Interim Results - Half Year to 30 June 2019

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

 

30 September 2019

 

Strategic Minerals plc

("Strategic Minerals", "SML", the "Group" or the "Company")

Interim Results - Half Year to 30 June 2019

 

Strategic Minerals plc (AIM: SML; USOTC: SMCDY),  a producing mineral company actively developing projects prospective for battery materials, is pleased to announce its unaudited interim results for the half year ended 30 June 2018.

 

Financial Highlights:

·     Accounting after tax loss of US$1,182,000 (H1 2018 profit of US$2,406,000). Cash after tax loss of US$256,000 (H1 2018 profit of US$35,000).

·     Pre-tax profit of US$675,000 (H1 2018: US$1,246,000) from the Company's Cobre operation, prior to intercompany management charges, continues to underpin corporate cash flow. The contracted profit level reflects the impact of the major Cobre client suspending shipments and maintenance works conducted at other client operations.  While sales from other clients have begun to rebound, it is not anticipated that the major client will resume taking shipments and the Company has initiated legal proceedings against the major client. In line with anticipated lower sales levels, cost reduction measures have been implemented in the second half of 2019.

·      Directors exercised 17.5m options (John Peters, 16m and Alan Broome, 1.5m) and acquired further stock in the company.

·     Investment of US$39,784 into Cornwall Resources Limited ("CRL"), the owner of the Redmoor Tin-Tungsten project.

·     Issue of 2,866,730 SML shares, in March 2019, at a deemed price of 1.9067 pence per share as part payment for the acquisition of Leigh Creek Copper Mine Pty Ltd ("Leigh Creek" or "LCCM").

·     In September 2019, the Board of SML undertook a review of the CARE tenements and those at Hanns Camp.  In light of this review, the Company is considering exiting its involvement and, in anticipation of this, an impairment of US$760,000 has been included in the six month period to 30 June 2019.

·     In June 2019, the Company undertook an equity fundraising that saw it issue 63,571,425 shares at 1.40 pence per share and netting US$1,059,000. Only US$91,000 of this amount was received prior to 30 June 2019 with the balance, US$968,000, received post 30 June 2019.

·     Unrestricted cash and cash equivalents at 30 June 2019 were US$319,000 (31 Dec 2018: US$1,988,000).  The reduction in cash balances reflects the lower than expected cash flows from Cobre and the cost of re-commencing operations at Leigh Creek.

 

 

 

Corporate Highlights:

·     Leigh Creek successfully brought back into production, involving:

o  retreatment of leach pads;

o  US$1,834,000 spent on refurbishment of plant, testing and preparing the site for full time operations; and

o  activation of the off-take agreement.

·     Entering into contracts for the acquisition of the balance of the Redmoor Tin-Tungsten project.  This was subsequently settled on 25 July 2019.

·     Access to the Cobre magnetite stockpile was rolled over in mid-January ahead of the normal roll over at the end of February.

·     Redmoor scoping study update completed indicating NPV (@8%) of US $94m, IRR 19.4% Life of Mine Operating Margin 46% and payback in less than 4 years.

 

Commenting, John Peters, Managing Director of Strategic Minerals, said:

"The first half of 2019 has offered some challenges, with the major client at Cobre suspending payments, affecting cash reserves.  However, the Company has shown resilience and remains on track to deliver the Board's strategy.

"During the period, significant investment has been made in restarting treatment of leach pads at Leigh Creek Copper Mine.  This was critical in demonstrating the Company's ability to resurrect operations ahead of expected government approval to mine the larger Paltridge North deposit.  Additionally, funding which was originally allocated for exploration of the Hanns Camp site, that has not proved as prospective for nickel sulphide as expected, has now been redirected towards the development of Leigh Creek.

"Also during the period, the Company entered into arrangements to acquire the balance of the Redmoor Tin-Tungsten project.  Full ownership of Redmoor will allow SML to gain control on project timing and investment in this potentially world class mining opportunity.

"The Board has been mindful of the change in expected cash flow and has been putting into place strategies to provide for continuity of progress on the Company's key projects.  It is expected that the working capital position will be addressed in 2020 once regular sales commence at Leigh Creek.  In the meanwhile, the Board continues to exercise strict financial and technical discipline.  Furthermore, the Company now believes that it has consolidated three excellent operating/near-operating/brownfields projects, all likely to significantly add to the Companies perceived net value."

