REG - Red Rock Resources - Annual Financial Report <Origin Href="QuoteRef">RRR.L</Origin> - Part 3
23/11/2017 16:00
- Part 3: For the preceding part double click ID:nRSW3965Xb
Unquoted investments at fair value 6,018,540 1,758,119
6,080,146 1,976,552
14 Cash and cash equivalents and restricted cash
Group 30 June 30 June
2017 2018
£ £
Cash in hand and at bank 909,094 26,564
909,094 26,564
For the purpose of the statement of cash flows, cash and cash equivalents
comprise the following at 30 June:
30 June 30 June
2017 2016
£ £
Cash in hand and at bank 909,094 26,564
909,094 26,564
Company 30 June 30 June
2017 2016
£ £
Cash in hand and at bank 905,135 24,370
905,135 24,370
15 Non-current receivables
Group and Company
2017 2016
£ £
Amounts due from associates 3,206,177 2,857,810
MFP sale proceeds 1,337,578 1,980,748
4,543,755 4,838,558
Non-current related party receivables of £3,206,176 (2016: £2,857,810) is
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 25. 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, although the Judicial Review case is ongoing,
no further impairment is considered necessary (2016: £nil). More details are
given in note 1.5, Significant accounting judgements, estimates and
assumptions.
The MFP sale proceeds represents 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 level, estimates of future production level and gold price
forecasts.
16 Other receivables
Group Company
2017 2016 2017 2016
£ £ £ £
Current trade and other receivables
Prepayments 221,070 236,765 135,073 170,313
Related party receivables:
- due from subsidiaries - - 465,145 404,747
- due from associates 118,965 225 118,965 225
- due from key management 3,096 - 3,096 -
Short-term loan 2,421,831 - 2,421,831 -
Other receivables 1,437,918 702,563 1,432,679 698,211
Total 4,202,880 939,553 4,576,789 1,273,496
17 Trade and other payables
Group Company
2017 2016 2017 2016
£ £ £ £
Trade and other payables 1,191,741 1,368,746 1,187,968 1,347,803
Accruals 332,540 335,663 332,540 335,663
Related party payables:
- due to associates - 86,966 - 86,966
- due to key management 29,384 62,629 29,384 62,629
Trade and other payables 1,553,665 1,854,004 1,549,892 1,833,061
Short-term borrowings 3,258,608 57,490 3,258,608 57,490
Total 4,812,272 1,911,494
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. 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 8 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 has a three-month repayment holiday and 75% of the loan is to be
amortized over 8 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. The
details of the security of the loan are descried in note 26.
18 Share capital of the Company
The share capital of the Company is as follows:
Issued and fully paid 2017 2016
£ £
2,371,116,172 deferred shares of £0.0009 each - -
4,662,024,541 ordinary shares of £0.0001 each - -
241,354,445 ordinary shares of £0.01 each 24,135 24,135
2,371,116,172 deferred shares of £0.09 each 2,134,005 2,134,005
6,033,861,125 A deferred shares of £0.0096 each 579,251 579,251
150,971,295 ordinary shares of £0.01 each 15,097 15,097
83,712,000 ordinary shares of £0.01 each 8,371 -
As at 30 June 2,760,859 2,752,488
Movement in share capital Number Nominal
£
Ordinary shares of £0.001 each
As at 30 June 2015 - ordinary shares of £0.0001 each 4,662,024,541 2,600,207
Issued 7 July 2015 at 0.0475 pence per share 421,052,632 42,105
Issued 7 July 2015 at 0.0475 pence per share 268,421,074 26,842
Issued 8 July 2015 at 0.0475 pence per share 107,894,948 10,789
Issued 13 July 2015 at 0.475 pence per share 157,894,800 15,789
Issued 9 October 2015 at 0.0183 pence per share 416,573,115 41,657
As at 21 December 2015, pre-share re-organisation 6,033,861,110 2,737,389
21 December 2015, share re-organisation (see below)
Issue of A deferred shares of £0.0096 each (6,033,861,110) (579,251)
Issue of new ordinary shares of £0.0004 each (6,033,861,110) (24,135)
Share consolidation: 1 new ordinary share of £0.01 for 25 ordinary shares of £0.0004 241,354,445 603,388
Issued 21 January 2016 at 0.375 pence per share 3,750,000 375
