new share issued was also accompanied by a warrant to subscribe for a further new share at a price of 3 pence per new share. An additional 1,200,000 warrants were issued in lieu of certain fees. This transaction is further discussed in Note 16.
On 31 May 2018, a placing and subscription raised an aggregate of £322,500 after expenses via the issue of 29,166,667 new ordinary shares of 1 pence each in the capital of the Company at a price of 1.2 pence per New Share; this transaction is further discussed in Note 16.
The fair value per warrant granted during the period and the assumptions used in the calculation are shown below:
6 months ended
30 June
2018
Pricing model used
Black-Scholes
Weighted average share price at grant date (pence)
1.48
Weighted average exercise price (pence)
3
Weighted average contractual life (years)
2
Share price volatility (%)
66%
Dividend yield (%)
0%
Risk-free interest rate (%)
0.0093%
Movements in the number of warrants outstanding and their related weighted average prices are as follows:
30 June 2018
31 December 2017
30 June 2017
Average exercise price in pence per share
Number of warrants
Average exercise price in pence per share
Number of warrants
Average exercise price in pence per share
Number of warrants
Outstanding at the beginning of the period
-
-
-
-
-
-
Granted
3
34,533,333
-
-
-
-
Lapsed
-
-
-
-
-
-
Exercised
-
-
-
-
-
-
Outstanding at the period / year end
3
34,533,333
-
-
-
-
Exercisable at the period / year end
3
34,533,333
-
-
-
-
11. Trade and other payables
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Trade payables
279,702
290,801
231,950
Accrued expenses
67,403
24,297
55,173
Corporation tax payables
21,953
97,699
21,953
Other payables
24,076
219,960
62,222
393,134
632,757
371,298
An amount of £178,652 is included within trade payables for amounts being claimed as being due to companies related to a former director of the Company. This amount is disputed in full by the Company based on legal advice received.
Within other payables is an amount of £24,076 which relates to an amount claimed by a former director and which, based on legal advice received by the company, is disputed in full. See note 17 for further details.
12. Borrowings and embedded derivative
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Convertible loans
673,234
612,031
641,903
Loan facility
188,409
149,500
243,325
Finance lease
34,300
-
-
895,943
761,531
885,228
Embedded derivative
70,354
72,451
113,333
966,297
833,982
998,561
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Due within the year
Loan facility
23,148
-
34,723
Finance lease
2,135
-
-
25,283
-
34,723
Due greater than one year
Convertible loan
673,234
612,031
641,903
Loan facility
165,261
149,500
208,602
Finance lease
32,165
-
-
870,660
761,531
850,505
Convertible loans and embedded derivative
The movement on each convertible loan liability component can be summarised as follows:
Embedded derivative
£
Convertible loan
£
Total
£
Balance at 1 January 2017
292,839
583,548
876,387
Finance charge: unwinding the discount factor
-
28,483
28,483
Fair value adjustment to embedded derivative
(220,388)
-
(220,388)
Balance at 30 June 2017
72,451
612,031
684,482
Finance charge: unwinding the discount factor
-
29,872
29,872
Fair value adjustment to embedded derivative
40,882
-
40,882
Balance at 31 December 2017
113,333
641,903
754,236
Finance charge: unwinding the discount factor
-
31,331
31,331
Fair value adjustment to embedded derivative
(42,979)
-
(42,979)
Balance at 30 June 2018
70,354
673,234
743,588
At 30 June 2018 the Group had in issue convertible loan stocks of £925,000 which has a term until 16 October 2021.
The terms of the convertible loan note 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. This requires a separate valuation as it does not relate to the host contract.
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
• 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).
A fair value exercise to determine the value of the two 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:
• 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%.
Loan facility
In 2017 the Company entered into a loan facility agreement with Mark Poole. A 90 day interest free period was included in the agreement from the date of the first draw down. After this point interest accrues on the capital balance at a rate of 10% per annum, which is payable quarterly in arrears. All capital to be repaid within 5 years from the date of the draw down on the facility.
Additionally a security over the property, plant and equipment of Kareevlei Mining (Pty) Limited is held.
During the period ended 30 June 2018 an interest charge of £9,087 (June 2017: £nil, December 2017: £4,024) was recognised on the total capital drawn down. Outstanding at the period ended 30 June 2018 was £184,793 capital and £3,616 interest.
Finance lease
During 2018 the Group entered into a lease facility agreement with William van Wyk, whereby motor vehicles are leased over a term of 72 months at a rate of 12.5% per annum with the final repayment during February 2024.
13. Provisions
Reconciliation of provisions
Rehabilitation costs
£
Balance at 1 January 2017
112,798
Unwinding of discount
31,849
Balance at 30 June 2017
144,647
Unwinding of discount
3,635
Balance at 31 December 2017
148,282
Revaluation of provision
67,889
Unwinding of discount
1,342
Exchange differences
(12,261)
Balance at 30 June 2018
205,252
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) during April 2018.