 

For further information, please contact:
Strategic Minerals plc		+61 (0) 414 727 965
John Peters
Managing Director
Website:	www.strategicminerals.net
Email:	[email protected]
Follow Strategic Minerals on:
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Twitter:	@SML_Minerals
LinkedIn:	https://www.linkedin.com/company/strategic-minerals-plc
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SP Angel Corporate Finance LLP	+44 (0) 20 3470 0470
Nominated Adviser and Broker
Ewan Leggat
Lindsay Mair
Stephen Wong

 

Notes to Editors

Strategic Minerals plc is an AIM-quoted, operating minerals company actively developing projects prospective for battery materials. It has an operation in the United States of America and Australia 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 being sought in the burgeoning electric vehicle/battery market.

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 orientated to supplying the burgeoning electric vehicle/battery market.

In January 2016, the portfolio was expanded with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia prospective for cobalt, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In September 2018, the Company entered contracts for the sale of certain CARE tenements identified as gold targets.

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 in Cornwall. This was completed on 24 July 2019

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 into limited production in April 2019, with full production expected in 2020.

 

 

Chairman's Statement

I am satisfied with the Company's achievements, in what has been a particularly challenging period.

Financial results

The results for the first half of 2019 reflect a tougher stage of development for the Company, as difficulties with our major client at Cobre emerged and projects took longer to develop.  It is not expected that these conditions will change dramatically over the remainder of 2019.  However, despite these obstacles, I am confident in the ability of the Board and management team to deliver the Company's strategy.  In 2020, the Company expects cash flow and profitability to improve dramatically, as full scale production commences at Leigh Creek Copper Mine.

As at 30 June 2019, unrestricted cash on hand was US$319,000, prior to the receipt of a further US$968,000 from the late June equity raise.  In the interests of preserving cash and ensuring that each of our projects are appropriately funded, the Board has been actively developing a capital plan and allocation policy to move the Company forward.

Operating profit of US$675,000 from the Cobre magnetite stockpile, prior to intercompany management fees, marked a significant decrease from the first half of 2018 (US$1,246,000) and reflected the drop in sales volumes associated with Cobre's major client not purchasing product in accordance with its contract.

Corporate overheads of US$1,211,000 were down on the same period last year (H1 2018 US$1,386,000) and the Board has implemented a series of cost-reduction initiatives in light of reduced sales at Cobre.

 

Strategic Focus

The continued profitability of the Cobre operations, even without the sales associated with the major client, provides comfort in relation to coverage of operating costs and allowed the Company to continue its three-pronged approach to diversified materials concentrating on:

1.         Coal and Bulk Materials- potential projects in this sector that are tied to current contracts and further offtake arrangements at attractive prices.

2.         Advanced Materials- considering project opportunities in materials where it expects demand to increase over the coming years (such as Rare Earths, Lithium and Graphite).

3.         Metals- identifying those projects exposed to metals that it expects to have price improvements over the next three to five years such as Cobalt, Nickel, Gold, Copper and Tin/Tungsten.

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).

 

Cobre Operations

During 2018, the major client at Cobre ceased taking material and entered into arrangements that compensated the Company in lieu of delivery.  However, in 2019, the Company has received no payment from the client and is currently undertaking legal recourse.

The first half of the year's sales at Cobre were also impacted by plant maintenance works by a further two clients, although this now appears to have been cleared and non-major client sales now appear to have been restored to previous levels.

 

Leigh Creek Copper Mine

Significant resources have been funnelled into testing and preparing the site for full scale operation.  The restarting of the heaps, while not providing the flow of copper hoped for, was a strategically important occurrence. It demonstrated the ability of the existing plant to treat the planned production from the Paltridge North Deposit with the Company seeking to develop this project in 2020.

In preparing to fund this production, the Company has entered discussions with various funding sources and is confident that 2020 will see full scale production commence at Leigh Creek.

 

 

 

Redmoor Tin-Tungsten Project

2018 saw a full drilling program and a substantial increase in the inferred resource base.  In this half year, a scoping/mining plan study was completed which highlighted how potentially lucrative the project could be.

With this in mind, the Company negotiated to acquire the other half of the project, with completion taking place in July 2019.  Control of the full project places the Company in an ideal position to direct the timing and funding of the Redmoor Tin-Tungsten project.

 

CARE

During the first half of 2019, development at Hanns Camp was minimised to ensure availability of cash for the Leigh Creek Copper Mine project.

