REG - Kropz PLC - Unaudited Half Year Results
30/09/2022 15:45
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RNS Number : 4110B Kropz PLC 30 September 2022
Kropz plc ("Kropz", the "Company") and its subsidiaries (the "Group")
Unaudited Half Year Results for the Six Months ended 30 June 2022
Kropz plc (AIM: KRPZ), an emerging African phosphate developer and producer,
announces its unaudited results for the six months ended 30 June 2022.
The financial report is available online at the Company's website
www.kropz.com (http://www.kropz.com) .
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Key financial indicators
· Impairment in the value of property, plant, equipment and mine
development assets at Kropz Elandsfontein (Pty) Ltd ("Elandsfontein") of
US$44.7 million;
· Property, plant, equipment and exploration assets, after the
impairment above, of US$ 144 million as at 30 June 2022 (31 December 2021:
US$ 180 million);
· Cash at 30 June 2022 of US$ 1 million (31 December 2021: US$ 2
million); and
· Trade and other payables at 30 June 2022 of US$ 8 million (31
December 2021: US$ 4 million).
Key corporate and operational developments during the period
Corporate
· Issued 6,700,000 ordinary shares, at an exercise price of £0.001
an ordinary share, in the Company to key members of the executive management
team, including certain Persons Discharging Managerial Responsibilities. The
issue of ordinary shares was due to awards vesting that had been issued under
the Company's Long-Term Incentive Plan of 31 July 2020, announced on 4 August
2020;
· The fifth and final drawdown on the US$ 5 million equity facility
with the ARC Fund, Kropz's major shareholder ("Further Equity Facility"), as
announced on 26 February 2021, occurred on 10 March 2022 for US$ 200,000;
· The third and fourth, and final drawdowns on the ZAR 200 Million
Equity Facility with the ARC Fund ("ZAR 200 Million Equity Facility"), as
announced on 29 September 2021, occurred on 25 March 2022 for ZAR 40 million
and on 26 April 2022 for ZAR 33 million;
· As announced on 27 April 2022, Kropz Elandsfontein entered into
an agreement with the ARC Fund for a ZAR 25 million (approximately US$ 1.60
million) bridge loan facility ("Loan 1") to meet cash requirements in respect
of Kropz Elandsfontein and draw down of Loan 1 took place on 28 April 2022;
· As announced on 11 May 2022, Kropz entered into a new conditional
convertible equity facility of up to ZAR 177 million (approximately US$ 11
million) ("ZAR 177 Million Equity Facility") with ARC Fund to fund
Elandsfontein to first revenues from bulk concentrate sales;
· The ZAR 177 Million Equity Facility was approved by Kropz
shareholders and became unconditional on 1 June 2022; and
· The first drawdown on the ZAR 177 Million Equity Facility
occurred on 2 June 2022 for ZAR 103.5 million (approximately US$ 7 million).
After set-off of Loan 1, Kropz received an amount of ZAR 78.5 million
(approximately US$ 5 million).
Elandsfontein
· The focus at the Elandsfontein project continued to be production
ramp-up of the mine and beneficiation plant;
· To 30 June 2022, 5,000 tonnes of concentrate had been produced
and was being stored in the Saldanha Bay storage facility;
· BNP released the ZAR 77 million (approximately US$ 5 million)
restricted cash in the bank account of Elandsfontein on 10 January 2022, upon
satisfaction of the requirement by BNP for Kropz to bridge the funding
shortfall in respect of Kropz Elandsfontein as announced on 1 September 2021;
· As announced on 27 April 2022, a further funding shortfall of ZAR
177 million was expected due to slower than expected progress in the ramp up
of operations at Elandsfontein;
· First bulk sales are now expected in Q4 2022 as a result of early
geological challenges in the mining area - higher than expected volumes of
indurated material limited the mining rate that could be achieved with the
mining equipment on site at that time;
· The delay was also driven by the need to re-engineer parts of the
fine flotation circuit as proposed by the vendor and had also been affected by
the lack of operator expertise and experience; and
· Measures taken by management to address these issues are set out
later in this report.
Hinda
· Since 31 December 2021, management has been interrogating the
Hinda Updated FS and financial model as prepared by Hatch;
· Various capital cost optimisation initiatives have been
identified for investigation ahead of detailed design; and
· Development alternatives are being considered and potential
funding options investigated.
Key corporate and operational developments post period end
Corporate
· The second drawdown on the ZAR 177 Million Equity Facility was
made on 7 July 2022 for ZAR 60 million (approximately US$ 4 million);
· As announced on 20 July 2022, Mark Summers, has resigned as Chief
Executive Officer ("CEO") and Executive Director of the company effective the
end of 2022. The Board has commenced a process for appointing a new CEO;
· On 9 August 2022, a final drawdown on the ZAR 177 Million Equity
Facility was made for ZAR 13.5 million (approximately US$ 0.9 million);
· As announced on 14 September 2022, Machiel Reyneke retired as a
non-executive director of the Company and was replaced by Mr Gerrit Duminy, as
non-executive director and representative of the ARC Fund;
· Today, Kropz, Kropz Elandsfontein and ARC Fund agreed to a
further ZAR 126 million (approximately US$ 7 million) bridge loan facility
to meet further cash requirements at Elandsfontein in the ramp-up of
operations at Elandsfontein; and
· Kropz and the ARC Fund are currently working on a comprehensive
funding structure to finance any further funding requirements in Kropz.
Elandsfontein
· Subsequent to 30 June 2022, further delays were announced in the
ramp-up of operations at Elandsfontein, largely been driven by initial ore
variability in the current mining area. Mining rates and associated delivery
of ore to the plant were compromised due to the presence of competent banks of
hard material within the orebody, that were previously unknown. This hard
material could not be mined using free-digging methods leading to new
equipment being brought to site to test mechanical breakage of the material,
while alternative mining methods are being evaluated;
· To quantify and assess the impact of this hard material on the
future mine plan, further drilling is currently in progress;
· A revised mineral resource estimate will be produced later in the
year, once the results of this current drilling programme have been
interpreted;
· As announced on 9 August 2022, Kropz, Kropz Elandsfontein and ARC
Fund agreed to a further ZAR 121.5 million (approximately US$ 7.3 million)
bridge loan facility ("Loan 2") to meet immediate cash requirements at Kropz
Elandsfontein. A draw down of ZAR 60 million (approximately US$ 3.6 million)
on Loan 2 was made on 9 August 2022. Loan 2 is unsecured, repayable on demand,
with no fixed repayment terms and is repayable by Kropz Elandsfontein on no
less than two business days' notice. Interest is payable on Loan 2 at the
South African prime overdraft interest rate plus 6%, nominal per annum and
compounded monthly;
· The second drawdown on Loan 2 was made on 1 September 2022 for
ZAR 47 million (approximately US$ 2.8 million). The third and final draw
down of ZAR 14.5 million on Loan 2 was made on 29 September 2022; and
· At the date of this report, 10,000 tonnes of phosphate rock
concentrate were in stock at the Saldanha Bay storage facility.
Hinda
· Potential funding solutions for the development of Hinda are
being evaluated and considered.
