REG - Strategic Minerals - Interim Results - Half Year to 30 June 2022
21/09/2022 07:00
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RNS Number : 0631A Strategic Minerals PLC 21 September 2022
Strategic Minerals plc
("Strategic Minerals", "SML", the "Group" or the "Company")
Interim Results
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing mineral company
actively developing critical minerals focused projects, is pleased to announce
its unaudited interim profit for the half year ended 30 June 2022.
Financial Highlights
· Continued operating profitability with six-month pre-tax profit
of US$248,000 (H1 2021: US$388,000) reflecting reduced sales in the period.
· Ongoing after-tax profit for the six-months of US$127,000 (H1
2021 US$207,000) consistent with the drop in sales and tight control of
overheads being maintained.
· Timing of claims on the Deep Digital Cornwall project of
US$128,000, US$55,000 received to date, saw an increase in debtors at the end
of June (US$435,000), as opposed to the same time last year (US$335,000).
· In June 2022, Southern Minerals Group ("SMG"), the Company's
wholly owned subsidiary, began increasing sales prices expected to reflect in
higher revenues in the second half of the year.
· US$12,000 of share-based payment expense for the interim
six-month period reflects the final charge relating to options which expired
30 June 2022.
· US$450,000 invested in development projects during the period
(Leigh Creek Copper Mine ("LCCM") US$250,000 and Redmoor Tin and Tungsten Mine
("Redmoor") US$200,000).
· Unrestricted cash at 30 June 2022 was US$430,000 (31 Dec 2021:
US$611,000).
Corporate Highlights
· Access to the Cobre magnetite stockpile rolled over for the 10th
time with a subsequent agreement to extend this access for 5 years to 31 March
2027.
· Unconditional approval for a Program for Environmental Protection
and Rehabilitation ("PEPR") for the planned mining of copper oxide at
Paltridge North at LCCM.
· Exploration license at Redmoor has been extended another 25 years
to 2037.
· Managing Director, John Peters, acquired a further 5,000,000
shares on market.
Commenting, John Peters, Managing Director of Strategic Miners, said:
"Just when the first half of 2022 saw early signs of the global economy
emerging from the full effects of the pandemic, conflict in the Ukraine
upended markets and saw price rises that helped fuel inflationary pressures
and rising interest rates. Against this background, the Company has been
managing its Cobre operation and has, prudently, pushed forward on its
development projects.
"After much effort, LCCM, the Company's wholly owned subsidiary, has secured
unconditional approval of the PEPR for mining the Paltridge North copper oxide
deposit, adjacent to LCCM's operating plant at Mountain of Light. At the same
time, the Company's wholly owned subsidiary, Cornwall Resources Limited
("CRL") owner of Redmoor exploration rights, has continued its important role
in the Deep Digital Cornwall project and has identified some very prospective
leads for future exploration.
"With the unconditional Paltridge North approval, the Company has intensified
discussions with both existing and previously identified parties and expects
that, once funding is secured, the inherent value of the LCCM project will
begin to be reflected in the Company's share price. While subject to
securing finance, the Company's current expectations are that operations will
restart at Mountain of Light before the end of the year.
"Post balance date, the UK Government issued both a Critical Minerals List and
Strategy. This has significant implications for CRL in that both Tin and
Tungsten, the main minerals identified at Redmoor, are on the list.
Accordingly, the Redmoor project, in the Board's view, has the potential to
benefit from the Government's stated strategy to provide assistance in
developing such resources, especially in areas, like East Cornwall, which may
benefit from the Government's "Levelling Up" initiative. CRL and the Board
look forward to exploring how these circumstances can best be applied to the
development of the proposed Redmoor mine.
"My personal, open market purchase of 5m shares, during the period, reflects
my view on how undervalued I believe the Company is. It was reassuring to
see, post balance date, a respected professional investor, Philip Richards of
RAB Capital, echo my sentiments and join both myself and SML Executive
Director, Peter Wale, in each owning around 4% of the Company.
"With the potential of a second income stream from LCCM, subject to securing
finance, coupled with the new focus on Tin and Tungsten as critical minerals,
it appears the long-awaited market recognition of the Board's strategic
decisions appears close. I look forward to delivering this for all
shareholders, and particularly long-term shareholders who have shown great
patience."
For further information, please contact:
Strategic Minerals plc +61 (0) 414 727 965
John Peters
Managing Director
Website: www.strategicminerals.net (http://www.strategicminerals.net)
Email: info@strategicminerals.net
Follow Strategic Minerals on:
Vox Markets: https://www.voxmarkets.co.uk/company/SML/
(https://www.voxmarkets.co.uk/company/SML/)
Twitter: @SML_Minerals (https://twitter.com/SML_Minerals)
LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc
(https://www.linkedin.com/company/strategic-minerals-plc)
SP Angel Corporate Finance LLP +44 (0) 20 3470 0470
Nominated Adviser and Broker
Matthew Johnson
Charlie Bouverat
NOTES TO EDITORS
Strategic Minerals plc is an AIM-quoted, profitable operating minerals company
actively developing projects tailored to materials expected to benefit from
strong demand in the future. It has an operation in the United States of
America along with development projects in the UK and Australia. The
Company is focused on utilising its operating cash flows, along with capital
raisings, to develop high quality projects aimed at supplying the metals and
minerals likely to be highly demanded in the future.