After further desktop review, the suspected nickel sulphide anomalies do not appear as strong as thought and the Company has taken a conservative approach in these financials and written down the value of the Hanns Camp tenements.

 

Issue of Capital

During the half year, the Company issued a total of 63,571,425 shares at 1.40 pence per share and netting US$1,059,000.
 

Safety

The Company continues to maintain a high level of safety performance with SML and its subsidiaries having no reportable environmental or personnel incidents recorded in the period.

 

This year marks a pace change for the organisation. I would like to take this opportunity to thank my fellow Directors, our management and staff in New Mexico, South Australia, Cornwall and Western Australia, 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 2020.

 

Alan Broome AM

Non-Executive Chairman

30 September 2019

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2019

 

	6 months to	6 months to	Year to
	30 June	30 June	31 December
	2019	2018	2018
	(Unaudited)	(Unaudited)	(Audited)
	$'000	$'000	$'000
Continuing operations
Revenue	1,395	2,120	3,355
Cost of sales	(229)	(391)	(650)
	_________	_________	_________
Gross profit	1,166	1,729	2,705
Bargain purchase gain on LCCM Acquisition	-	2,464	2,162
Administrative expenses	(1,211)	(1,386)	(2,569)
Depreciation	(19)	(36)	(64)
Share based payment	(163)	(92)	(268)
Share of net losses of associates and joint ventures	(38)	1	(27)
Profit on financial assets held at fair value through profit or loss	1	-	-
Impairment charge	(760)	-	-
Foreign exchange gain/(loss)	(2)	7	(6)
	_________	_________	_________
(Loss)/ profit from operations	(1,026)	2,687	1,933
	_________	_________	_________
(Loss)/ profit before taxation	(1,026)	2,687	1,933
Income tax (expense)/credit	(156)	(281)	(460)
	_________	_________	_________
Profit/(loss) for the period	(1,182)	2,406	1,473
Other comprehensive income
Exchange gains/(losses) arising on translation of foreign operations	(62)	(93)	(685)
	_________	_________	_________
Total comprehensive (loss)/ Income	(1,244)	2,313	788
	_________	_________	_________
(Loss)/ profit  for the period attributable to:
Owners of the parent	(1,244)	2,313	788
	_________	_________	_________
Total comprehensive (loss)/income attributable to:
Owners of the parent	(1,244)	2,313	788
	_________	_________	_________
(Loss)/ profit  per share attributable to the ordinary equity holders of the parent:	$	$	$
Continuing activities - Basic	(0.08)	0.19	0.11
-- Diluted	(0.08)	0.17	0.11

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

					30 June	30 June	31 December
					2019	2018	2018
					(Unaudited)	(Unaudited)	(Audited)
					$'000	$'000	$'000
	Assets
	Non-current assets
	Intangible Asset				562	-	564
	Deferred Exploration and evaluation costs				342	6,174	1,037
	Other Receivables				140	111	141
	Property, plant and equipment				7,026	295	5,170
	Investments in joint ventures- equity accounted				2,264	1,755	2,248
	Restricted cash				-	100	100
					_________	_________	_________
					10,334	8,435	9,260
					_________	_________	_________
	Current assets
	Inventories				7	3	4
	Financial Assets held at fair value through profit and loss				21	-	20
	Trade and other receivables				1,302	1,204	285
	Cash and cash equivalents				319	1,988	1,840
	Prepayments				119	81	32
					_________	_________	_________
					1,768	3,276	2,181
					_________	_________	_________
	Total Assets				12,102	11,711	11,441
					_________	_________	_________
	Equity and liabilities
	Share capital				2,202	2,087	2,095
	Share premium reserve				48,454	47,118	47,205
	Merger reserve				20,240	20,240	20,240
	Foreign exchange reserve				(956)	(302)	(894)
	Share options reserve				431	(29)	330
	Other reserves				(23,023)	(23,023)	(23,023)
	Accumulated loss				(37,752)	(35,515)	(36,632)
					_________	_________	_________
	Total Equity				9,596	10,576	9,321
					_________	_________	_________
	Liabilities
	Non-Current Liabilities
	Provision for Mining Royalties				435	-	435
	Environmental Liability				361	-	361
						________	________
					796	-	796
	Current liabilities
	Deferred Consideration				-	74	70
	Trade and other payables				1,029	356	354
	Environmental Liability				-	111	-
	Deferred revenue				525	594	900
	Income Tax Payable				156	-	-
					_________	_________	_________
					1,710	1,135	1,324
					_________	_________	_________
	Total Liabilities				2,506	1,135	2,120
					_________	_________	_________
	Total Equity and Liabilities				12,102	11,711	11,441
					________	________	________

