TIDMDCP
RNS Number : 7455I
Diamondcorp Plc
03 June 2014
3 June 2014
DiamondCorp plc
AIM share code: DCP & JSE share code: DMC
ISIN: GB00B183ZC46
(Incorporated in England and Wales)
(Registration number 05400982)
(SA company registration number 2007/031444/10)
("DiamondCorp", "the Group" or "the Company")
Final Results for the year ended 31 December 2013 and
Annual Report and Accounts and Notice of Annual General
Meeting
Highlights
* Further cuts in overhead costs including
mine G&A reduces net loss for the year to
GBP2.61 million from GBP3.53m in 2012 and
GBP4.24m in 2011
* Finance package for Lace mine development
finalised in January 2013, surface facilities
installed and underground mining commenced
* Carrying value of property, plant and equipment
at year end GBP14.89m from GBP8.78m
* Cash at year end GBP2.22m with a further
GBP2.10m gross raised in April 2014
* Lace mine is fully funded to production which
is expected to begin earlier than previously
expected
* Underground mining fleet continues to provide
near 90% availability with operating costs
running at 95% of budget
* Prices for rough diamonds remain firm with
a positive outlook for the medium and longer
term
Click on, or paste the following link into your web browser, to
view the full associated PDF document.
http://www.rns-pdf.londonstockexchange.com/rns/7455I_-2014-6-3.pdf
Annual Report and Accounts and Notice of General Meeting
The Company's Annual Report and Accounts for the year ended 31
December 2013 is being posted to shareholders today together with
the Notice of the Annual General Meeting which will be held on
Thursday, 26 June 2014 at 2.30 p.m. at City Group PLC, 4th floor, 6
Middle Street, London, EC1A 7JA.
The Company has also sent a letter today to shareholders
informing them that it is intending to provide Shareholder
Information in electronic form.
Copies of all of these documents, together with the form of
proxy, are also available on the Company's website
(www.diamondcorp.plc.uk).
Contact details:
DiamondCorp plc
Paul Loudon, Chief Executive
Tel: +27 (0) 56 216 1300
Euan Worthington, Chairman
Tel: +44 (0) 7753 862 097
UK Broker & Nomad
Panmure Gordon (UK) Limited
Dominic Morley/Adam James
Tel: +44 20 7886 2500
JSE Designated Advisor
Sasfin Capital (a division of Sasfin Bank Limited)
Megan Young
Tel: +27 11 809 7711
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Letter from the Chairman and the Chief Executive Officer
Dear Shareholder
Since we last wrote to you there have been major advances in our
development of the Lace underground mine. Located in the Free State
of South Africa, Lace is some two hours drive from Johannesburg on
good tarred roads. The mine, which now employs almost 300 people,
is connected to the main Eskom power grid and has an independent
integrated water supply. We had commissioned a 1.2 million tonne
per annum ("mtpa") diamond recovery plant at Lace in 2007. Last
year that plant resumed the processing of old tailings and has been
modified to treat kimberlite ore from underground. Your company
owns 74% of the project with our BEE partners, Shanduka Resources
(13%) and Sphere Investments (13%) holding the balance.
Underground mine development
At the end of 2012, we completed a ZAR320 million financing for
the 47 Level block cave development, including new underground
ramps, ventilation shafts, crusher and conveyor systems. In late
January 2013, work started and by the year-end, underground tunnel
development was 15% complete and was being achieved at 94% of the
budgeted cost per metre. Hiring of additional mining crews
continued after year end and the full underground complement was
reached by the end of March 2014.
The Company has experienced no labour issues and continues to
hire the personnel it requires. Safety remains a major priority for
the Company, with Lace achieving a 39% improvement in the lost time
injury frequency rate (LTIFR) from 0.90 in 2012 to 0.55 per 200,000
manhours in 2013. Management aims for zero harm to its employees
and targets, a LTIFR of less than 0.50.
The underground mining fleet continues to provide near 90%
availability, with operating costs running at 95% of budget. The
mining fleet rebuild costs are also running at 95% of budget. The
last two rebuilt 20 tonne low profile dump trucks, required to
achieve maximum underground development rates, were commissioned on
time during the year. The last two underground loaders were being
assembled at year end and since then one has been commissioned with
the other to be operational in coming weeks.
At year end, twin decline development from the base of the
boxcut was continuing downwards to meet the development tunnels
coming up from the 92m level and installation of the steel sets for
reinforcement of the portal area was complete. The two sets of
tunnels are expected to join up in October 2014.
The design and detailed drawings for the underground conveyor
belt system was on schedule (85% complete) and under budget.
Fabrication of the first leg of the conveyor to be installed was
completed and delivered to site; fabrication at year-end of the
second leg was 40% complete. During the current year, the conveyor
belt will be commissioned from the 200m level to surface, and will
then be progressively installed down to the 470m level as
development progresses.
In 2013, we bought a new Boart Longyear diamond drilling rig
which is now being used underground. The initial drilling programme
aimed at better defining the rim of the Main Pipe for finalised
cave layout and definition of the 'Bulge' area. In the process of
this drilling, much more high-grade K4 kimberlite (CK or coherent
kimberlite) was intersected on the western side of the pipe above
the 345m level than was projected in the Lace geological model.
This Upper K4 unit has now been defined over an area of
approximately 75m x 75m on the 250m level, and is being actively
delineated above and below to add to the resource base.
No kimberlite above the 345m level is included in the current
mine plan, as definition drilling from surface was not possible due
to the presence of old workings. The Upper K4 Block (UK4) now being
defined has the potential to add at least 1.0 million tonnes of
additional kimberlite to the Lace mine plan which can be mined
while the 47 Level Block Cave development progresses and will form
part of an upgraded resource statement in 2014.
Diamond recovery plant
During 2013, we re-commissioned the 1.2mtpa Lace diamond
recovery plant, including optimising bottom screen sizes to
maximise operating margins. Our first diamond sale since mid-2009
was a parcel of 6,442 carats which was concluded in Antwerp last
November. The sale included the first diamonds sold to Tiffany
& Co. subsidiary Laurelton Diamonds Inc. under the Company's
offtake agreement. Regular sales will continue this year as we ramp
up retreatment of the remaining 2.3 million tonnes of tailings.
These will be treated over the next few years alongside increasing
tonnage of kimberlite from underground development. The plant is
now configured to treat both tailings and kimberlite ore.
Corporate actions
The Company is very cost conscious on all levels and the London
office is no exception. During 2013, as activities accelerated at
the Lace mine, we relocated the Company's finance function to South
Africa to operate alongside the mining department. In July, we
recruited Sanette De Wet as Chief Financial Officer and we recently
announced the appointment of PricewaterhouseCoopers LLP as Group
auditors. Sanette, who lives near Lace, has experience in the
diamond sector and will work closely with the PwC office in
Kimberley which has long standing connections with South African
diamond producers.
To further bolster our South African team, we are pleased that
leading mining attorney, Hulme Scholes joined us as a Non-Executive
director last August. He has helped the Company since its creation
and brings a wealth of experience to the Board.
As well as changing auditors, we reviewed the role of all our
advisors. In London, we appointed Panmure Gordon & Co. as
Nominated Advisor and sole broker while in South Africa we have
retained Sasfin Capital as our AltX Designated Advisor and
broker.
Letter from the Chairman and the Chief Executive Officer
In March this year, we completed an oversubscribed share placing
to existing and new shareholders which raised GBP2.1million before
costs for corporate overheads and head office costs. We do not
anticipate further fund raisings before Lace is in full production
and loans to DiamondCorp plc can be repaid.
Diamond prices
Rough diamond prices fell during 2013 in response to the
weakening Indian rupee and continuing tight credit markets for
cutters and polishers. Polished prices on the other hand improved
in response to improving economic conditions, particularly in the
US, which remains the largest single market for diamond jewellery.
This was a healthy development as earlier increases in rough prices
had not been matched at the retail end which had the potential to
destabilise the market.
Since year end, the improving market for polished diamonds, with
diamond jewellery sales up 5% in the US in the first two months of
the year and Chinese jeweller Chow Tai Fook experiencing a 14%
increase in demand in Q1, has flowed across to the rough market, as
rough prices have improved by around 5%. The Company is forecasting
the market to be steady to modestly higher for the balance of 2014,
with potential for price strengthening in 2015 as world economies
continue to recover.
Company strategy
In our letter to you last year, we noted that we are continually
looking for other diamond opportunities to build DiamondCorp into a
mid-tier
producer. That search continued during 2013 and for the last few
months but despite reviewing a number of projects in Africa nothing
has cleared our stringent political risk hurdles or reached the
economic threshold that we seek. Despite the stabilisation of the
financial markets, we note that the investors remain risk averse
and increasingly focused on larger companies. We are strong
believers in the attractions of the diamond sector over coming
years and with our experienced team will continue our efforts to
build the Company but for now our attention is firmly focused on
the development of Lace.
In conclusion
It is difficult to convey in words the great advances which we
have made at Lace in the past 15 months and we hope you can get a
better flavour from some of the photographs and presentations on
the Company website at www.diamondcorp.plc.uk. We are now a mining
company and diamond producer well on the way to unlocking the
treasure chest underground at the Lace mine while seeking other
opportunities to build our Company into a strong and profitable
mid-tier diamond miner. We continue to believe that the outlook for
diamond prices is very positive particularly with growing demand
from developing countries such as China and India. On the supply
side, major new mines are not being discovered, older mines are
having to develop underground usually with lower output, new mine
developments such as GahchoKue in Canada are suffering delays and
perhaps most significantly output from the Marange fields in
Zimbabwe looks likely to fall sharply. All these factors are not
helping to meet the growing demand for diamonds that we and
industry observers expect.
We would like to thank all our advisors and consultants, past
and present, for helping us to reach this position but most
importantly our workforce at Lace. The future is positive and by
this time next year we intend to be producing diamonds from fresh
kimberlite.
Euan Worthington Paul Loudon
Chairman Chief Executive Officer
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Income Statement
Group Company
2013 2012 2013 2012
Note(s) GBP GBP GBP GBP
Other income 13,983 15,834 3,500 -
Operating expenses (2,193,475) (3,362,571) (10,981,127) (927,437)
Operating loss 20 (2,179,492) (3,346,737) (10,977,627) (927,437)
Investment income 243,634 25,586 88 315
Fair value adjustments (619,042) (44,821) (188,481) (26,226)
Finance costs 22 (55,004) (168,968) (253,619) (86,429)
Loss before taxation (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Taxation 23 - - - -
Loss for the year (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Loss attributable
to :
Owners of the
parent (2,382,647) (3,016,615) (11,419,639) (1,039,777)
Non-controlling
interest (227,257) (518,325)
(2,609,904) (3,534,940) (11,419,639) (1,039,777)
Loss per share
Per share information
Basic and diluted
loss per share
(pence) 26 0.86 1.22 - -
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Statement of Comprehensive Income
Group Company
2013 2012 2013 2012
Note(s) GBP GBP GBP GBP
Loss for the year (2,609,904) (3,534,940) (11,419,639) (1,039,777)
Other comprehensive
loss:
Items that may
be reclassified
to profit or loss
Exchange differences
on translating
foreign operations (2,290,568) (1,046,358) - -
Other comprehensive
loss for the year
net of taxation 25 (2,290,568) (1,046,358) - -
Total comprehensive
loss (4,900,472) (4,581,298) (11,419,639) (1,039,777)
Total comprehensive
loss attributable
to:
Owners of the
parent (4,057,858) (4,165,247) (11,419,639) (1,039,777)
Non-controlling
interest (842,614) (416,051) - -
(4,900,472) (4,581,298) (11,419,639) (1,039,777)
Items in the statement above are disclosed net of tax. The
income tax relating to each component of other comprehensive income
is disclosed in note 25.
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Statement of Financial Position
Group Company
2013 2012 2013 2012
Note(s) GBP GBP GBP GBP
Assets
Non-Current Assets
Property, plant
and equipment 4 14,892,223 8,776,273 277,440 297,258
Goodwill 5 4,606,026 4,606,026 - -
Investments in
subsidiaries 6 - - 4,672,501 4,672,501
Loans to group
companies 7 - - 13,714,510 -
Other non-current
asset 9 43,632 - - -
Restricted cash 12 73,108 92,372 - -
19,614,989 13,474,671 18,664,451 4,969,759
Current Assets
Inventories 10 557,085 297,474 - -
Loans to group
companies 7 - - - 23,436,964
Current tax receivable 6,651 8,403 - -
Trade and other
receivables 11 880,990 186,619 - 9,167
Cash and cash
equivalents 12 2,220,130 4,227,404 5,979 1,363,545
3,664,856 4,719,900 5,979 24,809,676
Total Assets 23,279,845 18,194,571 18,670,430 29,779,435
Equity and Liabilities
Equity
Equity Attributable
to Owners of Parent
Share capital 13 35,190,544 34,920,544 35,190,544 34,920,544
Reserves -1,807,236 -218,920 618,131 531,236
Accumulated loss -22,907,307 -20,524,660 -19,350,926 -7,931,287
10,476,001 14,176,964 16,457,749 27,520,493
Non-controlling
interest -1,946,868 -1,104,254 - -
Total Equity 8,529,133 13,072,710 16,457,749 27,520,493
Liabilities
Non-Current Liabilities
Other financial
liabilities 17 9,239,447 - 455,000 455,000
Provisions 18 528,828 119,745 - -
9,768,275 119,745 455,000 455,000
Current Liabilities
Compound instruments
- liabilities 16 2,532,981 2,642,739 981,022 780,261
Compound instruments
- derivatives 16 2,107,849 1,525,391 730,079 541,598
Trade and other
payables 19 341,607 833,986 46,580 482,083
4,982,437 5,002,116 1,757,681 1,803,942
Total Liabilities 14,750,712 5,121,861 2,212,681 2,258,942
Total Equity and
Liabilities 23,279,845 18,194,571 18,670,430 29,779,435
The financial statements on pages 26 to 70, of DiamondCorp plc,
registered number 5400982, were approved by the Board of Directors
and authorised for issue on 2 June 2014 and signed on behalf of the
Board of Directors.
