REG - Red Rock Resources - Annual Financial Report 2018
RNS Number : 3770IRed Rock Resources plc23 November 2018Red Rock Resources plc
("Red Rock" or the "Company")
Final Audited Results for the Year Ended 30 June 2018
23 November 2018
A copy of the Company's annual report and financial statements for 2018 - extracts from which are set out below - will be made available on the Company's website www.rrrplc.com shortly and at the Annual General Meeting to be held on 19 December 2018.
Chairman's Review
Dear Shareholders,
It's been another exciting year for Red Rock, we are well positioned through diverse and varied sources of capital and have set the foundation for growth in 2019 and beyond.
Overview and KPIs
Let us start with our Key Performance Indicators for 2018. We broadly defined these as:
• A Jupiter Mines Ltd liquidity event involving a disposal of shares
• Additional Jupiter dividends
• Steelmin first ferrosilicon production
• Repayment to us of the Steelmin Note
• Resolution of the license litigation in Kenya, and
• Achieving a valuation on Red Rock that reflected our underlying asset value.
Of these, the first four were achieved, the fifth looks as if it may be accomplished, and the sixth has not been achieved at all.
Manganese producer Jupiter Mines was listed on the Australian Stock Exchange on 18th April 2018. We disposed of shares to raise liquidity as we had said we would, but given the low valuation at listing and the expected high running yield of Jupiter, we retained the bulk of our holding, as we did not see how if we sold more we could reinvest the money better than in an operation like Jupiter itself.
That continues to be our view. Despite a pre-listing buyback and a 5c interim dividend this year, our 18,524,914 shares in Jupiter at AUD 0.29, down from a listing price of AUD 0.40, remain in our portfolio at a lowly valuation of AUD 5,372,225 despite undimmed prospects and world-class execution.
It may be said that as a KPI further Jupiter dividends were an easy target for management to achieve, but the decision to continue holding Jupiter through the down market in commodities up to 2016, rather than to use them for needed liquidity at that time, and to continue holding them since as the market recovered, was a hard and often criticised one. Only now can we declare it vindicated as we find Jupiter's dividend stream more than covering the overhead costs of our business.
Steelmin began production, after repaying in full our loan, and our 22% therefore has some apparent value. The plant is currently closed: it needs some adjustments to achieve its potential and the sharp rise in electricity prices just as it came on stream means that a pause for negotiation of a longer-term tariff will be beneficial.
We settled the litigation with the Government in Kenya, and expect restoration of our licenses, but the process is not yet complete.
Our valuation in the market, like that of Jupiter, has in our view gone from anomalous to extremely anomalous. The market has despite our efforts failed to reflect our continuing success and the fact that we have executed on nearly all fronts. Our price stands at 0.60 pence and when we wrote this report last year it stood at 0.65 pence. The fact that the companies in our sector with which we compare ourselves have done worse is no comfort; this was to be the year in which we differentiated ourselves by showing that we were income generative and cash flow positive and so beginning to be self-sustaining. It was to be the year in which our entrepreneurial skills and strong base allowed us to seize opportunities in the recovering market and so gain a wider recognition.
The record is not therefore one of unalloyed success. Nor did every activity perform in line with our hopes. Of our other objectives, we achieved the repayment of our promissory note in relation to our Colombian gold asset, partly in cash and partly in securities, but the build up in the royalty stream we expected to impact our profits was delayed and only now begins at the levels we had expected. Our due diligence on promising copper and cobalt assets in the Democratic Republic of Congo has taken more than a year, reflecting the caution with which we enter a new market. We have not prioritised our activities in Ivory Coast or Benin, and a small oil investment in Louisiana proved disappointing.
Financial Results
The combined impact of unwinding our back to back loan to Steelmin at a profit, distributions from Jupiter, and the Colombia promissory note repayment, has created a much stronger and more liquid balance sheet.
Our last share placings were in April 2016 and August 2016, when we raised £407,500 at 0.42p and £300,000 at 0.4p respectively to give us the ammunition to advance as we came out of a five year down market. Since then, we have raised £125,000 at 0.8p and a £1m Loan Stock convertible also at 0.8p late last year, when the liquidity event at Jupiter was delayed beyond the expected timetable. As the price has not reached a level where this Loan Stock will be converted we have chosen to extend the bulk of this for another year so as to preserve our liquidity and flexibility.
During the financial period to 30 June 2018 our main priority has once again remained to obtain or develop cash flow producing assets, to give us greater resilience and less dependence on funding from financial markets. We also wanted to keep our burn rate down to minimise dependence on external financing. We wrote last year of our belief that as a result of prior years' actions we were well positioned to gain from the recovery as long as we kept a steady course, and that remained true this year. Once again, our willingness to consider bold new initiatives was restrained by our need to avoid funding at a price below our true value, since few acquisition assets are likely to come with less risk or with a greater discount to true value than we believe is the case with our existing assets.
The financial results for the year ended 30 June 2018 show a slight reduction in Total Equity from £12,182,743 at 30 June 2017 to £11,446,269. Although fewer impairments were taken in the latest year than the previous one, the year to 30 June 2017 had seen the reversal of previous impairments of £4,368,005 at Jupiter, resulting in a substantial increase in Total Equity. In the year to 30 June 2018 there was no comparable number. Although a conservative view has been taken on the Kenyan assets and the past impairments taken on them, we hope that the current year will see a full restoration of our licenses which will potentially enable us to reverse a substantial part if not the whole of these.
Current Assets and Current Liabilities both declined as a result of the unwinding of the back to back loan taken and passed on to Steelmin, and Net Current Assets continued to improve. The underlying picture is also shown in the swing from receivables to cash in Current Assets, and from debt owed to financial institutions to debt in the form of convertible loan notes issued by the Company in Current Liabilities.
The Company's financial position has once more improved substantially over the course of the year.
We are glad to report that after a consolidated Loss after tax in the prior year of £1,114,213, in the year to 30 June 2018 the Company made a consolidated Profit after tax for the year of £78,120. The main factors in this are profit on sale of Jupiter shares and reduction in provisions. We look forward to further improvements in these figures next year.
Administration costs have remained significant, increasing by £204,830 to £849,518 in the year to 30 June 2018. This included increases in legal and travel costs, which increased as we were more active in overseas transactions and continued to conduct litigation to protect our rights in Kenya, and so are in large part costs directly tied to specific projects. Office and general costs reflected one-off costs in office relocation and in changing accountants. A substantial part of our costs, £288,016 in the year just ended, are professional and regulatory fees. We expect over time to lay off, charge on, or share part of our existing overhead, and remain focussed on controlling these expenditures.
Current Financial Year
We have settled our judicial review case in Kenya, to protect our interest in the Migori gold asset and its 1.2m oz gold Resource, as well as in the old Macalder gold and copper tailings where we had already submitted a feasibility study and applied for a mining license. We look forward to the early restoration of our licenses.
We have now increased our beneficial interest in the Kenya licenses to 100%, and following their restoration we expect to form co-operations with other parties who can complement our strengths and drive towards production. As always, we try to limit our direct financial exposure and favour joint operations where appropriate. We would like to think we are also always focussed, as here, with laser-like intensity on the possibilities of early production.
We believe all our assets should be producing assets, which over time has developed as a key differentiator between ourselves and other AIM-listed stocks. This is our particular model, that we think is a sound one.
Our investigation into our joint venture opportunity in the Congo has taken a long time to complete. The agreement signed last year to enter into copper and gold development with a view to early production is one we would like to pursue. The DRC produces more than half the world's cobalt, a material for which demand is rapidly increasing for use in battery cathodes, and the fundamental supply and demand factors for copper also appear positive in the short and long term. The Congo is the prime location for high grade deposits of both metals, and our neighbours in our targeted areas would be blue chip companies such as Glencore, China Railways and China Hydro, Jinchuan, and Gécamines.
We will look to either sell or advance our position in Steelmin, as opportunity presents.
We expect continued advance at our gold interests in Colombia, leading to higher royalties and a better price at Para Resources where we hold stock.
With the manganese price remaining at or above $6 per DMTU (dry metric ton unit), we expect continuing strong performance at Jupiter, whose policy is to pay out 70% or more of receipts as dividends to its shareholders.
Forward Prospects
We look forward to an increasing gold income stream from royalties supplementing our flow of manganese-derived dividends from Jupiter, and hope for profits or capital gains from our ferroalloys business at Steelmin.
Our key opportunities for growth and expansion in the near future we expect to be in our Kenyan and Congolese activities. We shall therefore concentrate on the maximisation, by transactions, exploration, or development planning, of the value of these assets to our shareholders and our share price. In doing so we hope to add profits from copper and cobalt to our revenue mix.
We shall renew and refresh our marketing, public relations, and social media as part of a process of shareholder engagement and regular market updating. As the market recovers, we expect those companies that communicate better to perform better. We shall as last year state the objective clearly: we want to unlock the discount between the true value we perceive in our stock and the market price, in the interest of all our shareholders and to enable the faster development of the Company.
As we raise our revenues and profitability, we shall turn our focus on to how we may best return some of that that value to shareholders. Our next target will be to obtain a level of stable revenue that will permit either share buybacks or a sustainable dividend. If we can achieve that in the course of the next 12 months, we will consider that the Company has made another great step towards maturity: we add this therefore to our Key Performance Indicators for this year and the next.
Andrew Bell
Chairman and CEO
22 November 2018
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
For further information, please contact:
Andrew Bell 0207 747 9990 Chairman Red Rock Resources Plc
Scott Kaintz 0207 747 9990 Director Red Rock Resources Plc
Roland Cornish/ Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0207 374 2212 Broker First Equity Limited
Consolidated Statement of Financial Position
as at 30 June 2018
Notes
30 June
2018
£
30 June
2017
£
Assets
Non-current assets
Property, plant and equipment
10
-
15,600
Investments in associates and joint ventures
12
1,000,374
963,080
Exploration assets
13
-
280,460
Available for sale financial assets
14
4,705,386
6,080,146
Non-current receivables
17
4,901,196
4,543,755
Total non-current assets
10,606,956
11,883,041
Current assets
Cash and cash equivalents
16
2,265,636
909,094
Financial asset - investment in derivatives
15
60,345
-
Other receivables
18
935,407
4,202,880
Total current assets
3,261,388
5,111,974
Total assets
13,868,344
16,995,015
Equity and liabilities
Equity attributable to owners of the Parent
Called up share capital
20
2,766,857
2,760,859
Share premium account
26,016,000
25,604,575
Other reserves
3,392,060
4,855,993
Retained earnings
(20,941,477)
(21,022,232)
Total equity attributable to owners of the Parent
11,233,440
12,199,195
Non-controlling interest
(19,088)
(16,453)
Total equity
11,214,352
12,182,742
Liabilities
Current liabilities
Trade and other payables
19
1,645,167
1,553,665
Short-term borrowings
19
1,008,825
3,258,608
Total current liabilities
2,653,992
4,812,273
Total equity and liabilities
13,868,344
16,995,015
These financial statements were approved by the Board of Directors and authorised for issue on 22 November 2018 and are signed on its behalf by:
Andrew Bell
Chairman and CEO
The accompanying notes form an integral part of these financial statements.
Consolidated Income Statement
for the year ended 30 June 2018
Year to
Year to
Notes
30 June
2018
£
30 June
2017
£
Gain/(loss) on sales of investments
14
1,200,050
90,200
Impairment of investment in associates and joint ventures
12
-
(1,496,550)
Exploration expenses
(14,218)
(42,190)
Impairment of exploration asset
(280,460)
-
Administrative expenses
4
(849,518)
(644,688)
Business development
(82,413)
-
Other project costs
(306,666)
-
Share of losses of associates
12
(23)
(8)
Impairment of loans and receivables
(217,226)
(140,178)
Other income
10,007
-
Other currency gain
61,918
122,481
Finance income, net
5
556,669
996,720
Profit/(loss) for the year before taxation from continuing operations
78,120
(1,114,213)
Tax
6
-
-
Profit/(loss) for the year from continuing operations
78,120
(1,114,213)
Profit/(loss) for the year
78,120
(1,114,213)
Profit/(loss) for the year attributable to:
Equity holders of the Parent
80,755
(1,111,496)
Non-controlling interest
(2,635)
(2,717)
78,120
(1,114,213)
Profit/(loss) per share attributable to owners of the Parent:
Basic loss per share
- Profit/(loss) from continuing operations
0.02 pence
(0.24) pence
Total
9
0.02 pence
(0.24) pence
Diluted
- Profit/(loss) from continuing operations
0.02 pence
(0.24) pence
Total
9
0.02 pence
(0.24) pence
The accompanying notes form an integral part of these financial statements.
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2018
Notes
30 June
2018
£
30 June
2017
£
Profit/(loss) for the year
78,120
(1,114,213)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Decrease in AFS reserve in relation to disposals
(1,346,648)
-
(Deficit)/surplus on revaluation of available for sale investments
14
(62,282)
4,217,753
Unrealised foreign currency (loss)/gain arising upon retranslation of foreign operations
(58,332)
17,095
Total other comprehensive (expense)/income net of tax for the year
(1,467,262)
4,234,848
Total comprehensive (expense)/income net of tax for the year
(1,389,142)
3,120,635
Total comprehensive (expense)/income net of tax attributable to:
Owners of the Parent
(1,386,507)
3,123,352
Non-controlling interest
(2,635)
(2,717)
(1,389,142)
3,120,635
The accompanying notes form an integral part of these financial statements.
Consolidated Statement of Changes in Equity
for the year ended 30 June 2018
The movements in equity during the period were as follows:
Share capital
Share
premium account
Retained earnings
Other reserves
Total attributable
to owners of the Parent
Non-controlling
interest
Total equity
£
£
£
£
£
£
£
As at 30 June 2016
2,752,488
25,275,788
(19,910,736)
523,431
8,640,971
(13,736)
8,627,235
Changes in equity for 2017
Loss for the year
-
-
(1,111,496)
-
(1,111,496)
(2,717)
(1,114,213)
Other comprehensive income for the year
-
-
4,234,848
4,234,848
-
4,234,848
Transactions with owners
Issue of shares
7,500
292,500
-
-
300,000
-
300,0000
Share issue costs
-
(15,000)
-
-
(15,000)
-
(15,000)
Share issue in relation to SIP
871
51,401
-
-
52,272
-
52,272
Share-based payment transfer
-
-
-
97,600
97,600
-
97,600
Total transactions with owners
8,371
328,901
-
97,600
434,872
-
434,872
As at 30 June 2017
2,760,859
25,604,689
(21,022,232)
4,855,879
12,199,195
(16,453)
12,182,742
Changes in equity for 2018
Profit for the year
-
-
80,755
-
80,755
(2,635)
78,120
Other comprehensive income for the year
-
-
-
(1,467,261)
(1,467,261)
-
(1,467,261)
Transactions with owners
Issue of shares
5,355
377,614
-
-
382,969
-
382,969
Share issue costs
-
(5,000)
-
-
(5,000)
-
(5,000)
Share issue in relation to SIP
643
38,697
-
-
39,340
-
39,340
Share-based payment transfer
-
-
-
3,442
3,442
-
3,442
Total transactions with owners
5,998
411,311
-
3,442
420,751
-
420,751
As at 30 June 2018
2,766,857
26,016,000
(20,941,477)
3,392,060
11,233,440
(19,088)
11,214,352
Available for sale
Foreign
trade investments
reserve
£
currency translation reserve
£
Share-based
payment reserve
£
Total other reserves
£
As at 30 June 2016
299,096
161,065
63,270
523,535
Changes in equity for 2017
Other comprehensive income for the year
4,217,753
17,095
-
4,234,848
Transactions with owners
Share-based payment transfer
-
-
97,600
97,600
Total transactions with owners
-
-
97,600
97,600
As at 30 June 2017
4,516,849
178,160
160,870
4,855,983
Changes in equity for 2018
Other comprehensive income for the year
Decrease in AFS reserve in relation to disposals
(1,346,647)
-
-
(1,346,647)
Change in reserve related to revaluation
(62,282)
-
-
(62,282)
Unrealised foreign currency gains on translation of foreign operations
-
(58,332)
-
(58,332)
Total other comprehensive income for the year
(1,408,929)
(58,332)
-
(1,467,261)
Transactions with owners
Share-based payment transfer
-
-
3,442
3,442
Total transactions with owners
-
-
3,442
3,442
As at 30 June 2018
3,107,920
119,828
164,312
3,392,060
See note 21 for a description of each reserve included above.
