TIDMGRIT
RNS Number : 2711S
Global Resources Investment Tst PLC
29 September 2017
To: RNS
From: Global Resources Investment Trust plc
LEI: 2138005OJKGWG3X4SY51
Date: 29 September 2017
Chairman's Statement
Introduction
Since I last wrote to you, your Company has made extremely
encouraging progress in restoring shareholder value.
Investment and Share Price Performance
On 30 June 2017 your Company's net asset value was 20.3 pence, a
decrease of 10.3% from the 22.4 pence at which it stood on 31
December 2016. In stark contrast, the Company's ordinary share
price rose by 53.1% from 8.0p to 12.25p over the same period, as
the discount at which its ordinary shares trade to net asset value
narrowed from 64.3% to 39.5%. This re-rating of the Company's
shares is a welcome development, and one which we look to see
continue.
The net asset value has risen since the period end, currently
standing at 21.0 pence.
A more comprehensive overview of the investment portfolio is
contained in the Investment Manager's Review.
9% Cumulative Unsecured Loan Stock 2017 ('CULS')
The Company issued GBP5 million nominal of CULS in 2014 to
provide working capital, of which GBP2.7 million remained in issue
at 31 December 2016. This outstanding balance was repaid during the
first quarter, leaving the Company ungeared and removing a
significant constraint on performance.
Change to Investment Strategy and Outlook
The change in the Company's investment policy reflected our
desire to reduce the portfolio's exposure to exploration and early
stage development companies, and to focus more on companies with
potentially large scale assets that are likely to be brought into
production in the foreseeable future. It is here that we see the
best opportunities to create value for shareholders.
The principal factor underpinning the increase in the Company's
net asset value since the period end has been the more than
trebling in value of our investment in the Bougainville based Kalia
Holdings, which is elaborated upon in more detail in the Investment
Manager's Review. This investment is directly in line with our new,
focussed investment strategy.
The marked recovery in both sentiment and in commodity prices
continues, with confidence bolstered by stability and growth in a
China that remains determinedly committed to its $5 trillion Belt
and Road initiative. This will help to sustain demand over the next
decade.
Board Changes
After I took on the role of non-executive Chairman in March
2014, we experienced a longer than expected bear market in
commodity prices which necessitated substantial change and
restructuring, both to ensure that the CULS holders were repaid and
to restore value to shareholders. This has been accomplished.
It has always been my desire to serve one term of office, and to
this end I shall be retiring and handing on the baton to the able
stewardship of Simon Farrell at the end of November. The
concomitant process of Board refreshment will be carried out with a
careful eye to Board balance.
Lord St John
Chairman
29 September 2017
Investment Manager's Review
In general it has been a better six months for the natural
resource sector, and although the net asset value shows a small
decline, there has been a significant improvement in the share
price.
Since the year end, the IAMGOLD bid for Merrex Gold completed
and subsequently the majority of our new holding in IAMGOLD was
sold to allow the full repayment of the outstanding convertible
loan notes.
As indicated in the Annual Report, and following the changes to
the investment policy approved at the Annual Meeting in January
this year, the investment portfolio is now a much more focused
portfolio, as we have made a conscious decision to sell the
investments where we are minority shareholders, to focus on the
investments where we have a meaningful exposure and where the
potential for delivering higher returns is better. The three
largest investments are now; Siberian Goldfields Ltd, Anglo African
Minerals plc and Kalia Holdings Pty Ltd.
The investment in Siberian Goldfields Ltd was originally made
via a convertible loan note instrument in a private offshore
company which was a joint venture with its Russian partner in the
Zhefezny Kryazh gold project in Russia. In anticipation of listing
the company on a recognised stock exchange, Siberian Goldfields
agreed a corporate restructuring with its Russian partner, so that
a new holding company (also called Siberian Goldfields) was created
to own 100% of the operational asset and consequently we agreed to
convert our loan notes and accrued interest into ordinary shares in
the new company. The new Siberian Goldfields is currently looking
to raise additional money via a pre-IPO fund raising, in
anticipation of a listing in late 2017, early 2018. Significant
pre-production work has been done on site, but additional funding
is required to complete early stage construction items and
technical documentation for the IPO.