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Statement of Changes in Equity
Total
attributable
Foreign to the
Total currency Share owner
Share Share share translation option Warrant Total Accumulated of the Non-controlling Total
Capital premium capital reserve reserve reserve reserve loss parent interest equity
Group GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
Balance at
01 January
2012 7,268,041 26,702,502 33,970,543 398,476 429,066 505,877 1,333,419 (18,013,922) 17,290,040 (688,203) 16,601,837
Loss for
the year - - - - - - - (3,016,615) (3,016,615) (518,325) (3,534,940)
Other
comprehensive
loss - - - (1,148,632) - - (1,148,632) - (1,148,632) 102,274 (1,046,358)
Total
comprehensive
loss for
the year - - - (1,148,632) - - (1,148,632) (3,016,615) (4,165,247) (416,051) (4,581,298)
Issue of
shares 857,143 142,857 1,000,000 - - - - - 1,000,000 - 1,000,000
Issue costs - (49,999) (49,999) - - - - - (49,999) - (49,999)
Warrants
granted - - - - - 92,000 92,000 - 92,000 - 92,000
Expiry of
warrants - - - - - (505,877) (505,877) 505,877 - - -
Value
attributed
for equity
based share
based
payments - - - - 10,170 - 10,170 - 10,170 - 10,170
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity 857,143 92,858 950,001 - 10,170 (413,877) (403,707) 505,877 1,052,171 - 1,052,171
Balance at
01 January
2013 8,125,184 26,795,360 34,920,544 (750,156) 439,236 92,000 (218,920) (20,524,660) 14,176,964 (1,104,254) 13,072,710
Loss for
the year - - - - - - - (2,382,647) (2,382,647) (227,257) (2,609,904)
Other
comprehensive
loss - - - (1,675,211) - - (1,675,211) - (1,675,211) (615,357) (2,290,568)
Total
comprehensive
loss for
the year - - - (1,675,211) - - (1,675,211) (2,382,647) (4,057,858) (842,614) (4,900,472)
Issue of
shares 180,000 90,000 270,000 - - - - - 270,000 - 270,000
Value
attributed
for equity
settled share
based
payments - - - - 86,895 - 86,895 - 86,895 - 86,895
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity 180,000 90,000 270,000 - 86,895 - 86,895 - 356,895 - 356,895
Balance at
31 December
2013 8,305,184 26,885,360 35,190,544 (2,425,367) 526,131 92,000 (1,807,236) (22,907,307) 10,476,001 (1,946,868) 8,529,133
Note(s) 13 13 13 15
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Statement of Changes in Equity
Share Share Total Foreign Share Warrant Total Accumulated Total Non-controlling Total
Capital premium share currency option reserve reserve loss attributable interest equity
capital translation reserve to the
reserve owner
of the
parent
Company GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
Balance at
01 January
2012 7,268,041 26,702,502 33,970,543 - 429,066 505,877 934,943 (7,397,387) 27,508,099 - 27,508,099
Loss for
the year - - - - - - - (1,039,777) (1,039,777) - (1,039,777)
Total
comprehensive
loss for
the year - - - - - - - (1,039,777) (1,039,777) - (1,039,777)
Issue of
shares 857,143 142,857 1,000,000 - - - - - 1,000,000 - 1,000,000
Issue costs - (49,999) (49,999) - - - - - (49,999) - (49,999)
Expiry of
warrants - - - - - (505,877) (505,877) 505,877 - - -
Value
attributed
for equity
based share
based
payments - - - - 10,170 - 10,170 - 10,170 - 10,170
Warrants
granted - - - - - 92,000 92,000 - 92,000 - 92,000
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity 857,143 92,858 950,001 - 10,170 (413,877) (403,707) 505,877 1,052,171 - 1,052,171
Balance at
01 January
2013 8,125,184 26,795,360 34,920,544 - 439,236 92,000 531,236 (7,931,287) 27,520,493 - 27,520,493
Loss for
the year - - - - - - - (11,419,639) (11,419,639) - (11,419,639)
Total
comprehensive
loss for
the year - - - - - - - (11,419,639) (11,419,639) - (11,419,639)
Issue of
shares 180,000 90,000 270,000 - - - - - 270,000 - 270,000
Value
attributed
for equity
settled share
based
payments - - - - 86,895 - 86,895 - 86,895 - 86,895
Total
contributions
by and
distributions
to owners
of company
recognised
directly
in equity 180,000 90,000 270,000 - 86,895 - 86,895 - 356,895 - 356,895
Balance at
31 December
2013 8,305,184 26,885,360 35,190,544 - 526,131 92,000 618,131 (19,350,926) 16,457,749 - 16,457,749
Note(s) 13 13 13 15
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Consolidated and Separate Statement of Cash Flows
Group Company
2013 2012 2013 2012
Note(s) GBP GBP GBP GBP
Cash flows from
operating activities
Cash used in operations 27 (3,313,229) (3,313,229) (3,313,229) (3,313,229)
Finance costs (55,004) (55,004) (55,004) (55,004)
Net cash used
in operating activities (3,368,233) (3,368,233) (3,368,233) (3,368,233)
Cash flows from
investing activities
Purchase of property,
plant and equipment 4 (6,765,660) (6,765,660) (6,765,660) (6,765,660)
Sale of property,
plant and equipment 4 2,530 2,530 2,530 2,530
Loans advanced - - - -
to group companies
Outflow relating
to other non-current
asset (43,632) (43,632) (43,632) (43,632)
Interest Income 243,634 243,634 243,634 243,634
Net cash used
in investing activities (6,563,128) (6,563,128) (6,563,128) (6,563,128)
Cash flows from
financing activities
Proceeds on share
issue 13 270,000 270,000 270,000 270,000
Proceeds from
other financial
liabilities 9,442,618 9,442,618 9,442,618 9,442,618
Movement in other - - - -
payables
Proceeds from - - - -
issue of convertible
bonds
Net cash from
financing activities 9,712,618 9,712,618 9,712,618 9,712,618
Total cash movement
for the year (218,743) (218,743) (218,743) (218,743)
Cash at the beginning
of the year 4,227,404 4,227,404 4,227,404 4,227,404
Effect of exchange
rate movement
on cash balances (1,788,531) (1,788,531) (1,788,531) (1,788,531)
Total cash at
end of the year 12 2,220,130 2,220,130 2,220,130 2,220,130
DiamondCorp plc
UK Company Registration No. 5400982
South African Company Registration No. 2007/031444/10
Audited Consolidated and Separate Financial Statements for the
year ended 31 December 2013
Basis of Preparation and Accounting Policies
1. General information
------------------------------ -------------------------------------------------------
DiamondCorp plc is a Company incorporated in
England and Wales under the Companies Act 2006
and incorporated as an external company in South
Africa under the Companies Act No 71 of 2008.
The address of the registered office is given
on page 2. The nature of the Group's operations
and its principal activities are set out in the
Directors' Report on page 11.
These financial statements are presented in pounds
sterling because that is the functional currency
of the parent Company as well as presentation
currency of the Group. Foreign operations are
included in accordance with the policies set
out in this note.
These accounting policies are consistent with
the previous period.
---------------------------------------------------------------------------------------
1.1 Segmental reporting
------------------------------ -------------------------------------------------------
Operating segments are reported in a manner consistent
with the internal reporting provided to the chief
operating-decision maker. The chief operating
decision-maker, who is responsible for allocating
resources and assessing performance of the operating
segments, has been identified as the Chief Executive
Officer that makes strategic decisions.
The basis of segmental reporting has been set
out in note 3.
---------------------------------------------------------------------------------------
1.2 Consolidation
------------------------------ -------------------------------------------------------
Basis of consolidation
The audited consolidated and separate financial
statements incorporate the audited consolidated
and separate financial statements of the group
and all investees which are controlled by the
Company (its subsidiaries).
The group has control of an investee when it
has power over the investee; it is exposed to
or has rights to variable returns
from involvement with the investee; and it has
the ability to use its power over the investee
to affect the amount of the investor's returns.
The results of subsidiaries are included in the
audited consolidated and separate financial statements
from the effective date of acquisition to the
effective date of disposal.
Adjustments are made when necessary to the audited
consolidated and separate financial statements
of subsidiaries to bring their accounting policies
in line with those of the group.
All intra-group transactions, balances, income
and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of
consolidated subsidiaries are identified and
recognised separately from the group's interest
therein, and are recognised within equity. Losses
of subsidiaries attributable to non-controlling
interests are allocated to the non-controlling
interest even if this results in a debit balance
being recognised for non-controlling interest.
Transactions which result in changes in ownership
levels, where the group has control of the subsidiary
both before and after the transaction are regarded
as equity transactions and are recognised directly
in the statement of changes in equity.
The difference between the fair value of consideration
paid or received and the movement in non-controlling
interest for such transactions is recognised
in equity attributable to the owners of the parent.
Where a subsidiary is disposed of and a non-controlling
shareholding is retained, the remaining investment
is measured to fair value with the adjustment
to fair value recognised in profit or loss as
part of the gain or loss on disposal of the controlling
interest.
Changes in the Group's ownership interests in
existing subsidiaries
Changes in the Group's ownership interests in
subsidiaries that do not result in the Group
losing control over the subsidiaries are accounted
for as equity transactions. The carrying amounts
of the Group's interests and the non-controlling
interests are adjusted to reflect the changes
in their relative interests in the subsidiaries.
Any difference between the amount by which the
non-controlling interests are adjusted and the
fair value of the consideration paid or received
is recognised directly in equity and attributed
to owners of the Company.
When the Group loses control of a subsidiary,
the profit or loss on disposal is calculated
as the difference between (i) the aggregate of
the fair value of the consideration received
and the fair value of any retained interest and
(ii) the previous carrying amount of the assets
(including goodwill), and liabilities of the
subsidiary and any non-controlling interests.
When assets of the subsidiary are carried at
revalued amounts or fair values and the related
cumulative gain or loss has been recognised in
other comprehensive income and accumulated in
equity, the amounts previously recognised in
other comprehensive income and accumulated in
equity are accounted for as if the Company had
directly disposed of the relevant assets (i.e.
reclassified to profit or loss or transferred
directly to retained earnings as specified by
applicable IFRSs). The fair value of any investment
retained in the former subsidiary at the date
when control is lost is regarded as the fair
value on initial recognition for subsequent accounting
under IAS 39 Financial Instruments: Recognition
and Measurement or, when applicable, the cost
on initial recognition of an investment in an
associate or a jointly controlled entity.
Goodwill
Goodwill arising on consolidation represents
the excess of the cost of acquisition over the
Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, at the
date of acquisition. Goodwill is initially recognised
as an asset at cost and is subsequently measured
at cost less any accumulated impairment losses.
Goodwill which is recognised as an asset is reviewed
for impairment at least annually. Any impairment
is recognised immediately in profit or loss and
is not subsequently reversed.
For the purpose of impairment testing, goodwill
is allocated to the Group's cash-generating unit
expected to benefit from the synergies of the
combination. The cash-generating unit to which
goodwill has been allocated is tested for impairment
annually, or more frequently when there is an
indication that the unit may be impaired. If
the recoverable amount of the cash-generating
unit is less than the carrying amount of the
unit, the impairment loss is allocated first
to reduce the carrying amount of any goodwill
allocated to the unit and then to the other assets
of the unit pro-rata on the basis of the carrying
amount of each asset in the unit.
On disposal of a subsidiary, the attributable
amount of goodwill is included in the determination
of the profit or loss on disposal.
Goodwill arising on acquisition of foreign entities
is considered an asset of the foreign entity.
In such cases the goodwill is translated to the
presentation currency of the group at the end
of each reporting period with the adjustment
recognised in equity through other comprehensive
income.
Statement of compliance
The consolidated and separate financial statements
have been prepared in accordance with International
Financial Reporting Standards (IFRSs) issued
by the IASB and in accordance with IFRS interpretations
committee (IFRS IC) interpretations. The financial
statements have also been prepared in accordance
with IFRSs adopted by the European Union and
therefore the Group financial statements comply
with Article 4 of the EU IAS Regulation.
Basis of preparation
The financial statements have been prepared in
accordance with the UK Companies Act 2006 applicable
to companies reporting under IFRS and in terms
of the Companies Act 2008 of South Africa.
The financial statements have been prepared on
the historical cost basis, except for certain
financial instruments that are measured at fair
value, as explained in the accounting policies
below. Historical cost is generally based on
fair value of the consideration given in exchange
for assets. The financial statements have been
prepared on a going concern basis. The principal
accounting policies adopted are set out below.
---------------------------------------------------------------------------------------
1.3 Significant judgements and sources of estimation
uncertainty
------------------------------ -------------------------------------------------------
In preparing the audited consolidated and separate
financial statements, management is required
to make estimates and assumptions that affect
the amounts represented in the audited consolidated
and separate financial statements and related
disclosures. Use of available information and
the application of judgement is inherent in the
formation of estimates. Actual results in the
future could differ from these estimates which
may be material to the audited consolidated and
separate financial statements. Significant judgements
include:
Impairment testing
Impairment of goodwill - Judgements is applied
in determining appropriate assumptions to be
used in testing for and calculating impairment.
See policy regarding Goodwill.
Provisions
Provisions were raised and management determined
an estimate based on the information available.
Additional disclosure of these estimates of provisions
are included in note 18 - Provisions.
Provisions are recognised when:
---------------------------------------------------------------------------------------
* the group has a present obligation as a result
of a past event;
------------------------------ -------------------------------------------------------
* it is probable that an outflow of resources
embodying economic benefits will be required
to settle the obligation;
------------------------------ -------------------------------------------------------
* a reliable estimate can be made of the obligation.
------------------------------ -------------------------------------------------------
The amount of a provision is the present value
of the expenditure expected to be required to
settle the obligation. Where some or all of the
expenditure required to settle a provision is
expected to be reimbursed by another party, the
reimbursement shall be recognised when, and only
when, it is virtually certain that reimbursement
will be received if the entity settles the obligation.
The reimbursement shall be treated as a separate
asset. The amount recognised for the reimbursement
shall not exceed the amount of the provision.
Provisions are not recognised for future operating
losses.
If an entity has a contract that is onerous,
the present obligation under the contract shall
be recognised and measured as a provision.
Valuations
---------------------------------------------------------------------------------------
* Valuation of inventory - Judgement was applied
in calculating the initial carrying value
of inventory and judgement continues to be
applied in assessing the net realisable value.
See accounting policy regarding Inventories.
