REG - Kropz PLC - Unaudited Results for 12 Months ended 31 Dec 2023
28/03/2024 08:30
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RNS Number : 6768I Kropz PLC 28 March 2024
KROPZ PLC
Registered number 11143400
UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
Contents Page Number
Financial and Operational Highlights 3 - 6
Condensed Consolidated Statement of Financial Position 7
Condensed Consolidated Statement of Comprehensive Income 8
Condensed Consolidated Statement of Changes in Equity 9
Condensed Consolidated Statement of Cash Flows 10
Notes to the Condensed Consolidated Financial Statements 11 - 25
Company Information 26 - 27
Kropz plc ("Kropz", the "Company") and its subsidiaries (the "Group")
Unaudited Results for the Twelve Months ended 31 December 2023
Kropz plc (AIM: KRPZ), an emerging African phosphate developer and producer,
is pleased to announce its unaudited results for the twelve months ended 31
December 2023. On 8 November 2023 the Company announced that it had changed
its accounting reference date from 31 December to 31 March. Accordingly, the
Company is today presenting unaudited interim results for the 12 months to 31
December 2023.
The financial report is available online at the Company's website
www.kropz.com (http://www.kropz.com) .
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Operational highlights
As the Company entered the new financial period it started with the first
trial sales being recorded from the trial production phase. The Group recorded
revenue of US$ 30.2 million for the twelve months ended 31 December 2023.
During the year, the Company faced significant challenges due to unprecedented
rainfall in the Western Cape region in South Africa. The heavy and persistent
rains combined with large volumes of in-pit water resulted in severely wet
mining conditions, posing obstacles to our operations. To address this issue,
the Company has undertaken various measures, with a primary focus on
increasing in-pit drainage to alleviate the waterlogged conditions in our
mining areas and implementing ore stockpiling and blending strategies.
The extent of the ultra-fines (natural slimes) in the ore encountered has also
limited our production throughput. In response, Kropz Elandsfontein (Pty) Ltd
("Elandsfontein") is making strategic investments in new equipment that will
enable the plant to more effectively handle and process the challenging slimes
material. Elandsfontein aims to increase its production throughput by more
than 40% following commissioning of the new equipment. The project is expected
to be fully operational by the end of the second quarter of 2024.
In addition to addressing the wet mining conditions, Kropz Elandsfontein
continues employing separating and stockpiling techniques of the various ore
materials encountered at Elandsfontein. The Company is in process of analysing
and testing the various ore types being stockpiled to identify and refine the
appropriate method of mining and processing to drive efficiencies.
The Elandsfontein mine is still in its trial production phase and further
challenges can be expected as it progresses towards full production.
The Company is glad to report and celebrate one year free of loss of time due
to injury. The Company adheres to strict health and safety standards and
international best practices. The safety of the Company's employees and other
stakeholders remains a key focus point of management. Kropz continues to give
back to local communities through various projects.
Key financial indicators
· Elandsfontein recognised its first trial revenue during the
12-month period under review. In total, Elandsfontein achieved total sales of
US$ 30.2 million for the twelve months ended 31 December 2023 (period ended:
31 December 2022: nil). This was below expectations due to the significant
mining and production challenges faced.
· As the Company is still ramping up to steady-state production, a
gross loss has been recognised in the period of US$ 5.7 million. The loss was
largely due to Elandsfontein having to discount its sales prices as a new
market entrant and to consider lower grades being achieved as part of the
ramp-up process, coupled with higher production costs per tonne. With
Elandsfontein operating below planned production levels operational cost per
tonne remain elevated.
· Property, plant, equipment and exploration assets carrying value
is US$ 112.6 million as at 31 December 2023 (31 December 2022: US$ 111.4
million).
· Cash at 31 December 2023 of US$ 3 million (31 December 2022:
US$ 2.1 million);
· Shareholder loans and derivatives at 31 December 2023 of
US$ 90.5 million (31 December 2022: US$ 55.1 million).
· Trade and other payables at 31 December 2023 of US$ 8.8 million
(31 December 2022: US$ 7.3 million).
· As announced on 14 September 2023, Kropz, Kropz Elandsfontein and
ARC Fund ("ARC") agreed to a further ZAR 250 million (approximately US$ 13.2
million) of bridge loan facility ("Loan 1") to meet immediate cash
requirements at Kropz Elandsfontein. ZAR 250 million has been drawn by 31
December 2023.The loan 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 at the South African prime
overdraft interest rate plus 6%, nominal per annum and compounded monthly. In
the event that any amounts are outstanding under the loan, together with
interest thereon, are not repaid within 6 months from the first utilisation
date, the interest rate will be increased by an additional 2%.
· In December 2023, Kropz Elandsfontein secured a further ZAR 115
million (approximately US$ 6 million) bridge loan facility with ARC ("Loan
2") to meet immediate cash requirements at Kropz Elandsfontein. ZAR 62.5
million has been drawn by 31 December 2023. The loan 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
at the South African prime overdraft interest rate plus 6%, nominal per annum
and compounded monthly. In the event that any amounts are outstanding under
the loan, together with interest thereon, are not repaid within 6 months from
the first utilisation date, the interest rate will be increased by an
additional 2%.
Key corporate and operational developments during the period
Corporate
· As announced on 16 January 2023, Kropz appointed Louis Loubser
to the board of the Company as Chief Executive Officer ("CEO") and executive
director.
· The third drawdown on the ZAR 550 million Equity Facility of
ZAR 60 million (approximately US$ 3.5 million) occurred on 25 January 2023.
· The fourth drawdown on the ZAR 550 million Equity Facility of
ZAR 40 million (approximately US$ 2.2 million) occurred on 27 February 2023.
· The fifth and final draw down on the ZAR 550 million Equity
Facility of ZAR 7.5 million (approximately US$ 0.4 million) occurred on
8 December 2023.
· PKF Littlejohn LLP has been appointed as the group auditors for
the financial period to 31 March 2024.