In September 2011, Strategic Minerals acquired the distribution rights to the
Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating
asset, which it brought into production in 2012 and which continues to provide
a revenue stream for the Company. This operating revenue stream is utilised to
cover company overheads and invest in development projects aimed at supplying
the metals and minerals likely to be highly demanded in the future.
In May 2016, the Company entered into an agreement with New Age Exploration
Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten
project in Cornwall, UK. The bulk of the funds from the Company's investment
were utilised to complete a drilling programme that year. The drilling
programme resulted in a significant upgrade of the resource. This was followed
in 2018 with a 12-hole 2018 drilling programme has now been completed and the
resource update that resulted was announced in February 2019. In March 2019,
the Company entered into arrangements to acquire the balance of the Redmoor
Tin/Tungsten project which was settled on 24 July 2019 by way of a vendor loan
which was fully repaid on 26 June 2020.
In March 2018, the Company completed the acquisition of the Leigh Creek Copper
Mine situated in the copper rich belt of South Australia and brought the
project temporarily into production in April 2019. In July 2021, the project
was granted a conditional approval by the South Australian Government for
a Program for Environmental Protection and Rehabilitation (PEPR) in relation
to mining of its Paltridge North deposit and processing at the Mountain of
Light installation. In late June 2022, an updated PEPR, addressing the
conditions associated with the July 2021 approval, was approved.
CHAIRMAN'S STATEMENT
I am pleased with the Company's achievements, in what has again proved to be a
particularly challenging period for Strategic Minerals and the world.
Financial results
The Company continued its profitable performance in the first half of 2022,
when many businesses succumbed to cash flow and profitability impacts arising
from the pandemic. This is a credit to both our local management and the
management team as a whole.
While operations at Cobre have been able to avoid a substantial impact from
the pandemic, the Company's ability to progress its development projects and
general development processes have been impacted by the Covid-19 pandemic and
slowed progress. However, now with the granting of an unconditional PEPR at
Paltridge North, the Company expects cash flow and profitability to improve
dramatically, in line with full-scale production recommencing at the Leigh
Creek Copper Mine in late 2022, subject to funding.
Unrestricted cash on hand at 30 June 2022 was US$430,000.
After having reduced corporate overheads last year, the Company successfully
reduced these a further 9% in the first half of the year to US$637,000
(US$698,000 2021). Increases in amortisation reflected SMG's purchase of a
new loader at Cobre.
Strategic Focus
Despite a reduction in sales compared to last year, current sales levels at
the Cobre operations continue to cover operating costs and allowed the Company
some scope to continue its strategic investment focus on investments in metals
such as Copper and Tin/Tungsten which it expects are likely to see significant
price improvements over the next three to five years, reflecting the world's
new emphasis on critical minerals.
On the back of this strategy, the Company continues to invest in development
programmes, particularly those associated with Leigh Creek Copper Mine
(copper) and Redmoor (tin/tungsten/copper focused) and continues dialogue with
parties that may be interested in co-investing in these projects.
Cobre Operations
During the first six months of 2022, the management at our Cobre operations
continued their excellent adaption to the challenges associated with the
disruption to world markets arising from the Covid-19 pandemic and the
subsequent impact on prices and demand associated with the Ukraine conflict.
The first half of the year also saw the receiver for CV Investments begin the
process of formalising claims in relation to the receivership of CV
Investments and we await the result of this process hopefully but with no
expectation of payment.
Leigh Creek Copper Mine ("Leigh Creek" or "LCCM")
The significant work conducted at Leigh Creek, to the first half of 2022,
resulted in the granting of an unconditional PEPR for copper oxide mining at
Paltridge North. This has now prepared the project to attract funding to
restart operations. The strong performance of the copper price in recent
times has improved the project's potential profitability and the Board feels
confident that 2023 will see full scale production and sales re-commence at
Leigh Creek, subject to funding.
Redmoor Tin-Tungsten Project ("Redmoor")
During the first six months of 2022, the Company has continued its excellent
work within the Deep Digital Cornwall project and has identified a number of
highly prospective areas for future exploration, notably some indications of
near surface tin occurrences to the southwest of the identified resource.
I am delighted in both Tin and Tungsten being included within the critical
minerals list and strategy and believe that this will place the Redmoor
project in a good position to benefit from the UK Government's planned support
for such projects.
Safety
The Company focuses on safety issues and continues to maintain a high level of
performance when it comes to safety. SML and its subsidiaries have had no
reportable environmental or personnel incidents recorded in the period.