------------------------------ -------------------------------------------------------
* Valuation of warrants, share options and
ordinary shares issued as consideration -
Judgement is applied in determining appropriate
assumptions to be used in calculating the
fair value of warrants, shares and share
options issued. See notes 14 and 15.
------------------------------ -------------------------------------------------------
* Valuation of convertible bonds - Judgement
is applied in determining appropriate assumptions
to be used in calculating the fair value
of convertible bonds. See note 16.
------------------------------ -------------------------------------------------------
Going concern
Judgement is applied in assessing the likelihood
and timing of future cash flows associated with
the Group's activities. Judgement is also applied
in assessing the likelihood of receiving future
funding.
---------------------------------------------------------------------------------------
1.4 Property, plant and equipment
------------------------------ -------------------------------------------------------
Initial recognition
The cost of an item of property, plant and equipment
is recognised as an asset when:
---------------------------------------------------------------------------------------
* it is probable that future economic benefits
associated with the item will flow to the
company; and
------------------------------ -------------------------------------------------------
* the cost of the item can be measured reliably
------------------------------ -------------------------------------------------------
Property, plant and equipment is initially measured
at cost.
Costs include costs incurred initially to acquire
or construct an item of property, plant and equipment
and costs incurred subsequently to add to, replace
part of, service it, the initial estimate of
the rehabilitation obligation, and for qualifying
assets (where relevant), borrowing costs. If
a replacement cost is recognised in the carrying
amount of an item of property, plant and equipment,
the carrying amount of the replaced part is derecognised.
The purchase price or construction cost is the
aggregate amount paid and the fair value any
other consideration given to acquire the asset.
The capitalised value of a finance lease is also
included within property, plant and equipment.
When a mine construction project moves into the
production stage, the capitalisation of certain
mine construction costs ceases and costs are
either regarded as part of the cost of inventory
or expensed, except for costs which qualify for
capitalisation relating to mining asset additions
or improvements, underground mine development
or mineable reserve development.
Property, plant and equipment is carried at cost
less accumulated depreciation and any impairment
losses.
Upon completion of mine construction, the assets
are transferred into "Property, plant and equipment".
Items of property, plant and equipment and mining
properties are stated at cost, less accumulated
depreciation and accumulated impairment losses.
Mines under construction
Upon transfer of "Exploration and evaluation
assets" into "Construction in progress" within
"Property, plant and equipment", all subsequent
expenditure on the construction, installation
or completion of infrastructure facilities is
capitalised within "Construction in progress".
Development expenditure is net of proceeds from
the incidental sale of diamonds extracted during
the development phase. After production starts,
all assets included in "Construction in progress"
are transferred to "Mining properties" within
"Property, plant and equipment".
Depreciation/amortisation
Mining properties are depreciated/amortised on
a unit-of-production basis over the economically
recoverable reserves of the mine concerned, except
in the case of assets whose useful life is shorter
than the life of the mine, in which case the
straight-line method is applied.
The units of production rate for the depreciation/amortisation
of mining properties takes into account expenditure
relating to mining properties currently and to
be expensed in future.
Other plant and equipment such as mobile mine
equipment is generally depreciated on a straight-line
basis over their estimated useful lives to their
residual values.
The useful lives of items of property, plant
and equipment have been assessed as follows:
---------------------------------------------------------------------------------------
Item Average useful life
-------------------------------- -----------------------------------------------------
Land N/A
-------------------------------- -----------------------------------------------------
Buildings 20 years
-------------------------------- -----------------------------------------------------
Plant and machinery 5 - 20 years
-------------------------------- -----------------------------------------------------
Mining rights 20 years (life of mine)
-------------------------------- -----------------------------------------------------
Rehabilitation asset 20 years (life of mine)
-------------------------------- -----------------------------------------------------
The residual value, useful life and depreciation
method of each asset are reviewed at the end
of each reporting period. If the expectations
differ from previous estimates, the change is
accounted for as a change in accounting estimate.
The depreciation charge for each period is recognised
in profit or loss unless it is included in the
carrying amount of another asset.
The gain or loss arising from the derecognition
of an item of property, plant and equipment is
included in profit or loss when the item is derecognised.
The gain or loss arising from the derecognition
of an item of property, plant and equipment is
determined as the difference between the net
disposal proceeds, if any, and the carrying amount
of the item.
Assets which the (company/group) holds for rentals
to others and subsequently routinely sell as
part of the ordinary course of activities, are
transferred to inventories when the rentals end
and the assets are available-for-sale. These
assets are not accounted for as non-current assets
held for sale. Proceeds from sales of these assets
are recognised as revenue. All cash flows on
these assets are included in cash flows from
operating activities in the cash flow statement.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs
comprises the cost of replacement assets or parts
of assets and overhaul costs. Where an asset
or part of an asset that was separately depreciated
and is now written off is replaced, and it is
probable that future economic benefits associated
with the item will flow to the Group through
an extended life, the expenditure is capitalised.
Where part of the asset was not separately considered
as a component, the replacement value is used
to estimate the carrying amount of the replaced
asset(s).
Repairs and maintenance that do not meet the
recognition criteria of an asset are expensed
when incurred.
---------------------------------------------------------------------------------------
1.5 Site restoration and dismantling cost
------------------------------ -------------------------------------------------------
The company has an obligation to dismantle, remove
and restore items of property, plant and equipment.
Such obligations are referred to as 'decommissioning,
restoration and similar liabilities'. The cost
of an item of property, plant and equipment includes
the initial estimate of the costs of dismantling
and removing the item and restoring the site
on which it is located, the obligation for which
an entity incurs either when the item is acquired
or as a consequence of having used the item during
a particular period for purposes other than to
produce inventories during that period.
If the related asset is measured using the cost
model:
---------------------------------------------------------------------------------------
* subject to (b), changes in the liability
are added to, or deducted from, the cost
of the related asset in the current period
------------------------------ -------------------------------------------------------
* if a decrease in the liability exceeds the
carrying amount of the asset, the excess
is recognised immediately in profit or loss.
------------------------------ -------------------------------------------------------
* if the adjustment results in an addition
to the cost of an asset, the entity considers
whether this is an indication that the new
carrying amount of the asset may not be fully
recoverable. If it is such an indication,
the asset is tested for impairment by estimating
its recoverable amount, and any impairment
loss is recognised in profit or loss.
------------------------------ -------------------------------------------------------
1.6 Financial liabilities / assets
------------------------------ -------------------------------------------------------
Initial recognition and measurement
Financial liabilities are classified as either
financial liabilities at fair value through profit
or loss ("at FVTPL") or 'other financial liabilities'.
Other financial liabilities
Other liabilities, including borrowings, are
initially measured at fair value, net of transaction
costs.
Other financial liabilities are subsequently
measured at amortised cost using the effective
interest method, with interest expense recognised
on an effective yield basis.
The effective interest method is a method of
calculating the amortised cost of a financial
liability and of allocating interest expense
over the relevant period. The effective interest
rate is the rate that exactly discounts estimated
future cash payments through the expected life
of the financial liability, or, where appropriate,
a shorter period, to the net carrying amount
on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities
when, and only when, the Group's obligations
are discharged, cancelled or they expire.
Financial liabilities at fair value through profit
or loss
Financial liabilities are classified as at FVTPL
when the financial liability is either held for
trading or it is designated as at FVTPL.
A financial liability is classified as held for
trading if:
---------------------------------------------------------------------------------------
* it has been incurred principally for the
purpose of repurchasing it in the near term;
or
------------------------------ -------------------------------------------------------
* on initial recognition it is part of a portfolio
of identified financial instruments that
the Group manages together and has a recent
actual pattern of short-term profit-taking;
or
------------------------------ -------------------------------------------------------
* it is a derivative that is not designated
and effective as a hedging instrument.
------------------------------ -------------------------------------------------------
A financial liability other than a financial
liability held for trading may be designated
as at FVTPL upon initial recognition if:
---------------------------------------------------------------------------------------
* such designation eliminates or significantly
reduces a measurement or recognition inconsistency
that would otherwise arise; or
------------------------------ -------------------------------------------------------
* the financial liability forms part of a group
of financial assets or financial liabilities
or both, which is managed and its performance
is evaluated on a fair value basis, in accordance
with the Group's documented risk management
or investment strategy, and information about
the grouping is provided internally on that
basis; or
------------------------------ -------------------------------------------------------
* it forms part of a contract containing one
or more embedded derivatives, and IAS 39
Financial Instruments:
------------------------------ -------------------------------------------------------
Recognition and Measurement permits the entire
combined contract (asset or liability) to
be designated as at FVTPL.
------------------------------ -------------------------------------------------------
Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising
on remeasurement recognised in profit or loss.
Derivative financial instruments
Derivatives are initially recognised at fair
value at the date a derivative contract is entered
into and are subsequently remeasured to their
fair value at each balance sheet date.
A derivative with a positive fair value is recognised
as a financial asset whereas a derivative with
a negative fair value is recognised as a financial
liability. A derivative is presented as a non-current
asset or a non-current liability if the remaining
maturity of the instrument is more than 12 months
and it is not expected to be realised or settled
within 12 months. Other derivatives are presented
as current assets or current liabilities.
Embedded derivatives
Derivatives embedded in other financial instruments
or other host contracts are treated as separate
derivatives when their risks and characteristics
are not closely related to those of the host
contracts and the host contracts are not measured
at FVTPL.
An embedded derivative is presented as a non-current
asset or a non-current liability if the remaining
maturity of the hybrid instrument to which the
embedded derivative relates is more than 12 months
and is not expected to be realised or settled
within 12 months. Other derivatives are presented
as current assets or current liabilities.
Loans to (from) group companies
These include loans to and from holding companies,
fellow subsidiaries, subsidiaries, joint ventures
and associates and are recognised initially at
fair value plus direct transaction costs.
Loans to group companies are classified as loans
and receivables.
Loans from group companies are classified as
financial liabilities measured at amortised cost.
Trade and other receivables
Trade receivables are measured at initial recognition
at fair value, and are subsequently measured
at amortised cost using the effective interest
rate method. Appropriate allowances for estimated
irrecoverable amounts are recognised in profit
or loss when there is objective evidence that
the asset is impaired. Significant financial
difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in
payments (more than 30 days overdue) are considered
indicators that the trade receivable is impaired.
The allowance recognised is measured as the difference
between the asset's carrying amount and the present
value of estimated future cash flows discounted
at the effective interest rate computed at initial
recognition.
The carrying amount of the asset is reduced through
the use of an allowance account, and the amount
of the loss is recognised in profit or loss within
operating expenses. When a trade receivable is
uncollectable, it is written off against the
allowance account for trade receivables. Subsequent
recoveries of amounts previously written off
are credited against operating expenses in profit
or loss.
Trade and other receivables are classified as
loans and receivables.
Trade and other payables
Trade payables are initially measured at fair
value, and are subsequently measured at amortised
cost, using the effective interest rate method.
The effective interest method is a method of
calculating the amortised cost of a financial
asset and of allocating interest income over
the relevant period. The effective interest rate
is the rate that exactly discounts estimated
future cash receipts (including all fees on points
paid or received that form an integral part of
the effective interest rate, transaction costs
and other premiums or discounts) through the
expected life of the financial asset, or, where
appropriate, a shorter period.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand
and demand deposits, other short-term highly
liquid investments and restricted cash that are
readily convertible to a known amount of cash
and are subject to an insignificant risk of changes
in value. These are initially and subsequently
recorded at amortised cost.
Convertible bond policy
The component parts of compound instruments (convertible
bonds) issued by the Group are classified separately
as an amortised cost financial liability and
an embedded derivative financial liability in
accordance with the substance of the contractual
arrangement. At the date of issue, the fair value
of the embedded derivative financial liability
component is estimated using observable market
data input into the Black Scholes model, modified
for the Barone Adesi Whaley approximation. This
amount is recorded as an embedded derivative
financial liability held at fair value through
profit and loss. The amortised cost financial
liability (host debt contract) is determined
by deducting the amount of the embedded derivative
component from the fair value of the compound
instrument as a whole. The host debt contract
is held on an amortised cost basis using the
effective interest method until extinguished
upon conversion or at the instrument's maturity
date.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are
measured initially at their fair values and,
if not designated as at FVTPL, are subsequently
measured at:
---------------------------------------------------------------------------------------
* the amount of the obligation under the contract,
as determined in accordance with IAS 37 Provisions,
Contingent
------------------------------ -------------------------------------------------------
Equity instruments
Equity instruments issued by the company are
recorded at the proceeds received, net of direct
issue cost.
---------------------------------------------------------------------------------------
1.7 Tax
------------------------------ -------------------------------------------------------
Current tax assets and liabilities
Current tax for current and prior periods is,
to the extent unpaid, recognised as a liability.
If the amount already paid in respect of current
and prior periods exceeds the amount due for
those periods, the excess is recognised as an
asset.
Current tax liabilities (assets) for the current
and prior periods are measured at the amount
expected to be paid to (recovered from) the tax
authorities, using the tax rates (and tax laws)
that have been enacted or substantively enacted
by the end of the reporting period.
Deferred tax assets and liabilities
Deferred tax is the tax expected to be payable
or recoverable on differences between the carrying
amounts of assets and liabilities in the financial
statements and the corresponding tax basis used
in the computation of taxable profit, and is
accounted for using the balance sheet liability
method. A deferred tax liability is recognised
for all taxable temporary differences, except
to the extent that the deferred tax liability
arises from the initial recognition of an asset
or liability in a transaction which at the time
of the transaction, affects neither accounting
profit nor taxable profit (tax loss).
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments
in subsidiaries and associates, and interests
in joint ventures, except where the Group is
able to control the reversal of the temporary
difference and it is probable that the temporary
difference will not reverse in the foreseeable
future. A deferred tax asset is not recognised
when it arises from the initial recognition of
an asset or liability in a transaction at the
time of the transaction, affects neither accounting
profit nor taxable profit (tax loss).
The carrying amount of deferred tax assets is
reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that
sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset
when there is a legally enforceable right to
set off current tax assets against current tax
liabilities and when they relate to income taxes
levied by the same taxation authority and the
Group intends to settle its current tax assets
and liabilities on a net basis.
A deferred tax asset is recognised for the carry
forward of unused tax losses to the extent that
it is probable that future taxable profit will
be available against which the unused tax losses
can be utilised.