Elandsfontein
· First bulk shipments and trial sales have been recorded with a
total of 262,703 tonnes of phosphate concentrate sales over the 12 months
ending 31 December 2023 from Elandsfontein. Elandsfontein, however, achieved
lower sales price compared to the prevailing market price. As a new entrant in
the market, in order to gain market share Elandsfontein was required to offer
discounted pricing to market participants. Furthermore, Elandsfontein produced
lower grade phosphate product as part of its ramp-up operations, which also
impacted the sales price. Elandsfontein is aiming to achieve better prices
going forward in the market going forward as both quality and market
reputation improves.
· Sales volumes are below exceptions due to the lack of available
stock on hand. Production has been negatively impacted by unprecedented
seasonal rains during the period under review and continued ore variability.
Hinda
· The Company is still in process of identifying potential
funding solutions for the development of Hinda.
· Engagement is ongoing with local government regarding project
development and progress.
· A reduced-sized project is being assessed to propose a
fit-for-purpose low capex project to prove the concept of producing phosphate
concentrate in the Congo and exporting it.
Key developments post the period end
Corporate
· The Company previously announced that it was in the process of
refinancing the BNP loan facility (outstanding amount at 31 December 2023 US$
11,250,000) and that a replacement loan was expected to be in place in the
first quarter of 2024, before the expiry of the facility. Detailed discussions
continue with potential lenders regarding a potential replacement loan and it
is now expected that a replacement loan will be in place by the end of the
second quarter of 2024. The Company is in discussion with BNP to extend its
waiver period in line with this timetable.
· On 1 January 2024 Kropz Plc, the Company's functional currency
changed from Great British Pounds to United States Dollars.
Elandsfontein
· Kropz had started building its customer base over the 12 months
ending 31 December 2023. The Company's rock phosphate has been qualified at
customers in South Korea, Australia, and Brazil at both single superphosphate
('SSP") and Phosphoric acid producers.
· Since the start of the 2024 Calendar year, Kropz's core
customer base was narrowed down to focus on South Korea, Australia and New
Zealand, where the special properties of Kropz Rock Phosphate (Low Cadmium, -
toxic metals, - moisture, - odour and - CaO levels) are complementary to
country rules dictating the final product properties.
· Shipments and sales of 77,000 tonnes of phosphate concentrate
from Kropz Elandsfontein were recorded in Q1 2024.
· Management expects there to be more than sufficient demand for
Elandsfontein's Rock Phosphate forecast production to the end of 2024. Two
shipments have been planned for qualification trials in both India and Europe
to further diversify the customer base.
· A second drawdown on Loan 2 of ZAR 52.5 million was made on 17
January 2024. The loan has been fully drawn to date.
· In March 2024, Kropz Elandsfontein secured a further ZAR 170
million (approximately US$ 9 million) bridge loan facility with The ARC Fund
("ARC") ("Loan 3") to meet immediate cash requirements at Kropz Elandsfontein.
The loan 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 at the South African prime overdraft interest rate plus
6%, nominal per annum and compounded monthly. In the event that any amounts
are outstanding under the loan, together with interest thereon, are not repaid
within 6 months from the first utilisation date, the interest rate will be
increased by an additional 2%.
· An updated Mineral Resource Estimate ("MRE") is underway and
the results of the updated MRE are expected during the second quarter of 2024.
Hinda
· The reduced sized project continues to be assessed to propose a
fit-for-purpose low capex project to prove the concept of producing phosphate
concentrate in the Congo and exporting it. The update of the project
feasibility is ongoing. Cominco has engaged with two engineering firms and
local contractors.
· The Company continues to invest in and prioritise ongoing
community projects.
For further information visit www.kropz.com (http://www.kropz.com) or contact:
Kropz Plc Via Tavistock
Louis Loubser (CEO) +44 (0) 207 920 3150
Grant Thornton UK LLP Nominated Adviser
Samantha Harrison +44 (0) 20 7383 5100
Harrison Clarke
Ciara Donnelly
Hannam & Partners Broker
Andrew Chubb +44 (0) 20 7907 8500
Ernest Bell
Tavistock Financial PR & IR (UK)
Nick Elwes +44 (0) 207 920 3150
Jos Simson kropz@tavistock.co.uk
R&A Strategic Communications PR (South Africa)
Charmane Russell +27 (0) 11 880 3924
Marion Brower charmane@rasc.co.za
marion@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 INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31
DECEMBER 2023
31 December 31 December
2023 2022
Unaudited Audited
Notes US$'000 US$'000
Non-current assets
Property, plant, equipment and mine development 8 68,483 68,965
Exploration assets 9 44,133 42,415
Other financial assets 1,315 860
113,931 112,240
Current assets
Inventories 7,016 3,273
Trade and other receivables 3,535 1,857
Cash and cash equivalents 3,008 2,120
13,559 7,250
127,490 119,490
TOTAL ASSETS
Current liabilities
Trade and other payables 8,846 7,284
Shareholder loans and derivative 10 72,106 -
Other financial liabilities 11 11,743 26,808
Current taxation 629 597
93,324 34,689
Non-current liabilities
Shareholder loans and derivative 10 18,441 55,102
Provisions 2,343 2,697
20,784 57,799
114,108 92,488
TOTAL LIABILITIES
NET ASSETS 13,382 27,002
Shareholders' equity
Share capital 1,212 1,212
Share premium 194,063 194,063
Merger reserve (20,523) (20,523)
Foreign exchange translation reserve (11,697) (11,195)
Share-based payment reserve 326 271
Accumulated losses (122,435) (116,972)
40,946 46,856
Total equity attributable to the owners of the Company
Non-controlling interests (27,564) (19,854)
13,382 27,002
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
Unaudited Audited
Notes US$'000 US$'000
Revenue 12 30,246
Cost of Sales (35,918) -
Gross loss (5,672) -
Other income 42 116
Selling and distribution expenses (3,963) -
Operating expenses (4,276) (5,808)
Operating loss (13,869) (5,695)
Finance income 13 201 136
Finance expense 14 (15,801) (9,812)
