Final Results for the year ended 30 June 2014

Consolidated statement of financial position

as at 30 June 2014

 

		30 June 2014 £	30 June 2013 £
ASSETS
Non-current assets
Property, plant and equipment		5,100	8,173,525
Investments in associates and joint ventures		5,319,306	4,035,728
Available for sale financial assets		1,583,984	3,136,448
Non-current receivables		7,148,560	6,484,534
Total non-current assets		14,056,950	21,830,235
Current assets
Cash and cash equivalents		51,167	21,081
Restricted cash		221,846	-
Other receivables		579,145	2,949,415
Total current assets		852,158	2,970,496
Assets classified as held for sale		6,994,468	3,168,735
TOTAL ASSETS		21,903,576	27,969,466
EQUITY AND LIABILITIES
Equity attributable to owners of the Parent
Called up share capital		1,934,588	1,279,769
Share premium account		22,663,691	20,558,401
Other reserves		604,064	243,716
Retained earnings		(11,671,669)	(7,783,544)
Total		13,530,674	14,298,342
Non-controlling interest		60,461	130,137
Total equity		13,591,135	14,428,479
LIABILITIES
Current liabilities
Trade and other payables		2,493,289	4,528,558
Short-term borrowings		755,889	5,602,840
Total current liabilities		3,249,178	10,131,398
Liabilities directly associated with the assets classified as held for sale		4,744,285	-
Non-current liabilities
Long-term borrowings		318,978	245,588
Deferred tax liabilities		-	3,164,001
Total non-current liabilities		318,978	3,409,589
TOTAL EQUITY AND LIABILITIES		21,903,576	27,969,466

 

 

Consolidated income statement

for the year ended 30 June 2014

 

		Year to 30 June 2014 £	Year to 30 June 2013* £
Gain/(loss) on sales of investments		6,994	(2,468,814)
Gain on dilution of interest in associate		-	17,942
Impairment of investment in associates and joint ventures		(1,863,962)	-
Impairment of available for sale investment		(469,446)	(12,667,999)
Financial assets at fair value through profit and loss		-	(150,413)
Exploration expenses		(34,939)	(55,061)
Other expenses		(1,563,808)	(2,244,908)
Share of losses of associates		(105,092)	(326,240)
Provision for bad debts		(599,673)	(928,012)
Write-off of associate investment reserve		-	(126,226)
Other income		375,643	-
Finance income/(costs), net		485,725	(191,226)
Loss for the year before taxation from continuing operations		(3,768,558)	(19,140,957)
Tax credit		-	2,170,333
Loss for the year from continuing operations		(3,768,558)	(16,970,624)
Discontinued operations
Loss after tax for the year from discontinued operations		(344,902)	(5,134,938)
Loss for the year		(4,113,460)	(22,105,562)
Loss for the year attributable to:
Equity holders of the Parent		(4,043,784)	(19,676,289)
Non-controlling interest		(69,676)	(2,429,273)
		(4,113,460)	(22,105,562)
Loss per share attributable to owners of the Parent:
Basic loss per share
- Loss from continuing operations		(0.25) pence	(1.58) pence
- Loss from discontinued operations		(0.02) pence	(0.25) pence
Total		(0.27) pence	(1.83) pence
Diluted
- Loss from continuing operations		(0.25) pence	(1.58) pence
- Loss from discontinued operations		(0.02) pence	(0.25) pence
Total		(0.27) pence	(1.83) pence

* Certain amounts shown here do not correspond to the 2013 financial statements to re-present the results of discontinued operations.