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply to
the period when the asset is realised or the
liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively
enacted by the end of the reporting period.
Tax expenses
Current and deferred taxes are recognised as
income or an expense and included in profit or
loss for the period, except to the extent that
the tax arises from:
---------------------------------------------------------------------------------------
* a transaction or event which is recognised,
in the same or a different period, to other
comprehensive income, or
------------------------------ -------------------------------------------------------
* a business combination.
------------------------------ -------------------------------------------------------
Current tax and deferred taxes are charged or
credited to other comprehensive income if the
tax relates to items that are credited or charged,
in the same or a different period, to other comprehensive
income.
Current tax and deferred taxes are charged or
credited directly to equity if the tax relates
to items that are credited or charged, in the
same or a different period, directly in equity.
---------------------------------------------------------------------------------------
1.8 Leases
------------------------------ -------------------------------------------------------
A lease is classified as a finance lease if it
transfers substantially all the risks and rewards
incidental to ownership. A lease is classified
as an operating lease if it does not transfer
substantially all the risks and rewards incidental
to ownership.
Operating leases - lessee
Operating lease payments are recognised as an
expense on a straight-line basis over the lease
term. The difference between the amounts recognised
as an expense and the contractual payments are
recognised as an operating lease asset / liability.
This asset / liability is not discounted.
Any contingent rents are expensed in the period
they are incurred.
Rentals payable under operating leases are charged
to income on a straight-line basis over the term
of the relevant lease.
---------------------------------------------------------------------------------------
1.9 Inventories
------------------------------ -------------------------------------------------------
Inventories and work in progress are measured
at the lower of cost, on a FIFO basis, and net
realisable value.
Net realisable value is the estimated selling
price in the ordinary course of business less
the estimated costs of completion and the estimated
costs necessary to make the sale.
Inventory relating from development of the underground
is carried at the lower of cost, on a FIFO basis,
and net realisable value.
The cost of inventories comprises of all costs
of purchase, costs of conversion and other costs
incurred in bringing the inventories to their
present location and condition.
When inventories are sold, the carrying amount
of those inventories are recognised as an expense
in the period in which the related revenue is
recognised. The amount of any write-down of inventories
to net realisable value and all losses of inventories
are recognised as an expense in the period the
write-down or loss occurs. The amount of any
reversal of any write-down of inventories, arising
from an increase in net realisable value, are
recognised as a reduction in the amount of inventories
recognised as an expense in the period in which
the reversal occurs.
---------------------------------------------------------------------------------------
1.10 Impairment of assets
------------------------------ -------------------------------------------------------
The group assesses at each end of the reporting
period whether there is any indication that an
asset may be impaired. If any such indication
exists, the group estimates the recoverable amount
of the asset.
Irrespective of whether there is any indication
of impairment, the group also:
---------------------------------------------------------------------------------------
* tests intangible assets with an indefinite
useful life or intangible assets not yet
available for use for impairment annually
by comparing its carrying amount with its
recoverable amount. This impairment test
is performed during the annual period and
at the same time every period.
------------------------------ -------------------------------------------------------
* tests goodwill acquired in a business combination
for impairment annually.
------------------------------ -------------------------------------------------------
If there is any indication that an asset may
be impaired, the recoverable amount is estimated
for the individual asset. If it is not possible
to estimate the recoverable amount of the individual
asset, the recoverable amount of the cash-generating
unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating
unit is the higher of its fair value less costs
to sell and its value in use. In assessing value
in use, the estimated future cash flows are discounted
to the 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 for which the estimates of future
cash flows have not been adjusted.
If the recoverable amount of an asset is less
than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount.
That reduction is an impairment loss. An impairment
loss is recognised as an expense immediately,
unless the relevant asset is carried at a re-valued
amount, in which case the impairment loss is
treated as a revaluation decrease.
An impairment loss of assets carried at cost
less any accumulated depreciation or amortisation
is recognised immediately in profit or loss.
Any impairment loss of a revalued asset is treated
as a revaluation decrease.
Where a reasonable and consistent basis of allocation
can be identified, corporate assets are also
allocated to individual cash-generating units,
or otherwise they are allocated to the smallest
group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
An entity assesses at each reporting date whether
there is any indication that an impairment loss
recognised in prior periods for assets other
than goodwill may no longer exist or may have
decreased. If any such indication exists, the
recoverable amounts of those assets are estimated.
The increased carrying amount of an asset other
than goodwill attributable to a reversal of an
impairment loss does not exceed the carrying
amount that would have been determined had no
impairment loss been recognised for the asset
in prior periods.
A reversal of an impairment loss of assets carried
at cost less accumulated depreciation or amortisation
other than goodwill is recognised immediately
in profit or loss. Any reversal of an impairment
loss of a revalued asset is treated as a revaluation
increase.
---------------------------------------------------------------------------------------
1.11 Share capital and equity
------------------------------ -------------------------------------------------------
An equity instrument is any contract that evidences
a residual interest in the assets of an entity
after deducting all of its liabilities.
Ordinary shares are classified as equity. Mandatorily
redeemable preference shares are classified as
liabilities.
Incremental costs directly attributable to the
issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
---------------------------------------------------------------------------------------
1.12 Share based payments
------------------------------ -------------------------------------------------------
An equity instrument is any contract that evidences
a residual interest in the assets of an entity
after deducting all of its liabilities.
Ordinary shares are classified as equity. Mandatorily
redeemable preference shares are classified as
liabilities.
Incremental costs directly attributable to the
issue of new shares or options are shown in equity
as a deduction, net of tax, from the proceeds.
Equity-settled share-based payments to employees
and others providing similar services are measured
at the fair value of the equity instruments at
the grant date. The fair value excludes the effect
of non market-based vesting conditions. Details
regarding the determination of the fair value
of equity-settled share-based transactions are
set out in note 13.
The fair value determined at the grant date of
the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period,
based on the Group's estimate of equity instruments
that will eventually vest. At each balance sheet
date, the Group revises its estimate of the number
of equity instruments expected to vest as a result
of the effect of non market-based vesting conditions.
The impact of the revision of the original estimates,
if any, is recognised in profit or loss such
that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to
equity reserves.
Save As You Earn ("SAYE") share options granted
to employees are treated as cancelled when employees
cease to contribute to the scheme. This results
in accelerated recognition of the expenses that
would have arisen over the remainder of the original
vesting period.
For cash-settled share-based payments, a liability
is recognised for the goods or services acquired,
measured initially at the fair value of the liability.
At each balance sheet date until the liability
is settled, and at the date of settlement, the
fair value of the liability is remeasured, with
any changes in fair value recognised in profit
or loss for the year.
---------------------------------------------------------------------------------------
1.13 Revenue
------------------------------ -------------------------------------------------------
Revenue from the sale of diamonds is recorded
when the diamonds are sold. Incidental sale of
diamonds derived from underground development
are credited to mine development costs.
Incidental sale of diamonds derived from underground
development is credited to mine development costs.
Revenue earned from sales prior to the new operations
achieving commercial production were recognised
as a reduction in the carrying value of the pre-production
expenses held within intangible assets. Revenue
is measured at the fair value of the consideration
received or receivable. Subsequently it is recognised
as a reduction in the carrying value of mine
development costs until production commences
once development is completed.
Interest income is accrued on a time basis, by
reference to the principal outstanding and at
the effective interest rate applicable, which
is the rate that exactly discounts estimated
future cash receipts through the expected life
of the financial asset to that asset's net carrying
value.
Dividends are recognised, in profit or loss,
when the company's right to receive payment has
been established.
---------------------------------------------------------------------------------------
1.14 Borrowing costs
------------------------------ -------------------------------------------------------
Borrowing costs that are directly attributable
to the acquisition, construction or production
of a qualifying asset are capitalised as part
of the cost of that asset until such time as
the asset is ready for its intended use. The
amount of borrowing costs eligible for capitalisation
is determined as follows:
---------------------------------------------------------------------------------------
* Actual borrowing costs on funds specifically
borrowed for the purpose of obtaining a qualifying
asset less any temporary investment of those
borrowings.
------------------------------ -------------------------------------------------------
* Weighted average of the borrowing costs applicable
to the entity on funds generally borrowed
for the purpose of obtaining a qualifying
asset. The borrowing costs capitalised do
not exceed the total borrowing costs incurred.
------------------------------ -------------------------------------------------------
The capitalisation of borrowing costs commences
when:
---------------------------------------------------------------------------------------
* expenditures for the asset have occurred;
------------------------------ -------------------------------------------------------
* borrowing costs have been incurred, and
------------------------------ -------------------------------------------------------
* activities that are necessary to prepare
the asset for its intended use or sale are
in progress.
------------------------------ -------------------------------------------------------
Capitalisation is suspended during extended periods
in which active development is interrupted.
Capitalisation ceases when substantially all
the activities necessary to prepare the qualifying
asset for its intended use or sale are complete.
All other borrowing costs are recognised as an
expense in the period in which they are incurred.
Bank ovedraft and borrowings are initially measured
at fair value, and are susequently measured at
amortised cost, using the effective interest
rate method. Any difference between the proceeds
(net of transaction costs) and the settlement
or redemption of borrowings is recognised over
the term of the borrowings in accordance with
the group's accounting policy for borrowing costs.
---------------------------------------------------------------------------------------
1.15 Translation of foreign currencies
------------------------------ -------------------------------------------------------
Functional and presentation currency
Items included in the audited consolidated and
separate financial statements of each of the
group entities are measured using the currency
of the primary economic environment in which
the entity operates (functional currency).
The audited consolidated and separate financial
statements are presented in Pounds sterling which
is the company's functional and presentation
currency for the consolidated financial statements.
In preparing the financial statements of the
individual entities, transactions in currencies
other than the entity's functional currency (foreign
currencies) are recorded at the rates of exchange
prevailing on the dates of the transactions.
At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies
are retranslated at the rates prevailing on the
balance sheet date. Non-monetary items carried
at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing
on the date when the fair value was determined.
Non-monetary items that are measured in terms
of historical cost in a foreign currency are
not translated.
Group and Company
Exchange differences arising on the settlement
of monetary items, and on the retranslation of
monetary items, are included in the income statement
for the period. Exchange differences arising
on the retranslation of non-monetary items carried
at fair value are included in the income statement
for the period except for differences arising
on the retranslation of non-
monetary items in respect of which gains and
losses are recognised directly in equity. For
such non-monetary items, any exchange component
of that gain or loss is also recognised directly
in equity.
In addition, in the case of presenting consolidated
financial statements, any foreign exchange differences
arising on elimination of intercompany loan balances
upon consolidation of the Group Companies, are
classified as equity and transferred to the Group's
translation reserve, as these loans are for long
term investment purposes.
Determining the rate of exchange to be used
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the
Group's foreign operations are translated at
exchange rates prevailing on the balance sheet
date. Income and expense items are translated
at the average exchange rates for the period,
unless exchange rates fluctuated significantly
during that period, in which case the exchange
rates at the dates of the transactions are used.
Exchange differences arising, if any, are classified
as other comprehensive income and transferred
to the Group's translation reserve. Such translation
differences are recognised in the income statement
in the period in which the foreign operation
is disposed of.
Goodwill and fair value adjustments arising on
the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity
and translated at the closing rate.
---------------------------------------------------------------------------------------
1.16 Environmental restoration and decommissioning
obligations
------------------------------ -------------------------------------------------------
An obligation to incur environmental restoration,
rehabilitation and decommissioning costs arises
when disturbance is caused by the development
or ongoing production of a mining property. Such
costs arising from the decommissioning of plant
and other site preparation work, discounted to
their net present value, are provided for and
capitalised at the start of each project, as
soon as the obligation to incur such costs arises.
These costs are recognised in the income statement
over the life of the operation, through the depreciation
of the asset and the unwinding of the discount
on the provision.
Costs for restoration of subsequent site damage
which is created on an ongoing basis during production
are provided for at their net present values
and recognised in the income statement as extraction
progresses.
Changes in the measurement of a liability relating
to the decommissioning of plant or other site
preparation work (that result from changes in
the estimated timing or amount of the cash flow,
or a change in the discount rate) are added to
or deducted from, the cost of the related asset
in the current period. If a decrease in the liability
exceeds the carrying amount of the asset, the
excess is recognised immediately in the income
statement. If the asset value is increased and
there is an indication that the revised carrying
value is not recoverable, an impairment test
is performed in accordance with the accounting
policy above.
---------------------------------------------------------------------------------------
1.17 Warranty reserve policy
------------------------------ -------------------------------------------------------
Options issued as warranties are treated as equity
settled share based payments.
---------------------------------------------------------------------------------------
Notes to the Consolidated and Separate Financial Statements
2. New Standards and Interpretations
2.1 Standards and interpretations effective and
adopted in the current year
In the current year, the group has adopted the
following standards and interpretations that
are effective for the current financial year
and that are relevant to its operations:
IFRS 10 Consolidated Financial Statements
Standard replaces the consolidation sections
of IAS 27 Consolidated and Separate Financial
Statements and SIC 12 Consolidation - Special
Purpose Entities. The standard sets out a new
definition of control, which exists only when
an entity is exposed to, or has rights to, variable
returns from its involvement with the entity,
and has the ability to effect those returns through
power over the investee.
The effective date of the standard is for years
beginning on or after 1 January 2013.
The group has adopted the standard for the first
time in the 2013 audited consolidated and separate
financial statements. The impact of the standard
is not material.
IAS 27 Separate Financial Statements
Consequential amendment as a result of IFRS 10.
The amended Standard now only deals with separate
financial statements.
The effective date of the amendment is for years
beginning on or after 1 January 2013.
The group has adopted the amendment for the first
time in the 2013 audited consolidated and separate
financial statements.
The impact of the amendment is not material.
IFRS 12 Disclosure of Interests in Other Entities
The standard sets out disclosure requirements
for investments in Subsidiaries, associates,
joint ventures and unconsolidated structured
entities. The disclosures are aimed to provide
information about the significance and exposure
to risks of such interests. The most significant
impact is the disclosure requirement for unconsolidated
structured entities or off balance sheet vehicles.
The effective date of the standard is for years
beginning on or after 1 January 2013.
The group has adopted the standard for the first
time in the 2013 audited consolidated and separate
financial statements. The impact of the standard
is not material.