Issued 1 April 2016 at 0.375 pence per share 5,072,000 507
Issued 28 April 2016 at 0.52777 pence per share 21,315,971 2,132
Issued 29 April 2016 at 0.42 pence per share 97,023,801 9,702
Issued 29 April 2016 at 0.42 pence per share 23,809,523 2,381
As at 30 June 2016 - ordinary shares of £0.01 each 392,325,740 2,752,488
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 £0.01 each 476,037,740 2,760,859
Change in nominal value/share re-organisation on 21 December 2015
On 21 December 2015, the Company announced that each of the existing
6,033,861,125 issued ordinary shares of 0.01 pence each in the capital of the
Company ("Existing Ordinary Shares") will be subdivided into one A deferred
share of 0.0096 pence each ("A Deferred Shares") and one new ordinary share of
0.0004 pence each. Furthermore, every 25 ordinary shares of 0.0004 pence each
in the capital of the Company will be consolidated into one new ordinary share
of 0.01 pence each ("New Ordinary Shares") and accordingly the Company will
have 241,354,445 New Ordinary Shares in issue post consolidation. The New
Ordinary Shares will have the same rights and be subject to the same
restrictions as the Existing Ordinary Shares in the Company's Articles of
Association and the A Deferred Shares will have the rights and be subject to
the restrictions attached to A Deferred Shares as set out in the Articles of
Association.
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 2017, the Company had 240,778,371 warrants in issue (2016:
145,778,371) with a weighted average exercise price of 0.99 pence (2016: 0.92
pence). Out of those, 97,023,801 (2016: 97,023,801) have market performance
conditions that accelerate the expiry date. Weighted average remaining life of
the warrants at 30 June 2017 was 434 days (2016: 768 days). All the warrants
are issued by the Group to its shareholders in the capacity of shareholders
and therefore are outside of IFRS 2 scope.
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 21).
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.
19 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 investment 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.
20 Share-based payments
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 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
2017 2016
Number of Weighted Number of Weighted
options average options average
exercise exercise
price price
pence pence
Outstanding at the beginning of the period 13,320,000 0.45 7,000,000 3.20
Granted during the period 35,000,000 0.80 13,320,000 0.45
Forfeited during the period - - - -
Exercised during the period - - - -
Lapsed during the period - - (7,000,000) 3.20
Outstanding at the end of the period 48,320,000 0.70 13,320,000 0.45
During the financial year 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. (2016: 13,320,000 options
at an exercise price of 0.45 pence, expiring on 29 January 2022, granted in
four tranches, first vested immediately and the other three had time and
market vesting conditions).
The weighted average fair value of each option granted during the year was
0.236 pence (2016: 0.394 pence).
The exercise price of options outstanding at 30 June 2017 ranged between 0.45p
and 0.8p (2016: 0.45p). Their weighted average contractual life was 5.28 years
(2016: 5.63 years).
Of the total number of options outstanding at 30 June 2017 24,160,000 (2016:
3,330,000) had vested and were exercisable.
The weighted average share price (at the date of exercise) of options
exercised during the year was nil (2016: nil) as no options were exercised.
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 into the Administration expenses line in the Consolidated Income
Statement in the amount of £97,600 (2016: £63,270).
In 2016 a credit of £111,929 was posted to the income statement in respect of
the cancelled share options and a charge of £63,270 was posted to the income
statement in respect of the share options issued during 2016. Therefore, a net
credit of £48,659 was posted to the income statement during 2016.