 

 

 

Consolidated statement of comprehensive income

for the year ended 30 June 2014

 

		30 June 2014 £	30 June 2013 £
Loss for the year		(4,113,460)	(22,105,562)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Surplus/(deficit) on revaluation of available for sale investment		390,001	(2,229,255)
Revaluation reserve transferred to the income statement on impairment of available for sale investments		-	12,603,355
Deferred tax charge on revaluation of available for sale investments		-	(2,323,323)
Write-off of associate investment reserve to income statement		-	126,226
Unrealised foreign currency profit/(loss) arising upon retranslation of foreign operations		126,006	(60,367)
Total other comprehensive income net of tax for the year		516,007	8,116,636
Total comprehensive expense net of tax for the year		(3,597,453)	(13,988,926)
Total comprehensive expense net of tax attributable to:
Owners of the Parent		(3,527,777)	(11,559,653)
Non-controlling interest		(69,676)	(2,429,273)
		(3,597,453)	(13,988,926)

 

 

 

Consolidated statement of changes in equity

for the year ended 30 June 2014

 

The movements in equity during the period were as follows:

	Share capital £	Share premium account £	Retained earnings £	Other reserves £	Total attributable to owners of the Parent £	Non-controlling interest £	Total equity £
As at 30 June 2012	884,150	16,938,435	11,892,745	(7,872,920)	21,842,410	2,559,410	24,401,820
Changes in equity for 2013
Loss for the year	-	-	(19,676,289)	-	(19,676,289)	(2,429,273)	(22,105,562)
Other comprehensive income for the year	-	-	-	8,116,636	8,116,636	-	8,116,636
Transactions with owners
Issue of shares	382,064	3,696,111	-	-	4,078,175	-	4,078,175
Share issue costs	-	(210,276)	-	-	(210,276)	-	(210,276)
Share issue in relation to SIP	13,555	134,131	-	-	147,686	-	147,686
Total transactions with owners	395,619	3,619,966	-	-	4,015,585	-	4, 015,585
As at 30 June 2013	1,279,769	20,558,401	(7,783,544)	243,716	14,298,342	130,137	14,428,479
Changes in equity for 2014
Loss for the year	-	-	(4,043,784)	-	(4,043,784)	(69,676)	(4,113,460)
Other comprehensive income for the year	-	-	-	516,007	516,007	-	516,007
Transactions with owners
Issue of shares	627,739	2,076,484	-	-	2,704,223	-	2,704,223
Share issue costs	-	(56,465)	-	-	(56,465)	-	(56,465)
Share issue in relation to SIP	27,080	85,271	-	-	112,351	-	112,351
Share-based payment transfer	-	-	155,659	(155,659)	-	-	-
Total transactions with owners	654,819	2,105,290	155,659	(155,659)	2,760,109	-	2,760,109
As at 30 June 2014	1,934,588	22,663,691	(11,671,669)	604,064	13,530,674	60,461	13,591,135

 

	Available for sale trade investments reserve £	Associate investments reserve £	Foreign currency translation reserve £	Share-based payment reserve £	Total other reserves £
As at 30 June 2012	(8,056,820)	(126,226)	26,548	283,578	(7,872,920)
Changes in equity for 2013
Other comprehensive income/(expense) for the year	8,050,777	126,226	(60,367)	-	8,116,636
As at 30 June 2013	(6,043)	-	(33,819)	283,578	243,716
Changes in equity for 2014
Other comprehensive income for the year	390,001	-	126,006	-	516,007
Transactions with owners
Share-based payment transfer	-	-	-	(155,659)	(155,659)
Total transactions with owners	-	-	-	(155,659)	(155,659)
As at 30 June 2014	383,958	-	92,187	127,919	604,064

 

 

Consolidated statement of cash flows

for the year ended 30 June 2014

 