Consolidated Statement of Cash Flows
for the year ended 30 June 2018
Year to
Year to
Notes
30 June
2018
£
30 June
2017
£
Cash flows from operating activities
Profit/(loss) before tax from continuing operations
78,210
(1,114,213)
Profit/(loss) before tax
78,120
(1,114,213)
Decrease in receivables
95,296
29,124
Increase/(decrease) in payables
209,797
(300,338)
Share of losses in associates
23
8
Interest receivable and finance income, including income from MFP
(852,886)
(620,053)
Dividend income
5
(234,830)
(387,755)
Interest expense
531,046
11,088
Share-based payments
35,669
142,732
Foreign exchange gain/loss
(61,918)
(122,480)
Impairment of associates and joint ventures
-
1,496,550
Gain on sale of available for sale investments
(1,200,050)
(90,200)
Impairment of loans and receivables
217,226
140,178
Depreciation
15,600
1,800
Impairment of exploration properties
280,460
-
Net cash outflow from operations
(886,447)
(813,559)
Corporation tax reclaimed/(paid)
-
-
Net cash used in operations
(886,447)
(813,559)
Cash flows from investing activities
Interest received
315,194
-
Proceeds on sale of available for sale investments
1,399,601
301,644
Dividends received
234,830
387,755
Loans granted
(892,722)
(2,427,378)
Loans re-paid by the borrower
3,513,843
-
Payments to acquire available for sale investments
-
(96,435)
Payments to increase interest in the assets of an associate
12
(37,317)
-
Net cash inflow from investing activities
4,533,429
(1,834,414)
Cash flows from financing activities
Proceeds from issue of shares
299,265
300,000
Transaction costs of issue of shares
(5,000)
(15,000)
Interest paid
(243,283)
(194)
Proceeds of new borrowings
967,000
3,308,774
Repayments of borrowings
(3,398,562)
(59,377)
Net cash inflow from financing activities
(2,380,580)
3,534,203
Net (decrease)/increase in cash and cash equivalents
1,266,402
886,230
Cash and cash equivalents at the beginning of period
909,094
26,564
Exchange (losses)/gains on cash and cash equivalents
90,140
(3,700)
Cash and cash equivalents at end of period
16
2,265,636
909,094
The accompanying notes and accounting policies form an integral part of these financial statements
Company Statement of Financial Position
as at 30 June 2018
Notes
30 June
2018
£
30 June
2017
£
Assets
Non-current assets
Property, plant and equipment
10
-
15,600
Investments in subsidiaries
11
942
941
Investments in associates and joint ventures
12
1,082,083
1,048,216
Available for sale financial assets
14
4,705,386
6,080,146
Non-current receivables
17
4,901,196
4,543,755
Total non-current assets
10,689,607
11,688,658
Current assets
Cash and cash equivalents
16
2,263,288
905,135
Financial assets - warrants in AFS
15
60,345
-
Other receivables
18
1,083,552
4,576,789
Total current assets
3,407,184
5,481,924
Total assets
14,096,791
17,170,582
Equity and liabilities
Called up share capital
20
2,766,857
2,760,859
Share premium account
26,016,000
25,604,689
Other reserves
3,272,232
4,679,070
Retained earnings
(20,608,820)
(20,682,534)
Total equity
11,446,269
12,362,084
Liabilities
Current liabilities
Trade and other payables
19
1,641,697
1,549,890
Short-term borrowings
19
1,008,825
3,258,608
Total current liabilities
2,650,522
4,808,498
Total equity and liabilities
14,096,791
17,170,582
These financial statements were approved by the Board of Directors and authorised for issue on 22 November 2018 and are signed on its behalf by:
Andrew Bell
Chairman and CEO
The accompanying notes form an integral part of these financial statements.
Company Statement of Changes in Equity
for the year ended 30 June 2018
The movements in equity during the period were as follows:
Share
capital
£
Share
premium
account
£
Retained
earnings
£
Other
reserves
£
Total
equity
£
As at 1 July 2016
2,752,488
25,275,788
(19,606,456)
363,281
8,785,537
Changes in equity for 2017
Loss for the year
-
-
(1,076,078)
-
(1,076,078)
Other comprehensive income for the year
-
-
-
4,217,753
4,217,753
Transactions with owners
Issue of shares
7,500
292,500
-
-
300,000
Share issue costs
-
(15,000)
-
-
(15,000)
Share issues in relation to SIP
871
51,401
-
-
52,272
Share-based payment transfer
-
-
-
97,600
97,600
Total transactions with owners
8,371
328,901
-
97,610
434,872
As at 30 June 2017
2,760,859
25,604,689
(20,682,534)
4,679,070
12,362,084
Changes in equity for 2018
Profit for the year
-
-
115,457
-
115,457
Other comprehensive income for the year
-
-
(41,743)
(1,410,280)
(1,452,023)
Transactions with owners
Issue of shares
5,355
377,614
-
-
382,969
Share issue costs
-
(5,000)
-
-
(5,000)
Share issues in relation to SIP
643
38,697
-
-
39,340
Share-based payment transfer
-
-
-
3,442
3,442
Total transactions with owners
5,998
411,311
-
3,442
420,751
As at 30 June 2018
2,766,857
26,016,000
(20,608,820)
3,272,232
11,446,269
Available
for sale trade
investments
reserve
£
Share-based
payment
reserve
£
Total
other
reserves
£
As at 1 July 2016
300,447
63,270
363,821
Changes in equity for 2017
Other comprehensive income for the year
4,217,753
-
4,217,753
Transactions with owners
Share-based payment transfer
-
97,600
97,600
Total transactions with owners
-
97,600
97,610
As at 30 June 2017
4,518,200
160,870
4,679,174
Changes in equity for 2018
Other comprehensive income for the year
Decrease in AFS reserve in relation to disposals
(1,389,741)
-
(1,389,741)
Change in AFS reserve in relation to revaluation
(62,282)
-
(62,282)
Transfer between reserves
41,743
-
41,743
Total Other comprehensive income
(1,410,280)
-
(1,410,280)
Transactions with owners
Share-based payment transfer
-
3,442
3,442
Total transactions with owners
-
3,442
3,442
As at 30 June 2018
3,107,920
164,312
3,272,232
See note 21 for a description of each reserve included above.
Company Statement of Cash Flows
for the year ended 30 June 2018
30 June
2018
£
30 June
2017
£
Cash flows from operating activities
Profit/(loss) before taxation
115,457
(1,076,076)
Decrease/(increase) in receivables
70,045
(10,674)
Increase/(decrease) in payables
209,797
(283,170)
Dividend income
(234,830)
(387,755)
Interest income and other finance income
(852,886)
(620,053)
Interest expense
530,637
10,612
Share-based payments
35,669
142,732
Impairment of investments in associates and joint ventures
-
1,496,550
(Gain) on sale of investments
(1,200,050)
(90,200)
Impairment of loans and receivables
217,226
140,178
Foreign exchange loss/(gain)
17,770
(142,968)
Impairment of exploration assets
280,460
-
Depreciation
15,600
1,800
Net cash outflow from operations
(795,105)
(819,024)
Corporation tax
-
-
Net cash used in operations
(795,105)
(819,024)
Cash flows from investing activities
Interest received
315,194
-
Dividends received
234,830
387,755
Loans granted
(892,722)
(2,427,378)
Loans re-paid by the borrower
3,513,843
-
Payments to increase interest in assets of an associate (note 12)
(37,317)
-
Proceeds from sale of available for sale investments
1,399,601
301,644
Payments to acquire available for sale investments
-
(96,435)
Net cash outflow from investing activities
4,533,429
(1,834,414)
Cash flows from financing activities
Proceeds from issue of shares
299,265
300,000
Transaction costs of issue of shares
(5,000)
(15,000)
Interest paid
(242,874)
(194)
Proceeds from new borrowings
967,000
3,308,774
Repayments of borrowings
(3,398,562)
(59,377)
Net cash inflow from financing activities
(2,380,171)
3,534,203
Net increase/(decrease) in cash and cash equivalents
1,358,153
880,765
Cash and cash equivalents at the beginning of period
905,135
24,370
Cash and cash equivalents at end of period
2,263,288
905,135
The accompanying notes and accounting policies form an integral part of these financial statements.
Notes to the Financial Statements
for the year ended 30 June 2018
1 Principal accounting policies
1.1 Authorisation of financial statements and statement of compliance with IFRS
The Group financial statements of Red Rock Resources plc for the year ended 30 June 2018 were authorised for issue by the Board on
22 November 2018 and the statement of financial position signed on the Board's behalf by Andrew Bell. Red Rock Resources plc is a public limited company incorporated and domiciled in England and Wales. The Company's Ordinary shares are traded on AIM.
1.2 Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as endorsed by the EU ("IFRS") and the requirements of the Companies Act applicable to companies reporting under IFRS.
The financial statements have been prepared on the cost basis, except for certain financial instruments, which are carried as described in the respective sections in the policies below. The principal accounting policies adopted are set out below.
Company statement of comprehensive income
As permitted by Section 408 Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The Company's profit for the financial year was £115,457 (2017: loss £1,076,076). The Company's other comprehensive loss for the financial year was £1,410,280 (2017: £4,217,753 income).
Amendments to published standards effective for the year ended 30 June 2018
New standards, amendments and interpretations effective for the periods from 1 July 2017
The following new standards, amendments and interpretations are effective for the first time in these financial statements. However, none have a material effect on the Group and Company:
• Amendments to IAS 12 Deferred Tax relating to recognition of deferred tax assets for unrealised losses, effective for the periods beginning on or after 1 January 2017;
• Amendments to IAS 7 Financial Instruments: Disclosures, effective for accounting periods beginning on or after 1 January 2017;
• Annual Improvements to IFRSs (2014-2016 cycle), Amendments to IFRS 12, effective for accounting periods beginning on or after 1 January 2017.
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 July 2017 that had a significant effect on the Group's financial statements.
New standards, amendments and interpretations not yet adopted
At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements were in issue but not yet effective for the year presented:
1 Principal accounting policies continued
1.2 Basis of preparation continued
The Directors do not expect that the adoption of these standards will have a material impact on the financial information of the Group in future periods, except for IFRS 9 as detailed below.
IFRS 9 "Financial Instruments" will impact both the measurement and disclosures of financial instruments. The Group is planning to first apply this standard at the beginning of the next reporting year to 30 June 2019. The Group will not retrospectively re-state prior period but will recognise any difference between the previous arrying amount and the carrying amount at 1 July 2018 in the opening retained earnings at 1 July 2018 for the assets that have not been disposed of at the date of initial application. All of the investments into equity instruments, that are held by the Group at 30 June 2018 and currently included in the Available for sale financial assets line in the Statement of financial position, are held by the Group with a long-term view and are not held for trading. The Group is analysing its investments into equity instruments on investment-by-investment basis and in respect of each one plans to make an irrevocable election to present subsequent changes in the fair value either in profit and loss (FVTPL) or in other comprehensive income (FVTOCI). For equity instruments designated at FVTOCI under IFRS 9, only dividend income will be recognised in profit or loss, all other gains and losses will be recognised in OCI without reclassification on derecognition. This differs from the current treatment of available for sale (AFS) equity instruments under IAS 39 where gains and losses recognised in OCI are reclassified on derecognition or impairment. IFRS 15 "Revenue from Contracts with Customers" - the Company is pre-revenue hence the adoption would have no impact on the reported results.
Adoption of IFRS 16 will result in the Group recognising right of use of assets and lease liabilities for all contracts that are, or contain, a lease. For leases currently classified as operating leases, under current accounting requirements the Group does not recognise related assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial statements the total commitment. Since the Group currently only has short-term (less than 12 months) operating leases, IFRS 16 will not have an impact on the results or balance sheet of the Group.
IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the standard. The Group does not have any contract that fall within the scope of this standard and therefore it would have no impact on the reported results.
IFRIC 23 is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. This interpretation is unlikely to have a material effect on the reported results.
Standards adopted early by the Group
The Group has not adopted any standards or interpretations early in either the current or the preceding financial year.
1.3 Basis of consolidation
The consolidated financial statements of the Group incorporate the financial statements of the Company and subsidiaries controlled by the Company made up to 30 June each year.
Subsidiaries
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain economic benefits from their activities. Subsidiaries are consolidated from the date on which control is obtained, the acquisition date, up until the date that control ceases.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued, contingent consideration and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at the acquisition date.
Provisional fair values are adjusted against goodwill if additional information is obtained within one year of the acquisition date, about facts or circumstances existing at the acquisition date. Other changes in provisional fair values are recognised through profit or loss.
Non-controlling interests in subsidiaries are measured at the proportionate share of the fair value of their identifiable net assets.
Intra-group transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated on consolidation, except to the extent that intra-group losses indicate an impairment.
At 30 June 2018, the consolidated financial statements combine those of the Company with those of its subsidiaries, Red Rock Australasia Pty Ltd, Red Rock Kenya Ltd and Red Rock Resources HK Ltd.
The Group's dormant subsidiary Intrepid Resources Limited, Red Rock Resources Inc., Ivory Coast, Red Rock Cote D'Ivoire sarl and Basse Terre sarl, have been excluded from consolidation on the basis of the exemption provided by Section 405(2) of the Companies Act 2006 that their inclusion is not material for the purpose of giving a true and fair view.
Non-controlling interests
Profit or loss and each component of other comprehensive income are allocated between the aims of the Parent and non-controlling interests, even if this results in the non-controlling interest having a deficit balance.