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE PERIOD ENDED 30 JUNE 19

	6 months to	6 months to	Year to
	30 June	30 June	31 December
	2019	2018	2018
	(Unaudited)	(Unaudited)	(Audited)
	$'000	$'000	$'000
Cash flows from operating activities
(Loss)/profit after tax	(1,182)	2,406	1,473
Adjustments for:
Bargain purchase of Leigh Creek Copper Mine Pty Ltd	-	(2,464)	(2,162)
Loss on sale of tenements	-	-	245
Gain on financial assets held at fair value through profit and loss	(1)	-	12
Impairment charge	760	-	-
Depreciation of property, plant and equipment	19	36	64
Share of net loss / (profit) losses from associates	38	(1)	27
Non Cash Director Remuneration	-	213	-
(Increase) / decrease in inventory	(3)	4	3
(Increase) / decrease in trade and other receivables	(50)	(193)	690
Increase / (decrease) in trade and other payables	251	(91)	119
(Increase) / decrease in prepayments	(87)	(69)	(20)
Increase /(decrease) in deferred revenue	(375)	594	900
(Decrease)/ Increase in income tax payable	156	(648)	(648)
Share based payment expense	163	92	268
	_________	_________	_________
Net cash flows from operating activities	(311)	(121)	971
	_________	_________	_________
Investing activities
Acquisition of PPE Development Asset	-	-	(1,214)
Increase in PPE Development Asset	(1,212)	-	(797)
Increase in deferred exploration and evaluation	(91)	(1,443)	(237)
Sale of tenements	-	-	70
Investment in joint arrangements	(40)	(107)	(639)
Acquisition of PPE	(57)	(26)	-
	_________	_________	_________
Net cash used in investing activities	(1,400)	(1,576)	(2,817)
	_________	_________	_________
Financing activities
Net proceeds from issue of equity share capital	91	-	-
	_________	_________	_________
Net cash from financing activities	91	-	-
	_________	_________	_________
Net increase / (decrease) in cash and cash equivalents	(1,620)	(1,697)	(1,846)
Cash and cash equivalents at beginning of period	1,840	3,706	3,706
Release of restricted cash	100	-	-
Exchange gains / (losses) on cash and cash equivalents	(1)	(21)	(20)
	_________	_________	_________
Cash and cash equivalents at end of period	319	1,988	1,840
	_________	_________	_________

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2019

 

	Share capital	Share premium reserve	Merger reserve	Share options reserve	Other reserves	Foreign exchange reserve	Retained earnings	Total Equity
	$'000	$'000	$'000	$'000	$'000	$'000	$'000	$'000
	________	________	________	________	________	________	________	________
Balance at 1 January 2018 - audited	2,009	45,935	20,240	137	(23,023)	(209)	(38,180)	6,909
	________	________	________	________	________	________	________	________
Gain/(Loss) for the period	-	-	-	-	-	-	1,473	1,473
Foreign exchange translation	-	-	-	-	-	(685)	-	(685)
	________	________	________	________	________	________	________	________
Total comprehensive income for the year	-	-	-	-	-	(685)	1,473	788
Shares issued in the year	86	1,270	-	-	-	-	-	1,356
Expenses of share issue		-	-	-	-	-	-	-
Transfer	-	-	-	(75)	-	-	75	-
Share based payments	-	-	-	268	-	-	-	268
	________	________	________	________	________	________	________	________
Balance at 31 December 2018- audited	2,095	47,205	20,240	330	(23,023)	(894)	(36,632)	9,321
	________	________	________	________	________	________	________	________
Profit for the period	-	-	-	-	-	-	(1,182)	(1,182)
Foreign exchange translation	-	-	-	-	-	(62)	-	(62)
	________	________	________	________	________	________	________	________
Total comprehensive income for the half year	-	-	-	-	-	(62)	(1,182)	(1,244)
Shares issued in the year	107	1,322	-	-	-	-	-	1,429
Expenses of share issue	-	(73)	-	-	-	-	-	(73)
Transfer	-	-	-	(62)	-	-	62	-
Share based payments	-	-	-	163	-	-	-	163
	________	________	________	________	________	________	________	________
Balance at 30 June 2019 - Unaudited	2,202	48,454	20,240	431	(23,023)	(956)	(37,752)	9,596
	________	________	________	________	________	________	________	________

 

 

All comprehensive income is attributable to the owners of the parent.