		Year to 30 June 2014 £	Year to 30 June 2013 £
Cash flows from operating activities
Loss before tax from continuing operations		(3,768,558)	(19,140,957)
Loss before tax from discontinued operations		(2,542,156)	(5,347,046)
Loss before tax		(6,310,714)	(24,488,003)
(Increase) in receivables		(407,285)	(596,938)
(Decrease)/increase in payables		(470,342)	2,003,737
Share of losses in associates		105,092	326,240
Write-off of associate asset reserve		-	126,226
Interest receivable and finance income		(627,557)	(298,752)
Interest payable		141,832	730,612
Share-based payments		92,712	122,067
Unrealised foreign exchange loss		125,364	2,661
Impairment of associate		1,863,962	-
Impairment of available for sale investment		469,446	12,667,999
Impairment of assets classified as held for sale		2,388,158	-
Loss on write-off/impairment of property, plant and equipment		41,326	3,947,609
Gain on dilution of interest in associates		-	(17,942)
(Gain)/loss on sale of investments		(6,994)	2,468,814
Provision for bad debts		599,673	928,012
Financial assets at fair value through profit and loss		-	150,413
Depreciation		522,497	928,853
Net cash outflow from operations		(1,472,830)	(998,392)
Corporation tax (paid)/reclaimed		(18,946)	219,592
Net cash used in operations		(1,491,776)	(778,800)
Cash flows from investing activities
Interest received		516	2,893
Proceeds of sale of investments		1,712,992	1,110,706
Payments to acquire associate company and joint venture investments		(83,897)	(2,632,673)
Payments to acquire available for sale investments		(232,978)	(200,000)
Payments to acquire property, plant and equipment		(39,430)	(104,629)
Net cash inflow/(outflow) from investing activities		1,357,203	(1,823,703)
Cash flows from financing activities
Proceeds from issue of shares		2,723,861	4,103,795
Transaction costs of issue of shares		(56,465)	(210,276)
Interest paid		(106,285)	(730,612)
Proceeds of new borrowings		1,328,154	1,405,445
Repayments of borrowings		(3,720,155)	(2,297,606)
Net cash inflow from financing activities		169,110	2,270,746
Net increase/(decrease) in cash and cash equivalents		34,537	(331,757)
Cash and cash equivalents at the beginning of period		21,081	352,838
Cash and cash equivalents at end of period		55,618	21,081

 

For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:

	30 June 2014 £	30 June 2013 £
Cash in hand and at bank	51,167	21,081
Cash in hand and at bank attributable to asset held for sale	4,451	-
	55,618	21,081

 

1 Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as endorsed by the EU ("IFRS") and the requirements of the Companies Act applicable to companies reporting under IFRS.

The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments. The principal accounting policies adopted are set out below.

 

Company statement of comprehensive income

As permitted by Section 408 Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive income. The Company's loss for the financial year was £5,810,863 (2013: £18,869,856). The Company's other comprehensive income for the financial year was £390,001 (2013: £8,050,777).

 

Amendments to published standards effective for the year ended 30 June 2014

The following standards have been adopted during the year:

·      IFRS 13 "Fair Value Measurement"; and

·      IAS 19 "Employee Benefits (revised)".

Additional disclosures have been provided to comply with the revised standards although the adoption of these amendments has had no significant impact on the financial position and performance of the Company and its subsidiaries (the "Group").

 

Standards adopted early by the Group

The Group has not adopted any standards or interpretations early in either the current or the preceding financial year.

 

Adoption of standards and interpretations

As at the date of authorisation of these financial statements, there were standards and interpretations in issue but that are not yet effective and have not been applied in these financial statements, as listed below.

 

Standards, amendments and interpretations in issue but not effective

Effective for annual periods beginning on or after 1 January 2014:

·      IFRS 10 "Consolidated Financial Statements";

·      IFRS 11 "Joint Arrangements";

·      IFRS 12 "Disclosure of Interests in Other Entities";  

·      IAS 27 (Revised) "Separate Financial Statements"; and

·      IAS 28 (Revised) "Investments in Associates and Joint Ventures".

Effective for annual periods beginning on or after 1 January 2015:

·      IFRS 9 "Financial Instruments: Classification and Measurement".

 

The Directors do not anticipate that the adoption of these standards and interpretations in future periods could have a material effect on the financial position or performance of the Group and Company, other than the introduction of IFRS 10 which could affect the financial position and performance due to the requirement to potentially consolidate the Company's associate, Mid Migori Mining Company Limited, over which the Company might be considered as having control under the revised definition and IFRS 11 and IFRS 12 which are likely to change or increase the level of disclosure required in respect of the Group's investments. The Group intends to adopt these standards when they become effective.

IFRS 10 is a new standard which establishes principles for the presentation and preparation of consolidated financial statements. As a result of its publication, the Directors will be required to consider the application of the revised definition of control to determine whether additional entities will need to be consolidated and whether consolidation is still appropriate for those that currently are.