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. Any differences between the adjustment for the non-controlling interest and the fair value of consideration paid or received are recognised in equity.
1.4 Summary of significant accounting policies
1.4.1 Property, plant and equipment
Assets in the course of construction are stated at cost, less any identified impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.
Field equipment and fixtures and fittings are stated at cost less accumulated depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight-line method, on the following bases:
Mines 5% per annum
Field equipment 33% per annum
Fixtures and fittings 10% per annum
Assets under construction not depreciated until brought into use
1.4.2 Investment in associates
An associate is an entity over which the Group has the power to exercise significant influence, but not controlled or jointly controlled by the Group, through participation in the financial and operating policy decisions of the investee.
Investments in associates are recognised in the consolidated financial statements using the equity method of accounting. The Group's share of post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in other comprehensive income is recognised directly in other comprehensive income. The carrying value of the investment, including goodwill, is tested for impairment when there is objective evidence of impairment. Losses in excess of the Group's interest in those associates are not recognised unless the Group has incurred obligations or made payments on behalf of the associate.
Where a Group company transacts with an associate of the Group, unrealised gains are eliminated to the extent of the Group's interest in the relevant associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred, in which case appropriate provision is made for impairment.
In the Company accounts investments in associates are recognised and held at cost. The carrying value of the investment is tested for impairment when there is objective evidence of impairment.
1.4.3 Interests in joint ventures
The Group recognises its interest in the jointly controlled entity's assets and liabilities using the equity method of accounting. Under the equity method, the interest in the joint venture is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of its net assets, less distributions received and less any impairment in value of individual investments. The Group income statement reflects the share of the jointly controlled entity's results after tax.
Any goodwill arising on the acquisition of a jointly controlled entity is included in the carrying amount of the jointly controlled entity and is not amortised. To the extent that the net fair value of the entity's identifiable assets, liabilities and contingent liabilities is greater than the cost of the investment, a gain is recognised and added to the Group's share of the entity's profit or loss in the period in which the investment is acquired.
Where necessary, adjustments are made to bring the accounting policies in line with those of the Group's and to reflect impairment losses where appropriate. Adjustments are also made in the Group's financial statements to eliminate the Group's share of unrealised gains and losses on transactions between the Group and its jointly controlled entity. The Group ceases to use the equity method on the date from which it no longer has joint control over, or significant influence in, the joint venture.
During the reporting year and the comparative year, the Company had a 60% interest in Melville Bay Limited (formerly known as "NAMA Greenland Limited"). The Company did not have significant control over Melville Bay Limited but has joint control along with North Atlantic Mining Associates Limited and International Media Projects Ltd through a contractual joint venture arrangement making it a jointly controlled entity. The shares in Melville Bay were sold on 29 June 2018, so it is no longer included in the consolidated accounts at 30 June 2018.
1 Principal accounting policies continued
1.4 Summary of significant accounting policies continued
1.4.4 Taxation
Corporation tax payable is provided on taxable profits at the current rate. The tax expense represents the sum of the current tax expense and deferred tax expense.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is measured using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than
in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is charged or credited in profit or loss, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity, or items charged or credited directly to other comprehensive income, in which case the deferred tax is also recognised in other comprehensive income.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax relates to income tax levied by the same tax authorities on either:
• the same taxable entity; or
• different taxable entities which intend to settle current tax assets and liabilities on a net basis or to realise and settle them simultaneously in each future period when the significant deferred tax assets and liabilities are expected to be realised or settled.
1.4.5 Foreign currencies
Both the functional and presentational currency of Red Rock Resources plc is Sterling (£). Each Group entity determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.
The functional currency of the foreign subsidiaries are Australian Dollars (AUD) and Kenyan Shillings and US Dollars (USD).
Transactions in currencies other than the functional currency of the relevant entity are initially recorded at the exchange rate prevailing on the dates of the transaction. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are translated at the exchange rate prevailing at the reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Gains and losses arising on translation are included in profit or loss for the period, except for exchange differences on non-monetary assets and liabilities, which are recognised directly in other comprehensive income when the changes in fair value are recognised directly in other comprehensive income.
On consolidation, the assets and liabilities of the Group's overseas operations are translated into the Group's presentational currency at exchange rates prevailing at the reporting date. Income and expense items are translated at the average exchange rates for the period unless exchange rates have fluctuated significantly during the year, in which case the exchange rate at the date of the transaction is used. All exchange differences arising, if any, are recognised as other comprehensive income and are transferred to the Group's foreign currency translation reserve.
1.4.6 Share-based payments
Share options
The Group operates an equity-settled share-based payment arrangement whereby the fair value of services provided is determined indirectly by reference to the fair value of the instrument granted.
The fair value of options granted to Directors and others in respect of services provided is recognised as an expense in the income statement with a corresponding increase in equity reserves - the share-based payment reserve until the award has been settled and then make a transfer to share capital.
On exercise or lapse of share options, the proportion of the share-based payment reserve relevant to those options is transferred to retained earnings. On exercise, equity is also increased by the amount of the proceeds received.
The fair value is measured at grant date and charged over the vesting period during which the option becomes unconditional.
The fair value of options is calculated using the Black-Scholes model taking into account the terms and conditions upon which the options were granted. The exercise price is fixed at the date of grant.
Non-market conditions are performance conditions that are not related to the market price of the entity's equity instruments. They are not considered when estimating the fair value of a share-based payment. Where the vesting period is linked to a non-market performance condition, the Group recognises the goods and services it has acquired during the vesting period based on the best available estimate of the number of equity instruments expected to vest. The estimate is reconsidered at each reporting date based on factors such as a shortened vesting period, and the cumulative expense is 'trued up' for both the change in the number expected to vest and any change in the expected vesting period.
Market conditions are performance conditions that relate to the market price of the entity's equity instruments. These conditions are included in the estimate of the fair value of a share-based payment. They are not taken into account for the purpose of estimating the number of equity instruments that will vest. Where the vesting period is linked to a market performance condition, the Group estimates the expected vesting period. If the actual vesting period is shorter than estimated, the charge is accelerated in the period that the entity delivers the cash or equity instruments to the counterparty. When the vesting period is longer, the expense is recognised over the originally estimated vesting period.
For other equity instruments granted during the year (i.e. other than share options), fair value is measured on the basis of an observable market price.
When a share-based payment is modified, the Group determines whether the modification affects the fair value of the instruments granted, affects the number of equity instruments granted or is otherwise beneficial to the employee. In cases where the exercise price of options granted to employees is reduced, the Group recognises the incremental change in fair value (along with the original fair value determined at grant date) over the remaining vesting period as an expense and an increase in equity. Decreases in the fair value are not considered. To determine if an increase has occurred, management compares the fair value of the modified award with the fair value of the original award at the modification date. Any other benefit to the employee is taken into account in estimating the number of equity instruments that are expected to vest.
Warrants or options issued to parties other than employees are valued based on the value of the service provided. Share Incentive Plan
Where shares are granted to employees under the Share Incentive Plan, the fair value of services provided is determined indirectly by reference
to the fair value of the free, partnership and matching shares granted on the grant date. Fair value of shares is measured on the basis of an observable market price, i.e. share price as at grant date, and is recognised as an expense in the income statement on the date of the grant. For the partnership shares the charge is calculated as the excess of the mid-market price on the date of grant over the employee's contribution.
1.4.7 Pension
The Group operates a defined contribution pension plan which requires contributions to be made to a separately administered fund. Contributions to the defined contribution scheme are charged to the profit and loss account as they become payable.
1.4.8 Finance income and expense
Finance expense is recognised on an accruals basis using the effective interest method.
Finance income is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.
Dividends received from available for sale investments are recognised as finance income in the period when they are declared by the investee. In case of distributions made by way of equal rights share buy-back by an investee, the funds received as a part of such distribution are shown by the Company and by the Group in the period then the right to receive them becomes established and presented in the Dividends received line of the income statement.
1 Principal accounting policies continued
1.4 Summary of significant accounting policies continued
1.4.9 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets and financial liabilities are recognised where the Group has become party to the contractual provisions of the instrument.
Investments
Investments in subsidiary companies are classified as non-current assets and included in the statement of financial position of the Company at cost at the date of acquisition less any identified impairment.
Investments in associates and joint ventures are classified as non-current assets and included in the statement of financial position of the Company at cost at the date of acquisition less any identified impairment.
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group has not classified any of its financial assets as held to maturity.
Fair value through profit and loss
Derivative financial instruments (warrants) are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date.
Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise through the provision of goods or services (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transactions costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using effective interest rate method, less provision for impairment.
Impairment provision is recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such provision being the difference between the net carrying amount and the net present value of the future expected cash flows associated with the impaired receivable.
The Group's loans and receivables comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position.
Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise cash at bank and in hand and short-term deposits.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
Trade and other receivables
Trade receivables, which generally have 30-day terms, are recognised at original invoice amount less an allowance for any uncollectable amounts. An allowance for impairment is made when there is objective evidence that the Group will not be able to collect the debts. Bad debts are written off when identified.
Available for sale financial assets
Non-derivative financial assets not included in the above categories are classified as available for sale and comprise principally the Group's strategic investments in entities not qualifying as subsidiaries, associates or jointly controlled entities. These equity investments are intended to be held by the Group for an indefinite period of time. They are carried at fair value, where this can be reliably measured, with movements in fair value recognised in other comprehensive income and debited or credited to the available for sale trade investments reserve. Where the fair value cannot be reliably measured, the investment is carried at cost or a lower valuation where the Directors consider the value of the investment to be impaired.
Available for sale investments are included within non-current assets. On disposal, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had previously been recognised directly in reserves is recognised in the income statement, and the cost of such disposed of investments is written off on a first in first out method.
Income from available for sale investments is accounted for in the income statement when the right to receive it has been established.
The Group assesses at each reporting date whether there is objective evidence that an investment is impaired. When there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement - is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in their fair value after impairment are recognised directly in other comprehensive income.
Financial liabilities and equity
The Group classifies its financial liabilities into one of two categories: fair value through profit and loss or other financial liabilities. The Group has not classified any of its financial liabilities as fair value through profit and loss.
Other financial liabilities comprise trade and other payables and borrowings.
Trade and other payables
Trade and other payables are initially recognised at fair value and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.
Borrowings
Borrowings are recorded initially at their fair value, plus directly attributable transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement or redemption, are recognised in the income statement over the term of the instrument using an effective rate of interest.
Deferred and contingent consideration
Where it is probable that deferred or contingent consideration is payable on the acquisition of a business based on an earn out arrangement, an estimate of the amount payable is made at the date of acquisition and reviewed regularly thereafter, with any change in the estimated liability being reflected in the income statement. Where deferred consideration is payable after more than one year the estimated liability is discounted using an appropriate rate of interest.
1.4.10 Dividend income
Dividends received from strategic investments are recognised when they become legally receivable. In case of interim dividends, this is when declared. In case of final dividends, this is when approved by the shareholders at the AGM.
1.4.11 Share capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group's Ordinary shares are classified as equity instruments.
1.4.12 Warrants
Derivative contracts that only result in the delivery of a fixed amount of cash or other financial assets for a fixed number of an entity's own equity instruments are classified as equity instruments. When warrants are issued attached to specific loan notes, the Company estimates the fair value of the issued warrants using the Black-Scholes pricing model taking into account the terms and conditions upon which the warrants were issued, value of such warrants is deducted from the balance of loan notes a directly attributable transaction cost. Warrants relating to equity finance and issued together with ordinary shares placement are valued by residual method and treated as directly attributable transaction costs and recorded as a reduction of share premium account based on the fair value of the warrants. Warrants classified as equity instruments are not subsequently re-measured.
1.5 Significant accounting judgements, estimates and assumptions
The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
Significant judgements in applying the accounting policies
In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:
Going concern
The Group has recorded a profit of £78,120 for the year ended 30 June 2018. At that date there were net current assets of £607,396
(2017: net current assets of £299,701). The profit resulted mainly from the sale of investments during the year of £1,200,050. Cash and cash equivalents were £2,265,636 at year end.
1 Principal accounting policies continued
1.5. Significant accounting judgements, estimates and assumptions continued
During the reporting year the Company has continued to receive proceeds from the sale of its gold interests in Colombia. The Company had a three-year convertible promissory note of USD1.0m secured over the assets of its former gold mine and associated plant and bearing interest of 5% per annum that became due in 2018. On 7 June 2018 the Company announced that it had received the final payment of the promissory note of USD750,000 and had chosen to apply CAN500,000 of that amount to a subscription for 2,500,000 shares of Para Resources Inc and the balance of USD376,500 in cash.
Additional payments of up to USD2.0m are to be paid in the form of a 3% net smelter royalty payable quarterly on gold production and these payments continued in 2017 and totalled USD71,414 to 30 June 2018. The Company estimates that approximately £150k will be paid out towards the initial USD2m royalty during 2019 based on updated projections from the operator in Colombia. A final royalty stream of up to USD1.0m will be paid following the payment in full of the initial net smelter royalty in the form of a 0.5% net smelter royalty.
On 11 September 2017, Jupiter Mines Ltd, where the Company held a 1.2% stake, announced its plans to make a USD25m distribution to its shareholders. On 5 December 2017 Red Rock announced that it had received USD279,945 following its participation in this Jupiter Mines distribution. On 22 January 2018 Jupiter Mines announced its intention to distribute a further USD42m to its shareholders. On 19 March 2018 Red Rock announced the completion of this equal access buy-back, and that it had received USD501,410 as a result of its participation.
On 19 March 2018 Jupiter announced its intention to seek relisting on the Australian Stock Exchange, which would offer existing shareholders the potential to partially exit their investments at the time of the IPO. Accordingly, on 17 April 2018 Red Rock announced that Jupiter Mines had completed its AUD240m IPO and that the relisting had been oversubscribed. As part of the listing process, Red Rock sold 4,700,000 shares, constituting 20.2% of its holding in Jupiter, and agreed to retain the balance of its 18,524,914 shares in escrow for a period after listing. This sale of Jupiter shares resulted in a further AUD1,842,400 of proceeds to the Company, with Red Rock retaining a 0.95% stake in the post IPO share capital of Jupiter.
On 18 June 2018 Jupiter Mines announced its intention to make its first public distribution in the form of ZAR1.5bn, well in excess of Jupiter's previously stated 70% distribution policy in the IPO prospectus. Subsequently, on 17 September 2018 Red Rock announced that it had received £508,000 in cash following the 14.5% half-year dividend distribution by Jupiter Mines. This brought the total proceeds from the Company's investments in Jupiter Mines to USD3.99m since 2017. Simultaneously, Jupiter announced that it continued to plan to make dividend distributions to shareholders going forward on a biannual basis.
On 10 November 2017 the Company announced the issuance of up to £1,000,000 of convertible loan notes, with the first tranche closing at
£495,000 and the balance closing by 14 December 2017. The notes carry a 10% interest rate and are convertible at a premium to the share price at issuance, being convertible at £0.008. During the course of the year £50k of notes were converted leaving a balance of £950,000 due for repayment or refinancing in Q4 2018.