The first half of 2022 has again proven to be a challenging environment in
which to operate and I would like to take this opportunity to thank my fellow
Directors, our management and staff in New Mexico, South Australia and
Cornwall, along with our advisers, for their support and hard work on our
behalf during the period. Additionally, I would like to thank our clients,
contractors, suppliers and partners for their continued backing. I look
forward to further progressing our key strategic goals in 2022 and pushing
onto a brighter 2023.
Alan Broome AM
Non-Executive Chairman
20 September 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Continuing operations
Revenue 1,329 1,511 2,611
Raw materials and consumables used. (256) (286) (524)
_________ _________ _________
Gross profit 1,073 1,225 2,087
Overhead expenses (637) (698) (1,535)
Amortisation (139) (77) (158)
Depreciation (16) (6) (52)
Share based payment (12) (48) (58)
Foreign exchange gain/(loss) (5) (2) (5)
_________ _________ _________
Profit from operations 264 394 279
Finance expense (4) (2) (7)
Lease Interest (12) (4) (15)
_________ _________ _________
Profit/ (loss) before taxation 248 388 257
Income tax (expense)/credit (121) (181) (101)
_________ _________ _________
_________ _________ _________
Profit for the period attributable to:
Owners of the parent 127 207 156
_________ _________ _________
Other comprehensive income
Exchange gains/(losses) arising on translation (902) (145) (516)
of foreign operations
_________ _________ _________
_________ _________ _________
Total comprehensive (loss)/income attributable to:
Owners of the parent (775) 62 (360)
_________ _________ _________
Profit/ (loss) per share attributable to the ordinary equity holders of the
parent:
Continuing activities - Basic ¢0.08 ¢0.13 ¢0.10
¢0.08 ¢0.13 ¢0.10
- Diluted
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Assets
Non-current assets
Intangible Asset 553 600 582
Deferred Exploration and evaluation costs 4,886 5240 5,228
Other Receivables 139 151 145
Property, plant and equipment 7,301 7,363 7,485
Right of Use Assets 568 150 717
_________ _________ _________
13,447 13,504 14,157
_________ _________ _________
Current assets
Inventories 2 4 4
Trade and other receivables 435 335 485
Income Tax Refund - - 63
Cash and cash equivalents 430 734 611
Prepayments 1 7 6
_________ _________ _________
868 1,080 1,169
_________ _________ _________
Total Assets 14,315 14,584 15,326
_________ _________ _________
Equity and liabilities
Share capital 2,916 2,770 2,916
Share premium reserve 49,387 49,010 49,387
Share options reserve - 88 97
Merger reserve 21,300 21,300 21,300
Warrant Reserve 153 153 153
Foreign exchange reserve (1,209) 64 (307)
Other reserves (23,023) (23,023) (23,023)
Accumulated loss (36,512) (36,700) (36,748)
_________ _________ _________
Total Equity 13,012 13,662 13,775
_________ _________ _________
Liabilities
Non-Current Liabilities
Lease Liabilities 317 19 420
Provisions 405 429 421
_________ _________ _________
722 448 841
_________ _________ _________
Current liabilities
Income Tax Payable 6 17 -
Trade and other payables 309 335 408
Lease Liabilities 266 122 302
_________ _________ _________
581 474 710
_________ _________ _________
Total Liabilities 1,303 922 1,551
_________ _________ _________
Total Equity and Liabilities 14,315 14,584 15,326
_________ _________ _________
CONSOLIDATED STATEMENT OF CASH FLOW
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
$'000 $'000 $'000
Cash flows from operating activities
Profit/ (loss) after tax 127 207 156
Adjustments for:
Depreciation of property, plant, and equipment 16 6 52
Amortisation of Right of Use asset 139 77 158
Finance expense 4 2 7
Income Tax expense 121 181 101
(Increase) / decrease in inventory 2 (1) (1)
(Increase) / decrease in trade and other receivables 12 (125) 161
(Increase) / decrease in prepayments 3 9 10
Increase / (decrease) in trade and other payables 48 91 92
Increase /(decrease) in prepaid income tax - - (63)
Income tax paid (52) (177) (121)
Share based payment expense 12 48 58
_________ _________ _________
Net cash flows from operating activities 432 318 610
_________ _________ _________
Investing activities
Increase in PPE Development Asset (253) (202) (584)
Increase in PPE - - (4)
Increase in deferred exploration and evaluation asset (201) (131) (564)
_________ _________ _________
Net cash used in investing activities (454) (333) (1,152)
_________ _________ _________
Financing activities
Net proceeds from issue of equity share capital - - 523
Lease Payments (151) (88) (195)
_________ _________ _________
Net cash from financing activities (151) (88) 328
_________ _________ _________
Net increase / (decrease) in cash and cash equivalents (173) (103) (214)
Cash and cash equivalents at beginning of period 611 833 833
Exchange gains / (losses) on cash and cash equivalents (8) 4 (8)
_________ _________ _________
Cash and cash equivalents at end of period 430 734 611
_________ _________ _________
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium reserve Merger Reserve Warrant Share options reserve Initial Re-structure Foreign Exch. Retained earnings Total equity
Warrant Reserve Reserve reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 2,770 49,010 21,300 153 272 (23,023) 209 (37,139) 13,552
1 January 2021
_______ _______ _______ _______ _______ _______ _______ _______ _______
Profit for the year - - - - - - - 156 156
Foreign exchange translation - - - - - - (516) - (516)