Fair value gain from derivative liability 15 15,942 10,807
Impairment losses 16 - (92,661)
Loss before taxation (13,527) (97,222)
Taxation 17 - (602)
Loss for the period (13,527) (97,824)
Loss attributable to:
Owners of the Company (4,163) (66,639)
Non-controlling interests (9,364) (31,185)
(13,527) (97,824)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
- Exchange differences on translating foreign operations (148) (3,246)
Total comprehensive loss (13,675) (101,070)
Loss attributable to:
Owners of the Company (4,665) (70,027)
Non-controlling interests (9,010) (31,043)
(13,675) (101,070)
Earnings per share attributable to owners of the Company:
Basic and diluted (US cents) 18 (0.45) (7.23)
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED INTERM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
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$'000
Unaudited - twelve months ended 31 December 2023
Balance at 1 January 2023 1,212 194,063 (20,523) (11,195) 271 (116,972) 46,856 (19,854) 27,002
Total comprehensive loss for the period - - - (502) - (4,163) (4,665) (9,010) (13,675)
Share based payment charges - - - - 55 - 55 - 55
Investment in non-redeemable preference shares of Kropz Elandsfontein - - - - - (1,300) (1,300) 1,300 -
Transactions with owners - - - - 55 (1,300) (1,245) 1,300 55
Balance at 31 December 2023 1,212 194,063 (20,523) (11,697) 326 (122,435) 40,946 (27,564) 13,382
Audited - Twelve months ended 31 December 2022
Balance at 1 January 2022 1,194 193,524 (20,523) (7,807) 1,197 (45,626) 121,959 5,778 127,737
Total comprehensive loss for the period - - - (3,388) - (66,639) (70,027) (31,043) (101,070)
18 539 - - - - 557 - 557
Issue of shares
Share options exercised - - - (694) 694 - - -
Share based payment charges - - - - (222) - (222) - (222)
Lapsed warrants (10) 10
Investment in non-redeemable preference shares of Kropz Elandsfontein - - - - - (5,411) (5,411) 5,411 -
Transactions with owners 18 539 - - (926) (4,707) (5,076) 5,411 335
Balance at 31 December 2022 1,212 194,063 (20,523) (11,195) 271 (116,972) 46,856 (19,854) 27,002
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
Unaudited Audited
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (13,527) (97,222)
Adjustments for:
Depreciation of property, plant and equipment 730 821
Amortisation of right-of-use assets - 5
Impairment losses - 92,661
Share-based payment 40 (222)
Interest income (201) (136)
Interest expense 13,474 6,496
Fair value gain from derivative liability (15,942) (10,807)
Debt Modification Present value adjustment (104) (233)
Foreign currency exchange differences 2,431 3,550
Fair value (gain) / loss on game animals (24) 21
Operating cash flows before working capital changes (13,123) (5,066)
Decrease / (Increase) in trade and other receivables (1,349) (471)
Increase in inventories (4,008) (3,453)
Increase / (Decrease) in payables 2,362 (172)
Net cash flows used in operating activities (16,118) (9,162)
Cash flows used in investing activities
Purchase of property, plant and equipment (4,374) (29,215)
Exploration and evaluation expenditure (330) (346)
Other financial asset (511) 427
Interest received 201 136
Transfers from restricted cash - 4,727
Net cash flows used in investing activities (5,014) (24,271)
Cash flows from financing activities
Finance cost paid (2,399) (2,586)
Shareholder loan received 40,609 38,727
Repayment of lease liabilities - (6)
Repayment of Other financial liabilities (15,040) (3,712)
Issue of ordinary share capital - 557
Net cash flows from financing activities 23,170 32,980
2,038 (453)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period 2,120 2,461
Foreign currency exchange (losses) / gains on cash (1,150) 112
Cash and cash equivalents at end of the period 3,008 2,120
The accompanying notes form part of the Condensed Consolidated Financial
Statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 31 DECEMBER 2023
1. General information
Kropz and its subsidiaries (together "the Group") is an emerging plant
nutrient producer with an advanced stage phosphate mining project in South
Africa, Elandsfontein, and a phosphate project in the RoC, Hinda. 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 the AIM rules and in
accordance with the accounting policies of the consolidated financial
statements for the year ended 31 December 2022. 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 2022 annual report. The
statutory financial statements for the year ended 31 December 2022 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").
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.
During the period, the Group changed its accounting reference date to March
and consequently will report again for the 15-month period ending 31 March
2024
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 28 March 2024.
3. Going concern
During the twelve months ended 31 December 2023, the Group incurred a loss of
US$ 16 million (twelve months ended 31 December 2022: US$97.8 million) and
experienced net cash outflows from operating activities. Cash and cash
equivalents totaled US$ 3 million as at 31 December 2023 (31 December 2022:
US$ 2.1 million).
Elandsfontein is currently the Group's only source of operating revenue. As
Elandsfontein is still in process of ramping up production an operating loss
is also expected in the full year 31 March 2024. The Group is consequently
dependent on future fundraisings to meet any production costs, overheads,
future development and exploration requirements and quarterly repayments on
the BNP loan that cannot be met from existing cash resources and sales revenue
in ramp-up phase.
The going concern assessment was performed using the Group's 15-month
forecast. The Group's forecast cash flows are largely driven by Elandsfontein
and are in line with the 31 December 2022 going concern assessment. The
Elandsfontein Life of Mine plan ("LOM" or "mine plan") used for the going
concern assessment only considers resources classified as measured and
indicated, excluding any inferred resources, as per the updated Mineral
Resource Estimate ("MRE") as announced on 10 January 2023. As mining
activities and further drilling work progress, Elandsfontein expects to
reclassify more of the resources from inferred to either measured and
indicated. An updated Mineral Resource Estimate is underway and the results
of the updated Mineral Resource Estimate is expected during the second quarter
of 2024.