On 2 November 2018 the Company announced that owners of £575,000 of existing convertible loan notes have applied for note renewal and have agreed to extend the term of their notes a further twelve months, with a new final redemption date of 19 December 2019 on the same terms. These notes are thus convertible into Red Rock shares at a price of £0.008 and carry an interest rate of 10% per annum accruing monthly.
The Group retains a lean operating structure, with three employees and both accounting and geological services outsourced. The Company has continued these cost control efforts by downsizing its offices in Q4 2017 and continuing to rely on consultants while minimising the size of permanently employed staff and associated overhead costs.
The Directors are confident in the Company's ability to fund its basic operations from the ongoing stream of dividends from Jupiter Mines expected to continue on a biannual basis, and currently averaging nearly £1m per annum to the Company. This quantum is expected to cover the Company's basic overhead costs several times over and allow for additional investment in the Company's projects. Over the longer term the Company expects to receive additional revenue from any transaction involving the Company's gold licences in Kenya as well as from the ongoing development of its investment in Steelmin, which operates a ferrosilicon smelter in Bosnia. Beyond this, the Company expects to receive an improved royalty stream from Colombia, as the operator of the gold assets there appears set for significant increases in production during 2018-19.
The Company has demonstrated the repeated ability to raise new finance as required, either in the form of debt or equity as deemed appropriate.
The Directors have concluded that the combination of these circumstances means that preparation of the Group's financial statements on a going concern basis is appropriate.
As sentiment in natural resource investment and development remains solid, the Directors feel strongly that they will be able to largely fund the business internally and will be able to access external capital as required during 2019.
Recognition of holdings less than 20% as an associate
The Company owns 15% of the issued share capital of Mid Migori Mining Company Limited ("MMM"). Andrew Bell is a member of the board of MMM. In accordance with IAS 28, the Directors of the Company consider this, and the input of resource by the Company in respect of drilling and analytical activities, to provide the Group with significant influence as defined by the standard. As such, MMM has been recognised as an associate for the years ended 30 June 2018 and 30 June 2017.
The effect of recognising MMM as an available for sale financial asset would be to decrease the loss by £23 (2017: £8).
Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period include the impairment determinations, the useful lives of property, plant and equipment, the bad debt provision and the fair values of our financial assets and liabilities.
Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability; or
• In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient dataare available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable
• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
At 30 June 2018, the Company holds 22% interest in the ordinary shares of Steelmin Limited ('Steelmin'). The ferrosilicon plant in Jajce, Bosnia was recommissioned and brought back into production earlier this year by Steelmin, and was closed in September 2018 for work to increase the capacity of the cooling system. This was initially planned as a short suspension of production as part of the commissioning process, but the management of the plant has now decided, in the light of exceptionally high spot electricity prices offered to Steelmin, to extend the shutdown until January 2019. An assessment of how the plant may be optimised is being carried out, and the plan is to lock in a long-term electricity supply contract once prices adjust. The 22% stake in Steelmin was valued based on the valuation of land and equipment, performed by the external independent surveyors in February 2017, and further adjusted by the value of all Steelmin's liabilities and additional discounting.
Comparative period estimates: For unquoted equity investments, we have based our valuation on the weighted average share price of actual sale transactions which we consider as level 2 of the fair value hierarchy as they are based on indirectly observable inputs. In the absence of a quoted liquid market for Jupiter shares directly determining their value, the Company relied on the single share buy-back that occurred during 2017. Using the preferred market approach, the Company has taken the price used in the proposed in September 2017 Jupiter Mines share buy-back of 134,190,158 shares at USD0.29, and this gives a total valuation for Red Rock's Jupiter holdings at 30 June 2017 of USD7,448,625, relied on the single share buy-back. On 18 April 2018, Jupiter's shares were admitted to Australian Securities Exchange and has been valued in these accounts based on publicly available quoted market price at 30 June 2018.
1 Principal accounting policies continued
1.5. Significant accounting judgements, estimates and assumptions continued
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined using the Black-Scholes model. The model has its strengths and weaknesses and requires six inputs as a minimum: 1. The share price; 2. The exercise price; 3. The risk-free rate of return; 4. The expected dividends or dividend yield; 5. The life of the option; and 6. The volatility of the expected return. The first three inputs are normally, but not always, straightforward. The last three involve greater judgement and have the greatest impact on the fair value.
Impairment of financial assets
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which fair value of an investment is less than its cost.
In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. "Significant" is evaluated against the original cost of the investment and "prolonged" against the period in which the fair value has been below its original cost. Mining share prices typically have more volatility than most other shares and this is taken into account by management when considering if a significant decline in the fair value of its mining investments has occurred.
Management would consider that there is a prolonged decline in the fair value of an equity investment when the period of decline in fair value has extended to beyond the expectation management have for the equity investment. This expectation will be influenced particularly by the company development cycle of the investment.
Impairment of non-financial assets
The Group follows the guidance of IAS 36 to determine when a non-financial asset is impaired. The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does
not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed projections, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These projections generally cover a period of five years with a terminal value or salvage value applied.
Impairment losses of continuing operations are recognised in the income statement in expense categories consistent with the function of the impaired asset.
For investments in associates and joint ventures, the Group assesses impairment after the application of the equity method.
Amounts due from associates
The Company conducted a review of the carrying value of the amount receivable from Mid Migori Mining Company Limited in relation to the Kenya asset. For the purpose of impairment review, the Company views this receivable as part of its net investment in the associate and hence followed the guidance of IAS 36. Management recognise that the recent variability in gold prices, the change in market fundamentals based on demand from key consumers, concerns around the global macroeconomic environment in general, and the key uncertainty relating to the renewals of licences can all have an effect on the value of this project. On 22 October 2018 the Company announced that a consent had been signed on behalf of the Attorney General and the Company and was being filed with the court. Under the terms of the consent the parties have agreed that the case be marked as withdrawn and that the Company was now at liberty to apply for renewal of the gold licenses in Kenya with no prejudicial decisions outstanding. This decision is considered a major step in the renewal and restoration of the Company's gold assets in Kenya and as such makes the amount due from Mid Migori Mining more likely to be recoverable.
2 Segmental analysis
The Group considered its mining and exploration activities as separate segments. These are in addition to the investment activities which continue to form a significant segment of the business. Its mining segment, which has now been sold, is currently presented as discontinued operations on the face of the income statement and is excluded from the continuing operations segmental analysis below.
The Group has made a strategic decision to concentrate on several commodities ranging from gold to manganese and ferrosilicon, and as such further segmental analysis by commodity has not been considered useful or been presented.
Investment
Exploration
Other
Jupiter
Mines Other
Australian African
Corporate
and
Year to 30 June 2018
Limited investments
£ £
exploration exploration
£ £
unallocated
£
Total
£
Gain on sale of available for sale investments
1,196,780 3,270
- -
-
1,200,050
Exploration expenses
- -
(1,173) (13,045)
-
(14,218)
Impairment of exploration properties
- -
- -
(280,460)
(280,460)
Administration expenses*
- -
(931) (11,303)
(837,284)
(849,518)
Business development
- -
- -
(82,413)
(82,413)
Other project costs
- -
- -
(306,666)
(306,666)
Currency gain
- -
(10,454) -
72,372
61,918
Other income
- -
- -
10,007
10,007
(Provision for)/Reversal of provision for bad debts
- -
- -
(217,226)
(217,226)
Share of losses in associates
- -
- -
(23)
(23)
Finance income, net
234,830 -
- 410
322,249
556,669
Net profit/(loss) before tax from continuing operations
1,431,610 3,270
(12,559) (24,758)
(1,319,444)
78,120
Investment
Exploration
Other
Jupiter
Mines Other
Australian
African
Corporate
and
Year to 30 June 2017
Limited investments
£ £
exploration
£
exploration
£
unallocated
£
Total
£
Gain on sale of available for sale investments
150,985 (60,785)
-
-
-
90,200
Impairment of investments in associates and joint ventures
- (1,496,550)
-
-
-
(1,496,550)
Exploration expenses
- (29,103)
-
(13,087)
-
(42,190)
Administration expenses*
- -
-
-
(644,687)
(644,687)
Currency gain
- -
41,430
-
81,050
122,480
(Provision for)/Reversal of provision for bad debts
- (140,178)
-
-
-
(140,178)
Share of losses in associates
- -
-
-
(8)
(8)
Finance income, net
387,755 -
-
-
608,965
996,720
Net profit/(loss) before tax from continuing operations
538,740 (1,726,616)
41,430
(13,087)
45,320
(1,114,213)
* Included in administration expenses is a depreciation charge of £15,600 (2016: £1,800).
2 Segmental analysis continued
Information by geographical area
Presented below is certain information by the geographical area of the Group's activities. Revenue from investment sales and the sale of exploration assets is allocated to the location of the asset sold.
UK
USA
Africa
Canada
Bosnia
Total
Year ended 30 June 2018
£
£
£
£
£
£
Revenue
Gain on sale of available for sale investments
3,270
-
1,196,780
-
-
1,200,050
Total segment revenue and other gains
3,270
-
1,196,780
-
-
1,200,050
Non-current assets
Property, plant and equipment
-
-
-
-
-
-
Investments in associates and joint ventures
-
-
1,000,374
-
-
1,000,374
Available for sale financial assets
284,322
-
4,050,887
259,284
110,894
4,705,387
Exploration assets
-
-
-
-
-
-
Total segment non-current assets
284,322
-
5,051,261
259,284
110,894
5,705,761
Non-current receivables
4,901,196
Total non-current assets
10,606,956
UK
USA
Africa
Canada
Bosnia
Total
Year ended 30 June 2017
£
£
£
£
£
£
Revenue
(Loss) on sale of available for sale investments
(60,785)
-
150,985
-
-
90,200
Total segment revenue and other gains
(60,785)
-
-
-
-
-
Non-current assets
Property, plant and equipment
15,600
-
-
-
-
15,601
Investments in associates and joint ventures
-
-
963,080
-
-
963,080
Available for sale financial assets
336,606
-
5,743,541
-
-
6,080,146
Exploration assets
-
280,460
-
-
-
280,460
Total segment non-current assets
352,206
280,460
6,706,621
-
-
7,339,287
Non-current receivables
4,543,755
Total non-current assets
11,883,042
3 Loss for the year before taxation
Loss for the year before taxation is stated after charging:
2018
£
2017
£
Auditor's remuneration:
- fees payable to the Company's auditor for the audit of consolidated and Company financial statements
21,600
20,000
Directors' emoluments (note 8)
330,047
343,681
- Share-based payments - Directors
31,184
83,746
- Share-based payments - staff
4,485
22,130
Depreciation
15,600
1,800
Currency gain
61,918
122,481
4 Administrative expenses
Group
Group
Company
Company
2018
£
2017
£
2018
£
2017
£
Staff costs
Payroll
321,169
316,311
321,169
316,311
Pension
15,443
12,632
15,443
12,632
Consultants
15,000
13,750
15,000
13,750
HMRC/PAYE
17,654
16,536
17,654
16,536
Professional services
Accounting
75,714
29,448
69,548
27,933
Legal
97,824
87,315
97,824
87,315
Marketing
28,300
48,748
28,300
48,749
Other
28,336
4,859
28,336
4,859
Regulatory compliance
57,842
69,968
57,842
69,968
Travel
37,885
8,499
37,885
8,499
Office and admin
General
61,823
(9,515)
55,973
(16,858)
IT related costs
8,423
4,648
8,423
4,648
Rent
75,914
38,105
75,696
38,105
Insurance
8,191
3,384
8,191
3,384
Total administrative expenses
849,518
644,688
837,284
635,831
5 Finance income/(costs), net
2018
2017
Group
£
£
Interest income (other than MFP finance income)
863,411
342,932
Dividend income
234,830
387,755
Interest expense
(529,612)
(11,088)
Total finance income (other than MFP finance income)
568,629
719,599
MFP finance expense/(income)
(11,960)
277,121
Total finance income
556,669
996,720
Interest income (other than MFP finance income) comes from non-current receivables from an associate and interest income from loan to Steelmin. Please refer to note 17 and note 18 respectively. Dividend income represents the money received from the Group's 0.95% holding in Jupiter Mines (2017: holding in Jupiter Mines of 1.2%).
6 Taxation
2018
2017
£
£
Current period taxation on the Group
UK corporation tax at 19.00% (2017: 19.75%) on profits for the period
-
-
Deferred tax
Origination and reversal of temporary differences
-
-
Deferred tax assets not recognised
-
-
Tax credit
-
-
Factors affecting the tax charge for the year
Profit/(loss) on ordinary activities before taxation
78,120
(1,114,213)
Profit/(loss) ordinary activities at the average UK standard rate of 19.00% (2017: 19.75%)
14,843
(220,057)
Income not taxable
(44,618)
-
Effect of expenditure not deductible
10,013
329,364
Indexation allowance on gains
(575)
-
Tax losses carried forward
20,337
-
Utilisation of prior year losses
-
(109,307)
Tax charge
-
-
Tax credit arising from continuing operations
-
-
Total tax credit
-
-
Deferred tax amounting to £nil (2017: £nil) relating to the Group's investments was recognised in the statement of comprehensive income. No deferred tax charge has been made due to the availability of trading losses, which are estimated circa £1,266 thousand (2017: £nil), and capital losses estimated circa £1,308 thousand (2017: £2,506 thousand).
7 Staff costs
The aggregate employment costs of staff (including Directors) for the year in respect of the Group were:
2018
£
2017
£
Wages and salaries
285,500
210,500
Pension
15,443
12,632
Social security costs
29,853
16,536
Employee share-based payment charge
35,669
142,732
Total staff costs
366,465
382,400
The average number of Group employees (including Directors) during the year was:
2018
Number
2017
Number
Executives
4
4
Administration
1
1
Exploration
-
-
5
5
The key management personnel are the Directors and their remuneration is disclosed within note 8.
576,000 (2017: 600,000) free shares were issued to each employee, including Directors, making a total of 2,880,000 (2017: 3,000,000) free shares issued during the year.
1,185,600 partnership and 3,808,000 matching shares, making the total of 3,556,800, were issued in the year ended 30 June 2018 (2017: 1,904,000 partnership, 3,808,000 matching, 8,112,000 total).