Anglo African Minerals continues in its progression from
explorer to producer as it looks to finalise a joint venture on its
FAR Project with a major Chinese State Owned enterprise. This will
provide full project funding, mining services and an "off take"
agreement with production anticipated by Q2 2018. The company is
also working to increase the reserves of its other two major
projects, Somalu and Toubal which have potential resources of over
2 billion tonnes.
Kalia Holdings Pty Ltd, is a new portfolio investment and is a
private Australian company that is the parent company of a Papua
New Guinean registered subsidiary Kalia Investments Limited. Kalia
Investments Limited holds contractual rights to explore for
minerals and develop mines in the Tinputz district of North
Bougainville, Papua New Guinea which is prospective for gold copper
and other minerals. The area over which Kalia holds contractual
rights is known as the Tore Project.
Bougainville is one of the last undeveloped mineralised
provinces of the world. The island straddles the Pacific "Ring of
Fire" tectonic plate boundary, an ideal setting for the porphyry
copper-gold and associated epithermal gold mineralisation. Rio
Tinto developed the Panguna Mine (the world's largest copper mine)
in the 1960s until it shut down in 1989. During its 17 years of
operation the Panguna Mine produced 3m tonnes of copper and 9m
ounces of gold.
Since we invested in Kalia there have been several significant
developments. The moratorium on exploration and mining, in place
since 1971, was lifted and the President of the Autonomous
Bougainville Government announced that applications for exploration
licences would be accepted. Kalia lodge applications for the Tore
Project area on 19 June 2017 and in September 2017, Kalia completed
mining warden hearings in the Tore Project area.
As was announced to the Stock Exchange on 22 September 2017, GB
Energy Limited (ASX: GBX) an Australian listed company exercised an
option to acquire the outstanding share capital of Kalia Holdings
Pty Ltd, for the issue of new GB Energy Limited shares. We have
subsequently advised GB Energy that we will not be accepting this
offer but will instead be entering into a Shareholder's Agreement
with the company. However going forward we will be valuing our
investment in Kalia on a "see through" value of the offer of the GB
Energy shares, which has resulted in significate uplift in value
for the investment. While still an exploration project, it remains
a very exciting investment.
Given the concentration of the portfolio in the three holdings
as outlined above (they represent 79% of shareholders' funds) the
fund's future performance is now directly linked to their future
performance and consequently we will be monitoring and working
closely with each of the companies in order to maximise our
returns.
David Hutchins
Director
29 September 2017
Enquiries:
David Hutchins
Director
Tel: +44 (0) 207 290 8541
Maitland Administration Services (Scotland) Limited
Martin Cassels
Tel: +44 (0) 131 550 3760
Income Statement
Six months ended 30 June
2017
Revenue Capital Total
Unaudited Unaudited Unaudited
------------------------------ ------ ---------- ---------- ----------
Notes GBP'000 GBP'000 GBP'000
------------------------------ ------ ---------- ---------- ----------
Losses on investments - (77) (77)
Exchange gains - 15 15
Foreign exchange forward
contract loss - (121) (121)
Income 58 - 58
Investment management
fee (25) (229) (254)
Other expenses (273) - (273)
------------------------------ ------ ---------- ---------- ----------
Net return before finance
costs and taxation (240) (412) (652)
Interest payable and similar
charges (24) - (24)
------------------------------ ------ ---------- ---------- ----------
Net return on ordinary
activities before taxation (264) (412) (676)
Tax on ordinary activities - - -
------------------------------ ------ ---------- ---------- ----------
Net return attributable
to equity shareholders (264) (412) (676)
------------------------------ ------ ---------- ---------- ----------
Loss per ordinary share 2 (0.63)p (0.99)p (1.62)p
------------------------------ ------ ---------- ---------- ----------
Six months ended 30 June
2016
Revenue Capital Total
Unaudited Unaudited Unaudited
------------------------------ ------ ---------- ---------- ----------
Notes GBP'000 GBP'000 GBP'000
------------------------------ ------ ---------- ---------- ----------
Gains on investments - 3,144 3,144
Exchange gains - 77 77
Foreign exchange forward - - -