_______ _______ _______
Total comprehensive income/(loss) for the year - - - - (516) 156 (360)
- -
Share based payments - - - - 60 - - - 60
Transfer - - - - (235) - - 235 -
Shares issued in the year 146 405 - - - - - - 551
Share issue costs - (28) - - - - - - (28)
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at 2,916 49,387 21,300 153 97 (23,023) (307) (36,748) 13,775
31 December 2021
Profit for the period - - - - - - - 127 127
Foreign exchange translation - - - - - - (902) - (902)
_______ _______ _______
Total comprehensive income for the year - - - - (902) 127 (775)
- -
Share based payments - - - - 12 - - - 12
Transfer - - - - (109) - - 109 -
Shares issued in the year - - - - - - - - -
Share issue costs - - - - - - - - -
_______ _______ _______ _______ _______ _______ _______ _______ _______
Balance at 2,916 49,387 21,300 153 - (23,023) (1,209) (36,512) 13,012
30 June 2022
_______ _______ _______ _______ _______ _______ _______ _______ _______
All comprehensive income is attributable to the owners of the parent Company.
NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. General Information
Strategic Minerals Plc ("the Company") is a public company incorporated in
England and Wales. The consolidated interim financial statements of the
Company for the six months ended 30 June 2022 comprise the Company and its
subsidiaries (together referred to as the "Group").
2. Significant accounting policies
Basis of preparation
In preparing these financial statements the presentational currency is US
dollars. As the entire group's revenues and majority of its costs, assets
and liabilities are denominated in US dollars it is considered appropriate to
report in this currency.
The principal accounting policies adopted in the preparation of the financial
statements are set out below. The policies have been consistently applied to
all the years presented, unless otherwise stated.
These financial statements have been prepared in accordance with International
Financial Standards and UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006.
The preparation of financial statements in compliance with adopted IFRS
requires the use of certain critical accounting estimates. It also requires
Group management to exercise judgment in applying the Group's accounting
policies. The areas where significant judgments and estimates have been made
in preparing the financial statements and their effect are disclosed in note
2.
The financial statements have been prepared on a historical cost basis, except
for the acquisition of LCCM and the valuation of certain investments which
have been measured at fair value, not historical cost.
Going concern basis
The Directors have given careful consideration to the Group and Parent
Company's (together "the Group") ability to continue as a going concern
through review of cash flow forecasts prepared by management for the period to
31 December 2023. It has reviewed the key assumptions on which these are based
and conducted sensitivity analysis.
The Group's forward commitments include corporate overhead, which is actively
managed in line with cash generated from the Cobre asset and costs associated
with keeping exploration licences and mining leases current.
As at 30 June 2022, the Group had US$0.430m of cash on hand.
Group forecasts are based on Management's expectations that tons sold in 2022
and 2023 will be in line with 2021 levels. An increase in sales prices for all
customers was implemented in June 2022. For the purposes of the consideration
of the Group's ability to operate as a going concern, only non-discretionary
expenditure on projects is included in the cash flow forecasts. On the basis
of these forecasts, operations at Cobre are expected to provide sufficient
funds until December 2023 to meet all operational costs and non-discretionary
project expenditure.
However, the Board considers additional funds will be required to progress the
development of the Leigh Creek Copper Mine and Redmoor projects. It is the
intention of the group that the LCCM asset will be developed in the second
half of 2022 and Management are actively pursuing such funding and envisage
that this will be sourced at the asset level.
During the period, the Group secured access to the Cobre stockpile at Cobre
until 2027.
As the Group is reliant on cash being generated from the Cobre asset in line
with forecast, Management has performed reverse stress testing which shows
that a 5% reduction in forecast sales would result in a cash deficit in June
2023, without management taking mitigating actions within their control. The
Group does not currently have offtake agreements with customers, therefore
there is uncertainty as to whether forecast sales will be met.
In the event that there is a reduction in forecast sales at Cobre or LCCM
funding is not raised, these conditions indicate a material uncertainty which
may cast significant doubt as to the Group's ability to continue as a going
concern and therefore it may be unable to realise its assets and discharge its
liabilities in the normal course of business.
If further funds are required, the Directors have reasonable expectation based
on the ability of the Company to raise funds in the past that the Group will
have access to sufficient resources by way of debt or equity markets to meet
all non-discretionary expenditure. Consequently, the consolidated financial
statements have been prepared on a going concern basis.