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 7,398,000 free and matching shares were
awarded (2016: 6,808,000) with a fair value of 0.375 pence (2016: 0.375-0.4
pence) resulting in a share-based payment charge of £45,132 (2016: £27,743),
included into the Administration expenses line in the income statement.
21 Financial instruments
21.1 Categories of financial instruments
The Group and Company hold a number of financial instruments, including bank
deposits, short-term investments, loans and receivables 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:
30 June Group2017 Group2016 Company2017 Company2016
£ £ £ £
Financial assets
Available for sale financial assets at fair value through OCI
Unquoted equity shares 6,018,540 1,758,119 6,018,540 1,758,119
Quoted equity shares 61,606 218,433 61,606 218,433
Total available for sale financial assets at fair value through OCI 6,080,146 1,976,552 6,080,146 1,976,552
Loans and receivables
Non-current receivables 4,543,755 4,838,559 4,543,755 4,838,559
Other receivables - current 4,202,879 939,554 4,576,789 1,273,496
Total loans and receivables 8,746,634 5,778,113 9,120,544 6,112,055
Total financial assets 14,826,780 7,754,665 15,200,690 8,088,607
Total current financial assets 4,202,879 939,554 4,576,789 1,273,496
Total non-current financial assets 10,623,901 6,815,111 10,623,901 6,815,111
Financial liabilities
Short-term borrowings 3,258,608 57,490 3,258,608 57,490
Total current financial liabilities 3,258,608 57,490 3,258,608 57,490
Other receivables and trade payables
Management assessed that 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.
Financial instruments held at cost can be reconciled from beginning to ending
balances as follows:
Group2017 Group2016 Company2017 Company2016
£ £ £ £
Financial liabilities
Loans and borrowings
Trade and other payables 1,553,664 1,854,002 1,549,892 1,833,060
Total loans and borrowings 1,553,664 1,854,002 1,549,892 1,833,060
Total financial liabilities 1,553,664 1,854,002 1,549,892 1,833,060
Total current 1,553,664 1,854,002 1,549,892 1,833,060
Total non-current - - - -
The carrying value of current financial liabilities in the Company is not
materially different from that of the Group.
21.2 Fair values
21.2.1 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 Company30 June 2017 Level 1 Level 2 Level 3 Total
£ £ £ £
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
Group and Company30 June 2016 Level 1 Level 2 Level 3 Total
£ £ £ £
Available for sale financial assets at fair value through OCI
- Unquoted equity shares - 1,758,119 - 1,758,119
- Quoted equity shares 218,433 - - 218,433
The valuation techniques used for instruments categorised in Levels 2 and 3
are described below:
Unquoted available for sale financial assets (Level 2)
A significant portion of the Group's available for sale financial asset is an
investment in equity shares of a non-listed company. The fair value of
unquoted ordinary shares has been estimated using the weighted average share
price of actual sale transactions that happened between de-listing date and
the year end.
21.3 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 risk policies 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.
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 15 for
further details.
The Group has an outstanding pledge (2016: £nil) of its shares in Jupiter
Mines Limited as security for its USD4.4m loan to YA Global in relation to its
investment into Steelmin Ltd.
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.
The Directors consider the balances most susceptible to foreign currency
movements to be the available for sale financial assets as well as its back to
back borrowing in Euros and loans outstanding in USD relating to its
investment in Steelmin Ltd. The Company is considering hedging options in
order to help mitigate the risks associated with adverse euro/dollar movements
between these two loan amounts.