Elandsfontein's forecast cashflows were estimated using market-based commodity
prices, exchange rate assumptions, estimated quantities of recoverable
minerals, production levels, operating costs and capital requirements over a
15-month period.
The forecast cashflows include a number of estimates which if the actual
outcome were different could have a significant impact on the financial
outcome of the Elandsfontein mine operations and the Group's funding needs.
The 15-month forecast assumes a refinancing by June 2024 to repay the BNP loan
facility and provide working capital. There is no guarantee that the
refinancing can be raised.
Phosphate rock prices and grade: Forecast phosphate rock prices are based on
management's estimates of quality of production. The forecast selling prices
are derived from forward price curves and long-term views of global supply and
demand in a changing environment, particularly with respect to climate risk,
building on past experience of the industry and consistent with external
sources.
A total of 262,703 tonnes of phosphate concentrate trial sales were achieved
in the 12 months ending 31 December 2023 from Kropz Elandsfontein.
Elandsfontein is a new entrant to the phosphate market and has to date
produced variable grade. As a result, Elandsfontein has sold its shipments at
a discount to prevailing market prices., Elandsfontein has managed to achieve
better prices in the market as quality and market reputation improves and
expects this trend to continue of the forecast period. The cashflow model
assumes a discount to the prevailing market price for 31% P(2)O(5) phosphate
concentrate for the period up to December 2024 largely due to variability in
the grade of Elandsfontein's product being produced during its ramp-up phase
and considering that Elandsfontein is a new market entrant. The mine plan
forecasts market related prices for all shipments from the end of 2024. The
ability to achieve market rates on sales is largely dependent on
Elandsfontein's ability to consistently produce 31% P(2)O(5) concentrate.
Failing this, the Group may continue to suffer a discount to market rates.
Phosphate recoveries: Estimated production volumes are based on detailed LOM
plans of the measured and indicated resource as defined in the MRE and take
into account development plans for the mine agreed by management as part of
the long-term planning process. Production volumes are dependent on a number
of variables, such as: the recoverable quantities; the production profile; the
cost of the development of the infrastructure necessary to extract the
reserves; the production costs; the contractual duration of mining rights; and
the selling price of the commodities extracted.
Estimated production volumes are subject to significant uncertainty given the
ongoing ramp up. The actual trial production volumes achieved in 2023 were
below forecast. The production ramp-up has been delayed largely by the need
to re-engineer parts of the fine flotation circuit proposed by the vendor.
Mining and processing have also been affected by early unpredicted ore
variability, wet mining conditions and lack of operator experience. The
Company is in the process of analyzing the hard bank and other challenging ore
variants within the ore body to identify the appropriate method of mining and
processing to extract phosphate. The Western Cape has experienced
unprecedented rain this season which has led to severely wet mining conditions
during the period under review which has hindered ore delivery to the plant
and concentrate production during the year. This is being addressed by
increased in-pit drainage. Production throughput is also being limited by the
nature and excessive amount of slimes material encountered in the ore deposit.
The Company is investing in new equipment to improve Elandsfontein's ability
to handle the slimes material and aims to increase production throughput by
more than 40% following its commissioning.
Reserves and resources: The LOM plan used for the going concern assessment
only includes the measured and indicated resources as defined in the MRE.
Excluding inferred resources limits the forecast production to only around 4
years. There was a significant reduction in the measured and indicated
resource in the MRE issued in January 2023 as set out in the Strategic report
in the Annual Report for the year ended 31 December 2022. As drilling
operations continue, and confidence improves, Management expects more of the
total resource will be reclassified to measured and indicated.
Exchange rates: Foreign exchange rates are estimated with reference to
external market forecasts. The assumed average long-term US Dollar/ZAR
exchange rate over LOM and for the forecast cashflows is ZAR18.50/USD.
Operating cost: Operating costs are estimated with reference to contractual
and actual current costs adjusted for inflation. Key operating cost
estimates are mine and plant operating costs and transportation and port
costs. The forecast mine and plant costs were based on the contracted rates
with the current mine and plant operators. Production cost per tonne currently
is higher than sales per tonne as full production volumes have not been
reached to date, leading to a gross loss per tonne. The forecast assumes that
as production volumes increase the average cost per tonne of phosphate will
decrease with economies of scale and further efficiency gains.
Transportation costs: Port authorities in South Africa have informed the Group
that it may have to export some of Elandsfontein's shipments through the port
of Cape Town in 2023 and 2024 instead of through the port of Saldanha, which
would lead to a higher transportation cost. The transportation costs in the
cashflows assume that 10% of 2024 shipments will be through Cape Town at the
higher logistic cost. To date, all sales have been exported through the port
of Saldanha Bay. As production is still ramping up and the port access
agreement with Transnet has not yet been formally concluded, the actual
operating costs may be higher than the estimates in the discounted cash flows.
The Group is dependent on future fundraisings to meet any production costs,
overheads, future development and exploration requirements and quarterly
repayments on the BNP loan that cannot be met from existing cash resources and
sales revenue.
The ARC Fund, on various occasions in the past, provided funding to support
the Group's operations. In March 2023, Kropz, Kropz Elandsfontein and the ARC
Fund agreed to further ZAR 285 million (approximately US$ 15.5 million)
bridge loan facilities to meet immediate cash requirements at Kropz
Elandsfontein. In September 2023, Kropz Elandsfontein and the ARC Fund
signed a further ZAR 250 million (approximately US$ 13.2 million) bridge
loan facility to meet immediate cash requirements. In December 2023, Kropz
Elandsfontein and the ARC Fund signed a further ZAR 115 million
(approximately US$ 6 million) bridge loan facility to meet immediate cash
requirements. In March 2024, Kropz Elandsfontein and the ARC Fund signed a
further ZAR 170 million (approximately US$ 9 million) bridge loan facility
to meet immediate cash requirements. Management has confirmed with the ARC
Fund that they have no intention to call any outstanding loans for cash
repayment over the next 12-months.