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the "UK MAR") which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
For further information visit www.kropz.com (http://www.kropz.com) or contact:
Kropz Plc Via Tavistock
Mark Summers (CEO) +44 (0) 20 7920 3150
Grant Thornton UK LLP Nominated Adviser
Samantha Harrison +44 (0) 20 7383 5100
Harrison Clarke
George Grainger
Ciara Donnelly
Hannam & Partners Broker
Andrew Chubb +44 (0) 20 7907 8500
Ernest Bell
Tavistock Financial PR & IR (UK)
Emily Moss +44 (0) 20 7920 3150
Nick Elwes kropz@tavistock.co.uk (mailto:kropz@tavistock.co.uk)
Adam Baynes
R&A Strategic Communications PR (South Africa)
Charmane Russell +27 (0) 11 880 3924
charmane@rasc.co.za
About Kropz plc
Kropz is an emerging African phosphate developer and producer with phosphate
projects in South Africa and the Republic of Congo ("RoC"). The vision of the
Group is to become a leading independent phosphate rock producer and to
develop into an integrated, mine-to-market plant nutrient company focusing on
sub-Saharan Africa.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022
30 June 31 December
2022 2021
Unaudited Audited
Notes US$'000 US$'000
Non-current assets 102,842 135,099
Property, plant, equipment and mine development 7
Exploration assets 8 41,199 44,631
Right-of-use assets 62 7
Other financial assets 1,261 1,357
145,364 181,094
Current assets
Inventories 2,059 1,025
Trade and other receivables 1,906 1,511
Restricted cash - 4,858
Cash and cash equivalents 1,007 2,461
4,972 9,855
150,336 190,949
TOTAL ASSETS
Current liabilities
Trade and other payables 7,929 3,543
Lease liabilities 23 7
Other financial liabilities 12 11,768 4,295
19,720 7,845
Non-current liabilities
Shareholder loans and derivative liability 11 43,783 25,043
Lease liabilities 41 -
Other financial liabilities 12 18,814 26,291
Provisions 4,091 4,033
66,729 55,367
86,449 63,212
TOTAL LIABILITIES
NET ASSETS 63,887 127,737
Shareholders' equity
Share capital 9 1,212 1,194
Share premium 9 194,757 193,524
Merger reserve 9 (20,523) (20,523)
Foreign exchange translation reserve (11,094) (7,807)
Share-based payment reserve 586 1,197
Accumulated losses (94,419) (45,626)
70,519 121,959
Total equity attributable to the owners of the Company
Non-controlling interests (6,632) 5,778
63,887 127,737
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months ended Six months ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes US$'000 US$'000
Revenue - -
Other income 500 7
Operating expenses (4,796) (3,436)
Operating loss (4,296) (3,429)
Finance income 13 85 1,547
Finance expense 14 (4,306) (1,471)
Fair value losses from derivative asset/liability 15 (7,637) (3,728)
Impairment losses 16 (44,700) -
Loss on disposal of subsidiary - (224)
Loss before taxation (60,854) (7,305)
Taxation 17 - (89)
Loss after taxation (60,854) (7,394)
Loss attributable to:
Owners of the Company (46,794) (6,602)
Non-controlling interests (14,060) (792)
(60,854) (7,394)
Loss for the period (60,854) (7,394)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
- Exchange differences on translation of parent company financial (4,137) 628
statements from functional to presentation currency
- Exchange differences on translating foreign operations 501 (175)
(3,636) 453
Total comprehensive loss (64,490) (6,941)
Attributable to:
Owners of the Company (50,081) (6,611)
Non-controlling interests (14,409) (330)
(64,490) (6,941)
Loss per share attributable to owners of the Company:
Basic and diluted (US cents) 18 (5.09) (1.03)
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Share Share premium Merger Foreign currency translation Share-based payment reserve Retained earnings Non-controlling interest Total equity
capital reserve reserve Total attributable
to owners
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Unaudited - six months ended 30 June 2022
Balance at 1 January 2022 1,194 193,524 (20,523) (7,807) 1,197 (45,626) 121,959 5,778 127,737
Total comprehensive loss for the period - - - (3,287) - (46,794) (50,081) (14,409) (64,490)
18 503 - - - - 521 - 521
Issue of shares
Share options exercised - 730 - - (730) - - - -
Share based payment - - - 119 - 119 - 119
charges -
Investment in non-redeemable preference shares of Kropz Elandsfontein - - - - - (1,999) (1,999) 1,999 -
Transactions with owners 18 1,233 - - (611) (1,999) (1,359) 1,999 640
Balance at 30 June 2022 1,212 194,757 (20,523) (11,094) 586 (94,419) 70,519 (6,632) 63,887
Unaudited - six months ended 30 June 2021
Balance at 1 January 2021 706 168,212 (20,523) 2,334 385 (11,005) 140,109 (5,276) 134,833
Total comprehensive loss for the period - - - (9) - (6,602) (6,611) (330) (6,941)
- - - - - - - 168 168
Disposal of subsidiary
Issue of shares 416 21,584 - - - - 22,000 - 22,000
Remeasurement of derivative asset on issuance of shares (Note 15) - - - - - (4,673) (4,673) - (4,673)
Share based payment charges - - - - 317 - 317 - 317
Transactions with owners 416 21,584 - - 317 (4,673) 17,644 168 17,812
Balance at 30 June 2021 1,122 189,796 (20,523) 2,325 702 (22,280) 151,142 (5,438) 145,704
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
Six months ended Six months ended
30 June 30 June
2022 2021
Unaudited Unaudited
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (60,854) (7,305)
Adjustments for:
Depreciation of property, plant and equipment 425 430
Amortisation of right-of-use assets 18 19
Impairment losses 44,700 -
Share-based payment 119 317
Interest income (85) (289)
Interest expense 2,414 1,011
Fair value losses from derivative asset/liability 7,637 3,728
Loss on disposal of subsidiary - 224
Foreign currency exchange differences 1,884 (1,028)
Fair value loss on game animals 21 12
Operating cash flows before working capital changes (3,721) (2,881)
Increase in trade and other receivables (478) (1,985)
(Increase) / decrease in inventories (1,117) 11
Increase in payables 4,832 2,445
Accretion in provisions - 177
(484) (2,233)
Income taxes paid - -
Net cash flows used in operating activities (484) (2,233)
Cash flows used in investing activities
Purchase of property, plant and equipment (16,762) (18,659)
Exploration and evaluation expenditure (194) (1,931)
Receipt from other financial asset 70 -
Interest received 85 289
Transfers from restricted cash 4,858 1,946
Net cash flows used in investing activities (11,943) (18,355)
Cash flows from financing activities
Finance cost paid (1,072) (1,011)
Shareholder loan received 11,730 -
Repayment of lease liabilities (14) (20)
Other financial liabilities received 25 38
Issue of ordinary share capital 554 22,000
Net cash flows from financing activities 11,223 21,007
(1,204) 419
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period 2,461 11,572
Foreign currency exchange (losses) / gains on cash (250) 499
Cash and cash equivalents at end of the period 1,007 12,490
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
1. General information
Kropz is an emerging plant nutrient producer with an advanced stage phosphate
mining project in South Africa and a phosphate project in the RoC. The
principal activity of the Company is that of a holding company for the Group,
as well as performing all administrative, corporate finance, strategic and
governance functions of the Group.