 

The accompanying accounting policies and notes form an integral part of these financial statements

 

STRATEGIC MINERALS PLC

 

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2019

 

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 2019 comprise the Company and its subsidiaries (together referred to as the "Group").

 

 

2.   Accounting policies

Basis of preparation

 

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. IAS 34 is not required to be adopted by the Company and has not been applied in the preparation of this interim information. The consolidated financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2018 Annual Report. The financial information for the half years ended 30 June 2019 and 30 June 2018 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

 

The annual financial statements of Strategic Minerals Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2018 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2018 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2018 was unqualified, and included an emphasis on matter paragraph regarding the Group's ability to continue as a going concern and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Going concern basis

These financial statements have been prepared on the assumption that the Group is a going concern.

When assessing the foreseeable future, the Directors have looked at the Group's working capital requirements for the period to October 2020 being the period for which projections have been prepared and the minimum period the Directors are required to consider.

The Directors have reviewed the Group's current cash resources, funding requirements and ongoing trading of the operations. As the Group has lost a key customer, the directors have been required to raise further funding through debt and cut the spending on the other group assets as appropriate.  As at the date of this report, there is no certainty regarding the group's ability to execute these transactions.  These conditions indicate the existence of material uncertainties which may cast significant doubt as to the Group and Company's ability to continue as a going concern. In the event that the Group is unable to raise sufficient funds, the Group may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial statements do not include the adjustments that would result if the Group and Company was unable to continue as a going concern.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements except for policies stated below.

 

Joint arrangements

 

Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Strategic Minerals Limited has one joint operation at 30 June 2019.

 

 

Joint operations

A joint operation is a joint arrangement whereby the parties have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. Strategic Minerals Plc recognises its direct right to the assets, liabilities, revenues and expenses of the joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses.

 

Joint Ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets of the joint arrangement. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated statement of financial position.

 

Business Combinations

Business Combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is obtained, whereby the fair value of identifiable assets acquired and liabilities (including contingent liabilities assumed) is recognised.

 

All transaction costs incurred in relation to business combinations, other than those associated with the issue of a financial instrument are recognised as expenses in profit and loss when incurred

 

The acquisition of a business may result in the recognition of goodwill or gain from a bargain purchase.

 

 

New, revised or amending accounting standards and interpretations

 

IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

 

IFRS "16 Leases" (effective for periods beginning on or after 1 January 2019) requires lessees to use single on-balance sheet model and recognise all lease assets and liabilities on the balance sheet. Management have completed an internal review of existing leases and operating contracts. All existing arrangements are short-term in nature and as such have not been accounted for under IFRS 16. The adoption of IFRS 16 does not have an impact on the Group's financial statements.

 

 

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.

 

Judgements

 

(a)  Joint arrangement and joint operation

The Company holds a 50% interest in Cornwall Resources Limited ("CRL") which owns the Redmoor Tin-Tungsten project in the United Kingdom with the other shareholder being New Age Exploration Limited ("NAE").  Under the shareholders agreement with NAE, CRL is operated as a 50:50 joint venture with each party being entitled to appoint one Director. Based on this, the Group considers that they have joint control over the arrangement. Under IFRS 11, this joint arrangement is classified as a joint venture and has been included in the consolidated financial statements using the equity method.

 

 

 

Estimates and assumptions

 

 

(a)  Carrying value of intangible assets

 

In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held.

 

(b)  Share based payments, warrants and options

 

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 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.

 

 

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. The investment in the Redmoor project in Cornwall, United Kingdom is held by this segment.

·     Australia - This segment holds the Central Australian Rare Earths Pty Ltd tenements in Australia and incurs all related operating costs.

·     Development Asset - This segment holds the Leigh Creek Copper Mine Development Asset in Australia and incurs all related operating costs.

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 EU Adopted IFRS but excluding non-cash losses, such as the effects of share-based payments.