Management engages frequently with BNP regarding the capital repayment and
refinancing of the BNP debt facility. The Company did not reach project
completion as stipulated in the BNP facility agreement by 31 December 2022.
Considering the delay in achieving sales, the Company also failed to fund the
debt service reserve account as required. BNP have, to date, waived these
requirements, preventing the Company from falling into default of its loan
terms.
At the end of the waiver period, BNP has the contractual right to request the
immediate repayment of the outstanding loan amount of US$ 11,250,000. BNP has
indicated their willingness to extend the waivers from 31 March 2024 to June
2024. Kropz Elandsfontein has made all the capital and interest payments to
BNP as required to the date of this report.
Based on the current cashflow forecast prepared based on the January 2023 MRE
additional funding will be required over the 15-month forecast period.
Given that BNP Paribas is exiting South Africa, the Group was unable to
refinance the existing loan with them. At the date of this report, the
Company is in continued discussions with a number of potential lenders to
provide the required funding to repay the BNP debt facility and provide
working capital. The discussions have extended over several months being a
lengthy process and technical in nature.
Based on the Group's current available reserves, recent operational
performance, forecast production and sales and anticipated new borrowing based
on discussions with a potential lenders, coupled with Management's track
record to successfully raise additional funds as and when required, to meet
its working capital and capital expenditure requirements, the Board have
concluded that they have a reasonable expectation that the Group will continue
in operational existence for the foreseeable future.
For these reasons, the financial statements have been prepared on the going
concern basis, which contemplates the continuity of normal business activities
and the realisation of assets and discharge of liabilities in the normal
course of business.
As there can be no guarantee that the required future funding can be raised in
the necessary timeframe, a material uncertainty exists that may cast
significant doubt on 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.
4. 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 2022, except for
the following amendments and revenue recognition and production start date
which apply for the first time in 2023. However, none of the recent amendments
to IFRS are expected to materially impact the Group as they are either not
relevant to the Group's activities or require accounting which is consistent
with the Group's current accounting policies.
The following new standards and amendments are effective for the period
beginning 1 January 2023:
· Disclosure of Accounting Policies (Amendments to IAS 1
Presentation of Financial Statements and IFRS Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8
Accounting policies, Changes in Accounting Estimates and Errors);
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12 Income Taxes); and
· International Tax Reform - Pillar Two Model Rules (Amendment to
IAS 12 Income Taxes).
5. Revenue recognition
The Group is principally engaged in the business of producing phosphate
concentrate. Revenue from contracts with customers is recognised when control
of the goods or services is transferred to the customer at an amount that
reflects the consideration to which the Group expects to be entitled in
exchange for those goods.
The Group has concluded that it is the principal in its revenue contracts
because it typically controls the goods or services before transferring them
to the customer.
6. Production start date
The Group assesses the stage of each mine under development/construction to
determine when a mine moves into the production phase, this being when the
mine is substantially complete and ready for its intended use. The criteria
used to assess the start date are determined based on the unique nature of the
mine development. The Group considers various relevant criteria to assess when
the production phase is considered to have commenced. At this point, all
related amounts are reclassified from "trial production" to "steady state
production".
Some of the criteria used to identify the production start date include, but
are not limited to:
• The percentage grade (phosphate concentrate) and volume of ore
being mined is sufficiently economic and consistent with the plant design
specifications;
• Ability to produce phosphate in saleable form (within
specifications); and
• Ability to sustain ongoing production of phosphate.
When the mine moves into the steady state production, the capitalisation of
certain mine development costs ceases and costs are either regarded as forming
part of the cost of inventory or expensed, except for the costs that qualify
for capitalisation relating to mining asset additions or improvements, or
mineable reserve development. It is also at this point that
depreciation/amortisation commences. Refer note 8.
7. Segmental 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 revenues and non-current assets by location of assets are detailed
below.