The Company was incorporated on 10 January 2018 and is a public limited
company, with its ordinary shares admitted to the AIM Market of the London
Stock Exchange on 30 November 2018 trading under the symbol, "KRPZ". The
Company is domiciled in England and incorporated and registered in England and
Wales. The address of its registered office is 35 Verulam Road, Hitchin, SG5
1QE. The registered number of the Company is 11143400.
2. Basis of preparation
These interim consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting and in accordance with the
accounting policies of the consolidated financial statements for the year
ended 31 December 2021. They do not include all disclosures that would
otherwise be required in a complete set of financial statements and should be
read in conjunction with the 2021 annual report. The statutory financial
statements for the year ended 31 December 2021 were prepared in accordance
with UK adopted international accounting standards and the Companies Act 2006
applicable to companies reporting under the International Financial Reporting
Standards ("IFRS"). They have been filed with the Registrar of Companies. The
auditors' reported on those financial statements was unqualified but included
a material uncertainty related to going concern.
The interim consolidated financial statements have been prepared under the
historical cost convention unless otherwise stated in the accounting policies.
They are presented in United States Dollars, the presentation currency of the
Group and figures have been rounded to the nearest thousand.
The interim financial information is unaudited and does not constitute
statutory accounts as defined in the Companies Act 2006.
The interim financial information was approved and authorised for issue by the
Board of Directors on 30 September 2022.
3. Significant events
The further potential effects of COVID-19, and the possibility of further
waves in South Africa and the RoC remain a risk to Kropz's projects. Kropz has
mitigated this risk as far as reasonably practicable by compliance with the
Kropz COVID-19 policies and procedures. Additionally, the recent
Ukraine-Russia conflict has created increased uncertainty and volatility in
debt and equity markets alongside increased inflationary pressures, supply
chain constraints and increased foreign exchange volatility which may make the
raising of funding more difficult to secure.
4. Going concern
During the six months ended 30 June 2022, the Group incurred a loss of
US$ 60.9 million (six months ended 30 June 2021: US$ 7.4 million) and
experienced net cash outflows from operating activities. Cash and cash
equivalents totalled US$ 1.0 million as at 30 June 2022 (31 December 2021: US$
2.5 million)
Delays in the ramp-up of operations at Elandsfontein, as set out above, have
delayed first revenues from Elandsfontein to later in 2022.
First revenue from Elandsfontein is now forecast in Q4 of 2022. The Group has
no current source of operating revenue and is therefore dependent on both
existing cash resources and facilities and future fund raisings to meet
overheads and future development and exploration requirements as they fall
due.
In September 2021, Kropz secured the ZAR 200 Million Equity Facility of up to
ZAR 200 million from the ARC Fund, to be used exclusively for the purposes of
bringing the Elandsfontein project to first revenues. On 26 October 2021,
Kropz received a draw down on the ZAR 200 Million Equity Facility of ZAR 90
million and a further ZAR 37 million on 10 December 2021. Two further
drawdowns were made in 2022, one on 25 March 2022 for ZAR 40 million and ZAR
33 million on 26 April 2022. The ZAR 200 Million Equity Facility is fully
drawn at the date of this report.
In April 2022, ARC Fund agreed to provide a ZAR 25 million (approximately US$
1.6 million) bridge loan facility ("Loan 1") to Kropz Elandsfontein to meet
its immediate cash requirements. Loan 1 was unsecured, repayable on demand,
and there were no fixed repayment terms. It is repayable by Kropz
Elandsfontein on no less than two business days' notice. Interest is payable
on the Loan at 14% nominal, compounded monthly. Loan 1 was fully drawn down
on 28 April 2022.
In May 2022, Kropz secured the ZAR 177 Million Equity Facility from the ARC
Fund. The ZAR 177 Million Equity Facility could be drawn down following a
written request from Kropz plc and at the discretion of the ARC Fund. The
principal drawn amount may, at the discretion of ARC Fund, at any time be
converted to ordinary shares, or alternatively be repaid in cash at the end of
the term of the ZAR 177 Million Equity Facility which is 27 October 2026. The
ZAR 177 Million Equity Facility was to be used exclusively for the purposes
of bringing the Elandsfontein project to first revenues, given a slower
ramp-up in operations than originally envisaged. The delay in ramp-up was
largely driven by the need to re-engineer parts of the fine flotation circuit
proposed by the vendor, but had also been affected by early unpredicted ore
variability and lack of operator experience. Since the announcement, the
vendor provided design changes which were implemented at the plant, additional
operator training was conducted and is ongoing and a mobile crusher ordered to
facilitate the crushing of the affected ore to an appropriate size fraction
until further test work has been conducted for a permanent solution.
First drawdown of the ZAR 177 Million Equity Facility of ZAR 103.5 million
was made on 2 June 2022. Loan 1 of ZAR 25 million was set off against the
first draw down and the net amount of ZAR 78.5 million received by the
Company. The second drawdown on the ZAR 177 Million Equity Facility for
ZAR 60 million was made on 7 July 2022 and third and final drawdown of ZAR
13.5 million on 9 August 2022.
As announced on 9 August 2022, Kropz, Kropz Elandsfontein and ARC Fund agreed
to a further ZAR 121.5 million (approximately US$ 7.3 million) bridge loan
facility ("Loan 2") to meet immediate cash requirements at Elandsfontein due
to further delays in the ramp-up of operations at Elandsfontein. These delays
have largely been driven by increased ore variability in the current mining
area. Mining rates and associated delivery of ore to the plant were
compromised due to the presence of competent banks of hard material within the
orebody, that were previously unknown. This hard material could not be mined
using free-digging methods and new equipment needed to be brought to site to
test mechanical breakage of the material. Alternative mining methods have
been identified. In order to assess the impact of this hard material on the
future mine plan, further drilling is currently in progress. A revised mineral
resource estimate will be produced once the results of this drilling have been
interpreted.
A draw down for ZAR 60 million (approximately US$ 3.6 million) of Loan 2 was
made on 9 August 2022. Loan 2 is unsecured, repayable on demand, and there are
no fixed repayment terms. It is repayable by Kropz Elandsfontein on no less
than two business days' notice. Interest is payable on the Loan at the South
African prime overdraft interest rate plus 6%, nominal per annum and
compounded monthly.
The second drawdown on Loan 2 was made on 1 September 2022 for ZAR 47 million
(approximately US$ 2.8 million). The third and final draw down of ZAR 14.5
million on Loan 2 was made on 29 September 2022.
On 30 September 2022, Kropz, Kropz Elandsfontein and ARC Fund agreed to a
further ZAR 126 million (approximately US$ 7 million) bridge loan facility
to meet forecast cash requirements at Elandsfontein up to expected first
revenue receipts due to further delays in the ramp-up of operations at
Elandsfontein. Once contractual agreements have been finalised, drawdowns will
be announced when made on this further bridge loan.