The new definition of control will require the Directors to consider whether the Company has:

a) power over the investee;

b) exposure, or rights, to variable returns from involvement with the investee; and

c)  the ability to use power over the investee to affect the amount of the investor's returns.

The financial effect of such changes on the Group has not yet been reliably estimated. However, it is widely expected, irrespective of industry sector and without specific reference to the Group that the adoption of IFRS 10 is likely to result in more entities being consolidated.

IFRS 11 replaces IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities - Non-monetary Contributions by Venturers". It removes the option to account for jointly controlled entities ("JCEs") using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture must be accounted for using the equity method. JCEs under current IAS 31 that will be classified as joint ventures under IFRS 11 will transition from proportionate consolidation to the equity method by aggregating the carrying values previously recorded, testing that amount for impairment and then using that amount as deemed cost for applying the equity method going forward. The Group recognises its interest in jointly controlled entities using the equity method of accounting. The application of this new standard will not impact the financial position of the Group.

IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the disclosures that were previously included in IAS 31 and IAS 28. These disclosures related to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are also required. The adoption of IFRS 12 is likely to change or increase the level of disclosure required in respect of the Group's investments.

 

Significant accounting judgements, estimates and assumptions

The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

 

Significant judgements in applying the accounting policies

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

 

Going concern

The Group has incurred a loss of £4.1 million for the year ended 30 June 2014. At that date there was a net current liability of £2.4 million. The loss resulted mainly from provision for bad debts and impairments net of deferred tax credits of £3.1 million. Whilst the Directors have instituted measures to preserve cash and secure additional finance, these circumstances create material uncertainties over future trading results and cash flows.

 

During the fiscal year the Board of Directors has made the decision to undertake a strategic disposal of its Colombian gold mining operations.  As such the Company has signed a binding letter of intent with Nicaragua Milling Company Limited ("NMCL") to sell its Colombia interest for a total consideration of US$5.0m.  Payment is to occur over four tranches the first of which is US$1.050m payable upon completion, US$1.075m payable six months after closing, a further US$1.125m payable a year after closing, and a final $1.750m payable in the form of 3% royalty on gold sales. NMCL have already paid US$0.1m as a non-refundable deposit to conduct due diligence with exclusivity. NMCL has separately arranged to purchase an additional 11% in Four Points Mining SAS from a minority shareholder. NMCL has shown further evidence of being a committed buyer by making a public announcement to assign certain agreements and rights to Prize Mining Corporation to acquire 61% of the issued and outstanding shares in the capital of Four Points Mining SAS, which includes and is contingent upon both the purchase of 50.002% from the Company and 11% from a minority shareholder. Management have completed negotiations with NMCL as of mid-November 2014, with documentation being finalised. Based on negotiations conducted to date the Directors have a reasonable expectation that the sale proceeds will provide the majority of the funding needed for the business over the coming year.      

 

The Group will need to secure additional finance facilities over the coming year, and as a result has already entered into talks with the UK Bond Network about an expanded two year loan facility. The Group also has an equity drawdown facility of approximately £4.5 million available under the £10.5m SEDA facility with YA Global, and has discussed an additional convertible loan with a third vendor as of November 2014.

 

The Group has further implemented plans to minimise its cash outflows by reducing its cost base by such measures as staff reductions both in the form of redundancies earlier in the year and natural employee attrition, as well as minimizing marketing costs and other office and corporate overheads. Subsequent to year end, the Group has paid off £0.15 m of its borrowings leaving residual loans of £0.926m to be paid in 2014, 2015 and 2016.   

 

The Directors are confident in the Company's ability to raise new finance from stock markets if this is required during 2015 and the Group has demonstrated a consistent ability to do so. This includes recent share issues of 100 million shares for a total consideration of £0.20 m and 76m shares for a total consideration of £0.167m.  Further, the Company retains liquid investments in the form of Resource Star Limited and Regency Mines Plc, as well as a substantial stake in private Jupiter Mines Limited, all of which may be sold or disposed of if required during the course of the year.  Currently the firm expects to begin partial disposals of Resource Star Limited when it is deemed strategically sound to do so.