8 Directors' emoluments
Directors'
fees
Directors' discretionary
bonus
Consultancy
fees
Share Incentive Plan
Share-based payments
Pension contributions
Social security costs
Total
2018 £
£
£
£
£
£
£
£
Executive Directors
A R M Bell 82,000
20,000
15,000
7,200
1,180
6,504
11,081
142,965
S Kaintz 65,000
20,000
-
7,200
1,082
4,618
9,602
107,501
Other Directors
M C Nott 18,000
10,000
-
7,056
-
1,179
2,463
38,698
S Quinn 18,000
10,000
-
7,171
295
1,100
4,317
40,883
183,000
60,000
15,000
28,627
2,557
13,401
27,462
330,047
Directors'
Directors' discretionary
Consultancy
Share
Share-based
Pension
Social
fees
bonus
fees
Incentive Plan
payments
contributions
security costs
Total
2017 £
£
£
£
£
£
£
£
Executive Directors
A R M Bell 82,000
-
13,750
10,440
35,115
6,091
7,847
155,243
S Kaintz 65,000
-
-
10,440
31,358
3,797
6,967
117,562
Other Directors
M C Nott 18,000
-
-
10,212
1,245
976
1,175
31,608
S Quinn 18,000
-
-
10,440
8,031
275
2,522
39,268
183,000
-
13,750
41,532
75,749
11,139
18,511
343,681
The number of Directors who exercised share options in the year was nil (2017: nil). During the year, the Company contributed to a Share Incentive Plan more fully described in the Directors' Report.
9 Earnings per share
The basic earnings/(loss) per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue. Diluted earnings/(loss) per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue plus the weighted average number of Ordinary shares that would be issued on conversion of all dilutive potential Ordinary shares into Ordinary shares.
2018
£
2017
£
Profit/(loss) attributable to equity holders of the parent company
80,755
(1,114,213)
Adjusted for interest accrued on the convertible notes
60,030
-
Adjusted profit/(loss) attributable to equity holders of the parent company used for diluted EPS calculation
140,785
(1,114,213)
Weighted average number of Ordinary shares of £0.0001 in issue, used for basic EPS
498,552,731
458,077,061
Effect of all dilutive potential ordinary share, consisting of:
81,632,170
-
(a) from potential ordinary shares that would have to be issued, if all loan notes convertible
at the discretion of the noteholder converted at the beginning of the period or at the inception of the instrument, whichever is later
75,808,152
-
(b) effect from all potentially dilutive options in issue
3,556,188
-
(c) Effect from all potentially dilutive warrants in issue
2,267,829
-
Weighted average number of Ordinary shares of £0.0001 in issue, including potential ordinary shares, used for diluted EPS
580,184,901
458,077,061
Earnings/(loss) per share - basic
0.02 pence
(0.24) pence
Earnings/(loss) per share - fully diluted
0.02 pence
(0.24) pence
9 Earnings per share continued
At 30 June 2017, the effect of all the instruments in issue is anti-dilutive as it would lead to a further reduction of loss per share, therefore they were not included into the diluted loss per share calculation.
Options and warrants with conditions not met at the end of the period, that could potentially dilute basic EPS in the future, but were not included in the calculation of diluted EPS for the periods presented:
2018
£
2017
£
Share options granted to employees - not vested and/or out of the money
24,160,000
24,160,000
Number of warrants given to shareholders as a part of placing equity instruments - out of the money
214,432,432
219,462,400
Total number of contingently issuable shares that could potentially dilute basic earnings per share in future
238,592,432
243,622,400
2018
£
2017
£
Number of warrants - vested and in the money at year end but not included into diluted EPS calculation due to their effect being anti-dilutive
-
21,315,971
Number of share options granted to employees - vested and in the money at year end but not included into diluted EPS calculation due to their effect being anti-dilutive
-
24,160,000
Total number of contingently issuable shares that could potentially dilute basic earnings per share in future and anti-dilutive potential ordinary shares that were not included into the fully diluted EPS calculation
238,592,432
289,098,371
There were no ordinary share transactions after 30 June 2018, that could have changed the EPS calculations significantly if those transactions had occurred before the end of the reporting period.
10 Property, plant and equipment
Group and Company
Field equipment and machinery
£
Fixtures and
fittings
£
Total
£
Cost
At 1 July 2016
34,607
45,807
80,414
Additions
-
-
-
Disposals
-
-
-
At 30 June 2017
34,607
45,807
80,414
Additions
-
-
-
Disposals
(34,607)
(45,807)
(80,414)
At 30 June 2018
-
-
-
Depreciation and impairment
At 1 July 2016
(34,607)
(28,407)
(63,014)
Depreciation charge
-
(1,800)
(1,800)
Disposal
-
-
-
At 30 June 2017
(34,607)
(28,407)
(63,014)
Depreciation charge
-
(15,600)
(15,600)
At 30 June 2018
(34,607)
(45,807)
(80,414)
Net book value At 30 June 2018
-
-
-
At 30 June 2017
-
15,600
15,600
Of the depreciation charge, £15,600 (2017: £1,800) is included within administrative expenses in the income statement.
11 Investments in subsidiaries
2018
2017
Company
£
£
Cost
At 1 July 2017
1,423
613
Investment in subsidiary
1
810
At 30 June 2018
1,424
1,423
Impairment
At 1 July 2017
(482)
(482)
Charge in the year
-
-
At 30 June 2018
(482)
(482)
Net book value
942
941
As at 30 June 2018 and 30 June 2017, the Company held interests in the following subsidiary companies:
Company
Country of
registration
Class
Proportion
Held
At 30 June 2018
Proportion
Held
At 30 June 2017
Nature of business
Red Rock Australasia Pty Limited
Australia
Ordinary
100%
100%
Mineral exploration
Red Rock Kenya Limited
Kenya
Ordinary
87%
87%
Mineral exploration
RRR Kenya Limited
Red Rock Resources Inc.
Kenya
USA
Ordinary
Ordinary
100%
100%
100%
100%
Dormant
Natural resources
Red Rock Cote D'Ivoire sarl
Ivory Coast
Ordinary
100%
100%
Dormant
Basse Terre sarl
Ivory Coast
Ordinary
100%
100%
Dormant
Red Rock Resources (HK) Ltd
Hong Kong
Ordinary
100%
-
Holding company
12 Investments in associates and joint ventures
Group Company
2018
£
2017
£
2018
£
2017
£
Cost
At 30 June
7,398,569
7,398,569
7,241,725
7,241,725
Additions during the year
37,317
-
37,317
-
Disposals during the year
(6,213,207)
-
(6,193,509)
-
At 30 June
1,222,679
7,398,569
1,085,533
7,241,725
Impairment
At 1 July
(6,435,489)
(4,938,931)
(6,193,509)
(4,696,959)
Losses during the year
(23)
(8)
-
-
Disposals during the year
Impairment in the year
6,213,207
-
-
(1,496,550)
6,190,059
-
-
(1,496,550)
At 30 June
(222,305)
(6,435,489)
(3,450)
(6,193,509)
Net book amount at 30 June
1,000,374
963,080
1,082,083
1,048,216
The Company, at 30 June 2018 and at 30 June 2017, had significant influence by virtue other than shareholding over 20% over Mid Migori Mining Company Limited. During the reporting period the Group acquired the remaining 25% of interest in net assets of Mid Migori and from 15 June 2018 it has 100% interest in Mid Migori's net assets.
12 Investments in associates and joint ventures continued
Company
Country of
incorporation
Class of
shares held
Percentage of
issued capital
Accounting year ended
Mid Migori Mining Company Limited
Kenya
Ordinary
15.00%
30 September 2017
The Company, at 30 June 2017, had holdings amounting to 20% or more of the issued share capital of the following companies which amounted to significant influence or joint control. All shares in Melville Bay were sold on 29 June 2018.
Company
Country of
incorporation
Class of
shares held
Percentage of
issued capital
Accounting year ended
Melville Bay Limited (formerly "NAMA Greenland Limited")
England
Ordinary
60.00%
30 November 2017
Summarised financial information for the Company's associates and joint ventures, where available, is given below:
For the year as at 30 June 2018:
Revenue
Loss
Assets
Liabilities
Company
£
£
£
£
Mid Migori Mining Company Limited
-
(31)
2,534,645
(3,207,445)
For the year as at 30 June 2017:
Company
Revenue
£
Loss
£
Assets
£
Liabilities
£
Mid Migori Mining Company Limited
-
(51)
2,763,865
(3,434,865)
Melville Bay Limited
-
(4,146,034)
37,211
(228,025)
Mid Migori Mining Company
Limited
Red Rock Zambia Limited
Melville
Bay Limited
Total
£
£
£
£
Cost
At 30 June 2017
1,044,766
140,596
6,213,207
7,398,569
Additions during the year
37,317
-
-
37,317
Disposals during the year
-
-
(6,213,207)
(6,213,207)
At 30 June 2018
1,082,083
140,596
-
1,222,679
Impairment and losses during the year
At 30 June 2017
(81,686)
(140,596)
(6,213,207)
(6,435,489)
Disposals during the year
-
-
6,213,207
6,213,207
(Losses) during the year
(23)
-
-
(23)
At 30 June 2018
(81,709)
(140,596)
-
(222,305)
Carrying amount
At 30 June 2018
1,000,374
-
-
1,000,374
At 30 June 2017
963,080
-
-
963,080
Mid Migori Mining Company Limited
The Company owns 15% of the issued share capital of Mid Migori Mining Company Limited ("MMM"). The Company has entered into an agreement whereby it manages and funds a number of MMM's development projects and has representation on the MMM board. On 15 June 2018, the Company purchased the remaining interest in the assets of MMM for the consideration of USD50,000, bringing its overall interest in MMM's assets to 100%.
In accordance with IAS 28, the involvement with MMM meets the definition of significant influence and therefore has been accounted for as an associate (note 1.5).
Melville Bay Limited
In consideration for funding the 2012 exploration programme of North Atlantic Mining Associates Limited ("NAMA"), the Company earned 60% interest in Melville Bay Limited ("MBL"). The Company does not have control over MBL but has joint control along with North Atlantic Mining Associates Limited and International Media Projects Ltd through a contractual joint venture arrangement making MBL a jointly controlled entity. The book value of MBL has been fully written off in the 2017 financial year. Since then all the expenses related to this project are being written off as they occur. The entire interest in Melville Bay was sold on 29 June 2018 for £1, and an additional liability of £183,100 was accrued at 30June 2018 to reflect the Company's obligation to clear the site of the previous exploration camp and to remove residual drilling equipment and supplies. The Company has retained ownership of the intellectual property and data associated with its exploration activities in Greenland.
13 Exploration assets
Group
2018
£
2017
£
Cost
At 1 July
280,460
-
Additions
-
280,460
Disposals
-
-
At 30 June
280,460
280,460
Impairment
At 1 July
-
-
Written off during the year
(280,460)
-
At 30 June
(280,460)
-
Net book value
-
280,460
14 Available for sale financial assets
Group and Company
2018
£
2017
£
Opening balance
6,080,146
1,976,552
Additions
287,236
96,435
Disposals
(1,599,714)
(210,594)
Change in fair value
(62,282)
(42,668)
Reversal of previous impairment
-
4,260,421
Closing balance
4,705,386
6,080,146
Market value of investments
The market value as at 30 June 2018 of the Company's available for sale listed and unlisted investments was as follows:
2018
£
2017
£
Quoted on London AIM
9,323
61,606
Quoted on other foreign stock exchanges
4,310,170
-
Unquoted investments at fair value
385,893
6,018,540
4,705,386
6,080,146
Jupiter Mines
On 18 April 2018, Jupiter Mines ("Jupiter"), an Australian public company, has announced the full allocation of its A$240m Initial Public Offering, comprising a A$225m institutional allocation and an A$15m allocation in the general public offer. The IPO was significantly oversubscribed.
As part of the listing process, the Company, along with several other large institutional shareholders in Jupiter agreed to sell part of their holdings to ensure an adequate free float post-listing. Red Rock has now sold 4,700,000 shares, constituting 20.2% of its holding in Jupiter, and has agreed to retain the balance of its 18,524,914 shares in escrow for a period after listing. In consideration for this sale the Company has received A$1,842,400 after expenses (£1,000,027). The Company recognised a gain on sale of those shares in the amount of £903,079, that is included into the line Gain on sale of investments in the Consolidated Income Statement.
During the reporting year Jupiter has also completed two series of equal access share buy-backs. Total proceeds received by the Company from both buy-back distributions was £579,274. Part of the two share buy-back distributions recognised as dividends is included into the Dividend line in the Consolidated Income Statement in the amount of £243,830. The component of the distributions that represents capital return, less original cost of the sold shares, is recorded in the Gain on sale of investments in the Consolidated Income Statement in the amount of £293,701. Red Rock retains a 0.95% stake in the post IPO share capital of Jupiter.
14 Available for sale financial assets continued
Steelmin Limited
IAS 39 requires available for sale investments to be carried at fair value, therefore the Group performed a non-recurring fair value measurement at 30 June 2018. After repayment of the loan was completed, the final holding in Steelimin was identified to be a 22% interest in ordinary shares. In accordance with IFRS 13, where a price for an identical asset is not observable, the Group is required to measure fair value using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs.
The valuation technique the Company applied to value this available for sale financial asset is the salvage value method. It is based on the value of Steelmin's land and property, plant and equipment, that was independently valued in February 2017, and which was then further adjusted for the value of Steelmin's liabilities. Fair value measurement of Steelmin shares is based on a combination of observable inputs and significant unobservable inputs i.e. Level 3. There were no transfers between levels during the period in relation to Steelmin shares.
More information on Steelmin is disclosed in note 1.5.
The following table shows the changes to the fair value of the Company's Level 3 financial assets:
Group
2018
£
2017
£
At 1 July
-
Change in fair value of available for sale investment recognised in OCI - Steelmin shares
110,894
-
Change in fair value of available for sale investment recognised in OCI - Jupiter shares, which were admitted to ASX on 18 April 2018
-
4,260,421
At 30 June
110,894
4,260,421
Para Resources, Inc.
On 4 June 2018, the Company paid CAN$500,000 to subscribe for 2,500,000 shares in Para Resources, Inc.("Para") a private placement at CAN$0.20 per Para share, representing approximately 1.57% of the Para enlarged issued share capital. Each Para placement share subscribed for has an attached three-year warrant exercisable at CAN$0.30 per Para share. Para is a Canadian gold explorer and producer listed on the Toronto Venture Exchange. Details on the warrants are presented in note 15 below.
15 Financial instruments with fair value through profit and loss
Group
30 June
2018
£
30 June
2017
£
Warrants in Para Resources, Inc. ordinary shares
60,345
-
60,345
-
At 30 June 2018, the Company was holding 2,500,000 warrants in Para Resources, Inc. (2017: nil).
Warrant exercise price Number of
Fair value of individual
warrant
Total value of warrants held
Total Value of warrants held
CAD$ warrants granted Grant date Expiry date
CAD$
CAD$
£
0.30 2,500,000 4 June 2018 4 June 2021
0.042
105,000
60,345
The following information is relevant in the determination of the fair value of the warrants granted during the year:
Valuation model
Black-Scholes model
Warrant exercise price, CAD$
0.30
Weighted average share price at grant date, CAD$
0.2
Weighted average contractual life, years
3
Expected volatility, %
47.57%
Expected dividend growth rate, %
0
Risk-free interest rate (Canadian Government three-year bond), %
2.017
Calculation of volatility involves significant judgement by the Directors and it is based on the Para Resources, Inc trading data directly preceding the grant date.