IFRS 13 Fair Value Measurement
New standard setting out guidance on the measurement
and disclosure of items measured at fair value
or required to be disclosed at fair value in
terms of other IFRS's.
The effective date of the standard is for years
beginning on or after 1 January 2013.
The group has adopted the standard for the first
time in the 2013 audited consolidated and separate
financial statements. The impact of the standard
is not material.
2.2 Standards and interpretations not yet effective
The group has chosen not to early adopt the following
standards and interpretations, which have been
published and are mandatory for the group's accounting
periods beginning on or after 1 January 2014
or later periods:
IFRS 9 Financial Instruments
This new standard is the first phase of a three
phase project to replace IAS 39 Financial Instruments:
Recognition and Measurement. To date, the standard
includes chapters for classification, measurement
and derecognition of financial assets and liabilities.
The following are main changes from IAS 39:
* Financial assets will be categorised as those
subsequently measured at fair value or at
amortised cost.
* Financial assets at amortised cost are those
financial assets where the business model
for managing the assets is to hold the assets
to collect contractual cash flows (where
the contractual cash flows represent payments
of principal and interest only). All other
financial assets are to be subsequently measured
at fair value.
* Under certain circumstances, financial assets
may be designated as at fair value.
* For hybrid contracts, where the host contract
is an asset within the scope of IFRS 9, then
the whole instrument is classified in accordance
with IFRS 9, without separation of the embedded
derivative. In other circumstances, the provisions
of IAS 39 still apply.
* Voluntary reclassification of financial assets
is prohibited. Financial assets shall be
reclassified if the entity changes its business
model for the management of financial assets.
In such circumstances, reclassification takes
place prospectively from the beginning of
the first reporting period after the date
of change of the business model.
* Voluntary reclassification of financial assets
is prohibited. Financial assets shall be
reclassified if the entity changes its business
model for the management of financial assets.
In such circumstances, reclassification takes
place prospectively from the beginning of
the first reporting period after the date
of change of the business model.
* Investments in equity instruments may be
measured at fair value through other comprehensive
income. When such an election is made, it
may not subsequently be revoked, and gains
or losses accumulated in equity are not recycled
to profit or loss on derecognition of the
investment. The election may be made per
individual investment.
* IFRS 9 does not allow for investments in
equity instruments to be measured at cost.
* The classification categories for financial
liabilities remains unchanged. However, where
a financial liability is designated as at
fair value through profit or loss, the change
in fair value attributable to changes in
the liabilities credit risk shall be presented
in other comprehensive income. This excludes
situations where such presentation will create
or enlarge an accounting mismatch, in which
case, the full fair value adjustment shall
be recognised in profit or loss.
The effective date of the standard is for years
beginning on or after 1 January 2018.
The group expects to adopt the standard for the
first time in the 2018 audited consolidated and
separate financial statements.
It is unlikely that the standard will have a
material impact on the company's audited consolidated
and separate financial statements.
IFRS 10, IFRS 12 and IAS 27 - Investment Entities
The amendments define an investment entity and
introduce an exception to consolidating particular
subsidiaries for investment entities. These amendments
require an investment entity to measure those
subsidiaries at fair value through profit or
loss in accordance with IFRS 9 Financial Instruments
in its consolidated and separate audited consolidated
and separate financial statements. The amendments
also introduce new disclosure requirements for
investment entities in IFRS 12 and IAS 27.
The effective date of the amendments is for years
beginning on or after 1 January 2014.
The group expects to adopt the amendments for
the first time in the 2014 audited consolidated
and separate financial statements.
It is unlikely that the amendment will have a
material impact on the company's audited consolidated
and separate financial statements.
3. Segmental information
The Group is currently operating the Lace Diamond
Mine. This operation is located in the northern
part of the Free State province in South Africa,
200 kilometres from Johannesburg, 30 kilometres
from Kroonstad and 30 kilometres from Viljoenskroon.
The Lace Diamond Mine operation is treated as
a single operation with the corporate head office
and other subsidiaries reported separately, including
consolidation entries.
2013 Separately disclosable
items
Total EBITDA Depreciation Interest Interest Taxation
other and income expense
income amortisation
GBP GBP GBP GBP GBP GBP
Lace Diamond
Mine 13,645 (911,232) - 39,012 - -
All other
segments 204,825 (1,043,956) (19,817) 135 (55,004) -
Total 218,470 (1,955,188) (19,817) 39,147 (55,004) -
Reconciling
items
Fair value
adjustments (619,042)
Loss after
tax (2,609,904)
2012 Separately disclosable
items
Total Depreciation
Other and Interest Interest
Income EBITDA amortisation income Expense Taxation
GBP GBP GBP GBP GBP GBP
Lace Diamond
Mine - (201,760) (503,391) 24,045 - -
All other
segments 15,834 (2,475,321) (166,265) 1,541 168,968 -
Total 15,834 (2,677,081) (669,656) 25,586 168,968 -
Reconciling
items
Fair value
adjustments (44,821)
Loss after
tax (3,534,940)
Segment assets and liabilities
The amounts provided to the Chief Executive Officer
with respect to total assets are measured in
a manner consistent with that of the financial
statements. These assets are allocated based
on the operations of the segment and the physical
location of the asset.
Additions
to non-current
2013 assets Total assets
Lace Diamond Mines 7,736,774 17,813,845
All other segments 2,891 5,466,000
Total 7,739,665 23,279,845
Additions
to non-current
2012 assets Total assets
Lace Mines Diamond 951,284 9,310,270
All other segments 5,480 8,884,301
Total 956,764 18,194,571
4. Property, plant and equipment
2013 2012
Group Accumulated Accumulated
depreciation/ depreciation/
amortisation/ amortisation/
Cost exchange Carrying Cost exchange Carrying
/ Valuation differences valut / valuation differences value
GBP GBP GBP GBP GBP GBP
Land &
Buildings 863,020 (191,071) 671,949 796,573 (197,001) 599,572
Plant and
machinery 6,898,130 (3,355,700) 3,542,430 7,307,782 (3,719,464) 3,588,318
Mining Rights 565,493 (169,648) 395,845 610,067 (152,516) 457,551
Construction
in Progress 12,602,367 (2,320,368) 10,281,999 7,120,133 (2,989,301) 4,130,832
Total 20,929,010 (6,036,787) 14,892,223 15,834,555 (7,058,282) 8,776,273
2013 2012
Company Accumulated Accumulated
depreciation/ depreciation/
amortisation/ amortisation/
Cost exchange Carrying Cost exchange Carrying
/ Valuation differences valut / valuation differences value
GBP GBP GBP GBP GBP GBP
Mining Rights 396,343 (118,903) 277,440 396,343 (99,085) 297,258
Reconciliation of property, plant and equipment - Group -
2013
Opening Additions Disposals Exchange Depreciation Total
balance differences
GBP GBP GBP GBP GBP GBP
Land & Buildings 599,572 236,946 - (128,754) (35,815)
671,949
Plant and machinery 3,588,318 769,275 (2,530) (397,098)
(415,535) 3,542,430
Mining Rights 457,551 - - (33,273) (28,433) 395,845
Construction in 4,130,832 6,733,444 - (582,277) - 10,281,999
Progress
8,776,273 7,739,665 (2,530) (1,141,402) (479,783) 14,892,223
Reconciliation of property, plant and equipment - Group -
2012
Opening Additions Transfers Exchange Depreciation Total
balance from differences
intangible
assets
GBP GBP GBP GBP GBP GBP
Land & Buildings 179,511 78,282 436,102 (53,265) (41,058)
599,572
Plant and machinery 4,429,773 97,709 - (341,640) (597,524)
3,588,318
Mining Rights - - 503,623 (14,997) (31,075) 457,551
Construction in Progress - 780,773 3,702,076 (352,017) -
4,130,832
4,609,284 956,764 4,641,801 (761,919) (669,657) 8,776,273
Reconciliation of property, plant and equipment - Company -
2013
Opening Depreciation Total
balance
GBP GBP GBP
Mining Rights 297,258 (19,818) 277,440
Reconciliation of property, plant and equipment - Company -
2012
Opening Transfers Depreciation Total
balance from
intangible
assets
GBP GBP GBP GBP
Mining Rights - 317,075 (19,817) 297,258
Plant and machinery includes mining fleet, processing
plant, office equipment and motor vehicles which
were previously separately classified. The property,
plant and equipment is pledged as security for
the Convertible Bonds (note 16).
However, once the Industrial Development Corporation
of South Africa Limited ("IDC") loan is drawn
down in whole or in part, the Bondholders security
interest in these assets will be subordinated
to the security interest of the IDC (note 17).
On 1 January 2012, a decision was taken that
the mining property is economically feasible
therefore all previous exploration and evaluation
and pre-production development expenditure has
now been capitalised within property, plant and
equipment under construction in progress and
has been transferred from intangible assets,
and is still under development.
--------------------------------------------------------
5. Goodwill
-------------- ----------------------------------------
Group 2013 2012
Cost Accumulated Carrying value Cost Accumulated Carrying
value
impairment impairment
GBP GBP GBP GBP GBP GBP
Goodwill 4,606,026 - 4,606,026 4,606,026 - 4,606,026
The goodwill relates to the acquisition of DiamondCorp
Holdings Limited.
The Group tests annually for impairment, or more
frequently if there are indications that goodwill
might be impaired. The Group has one reportable
business segment and all goodwill is associated
with that segment. The recoverable amounts of
the cash generating unit ("CGU") are determined
from discounted cash flows to estimate fair value
less cost to sell. The key assumptions for the
discounted cash flow calculations are those regarding
the discount rates, production, resources and
expected changes to selling prices and direct
costs during the period. A post tax discount
rate of 15% has been used.
The Group's test for impairment is based on several
considerations including a model adopted by management
from the model prepared for the Lace Mine by
one of its technical advisors. This model uses
grade assumptions based on the resource statement
of the Group's technical advisor and it uses
diamond prices considered representative of market
prices. The model assumes that the Lace mine
will reach full production of 1,200,000 tonnes
of kimberlite in 2015 and run through 2040. The
valuations of the Lace Mine generated by the
Model under variable sets of assumptions as to
grades, revenues and costs indicate that there
has been no impairment of goodwill during the
year. Management have considered the key assumptions
to be reasonable. A reasonable possible change
in a key assumption would not lead to an indicator
of impairment of the cash generating unit which
contains goodwill.
----------------------------------------------------------
6. Interests in subsidiaries including consolidated
structured entities
---- ----------------------------------------------------
The following table lists the entities which
are controlled by the company, either directly
or indirectly through subsidiaries.
----------------------------------------------------------
Company
Name of company Held by % % Carrying Carrying
holding holding amount amount
and and
voting voting
power power
2013 2012 2013 2012
GBP GBP
Diamondcorp Holdings Limited - DiamondCorp plc 100.00 % 100.00 %
4,217,500 4,217,500
incorporated in the British Virgin
Islands
Botswana Diamondcorp Limited - DiamondCorp plc 100.00 % 100.00 %
1 1
incorporated in the British Virgin
Islands
Lace Diamond Mines (Pty) Ltd - DiamondCorp Holdings 74.00 % 74.00 % - -
incorporated in South Africa Limited
Soapstone Investment Ltd - DiamondCorp Holdings 100.00 % 100.00
% 455,000 455,000
incorporated in South Africa Limited
DCP Exploration (Pty) Ltd - Botswana DiamondCorp 100.00 % 100.00
% - -
incorporated in Botswana Limited
4,672,501 4,672,501
Subsidiaries with material non-controlling interests
The following information is provided for subsidiaries
with non-controlling interests which are material
to the reporting company. The summarised financial
information is provided prior to intercompany
eliminations
--------------------------------------------------------
Subsidiary
Lace Diamond Mines (Pty) Ltd
Summarised statement of financial position
Assets
Non-current assets Current assets
Total assets
Liabilities
Non-current liabilities Current liabilities
Total liabilities
Total net liabilities
Carrying amount of non-controlling interest
Summarised statement of financial performance
Other income and expenses
Loss before tax
Loss for the year
Total comprehensive loss
Loss allocated to non-controlling interest
Country of % Ownership interest held
incorporation by non-controlling interest
2013 2012
RSA 26% 26%
Lace Diamond Mines (Pty)
Ltd
2013 2012
GBP GBP
14,502,254 8,926,477
3,308,578 377,873
17,810,832 9,304,350
26,007,751 18,830,076
553,685 569,730
26,561,436 19,399,806
(8,750,604) (10,095,456)
(1,946,868) (1,104,254)
Lace Diamond Mines (Pty)
Ltd
2013 2012
GBP GBP
(872,220) (1,993,558)
(872,220) (1,993,558)
(872,220) (1,993,558)
(872,220) (1,993,558)
(226,777) (518,325)
Lace Diamond Mines (Pty)
Ltd
2013 2012
GBP GBP
Cash flows from operating activities (1,479,667) (1,633,604)
Cash flows from investing activities (8,528,827) (850,034)
Cash flows from financing activities 12,127,898 281,620
Net increase (decrease) in cash and cash equivalents 2,119,404
(2,202,018)
7. Loans to group companies
--- -------------------------
Company
2013 2012
GBP GBP
Subsidiaries
DiamondCorp Holdings Ltd 23,869,096 23,436,964
23,869,096 23,436,964
Impairment of loans to subsidiaries (10,154,586) -
13,714,510 23,436,964
The Directors consider that the carrying amount
of these assets approximates their fair value.
All receivable balances are non-interest bearing.
The loan at the end of the year is in terms of
agreement not repayable within the next 12 months.
Credit quality of loans to group companies
The credit quality of loans to group companies
is neither past nor due. The loan has an unrated
credit rating. The loan has been impaired to
the extent that the liabilities of the subsidiary
exceeds its assets. The company has subordinated
as much of its loan as is required to support
its subsidiary in this position.
----------------------------------------------------
Company
2013 2012
GBP GBP
Non-current assets 13,714,510 -
Current assets - 23,436,964
13,714,510 23,436,964
Credit quality of loans to group companies
The credit quality of loans to group companies
that are neither past due nor impaired can be
assessed by reference to external credit ratings
(if available) or to historical information about
counterparty default rates:
-----------------------------------------------------
Company
2013 2012
GBP GBP
Credit rating
Unrated - no prior defaults 23,869,096 23,436,964
Loans to group companies impaired
As of 31 December 2013, loans to group companies of GBP
10,154,586 (2012: GBP -) were impaired and provided for. The amount
of the provision was GBP 10,154,586 as of 31 December 2013 (2012:
GBP -).
