REG - Tengri Resources - Final Results <Origin Href="QuoteRef">TENT.L</Origin> - Part 2
29/07/2016 07:06
- Part 2: For the preceding part double click ID:nRSc5670Fa
Investments in subsidiaries at end of year - 16,511,152
Investments in subsidiaries relate to the Kyrgyz Companies that the Company
lost control of during the year. At the point control was lost, these were
reclassified as available for sale financial assets. The investment at 31
December 2015 has been adjusted based on the net consideration received for
the divestment of the Kyrgyz Companies subsequent to year end. The divestment
of the Kyrgyz Companies resulted in the Company receiving net consideration of
US$4.447 million.
12. PROPERTY, PLANT AND EQUIPMENT
As at 31 December 2015 and 2014, property, plant and equipment consisted of
the following:
Mining EquipmentUS$ Office Equipment and FurnitureUS$ TotalUS$
Cost
At 1 January 2014 - - -
Additions 35,538 19,395 54,933
Disposals - - -
At 31 December 2014 35,538 19,394 54,932
Additions 8,523 29,053 37,576
Disposals - - -
At 31 December 2015 44,061 48,447 92,508
Accumulated depreciation
At 1 January 2014 - - -
Depreciation for the year 3,964 3,016 6,980
Disposals - - -
At 31 December 2014 3,964 3,016 6,980
Depreciation for the year 13,332 12,046 25,378
Impairment 26,765 33,385 60,150
Disposals - - -
At 31 December 2015 44,061 48,447 92,508
Carrying amounts
At 31 December 2014 31,574 16,378 47,952
At 31 December 2015 - - -
Impairment
As at 31 December 2015 the Company had identified the following factors
indicating a potential trigger for impairment:
- Scoping Study indicated the Kyrgyz projects didn't meet the Company's
investment criteria; and
- All operational activities in Kyrgyz were suspended.
The carrying value of the Company's property, plant and equipment has been
determined based on the higher of fair value less costs to sell and value in
use. Under both methodologies it has been assessed that the carrying value is
nil.
13. TRADE AND OTHER PAYABLES
As at As at
31 December 2015US$ 31 December 2014US$
Trade and other payables 666,747 132,894
Trade and other payables 666,747 132,894
14. INTEREST BEARING LIABILITIES
As at As at
31 December 2015US$ 31 December 2014US$
Convertible note liability (i) 3,241,778 -
Unsecured loan 153,454 -
Interest bearing liabilities 3,395,232 -
(i) Convertible note liability
During the year the Company issued convertible unsecured loan notes to funds
managed by Argyle Street Management Limited (ASML) and TIH Limited (TIH). The
Company also issued convertible unsecured loan notes to its major shareholder
Robust Resources Limited (Robust).
The convertible note liabilities have the following terms:
ASML Convertible Note TIH Convertible Note Robust Convertible Note
Amount $0.500 million $0.500 million $3.000 million
Maturity 31 March 2018 31 March 2018 31 March 2018
Coupon 5% cash paid 5% cash paid 5% cash paid
Ranking Unsecured Unsecured Unsecured
Conversion price £0.05 £0.05 £0.05
Conversion price adjustment Conversion price adjusted for dividends, stock splits, combinations and similar events Conversion price adjusted for dividends, stock splits, combinations and similar events Conversion price adjusted for dividends, stock splits, combinations and similar events
Subsequent to initial recognition, the carrying value of the host debt
contract associated with the convertible note liabilities is calculated by
using the amortised cost method. These loan notes have been treated as current
liabilities in these financial statements since no interest has been paid on
these in accordance with the agreement in place, and so these were considered
to be in default at 31 December 2015.
Reconciliation of the convertible note liabilities at inception:
ASML Convertible Note TIH Convertible Note Robust Convertible Note
Convertible note liability 393,518 393,305 2,340,932
Embedded derivative associated with convertible note liability 106,482 106,695 659,068
Proceeds 500,000 500,000 3,000,000
Reconciliation of the convertible note liabilities movement during the year:
As at
31 December 2015US$
Convertible note liability at inception 3,127,755
Capitalise interest payable 267,477
Balance at 31 December 2015 3,395,232
15. FINANCIAL DERIVATIVE LIABILITY
As at As at
31 December 2015US$ 31 December 2014US$
Financial derivative associated with convertible note liability 647,504 -
Financial derivative liability 647,504 -
The convertible note liabilities issued by the Company contain an embedded
option to convert the debt to ordinary shares. The embedded options have been
separated from the host contract and accounted for as a derivative as the
economic characteristics and risks of the embedded derivative are not closely
related to the economic characteristics and risks of the host contract. The
embedded derivatives are measured at fair value with changes in value being
recorded in profit or loss.