14. Cash used in operations
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Loss before taxation
(1,293,931)
(867,164)
(1,179,529)
Adjustments for non-cash items:
Depreciation and amortisation
163,166
131,036
274,407
Foreign exchange movement
503,240
85,869
(71,468)
Property plant and equipment NBV disposal
-
18,197
18,740
Embedded derivative charge
(42,979
(220,388)
(179,506)
Share based payment expense
26,980
77,903
92,305
Share payments in lieu of Director fees
-
-
52,000
Finance charge on convertible loan notes
31,331
28,483
58,355
Movements in provisions
1,342
(1,701)
-
Taxes Paid
-
-
(90,621)
Changes in working capital:
Decrease / (increase) in trade and other receivables
(23,376)
87,686
125,635
Increase in trade and other payables
21,835
17,564
26,230
(Increase) / decrease in inventories
38.103
(13,728)
(101,749)
(574,290)
(656,243)
(975,201)
15. EPS (Earnings per share)
30 June
2018
£
Unaudited
30 June
2017
£
Unaudited
31 December
2017
£
Audited
Loss attributable to ordinary shareholders
(712,780)
(550,067)
(901,987)
Weighted average number of shares
80,758,074
57,645,136
90,383,380
Loss per share basic and diluted
(0.01)
(0.01)
(0.01)
Weighted average number of shares after dilution
80,758,074
57,645,136
90,383,380
Fully diluted earnings per share
(0.01)
(0.01)
(0.01)
Share options granted to directors could potentially dilute EPS in the future but are not included in a dilutive EPS calculation because they are antidilutive for the period.
16. Related party transactions
Relationships
Minority Interest ‑ William van Wyk
Kgalagadi Engineering & Mining Supplies (Pty) Ltd
Ghaap Mining (Pty) Ltd
Shareholder - Mark Poole
BlueRock Diamond
Shareholder's Daughter - Emma Poole
BlueRock Diamond
Placing and Subscription
As part of the £500,000 placing and subscription on 19 March 2018, Paul Beck, Non-Executive Chairman of the Company and David Facey, Financial Director of the Company, has subscribed for 1,000,000 and 1,666,666 New Shares respectively, following which they will have a beneficial interest in 4,680,643 and 5,666,666 Ordinary Shares of the Company. Included in Mr Beck's beneficial interest are 455,455 Ordinary Shares held by Front Square Securities Limited, a company wholly owned by Mr Beck and his wife and of which Mr Beck is a director.
As part of the placing on 19 March 2018, 33,333,333 warrants were issued to investors of which 1,000,000 and 1,666,666 were issued to Paul Beck and David Facey respectively. The warrants are exercisable at a price of 3 pence and are exercisable for a period of 2 years from date of issue.
Borrowings
William van Wyk
During March 2018 the Group entered into a lease facility agreement with William van Wyk, whereby motor vehicles are leased over a term of 72 months at a rate of 12.5% per annum with the final repayment during February 2024. See note 12 for further details. As at 30 June 2018 the balance payable on the lease facility was £34,300.
Mark Poole
As at 30 June 2018 the balance due on the asset finance facility granted by Mark Poole was £188,409. See note 12 for further details.
Directors' remuneration
The following directors' remuneration were paid during the period:
A Waugh - received fees of £48,320
D Facey - received fees of £18,000
17. Events after the reporting period
Claim by former company director
On 10 August Kareevlei Mining (Pty) Ltd, the Company's main operating subsidiary, reached an agreement with Mr. C Visser, a former director of the company, that his application for the liquidation of Kareevlei Mining (Pty) Ltd be removed from the court roll, subject to security being provided for the full amount of his alleged claim which amounts to approximately £230,000 (the 'Security'). Accordingly, the provisional liquidation hearing scheduled for 10 August 2018 did not proceed. The Security was given on 17 August 2018. The Company has taken this prudent action on the advice of its lawyers because, whilst the Board was confident that, had the hearing proceeded, it would have been successful, it is impossible to be entirely confident of success in this or indeed any other court process.
The alleged claims remain disputed and the applicants may initiate ordinary course recovery proceedings. Such proceedings, if initiated, are likely to last for a period of around 18 months. BlueRock's legal advice remains that Mr Visser's claim is without merit. The Security will remain held in escrow with BlueRock's legal advisers until such time that either Mr Visser fails to initiate recovery proceedings within the yet to be agreed time frame, or the final determination of any such proceedings.
Loan agreement
Pursuant to the above agreement, BlueRock Diamonds plc and its subsidiary Kareevlei Mining PTY Limited entered into a loan agreement with Adam Waugh (CEO) and Paul Beck (Chairman) on 17 August 2018. The Loan will only be available to satisfy any final determination of any further claim that Mr Visser brings.
The principal amount of the loan is £231,400 comprising £50,000 from Paul Beck and £181,400 from Adam Waugh. The key provisions of the loan are as follows:
1) a term of up to three years, but pre-payable in full or in part at any time at the option of the Company;
2) an arrangement fee of 5 percent of the loan principal;
3) interest payable of 11 percent per annum on the loan principal payable quarterly, 6 percent payable in cash and the remaining 5 percent payable by a combination of cash and shares (at the Company's sole discretion);
4) a repayment premium at an amount equal to 2 percent of the loan principal per month that the loan is outstanding, payable on repayment of the loan in full or in part to be satisfied half in cash and half in shares, at the mid-market price at the time of the relevant repayment, or cash (at the Company's sole discretion);
5) and that in the event that the Company raises further funds, preference is given to repaying the loan. It will be the Board's intention to repay the Loan as soon as practicable
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 FKLLFVKFBBBV
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