16 Cash and cash equivalents
Group
30 June
2018
£
30 June
2017
£
Cash in hand and at bank
2,265,636
909,094
2,265,636
909,094
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:
30 June
2018
£
30 June
2017
£
Cash in hand and at bank
2,265,636
909,094
2,265,636
909,094
Company
30 June
2018
£
30 June
2017
£
Cash in hand and at bank
2,263,288
905,135
2,263,288
905,135
17 Non-current receivables
Group and Company
2018
£
2017
£
Amounts due from associates
3,599,439
3,206,177
MFP sale proceeds
1,301,757
1,337,578
4,901,196
4,543,755
Non-current related party receivables of £3,599,439 (2017: £3,206,176) are recoverable from Mid Migori Mining Company Limited under the terms of the joint venture, purchase and sale agreement entered into in August 2009 as detailed in note 29. The amount is unsecured and has no fixed repayment date. Interest is charged at 8% per annum. Management have considered the recoverability of this debt and given
the recent announcement as to a settlement of judicial proceedings in Kenya, no further impairment is considered necessary (2017: £nil). More details are given in note 1.5, "Significant accounting judgements, estimates and assumptions".
The MFP sale proceeds represent the fair value of the deferred consideration receivable for the sale of MFP. The fair value was estimated based on the consideration offered by the buyer adjusted to its present value based on the timing for which the consideration is expected
to be received. The most significant inputs are the offer price per tranches, discount rate and estimated royalty stream. The estimated royalty stream takes into account current production levels, estimates of future production levels and gold price forecasts.
18 Other receivables
Group
Company
2018
£
2017
£
2018
£
2017
£
Current trade and other receivables
Prepayments
56,353
221,070
56,353
135,073
Related party receivables:
- due from subsidiaries
-
-
236,136
465,145
- due from associates
225
225
225
225
- due from Regency Mines plc
203,498
118,740
203,498
118,740
- due from key management
3,096
3,096
3,096
3,096
Short-term loan to related party:
- due from a director of a JV partner
37,397
-
37,397
-
Short-term loan to Steelmin
-
2,421,831
-
2,421,831
Other receivables
634,838
1,437,918
546,847
1,432,679
Total
935,407
4,202,880
1,083,552
4,576,789
19 Trade and other payables
Group
Company
2018
£
2017
£
2018
£
2017
£
Trade and other payables
1,237,089
1,191,741
1,233,619
1,187,968
Accruals
408,078
332,540
408,078
332,540
Related party payables:
- due to key management
-
29,384
-
29,384
Trade and other payables
1,645,167
1,553,665
1,641,697
1,549,892
Short-term borrowings
1,008,825
3,258,608
1,008,825
3,258,608
Total
2,653,992
4,812,272
2,650,522
4,808,500
During the year, the Company issued 1,000,Convertible Loan Notes ("CLN") for the total amount of £1,000,000. The Notes were issued at par and are convertible into the Company's ordinary shares at a price of 0.8 pence per share. Each Note has a denomination of £1,000 and is thus convertible into 125,000 new ordinary shares in the Company. Conversion may take place at any time up to the final redemption date. Each Note holder also received 62,500 Warrants for each Note subscribed. Each Warrant entitles the holder to subscribe for Shares at any time up to the date of expiry at a price of 1.4 pence per Share. The interest rate on the Notes is 10% per annum, accruing monthly. The Notes were due for redemption or conversion into the Company's new ordinary shares with a final redemption date of 19 December 2018. The Warrants were issued on the basis of 1 Warrant for every 2 Shares to be issued on conversion, with an exercise price of 1.4 pence per Share and a life to 30 April 2019.
During the year, 50 CLNs for the total value of £50,000 and accumulated interest of £1,205 have been converted by the holders and has in consequence the Company issued 6,400,624 new ordinary shares of 0.01p each in the Company at a price of 0.8p per Ordinary Share.
On 2 November 2018, the Company announced that Holders of £575,000 principal value of Notes, out of £950,000 of Notes still outstanding, have to date applied to renew the Notes for twelve months to a new final redemption date of 19 December 2019 on the same terms. The Warrants of renewing Noteholders have similarly been extended on the same terms by one year to expire on 30 April 2020. More details on the extension are given in the note 26.
In the previous reporting period, the Company has borrowed USD4,400,000 in order to make a loan to Steelmin Ltd to fund refurbishment of its ferrosilicon smelter in Jacje, Bosnia. The Company borrowed USD4,400,000 from a group of institutional investors on a secured basis bearing interest at 13% pa with a renewal option for a further eight months for a 5% fee. The Company further issued 20,000,000 warrants with a
24-month life exercisable at 2.2 pence per share. The loan had a three-month repayment holiday and 75% of the loan was to be amortised over eight months leaving a 25% bullet at 12 months. A 7.5% arrangement fee was agreed with 4% to be withheld at closing and 3.5% at the earlier of an exit from the Company's stake in Jupiter Mines or 31 December 2017, for which additional USD100,000 accrual was made.
Steelmin repaid its loan to the Company on 21 February 2018 in full. Total amount repaid to Red Rock was €4,314,688, and post repayment Red Rock retained a 22% holding in Steelmin Ltd as well as a board seat. Simultaneously with this repayment Red Rock has repaid USD3,000,899 in full settlement of its obligations to the institutional investors that provided the back to back financing enabling the loan
to Steelmin. More details on the investment into equity interest in Steelmim Limited are given in note 14.
20 Share capital of the Company
The share capital of the Company is as follows:
Issued and fully paid
2018
£
2017
£
536,012,471 (2017: 476,037,740) ordinary shares of £0.0001 each
53,601
47,603
2,371,116,172 deferred shares of £0.0009 each
2,134,005
2,134,005
6,033,861,125 A deferred shares of £0.000096 each
579,251
579,251
As at 30 June
2,766,857
2,760,859
Movement in ordinary shares
Number
Nominal
£
As at 30 June 2016 - ordinary shares of £0.0001 each
392,325,740
39,232
Issued 24 August 2016 at 0.4 pence per share
75,000,000
7,500
Issued 5 April 2017 at 0.6 pence per share
8,712,000
871
As at 30 June 2017 - ordinary shares of £0.0001 each
476,037,740
47,603
Issued 6 October 2017 at 0.625 pence per share
2,880,000
288
Issued 30 October 2017 at 0.6 pence per share
4,500,000
450
Issued 21 December 2017 at 0.8 pence per share
15,625,000
1,563
Issued 20 February 2018 at 0.65 pence per share
4,615,384
461
Issued 9 March 2018 at 0.8 pence per share
6,400,624
640
Issued 3 April 2018 at 0.6 pence per share
3,556,800
356
Issued 13 April 2018 at 0.66 pence per share
21,315,971
2,132
Issued 20 April 2018 at 0.84 pence per share
1,080,952
108
As at 30 June 2018 - ordinary shares of £0.0001 each
536,012,471
53,601
Subject to the provisions of the Companies Act 2006, the deferred shares may be cancelled by the Company, or bought back for £1 and then cancelled. The deferred shares are not quoted and carry no rights whatsoever.
Warrants
At 30 June 2018, the Company had 289,432,432 warrants in issue (2017: 240,778,371) with a weighted average exercise price of 1.10 pence (2017: 0.99 pence). Out of those, 123,599,099 (2017: 97,023,801) have market performance conditions that accelerate the expiry date.
Weighted average remaining life of the warrants at 30 June 2018 was 186 days (2017: 434 days). All the warrants, except for the last issue of 19,843,750 warrants, were issued by the Group to its shareholders in the capacity of shareholders and therefore are outside of IFRS 2 scope.
Group and Company
2018
number of warrants
2017
number of warrants
Outstanding at the beginning of the period
240,778,371
145,778,371
Granted during the period
90,156,250
95,000,000
Exercised during the period
(22,396,923)
-
Lapsed during the period
(19,105,266)
-
Outstanding at the end of the period
289,432,432
240,778,371
During the year ended 30 June 2018 the Company had the following warrants to subscribe for shares in issue:
Grant date
Expiry date
Warrant exercise price
£
Number of warrants
3 Sept 2015
3 Sept 2018
0.0090
8,333,333
13 May 2016
13 Nov 2018
0.0084
95,942,849
22 Aug 2016
22 Aug 2018
0.0080
75,000,000
21 Jun 2017
20 Jun 2019
0.0220
20,000,000
19 Oct 2017
30 Apr 2019
0.0140
62,500,000
21 Dec 2017
20 Dec 2019
0.0140
7,812,500
23 Feb 2018
30 Apr 2019
0.0140
19,843,750
Total warrants in issue at 30 June 2018
289,432,432
The aggregate fair value related to the share warrants granted during the reporting period was £nil (2017: £nil).
Capital management
Management controls the capital of the Group in order to control risks, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern.
The Group's debt and capital includes Ordinary share capital and financial liabilities, supported by financial assets (note 23). There are no externally imposed capital requirements.
Management effectively manages the Group's capital by assessing the Group's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.
There have been no changes in the strategy adopted by management to control the capital of the Group since the prior year.
21 Reserves
Share premium
The share premium account represents the excess of consideration received for shares issued above their nominal value net of transaction costs.
Foreign currency translation reserve
The translation reserve represents the exchange gains and losses that have arisen from the retranslation of overseas operations.
Retained earnings
Retained earnings represent the cumulative profit and loss net of distributions to owners.
Available for sale trade investments reserve
The available for sale trade investments reserve represents the cumulative revaluation gains and losses in respect of available for sale trade investments.
Associate investments reserve
The associate investments reserve represents the cumulative share of gains and losses of associates recognised in the statement of other comprehensive income.
Share-based payment reserve
The share-based payment reserve represents the cumulative charge for options granted, still outstanding and not exercised.
22 Share-based payments
During the year 19,843,750 warrants were issued as introducers fees for broker's, to which a finance charge has not been included on grounds of materiality. Details of those warrants are disclosed in note 20.
Employee share options
In prior years, the Company established employee share option plans to enable the issue of options as part of the remuneration of key management personnel and Directors to enable them to purchase Ordinary shares in the Company. Under IFRS 2 "Share-based Payments", the Company determines the fair value of the options issued to Directors and employees as remuneration and recognises the amount as an expense in the statement of income with a corresponding increase in equity.
At 30 June 2018 and June 2017, the Company had outstanding options to subscribe for Ordinary shares as follows:
Options issued 14 June 2016 exercisable at 0.45 pence per share expiring 29 January 2022
Number
Options issued 13 January 2017 exercisable at 0.8p per share, expiring on 13 January 2023
Number
Total Number
A R M Bell
5,760,000
12,000,000
17,760,000
S Kaintz
4,680,000
11,000,000
15,680,000
M C Nott
900,000
-
900,000
S Quinn
900,000
3,000,000
3,900,000
Employees
1,080,000
9,000,000
10,080,000
Total
13,320,000
35,000,000
48,320,000
Company and Group
2018 2017
Weighted
Weighted
average
average
exercise
exercise
Number of
price
Number of
price
options
pence
options
pence
Outstanding at the beginning of the period
48,320,000
0.70
13,320,000
0.45
Granted during the period Forfeited during the period Exercised during the period
Lapsed during the period
-
-
-
-
-
-
-
-
35,000,000
-
-
-
0.80
-
-
-
Outstanding at the end of the period
48,320,000
0.70
48,320,000
0.70
Of them vested and exercisable
24,160,000
0.70
24,160,000
0.70
No share options were granted by the Company in the reporting year. During the financial year ended 30 June 2017, 35,000,000 options were issued at an exercise price of 0.8 pence and they expire on 13 January 2023. The grant was structured in four tranches, first tranche vested immediately and the other three tranches had time and market performance vesting conditions.
The weighted average fair value of each option granted during the year was nil pence (2017: 0.236 pence).
The exercise price of options outstanding at 30 June 2018 ranged between 0.45p and 0.8p (2017: 0.45p-0.8p). Their weighted average contractual life was 4.28 years (2017: 5.28 years).
22 Share-based payments continued
The following information is relevant in the determination of the fair value of options granted during the year under equity-settled share-based remuneration schemes:
Granted on 13 January 2017
Granted on 14 June 2016
Option pricing model used
Black-Scholes model
Black-Scholes model
Weighted average share price at grant date, pence
0.59
0.48
Exercise price, pence
0.80
0.45
Weighted average contractual life, months
66.50
55.00
Expected volatility, %
51.42
112.00
Expected dividend growth rate, %
0
0
Risk-free interest rate, %
0.579
0.679
Share-based remuneration expense related to the share options grant is included in the administration expenses line in the consolidated income statement in the amount of £3,442 (2017: £97,600).
Share Incentive Plan
In January 2012 the Company implemented a tax efficient Share Incentive Plan, a government approved scheme, the terms of which provide for an equal reward to every employee, including Directors, who have served for three months or more at the time of issue. The terms of the plan provide for:
• each employee to be given the right to subscribe any amount up to £150 per month with Trustees who invest the monies in the Company's shares;
• the Company to match the employee's investment by contributing an amount equal to double the employee's investment ("matching shares"); and
• the Company to award free shares to a maximum of £3,600 per employee per annum.
The subscriptions remain free of taxation and national insurance if held for five years.
All such shares are held by SIP Trustees and the Ordinary shares cannot be released to participants until five years after the date of the award. During the financial year, a total of 6,436,800 free, matching and partnership shares were awarded (2017: 8,712,000) with a fair value of
0.6-0.625 pence (2017: 0.375 pence) resulting in a share-based payment charge of £32,227 (2017: £45,132), included in the administration expenses line in the income statement.
23 Financial instruments
23.1 Categories of financial instruments
The Group and Company hold a number of financial instruments, including bank deposits, short-term investments, loans and receivables, borrowings and trade payables. The carrying amounts for each category of financial instrument, measured in accordance with IAS 39 as detailed in the accounting policies, are as follows:
Group
Group
Company
Company
2018
2017
2018
2017
30 June
£
£
£
£
Financial assets
Available for sale financial assets at fair value through OCI
Unquoted equity shares
385,894
6,018,540
385,894
6,018,540
Quoted equity shares
4,319,492
61,606
4,319,492
61,606
Total available for sale financial assets at fair value through OCI
4,705,386
6,080,146
4,705,386
6,080,146
Financial assets FVTPL (Para warrants)
60,345
-
60,345
-
Total financial assets carried at fair value through profit and loss
60,345
-
60,345
-
Cash and cash equivalents
2,265,636
909,094
2,263,288
905,135
Loans and receivables
Non-current receivables
4,901,196
4,543,755
4,901,196
4,543,755
Other receivables - current
935,407
4,202,879
1,083,553
4,576,789
Total loans and receivables carried at amortised cost
5,836,603
8,746,634
5,984,748
9,120,544
Total financial assets
12,867,970
15,735,874
13,013,767
16,105,825
Total current financial assets
3,261,388
5,111,973
3,407,185
5,481,924
Total non-current financial assets
9,606,582
10,623,901
9,606,582
10,623,901
Financial liabilities
Short-term borrowings
1,008,825
3,258,608
1,008,825
3,258,608
Trade and other payables, excluding accruals
1,237,089
1,221,125
1,233,618
1,217,350
Total current financial liabilities
2,245,914
4,479,733
2,242,444
4,475,958
Other receivables and trade payables
Management assessed that fair values of other receivables and trade and other payables approximate their carrying amounts largely due to the short-term maturities of these instruments.