 

The majority of the Company's shares in Resource Star Limited, Jupiter Mines Limited and all of the Company's shareholding in Regency Mines plc and American Gold Mines Limited are pledged as collateral against loans owing to YA Global Master SPV Limited and the UK Bond Network Limited.

 

The Directors have concluded that the combination of these circumstances represents a material uncertainty that casts significant doubt upon the Group's ability to continue as a going concern. Nevertheless after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.

 

Assets classified as held for sale

In November 2012, the Company started discussions with potential farm-in partners following an indicative offer from International Media Projects Ltd. ("IMP"), a private British Virgin Island based company, on behalf of its industrial partner ("the Investor"), to acquire 51% of the outstanding share capital ("the Offer") of Melville Bay Limited ("MBL"), then known as "NAMA Greenland Limited", which holds direct ownership of the Melville Bugt Iron Ore project ("the Project") in Greenland. 51% of the cost of the Company's investment in MBL has been reclassified as an asset held for sale as at prior year end.

In April 2014, the Company announced that the probability of eventual contract with the above investor parties must be reduced to some degree, and the probability of an early contract and completion must be considerably reduced. Although the Company have received verbal indications that the transaction will progress, there is no recent activity that shows it is being actively worked on.  The Company has been engaging with possible alternative investors, and these discussions will continue. Considering there is no foreseeable timeline on the completion of the sale and discussions with alternative investors are still at an early stage, the criteria for an asset held for sale is deemed no longer met as at 30 June 2014. Hence, the portion previously presented as an asset classified as held for sale is re-presented as an investment in joint ventures and measured at its recoverable amount at the date of the subsequent decision not to sell.

 

On 12 May 2014 the Company executed a binding Letter of Intent ("LOI") with Nicaragua Milling Company Limited ("NMCL"), a private company registered in Belize. Under the LOI, the Company will sell (a) its 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 Limon mine, and (b) its loans to FPM, for a total consideration of US$5m payable in three tranches including a payment of US$1m in the form of a 3% royalty on annual net gold sales. In November 2014, the terms of payment were re-negotiated as follows:

Payment of consideration will occur in four tranches. The first tranche of US$1.050m will be payable upon the closing of the transaction which is expected in December 2014.

A second tranche of US$ 1.075m is payable six months after closing and a third tranche of US$ 1.125m is payable a year after closing. These tranches will be satisfied by the issuance by NMCL to the Company of a non-interest bearing promissory note (the "PN") due and payable on or before the dates specified. Security for the PN will be held in the form of a charge over 100% of the shares in AGM.

The fourth tranche of up to US$ 1.750m will be paid in the form of a 3% royalty on annual net gold sales. In the event that gold production at any stage ceases at El Limon, the total paid under the fourth tranche may fall short of this amount.

A 7% commission is payable to Ariel Partners on the transaction.

Based on this and in accordance with IFRS 5, FPM is classified as a disposal group held for sale in the Company & Group's accounts as at 30 June 2014.

 

Recognition of holdings less than 20% as an associate

The Company owns 15% of the issued share capital of Mid Migori Mining Company Limited ("MMM"). Andrew Bell is a member of the board of MMM. In accordance with IAS 28, the Directors of the Company consider this, and the input of resource by the Company in respect of drilling and analytical activities, to provide the Group with significant influence as defined by the standard. As such, MMM has been recognised as an associate for the year ended 30 June 2014.

The effect of recognising MMM as an available for sale financial asset would be to decrease the loss by £19,395.

 

Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period include the impairment determinations, the selling price of assets held for sale, the useful lives of property plant and equipment, the bad debt provision and the fair values of our financial assets and liabilities.

 

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

·      In the principal market for the asset or liability; or

·      In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

·      Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

·      Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

·      Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.