Reconciliation of the financial derivative liability during the year:
As at
31 December 2015US$
Balance at 1 January 2014 -
Financial derivative liability at inception 872,246
Fair value of financial derivative recognised in profit or loss (224,742)
Balance at 31 December 2015 647,504
As at 31 December 2015, the value of the embedded derivative associated with
the convertible note liabilities is US$0.648 million. The fair value of the
financial derivative associated with the convertible note liabilities is
valued using a Black-Scholes option pricing model that takes into account the
exercise price, term, non-tradeable nature, share price at issue date and
expected price volatility of the underlying share, the expected dividend yield
and the risk-free rate for the term of the convertible note liabilities. This
is then multiplied against the amount of securities that the Company would be
required to issue. The table below summarises the model inputs for the
financial derivative associated with the convertible note liabilities at 31
December 2015:
Financial Derivative
Conversion price per share (£) £0.05
Valuation date 31 December 2015
Estimated exercise date 31 March 2018
Underlying security spot price at valuation date (£) £0.03
Estimated price volatility of the Company's shares 71%
Expected dividend yield 0%
Risk-free interest rate 1.13%
Black-Scholes valuation per right (£) £0.0081
16. RELATED PARTY DISCLOSURES
Control Relationships
Until 14 July 2014 the company did not consider there to be one single
controlling party.
Robust Resources Limited became the immediate and ultimate parent company and
controlling party from 14 July 2014 following a reverse takeover transaction.
On 29 October 2014, Robust Resources Limited was wholly acquired by Padiham
Resources Pty Ltd. The ultimate controlling party following this transaction
was the Salim Group which is controlled by Anthoni Salim.
Related Party Loans
As at As at
31 December 2015US$ 31 December 2014US$
Loans from parent
Included in current liabilities:
Convertible note liability 2,430,932 -
Unsecured loan 153,454 -
2,584,386 -
Loans to subsidiaries
Included in current assets:
Loan to subsidiaries 7 9,604,747 7,790,442
Provisions made (9,604,747) -
- 7,790,442
The terms of the loans from the parent company are detailed in Note 14. The
loans to subsidiaries are unsecured, interest free and repayable on demand.
During the year, Robust Resources Limited charged the company US$840,207 in
relation to services provided to the company in respect of the operations of a
branch office in the Kyrgyz Republic.
Key Management Personnel Remuneration
The remuneration of key management personnel is included in employee benefits
expenses accounts within the Consolidated Statement of Profit or Loss and
Other Comprehensive Income.
Directors and key management personnel remuneration for the 2015 and 2014
financial years were as follows:
Year ended Year ended
31 December 2015US$ 31 December 2014US$
Directors of Tengri Resources
Shahed Mahmood - 18,552
Charles Goodfellow - 18,552
Peter Moss 43,047 29,939
Gary Lewis 92,020 17,086
(appointed 14/04/2015, resigned 19/10/2015)
David King - 29,286
Joshua Crumb 10,000 -
(appointed 14/04/2015, resigned 11/12/2015)
Key Management Personnel
of Tengri Resources
Bruce Lumley 304,500 161,855
(Chief Executive Officer) (resigned 15/12/2015)
Total 449,567 275,270
Shareholdings of Key Management Personnel
At the balance sheet date and at the date of this report, the following shares
and options/warrants were held by Directors and their related entities.
NumberofShares Number of Options Number of Warrants
Peter Moss - 10,000 -
Idris Khan - 30,000 80,000
(resigned 11/12/2015)
Gary Lewis 265,000 - -
(appointed 14/04/2015, resigned 19/10/2015)
Joshua Crumb - - -
(appointed 14/04/2015, resigned 11/12/2015)
John Levings 100,000 40,000 -
(resigned 14/04/2015)
Allen Wang - - -
(appointed 11 December 2015)
Total 365,000 80,000 80,000
The options and warrants have expiry dates of between September 2018 and July
2019, with exercise prices ranging between 22.5p and 23p.