contract loss
Income 228 - 228
Investment management
fee (80) - (80)
Other expenses (244) - (244)
------------------------------ ------ ---------- ---------- ----------
Net return before finance
costs and taxation (96) 3,221 3,125
Interest payable and similar
charges (209) - (209)
------------------------------ ------ ---------- ---------- ----------
Net return on ordinary
activities before taxation (305) 3,221 2,916
Tax on ordinary activities - - -
------------------------------ ------ ---------- ---------- ----------
Net return attributable
to equity shareholders (305) 3,221 2,916
------------------------------ ------ ---------- ---------- ----------
(Loss)/gain per ordinary
share 2 (0.76)p 8.06p 7.30p
------------------------------ ------ ---------- ---------- ----------
Year ended 31 December
2016
Revenue Capital Total
Audited Audited Audited
------------------------------ ------ -------- -------- --------
Notes GBP'000 GBP'000 GBP'000
------------------------------ ------ -------- -------- --------
Gains on investments - 1,664 1,664
Exchange gains - 114 114
Foreign exchange forward
contract loss - (38) (38)
Income 258 - 258
Investment management
fee (155) - (155)
Other expenses (638) - (638)
------------------------------ ------ -------- -------- --------
Net return before finance
costs and taxation (535) 1,740 1,205
Interest payable and similar
charges (374) - (374)
------------------------------ ------ -------- -------- --------
Net return on ordinary
activities before taxation (909) 1,740 831
Tax on ordinary activities - - -
------------------------------ ------ -------- -------- --------
Net return attributable
to equity shareholders (909) 1,740 831
------------------------------ ------ -------- -------- --------
(Loss)/gain per ordinary
share 2 (2.28)p 4.35p 2.08p
------------------------------ ------ -------- -------- --------
The 'total' column of this statement represents the Company's
profit and loss account, prepared in accordance with IFRS. All
revenue and capital items in this statement derive from continuing
operations. All of the loss for the period is attributable to the
owners of the Company.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required
as all gains and losses of the Company have been reflected in the
above Income Statement.
Balance Sheet
As at As at
30 June 31 December
2017 2016
Unaudited Audited
----------------------------- ------ ---------- -------------
Notes GBP'000 GBP'000
----------------------------- ------ ---------- -------------
Fixed assets
Investments 7,431 10,235
Current assets
Debtors 954 663
Cash at bank and on deposit 157 3,142
----------------------------- ------ ---------- -------------
1,111 3,805
Creditors: amounts falling
due within one year
Other creditors (43) (2,484)
9% Convertible Unsecured
Loan Stock 2017 - (2,700)
----------------------------- ------ ---------- -------------
Net current liabilities (43) (5,184)
Net assets 8,499 8,946
----------------------------- ------ ---------- -------------
Capital and Reserves
Called up share capital 420 400
Share premium 36,880 36,800
Capital reserve (25,594) (25,311)
Revenue reserve (3,207) (2,943)
----------------------------- ------ ---------- -------------
Equity shareholders' funds 8,499 8,946
----------------------------- ------ ---------- -------------
Net asset value per share 3 20.25p 22.38p
----------------------------- ------ ---------- -------------
Statement of Changes in Equity
For the 6 months to 30 June 2017 (unaudited)
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- --------- --------
Balance at 31 December
2016 400 36,800 (25,311) (2,943) 8,946
Return on ordinary
activities after taxation - - (412) (264) (676)
Investment management
fee - charged to capital - - 229 - 229
Issue of shares 20 80 (100) - -
---------------------------- --------- --------- --------- --------- --------
Balance at 30 June
2017 420 36,880 (25,594) (3,207) 8,499
---------------------------- --------- --------- --------- --------- --------
For the 6 months to 30 June 2016 (unaudited)
Share
Share premium Capital Revenue
capital account reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- --------- --------
Balance at 31 December
2015 400 36,800 (27,051) (2,034) 8,115
Return on ordinary
activities after taxation - - 3,221 (305) 2,916
Balance at 30 June
2016 400 36,800 (23,830) (2,339) 11,031
---------------------------- --------- --------- --------- --------- --------
The revenue reserve represents the amount of the Company's
reserves distributable by way of dividend.