For unquoted equity investments, we have based our valuation on the weighted average share price of actual sale transactions which we consider as level 2 of the fair value hierarchy as they are based on indirectly observable inputs. In the absence of a quoted liquid market for Jupiter shares directly determining their value, the Company applied two different methodologies to estimate the fair value of its holding. These included an Adjusted Net Asset Method and a Market Approach. Under the Adjusted Net Asset method, the final results of Jupiter announced on 3^rd June 2014, as well as the independent business valuation on the Tshipi asset by Venmyn Deloitte were used to provide relevant data points.  Taking the net asset value, an adjusted hard asset only net asset value, and a further adjusted asset value modified using figures from Venmyn Deloitte, management arrived at an average value of 20 cents per share and a total valuation of AUD 5.47m (£3.14m). Applying a discount of 40% to this for illiquidity would reduce the fair value to 12 cents per share or AUD 3.282m (£1.88m). Under the Market Approach, the Company considered all the transactions involving Jupiter shares since de-listing. A total of seven transactions occurred between the de-listing date in January 2014 and the financial year-end, at an average price of 9.5 cents per share. This period is determined to be representative of the fair value at year end since there were no significant changes to the business and the transactions were considered orderly. After careful consideration of all the facts and circumstances that existed at the year-end date, Management believes that greater weight should be given to the actual transactions between buyers and sellers rather than the net asset value figures.  Thus, the market value approach was determined to be more suitable, and the corresponding 9.5 cents per share value implies that the Company's holding in Jupiter Mines is valued at AUD 2.596m (£1.49m). 

 

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value of share options is determined using the Black-Scholes model.

 

Impairment of financial assets

The Group follows the guidance of IAS 39 to determine when a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred "loss event") and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. This determination requires significant judgement. In making this judgement, the Group evaluates, among other factors, the duration and extent to which fair value of an investment is less than its cost.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. "Significant" is evaluated against the original cost of the investment and "prolonged" against the period in which the fair value has been below its original cost. Mining share prices typically have more volatility than most other shares and this is taken into account by management when considering if a significant decline in the fair value of its mining investments has occurred. Management would consider that there is a prolonged decline in the fair value of an equity investment when the period of decline in fair value has extended to beyond the expectation management have for the equity investment. This expectation will be influenced particularly by the company development cycle of the investment.

As a result of the Group's evaluation, an impairment loss of £469,446 on available for sale financial assets was recognised in the income statement.

 

Impairment of non-financial assets

The Group follows the guidance of IAS 36 to determine when a non-financial asset is impaired. The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed projections, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These projections generally cover a period of five years with a terminal value or salvage value applied.

Impairment losses of continuing operations are recognised in the income statement in expense categories consistent with the function of the impaired asset.

For investments in associates and joint ventures, the Group assesses impairment after the application of the equity method.

As a result of the Group's evaluation of its non-financial assets, an impairment loss of £1,863,962 on investments in associates and joint ventures was recognised in the income statement (2013: £3,947,609 impairment on property, plant and equipment was recognised within loss from discontinued operations). The impairment of £1.863m relates to the Company's iron ore assets in Greenland. Management recognises that the loss of a prospective buyer and transaction, the recent declines in the price of iron ore and the general decline in global growth rates, are all factors which indicate an impairment may be required in the Greenland asset. In estimating the level of this impairment, management have considered factors such as the outlook for the iron ore market, the infrastructure which would be required to produce iron ore for the Greenland asset. It was decided that a valuation based on the income approach would not be appropriate due to the relative infancy of the project, and an inability to accurately project cash-flows in a meaningful way. Hence the fair value has been determined by estimating the recoverable amount based on the asset's fair value less cost to sell per IAS 36. In estimating the level of impairment required, several judgements have had to be made and these have been based on comparing similar comparable transactions involving the sale of iron ore assets.  Five iron ore asset transactions from 2013-14 were deemed to be comparable and relevant to the Company's assets in Greenland. Of these, two 2013 transactions were discounted to take account of the decline in iron prices over this time period, and the resulting modified group gives a resource value of £4.40m. However, it was decided it is more appropriate to use the three comparable transactions which took place during 2014 resulting in a modified group resource value of £4.17m. A final impairment value of £1.863m was thus determined to be most appropriate.