The ageing of these loans is as follows:
Company
2013 2012
GBP GBP
Over 6 months 23,869,096 23,463,964
8. Deferred tax
------ -----------------------------------------
Deferred tax asset
Until it is probable that sufficient taxable
profits will be available to allow the entire
or partial recovery of potential deferred tax
assets of GBP2,773,590 (2012: GBP2,259,551),
the accounting benefit of tax losses will not
be reflected in the accounts. The Group's tax
losses have no expiry date.
Due to the Group's accumulated loss position,
there are no temporary differences associated
with investments in the Group's subsidiaries.
-------------------------------------------------
9. Other non-current asset
------ -----------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
At amortised cost:
Rehabilitation fund 43,632 - - -
Contributions to an insurance policy to cover
future environmental rehabilitation and closure
cost.
---------------------------------------------------
10. Inventories
------------- ------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Diamond inventories 408,867 293,283 - -
Consumable and other inventories 148,218 4,191 - -
557,085 297,474 - -
Diamond inventories at 31 December 2013 totalled
7,675 carats. Of these, 2,189 carats were recovered
from bulk testing and the balance, 5,486 carats,
from tailings. Inventory is valued as per the
accounting policy. No inventories were recognised
as an expense during the year. There were no
write down of inventories (2012: GBP275,561)
or any reversal of inventory write downs during
the year.
-------------------------------------------------------
11. Trade and other receivables
------- ----------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Trade receivables - 130,829 - 9,167
Prepayments 183,235 - - -
VAT 697,755 55,790 - -
880,990 186,619 - 9,167
The Directors consider that the carrying amount
of these assets approximates their fair value.
All receivables balances are non-interest bearing.
Credit quality of trade and other receivables
The credit quality of trade and other receivables
that are neither past nor due nor impaired can
be assessed by reference to external credit ratings
(if available) or to historical information about
counterparty default rates:
Trade and other receivables past due but not
impaired
Trade and other receivables which are less than
3 months past due are not considered to be impaired.
At 31 December 2013, GBP - (2012: GBP -) were
past due but not impaired.
--------------------------------------------------------
12. Cash and cash equivalents
-------- ----------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Cash & cash equivalents - current 2,220,130 4,227,404 5,979
1,363,545
Restricted cash - non-current 73,108 92,372 - -
2,293,238 4,319,776 5,979 1,363,545
The restricted cash above form the basis of a
guarantee issued by the financial institution,
where the cash is held, in favour of the Department
of Mineral Resources providing for the original
determined cost of environmental rehabilitation
and decommissioning on termination of the Lace
project.
In terms of an agreement the group's right, title
and interest in and to the debit balances have
been encumbered for the benefit of the bond holders
as referred to note 16.
Credit quality of cash at bank and short term
deposits, excluding cash on hand
The credit quality of cash at bank and short
term deposits, excluding cash on hand that are
neither past due nor impaired can be assessed
by reference to external credit ratings (if available)
or historical information about counterparty
default rates:
--------------------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Credit rating
A- 1,833,564 1,363,545 5,979 1,363,545
BBB 457,940 2,954,404 - -
Other 1,734 1,827 - -
2,293,238 4,319,776 5,979 1,363,545
13. Share capital
------------ ----------------------------------------
AUTHORISED
DiamondCorp plc does not have an authorised share
capital, in line with the provisions of the UK
Companies Act 2006.
The Directors' authority to issue and allot shares
in the company is set each year by Company's
shareholders at the Annual General Meeting. The
level of disapplication in respect of pre-emption
authority is determined by the Company's Nominated
Adviser and is based on UK corporate governance
guidlines for AIM companies.
ISSUED
------------------------------------------------------
Group Company
2013 2012 2013 2012
No. No. No. No.
Reconciliation of number of shares issued before
reorganisation:
Ordinary shares of (2012: 3 pence each) 270,839,478 242,268,048
270,839,478 242,268,048
Issue of shares - ordinary shares 6,000,000 28,571,430 6,000,000
28,571,430
Total number of shares 276,839,478 270,839,478 276,839,478
270,839,478
Reconciliation of number of shares issued after
reorganisation:
Ordinary shares of 0.1 pence each 276,839,478 - 276,839,478
-
Deferred ordinary shares of 2.9 pence each 276,839,478 -
276,839,478 -
Total number of shares 553,678,956 - 553,678,956 -
- In October 2012, the Company issued 28,571,430
ordinary shares at 3.5 pence each. The cost
associated with the issuance of these shares
has been charged to the share premium account.
------------------------------------------------------
- Existing ordinary shares were sub-divided
into one new ordinary share of 0.1 pence
each ("New Ordinary Share") and one deferred
ordinary share of 2.90 pence each (Deferred
Ordinary Share). As at year end each ordinary
share holder held the same number of ordinary
shares and deferred ordinary shares.
------------------------------------------------------
- The New Ordinary Shares continue to carry
the same rights and benefits as those attached
to the Company's existing ordinary shares
(save for the reduction in nominal value).
The number of New Ordinary Shares in issue
following the Share Capital Reorganisation
is identical to the number of existing ordinary
shares in issue immediately prior to the
Share Capital Reorganisation.
------------------------------------------------------
- The Deferred Ordinary Shares do not entitle
the holders to (a) receive notice of or
attend and vote at any general meeting of
the Company; (b) to receive any dividend
or other distribution; or (c) to participate
in any return on capital on winding up,
other than the nominal amount paid on such
shares following a substantial distribution
of ordinary shares in the Company.
------------------------------------------------------
- The Deferred Ordinary Shares are effectively
valueless, non-transferable and have no
effect on the economic interest of the Shareholders.
------------------------------------------------------
- In January 2013, 4,500,000 ordinary shares
at 5 pence each were issued to a director
and certain employees for successful completion
of the project financing to fund the development
of Lace mine.
------------------------------------------------------
- In April 2013, 1,500,000 ordinary shares
at 3.5 pence each were issued to a financial
advisor in respect of a success fee for
introducing Laurelton Diamonds Inc., a wholly
owned subsidiary of Tiffany & Co.
------------------------------------------------------
Group Company
2013 2012 2013 2012
No. No. No. No.
Issued
Ordinary shares of 0.1 pence each 276,840 8,125,184 276,840
8,125,184
Deferred ordinary shares of 2.9 pence each 8,028,344 - 8,028,344
-
Share premium at shares of 5p and 3.5p each 26,885,360
26,795,360 26,885,360 26,795,360
35,190,544 34,920,544 35,190,544 34,920,544
14. Share based payments
--------- --------------------------------------------
Equity-settled share option scheme
The Company has a share option scheme for all
employees of the Group. Options are exercisable
at a price equal to the average quoted market
price of the Company's shares on the date of
grant. If the options remain unexercised after
a period of ten years from the date of grant
the options expire. Options are generally forfeited
if the employee leaves the Group before the options
vest.
Details of the share options outstanding during
the year are as follows.
-------------------------------------------------------
2013 2012
Number Number
Outstanding at the beginning of the year 6,345,000 6,345,000
Granted during the year 2,000,000 -
Forfeited during the year - -
Exercised during the year - -
Expired during the year - -
Outstanding at the end of the year 8,345,000 6,345,000
Exercisable at the end of the year 8,345,000 5,125,000
At 31 December 2013, 8,345,000 (2012: 6,345,000)
options were outstanding at a weighted average
exercise price of 13p (2012: 15p), and a weighted
average remaining contractual life of 5.4 years
(2012: 6.5 years).
During 2013, the Group recognised an expense
of GBP86,895 (2012 - GBP10,170) relating to equity-settled
share-based payment transactions. The Group also
recognised an expense of GBP225,000 in 2013 relating
to shares issued to employees in lieu of bonus
payments, bringing the total share based payments
expense for the Group to GBP311,895.
------------------------------------------------------------
Black-Scholes Assumptions 2013 Option 2010 Option 2007 UK
The
Plan Plan Option Plan DiamondCorp
Share Option
Plan
Term range 5 Years 3 Years 3 Years 3 Years
Expected dividend yield Nil Nil Nil Nil
Risk free interest rate 5% 2% 5% 2%
Share price volatility 90% 50% 40% 40%
Share price at time of grant 5 pence 6.88 pence 90 pence 34.5
pence
2007 UK Options ("2007 Plan")
During 2007, options over 2,940,000 ordinary
shares of 3 pence each were granted to employees
and management of the Company, exercisable at
135 pence for a period of 10 years from the date
of issue.
270,000 of these options vested on grant date
and the balance vest over 3 years at one-third
at each anniversary of the issue date. 690,000
of these options were forfeited during 2008 by
reason of retirement and 120,000 options were
forfeited in 2009.
Share options granted during the year ended 31
December 2007 were valued by the Directors using
the Black-Scholes valuation model, based upon
the assumptions as detailed in the table above:
At 31 December 2013, 2,130,000 options were outstanding
under this plan (2012 - 2,130,000).
The DiamondCorp Share Option Plan ("DCP Plan")
During 2008, a share option plan was approved
and registered in the Republic of South Africa
to provide eligible employees of the Group with
the opportunity to acquire as an incentive an
interest in the equity of the Company. Eligible
employees were granted options over 695,000 ordinary
shares of 3 pence each, exercisable at 50 pence
for a period of 10 years from the date of issue,
16 December 2008. These options vest over 3 years
at one-third at each anniversary of the issue
date. During 2009, a further 200,000 options
were granted under this plan and 340,000 options
were forfeited.
These options were valued by the Directors using
the Black-Scholes valuation model, based upon
the assumptions as detailed in the table above.
In August 2010, the exercise price of these options
was adjusted to 21 pence. All other conditions
remain unchanged. At 31 December 2013, the number
of options outstanding under this plan was 555,000
(2012 - 555,000).
2010 Option Plan ("2010 Plan")
During 2010, options over 4,570,000 ordinary
shares of 3 pence each were granted to employees
and management of the Company, exercisable at
12 pence each for a period of 10 years from the
date of issue. These options vest over 3 years
at one third on each anniversary of the date
of issue, subject to the share price of the Company
attaining and trading at or above 17 pence for
a period of 3 consecutive months.
These options were valued by the Directors using
the Black-Scholes valuation model, based upon
the assumptions as detailed above.
During the year ended 31 December 2010, 660,000
options expired.
During the year ended 31 December 2011, 250,000
option expired.
During 2012 the exercise price of these options
was adjusted to 5 pence. All other conditions
remain unchanged. At 31 December 2013, 3,660,000
options were outstanding under this plan (2012
- 3,660,000).
2013 Option Plan ("2013 Plan")
During 2013, options over 2,000,000 ordinary
shares of 0.10 pence each were granted to Mr.
EA Worthington, exercisable at a price of 5 pence
each for a period of 5 years from the date of
issue. The 2,000,000 options vest immediately.
These options were valued by the Directors using
the Black-Scholes valuation model, based upon
the assumptions as detailed above.
At 31 December 2013, 2,000,000 options were outstanding
under this plan.
-----------------------------------------------------------
15. Warrant Reserve
------------ ---------------------------------------------
GROUP AND COMPANY Warrants in Warrant
issue reserve
GBP
Outstanding at 1 January 2013 5,000,000 92,000
Outstanding at 31 December 2013 5,000,000 92,000
GROUP AND COMPANY Warrants in Warrant
issue reserve
GBP
Outstanding at 1 January 2012 5,816,666 505,877
Granted during the year 5,000,000 92,000
Expired during the year (5,816,666) (505,877)
Outstanding at 31 December 2012 5,000,000 92,000
Darwin Warrants
In respect of agreeing to provide a standby equity
finance facility of up to GBP10,000,000 which
can be drawn upon at the Company's discretion
during a period of 36 months ending on 18 October
2015, the Company has granted 5,000,000 warrants
to Darwin Strategic Limited a unit of Henderson
Global Investors which are exercisable at 9p
on or before 18 October 2015.
These warrants were valued by the Directors using
the Black-Scholes valuation model, based on the
assumptions as detailed below.
----------------------------------------------------
Black-Scholes Assumptions Darwin
Warrants
Term range 3 years
Expected dividend yield Nil
Risk free interest rate 1.4%
Share price volatility 100%
Share price at time of grant 4 pence
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Warrant Reserve - End of the year 92,000 92,000 92,000
92,000
16. Compound instruments
The compound instruments have been split in a debt component and
derivative as presented below:
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
At amortised cost
Current liabilities 2,532,981 2,642,739 981,022 780,261
2,532,981 2,642,739 981,022 780,261
At fair value through profit or loss
Derivative financial instruments 2,107,849 1,525,391 730,079
541,598
2,107,849 1,525,391 730,079 541,598
UK Bonds
On 14 December 2012, the Company, issued GBP1,410,000
14% senior secured bonds (the "UK Bonds") to
investors in the United Kingdom. The proceeds
of the UK Bonds was held in escrow and released
from escrow upon completion of a loan agreement
between Diamondcorp Holdings Limited, an associated
company, and Laurelton Diamonds Inc. The UK Bonds
are due for repayment 14 December 2018 with interest
payable quarterly in arrears, with the first
24 months of interest on the UK Bonds to be accumulated
and added to the principal amount to be repaid.
Bondholders can request conversion of the UK
Bonds and outstanding interest at any time after
24 January 2013. Any request for conversion can
be settled at the absolute discretion of the
Company with ordinary shares at 5.80 pence per
share or the cash equivalent of the number of
underlying shares multiplied by the share price
at the time of conversion. The UK Bonds are secured
by the assets of the Company and have a reversionary
interest in the assets of Lace Diamond Mines
(Pty) Limited. GBP250,000 of the UK Bonds were
taken up by directors of the Company or other
related parties (see note 28).