Non-current receivables
Long-term fixed-rate receivables are evaluated by the Group based on parameters such as interest rates, recoverability and risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for any expected losses on these receivables.
Loans and borrowings
The carrying value of interest-bearing loans and borrowings is determined by calculating present values at the reporting date, using the issuer's borrowing rate.
The carrying value of current financial liabilities in the Company is not materially different from that of the Group.
23 Financial instruments continued
23.2.1 Fair values of financial assets and liabilities
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows:
• Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities;
• Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and
• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.
The carrying amount of the Company's financial assets and liabilities is not materially different to their fair value. The fair value of financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Where a quoted price in an active market is available, the fair value is based on the quoted price at the end of the reporting period. In the absence of a quoted price in an active market, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.
The following table provides the fair value measurement hierarchy of the Group's assets and liabilities.
Group and Company
Level 1
Level 2
Level 3
Total
30 June 2018
£
£
£
£
Available for sale financial assets at fair value through OCI
- Unquoted equity shares
-
-
385,894
385,894
- Quoted equity shares
4,319,492
-
-
4,319,492
FVTPL (Para warrants)
-
-
60,345
60,345
Group and Company
Level 1
Level 2
Level 3
Total
30 June 2017
£
£
£
£
Available for sale financial assets at fair value through OCI
- Unquoted equity shares
-
6,018,540
-
6,018,540
- Quoted equity shares
61,606
-
-
61,606
23.3 Financial risk management policies
The Directors monitor the Group's financial risk management policies and exposures and approve financial transactions.
The Directors' overall risk management strategy seeks to assist the consolidated Group in meeting its financial targets, while minimising potential adverse effects on financial performance. Its functions include the review of credit and future cash flow requirements.
Specific financial risk exposures and management
The main risks the Group are exposed to through its financial instruments are credit risk and market risk, consisting of interest rate risk, liquidity risk, equity price risk and foreign exchange risk.
Credit risk
Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss for the Group.
Credit risk is managed through the maintenance of procedures (such procedures include the utilisation of systems for the approval, granting and renewal of credit limits, regular monitoring of exposures against such limits and monitoring of the financial liability of significant customers and counterparties), ensuring, to the extent possible, that customers and counterparties to transactions are of sound creditworthiness.
Such monitoring is used in assessing receivables for impairment.
Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating, or in entities that the Directors have otherwise cleared as being financially sound.
Other receivables which are neither past due nor impaired are considered to be of high credit quality.
23.3 Financial risk management policies continued
The consolidated Group does have a material credit risk exposure with Mid Migori Mining Company Limited, an associate of the Company. See note 1.5, 'Significant accounting judgements, estimates and assumptions' and note 17 for further details.
Liquidity risk
Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:
• monitoring undrawn credit facilities;
• obtaining funding from a variety of sources; and
• maintaining a reputable credit profile.
The Directors are confident that adequate resources exist to finance operations for commercial exploration and development and that controls over expenditure are carefully managed.
Management intend to meet obligations as they become due through ongoing revenue streams, the sale of assets, the issuance of new shares, the collection of debts owed to the Company and the drawing of additional credit facilities.
Market risk
Interest rate risk
The Company is not exposed to any material interest rate risk.
Equity price risk
Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors for commodities, but also include political, economic, social, technical, environmental and regulatory factors.
Foreign currency risk
The Group's transactions are carried out in a variety of currencies, including Sterling, Australian Dollar, US Dollar, Kenyan Shilling and Euro.
To mitigate the Group's exposure to foreign currency risk, non-Sterling cash flows are monitored. The Group does not enter into forward exchange contracts to mitigate the exposure to foreign currency risk as amounts paid and received in specific currencies are expected to largely offset one another and the currencies most widely traded in are relatively stable.
23 Financial instruments continued
These assets are denominated in the following currencies:
Group
30 June 2018
GBP
£
AUD
£
USD
£
EUR
£
CAD
£
Other
£
Total
£
Cash and cash equivalents
460,575
2,803
1,799,774
-
-
2,484
2,265,636
Other receivables
578,421
-
255,630
-
-
101,355
935,407
Available for sale investments
9,323
4,050,886
275,000
110,894
259,284
-
4,705,386
Fair value through profit and loss - warrants
-
-
-
-
60,345
-
60,345
Non-current receivables
3,599,439
-
1,301,757
-
-
-
4,901,196
Trade and other payables, excluding accruals
384,256
2,460
46,283
432
779,704
23,953
1,237,089
Short-term borrowings
1,008,825
-
-
-
-
-
1,008,825
Group
GBP
AUD
USD
EUR
CAD
Other
Total
30 June 2017
£
£
£
£
£
£
£
Cash and cash equivalents
27,304
225
877,696
-
-
3,869
909,094
Other receivables
725,727
97
1,050,854
2,421,831
-
4,371
4,202,880
Available for sale investments
61,606
5,743,540
275,000
-
-
-
6,080,146
Non-current receivables
3,070,862
-
1,337,578
-
-
135,315
4,543,755
Trade and other payables, excluding accruals
213,885
267
161,171
-
-
845,802
1,221,125
Short-term borrowings
-
-
3,258,608
-
-
-
3,258,608
Company
GBP
AUD
USD
EUR
CAD
Other
Total
30 June 2018
£
£
£
£
£
£
£
Cash and cash equivalents
460,575
2,803
1,799,773
-
-
135
2,263,288
Other receivables
578,421
-
255,631
-
-
249,501
1,083,553
Available for sale investments
9,322
4,050,886
275,000
110,894
259,284
-
4,705,386
Fair value through profit and loss - warrants
-
-
-
-
60,345
-
60,345
Non-current receivables
3,599,439
-
1,301,757
-
-
-
4,901,196
Trade and other payables, excluding accruals
384,256
2,460
46,283
432
779,704
20,555
1,233,691
Short-term borrowings
1,008,825
-
-
-
-
-
1,008,825
Company
GBP
AUD
USD
EUR
CAD
Other
Total
30 June 2017
£
£
£
£
£
£
£
Cash and cash equivalents
27,304
-
877,696
-
-
135
905,135
Other receivables
940,601
-
964,856
2,421,831
-
249,501
4,576,789
Available for sale investments
61,606
5,743,540
275,000
-
-
-
6,080,146
Non-current receivables
3,070,862
-
1,337,578
-
-
135,315
4,543,755
Trade and other payables, excluding accruals
213,885
-
161,171
-
-
842,296
1,217,350
Short-term borrowings
-
-
3,258,608
-
-
-
3,258,608
Exposures to foreign exchange rates vary during the year depending on the volume and nature of overseas transactions.
24 Reconciliation of liabilities arising from financing activities
30 June 2017
Non-cash flow Cash flows Forex movement
Non-cash flow Interest and
Non-cash flow arrangement fee Conversion accreted
30 June 2018
Loan from institutional investors
3,258,608
(3,641,437) (53,166)
- 435,995
-
Convertible notes
-
967,000 -
(51,205) 93,030
1,008,825
3,258,608
2,674,437 (53,166)
(51,205) 529.025
1,008,825
25 Operating lease commitments
On 5 April 2013, Red Rock Resources plc entered into a joint lease agreement with Regency Mines plc and Greatland Gold plc at Ivybridge House, 1 Adam Street, London WC2N 6LE. The lease was non-cancellable until 1 December 2017. The Company let the lease expire on
1 December 2017 and moved into new offices.
On 21 August 2017, the Company entered into a new lease agreement for office space with WeWork Aldwych House. The initial lease runs from 1 October 2017 through 30 September 2019 and is non-cancellable during this period. Thereafter the lease can be terminated by giving one full calendar month notice.
The Group and Company's total of future minimum lease payments under non-cancellable operating leases are as presented in the table below:
Group
Group
Company
Company
2018
2017
2018
2017
£
£
£
£
Not later than one year
30,114
12,069
30,114
12,069
Later than one year and not later than five years
7,560
-
7,560
-
Later than five years
-
-
-
-
Total non-cancellable operating lease commitments at 30 June
37,674
12,069
37,674
12,069
26 Significant agreements and transactions
The following are the significant agreements and transactions recently undertaken having an impact in the year under review and for the period to 22 November 2018. For the sake of completeness and of clarity, some events after the reporting period are included here and in note 28.
Financing
On 10 November 2017 the Company announced the issuance of up to £1,000,000 of convertible loan notes, with the first tranche closing at
£495,000 and the balance closing by 14 December 2017. The notes carry a 10% interest rate and are convertible at a premium to the share price at issuance, being convertible at £0.008. Each note holder also received warrants equating to 62,500 warrants for each £1,000 loan note and which allows the warrant holder to subscribe for ordinary shares in the Company at a price of £0.014 until 19 December 2019. During the course of the year £50k of notes were converted leaving a balance of £950,000 due for repayment or refinancing in Q4 2018.
On 21 December 2017, the Company raised £125,000 by way of an issue of 15,625,000 new ordinary shares of 0.01 pence each in the Company at a price of 0.80 pence per share. For every two shares, each subscriber was issued with one warrant exercisable at a price of
1.6 pence per share and expiring on 21 December 2019. The proceeds of the placing were applied towards working capital and strengthening the Company's balance sheet.
Steelmin
On 23 June 2017 the Company announced that it had entered into back to back financing agreements under which it would fund Steelmin Limited to complete the refurbishment and recommissioning of a ferrosilicon smelter complex in Jajce, Bosnia and to simultaneously acquire an equity interest in Steelmin.
In order to fund Steelmin's refurbishment, Red Rock issued an eight-month secured loan of €3,848,000 bearing 13% interest and extendable for a further eight months for a 5% renewal fee. The Company received a 7.5% arrangement fee with 4% due at close and the balance of 3.5% due after eight months.
For putting this loan in place Red Rock was issued 16% of the fully diluted equity of Steelmin. Red Rock also received a board seat and one observer seat, with the second seat converting to a full board position if the loan was extended. For each month following a holiday period lasting until 1 September 2017 the Company received a further 1% of the fully diluted equity of Steelmin on a predetermined schedule up to a maximum of 30%.
26 Significant agreements and transactions continued
To fund the loan to Steelmin the Company borrowed USD4,400,000 from a group of institutional investors on a secured basis bearing interest at 13% pa with a renewal option for a further eight months for a 5% fee. The Company further issued 20,000,000 warrants with a 24-month life exercisable at 2.2 pence per share. The loan had a three-month repayment holiday and 75% of the loan is to be amortised over eight months leaving a 25% bullet at 12 months. A 7.5% arrangement fee was agreed with 4% to be withheld at closing and 3.5% at the earlier of an exit from the Company's stake in Jupiter Mines or 31 December 2017.
Additional 1% interests in Steelmin were issued to the Company in September, October, November, and December 2017 as well as in January and February 2018.
On 21 February 2018 Steelmin repaid in full €4,314,688 outstanding to Red Rock under the secured loan that had been previously issued on 23 June 2017 to fund the refurbishment and recommissioning of a ferrosilicon smelter complex in Jajce, Bosnia. The Company also retained a 22% fully diluted shareholding in Steelmin under the conditions of the loan.
Jupiter Mines
On 11 September 2017, Jupiter Mines Ltd, where the Company held a 1.2% stake, announced its plans to make a USD25m distribution to its shareholders. On 5 December 2017 Red Rock announced that it had received USD279,945 following its participation in this Jupiter Mines distribution. On 22 January 2018 Jupiter Mines announced its intention to distribute a further USD42m to its shareholders. On 19 March 2018 Red Rock announced the completion of this equal access buy-back, and that it had received USD501,410 as a result of its participation.
On 19 March 2018 Jupiter announced its intention to seek relisting on the Australian Stock Exchange, which would offer existing shareholders the potential to partially exit their investments at the time of the IPO. Accordingly, on 17 April 2018 Red Rock announced that Jupiter Mines had completed its AUD240m IPO and that the relisting had been oversubscribed. As part of the listing process, Red Rock sold 4,700,000 shares, constituting 20.2% of its holding in Jupiter, and agreed to retain the balance of its 18,524,914 shares in escrow for a period after listing. This sale of Jupiter shares resulted in a further AUD1,842,400 of proceeds to the Company, with Red Rock retaining a 0.95% stake in the post IPO share capital of Jupiter.
On 18 June 2018 Jupiter Mines announced its intention to make its first public distribution in the form of ZAR1.5bn, well in excess of Jupiter's previously stated 70% distribution policy in the IPO prospectus. Subsequently, on 17 September 2018 Red Rock announced that it had received £508,000 in cash following the 14.5% half-year dividend distribution by Jupiter Mines. This brought the total proceeds from the Company's investments in Jupiter Mines to USD3.99m since 2017. Simultaneously, Jupiter announced that it continued to plan to make dividend distributions to shareholders going forward on a biannual basis.
Democratic Republic of Congo Copper-Cobalt due diligence
On the 27th of September 2017 the Company announced that it has entered into a conditional agreement with Cobalt Blue Limited, a private Isle of Man company ("COB"), to acquire an interest in a Joint Venture company ("JVCo") to be newly formed for the exploitation of four or five copper/cobalt tailings near Kolwezi in the Democratic Republic of Congo ("Agreement" and "DRC"). Red Rock had 40 days for due diligence and an exclusivity period of 45 days. In the event that Red Rock elected to proceed with the transaction following due diligence and fulfilment or waiver of the conditions, it will acquire 26.25% of JVCo for:
• Cash payment of USD700,000
• £490,000 payable in Red Rock shares ("Shares") at 0.65 pence a share, with attached 5 for 3 three-year warrants to subscribe for new Shares at 1p ("Warrants")
• Commitment by Red Rock to fund USD1.2m of exploration expenditure over 18 months to produce a bankable feasibility study ("BFS") on Kamirombe, and thereafter pro rata.
• Following completion of a BFS, Red Rock will have six months within which to elect to pay USD1m to farm into a further 26.25% of the JVCo, bringing its interest to 52.5%
On 3 November 2017 the Company announced that the due diligence period had been extended by 30 days to allow additional time to complete the planned drilling and laboratory analysis in order to determine whether to proceed with the investment and JVCo.
On 31 January 2018 the due diligence period was further extended until 16 March 2018.
On 29 March 2018 the Company announced that its prospective joint venture partners have engaged a drilling contractor to conduct work on the three copper/cobalt tailings dams not tested so far. Drilling and sampling work scheduled by Cobalt Blue to be completed by
30 April 2018, with the objective of defining a JORC (2012) resource report and final due diligence report to be received in May 2018 following laboratory analysis of the auger and bulk samples and receipt of assays. The due diligence period was further extended to 31 May 2018
to allow sufficient time for this work to be completed.