Cash Flow Statement
Six months Six months
ended ended
30 June 30 June
2017 2016
Unaudited Unaudited
--------------------------------- ----------- -----------
GBP'000 GBP'000
--------------------------------- ----------- -----------
Operating activities
(Losses)/gains before finance
costs and taxation (652) 3,125
Gains/(losses) on investments 77 (3,144)
Increase in other receivables (61) (211)
Decrease in forward exchange (2,412) -
creditor
Decrease in other payables (28) (61)
Value of share issued in 229 -
lieu of management fee
Net cash outflow from operating
activities before interest
and taxation (2,847) (291)
Interest paid (24) (209)
Net cash outflow from
operating activities (2,871) (500)
---------------------------------- ----------- -----------
Investing activities
Purchases of investments (1,306)
Sales of investments 4,123 2,508
Advanced Loan to AAM (231) (744)
Interest received - 1
Net cash inflow from
investing activities 2,586 1,765
---------------------------------- ----------- -----------
Financing
Redemption of CULS (2,700) -
Net cash outflow from (2,700) -
financing
--------------------------------- ----------- -----------
(Decrease)/Increase in cash
and cash equivalents (2,985) 1,265
---------------------------------- ----------- -----------
Net cash at the start
of the period 3,142 331
---------------------------------- ----------- -----------
Net cash at the end of
the period 157 1,596
---------------------------------- ----------- -----------
The accompanying notes are an integral part of the financial
statements.
Notes
1. Accounting Policies
Going Concern basis of accounting
The Company's operations have been cash flow negative since its
inception; the Company relies on the sale of investments to
generate the cash needed to continue to operate. GBP4.1m was
realised from the sale of investments during the 6 month period
under review.
2. Return per Ordinary Share
The revenue loss per ordinary share for the six months ended 30
June 2017 is based on a net loss after taxation of GBP264,000 and
on a weighted average of 41,786,233 ordinary shares in issue during
the period.
The capital return per ordinary share for the six months ended
30 June 2017 is based on a net capital loss after taxation of
GBP412,000 and on a weighted average of 41,786,233 ordinary shares
in issue during the period.
3. Net Asset Value per Ordinary Share
The net asset value per ordinary share is based on net assets of
GBP8,499,000 (31 December 2016: GBP8,900,000) and on 41,964,512 (31
December 2016: 39,970,012) ordinary shares, being the number of
ordinary shares in issue at the period end.
4 . 9% Convertible Unsecured Loan Stock 2017
Nominal value
of CULS
GBP'000
-------------------------------- --------------
Opening balance at 31 December
2016 2,700
Repayment of CULS (2,700)
Balance at 30 June 2017 -
-------------------------------- --------------
5. Warrant Instrument
The Company issued 5,000,000 warrants in 2014. The warrants are
unlisted and are exercisable up to the fifth anniversary of
admission in amounts or multiples of 50,000 warrants at GBP1.00 per
ordinary share.
6. Related Party Transactions
The Board of Directors is considered to be a related party. All
of the Directors are considered to be independent, with the
exception of Mr Hutchins who was appointed at the conclusion of the
General Meeting noted in 7 below. No Director has an interest in
any transactions which are, or were, unusual in their nature or
significant to the nature of the Company except as noted in 7
below.
The Directors of the Company received fees for their services.
Total fees for the six months to 30 June 2017 were GBP42,000 (six
months ended 30 June 2016: GBP38,000) of which GBP3,750 (30 June
2016: GBP12,000) remained payable at the period end.
RDP Fund Management LLP ('RDP') received GBP25,000 in relation
to the six months ended 30 June 2017, (six months ended 30 June
2016: GBP80,000) of which GBPnil (30 June 2016: GBP13,000) remained
payable at the period end.