The financial report does not include adjustments relating to the
recoverability and classification of recorded asset amounts or to the amounts
and classification of liabilities that might be necessary should the Group not
continue as a going concern.
The financial report does not include adjustments relating to the
recoverability and classification of recorded asset amounts or to the amounts
and classification of liabilities that might be necessary should the Group not
continue as a going concern.
New standards, interpretations, and amendments effective 1 July 2022:
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods and which have not been adopted early.
Investment in joint arrangements
The Group is a party to a joint arrangement when there is a contractual
arrangement that confers joint control over the relevant activities of the
arrangement to the group and at least one other party. Joint control is
assessed under the same principles as control over subsidiaries.
The group classifies its interests in joint arrangements as either:
· Joint ventures: where the group has rights to only the net assets
of the joint arrangement.
· Joint operations: where the group has both the rights to assets
and obligations for the liabilities of the joint arrangement.
In assessing the classification of interests in joint arrangements, the Group
considers:
· The structure of the joint arrangement
· The legal form of joint arrangements structured through a
separate vehicle
· The contractual terms of the joint arrangement agreement
· Any other facts and circumstances (in any other contractual
arrangements).
The Group accounts for its interests in joint ventures initially at cost in
the consolidated statement of financial position. Subsequently joint ventures
are accounted for using the equity method where the Group's share of
post-acquisition profits and losses and other comprehensive income is
recognised in the consolidated statement of profit and loss and other
comprehensive income (except for losses in excess of the Group's investment in
the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its joint
ventures are recognised only to the extent of unrelated investors' interests
in the joint venture. The investor's share in the joint ventures' profits and
losses resulting from these transactions is eliminated against the carrying
value of the joint venture.
Any premium paid for an investment in a joint venture above the fair value of
the Group's share of the identifiable assets, liabilities and contingent
liabilities acquired is capitalised and included in the carrying amount of the
investment in joint venture. Where there is objective evidence that the
investment in a joint venture has been impaired the carrying amount of the
investment is tested for impairment in the same way as other non-financial
assets.
The Group accounts for its interests in joint operations by recognising its
share of assets, liabilities, revenues, and expenses in accordance with its
contractually conferred rights and obligations. In accordance with IFRS 11
Joint Arrangements, the Group is required to apply all of the principles of
IFRS 3 Business Combinations when it acquires an interest in a joint operation
that constitutes a business as defined by IFRS 3.Where there is an increase in
the stake of the joint venture entity from an associate to a subsidiary and
the acquisition is considered as an asset acquisition and not a business
combination in accordance with IFRS3, this step up transaction is accounted
for as the purchase of a single asset and the cost of the transaction is
allocated in its entirety to that asset with no gain or loss recognised in the
income statement. The step-up acquisition of CRL in 2019 has been accounted
for as a purchase of a single asset and the cost of the transaction is
allocated in its entirety to that balance sheet.
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates
and assumptions that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial
year are discussed below.
Estimates
(a) Carrying value of intangible assets
Management assesses the carrying value of the exploration and evaluation
assets for indicators of impairment based on the requirements of IFRS 6 which
are inherently judgemental. This includes ensuring the Group maintains legal
title, assessment regarding the commerciality of reserves and the clear
intention to move the asset forward to development.
i) The Redmoor projects are early-stage exploration projects and
therefore Management have applied judgement in the period as to whether the
results from exploration activity provide sufficient evidence to continue to
move the asset forward to development. There are no indicators of impairment
for the Redmoor project in the period to 30 June 2022.
(b) Share based payments
The fair value of share-based payments recognised in the statement of
comprehensive income is measured by use of the Black Scholes model after
taking into account market-based vesting conditions and conditions attached to
the vesting and exercise of the equity instruments. The expected life used in
the model is adjusted based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations. The
share price volatility percentage factor used in the calculation is based on
management's best estimate of future share price behaviour based on past
experience.
(c) Carrying value of amounts owed by subsidiary undertakings.
IFRS9 requires the parent company to make certain assumptions when
implementing the forward- looking expected credit loss model. This model is
required to be used to assess the intercompany loan receivables from its
subsidiaries for impairment. Arriving at an expected credit loss allowance
involved considering different scenarios for the recovery of the intercompany
loan receivables, the possible credit losses that could arise and
probabilities for these scenarios.
The following were considered: the exploration project risk, the future
sales potential of product, value of potential reserves and the resulting
expected economic outcomes of the project.
(d) Carrying Value of Development Assets
Management assesses the carrying value of development assets for indicators of
impairment based on the requirements of IAS36 which are inherently
judgemental.
The following are the key assumptions used in this assessment of Carrying
value.
i) Mineable reserves over life of project
ii) Forecasted Copper pricing
iii) Capital and operating cost assumptions to deliver the mining schedule
iv) Foreign exchange rates
v) Discount rate
vi) Estimated project commencement date.