31 December 2023 Non-Current Assets
Revenues US$'000
US$'000
South Africa 30,246 69,571
Republic of Congo - 44,360
30,246 113,931
31 December 2022 Non-Current Assets
Revenues US$'000
US$'000
South Africa - 69,795
Republic of Congo - 42,415
- 112,240
8. Tangible assets - Property, plant, equipment and mine development
31 Dec 31 Dec 31 Dec 31 Dec 2022 31 Dec 31 Dec
2023 2023 2023 2022 2022
Cost Accumulated Carrying value Cost Accumulated Carrying value
depreciation and impairment depreciation and impairment
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and infrastructure
Land 1,319 (795) 524 1,418 (795) 623
Buildings (5,208) 4,0 9,840 (5,597) 4,243
9,548
Capitalised road costs 7,070 (5,763) 1,307 7,600 (5,709) 1,891
Capitalised electrical sub-station costs 3,067 (2,470) 597 3,297 (2,445) 852
Machinery, plant and equipment
Critical spare parts 1,907 (924) 983 1,786 (1,002) 784
Plant and machinery 89,967 (49,322) 40,645 95,061 (53,486) 41,575
Water treatment plant 2,517 (1,207) 1,310 2,333 (1,308) 1,025
Furniture and fittings 52 (41) 11 56 (41) 15
Geological equipment 74 (52) 22 79 (48) 31
Office equipment 28 (28) - 30 (28) 2
Other fixed assets 1 (1) - 1 (1) -
Motor vehicles 90 (72) 18 93 (93) -
Computer equipment 79 (58) 21 79 (45) 34
Mine development 17,985 (9,016) 8,969 17,724 (9,788) 7,936
Stripping activity costs 21,056 (11,514) 9,542 22,257 (12,485) 9,772
Game animals 194 - 194 182 - 182
Total 154,954 (86,471) 68,483 161,836 (92,871) 68,965
Reconciliation of property, plant, equipment and mine development - Period
ended 31 December 2023
Opening Additions Fair value gain Deprecia-tion charge Foreign exchange loss Closing balance
Balance US$'000 US$'000 US$'000 US$'000 US$'000
US$'000
Buildings and infrastructure
Land 623 - - - (99) 524
Buildings 4,243 392 - (29) (266) 4,340
Capitalised road costs 1,891 - - (474) (110) 1,307
Capitalised electrical sub-station costs 852 - - (201) (54) 597
Machinery, plant and equipment
Critical spare parts 784 243 - - (44) 983
Plant and machinery 41,575 1,349 - (3) (2,276) 40,645
Water treatment plant 1,025 345 - - (60) 1,310
Furniture and fittings 15 - - (3) (1) 11
Geological equipment 31 - - (7) (2) 22
Office equipment 2 - - (2) - -
Other fixed assets - - - - - -
Motor vehicles - 19 - (1) - 18
Computer equipment 34 5 - (16) (2) 21
-
Mine development 7,936 1,485 - - (452) 8,969
-
Stripping activity costs 9,772 349 - - (579) 9,542
Game animals 182 - 24 - (12) 194
Total 68,965 4,187 24 (736) (3,957) 68,483
Reconciliation of property, plant, equipment and mine development - Year ended
31 December 2022
Opening Additions Deprecia-tion charge Foreign exchange loss Closing balance
Balance US$'000 Fair value loss Impair- US$'000 US$'000 US$'000
US$'000 US$'000 ment
US$'000
Buildings and infrastructure
Land 1,515 - - (795) - (97) 623
Buildings 10,458 - - (5,747) (33) (435) 4,243
Capitalised road costs 5,143 - - (2,522) (527) (203) 1,891
Capitalised electrical sub-station costs 2,310 - - (1,137) (229) (92) 852
Machinery, plant and equipment
Critical spare parts 1,713 190 - (1,046) - (73) 784
Plant and machinery 86,180 14,911 - (55,775) (1) (3,740) 41,575
Water treatment plant 2,435 56 - (1,366) - (100) 1,025
Furniture and fittings 9 10 - - (4) - 15
Geological equipment 20 18 - - (6) (1) 31
Office equipment 11 - - - (9) - 2
Other fixed assets - - - - - - -
Motor vehicles - - - - - - -
Computer equipment 24 24 - - (12) (2) 34
Mine development 18,938 - - (10,227) - (775) 7,936
Stripping activity costs 6,126 17,178 - (13,035) - (497) 9,772
Game animals 217 - (21) - - (14) 182
Total 135,099 32,387 (21) (91,650) (821) (6,029) 68,965
Kropz Elandsfontein has a fully drawn down project financing facility with BNP
Paribas for US$ 30 million, outstanding balance as at 31 December 2023: $11
250 000 (see Note 11). BNP has an extensive security package over all the
assets of Kropz Elandsfontein and Elandsfontein Land Holdings (Pty) Ltd
("Elandsfontein Land Holdings") as well as the share investments in those
respective companies owned by Kropz SA (Pty) Ltd ("Kropz SA").
9. Intangible assets - exploration and evaluation costs
31 December 31 December
2023 2022
US$'000 US$'000
Capitalised exploration costs
Cost 44,133 42,415
Amortisation - -
Carrying value 44,133 42,415
Reconciliation of exploration assets
Opening Additions Foreign exchange Gain Closing balance
Balance US$'000 US$'000 US$'000
US$'000 Disposals
US$'000
Period ended 31 December 2023
Capitalised exploration costs 42,415 347 - 1,371 44,133
Reconciliation of exploration assets
Opening Additions Foreign exchange loss Closing balance
Balance US$'000 US$'000 US$'000
US$'000 Disposals
US$'000
Year ended 31 December 2022
Capitalised exploration costs 44,631 346 - (2,562) 42,415
The costs of mineral resources acquired and associated exploration and
evaluation costs are not subject to amortisation until they are included in
the life-of-the-mine plan full scale production has commenced.
Where assets are dedicated to a mine, the useful lives are subject to the
lesser of the asset category's useful life and the life of the mine, unless
those assets are readily transferable to another productive mine. In
accordance with the requirements of IFRS 6, the Board of Directors assessed
whether there were any indicators of impairment. No indicators were identified
(refer to Note 16).
10. Shareholder loans and derivative liability
31 December 31 December
2023 2022
US$'000 US$'000
Shareholder loans - ARC Fund 18,441 17,010
Demand Loan facility - ARC Fund 35,106 -
Convertible debt - ARC Fund 26,006 15,055
Derivative liability 10,994 23,037
90,547 55,102
Maturity
Non-current 18,441 55,102
Current 72,106 -
Total 90,547 55,102
Shareholder loans - ARC Fund
The loans are: (i) US$ denominated, but any repayments will be made in ZAR at
the then prevailing ZAR/US$ exchange rate; (ii) carry interest at monthly
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).
Demand Loan facility - ARC Fund
The loans are unsecured, repayable on demand, and interest accruing at SA
prime overdraft rate plus 6%, if not repaid within 6 months from first
utilisation date rate increases by 2%. ARC have no intention to call any
outstanding loans over the next 12 months for cash repayment.
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, the
Company's major shareholder. 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, 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, 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 ("Conversion"), 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. The ZAR 200 Million Equity Facility is fully drawn
at the date of this report.