These assets are denominated in the following currencies:
Group30 June 2017 GBP AUD USD EUR£ Other£ Total
£ £ £ £
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 549,930 267 161,171 - 842,296 1,553,664
Short-term borrowings - - 3,258,608 - - 3,258,608
Group30 June 2016 GBP AUD USD EUR Other Total
£ £ £ £ £ £
Cash and cash equivalents 23,847 106 388 - 2,223 26,564
Other receivables 549,179 242 386,833 - 3,300 939,554
Available for sale investments 218,432 1,483,120 275,000 - - 1,976,552
Non-current receivables 2,722,496 - 1,980,748 - 135,315 4,838,559
Trade and other payables 965,553 597 85,214 - 802,638 1,854,002
Short-term borrowings - - 57,490 - - 57,490
Company30 June 2017 GBP AUD USD EUR£ Other£ Total
£ £ £ £
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 546,425 - 161,171 - 842,296 1,549,892
Short-term borrowings - - 3,258,608 - - 3,258,608
Company30 June 2016 GBP AUD USD EUR Other Total
£ £ £ £ £ £
Cash and cash equivalents 23,847 - 388 - 135 24,370
Other receivables 949,815 - 320,381 - 3,300 1,273,496
Available for sale investments 218,432 1,483,120 275,000 - - 1,976,552
Non-current receivables 2,722,495 - 1,980,748 - 135,315 4,838,558
Trade and other payables 945,207 - 85,214 - 802,639 1,833,060
Short-term borrowings - - 57,490 - - 57,490
Exposures to foreign exchange rates vary during the year depending on the
volume and nature of overseas transactions.
22 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 2017. For the sake of completeness and of clarity, some events after
the reporting period are included here and in note 24.
Financing
On 22 August 2016, the Company raised £300,000 by way of an issue of
75,000,000 new ordinary shares of 0.01 pence each in the Company at a price of
0.40 pence per share. For every one share, each subscriber was issued with one
warrant exercisable at a price of 0.80 pence per share and expiring on 22
August 2018. The proceeds of the placing were applied towards the Company's
existing hard rock mineral projects and in expanding its project and business
pipeline.
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 E3,848,000 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 will receive a further 1% of the fully diluted equity of
Steelmin on a predetermined schedule up to a maximum of 30%.
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 8 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 has a three-month repayment holiday and 75% of the loan is to be
amortized over 8 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.
In the case of a Jupiter Mines liquidity event then depending on the quantum
Red Rock will repay between 30% and 50% of the outstanding principal and
interest of the loan. Any other early repayments outside of this mechanism
will incur a 5% early repayment fee. In the event of a default in repayment in
principal or interest by the Company of more than 5 days, the investors may
convert the amount in default into new ordinary shares at 93% of the
volume-weighted average price at which the shares have traded in the three
days prior to the allotment, subject to a maximum value of 5x the average
daily value traded over that period. The investors are to receive a potential
earn out payment based on the value of the Company's Jupiter Mines investment
at the time of a trade sale or IPO of the Tshipi Manganese mine, the amount
payable is to vary between USDnil and USD410,000 with USD100k payable if no
Jupiter Mines liquidity event occurs before 31 December 2017.
Jupiter Mines
On 21 November 2016 and 23 January 2017, the Company announced that Jupiter
Mines Ltd, ("Jupiter") an Australian unlisted public company had provided
details of its plans to distribute USD55m to shareholders. All Jupiter
shareholders were made an equal offer to buy back 6% of their shares at a
price of USD0.40 per share. At the time of the buyback Red Rock held
27,324,374 shares in Jupiter, equal to approximately 1.2% of the issued share
capital. During the year the Company accepted the buy-back offer and received
USD655,784 in consideration and following the buyback held 25,684,913 shares.
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 ("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. The initial payment of
USD100,000, was made in respect of the CML's due diligence review and was
considered part of the first tranche. The balance of the first tranche of
USD400,000, second tranche of USD225,000 and third tranche of USD225,000 have
been paid as of 30 June 2017.
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 has been made, leaving
the balance due with interest in May 2018.
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 Licence 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.