If the carrying amount of the Development asset exceeds the recoverable
amount, the asset is impaired. The Group will reduce the carrying amount of
the asset to its recoverable amount and recognise an impairment loss. The
assessment is carried out twice per year - end of half year reporting period
and end of annual reporting period.
(e) Determination of incremental borrowing rate for leases
Under IFRS 16, where the interest rate implicit in the lease cannot be readily
determined the incremental borrowing rate is used. The incremental borrowing
rate is defined as the rate of interest that a lessee would have to pay to
borrow, over a similar term and with a similar security, the funds necessary
to obtain an asset of a similar value to the cost of the right-of-use asset in
a similar economic environment.
Judgements
(a) Investments in subsidiaries
Investment in subsidiaries comprises of the cost of acquiring the shares in
subsidiaries.
If an impairment trigger is identified and investments in subsidiaries are
tested for impairment, estimates are used to determine the expected net return
on investment. The estimated return on investment takes into account the
underlying economic factors in the business of the Company's subsidiaries
including estimated recoverable reserves, resources prices, capital investment
requirements, and discount rates among other things.
(b) Contingent consideration as part of Asset acquisition
Judgement was required in determining the accounting for the contingent
consideration payable as per of the CRL acquisition. The group has an
obligation to pay A$1m on net smelter sales arising from CRL production
reaching A$50m and a further A$1m on net smelter sales arising from CRL
production reaching A$100m.
Whilst a possible obligation exists in relation to the consideration payable,
given the early stage of the project it was concluded that at reporting date
it is not probable that an outflow of resources embodying economic benefits
will be required to settle the obligation
4. Segment information
The Group has four main segments during the period:
· Southern Minerals Group LLC (SMG) - This segment is involved in
the sale of magnetite to both the US domestic market and historically
transported magnetite to port for onward export sale.
· Head Office - This segment incurs all the administrative costs of
central operations and finances the Group's operations. A management fee is
charged for completing this service and other certain services and expenses.
· Development Asset - This segment holds the Leigh Creek Copper
Mine Development Asset in Australia and incurs all related operating costs.
· United Kingdom - The investment in the Redmoor project in
Cornwall, United Kingdom is held by this segment.
Factors that management used to identify the Group's reportable segments.
The Group's reportable segments are strategic business units that carry out
different functions and operations and operate in different jurisdictions.
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision maker has been identified as the board and management team which
includes the Board and the Chief Financial Officer.
Measurement of operating segment profit or loss, assets, and liabilities
The Group evaluates segmental performance on the basis of profit or loss from
operations calculated in accordance with International Accounting Standards.
Segment assets exclude tax assets and assets used primarily for corporate
purposes. Segment liabilities exclude tax liabilities. Loans and borrowings
are allocated to the segments in which the borrowings are held. Details are
provided in the reconciliation from segment assets and liabilities to the
Group's statement of financial position.
6 Months to 30 June 2022 SMG Head United Kingdom Development Asset Intra Total
(Unaudited) Office Segment
Elimination
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,329 - - - - 1,329
_______ _______ _______ _______ _______ _______
Gross profit 1,329 - - - 1,329
Raw materials/consumables (256) - - - - (256)
Overhead expenses (281) (380) (6) - 30 (637)
Management fee income/(expense) (200) 206 - (6) -
Share based payments - (12) - - - (12)
Amortisation (139) - - - - (139)
Depreciation (16) - - - - (16)
Foreign exchange gain/(loss) - 63 - - (68) (5)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) from operations 437 (123) (6) - (44) 264
_______ _______ _______ _______ _______ _______
Lease Interest (10) (2) (12)
Finance Expense - - - (4) - (4)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) before taxation 427 (123) (8) (4) (44) 248
_______ _______ _______ _______ _______ _______
6 Months to 30 June 2021 SMG Head United Kingdom Development Asset Inter Total
(Unaudited) Office Segment
Elimination
$'000 $'000 $'000 $'000 $'000 $'000
Revenues 1,511 - - - - 1,511
_______ _______ _______ _______ _______ _______
Gross profit 1,511 - - - 1,511
Raw materials/consumables (286) - - - - (286)
Overhead expenses (311) (383) (4) - - (698)
Management fee income/(expense) (200) 201 - (1) -
Share based payments - (48) - - - (48)
Amortisation (77) - - - - (77)
Depreciation (6) - - - - (6)
Lease Interest (4) - - - - (4)
Foreign exchange gain/(loss) - (306) - - 304 (2)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) from operations 627 (536) (4) - 303 390
_______ _______ _______ _______ _______ _______
Finance Expense - - - (2) - (2)
Segment profit /(loss) before taxation 627 (536) (4) (2) 303 388
_______ _______ _______ _______ _______ _______
Year to 31 December 2021 SMG Head United Kingdom Development Asset Intra Total
(Audited) Office Segment
Elimination
$'000 $'000 $'000 $'000 $'000 $'000