SA Bonds
On 14 December 2012, Soapstone Investment Ltd
("Soapstone"), wholly-owned subsidiary of the
Company, issued ZAR 40,000,000 14% senior secured
bonds (the "SA Bonds") to investors in South
Africa. The proceeds of the SA Bonds was held
in escrow and released from escrow upon completion
of a loan agreement between Diamondcorp Holdings
Limited, a subsidiary company, and Laurelton
Diamonds Inc. The SA Bonds are due for repayment
14 December 2018 with interest payable quarterly
in arrears, the first payment being 14 March
2013. The first two years of interest will be
held in escrow to be paid on the quarterly interest
dates. Bondholders can request conversion of
the SA Bonds and outstanding interest at any
time after 24 January 2013. Any request for conversion
can be settled at the absolute discretion of
the Company with ordinary shares at ZAR 0.81
per share or the cash equivalent of the number
of underlying shares multiplied by the share
price at the time of conversion. The SA Bonds
are secured by the assets of Soapstone and have
a reversionary interest in the assets of Lace
Diamond Mines (Pty) Limited. The SA Bond is also
secured by way of a financial guarantee provided
by DiamondCorp plc.
Fair Value
Refer to note 31 for the valuation techniques
and assumptions applied for the purposes of measuring
fair value.
-----------------------------------------------------------
17. Other financial liabilities
-------- -------------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Financial gaurantee contract - - 455,000 455,000
Held at amortised cost
Loan from the Industrial Development Corporation of 5,322,277 -
- -
SA Limited
Loan from Laurelton Diamonds Inc. 3,917,170 - - -
Total financial liabilities 9,239,447 - 455,000 455,000
IDC Loan
On 20 September 2012, Lace Diamond Mines (Pty)
Ltd ("Lace"), a 74% owned subsidiary of the Company,
entered into an agreement with the Industrial
Development Corporation of South Africa Limited
("IDC") whereby IDC will provide a project loan
facility of ZAR 220,000,000. The term of the
loan is 7 years from the initial drawdown date
which was 14 August 2013 with an interest rate
of South Africa Prime Rate + 2%. Interest will
be capitalised for two years, subject to a maximum
of ZAR 20,141,000 and thereafter is payable semi-annually
in arrears. The loan is repayable in 10 bi-annual
payments of ZAR 24,014,000 commencing on the
date that is 2 years after the initial drawdown
date and every six months thereafter.
The IDC Loan is secured by a general charge over
the assets of Lace. In addition there is a cession
in favour of IDC of shares held by Lace's shareholders
and of loans to Lace by shareholders and associated
companies. The initial drawdown was conditional
on ZAR100,000,000 having been advanced to Lace
by shareholders and associated companies after
20 September 2012.
Loan from Laurelton Diamonds Inc
On 4 January 2013 DiamondCorp Holdings Limited,
a wholly-owned subsidiary of the Company, entered
into an agreement with Laurelton Diamonds Inc
("Laurelton") whereby Laurelton will provide
a Lace project loan facility of $6,000,000 in
total. The terms of the loan are 8 years, an
interest rate of 9% per annum. Interest from
the initial drawdown date will be capitalised
for 3 years and the interest accrued will be
added to the loan balance.
The loan is repayable in 30 quarterly payments
of $463,298 commencing on the date 3 years after
the initial drawdown date and every quarter thereafter.
This loan is further secured by a guarantee from
DiamondCorp plc and a third ranking bond over
the assets of Lace Diamond Mines (Pty) Ltd.
Financial Guarantee Contract
DiamondCorp plc has provided a financial guarantee
to the Bondholders of the SA Bond, guaranteeing
any amounts due under the SA Bond agreement by
its wholly-owned subsidiary, Soapstone Investment
Ltd. This financial guarantee meets the definition
of a financial guarantee contract under IAS 39,
Financial Instruments: Recognition and Measurement.
In accordance with IAS 39, the financial guarantee
contract must be recognised initially at fair
value. The fair value of the financial guarantee
contract has been determined to be GBP455,000
and this amount has been recorded as a financial
liability on the Company's balance sheet, with
a corresponding increase in the cost of its investment
balance.
Based on expectations at the end of the reporting
period, the Company considers that it is more
likely than not that no amount will be payable
under the arrangement. However, this estimate
is subject to change depending on the probability
of the counterparty claiming under the guarantee
which is a function of the likelihood that the
financial receivables held by the counterparty
which are guaranteed suffer credit losses.
-----------------------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Non-current liabilities
Fair value through profit or loss - - 455,000 455,000
At amortised cost 9,239,447 - - -
9,239,447 - 455,000 455,000
18. Provisions
Reconciliation of provisions - Group - 2013
Opening Additions Exchange Total
balance differences
GBP GBP GBP GBP
Rehabilitation provision 119,745 500,325 (91,242) 528,828
Reconciliation of provisions - Group - 2012
Opening Additions Exchange Total
balance differences
GBP GBP GBP GBP
Rehabilitation provision 11,105 105,804 2,836 119,745
A provision is recognised for the site restoration and
decommissioning of current mining activities based on
currentenvironmental and regulatory requirements.
19. Trade and other payables
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Trade payables 285,219 833,986 46,580 482,083
Accrued leave pay 56,388 - - -
341,607 833,986 46,580 482,083
The Directors consider that the carrying amount
of these liabilities approximate their fair value.
All payable balances are non-interest bearing.
---------------------------------------------------------
20. Operating loss
------------ -------------------------------------------
Operating loss for the year is stated after accounting
for the following:
---------------------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Other income
Sale of scrap metal (10,483) (15,834) - -
Office rent (3,500) - (3,500) -
(13,983) (15,834) (3,500) -
Auditors remuneration - 79,855 - 53,255
Write-off of tailings inventory - 275,561 - -
Share based payment expense 311,895 10,170 - -
Impairment on loans to group companies - - 10,154,586 -
Depreciation on property, plant and equipment (not 19,817
669,657 19,818 19,817
capitalised)
Attributable depreciation costs were capitalised to mine
development cost.
21. Employee cost
Employee costs of the Group and Company were:
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Employee costs 803,925 948,160 508,346 155,208
Social security costs 20,681 18,118 20,681 18,118
Pension costs 65,200 66,943 - -
Share-based payment 311,895 10,170 311,895 10,170
1,201,701 1,043,391 840,922 183,496
Attributable payroll costs were capitalised to mine development
cost.
Average monthly number of persons employed during the year
was:
Administration 17 8 3 3
Operational 115 62 - -
132 70 3 3
22. Finance costs
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Effective interest cost on Bonds - 31,261 201,462 8,410
Other interest paid 55,004 137,707 52,157 78,019
55,004 168,968 253,619 86,429
Borrowing costs capitalised to qualifying assets (mine
development) amounted to GBP1,063,296 (2012: nil) in the Group.
23. Taxation
Major components of the tax expense
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Current
Local income tax - current period - - - -
Deferred
Originating and reversing temporary differences - - - -
Reconciliation of the tax expense
Reconciliation between accounting loss and tax expense.
Accounting loss (2,609,904) (3,534,940) (11,419,639)
(1,039,777)
Tax at the applicable weighted UK tax rate of 23.25% (606,803)
(866,060) (2,655,066) (254,745)
(2012: 24.5%)
Tax effect of adjustments on taxable income
Expenses not deductable 150,412 55,710 43,822 6,098
Deferred tax asset not recognised - previous period (2,259,551)
(1,449,200) (248,647) -
Deferred tax asset not recognised - current year 2,773,590
2,259,550 - -
Effect of different tax rates (57,648) - - -
Tax losses carried forward - - 2,859,891 248,647
- - - -
The changes to the main rate of corporation tax
for UK companies announced in the March 2013
Budget were substantively enacted for financial
reporting purposes on 2 July 2013. The main changes
in corporation tax rates, that will have accounting
implications for deferred tax, are as follows:
-------------------------------------------------------
* The main rate of corporation tax will reduce
from 23% to 21% from 1 April 2014.
----- ------------------------------------------------
* The main rate of corporation tax will further
reduce to 20% from 1 April 2015.
----- ------------------------------------------------
Deferred tax assets and liabilities are measured
at the tax rates that are expected to apply to
the period when the asset is realised or the
liability is settled, based on tax rates (and
tax laws) that have been enacted or substantively
enacted by the balance sheet date.
DiamondCorp has measured its deferred tax assets
and liabilities as follows:
-------------------------------------------------------
* Those being realised or settled before 1
April 2014 based on the existing 23% rate;
----- ------------------------------------------------
* Those being realised or settled between
1 April 2014 and 1 April 2015 should be
based on the new 21% rate; and
----- ------------------------------------------------
* Those being realised or settled after 1
April 2015 should be based on the new 20%
rate.
----- ------------------------------------------------
24. Auditors' remuneration
----- ------------------------------------------------
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Fees payable to the Company's auditors for the - 53,255 -
53,255
audit of the Group accounts
Fees payable to the Company's auditors and their
associates for other services to the Group
The audit of the Company's subsidiaries - 26,000 - -
Total audit fees - 79,255 - 53,255
There were no non-audit services in 2013 (2012
- nil). No auditors' remuneration are reflected
for the current year as new auditors was appointed
subsequent to the year end. No audit services
were rendered prior to the year end.
------------------------------------------------------
25. Other comprehensive income
------- ---------------------------------------------
Components of other comprehensive income - Group
- 2013
------------------------------------------------------
Gross Tax Net before Non- Net
non- controlling
controlling interest
interest
GBP GBP GBP GBP GBP
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations
Exchange differences arising during the (2,290,568) -
(2,290,568) 615,357 (1,675,211)
year
Components of other comprehensive income - Group - 2012
Gross Tax Net before Non- Net
non- controlling
controlling interest
interest
GBP GBP GBP GBP GBP
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations
Exchange differences arising during the (1,046,358) -
(1,046,358) (102,274) (1,148,632)
year
26. Loss per share
Basic loss per share
Basic loss per share is determined by dividing loss attributable
to the owners of the parent by the weighted average number of
ordinary shares outstanding during the year.
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
From continuing operations (pence per share) 0.86 1.22 - -
Basic loss per share was based on loss of GBP 2,382,647 (2012:
loss of GBP 3,016,615) and a weighted average number of ordinary
shares of 276,354,546 (2012: 247,576,401).
Reconciliation of loss for the year to basic loss
Loss for the year attributable to owners of the parent
(2,382,647) (3,016,615) - -
and basic loss
Diluted loss per share
International Accounting Standard 33 requires presentation of
diluted loss per share when a company could be called upon to issue
shares that would decrease the net profit or increase the net loss
per share. The calculation of diluted loss per share does not
assume conversion, exercise, or other issue of potential ordinary
shares that would increase the net profit or decrease the net loss
per share. As the Group is currently in a loss-making position then
the inclusion of the potential ordinary shares associated with
share options or the convertible bonds in the diluted loss per
share calculation would serve to decrease the net loss per share.
On that basis, no adjustment has been made for diluted loss per
share.
Headline loss per share
The Group presents an alternative measure, as required by the
JSE listing requirements, of loss per share after excluding all
capital gains and losses from the loss attributable to ordinary
shareholders. Due to there being no adjustments headline loss per
share and basic loss per share is the same.
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Headline loss per share (pence) 0.86 1.22 - -
27. Cash used in operations
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Loss before taxation (2,609,904) (3,534,940) (11,419,639)
(1,039,777)
Adjustments for:
Depreciation (not capitalised) 19,817 669,656 19,817 19,817
Gain on foreign exchange (203,171) - - -
Interest received - investment (243,634) (25,586) (88) (315)
Finance costs 55,004 168,968 253,619 86,429
Fair value adjustments 619,042 44,821 188,481 26,226
Impairment loss - - 10,154,586 -
Movements in provisions 409,083 - - -
Share option expense 86,895 10,170 86,895 10,170
Warrants granted - 92,000 - 92,000
Write-off of tailings inventory - 275,561 - -
Changes in working capital:
Inventories (259,611) (140,443) - -
Trade and other receivables (694,371) (12,675) 9,167
(611,069)
Trade and other payables (492,379) 266,625 (435,503) 306,211
(3,313,229) (2,185,843) (1,142,665) (1,110,308)
28. Related parties
Relationships
Subsidiaries Refer to note 6
Directors Refer to directors' report
Company of which PR Loudon and J Willis-Richards are directors
Loeb Aron & Company Limited
Company of which M Toxvaerd is a director European Islamic
Investment Bank plc
28. Related parties (continued)
Related party balances
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Loan accounts - Owing (to) by related parties
DiamondCorp Holdings Limited (before impairment provision)
Amounts included in Receivables (Payables) regarding related
parties
EA Worthington
Bonds held by related parties
Loeb Aron & Company Limited EA Worthington
PR Loudon
Financial Guarantees to bondholders of
Soapstone Investment Ltd
Related party transactions
Interest paid to (received from) related parties
EA Worthington
Administration and management fees
Lace Diamond Mines (Pty) Ltd
Directors Remuneration paid to related parties
Glendree Capital Management Limited Loeb Aron & Company
Limited
European Islamic Investment Bank plc
29. Directors' emoluments
2013
E A Worthington (Chairman) * R N Allen **
P R Loudon *
J Willis-Richards ** M Toxvaerd **
H Scholes (Appointed 1 August 2013) **
G K Morton (Retired 1 August 2013) **
- - 23,869,096 23,436,964
- 68,485 - 68,485
50,000 50,000 50,000 50,000
100,000 100,000 100,000 100,000
100,000 100,000 100,000 100,000
- - 455,000 455,000
- 68,485 - 68,485
- - 235,600 -
116,572 91,458 116,572 91,458
11,250 20,000 11,250 20,000
15,000 20,000 15,000 20,000
Emoluments Other benefits Fees paid to Total
third party
GBP GBP GBP GBP
90,000 - - 90,000
15,000 - - 15,000
163,428 412 116,572 280,412
3,750 - 11,250 15,000
7,500 - - 7,500
- - 15,000 15,000
6,666 - - 6,666
286,344 412 142,822 429,578
29. Directors' emoluments (continued)
2012
Emoluments Other benefits Fees paid to Total
third party
GBP GBP GBP GBP
E A Worthington (Chairman) * 70,000 - - 70,000
R N Allen ** 12,000 - - 12,000
P R Loudon * 64,583 7,500 91,458 163,541
J Willis-Richards ** - - 12,000 12,000
M Toxvaerd ** 12,000 - - 12,000
H Scholes (Appointed 1 August 2013) ** - - 8,000 8,000
158,583 7,500 111,458 277,541
Indicator Type of Director
Executive
** Non-executive
30. Compensation to key personnel
Group Company
2013 2012 2013 2012
GBP GBP GBP GBP
Short term employee benefits 216,390 183,310 - -
Long term employee benefits 12,600 - - -
Share based payments 25,000 - - -
253,990 183,310 - -
The key personnel included in these amounts are
Mr. S West, Chief Operating Officer, Mrs. S De
Wet, Chief Financial Officer and Mr. A Labuschagne,
Lace Mine Manager.