On 24 February 2022, Russian troops invaded Ukraine. The war in Ukraine and
related events take place at a time of significant global economic uncertainty
and volatility, and the effects are likely to interact with and exacerbate the
effects of current market conditions. Phosphate markets are currently in
turmoil, largely due to the sanctions imposed on Russia. Russia is a
significant supplier of fertiliser feed products and associated sanctions
increased the prices of phosphate products significantly as producers that
relied on Russian sources scrambled to secure alternative sources of amongst
others, low cadmium phosphate rock. Kropz does not have Russian entities in
its supply chain nor customers and will benefit from higher phosphate prices.
Additionally, at the date of these interim financial statements, the potential
future impact of COVID is uncertain, and any delays or interruptions could
cause delays that would require additional funding through the raising of debt
or equity.
Key contracts associated with operational readiness and commencement of
production activities at Kropz Elandsfontein are finalised, except for
Transnet. Negotiations with Transnet were finalised in December 2021 and final
signature of the Transnet contract is expected prior to the shipment of first
concentrate sales.
Production has steadily been increasing and 10,000 tonnes of phosphate rock
concentrate is now in stock at the Saldanha Bay storage facility.
Current forecasts are based on first concentrate sales from Kropz
Elandsfontein of approximately ZAR 40 million in October 2022, an average of
ZAR 40 million per month for the 3-month period ended 31 December 2022 and
ZAR169 million per month for the 14-month period ended 28 February 2024,
thereafter. Should first concentrate sales not occur in October to December
2022, a funding shortfall would arise in Kropz Elandsfontein at the end of
31 December 2022 of approximately ZAR 209 million.
Failure to produce adequate quantities of phosphate rock concentrate to fulfil
first sales in the projected time frame, could negatively impact production
ramp-up and cash generation and create an additional funding requirement. The
average operating costs over the 17-month forecast period for Kropz
Elandsfontein is estimated at approximately ZAR 116 million per month.
Kropz Plc's future cashflows are dependent on concentrate revenues being
achieved by Kropz Elandsfontein.
The Directors have reviewed the Group's overall cash position, debt repayments
and outlook, for a period of seventeen months following the date of signature
of these interim financial statements and have considered sensitivities around
pricing, volume and timing of production and stress tested various scenarios,
in respect of the matters identified above and are of the opinion that it is
appropriate to adopt the going concern basis of accounting in preparing these
interim financial statements.
Management is working hard with its contractors to overcome mining and
production challenges and increase production to achieve steady state
production. Management has successfully raised money in the past from its
supportive shareholder base, but there is no guarantee forecast sales will be
achieved by the end of the 2022 financial year and that adequate funds will be
available in the future. These circumstances indicate the existence of a
material uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern and therefore it may be unable to
realise its assets and discharge its liabilities in the normal course of
business.
The financial report does not include adjustments relating to the
recoverability and classification of recorded asset amounts or to the amounts
and classification of liabilities that might be necessary should the Group not
continue as a going concern.
5. Significant accounting policies
The Company has applied the same accounting policies, presentation, methods of
computation, significant judgements and the key sources of estimation
uncertainties in its interim consolidated financial statements as in its
audited financial statements for the year ended 31 December 2021, except for
the adoption of new standards effective as of 1 January 2022. The Group has
not early adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
The following amendments are effective for the period beginning 1 January
2022:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37);
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3).
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37)
IAS 37 defines an onerous contract as a contract in which the unavoidable
costs (costs that the Group has committed to pursuant to the contract) of
meeting the obligations under the contract exceed the economic benefits
expected to be received under it.
The amendments to IAS 37.68A clarify, that the costs relating directly to the
contract consist of both:
· The incremental costs of fulfilling that contract- e.g. direct
labour and material; and
· An allocation of other costs that relate directly to fulfilling
contracts: e.g. allocation of depreciation charge on property, plant and
equipment used in fulfilling the contract.
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS
16)
The amendment to IAS 16 prohibits an entity from deducting from the cost of an
item of property, plant and equipment any proceeds received from selling items
produced while the entity is preparing the asset for its intended use. The
proceeds from selling such items, together with the costs of producing them,
are now recognised in profit or loss.
Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS 1, IFRS 9,
IFRS 16 & IAS 41)
• IFRS 1: Subsidiary as a First-time Adopter (FTA)
• IFRS 9: Fees in the '10 per cent' Test for Derecognition of
Financial liabilities
• IFRS 16: Amendment of illustrative example 13 to remove any
confusion about the treatment of lease
• IAS 41: Taxation in Fair Value Measurements
References to Conceptual Framework (Amendments to IFRS 3)
In May 2020, the IASB issued amendments to IFRS 3, which update a reference to
the Conceptual Framework for Financial Reporting without changing the
accounting requirements for business combinations.
These amendments had no impact on the interim condensed consolidated financial
statements of the Group.
6. Segment information
Operating segments
The Board of Directors consider that the Group has one operating segment,
being that of phosphate mining and exploration. Accordingly, all revenues,
operating results, assets and liabilities are allocated to this activity.
Geographical segments
The Group operates in two principal geographical areas - South Africa and the
RoC.
The Group's non-current assets by location of assets are detailed below.