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 2019 (Unaudited)	Head Office	SMG	Australia	Development Asset	Inter Segment Elimination	Total
		$'000	$'000	$'000	$'000	$'000	$'000
	Revenue	-	1,395	-	-	-	1,395
	Cost of sales	-	(229)	-	-	-	(229)
		_______	______	_______	_______	_______	_______
	Gross Profit	-	1,166	-	-	-	1,166
	Depreciation	-	(16)	(3)	-	-	(19)
	Overhead expenses	(552)	(475)	(184)	-	-	(1,211)
	Management fee	100	(100)	-	-	-
	Impairment Charge	-	-	(760)	-	-	(760)
	Share based expense	(163)	-	-	-	-	(163)
	Write back of provisions	1,744		-	-	(1,744)	-
	Equity accounting profit(loss)	(38)	-	-	-	-	(38)
	Foreign Exchange	-	-	(2)	-	-	(2)
	Gain on Shares available for resale	-	-	1	-	-	1
		________	________	________	________	________	________
	Segment profit/(loss) from operations	1,091	575	(948)	-	(1,744)	(1,026)
		________	________	________	________	________	________
	Segment profit/(loss) before taxation	1,091	575	(948)	-	(1,744)	(1,026)
		________	________	________	________	________	________

 

6 Months to 30 June 2018 (Unaudited)	Head Office	SMG	Australia	UK	Inter Segment Elimination	Total
	$'000	$'000	$'000	$'000	$'000	$'000
Revenue	2	2,118	-	-	-	2,120
Cost of sales	-	(391)	-	-	-	(391)
	_______	______	_______	_______	_______	_______
Gross Profit	2	1,727	-	-	-	1,729
Other Income	-	-	2,464	-	-	2,464
Depreciation	-	(36)	-	-	-	(36)
Overhead expenses	(838)	(445)	(103)	-	-	(1,386)
Management fee	200	(200)	-	-	-	-
Share based expense	(92)	-	-	-	-	(92)
Write back of provisions	(379)	-	-	-	379	-
Equity accounting loss	1	-	-	-	-	1
Foreign Exchange	8	-	-	-	(1)	7
	________	________	________	________	________	________
	(1,098)	1,046	2,361	-	378	2,687
Segment profit/(loss) from operations	(1,098)	1,046	2,361	-	378	2,687
	________	________	________	________	________	________
Segment profit/(loss) before taxation	(1,098)	1,046	2,361	-	-	2,687
	________	________	________	________	________	________

 

	Year to 31 December 2018(Audited)	Head Office	SMG	Australia	Development Asset	Intra Segment Elimination	Total
		$'000	$'000	$'000	$'000	$'000	$'000
	Revenue	3	3,350	2	-	-	3,355
	Cost of sales	-	(650)	-	-	-	(650)
		________	_______	________	________	________	________
	Gross profit	3	2,700	2	-	-	2,705
	Other Income	-	-	-	2,162	-	2162
	Depreciation	-	(64)	-	-	-	(64)
	Overhead expenses	(1,250)	(850)	(224)	-	-	(2,324)
	Management fee	380	(380)	-	-	-	-
	Loss on available for sale assets	-	-	(12)	-	-	(12)
	Loss on sale of tenements	-	-	(245)	-	-	(245)
	Share-based payments charge	(268)	-	-	-	-	(268)
	(Loss)/ gain on intercompany loans	1,899	-	-	-	(1,899)	-
	Share of net loss from associates	(27)	-	-	-	-	(27)
	Foreign exchange gain (loss)	(149)	-	-	-	155	6
		________	________	________	________	________	________
	Segment profit / (loss) from operations	588	1406	(479)	2,162	(1,744)	1,933
		________	________	________	________	________	________

 

 

	As at 30 June 2019  (Unaudited)	Head Office	SMG	Development Asset	Australia	Total
		$'000	$'000	$'000	$'000	$'000
	Additions to non-current assets (excluding deferred tax)	37	-	1,272	91	1,400
		________	________	________	________	________
	Reportable segment assets (excluding deferred tax)	3,324	579	5,849	2,350	12,102
	Reportable segment liabilities	108	762	1,528	108	2,506
		________	________	________	________	________
	Total Group Liabilities					2,506
						________
	As at 30 June 2018 (Unaudited)	Head Office	SMG	Development Asset	Australia	Total
		$'000	$'000	$'000	$'000	$'000
	Additions to non-current assets (excluding deferred tax)	107	-	-	1,469	1,576
		________	________	________	________	________
	Reportable segment assets (excluding deferred tax)	3,098	2053	-	6,560	11,711
	Reportable segment liabilities	189	680	-	266	1,135
		________	________	________	________	________
	Total Group Liabilities					1,135
						________
	As at 31 December 2018(Audited)	Head Office	SMG	Development Asset	Australia	Total
		$'000	$'000	$'000	$'000	$'000
	Additions to non-current assets (excluding deferred tax)	639	-	2,011	237	2,887
		________	________	________	________	________
	Reportable segment assets (excluding deferred tax)	2,576	1,511	5,722	1,632	11,441
		________	________	________	________	________
	Reportable segment liabilities	129	978	901	112	2,120
		________	________	________	________	________
	Total Group liabilities					2,120
						________