Four Points Mining
On 14 April 2015 the Company executed a Sale Agreement with Colombia Milling Limited ("CML"), a private company registered in Belize. CML is the nominee of Nicaragua Milling Company ("NML"), with which Red Rock signed a Letter of Intent on 12 May 2014. CML is represented by James Randall Martin and Geoff Hampson, and the entire share capital of CML has as of early 2016 been vended into Para Resources Ltd, a public vehicle listed on the TSX Venture Exchange. Completion of the Sale Agreement took place on 13 May 2015. Under the Sale Agreement, the Company sold, and CML bought, (a) a 100% interest in American Gold Mines Limited ("AGM"), which owns a 50.002% interest in Four Points Mining SAS ("FPM"), the owner of the El Limón mine, and (b) its loans to FPM, for a total consideration of USD5,000,000. CML also purchased a 11.2% stake from a minority shareholder in the business. Payment of the consideration of USD5,000,000 occurs in tranches.
Additional payments of up to USD2,000,000 will be paid in the form of a 3% net smelter return royalty ("First NSR") payable quarterly and as of 30 June 2017 USD31,841 of the USD2,000,000 has been paid to the Company. A final royalty stream of up to USD1,000,000 will be paid following the payment in full of the First NSR in the form of a 0.5% net smelter return royalty ("Second NSR") payable quarterly on gold production from FPM.
A further payment of USD1,000,000 was satisfied by the issuance by CML to Red Rock at Completion of a three-year convertible 5% promissory note ("PN"), secured on the acquired shares in AGM and providing that during its currency CML will procure that AGM does not alienate or dispose of its interest in FPM. Security for the PN is held in the form of a charge over 100% of the shares in AGM and conversion was possible following any listing of CML or vend of the assets into a public vehicle. As of 05 April 2017, the Company has agreed to drop all claims of conversion in exchange for an early partial repayment of the loan note and a broadening of the definition of what production is
covered by the First NSR and Second NSR. In particular both the First NSR and Second NSR will be payable on all gold production revenues of the plant at El Limon, and as such will include both ore mined locally as well as ore brought in from third party sources.
As of 12 June 2017, the early repayment of USD225,000 had been made, leaving the balance due with interest in May 2018.
On 7 June 2018 Red Rock announced that it had received the final payment of USD750,000 plus interest, on behalf of its subsidiary Colombia Milling Limited, in respect of the USD1,000,000 Promissory Note ("PN") held by Red Rock as part of the consideration for the sale of the
El Limon mine in 2015 from Para Resources, Inc. (TSXV:PBR)("Para").
Red Rock has applied CAN$500,000 of the amount due to a subscription for 2,500,000 shares in the Para private placement at CAN$0.20 per Para share, representing approximately 1.57% of the enlarged issued share capital. Each Para placement share subscribed for has an attached three-year warrant exercisable at CAN$0.30 per Para share.
Gold Exploration Licences in Kenya
On 7 May 2015, the Company announced that its partner, Mid Migori Mining Ltd ("MMM"), has been advised by the Ministry of Mining of the termination of its Special Licences numbers 122 and 202 ("the SLs"). MMM intends to challenge this purported termination. MMM also continues to have an application for a Mining License over a part of the SLs, submitted in 2012 pending at the Ministry.
On 26 June 2015, the Company announced that it has been granted leave to institute judicial review proceedings and a stay in relation to the purported termination of the Special Licences covering the Migori Gold Project of its partner Mid Migori Mining Ltd ("MMM"). Red Rock has now executed an agreement with Kansai Mining Corporation Ltd ("Kansai"), the other shareholder in MMM, pursuant to which Red Rock's farm-in agreement is replaced by arrangements under which any interest in the Migori Gold Project or the other assets of MMM that may
be retained by or granted to MMM or Red Rock shall be shared in the ratio 75% to Red Rock and 25% to Kansai. Kansai's interest will be carried up to the point of an Indicated Mineral Resource of 2m oz gold. Red Rock is to have full management rights and the conduct of legal proceedings on behalf of both MMM and itself. Red Rock at the same time surrenders all its share interest in Kansai and pays £25,000 to Kansai, with a further £25,000 due upon recovery of the Migori Gold Project.
On 15 June 2018 the Company announced that a revision to earlier agreements with Kansai Mining Corporation was executed, and that the effect of the revision is that Kansai exchanges its 25% carried interest in the mineral assets of Mid Migori Mining in exchange for a USD50,000 payment, leaving Red Rock with a 100% interest in the assets. In the event of a renewal or reissue of the licences Red Rock will make within three months further payments of USD2.5m in cash, a USD1.0m promissory note payable 15 months after issue, and £500,000 of warrants in Red Rock shares at a price 20% above the average closing prices three days prior to issue.
During the year under review the Company continued to work to protect its interests and those of its local partner in Kenya via its application for judicial review in relation to its Kenyan licences.
Shoats Creek
On 8 May 2018 the Company's partner in the field, Mayan Energy, announced its intention to relinquish its 50% working interest in Shoats Creek and as such the Company intends to write-off its interest in the project.
27 Related party transactions
• On 5 April 2013, Regency Mines plc, Red Rock Resources plc where Andrew Bell currently is a Director and Greatland Gold plc, where Andrew Bell previously was a Director, entered into a joint lease at Ivybridge House, 1 Adam Street, London WC2N 6LE. The total cost to the Company for these expenses during the year was £17,397 (2017: £121,046), of which £14,497 represented the Company's share of the office rent and the balance is services provided (2017: £60,523). This agreement lapsed at expiration on 1 December 2017.
• The costs incurred on behalf of the Company by Regency Mines plc are invoiced at each month end and settled on a quarterly basis. By agreement, the Company pays interest at the rate of 0.5% per month on all balances outstanding at each month end until they are settled. The total charge for the year was £45,699 (2017: £44,646). Of this, £14,096 was outstanding at 30 June 2018.
• The costs incurred by the Company on behalf of Regency Mines plc were £42,200 (2017: £15,869) in relation to shared services during the year. Of this, £13,376 was outstanding at 30 June 2018.
• Related party receivables and payables are disclosed in notes 18 and 19.
• The Company held 1,695,000 shares (0.21%) in Regency Mines plc as at 30 June 2018, at 30 June 2017 and same number of shares at 22 November 2018.
• The direct and beneficial interests of the Board in the shares of the Company as at 30 June 2018 and at 30 June 2017 are shown in the Director's Report.
• The key management personnel are the Directors and their remuneration is disclosed within note 8.
28 Events after the reporting period
Renewal of Convertible Loan Notes
On 2 November 2018 the Company announced that owners of £575,000 of existing convertible loan notes have applied for note renewal and have agreed to extend the term of their notes a further twelve months, with a new final redemption date of 19 December 2019 on the same terms. These notes are convertible into Red Rock shares at a price of £0.008 and carry an interest rate of 10% per annum accruing monthly.
Democratic Republic of Congo Copper-Cobalt projects
On 30 August 2018 Red Rock announced progress in relation to the conditional agreement first announced on 26 September 2017, and supplemented by further announcements dated 29 March 2018 and 15 June 2018, to acquire an interest in a Joint Venture company to be formed for the exploitation of copper/cobalt tailings and dumps near Kolwezi in the Democratic Republic of Congo. Pursuant to the Agreement Red Rock made the initial payment of $50,000, and conducted due diligence, including drilling and testwork.
Minor adjustments have been made to the Agreement to reflect the passage of time and the opportunity cost borne by Red Rock which have the effect of slightly reducing the overall cost and simplifying the transaction. The immediate counterparty has been changed from an Isle of Man company to a Congolese company, Bring Minerals SAU ("BRO").
On 22 November 2018 the Company announced that suitable tenements list has been finalised and comprises three permits in Katanga segment of the Central African Copperbelt. These are the Musonoi PE4962 equivalent to 1.683km2 just 3km west of Kolwezi; the Kamukongo block PE663 some 5.268km2 in area and <20km southeast of Kolwezi, and the 3.503km2 Kasombo South permit (PE2360) just west of Lubumbashi. Following this, Red Rock decided to proceed with the JV agreement and make the initial cash payment of $250,000, with further ~$2m payments in cash and shares linked to project milestones.
Completion Summary:
• Red Rock has made the initial cash payment of $250,000.
• Cash payments of $250,000 and £490,000, the latter payable in Red Rock shares ("Shares") at 0.7 pence a share with attached 1-for-1 three-year warrants to subscribe for new Shares at 1p, will be made upon execution of the detailed documents governing the conduct of the joint venture.
Post-Completion Obligation:
• Further payments will be made in accordance with the announcement of 30 August 2018, being $200,000 upon the earliest of (a) confirmation of economic mineralisation to the satisfaction of the parties (b) definition of a compliant Resource at Indicated or above status or of a Reserve (c) decision to mine and $1m as a post-completion obligation if and when commercial production begins.
• Formation of a joint venture company between Red Rock, BRO and local partner Vumilia Pendeza SA in the proportions 50.1:29.9:20.
Exploration Programme for Gold, Copper and Cobalt in Democratic Republic of Congo
On 17 October 2018 the Company announced commencement of a soil sampling programme on a new licence in the copperbelt in the south of the Democratic Republic of Congo ("DRC") near the Zambian border. The licence is considered prospective for copper and cobalt mineralisation, and was recently acquired from a private seller.
80% of licence PR13513 was acquired together with a nearby licence and a gold-prospective licence in the northern DRC adjacent to the licences containing Randgold's Kibali mine, at a cost of USD60,000. The balance of 20% of the licences is retained by the vendor, Congo Geologist Galaxy.
Dividends by Jupiter Mines
On 17 September 2018 Jupiter Mines Limited ("Jupiter", ASX:JMS), an Australian public company in which Red Rock holds 18,524,914 shares (0.95%), announced an interim unfranked dividend of $0.05 per share.
Further to the announcement of 17 September 2018, Red Rock announced that it has received a USD658,545.69 dividend from Jupiter Mines Limited ("Jupiter", ASX:JMS), in respect of the first half of Jupiter's financial year, which ran from 1st March 2018.
Gold Exploration Licences in Kenya
On 22 October 2018 the Company announced an update in relation to the legal proceedings instituted by Red Rock and its local partner in May 2015 against the Ministry of Mining in Kenya in order to achieve the restoration of the licences, which contain a 1.2m oz JORC gold resource, based on exploration up to 2011.
A Consent has been signed on behalf of the Attorney General and the Company and is being filed with the court. Under the terms of the Consent, the parties have agreed that the case be marked as withdrawn with no order as to costs, that the Applicants are at liberty to apply for licences under section 225(6) of the Mining Act 2016, and that previous decisions will not be prejudicial to such applications. The Company welcomes this settlement and has caused the appropriate applications to be made.
Investment in and Loan to Amulet Diamond Corporation
On 19 July 2018 the Company agreed to subscribe for 35,519 common shares in Amulet Diamond Corporation at a subscription price of USD2.76 per common share. The Company further subscribed to USD401,961 of shareholder loans. These shareholder loans are unsecured, non-interest bearing and have no fixed maturity or repayment date. These loans must be repaid by Amulet Diamond Corporation before any distributions are made to common shares, including any dividend payment or return of capital.
Amulet Diamond Corporation holds an option to acquire 100% of a kimberlite mining operation and licence in Botswana. An existing processing plant is in place with 100tph capacity and a bulk sampling programme is planned for H2 2018. The resource is an open pit of up to 9MT of kimberlite and Amulet aims to produce 100kcpa with minimal further investment.
Investment in Steelmin
On 23 July 2018 the Company announced that commissioning of the ferrosilicon smelter in Bosnia had progressed and was building to full power while ongoing checks on material were being conducted. As of July the plant was operating at 24MW and had achieved commercial production.
On 28 September 2018 the Company further announced that the plant was being closed in September to allow for works to be completed to upgrade the cooling system to allow it to operate during warmer periods at full power. An assessment of other ways in which the plant and product can be optimised was also underway, and various sale options were also under consideration.
Annual General Meeting
The Company intends to issue a notice of Annual General Meeting of shareholders to be held on 19 December 2018 for the purpose of dealing with the usual business applicable at such a meeting.
29 Commitments
As at 30 June 2018, the Company had entered into the following commitments:
• Exploration commitments: ongoing exploration expenditure is required to maintain title to the Group mineral exploration permits in Kenya. No provision has been made in the financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of operations of the Group.
• On 26 June 2015 the Company announced an agreement with Kansai Mining Corporation Ltd pursuant to which Red Rock's farm in agreement was replaced by agreements under which any interest in the Migori Gold Project or the other assets of Mid Migori Mines that may be retained or granted to Mid Migori Mines or Red Rock shall be shared 75% to Red Rock and 25% to Kansai. Kansai's interest is
to be carried up the point of an Indicated Mineral Resouce of 2m oz of gold. Red Rock committed to having full management rights of the operations and of the conduct of legal proceedings on behalf of both Mid Migori Mines and itself.
• On 5 April 2013, Red Rock Resources plc entered into a joint lease agreement with Regency Mines plc and Greatland Gold plc at Ivybridge House, 1 Adam Street, London WC2N 6LE. The lease is non-cancellable until 1 December 2017. The Company let the lease expire on
1 December 2017 moved into new offices.
• On 21 August 2017, the Company entered into a new lease agreement for office space with WeWork Aldwych House. The initial lease runs from 1 October 2017 through 30 September 2019 and is non-cancellable during this period. Thereafter the lease can be terminated by giving one full calendar month's notice. More details are disclosed in note 25.
30 Assets pledged as collateral
As announced on 23 June 2017 the Company has borrowed USD4,400,000 in order to make a loan to Steelmin Ltd to fund refurbishment of its ferrosilicon smelter in Jacje, Bosnia. As part of this loan the Company has given security over 100% of its holding in the shares of Jupiter Mines, being 25,684,913 shares of an unlisted public company in Australia, as well as over the Company's own €3,848,000 loan note to Steelmin secured with a fixed and floating charge over all the assets of Steelmin Ltd, which includes the shares of Steelmin limited in that of its Bosnian subsidiary, Steelmin BH, the 100% owner of the Jajce ferrosilicon smelter.
On 21 February 2018 Steelmin repaid in full €4,314,688 outstanding to Red Rock and thereafter Red Rock repaid USD3,000,899 in full settlement of its obligations its own institutional lenders. The associated assets that had been pledged as collateral were subsequently released.
31 Control
There is considered to be no controlling party.
32 These results are audited, however the information does not constitute statutory accounts as defined under section 434 of the Companies Act 2006. The consolidated statement of financial position at 30 June 2018 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended have been extracted from the Group's 2018 statutory financial statements. Their report was unqualified and contained no statement under sections 498(2) or (3) of the Companies Act 2006. The financial statements for 2018 will be delivered to the Registrar of Companies by 31 December 2018.
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