30 June 2022 South Africa Group
US$'000 RoC US$'000
US$'000
Total non-current assets 104,140 41,224 145,364
31 December 2021 South Africa Group
US$'000 RoC US$'000
US$'000
Total non-current assets 136,431 44,663 181,094
7. Tangible assets - Property, plant, equipment and mine development
30 June 30 June 30 June 31 Dec 2021 31 Dec 31 Dec
2022 2022 2022 2021 2021
Cost Accumulated Carrying value Cost Accumulated Carrying value
depreciation and impairment depreciation
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and infrastructure
Land 1,481 - 1,481 1,515 - 1,515
Buildings 10,281 (3,161) 7,120 10,514 (56) 10,458
Capitalised road costs 7,941 (5,570) 2,371 8,121 (2,978) 5,143
Capitalised electrical sub-station costs 3,445 (2,340) 1,105 3,523 (1,213) 2,310
Machinery, plant and equipment
Critical spare parts 2,101 - 2,101 1,713 - 1,713
Plant and machinery 90,610 (27,377) 63,233 86,243 (63) 86,180
Water treatment plant 2,381 (718) 1,663 2,435 - 2,435
Furniture and fittings 58 (41) 17 49 (40) 9
Geological equipment 83 (47) 36 65 (45) 20
Office equipment 32 (27) 5 32 (21) 11
Other fixed assets 1 (1) - 1 (1) -
Motor vehicles 97 (97) - 100 (100) -
Computer equipment 76 (44) 32 65 (41) 24
Mine development 18,520 (5,583) 12,937 18,938 - 18,938
Stripping activity costs 15,101 (4,552) 10,549 6,126 - 6,126
Game animals 192 - 192 217 - 217
Total 152,400 (49,558) 102,842 139,657 (4,558) 135,099
Reconciliation of property, plant, equipment and mine development - Period
ended 30 June 2022
Opening Additions Impairment provision Fair value loss Deprecia-tion charge Foreign exchange gain/loss Closing balance
Balance US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
US$'000
Buildings and infrastructure
Land 1,515 - - - (34) 1,481
Buildings 10,458 - (3,099) - (7) (232) 7,120
Capitalised road costs 5,143 - (2,394) - (280) (98) 2,371
Capitalised electrical sub-station costs 2,310 - (1,039) - (121) (45) 1,105
Machinery, plant and equipment
Critical spare parts 1,713 450 - - - (62) 2,101
Plant and machinery 86,180 6,634 (27,315) - (1) (2,265) 63,233
Water treatment plant 2,435 - (718) - - (54) 1,663
Furniture and fittings 9 10 - (2) - 17
Geological equipment 20 20 - (3) (1) 36
Office equipment 11 - - (6) - 5
Other fixed assets - - - - - -
Motor vehicles - - - - - -
Computer equipment 24 14 - (5) (1) 32
-
Mine development 18,938 - (5,583) - - (418) 12,937
-
Stripping activity costs 6,126 9,634 (4,552) - - (659) 10,549
Game animals 217 - - (21) - (4) 192
Total 135,099 16,762 (44,700) (21) (425) (3,873) 102,842
Reconciliation of property, plant, equipment and mine development - Year ended
31 December 2021
Opening Additions Deprecia-tion charge Foreign exchange gain/loss Closing balance
Balance US$'000 Fair value loss US$'000 US$'000 US$'000
US$'000 US$'000
Buildings and infrastructure
Land 2,067 - - - (552) 1,515
Buildings 10,991 - - (49) (484) 10,458
Capitalised road costs 6,177 - - (583) (451) 5,143
Capitalised electrical sub-station costs 2,765 - - (253) (202) 2,310
Machinery, plant and equipment
Critical spare parts 1,285 571 - - (143) 1,713
Plant and machinery 66,609 29,578 - (4) (10,003) 86,180
Water treatment plant 1,129 1,503 - - (197) 2,435
Furniture and fittings 3 10 - (2) (2) 9
Geological equipment - 24 - (2) (2) 20
Office equipment 18 - - (6) (1) 11
Other fixed assets - - - - - -
Motor vehicles - - - - - -
Computer equipment 5 24 - (5) - 24
Mine development 20,046 528 - - (1,636) 18,938
Stripping activity costs 3,193 3,433 - - (500) 6,126
Game animals 185 - 51 - (19) 217
Total 114,473 35,671 51 (904) (14,192) 135,099
Kropz Elandsfontein has a fully drawn down project financing facility with BNP
Paribas for US$ 30 million (see Note 12). BNP has an extensive security
package over all the assets of Kropz Elandsfontein and Elandsfontein Land
Holdings (Pty) Ltd ("Elandsfontein Land Holdings") as well as the share
investments in those respective companies owned by Kropz SA (Pty) Ltd ("Kropz
SA").
8. Intangible assets - exploration and evaluation costs
30 June 31 December
2022 2021
US$'000 US$'000
Capitalised exploration costs
Cost 41,199 44,631
Amortisation - -
Carrying value 41,199 44,631
Reconciliation of exploration assets
Opening Additions Foreign exchange loss Closing balance
Balance US$'000 US$'000 US$'000
US$'000 Disposals
US$'000
Period ended 30 June 2022
Capitalised exploration costs 44,631 194 - (3,626) 41,199
Reconciliation of exploration assets
Opening Additions Foreign exchange loss Closing balance
Balance US$'000 US$'000 US$'000
US$'000 Disposals
US$'000
Year ended 31 December 2021
Capitalised exploration costs 44,348 3,931 (62) (3,586) 44,631
The costs of mineral resources acquired and associated exploration and
evaluation costs are not subject to amortisation until they are included in
the life-of-the-mine plan and production has commenced.
Where assets are dedicated to a mine, the useful lives are subject to the
lesser of the asset category's useful life and the life of the mine, unless
those assets are readily transferable to another productive mine. In
accordance with the requirements of IFRS 6, the Board of Directors assessed
whether there were any indicators of impairment. No indicators were
identified.
9. Share capital
Shares were issued during the period as set out below:
Share capital Share premium Merger reserve
Number of Total
shares US$'000 US$'000 US$'000 US$'000
At 1 January 2021 558,627,558 706 168,212 (20,523) 148,395
Convertible loan - issue of shares 350,944,417 488 25,312 - 25,800
As at 31 December 2021 909,571,975 1,194 193,524 (20,523) 174,195
Share options exercised 6,700,000 9 731 - 740
Shares issued in settlement of guarantee fees 3,971,712 4 307 - 311
Convertible loan - issue of shares 3,474,536 5 195 - 200
At 30 June 2022 923,718,223 1,212 194,757 (20,523) 175,446
The changes to the issued share capital of the Company which occurred between
1 January 2022 and 30 June 2022 were as follows:
Convertible loan facilities
Kropz secured a convertible loan facility of up to US$ 5 million (not
exceeding a maximum of ZAR 85 million) from ARC Fund ("Further Equity
Facility") in February 2021, to be used exclusively for the Hinda Updated FS
and general corporate purposes for Kropz. Quarterly drawdowns under the
Further Equity Facility are at the sole discretion of Kropz. Repayment of the
Further Equity Facility and any interest thereon will be in the form of
immediate conversion into ordinary shares in Kropz and issued to ARC Fund, at
a conversion price of 4.202 pence per ordinary share each quarter, and any US$
amount will be converted to GBP at an agreed rate of US$ 1 = 0.73 GBP.
Ordinary shares to be issued to ARC Fund in terms of the Further Equity
Facility will be a maximum of 86,863,398 ordinary shares.
The fifth and final drawdown on the Further Equity Facility occurred on 10
March 2022 for US$ 200,000 which was settled by way of the issue of 3,474,536
new ordinary shares at the issue price of 4.202 pence per ordinary share to
the ARC Fund.
As announced on 13 May 2020, and pursuant to the terms of the original US$ 40
million equity facility, any fees associated with the bank guarantee provided
by ARC Fund, would be settled by the issue of new ordinary shares to ARC Fund.
The final guarantee fees due to ARC Fund, amounting to US$ 311,733 was
settled by the issue of 3,971,712 new ordinary shares on 10 March 2022.
Share based payment arrangements
Employee Share Option Plan and Long-Term Incentive Plan
The Company operates an ownership-based scheme for executives and senior
employees of the Group. In accordance with the provisions of the plans,
executives and senior employees may be granted options to purchase parcels of
ordinary shares at an exercise price determined by the Board based on a
recommendation by the Remuneration Committee.
The following plans have been adopted by the Company:
· an executive share option plan used to grant awards on Admission
of the Company to AIM and following Admission (the "ESOP Awards") - a
performance and service-related plan pursuant to which nominal-cost options
can be granted; and
· an executive long-term incentive plan (the "LTIP Awards") - a
performance and service-related plan pursuant to which conditional share
awards, nominal-cost options and market value options can be granted,
(together, the ''Incentive Plans'').
An option-holder has no voting or dividend rights in the Company before the
exercise of a share option.
The charge to profit and loss for the period ended 30 June 2022 was
US$ 119,000 (period ended 30 June 2021: US$ 317,000).