 

 

 

 

		External revenue by location of customers		Non-current assets by location of assets
		2019	2018	2019	2018
		$'000	$'000	$'000	$'000
	United States	1,395	2,118	177	395
	United Kingdom	-	2	2,264	1,755
	Australia	-	-	7,893	6,285
		_______	_______	_______	_______
		1,395	2,120	10,334	8,435
		_______	_______	_______	_______

 

Revenues from Customer A totalled $351,140 (2018: $362,051), which represented 25% (2018: 17%) of total domestic sales in the United States, Customer B totalled $563,945 (2018: $627,977) which represented 40% (2018: 30%) of total sales and Customer C totalled $375,000 (2018: $506,186) which represented 27% (2018: 24%).  There were no export sales in the year (2018: Nil).

 

5.	Operating loss

 

Administration costs by nature

		6 months to	6 months to	Year to
		30 June	30 June	31 December
		2019	2018	2018
		(Unaudited)	(Unaudited)	(Audited)
		$'000	$'000	$'000
	Operating gain/loss is stated after charging/(crediting):
	Directors' fees and emoluments	401	414	665
	Depreciation	19	36	64
	Equipment rental	145	130	248
	Equipment maintenance	26	34	46
	Share of net loss (profit) from joint operations	38	(1)	27
	Auditors' remuneration	13	8	76
	Salaries, wages and other staff related costs	274	276	514
	Insurance	15	11	-
	Legal, professional and consultancy fees	178	329	476
	Loss on sale of tenements	-	-	245
	Impairment charge	760	-	-
	Loss (gain)on financial assets held at fair value through profit and loss	(1)	-	12
	Travelling and related costs	51	69	95
	Foreign exchange	2	(7)	(6)
	Share based payments	163	92	268
	Other expenses	108	126	204

 

 

 

6.	Intangible Assets
		Exploration/
		evaluation
		costs
	Cost	$'000
	At 1 January 2018	1,242
	Additions  to 30 June 2018*	4,932
	At 30 June 2018 ( unaudited)	6,174
	Reallocation to Development Asset*	(4,932)
	Disposals	(347)
	Additions in the year Foreign exchange difference	237 (95)
	At 31 December 2018 ( audited)	1,037
	Additions to 30 June 2019	91
	Foreign exchange difference	(26)
	Impairment Charge*	(760)
	At 30 June 2019 (unaudited)	342

 

At 30 June 2019, the Group has raised an impairment assessment based on its decision to exit a number of CARE tenements.

 

7.	Investments in Associates	Investments
		(Unaudited)
	Cost	$'000
	At 1 January 2019	2,248
	Acquisition of joint venture interests	40
	Share of equity  (loss)profit in joint ventures	(38)
	Foreign exchange difference	14
	As at 30 June 2019	2,264

 

On 25 July 2019, the Company settled the acquisition of New Age Exploration Limited's ("NAE") 50% holding in Cornwall Resources Ltd ("CRL"). Details of the settlement are included in Note 12.

 

 