 

Amounts due from associates

The Company conducted a review of the carrying value of the amount receivable from Mid Migori Mining Company Limited in relation to the Kenya asset. For the purpose of impairment review, the company views this receivable as part of its net investment in the associate and hence followed the guidance of IAS 36. Management recognise that the recent variability in gold prices, change in market fundamentals based on demand from key consumers, concerns around the global macroeconomic environment in general, and the pending renewals of licences can all have an effect on the value of this project. As the Kenya asset is still at a pre-feasibility stage, it is not possible to accurately project future cash flows to measure value in use. Thus, it was decided that a valuation based on the market approach would be more appropriate as it reflects how comparable gold assets are being valued by market participants worldwide. In estimating the value of this asset, the management looked at comparable companies involved in gold exploration with assets at a similar stage of development. Thirty-eight companies with projects across the globe and gold resources between 0-2 million ounces were deemed to be comparable and relevant for this valuation exercise.  The 38 company peer group is statistically significant and all companies in the industry are affected by the general macroeconomic environment and downturn. Hence, the metric obtained can be directly applied for use in the valuation of the Company's assets in Kenya.   The average valuation of this group was US$39 per ounce of gold in the ground.  Using this metric implies that the Company's share in the Kenya asset is worth US$23.26m and thus, no impairment is currently required. Management believe that the receivable balance will be repaid by Mid Migori Mining Company Limited once gold is being produced from the asset or from the proceeds of a possible sale or other transaction involving the assets.  Further, the Company has invested considerable time and resources to develop the project to date and maintains good relations with the Kenyan Ministry of Mines and has no information to currently to indicate that the exploration licences on the tenements will not be successfully renewed.  

 

2 Loss per share

The basic loss per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue.              

Diluted loss per share is derived by dividing the loss for the year attributable to ordinary shareholders of the Parent by the weighted average number of shares in issue plus the weighted average number of Ordinary shares that would be issued on conversion of all dilutive potential Ordinary shares into Ordinary shares.

The following reflects the loss and share data used in the basic and diluted earnings per share computations:

	2014	2013
Loss attributable to equity holders of the parent from continuing operations	£(3,768,558)	£(16,970,623)
Loss attributable to equity holders of the parent from discontinued operations	£(275,226)	£(2,705,666)
Loss attributable to equity holders of the Parent	£(4,043,784)	£(19,676,289)
Weighted average number of Ordinary shares of £0.001 in issue	1,518,425,648	1,076,285,074
Loss per share - basic	(0.27) pence	(1.83) pence
Weighted average number of Ordinary shares of £0.001 in issue inclusive of outstanding dilutive options*	1,518,425,648	1,076,285,074
Loss per share - fully diluted	(0.27) pence	(1.83) pence

 

The weighted average number of shares issued for the purposes of calculating diluted earnings per share reconciles to the number used to calculate basic earnings per share as follows:

	2014	2013
Loss per share denominator	1,518,425,648	1,076,285,074
Weighted average number of exercisable share options	-	-
Diluted loss per share denominator	1,518,425,648	1,076,285,074

 

In accordance with IAS 33, the diluted earnings per share denominator takes into account the difference between the average market price of Ordinary shares in the year and the weighted average exercise price of the outstanding options. The Group has weighted average share options of 20,590,411 (2013: 24,250,000). These were not included in the calculation of diluted earnings per share because all the options are not likely to be exercised given that even the lowest exercise price is substantially higher than the market price and are therefore non-dilutive for the period presented.

 

3 These results are audited, however, the financial 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 2014 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 2014 statutory financial statements.  The auditors have reported on the 2014 financial statements; their report was unqualified but did contain an emphasis of matter paragraph on going concern. It contained no statement under sections 498(2) or (3) of the Companies Act 2006. The financial statements for 2014 will be delivered to the Registrar of Companies by 31 December 2014.

 

4 A copy of the Company's annual report and financial statements for 2014 will be made available on the Company's website www.rrrplc.com shortly and at the Annual General Meeting on 23 December 2014; in addition the Annual Report will be posted to the Shareholders.