As announced on 4 August 2020, 6,700,000 LTIP Awards were awarded to a
Director and senior management. Of this total, 2,350,000 LTIP Awards were
granted to each of Mark Summers and Michelle Lawrence and 1,000,000 to Patrick
Stevenaert. The performance conditions were met and 6,700,000 LTIP Awards
vested on 31 December 2021. Consequently, 6,700,000 ordinary shares were
issued on 24 January 2022, at an exercise price of £0.001 an ordinary share,
in the Company.
10. Key management personnel remuneration
The remuneration for each Director and Key Management Personnel ("KMP") of the
Group during the period was as follows:
Short-Term Benefits Total
US$
Period ended 30 June 2022 Remuneration ((i)) Bonus Options ((ii))
US$ US$ US$
Executive directors
Mark Summers 161,879 - 52,638 214,517
161,879 - 52,638 214,517
Non-executive directors
Lord Robin Renwick 25,946 - - 25,946
Linda Beal 24,269 - - 24,269
Mike Daigle 31,135 - - 31,135
Machiel Reyneke ((iii)) - - - -
Mike Nunn ((iii)) - - - -
81,350 - - 81,350
Total directors' remuneration 243,229 - 52,638 295,867
Executives
Michelle Lawrence 116,474 - 36,510 152,984
Patrick Stevenaert 81,328 - 9,021 90,349
197,802 - 45,531 243,333
Short-Term Benefits
Period ended 30 June 2021 Remuneration((i)) Bonus Options ((ii)) Total
US$ US$ US$ US$
Executive directors
Mark Summers 154,491 - 127,317 281,808
154,491 - 127,317 281,808
Non-executive directors
Lord Robin Renwick 27,759 - - 27,759
Linda Beal 25,965 - - 25,965
Mike Daigle 33,311 - - 33,311
Machiel Reyneke ((iii)) - - - -
Mike Nunn ((iii)) - - - -
87,035 - - 87,035
Total directors' remuneration 241,526 - 127,317 368,843
Executives
Michelle Lawrence 109,585 - 110,062 219,647
Patrick Stevenaert 89,692 - 41,165 130,857
199,277 - 151,227 350,504
(i) Includes UK NIC, UK payroll tax and pension.
(ii) Options as share-based payment arrangements under the ESOP,
LTIP and other schemes are expensed over the vesting period, which includes
the years to which they relate and their subsequent vesting periods.
(iii) Machiel Reyneke and Mike Nunn receive no Director fees.
The following ESOP options, which were issued at the time of admission to AIM
as share-based payment arrangements, were outstanding to KMP at the period
ended 30 June 2022:
Name Expiry Date Exercise Price (pence) Number of Options
Mark Summers 28 November 2028 0.1 3,362,609
Michelle Lawrence 28 November 2028 0.1 1,465,137
4,827,746
The following LTIP options, which were issued on 2 July 2021 as share-based
payment arrangements, were outstanding to KMP at the period ended 30 June
2022:
Name Vesting dates Exercise Price (pence) Number of Options
Mark Summers Various 0.1 2,400,000
Michelle Lawrence Various 0.1 2,400,000
Patrick Stevenaert Various 0.1 900,000
5,700,000
11. Shareholder loans and derivative liability
30 June 31 December
2022 2021
US$'000 US$'000
ARC Fund 16,489 16,196
Convertible debt - ARC Fund 15,583 6,191
Derivative liability 11,711 2,656
43,783 25,043
ARC Fund
The loans are: (i) US$ denominated, but any repayments will be made in ZAR at
the then prevailing ZAR/US$ exchange rate; (ii) carry interest at monthly US
LIBOR plus 3%; and (iii) are repayable by no later than 1 January 2035 (or
such earlier date as agreed between the parties to the shareholder
agreements).
Convertible debt - ARC Fund
On 20 October 2021, the Company entered into a new convertible equity facility
of up to ZAR 200 million ("ZAR 200 Million Equity Facility") with ARC Fund.
The Company made a drawdown of ZAR 90 million of the ZAR 200 Million Equity
Facility on 26 October 2021, ZAR 37 million on 9 December 2021, ZAR40 million
on 25 March 2022 and a further ZAR 33 million on 26 April 2022. The ZAR 200
Million Equity Facility is fully drawn down at the date of this report.
Interest is payable at 14% nominal, compounded monthly. At any time during the
term of the ZAR 200 Million Equity Facility, repayment of the ZAR 200
Million Equity Facility capital amount will, at the election of ARC Fund,
either be in the form of the conversion into ordinary shares of 0.1 pence each
("Ordinary Shares") in the Company and issued to ARC Fund, at a conversion
price of 4.5058 pence per Ordinary Share each, representing the 30-day Volume
Weighted Average Price ("VWAP") on 21 September 2021, and at fixed exchange
rate of GBP 1 = ZAR 20.24, or payable in cash by the Company at the end of the
term of the ZAR 200 Million Equity Facility which is 27 October 2026.
On 11 May 2022, the Company entered into a new convertible equity facility of
up to ZAR 177 million ("ZAR 177 Million Equity Facility") with ARC Fund.
The Company made a drawdown of ZAR 103.5 million of the ZAR 177 Million
Equity Facility on 2 June 2022. Interest is payable at 14% nominal,
compounded monthly. At any time during the term of the ZAR 177 Million Equity
Facility, repayment of the ZAR 177 Million Equity Facility capital amount
will, at the election of ARC Fund, either be in the form of the conversion
into Ordinary Shares in the Company and issued to ARC Fund, at a conversion
price of 9.256 pence per Ordinary Share each, representing the 30-day VWAP on
4 May 2022, and at fixed exchange rate of ZAR 1 = GBP 0.0504, or payable in
cash by the Company at the end of the term of the ZAR 177 Million Equity
Facility which is 2 June 2027. Two further draw downs were made in 2022,
one on 7 July 2022 for ZAR 60 million and ZAR 13.5 million on 9 August
2022. The ZAR 177 Million Equity Facility is fully drawn down at the date of
this report.
Convertible liability
It was determined that the conversion option embedded in the convertible debt
equity facility be accounted for separately as a derivative liability.
Although the amount to be settled is fixed in ZAR, when converted back to
Kropz's functional currency, will result in a variable amount of cash based on
the exchange rate at the date of conversion. The value of the liability
component and the derivative conversion component were determined at the date
of first draw down using a Monte Carlo simulation. The debt host liability was
bifurcated based on the determined value of the option. Subsequently, the
embedded derivative liability is adjusted to reflect fair value at each period
end with changes in fair value recorded in profit and loss (refer to Note 21).
12. Other financial liabilities
30 June 31 December
2022 2021
US$'000 US$'000
BNP Paribas 30,064 30,041
Greenheart Foundation 518 545
Total 30,582 30,586
Non-current financial liabilities 18,814 26,291
Current financial liabilities 11,768 4,295
Total 30,582 30,586
BNP
A US$ 30,000,000 facility was made available by BNP Paribas to Kropz
Elandsfontein in September 2016. Interest was charged at three months US LIBOR
plus 4.5% and was initially repayable quarterly over 2 years. The first
capital repayment was due on 31 March 2018.