2,611 - - - - 2,611
Revenues
_______ _______ _______ _______ _______ _______
Total Revenue 2,611 - - - 2,611
Raw Materials/Consumables (524) - - - - (524)
Overhead expenses (678) (910) (8) - 61 (1,535)
Management fee income/(expense) (398) 396 - 2 -
Share based payments - (58) - - - (58)
Amortisation- right of use asset (158) - - - - (158)
Depreciation (52) - - - - (52)
(Loss)/ gain on intercompany loans - 29 - - (29) -
Foreign exchange gain/(loss) - (478) - - 473 (5)
_______ _______ _______ _______ _______ _______
Segment profit /(loss) from operations 801 (1,021) (8) - 507 279
_______ _______ _______ _______ _______ _______
Lease Interest (12) - (3) (15)
Finance Expense - - - (7) - (7)
_______ _______ _______ _______ _______ _______
789 (1,021) (11) (7) 507 257
Segment profit /(loss) before taxation
_______ _______ _______ _______ _______ _______
As at 30 June 2022 SMG Head United Kingdom Development Asset Total
(Unaudited) Office
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 201 253 454
_______ _______ _______ ______ _______
Reportable segment assets 1,181 160 5,068 7,906 14,315
_______ _______ _______ ______ _______
Reportable segment liabilities 651 172 31 449 1303
_______ _______ _______ _______ _______
As at 30 June 2021 SMG Head United Kingdom Development Asset Total
(Unaudited) Office
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 131 202 333
_______ _______ _______ ______ _______
Reportable segment assets 1,166 143 5,298 7,977 14,584
_______ _______ _______ ______ _______
Reportable segment liabilities 227 146 37 512 922
_______ _______ _______ _______ _______
As at 31 December 2021 SMG Head United Kingdom Development Asset Total
Office
(Audited)
$'000 $'000 $'000 $'000 $'000
Additions to non-current assets - - 568 584 1,152
_______ _______ _______ _______ _______
Reportable segment assets 1,603 82 5,533 8,108 15,326
_______ _______ _______ _______ _______
Reportable segment liabilities 795 185 66 505 1,551
_______ _______ _______ _______ _______
External revenue by Non-current assets by
location of assets
location of customers
30 June 2022 30 June 2021 30 June 2022 30 June 2021
$'000 $'000 $'000 $'000
United States 1,329 1,511 648 275
United Kingdom - - 4,905 5,305
Australia - - 7,894 7,924
_______ _______ _______ _______
1,329 1511 13,447 13,504
_______ _______ _______ _______
Revenues from Customer A totalled $188,315 (2021: $244,683), which represented
14% (2021: 16%) of total domestic sales in the United States, Customer B
totalled $506,503 (2021: $673,560) which represented 38% (2021: 45%) and
Customer C totalled $436,587 (2021: $ 523,027) which represented 33% (2021:
35%).
5. Operating Loss
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited)
(Unaudited)
(Audited)
$'000 $'000 $'000
Operating gain/loss is stated after charging/(crediting):
Directors' fees and emoluments 197 222 428
Equipment rental 2 63 116
Equipment maintenance 12 34 60
Fees payable to the company's auditor for the - - 111
audit of the parent company and consolidated financial statements
Non- Audit Services - - 13
Salaries, wages, and other staff related costs 248 211 480
Legal, professional and consultancy fees 96 85 169
Other Expenses 82 83 158
_______ _______ _______
637 698 1,535
_______ _______ _______
Lease Interest 12 4 15
Finance Fee 4 2 7
Foreign exchange 5 2 5
Amortisation of Right of use assets 139 77 158
Depreciation 16 6 52
Share based payments 12 48 58
_______ _______ _______
Total 825 837 1,830
_______ _______ _______
6. Intangible assets - exploration and evaluation costs
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited)
(Unaudited)
(Audited)
$'000 $'000 $'000
Cost
Opening balance for the period 5,228 5,026 5,026
Additions for the period 201 131 564
Grant Reimbursement (123) - (196)
Research and development incentive - - (65)
Foreign exchange difference (420) 83 (101)
_______ _______ _______
Closing balance for period 4,886 5,240 5,228
_______ _______ _______
7. Property, plant and equipment
Development Asset Plant and Machinery Total
$'000 $'000 $'000
Group
Cost
At 1 January 2021 (audited) 6,828 762
7,590
Additions 202 - 202
Foreign exchange difference (176) (9) (185)
________ ________ ________
At 30 June 2021 (unaudited) 6,854 753 7,607
Additions for period 382 4 386
Foreign exchange difference (209) (11) (220)
________ ________ ________
At 31 December 2021 (audited) 7,027 746 7,773
________ ________ ________
Additions 253 - 253
Foreign exchange difference (403) (18) (421)
_______ ________ _______-
At 30 June 2022 (Unaudited) 6,877 728 7,605
________ ________ ________
Depreciation
At 1 January 2021 (audited) - (239) (239)
Charge for the period - (9) (9)
Foreign exchange difference 4 4
________ ________ ________
At 30 June 2021 (unaudited) - (244) (244)
Charge for the period - (43) (43)
Foreign exchange difference - (1) (1)
________ ________ ________
At 31 December 2021 (audited) - (288) (288)
________ ________ ________
Charge for the period - (16) (16)
Foreign exchange difference - - -
________ ________ ________
As at 30 June 2022(unaudited) - (304) (304)
________ ________ ________
Carrying Value
As at 30 June 2021 (unaudited) 6,854 509 7,363
________ ________ ________
As at 31 December 2021(audited) 7,027 458 7,485
________ ________ ________
As at 30 June 2022 (unaudited) 6,877 424 7,301
________ ________ ________
8. Leases
The Group has leases for an office, plant and machinery and a vehicle. Each
lease is reflected on the balance sheet as a right-of-use asset and a lease
liability. The Group classifies its right-of-use assets in a consistent manner
to its property, plant and equipment.