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 20 January 2016 the Company announced that its wholly owned subsidiary Red
Rock Resources Inc, has agreed to acquire a 20% working interest / 14.4% net
revenue interest from Shoats Creek Development Corporation in the LM#20 well
for an immediate payment of USD120,000 and a USD80,000 promissory note payable
in monthly instalments between July 2016 and December 2018 and bearing 4.5%
interest. In the event that cumulative production from the LM#20 well exceeds
100,000 barrels of oil within three years, a further payment of USD40,000
becomes due. Shoats Creek Development Corporation receives a
back-in-after-payout so that once the Company has received payments for oil
and gas sales minus operating expenses equal to the investment required to
drill the wells and associated facilities, the Company's working interest will
reset to 16.25% with a 11.7% net revenue interest. The Company further
acquired the option but not the obligation to invest in additional wells and
re-entry opportunities that might be proposed from time to time on a heads-up
basis.
23 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 £121,046 (2016: £110,918), of which £60,523 represented
the Company's share of the office rent and the balance services provided
(2016: £44,979). The Company planned to let this agreement lapse 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 £44,645.59 (2016: £15,869).
· Related party receivables and payables are disclosed in notes 16 and 17.
· The Company held 1,695,000 shares (0.29%) in Regency Mines plc as at 30
June 2016, at 30 June 2017 and same number of shares at 22 November 2017.
· The direct and beneficial interests of the Board in the shares of the
Company as 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 7.
24 Events after the reporting period
Democratic Republic of Congo Copper-Cobalt project due diligence
On 27 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"). RRR has
40 days for due diligence and an exclusivity period of 45 days. In the event
that RRR elects 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 RRR 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 RRR 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.
Steelmin investment
On 1 September 2017 the Company was issued with an additional 1% of Steelmin's
fully diluted shares. On 1 October 2017 the Company was issued with a further
1% of the fully diluted equity of Steelmin, and on 1 November the Company was
issued with an additional 1% of Steelmin Ltd. share bringing its total to
19%.
Jupiter buy back
On 31 July 2017, 11 September 2017 and 28 September 2017 Jupiter Mines, an
unlisted public company in which Red Rock owns approximately 1.2%, announced
its intentions to distribute USD25m to shareholders. This distribution would
be via an equal offer to buy back 4% of outstanding shares at a price of
USD0.29 per share. Red Rock announced its intention to take up this offer and
as such expected proceeds of approximately USD300,000 in early December 2017.
Issue of new shares
On 27 October 2017, Red Rock issued 4,500,000 share consideration as part of a
settlement of obligations to Kansai Mining Corporation Ltd, originally
announced on 26 June 2015. The commitment to pay Kansai an initial amount of
£25,000 arising under that agreement was settled by shares which equated to
£27,000 and included a notional charge for delayed interest.
Convertible Loan Issuance
On 10 November 2017 Red Rock announced the issuance of £495,000 of convertible
loan notes with accompanying warrants to high net worth investors. The notes
were issued at par and are convertible into ordinary shares of Red Rock at a
price of £0.008 per share. Each note has a denomination of £1,000 and is
convertible into 125,000 new shares in the Company. Conversion may take place
at any time up to the final redemption date of 19 December 2018. Each note
holder further receives 62,500 warrants for each note subscribed. Each warrant
entitles the holder to subscribe for shares any time up to 30 April 2019 at a
price of £0.014 per share. The interest rate on the notes is 10% per annum
accruing monthly. Up to £1,000,000 may be issued in one or more tranches.
Annual General Meeting
The Company intends to issue a notice of Annual General Meeting of
shareholders to be held on 22 December 2017 for the purpose of dealing with
the usual business applicable at such a meeting.
25 Commitments
As at 30 June 2017, 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 Resource 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. As of 1 November 2017, the Company intended to let the lease expire on 1
December 2017 and to move into new offices.
26 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,
an unlisted public company in Australia, as well as over the Company's own
E3,848,000 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.
27 Control
There is considered to be no controlling party.
28 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 2017 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 2017
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 2017 will be delivered to the Registrar of Companies
by 31 December 2017.
This information is provided by RNS
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