The Group was unable to fund the instalment payments on the loan as they fell
due in early 2018 and consequently, under the terms of the facility agreement,
was in default from 1 April 2018. On 20 September 2018 the Group and BNP
Paribas conditionally agreed a waiver of the breach and restructure of the
facility under which the first capital repayment was deferred to 30 September
2020. In addition, BNP Paribas provided the necessary consents required to
facilitate all the contemplated transactions leading up to the admission of
Kropz plc to AIM. The waiver and restructured facility were only contingent on
the admission of Kropz plc's shares to trading on AIM by 30 November 2018,
which did occur on that date. The facility has been fully drawn down.
During January 2020, given the delays in the recommissioning of Elandsfontein,
Kropz Elandsfontein was once again placed into default by BNP Paribas. In May
2020, Kropz Elandsfontein and BNP Paribas agreed to amend and restate the term
loan facility agreement entered into on or about 13 September 2016 (as
amended from time to time). The BNP Paribas facility amendment agreement
extends inter alia the final capital repayment date to Q3 2024, with eight
equal capital repayments to commence in Q4 2022 and an interest rate of 6.5%
plus US LIBOR, up to project completion and 4.5% plus US LIBOR thereafter.
Financial closure occurred on 25 June 2020.
BNP Paribas has an extensive security package over all the assets of Kropz
Elandsfontein and Elandsfontein Land Holdings as well as the share investments
in those respective companies owned by Kropz SA.
13. Finance income
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Interest income 85 289
Foreign exchange gains - 1,258
Total 85 1,547
14. Finance expense
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Shareholder loans 1,215 243
Foreign exchange losses 1,892 44
Bank debt 1,057 1,010
BNP Paribas - Debt modification present value adjustment amortisation (123) (130)
BNP Paribas amendment fee amortisation 108 114
Finance leases 3 -
Other 154 190
Total 4,306 1,471
15. Fair value losses from derivative asset/liability
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Fair value loss from convertible loan facilities 7,637 3,728
Total 7,637 3,728
The Group secured a US$ 40 million convertible loan facility from ARC Fund,
Kropz's major shareholder, in June 2020 for the development of Elandsfontein.
Under the terms of the convertible equity facility, ARC Fund committed to
provide up to a ZAR equivalent of US$ 40 million (up to a maximum of ZAR 680
million) to the Company which will be converted into new ordinary shares. The
cap of ZAR 680 million was put in place as ARC Fund secured this facility
from Rand Merchant Bank in South Africa in order to fulfil its commitments to
the Company. The Company, via Kropz Elandsfontein, received the ZAR equivalent
of the draw down based on the actual exchange rate prevailing at the time of
the drawdown, subject to a maximum exchange rate of ZAR 17 to the US$.
Immediately upon draw down, new ordinary shares in the Company were issued to
ARC Fund at a fixed share price (6.75 pence per share) and fixed GBP / US$
exchange rate (0.86). Drawdowns are at the sole discretion of the Company and
no interest is payable on the drawdown unless equity shares are not issued to
ARC Fund in terms of a drawdown.
Kropz secured a further convertible loan facility of up to US$ 5 million (not
exceeding a maximum of ZAR 85 million) from ARC Fund ("Further Equity
Facility") in February 2021, to be used exclusively for the Hinda Updated FS
and general corporate purposes for Kropz. Repayment of the Further Equity
Facility and any interest thereon will be in the form of immediate conversion
into ordinary shares in Kropz and issued to ARC Fund, at a conversion price of
4.202 pence per ordinary share each quarter, and any US$ amount will be
converted to GBP at an agreed rate of US$ 1 = 0.73 GBP.
At 30 June 2021, US$ 4 million remained undrawn of the Original and Further
Equity Facility which equated to 55,594,902 new ordinary shares to be issued
in the Company pursuant to the terms of the Original Equity Facility and
Further Equity Facility. A Monte-Carlo simulation was applied to simulate
the expected share price at a 60% volatility and the expected share price was
deemed to be 5.70 pence per share. Accordingly, the derivative asset was
revalued for changes in the share price prior to draw down with the resulting
loss for revaluation for the six months ended 30 June 2021 booked to profit
and loss of US$ 3,728,000 and US$ 4,673,000 receivable extinguished through
equity based on the relative draw down percentage of the undrawn facilities at
period end.
On 20 October 2021, the Company entered into a new convertible equity facility
of up to ZAR 200 million ("ZAR 200 Million Equity Facility") and on 11 May
2022 of up to ZAR 177 million ("ZAR 177 Million Equity Facility") with ARC
Fund (refer to Note 11). It was determined that the conversion option
embedded in the convertible debt equity facilities be accounted for separately
as a derivative liability. The embedded derivative liability is adjusted to
reflect fair value at each period end with changes in fair value recorded in
profit and loss (refer to Note 21).
16. Impairment losses
The Elandsfontein mine is currently in the ramp-up phase. The Directors have
therefore carried out a review of impairment indicators. As part of the
impairment indicator assessment, the net present value of the life of mine
plan is considered. The net present value is most sensitive to the following
key estimates and assumptions:
· Phosphate rock prices;
· Phosphate recoveries;
· Foreign exchange rates; and
· Operating costs.
Economical recoverable resources represent management's expectations at the
time of completing the assessment of the carrying value of property, plant,
equipment and mine development. These assessments are based on the resource
statements and exploration and evaluation work undertaken by appropriately
qualified persons. Forecast phosphate prices have been obtained from
independent external experts and forecast South African Rand exchange rates
from commercial banks. Based on the assumptions the recoverable amount of
assets (US$ 100.5 million) is significantly less than its carrying amount
(US$ 145.2 million) and an impairment of US$ 44.7 million is required.
The impairment loss was allocated as follows:
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Property, plant, equipment and mine development assets 44,700 -
Total 44,700 -
Sensitivity Analysis
The following table summarises the potential impact of changes in the key
estimates and assumptions on the quantum of impairment (assessed independently
of each other):
Reversal of / (increase in) impairment
US$ million
Impact if discount rate Increased by 2% (12.3)
Impact if selling prices increased by 10% 44.7
reduced by 10% (63.8)
Impact if production tonnes increased by 10% 44.7
reduced by 10% (57.8)
Impact if foreign exchange rates increased by 10% 44.7
reduced by 10% (59.8)
Impact if operating costs: increased by 10% (54.3)
reduced by 10% 44.7
17. Taxation
Major components of tax charge Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Deferred
Originating and reversing temporary differences - -
Current tax
UK tax in respect of current period - 89
Total - 89
The Group had losses for tax purposes of approximately US$ 78.2 million (31
December 2021: US$ 52.1 million) which, subject to agreement with taxation
authorities, are available to carry forward against future profits. A net
deferred tax asset arising from these losses has not been recognised as steady
state production has not been reached.
18. Earnings per share
The calculations of basic and diluted earnings per share have been based on
the following loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding:
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
Loss attributable to ordinary shareholders (46,794) (6,602)
Weighted average number of ordinary shares in Kropz plc 920,069,356 643,728,660
Basic and diluted loss per share (US cents) (5.09) (1.03)
The diluted loss per share and the basic loss per share are recorded as the
same amount, as the conversion of share options decreases the basic loss per
share, thus being anti-dilutive.