17. SHARE CAPITAL
As at As at As at As at
31 December 2015Shares 31 December 2015US$ 31 December 2014Shares 31 December 2014US$
(a) Issued and paid up capital
Ordinary shares fully paid 107,618,497 96,931,323 107,618,497 96,931,323
Partly paid shares 500,000 128,286 500,000 128,286
108,118,497 97,059,609 108,118,497 97,059,609
Number of Shares US$
(b) Movement in contributed equity
Balance at the 1 January 2014 580,037,345 67,562,979
Issue of shares 125,000,000 641,430
Share consolidation (690,936,598) -
Issue of shares for the cost of acquisition 93,831,153 28,830,904
Issue of shares 186,597 24,296
Balance at 31 December 2014 108,118,497 97,059,609
Balance at 31 December 2015 108,118,497 97,059,609
(c) Terms and Conditions of Share Capital
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the
event of winding up of the Company, to participate in the proceeds from the
sale of all surplus assets in proportion to the number of and amounts paid up
on shares held. Ordinary shares entitle their holder to one vote, either in
person or by proxy, at a meeting of the Company.
18. CASH FLOW STATEMENT RECONCILIATION
The table below is a reconciliation of the loss for the year to net cash flows
from operations:
31 December 2015US$ 31 December 2014US$
Loss after income tax (25,507,798) (4,460,625)
Adjustments for:
Depreciation 25,378 6,980
Non-cash finance expenses 189,025 -
Net foreign exchange losses 35,727 291,339
Impairment 21,798,435 1,185,033
Fair value of derivative (224,742) -
Provision for non-recovery 300,415 -
Changes in assets and liabilities
(Decrease) / increase in trade and other receivables (176,682) 317,318
Decrease in prepayments (147,635) -
Increase in trade and other payables 89,614 27,893
Increase in provisions and other payables 453,186 -
Net cash used in operating activities (3,165,077) (2,632,062)
19. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Policies
The Company's financial instruments comprise cash and cash equivalents, trade
and other receivables, trade and other payables and loans payable to the
ultimate parent company and other entities. The Company does not trade in
derivatives or in foreign currency.
The main risks arising from the Company's financial instruments are interest
rate risk, foreign currency risk and liquidity risks. The Company uses
different methods to manage and minimise its exposure to risks. These include
monitoring levels of interest rates fluctuations to maximise the return of
bank balances and liquidity risk is monitored through the development of
future rolling cash flow forecasts.
The final approval and monitoring of any of these policies is done by the
Board which reviews and agrees on the policies for managing each of the risks
as summarised below.
The primary responsibility to monitor the financial risks lies with the
Managing Director under the authority of the Board. The Board agrees and
approved policies for managing each of the risks identified below, including
the setting up of approval limits for purchases and monitoring projections of
future cash flow.
Risk Exposures
(a) Interest rate risk and maturity analysis
The Directors believe that the exposure to interest rate fluctuations is
immaterial and therefore no interest rate sensitivity analysis has been
disclosed. The borrowings disclosed in the Statement of Financial Position
are the Company's fixed rate borrowings and therefore not subject to interest
rate risk as defined in IFRS 7 Financial Instruments: Disclosures. The
short-term loans from the controlling entities and trade creditors are not
exposed to interest rate fluctuations.
(b) Liquidity risk
The Company's objective is to maximise its cash availability by evaluating
current charges of various suppliers and the Company will seek additional
funds from existing investors or new investors or a combination of both.
(c) Foreign currency risk
The Company had operations in Kyrgyz Republic where its operating expenses are
incurred in US dollars and accordingly the majority of its cash was held in US
dollars. Now the Company is a cash shell the majority of its operating
expenditure will be incurred in GBP therefore the fluctuation of the US dollar
in relation to GBP will have an impact upon the operations of the Company and
will also affect the value of the Company's cash balances.
The Company has not entered into any agreements or purchased any instruments
to hedge possible currency risks.
(d) Equity price risk
Equity price risk arises from the embedded financial derivative associated
with the convertible note liabilities. For financial instruments not quoted in
active markets, the Company uses valuation techniques such as present value
techniques, comparison to similar instruments for which market observable
prices exist and other relevant models used by market participants (Level 2).
These valuation techniques use both observable and unobservable market inputs.
The fair value of any equity conversion option is derived on the Black-Scholes
valuation technique.
As at 31 December 2015, if the Company's share price had moved as illustrated
in the table below, with all other variables held constant, (loss)/profit
after income tax and equity would have been affected as follows:
Post Tax Profit Equity
2015US$ 2015US$
Tengri share price +10% 132,010 132,010
Tengri share price -10% (123,073) (123,073)
Reasonably possible movements in the Company's share price were determined
based on observations of historical movements from the date of issue of the
convertible note liabilities.
The reasonably possible movement was calculated by updating the share price
input in a Black-Scholes valuation mode, keeping all other variables
constant.
Credit Risk Management
Credit risk refers to the risk that the counterparty will default on its
contractual obligations resulting in financial loss to the Company. The
Company's exposure to, and the credit ratings of, its counterparties are
continuously monitored and the aggregate value of transactions concluded is
spread amongst approved counterparties. Periodic evaluation is performed on
the financial condition of accounts and other receivables.