Office Lease Plant, Machinery and Vehicles Total
$'000 $'000 $'000
Right of Use Assets
As at 1 January 2021 (audited) 40 38 78
Additions - 156 156
Amortisation(capitalised) (9) (4) (13)
Amortization - (71) (71)
________ ________ ________
As at 30 June 2021 (unaudited) 31 119 150
________ ________ ________
Additions - 666 666
Amortisation(capitalised) - (5) (5)
Amortization (11) (83) (94)
________ ________ ________
As at 31 Dec 2021 (Audited) 20 697 717
________ ________ ________
Additions - - -
Amortisation(capitalised) (9) (1) (10)
Amortization - (139) (139)
________ ________ ________
As at 30 June 2022 (unaudited) 11 557 568
________ ________ ________
Lease Liabilities
As at 1 January 2021 (audited) 40 40 80
Additions - 156 156
Interest Payments 1 5 6
Lease Payments (10) (91) (101)
________ ________ ________
As at 30 June 2021 (unaudited) 31 110 141
________ ________ ________
Additions - 666 666
Interest Payments 1 8 9
Lease Payments (10) (84) (94)
________ ________ ________
As at 31 Dec 2021 (Audited 22 700 722
________ ________ ________
Interest Payments 1 11 12
Lease Payment (5) (146) (151)
________ ________ ________
As at 30 June 2022 (unaudited) 18 565 583
________ ________ ________
Current 266 122 302
Non-Current 317 19 420
________ ________ ________
583 141 722
________ ________ ________
9. Dividends
No dividend is proposed for the period.
10. Earnings per share
Earnings per ordinary share have been calculated using the weighted average
number of shares in issue during the relevant financial year as provided
below.
6 months to 6 months to Year to
30 June 30 June 31 December
2022 2021 2021
(Unaudited)
(Unaudited)
(Audited)
$'000 $'000 $'000
Weighted average number of shares - Basic 1,593,558,030 1,573,956,203 1,593,558,030
Weighted average number of shares - Diluted 1,593,558,030 1,573,956,203 1,593,558,030
Earnings for the period $127,000 $207,000 $156,000
Earnings per share in the period - Basic ¢0.08 ¢0.13 ¢0.10
Earnings per share in the period - Diluted ¢0.08 ¢0.13 ¢0.10
11. Share capital and premium
30 June 30 June 30 June 30 June
2022 2022 2021 2021
No $'000 No $'000
Allotted, called up and fully paid
Ordinary shares 2,015,964,616 52,303 1,909,297,949 51,780
____________ ____________ ____________ ____________
Share options and warrants
The number of options as at 30 June 2022 and a reconciliation of the movements
during the half year are as follows:
Date of Grant Granted as at 31 December 2021 Expired Granted as at 30 June 2022 Exercise price Date of vesting Date of expiry
15.02.18 17,500,000 (17,500,000) - 5.00p 01.01.22 30.06.22
09.08.18 4,750,000 (4,750,000) - 5.00p 01.01.22 30.06.22
____________ ____________ ____________
22,250,000 (22,250,000) -
____________ ____________ ____________
Warrants
The number of warrants as at 30 June 2022 and a reconciliation of the
movements during the half year are as follows:
Granted as at 31 December 2021 Expired Granted as at 30 June 2022 Exercise price Date of vesting Date of expiry
03.12.20 175,000,000 - 175,000,000 1.00p 03.12.20 30.12.22
12. Post balance date events
Critical Minerals List
In August 2022 the UK Government issued both a Critical Minerals List and
Strategy. Both Tin and Tungsten, the main minerals identified at Redmoor, are
on this list. Accordingly, the Redmoor project, has the potential to benefit
from the Government's stated strategy to provide assistance in developing such
resources.
New Shareholding
In September 2022, a respected professional investor, Mr Philip Richards of
RAB Capital purchased 81,000,000 ordinary shares of 0.1 pence in the Company
representing 4.02% of the Company's issued share capital.
Copies of this interim report will be made available on the Company's website,
www.strategicminerals.net (http://www.strategicminerals.net) .
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