19. Related party transactions
Details of share issues, KMP remuneration and shareholder loans are explained
in Notes 9, 10 and 11. In addition, the following transactions were carried
out with related parties:
Related party balances
Loan accounts - Owed to related parties
30 June 31 December
2022 2021
US$'000 US$'000
ARC Fund 16,489 16,196
Convertible debt - ARC Fund 15,583 6,191
Derivative liability 11,711 2,656
Greenheart Foundation 518 545
Total 44,301 25,588
Related party balances
Interest paid to related parties
Six months ended Six months ended
30 June 30 June
2022 2021
US$'000 US$'000
ARC Fund 1,215 243
Total 1,215 243
20. Seasonality of the Group's business
There are no seasonal factors which materially affect the operations of any
company in the Group.
21. Fair value
The following table compares the carrying amounts and fair values of the
Group's financial assets and financial liabilities as at 30 June 2022.
The Group considers that the carrying amount of the following financial assets
and financial liabilities are a reasonable approximation of their fair value:
· Trade receivables;
· Trade payables;
· Restricted cash; and
· Cash and cash equivalents.
As at 30 June 2022 As at 31 December 2021
Carrying amount Fair Carrying amount Fair
US$'000 value US$'000 value
US$'000 US$'000
Financial Assets
Other financial assets 1,261 1,261 1,357 1,357
Derivative asset - - - -
Total 1,261 1,261 1,357 1,357
Financial Liabilities
Shareholder loans 32,072 32,072 22,387 22,387
Derivative liability 11,711 11,711 2,656 2,656
Other financial liabilities 30,582 30,582 30,586 30,586
Total 74,365 74,365 55,629 55,629
This note provides an update on the judgements and estimates made by the Group
in determining the fair values of the financial instruments.
(i) Financial instruments Measured at Fair Value
The financial instruments recognised at fair value in the Statement of
Financial Position have been analysed and classified using a fair value
hierarchy reflecting the significance of the inputs used in making the
measurements.
(ii) Fair value hierarchy
The fair value hierarchy consists of the following levels
• Quoted prices in active markets for identical assets and
liabilities (Level 1);
• Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (Level 2); and
• Inputs for the asset and liability that are not based on
observable market date (unobservable inputs) (Level 3).
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
30 June 2022
Derivative asset - - - -
31 December 2021
Derivative asset - - - -
Level 1 Level 2 Level 3 Total
US$'000 US$'000 US$'000 US$'000
30 June 2022
Derivative liability - - 11,711 11,711
31 December 2021
Derivative liability - - 2,656 2,656
There were no transfers between levels for recurring fair value measurements
during the year.
(iii) Reconciliation: Level 3 fair value measurement
Six months ended Year
30 June ended
2022 31 December 2021
US$'000 US$'000
Derivative asset
Opening balance - 8,586
Fair value loss recognised in profit and loss - (4,139)
Extinguished on issuance of equity - (4,447)
Closing balance - -
Derivative liability
Opening balance (2,656) -
Fair value at initial recognition (2,320) (2,015)
Fair value loss recognised in profit and loss (7,637) (653)
Foreign exchange 902 12
Closing balance (11,711) (2,656)
(iv) Valuation technique used to determine fair value
Derivative asset:
A Monte-Carlo simulation was applied to simulate the expected share price at a
60% volatility multiplied by the number of shares to be issued pursuant to the
Original and Further Equity Facility compared to the quoted market share
price.
Derivative liability:
A Monte-Carlo simulation was applied to value the option component of the
convertible debt at a 30% volatility in share price, 14% volatility in the
GBP:ZAR exchange rate and risk free rate of 0.76% multiplied by the number of
shares to be issued pursuant to the drawn amounts under the ZAR 200 Million
Equity Facility and ZAR 177 Million Equity Facility.
22. Events after the reporting period
The second drawdown on the ZAR 177 Million Equity Facility of ZAR 60 million
was made on 7 July 2022 and third and final drawdown of ZAR 13.5 million on 9
August 2022.
Further delays in the ramp-up of operations at Elandsfontein has largely been
driven by ore variability in the current mining area, as discussed above.
As announced on 9 August 2022, Kropz, Kropz Elandsfontein and ARC Fund agreed
to a further ZAR 121.5 million (approximately US$ 7.3 million) bridge loan
facility ("Loan 2") to meet immediate cash requirements at Elandsfontein. A
draw down ZAR 60 million (approximately US$ 3.6 million) of Loan 2 was made
on 9 August 2022 and the third and final draw down of ZAR 14.5 million
(approximately US$ 800,000) was made on 29 September 2022.
Loan 2 is unsecured, repayable on demand, and there are no fixed repayment
terms. It is repayable by Elandsfontein on no less than two business days'
notice. Interest is payable on Loan 2 at the South African prime overdraft
interest rate plus 6%, nominal per annum and compounded monthly.
At the date of this report, 10,000 tonnes of phosphate rock concentrate were
in stock at the Saldanha Bay storage facility.
As announced on 30 September 2022, Kropz, Kropz Elandsfontein and ARC Fund
agreed to a further ZAR 126 million (approximately US$ 7 million) bridge
loan facility to meet further cash requirements at Elandsfontein due to
further delays in the ramp-up of operations at Elandsfontein. A further
announcement will be made once contractual agreements have been finalised and
drawdowns made on this further bridge loan.
Company information
Directors
Lord Robin William Renwick of Clifton, Non-executive Chairman
Mark Robert Summers, Chief Executive Officer
Michael (Mike) John Nunn, Non-executive Director
Gerrit Jacobus Duminy, Non-executive Director (appointed 14 September 2022)
Michael (Mike) Albert Daigle, Independent Non-executive Director
Linda Janice Beal, Independent Non-executive Director
Company secretary
Mark Robert Summers
Company number
11143400
Registered address
35 Verulam Road
Hitchin SG5 1QE
Independent auditors
BDO LLP
55 Baker Street
London W1U 7EU
Nominated adviser
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
Broker
H&P Advisory Limited
2 Park Street
Mayfair
London W1K 2HX
Legal advisers as to English Law
Memery Crystal Limited
165 Fleet Street
London EC4A 2DY
Legal advisers as to South African Law
Werksmans Attorneys
The Central, 96 Rivonia Road
Sandton 2196
Johannesburg
South Africa
Bowmans
22 Bree Street
Cape Town 8000
South Africa
Legal advisers as to the laws of Republic of Congo
PricewaterhouseCoopers Tax & Legal
88 Avenue du General de Gaulle
B.P. 1306
Pointe-Noire
Congo
Legal advisers as to the laws of the British Virgin Islands
Harney Westwood & Riegels LP
Craigmuir Chambers
PO Box 71,
Road Town
Tortola VG1110
British Virgin Islands
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Principal bankers
Barclays
One Churchill Place
London E14 5HP
BNP Paribas
11 Crescent Place
Melrose Arch
Johannesburg 2196
South Africa
Financial PR
Tavistock Communications Limited
1 Cornhill
London EC3V 3ND
Market consultant
CRU Consulting
Chancery House
53-64 Chancery Lane
London WC2A 1QS
Company's website: www.kropz.com (http://www.kropz.com)
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