Capital Management
The Company's objective when managing capital is to ensure that adequate
funding and resources are obtained to enable it to develop its projects
through to profitable production, whilst in the meantime safeguarding the
Company's ability to continue as a going concern. This is to enable the
Company, once projects become commercially and technically viable, to provide
appropriate returns for shareholders and benefits for other stakeholders.
Since admission to the AIM market of the London Stock Exchange plc, the Board
intends to utilise financing sources, be that debt or equity that best suits
the Company's working capital requirements and market conditions.
Fair Value
The fair value of the financial assets and financial liabilities of the
Company, at each reporting date, approximates to their carrying amount as
disclosed in the Consolidated Statement of Financial Position and in the
related notes.
The fair value of the financial assets and liabilities are included at the
amounts at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale. The cash
and cash equivalents, other receivables, trade payables and other current
liabilities approximate their carrying value amounts largely due to the
short-term maturities of these instruments.
Set out below is a comparison of the carrying amounts and fair values of
financial instruments as at 31 December 2015:
Carrying Amount Fair Value
31 December 2015US$ 31 December 2015 US$
Financial assets:
Available for sale financial assets 4,571,051 4,571,051
Total 4,571,051 4,571,051
Financial liabilities:
Payables 666,747 666,747
Financial derivatives 647,504 647,504
Convertible note liability 3,395,232 3,250,000
Total 4,709,483 3,916,747
All financial instruments for which fair value is recognised or disclosed 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 market prices in an active market (that are unadjusted) 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 financial instruments that are recognised at fair value on a recurring
basis, the Company determines whether transfers have occurred between levels
in the hierarchy by re-assessing categorisation (based on the lowest level of
input that is significant to the fair value measurement as a whole) at the end
of each reporting period.
(a) Convertible note and financial derivative
As at 31 December 2015, the value of the financial derivative associated with
the convertible notes is US$0.648 million. The fair value of the financial
derivative has been determined using the techniques detailed in Note 15.
The following methods have been used for the Company's valuation derivatives:
Financial derivative Level 2
For financial instruments not quoted in active markets, the Company uses
valuation techniques such as present value techniques, comparison to similar
instruments for which the market observable prices exist and other relevant
models used by market participants (Level 2). These valuation techniques use
both observable and unobservable market inputs.
As at 31 December 2015 the Company held the following financial instruments
measured at fair value:
Level 1US$ Level 2US$ Level3US$ TotalUS$
Financial liabilities measured at fair value:
Financial derivative - 647,504 - 647,504
Financial liabilities for which fair value is disclosed:
Convertible note liability (i) - - 3,325,000 3,325,000
(i) The fair value of US$3.325 million has been estimated using inputs
for the convertible note liability that are based on the Company's current net
asset position. The fair value takes into account the total current assets and
the current non-interest bearing liabilities of the Company.
20. AUDITORS' REMUNERATION
Year Ended As at
31 December 2015US$ 31 December2014US$
Lubbock Fine, Chartered Accountants 48,918 38,835
21. EVENTS SUBSEQUENT TO BALANCE SHEET DATE
On 12 April 2016, the Company entered into a conditional agreement with
Socagest SA to sell its Kyrgyz assets relating to the Taldybuluk and Andash
projects for US$6.000 million. The sale provided that Tengri use US$0.553
million of the sales proceeds to repay trade creditor balances relating to its
subsidiaries that formed part of the sale. The sale was completed on 31 May
2016. At the same time the Company and its majority shareholder Robust
Resources Limited entered into an agreement with Gold Fields Orogen Holdings
BVI Limited (Goldfields) to settle all ongoing and future obligations owed to
Goldfields in respect of the Kyrgyz projects for a consideration of US$1.000
million allowing it to complete a full and clean exit from its activities in
the Kyrgyz Republic.
The completion of the disposal represented a fundamental change of business
under AIM Rule 15 and as such, the Company is now an "AIM Rule 15 cash shell"
for the purpose of the AIM Rules and has until 1 December 2016 to make an
acquisition or acquisitions which constitute a reverse takeover under Rule 14
of the AIM Rules or otherwise seek readmission as an "investing company" with
the attendant requirement to raise at least £6.000 million on or immediately
before such readmission.
In June 2016, the Company repaid in full the principal amounts outstanding to
TIH Limited and Argyle Street Management Limited of US$1.000 million. The
Company also partly repaid US$2.250 million of the outstanding principal owing
to Robust Resources Limited.
This information is provided by RNS
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