As announced on 11 May 2022, the Company entered into a new conditional
convertible equity facility of up to ZAR 177 million ("ZAR 177 Million Equity
Facility") with ARC. 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, either be in the form of the conversion into Ordinary Shares in the
Company and issued to ARC, at a conversion price of 9.256 pence per Ordinary
Share each, representing the 30-day Volume Weighted Average Price ("VWAP") on
4 May 2022, and at fixed exchange rate of ZAR 1 = GBP 0.0504 ("Conversion"),
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. The ZAR 177 Million Equity
Facility is fully drawn at the date of this report.
As announced on 14 November 2022, the Company entered into a new conditional
convertible equity facility of up to ZAR 550 million ("ZAR 550 Million Equity
Facility") with ARC. Interest is payable at the South African prime overdraft
interest rate plus 6%, nominal per annum and compounded monthly. At any time
during the term of the ZAR 550 Million Equity Facility, repayment of the
ZAR 550 Million Equity Facility capital amount will, at the election of ARC,
either be in the form of the conversion into Ordinary Shares in the Company
and issued to ARC, at a conversion price of 4.579 pence per Ordinary Share
each, representing the 30-day Volume Weighted Average Price ("VWAP") on 21
October 2022 and at fixed exchange rate of ZAR 1 = GBP 0.048824
("Conversion"), or payable in cash by the Company at the end of the term of
the ZAR 550 Million Equity Facility which is 30 November 2027. The Company
drew down a further ZAR 107.5 million during the 12-month period and is fully
drawn as at 31 December 2023.
Derivative 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 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).
Fair value of shareholder loans
The carrying value of the loans approximates their fair value.
11. Other financial liabilities
31 December 31 December
2023 2022
US$'000 US$'000
BNP Paribas ("BNP") 11,269 26,298
Greenheart Foundation 474 510
Total 11,743 26,808
BNP
A US$ 30,000,000 facility was made available by BNP Paribas to Kropz
Elandsfontein in September 2016.
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 LIBOR, up to project completion and 4.5% plus LIBOR thereafter.
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.
The BNP loan is subject to covenant clauses. Kropz Elandsfontein did not reach
project completion as stipulated in the agreement to be 31 December 2022 and
failed to fund the Debt Service Reserve Account, however BNP Paribas has
provided, a waiver to 31 March 2024. The outstanding balance is therefore
presented as a current liability.
Greenheart Foundation
A loan has been made to the Group by Greenheart Foundation which is
interest-free and repayable on demand. Louis Loubser, a Director of Kropz plc,
is a Director of Greenheart Foundation.
Fair value of other financial liabilities
The carrying value of the loans approximate their fair value.
12. Revenue
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Sales to region/country
South Africa 1,840 -
Australia 5,414 -
Brazil 4,869 -
New Zealand 1,942 -
South Korea 16,181 -
30,246 -
Timing of transfer of Goods
Delivery to port of departure 30,246 -
30,246 -
All 2023 revenue from phosphate is trial revenue. All 2023 revenue from
phosphate is recognised at a point in time when control transfers.
13. Finance income
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Interest income 201 136
Total 201 136
14. Finance expense
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Shareholder loans 10,862 3,407
Foreign exchange losses 2,431 3,550
Bank debt 2,380 2,576
BNP Paribas - Debt modification present value adjustment amortisation (207) (233)
BNP Paribas amendment fee amortisation 181 205
Other 154 307
Total 15,801 9,812
15. Fair value gain / (loss) from derivative liability
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Fair value gain from derivative liability 15,942 10,807
Total 15,942 10,807
The Company has entered into three convertible equity facilities with the ARC
Fund. On 20 October 2021, the Company entered into the first a convertible
equity facility of up to ZAR 200 million ("ZAR 200 Million Equity Facility").
The second convertible equity facility was entered into on 11 May 2022 of up
to ZAR 177 million ("ZAR 177 Million Equity Facility"). On 14 November 2022,
the Company entered into its third conditional convertible equity facility of
up to ZAR 550 million ("ZAR 550 Million Equity Facility.") (refer to Note
10).
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 was determined at the date
of 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).
16. Impairment losses
The following impairment loss was recognised in the twelve-month period ended
31 December 2023:
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Property, plant, equipment and mine development assets - 91,650
Inventory 1,011
Total - 92,661
An impairment assessment was performed and it was determined that there were
no indicators of impairment or indicators of reversal of impairment in the
period and therefore no adjustment to the impairment provision for the period
to 31 December 2023 is required. The impairment loss for the period to 31
December 2022 was recognised in relation to the Elandsfontein mine. The
triggers for the impairment test were primarily related to the hard bank that
was encountered in the pit, which necessitated further drilling and the effect
of changes to the mine plan resulting from the updated MRE and downgrading of
the measured and indicated resource. An updated Mineral Resource Estimate is
underway and the results of the update are expected during the second quarter
of 2024. More detail was provided in Note 25 of the 2022 Annual Report.
17. Taxation
Major components of tax charge Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Deferred
Originating and reversing temporary differences - -
Current tax
UK tax in respect of the current period - (602)
Total - (602)
The Group had losses for tax purposes of approximately US$ 70.9 million (31
December 2022: US$ 57.5 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 and therefore the reversal of any
potential deferred tax asset remains uncertain.
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:
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
Profit / (Loss) attributable to ordinary shareholders (4,163) (66,639)
Weighted average number of ordinary shares in Kropz plc 926,718,223 921,908,785
Basic and diluted profit / (loss) per share (US cents) (0.45) (7.23)
19. Related party transactions
Details of share issues and shareholder and related party loans are explained
in Notes 10 and 11. In addition, the following transactions were carried out
with related parties:
Related party balances
Loan accounts - Owed to related parties
31 December 31 December
2023 2022
US$'000 US$'000
Shareholder loans - ARC Fund 18,441 17,010
Demand Loan facility - ARC Fund 35,106 -
Convertible debt - ARC Fund 26,006 15,055
Derivative liability 10,994 23,037
Greenheart Foundation 474 510
Total 91,021 55,612
Related party balances
Interest accrued to related parties
Twelve months ended Twelve months ended
31 December 31 December
2023 2022
US$'000 US$'000
ARC Fund 10,862 3,407
Total 10,862 3,407
20. Seasonality of the Group's business
With the unexpected record rainfall experienced in the Western Cape the mining
plan was amended to consider higher rainfall in winter periods to minimise the
effects of wet mining conditions. There are no other 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 31 December 2023.