8.  Property, plant and equipment
		Railway	Development	Plant and
		infrastructure	Asset	Machinery	Total
Group		$'000	$'000	$'000	$'000
Cost
At 1 January 2018		3,498	-	199	3,697
Additions for period		-	-	190	190
Acquired in business combination		-	-	74	74
		________	________	________	________
At 30 June 2018		3,498	-	463	3,961
Acquired in business combination		-	4,559	-	4,559
Additions		-	797	-	797
Disposals		(3,498)	-	-	(3,498)
Foreign exchange difference		-	(449)	(2)	(451)
		________	________	________	________
At 31 December 2018		-	4,907	461	5,368
		________	________	________	________
Additions		-	1,834	57	1,891
Disposals		-	-	-	-
Foreign exchange difference		-	(16)	-	(16)
		________	________	________	________
At 30 June 2019		-	6,725	518	7,243
		________	________	________	________
Depreciation
At 1 January 2018		(3,498)	-	(132)	(3,630)
Charge in the six months		-	-	(36)	(36)
		________	________	________	________
At 30 June 2018		(3,498)	-	(168)	(3,666)
Charge in the year		-	-	(28)	(28)
Disposals		3,498	-	-	3,498
Foreign exchange difference		-	-	(2)	(2)
		________	________	________	________
At 31 December 2018		-	-	(198)	(198)
		________	________	________	________
Charge for the period		-	-	(19)	(19)
		________	________	________	________
As at 30 June 2019		-	-	(217)	(217)
		________	________	________	________
Carrying Value
At 30 June 2018		-	-	295	295
		________	________	________	________
At 31 December 2018		-	4,907	263	5,170
		________	________	________	________
At 30 June 2019		-	6,725	301	7,026
		________	________	________	________

 

 

 

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
		2019	2018	2018
		(Unaudited)	(Unaudited)	(Audited)
	Weighted average number of shares-Basic	1,391,249,064	1,275,230,925		1,366,949,045
	(Loss)/earnings for the period	($1,182,000)	$2,406,000		$1,473,000
	(Loss)/earnings per share in the period-Basic	($0. 0008)	$0.0019		$0.0011

 

 

 

11.	Share capital and premium
		2019	2019	2018	2018
		No	$'000	No	$'000
	Allotted, called up and fully paid
	Ordinary shares	1,467,631,282	50,656	1,376,193,127	49,205
		__________	__________	__________	__________

 

In February 2019, the Company issued 17,500,000 ordinary shares due to options being exercised at an exercise price of 1 pence.

 

In March 2019, the Company issued 2,866,730 ordinary shares at a price of GBP 0.19 to Resilience Mining Australia Ltd, in respect of its acquisition of Leigh Creek Copper Mine Pty Ltd.

 

As a result of a placement in June 2019 the Company issued 63,571,425 ordinary shares at a price of GBP 0.14. The total proceeds of the placement after fees was GBP 834,375 ($1,059,000). Of this amount $91,000 was received in June 2019, with the balance $968,000 received in July 2019.

 

Share options and warrants

 

The number of options and warrants as at 30 June 2019 and a reconciliation of the movements during the half year are as follows:

 

 

Date of Grant	Granted as at 31 December 2018	Exercised	Granted as at 30 June 2019	Exercise price	Date of vesting	Date of expiry
10.04.15	8,000,000	(8,000,000)	-	1.00p	19.05.17	30.06.19
06.01.17	9,500,000	(9,500,000)	-	1.00p	19.05.17	30.06.19
15.02.18	72,000,000	-	72,000,000	2.75p	01.04.20	30.06.20
15.02.18	38,500,000	-	38,500,000	3.75p	01.01.21	30.06.21
15.02.18	17,500,000	-	17,500,000	5.00p	01.01.22	30.06.22
09.08.18	35,250,000	-	35,250,000	2.75p	01.04.20	30.06.20
09.08.18	10,750,000	-	10,750,000	3.75p	01.01.21	30.06.21 3030
09.08.18	4,750,000	-	4,750,000	5.00p	01.01.22	30.06.22
	19,250,000	(17,500,000)	178,750,000

 

 

12.	Post balance date events

On 25 July 2019, the Company settled the acquisition of New Age Exploration Limited's ("NAE") 50% holding in Cornwall Resources Ltd ("CRL"). Details of the settlement are:

 

·      An initial A$290,000 payment, taking total cash paid to A$300,000 and agreeing an 11 month payment schedule for the balance of A$2,700,000.

·      Payments of A$300,000 to made quarterly before 31 October 2019, 31 January 2020 and 30 April 2020 with balance to be paid on or before 26 June 2020.

·      The interest rate on the balance of A$2,700,000 is 5% pa, calculated on a daily balance basis, payable at the end of each calendar quarter to allow for early repayment.

·      SML has provided NAE with a charge over the Company's shares in CRL, a debenture charge over CRL's property and, in the event of default, NAE has the option to convert any outstanding balances to SML shares at 90% of the VWAP for SML shares in the 10 trading days prior to the issue of the conversion notice.

 

Copies of this interim report will be made available on the Company's website, www.strategicminerals.net.