The issue of up to four tranches of shares to RDP were approved
at the General Meeting, each of 2,000,000 shares at a price of
GBP0.05, subject to the satisfying of certain conditions, in
particular share price triggers. The first tranche of shares was
issued following the General Meeting and RDP received 1,994,500
shares; 5,500 further shares remain to be issued. The second
tranche of shares falls to be issued if the Company's share price
remains for a period of at least one month at or above 14p; the
third and fourth tranches similarly fall to be issued at trigger
prices of 16p and 18p respectively.
7. Change of Management Arrangements
On 17 January 2017 at the Company's General Meeting, the
Shareholders voted in favour of Resolutions 1-3. Resolution 1
authorised the Directors of the Company to allot shares up to a
maximum of GBP80,000, resolution 2 resulted in the termination of
the Management Agreement and resolution 3 approved a New Investing
Policy as detailed below. As a result of the approval of these
resolutions, the Company became a self-managed trust run by its
Board and David ('Sam') Hutchins was appointed as an Executive
Director of the Company.
The New Investment Policy is as follows:
"GRIT will seek to achieve its investment objective through
investment in companies globally which have a significant focus on
natural resources and mining. GRIT will invest in companies that
are in the field of the exploration and production of oil, gas,
precious and industrial metals, and industrial and commercial
minerals which, in the opinion of GRIT's investment manager, have
the potential to increase their value considerably. These companies
may be producing companies with a historical track record of
production or they may be development companies or companies with
exploration potential. GRIT will seek to ensure,through active
shareholder involvement, that investee companies act to maximise
long-term shareholdervalue. GRIT will invest primarily in companies
with shares and securities which are listed, quoted or areadmitted
to dealing, on a relevant exchange (including debt securities which
are convertible into quotedequity securities). For the purpose of
this investment policy, a "relevant exchange" is (i) a regulated
market,recognised investment exchange, recognised stock exchange,
recognised overseas investment exchange or
designated investment exchange, or (ii) a junior market operated
by the operator of an exchange referred to in (i). However GRIT may
hold some investments in non-quoted, seed capital or pre-IPO
companies."
8. Post Balance Sheet Events
On 22 September the Company announced to the Stock Exchange that
GB Energy Limited had exercised an option to acquire the
outstanding share capital of Kalia Holdings Pty Ltd for the issue
of new GB Energy Limited shares. The Company has not accepted this
offer, but instead intends to enter into a Shareholder's Agreement
with the company. Going forward the Company is valuing its
investment in Kalia on a "see through" value of the offer of the GB
Energy shares. This resulted in a significant uplift in value for
the investment.
9. Financial Information
The financial information set out above does not constitute the
Company's statutory accounts for the six months ended 30 June 2017.
The statutory accounts for the twelve months ended 31 December 2016
are audited and the Auditors have issued an unqualified
opinion.
Directors' Statement of Principle Risks and Uncertainties
The risks, and the way in which they are managed, are described
in more detail in the Strategic report contained within the Annual
Report and Financial Statements for the year ended 31 December
2016. In the opinion of the Directors, the Company's principal
risks and uncertainties have not changed materially since the date
of the report and are not expected to change materially for the
rest of the Company's financial reporting period to 31 December
2017.
Statement of Directors' Responsibilities in Respect of the
Interim Report
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' and gives a
true and fair view of the assets, liabilities, financial position
and profit of the Company;
-- the Chairman's Statement and Investment Manager's Review
(together constituting the Interim Management Report) include a
fair review of the information required by the Disclosure Guidance
and Transparency Rules ('DTR') 4.2.7R, being an indication of
important events that have occurred during the first six months of
the year and their impact on the financial statements;
-- the Statement of Principle Risks and Uncertainties referred
to above is a fair review of the information required by DTR
4.2.7R; and
-- the condensed set of financial statements included a fair
review of the information required by DTR 4.2.8R, being related
party transactions that have taken place in the first six months of
the year and that have materially affected the financial position
or performance of the Company during the period.
On behalf of the Board
Lord St. John
Chairman
29 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BBGDCCXDBGRC
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