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 31 December 2023 As at 31 December 2022
Carrying amount Fair Carrying amount Fair
US$'000 value US$'000 value
US$'000 US$'000
Financial Assets
Other financial assets 1,315 1,315 860 860
Total 1,315 1,315 860 860
Financial Liabilities
Shareholder loans 79,553 79,553 32,065 32,065
Derivative liability 10,994 10,994 23,037 23,037
Other financial liabilities 11,743 11,753 26,808 26,808
Total 102,290 102,290 81,910 81,910
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
31 December 2023
Derivative liability - - 10,994 10,994
31 December 2022
Derivative liability - - 23,037 23,037
There were no transfers between levels for recurring fair value measurements
during the year.
(iii) Reconciliation: Level 3 fair value measurement
Twelve months ended Year ended
31 December 31 December
2023 2022
US$'000 US$'000
Derivative liability
Opening balance (23,037) (2,656)
Fair value at initial recognition (3,089) (31,852)
Fair value gain recognised in profit and loss 15,942 10,807
Foreign exchange (810) 664
Closing balance (10,994) (23,037)
(iv) Valuation technique used to determine fair value
Derivative liability:
The fair value is calculated with reference to market rates using industry
valuation techniques and appropriate models from a third-party provider. The
Monte-Carlo model utilised includes a high level of complexity and the main
inputs are share price volatility, risk margin, foreign exchange volatility
and UK risk-free rate. A number of factors are considered in determining these
inputs, including assessing historical experience but also considering future
expectations. The determined fair value of the option is multiplied by the
number of shares available for issue pursuant to the ZAR 200 Million Equity
Facility, ZAR 177 Million Equity Facility and the ZAR 550 Million Equity
Facility (refer to Note 10).
Valuation results (as at 31 December 2023)
Total loan amount Value per Number of Total Value
Facility (ZAR) share (p) Shares (GBP)
ZAR200m facility 200,000,000 1.18 219,272,938 1,627,431
ZAR177m facility 177,000,000 0.65 96,378,566 496,895
ZAR550m facility 550,000,000 1.51 586,442,455 6,510.899
Total 902,093,959 8,635,225
Sensitivity Valuation results (as at 31 December 2023) - Volatility
Total Value
(GBP) - 75% Total Value
historical (GBP) - 50%
Base volatility volatility historical
Facility assumption (66%) volatility (44%)
ZAR200m facility 87% 729,265 151,877
ZAR177m facility 87% 150,519 11,482
ZAR550m facility 87% 2,982,464 724,776
Total 3,861,249 888,134
Sensitivity Valuation results (as at 31 December 2023) - Risk Margin
Total Value Total Value
Base risk margin (GBP) - 7% (GBP) - 3%
Facility assumption risk margin risk margin
ZAR200m facility 5% 1,632,349 1,622,282
ZAR177m facility 5% 498,586 495,113
ZAR550m facility 5% 6,538,094 6,482205
Total 8,669,029 8,599,600
Sensitivity Valuation results (as at 31 December 2023) - FX volatility
Total Value Total Value
(GBP) - 20% (GBP) - 10%
Facility Base FX volatility FX volatility FX volatility
ZAR200m facility 14% 1,481,814 1,722,048
ZAR177m facility 14% 432,128 540,193
ZAR550m facility 14% 5,983,992 6,851,592
Total 7,897,934 9,113,833
Sensitivity Valuation results (as at 31 December 2023) - UK risk-free rate
Total Value Total Value
(GBP) - UK rf (GBP) - UK rf
Facility Base UK risk-free rate + 2% -2%
ZAR200m facility 3.9% 1,544,596 1,714,784
ZAR177m facility 3.9% 466,130 529,665
zAR550m facility 3.9% 6,082315 6,970,764
Total 8,093,041 9,215,213
22. Events after the reporting period
Further shipments and sales of 33,000 tonnes of phosphate concentrate from
Kropz Elandsfontein were recorded in January 2024, 8,000 tonnes in February
2024 and a further 36,000 tonnes in March 2024.
The second and final drawdown on the ZAR 115 million bridging facility of ZAR
52.50 million was made on 17 January 2024.
As announced on 27 March 2024, Kropz, Kropz Elandsfontein and ARC Fund agreed
to further ZAR 170 million (approximately US$ 9 million) bridge loan
facilities ("Loan 4") to meet immediate cash requirements at Kropz
Elandsfontein. The loan 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 the Loan at the South African
prime overdraft interest rate plus 6%, nominal per annum and compounded
monthly. In the event that any amounts outstanding under the Loan, together
with interest thereon, is not repaid within 6 months from the first
utilisation date, the interest rate will be increased by an additional 2%.
Company information
Directors
Lord Robin William Renwick of Clifton, Non-executive Chairman
Louis Ronald Loubser, Chief Executive Officer
Michael (Mike) John Nunn, Non-executive Director
Gerrit Jacobus Duminy, Non-executive Director
Michael (Mike) Albert Daigle, Independent Non-executive Director
Linda Janice Beal, Independent Non-executive Director
Company secretary
Fusion Corporate Secretarial Service (Pty) Ltd
Company number
11143400
Registered address
35 Verulam Road
Hitchin
SG5 1QE
Independent auditors
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
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
ABSA
7th Floor, Absa Towers West
15 Troye Street
Johannesburg
2001
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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. END MSCPPUUGWUPCURRRecent news on Kropz
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