----------------------------------------------------------
31. Risk management
------------ --------------------------------------------
Capital risk management
The group's objectives when managing capital
are to safeguard the group's ability to continue
as a going concern in order to provide returns
for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure
to reduce the cost of capital.
The capital structure of the group consists of
debt, which includes the borrowings (excluding
derivative financial liabilities) disclosed in
notes 7, 16 & 17, cash and cash equivalents disclosed
in note 12, and equity attributable to owners
of the parent, comprising issued capital, reserves
and retained earnings. The Group is not subject
to any externally imposed capital requirements.
The Group reviews the capital structure on a
regular basis. As part of this review the Directors
consider the cost of capital and the risks associated
with each class of capital. In order to maintain
or adjust the capital structure, the group may
adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares
or sell assets to reduce debt.
Significant accounting policies
Details of the significant accounting policies
and methods adopted, including the criteria for
recognition, the basis of measurement and the
basis on which income and expenses are recognised,
in respect of each class of financial asset,
financial liability and equity instrument are
disclosed in note 1 to the financial statements.
Categories of financial instruments
The Directors consider that the carrying amounts
of financial assets and financial liabilities
recorded at amortised cost in the financial statements
approximate their fair values.
There have been no changes to what the entity
manages as capital, the strategy for capital
maintenance or externally imposed capital requirements
from the previous year.
----------------------------------------------------------
Group Group Company Company
Carrying Carrying Carrying Carrying
amount amount amount amount
2013 2012 2013 2012
GBP GBP GBP GBP
FINANCIAL ASSETS - - - -
Loans and receivables (Including cash and cash 3,217,860
4,506,395 - -
equivalents)
FINANCIAL LIABILITIES - - - -
Amortised cost 12,114,035 3,476,725 981,022 780,261
Financial guarantee contracts - - 455,000 455,000
Derivative instruments designated as fair value through
2,107,849 1,525,391 730,079 541,598
profit and loss (FVTPL)
The Directors consider that the carrying amounts
of financial assets and financial liabilities
recorded at amortised cost in the financial statements
approximate their fair values.
Valuation techniques and assumptions applied
for the purposes of measuring fair value
The fair values of derivative instruments are
calculated using quoted prices. Where such prices
are not available, a discounted cash flow analysis
is performed using the applicable yield curve
for the duration of the instruments for non-optional
derivatives, and option pricing models for optional
derivatives. The fair value of the embedded derivative
component of the convertible bonds was determined
using the Black Scholes (using the Barone-Adesi
and Whaley approximation technique) option pricing
model. The table below outlines the fair value
inputs used in the embedded derivative valuation.
---------------------------------------------------------------------------------------------
Black-Scholes Assumptions 31 December 31 December
2013 2013
------------------------------------ --------------------- --------------------------------
Term range 5 years 6 years
------------------------------------ --------------------- --------------------------------
Expected dividend yield Nil Nil
------------------------------------ --------------------- --------------------------------
Risk free interest rate 1.4% 1.4%
------------------------------------ --------------------- --------------------------------
Share price volatility 84% 96%
------------------------------------ --------------------- --------------------------------
Share price at time of 4.9 pence 3.9 pence
valuation
------------------------------------ --------------------- --------------------------------
The embedded derivative component of the convertible
bonds is deemed to represent a Level 2 fair value
instrument in the fair value hierarchy.
---------------------------------------------------------------------------------------------
* Level 1 fair value measurements are those
derived from quoted prices (unadjusted)
in active markets for identical assets or
liabilities;
---------------------------------- ---------------------------------------------------------
* Level 2 fair value measurements are those
derived from inputs other than quoted prices
included within Level 1 that are observable
for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived
from prices); and
---------------------------------- ---------------------------------------------------------
* Level 3 fair value measurements are those
derived from valuation techniques that include
inputs for the asset or liability that are
not based on observable market data (unobservable
inputs).
---------------------------------- ---------------------------------------------------------
Financial risk management objectives
The Group's financial function provides services
to the business, monitors and manages the financial
risks relating to the operations of the Group.
These risks include market risk (including currency
risk, fair value interest rate risk, cash flow
interest rate risk and price risk), credit risk
and liquidity risk.
The Group does not enter into or trade financial
instruments, including derivative financial instruments,
for any purpose.
Market risk
The Group's activities expose it primarily to
the financial risks of changes in foreign currency
exchange rates. There has been no change to the
Group's exposure to market risks or the manner
in which it is measured and managed.
Credit risk management
The Group and Company's principal financial assets
are bank balances and cash. The credit risk on
liquid funds is limited because the counterparties
are banks with high credit-ratings assigned by
international credit-rating agencies. Management
reviews the credit worthiness of all customers
before entering into a transaction.
The Company transacts with the following financial
institutions:
---------------------------------------------------------------------------------------------
Financial Institution External credit rating
----------------------------------- --------------------------------------------------------
Barclays A-
----------------------------------- --------------------------------------------------------
ABSA A-
----------------------------------- --------------------------------------------------------
Standard Bank BBB
----------------------------------- --------------------------------------------------------
First National Bank BBB
----------------------------------- --------------------------------------------------------
Rand Merchant Bank BBB
----------------------------------- --------------------------------------------------------
The Company also holds amounts receivable from
related parties as disclosed in note 28. Management
reviews the credit worthiness of all balances
due from related parties with reference to future
profitability.
Credit risk consists mainly of cash deposits,
cash equivalents, derivative financial instruments
and trade receivables. The company only deposits
cash with major banks with high quality credit
standing and limits exposure to any one counter-party.
Management evaluated credit risk relating to
customers on an ongoing basis. If customers are
independently rated, these ratings are used.
Otherwise, if there is no independent rating,
risk control assesses the credit quality of the
customer, taking into account its financial position,
past experience and other factors. Individual
risk limits are set based on internal or external
ratings in accordance with limits set by the
board. The utilisation of credit limits is regularly
monitored.
Foreign currency risk management
The Group undertakes certain transactions denominated
in foreign currencies. Hence, exposures to exchange
rate fluctuations arise.
The carrying amounts of the Group's and Company's
foreign currency denominated monetary assets
and monetary liabilities at the reporting date
are as follows:
---------------------------------------------------------------------------------------------
Assets/(Liabilities) Assets/(Liabilities)
------------------------------------ --------------------- --------------------------------
2013 2012
------------------------------------ --------------------- --------------------------------
Cash denominated in South
African Rand 2,145,355 2,958,573
------------------------------------ --------------------- --------------------------------
Loan denominated in South (5,322,277) -
African Rand
------------------------------------ --------------------- --------------------------------
Cash denominated in United 135,141 -
States Dollar
------------------------------------ --------------------- --------------------------------
Loan denominated in United (3,917,170) -
States Dollar
------------------------------------ --------------------- --------------------------------
Foreign currency sensitivity analysis
The Group is exposed to the currency of South
Africa (ZAR) and the United States Dollar.
The following table details the Group's sensitivity
to a 20% increase and decrease in the Great Brittish
Pound against South African Rand and United States
Dollar. 20% is the sensitivity rate used when
reporting foreign currency risk internally to
key management personnel and represents management's
assessment of the reasonably possible change
in foreign exchange rates. The sensitivity analysis
includes only outstanding foreign currency denominated
monetary items and adjusts their translation
at the period end for a 20% change in foreign
currency rates. A negative number below indicates
a decrease in profit where the Great British
Pound strengthens 20% against the relevant currency.
For a 20% weakening of the Great British Pound
against the relevant currency, there would be
an equal and opposite impact on the profit and
the balances below would be positive.
---------------------------------------------------------------------------------------------
ZAR Currency Impact 2013 2012
------------------------------------ --------------------- --------------------------------
GBP GBP
------------------------------------ --------------------- --------------------------------
Profit due to a 20% depreciation
of the ZAR 635,384 (390)
------------------------------------ --------------------- --------------------------------
Loss due to a 20% appreciation
of the ZAR (635,384) 586
------------------------------------ --------------------- --------------------------------
ZAR Currency Impact 2013 2012
------------------------------------ --------------------- --------------------------------
GBP GBP
------------------------------------ --------------------- --------------------------------
Profit due to a 20% depreciation 756,406 -
of the USD
------------------------------------ --------------------- --------------------------------
Loss due to a 20% appreciation (756,406) -
of the USD
------------------------------------ --------------------- --------------------------------
The Group's sensitivity to foreign currency has
increased during the current period, because
the Company held higher balances of foreign currency.
However, the Group's South African Rand deposits
are held at a subsidiary level in South Africa
and as such this sensitivity analysis does not
represent a real cash foreign exchange risk to
the Group.
In management's opinion, the impact of the sensitivity
analysis is representative of the inherent foreign
exchange risk.
Liquidity and interest risk tables
The following table details the Group's remaining
contractual maturity for its non-derivative financial
liabilities. The tables have been drawn up on
the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group
can be required to pay. The table includes the
principal cash flows all of which are due within
less than one year.
In respect of the financial liability and the
financial guarantee contract liability (Company
only), the terms on which those instruments might
be required to be settled are outlined in note
17. The amounts outlined below in respect of
these financial guarantee contract which are
currently repayable on demand and disclosed as
current liabilities in the balance sheet of the
Group and the Company.
---------------------------------------------------------------------------------------------
31. Risk management (continued)
LIABILITIES
GROUP Weighted Less than 1 More than 1 Weighted Less than 1 More
than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
GBP GBP GBP GBP
Non-interest bearing -% 2,449,456 - -% 2,359,377 -
Fixed interest rate instruments 13.0 % 2,532,981 9,239,447 25.0
% 2,642,739 -
COMPANY Weighted Less than 1 More than 1 Weighted Less than 1
More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
GBP GBP GBP GBP
Non-interest bearing -% 776,659 - -% 1,023,681 -
Fixed interest rate instruments 23.0 % 981,022 - 23.0 % 780,261
-
Financial guarantee contract -% - 455,000 -% - 455,000
The following table details the Group's and Company's expected
maturity for its non-derivative financial assets. The tables below
have been drawn up based on the undiscounted contractual maturities
of the financial assets including interest that will be earned on
those assets.
ASSETS
GROUP Weighted Less than 1 More than 1 Weighted Less than 1 More
than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
GBP GBP GBP GBP
Non-interest bearing -% 880,990 43,632 -% 186,619 -
Interest bearing 2.0 % 2,220,130 73,108 1.0 % 4,227,404
92,372
COMPANY Weighted Less than 1 More than 1 Weighted Less than 1
More than 1
average year year average year year
effective effective
interest rate interest rate
2013 2013 2013 2012 2012 2012
GBP GBP GBP GBP
Non-interest bearing -% - 13,714,510 -% 23,446,131 -
Interest bearing 1.0 % 5,979 - -% 1,363,545 -
Interest rate and liquidity risk management
INTEREST RATE RISK MANAGEMENT
The Group is exposed to interest rate risk because
entities in the Group borrow funds at both fixed
and floating interest rates. The risk is managed
by the Group by maintaining an approximate mix
between fixed and floating rate borrowings.
The Group's exposure to interest rates on financial
assets and financial liabilities are detailed
in the liquidity risk management section of this
note.
LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management
rests with the Board of Directors, which has
built an appropriate liquidity risk management
framework for the management of the Group's short
term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining
adequate reserves, by continuously monitoring
forecast and actual cash flows and matching the
maturity profiles of financial assets and liabilities.
-------------------------------------------------------------
32. Going concern
------- ----------------------------------------------------
In determining the appropriate basis of presentation
of the financial statements, the Directors are
required to consider whether the Group can continue
in operational existence for the foreseeable
future, this being a period of not less than
12 months from the date of the approval of the
financial statements. The Group's business activities
and goals are set out in the Letter from the
Chairman and Chief Executive.
As at 31 December 2013 the Group had a cash balance
of GBP2.3 million, which combined with the undrawn
IDC loan facility of GBP7.4 million, provides
full funding for development of the Lace mine.
The funding from the convertible bonds and loans
are restricted solely for that use.
While all of the necessary finance for the development
of the Lace mine has been secured, the restricted
nature of those funds means the Company needed
to raise additional cash to cover its corporate
expenses.
After year-end the Group raised an additional
GBP2.1 million equity financing, which is solely
for the use of corporate overheads. Management
has reviewed cash flows for the next three years
and is of the opinion that no further equity
financing will be necessary to take the Lace
mine into production. Management therefore adopts
the going concern basis of preparation in the
financial statements.
The loans to the subsidiaries of DiamondCorp
plc have been subordinated. The directors have
every reason to believe that the company has
adequate resources in place to continue operations
for the foreseeable future.
-------------------------------------------------------------
33. Events after the reporting period
------- ----------------------------------------------------
After year-end the Group raised an additional
GBP2.1 million equity financing, which is solely
for the use of corporate overheads. Management
has reviewed cash flows for the next three years
and is of the opinion that no further equity
financing will be necessary to take the Lace
mine into production. Management therefore adopts
the going concern basis of preparation in the
financial statements. After yearend underground
core drilling designed to better define the rim
of the Main Pipe for finalised cave layout and
definition of the "Bulge" areas intersected significantly
more high-grade kimberlite on the eastern site
of the pipe above the 345m level than was projected
in the original Lace geological model. This block
is predominantly higher grade kimberlite (K4
hypabyssal, otherwise called coherent or CK kimberlite)
and has thus far been defined over an area of
approximately 75m x 75m on the 250m level, and
is being actively delineated above and below
to add to the resource base.
No kimberlite of any type above the 345m level
is included in the current mine plan, as definition
drilling from surface was not possible due to
the presence of old workings. This Upper K4 resource
drilling is now being completed from underground
with the Company's own rig and drilling crews,
under the direction of the Company's independent
consultants.
The Upper K4 Block now being defined has the
potential to add at least 1.0 million tonnes
of additional kimberlite to the Lace mine plan
which could be mined while the 47 Level Block
Cave development progresses.
-------------------------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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