TIDMKDNC
RNS Number : 6118G
Cadence Minerals PLC
31 May 2017
Cadence Minerals Plc
("Cadence Minerals" or "Cadence")
Results for the year ended 31 December 2016
The Company is pleased to announce its final results for the
year ended 31 December 2016. A copy of these results will be made
available on the Company's website from today.
For further information please
contact
Cadence Minerals plc +44 (0) 207 440 0647
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD
& Broker) +44 (0) 207 220 1666
James Joyce
James Bavister
Square1 Consulting +44 (0) 207 929 5599
David Bick
Brian Alexander
chairman's statement
STRONG ASSET GROWTH AND RETURN ON EQUITY
The lithium compound market continued to perform extremely well
in 2016 and with medium-term supply requirements remaining
unfulfilled, our assets also rose to the challenge.
We believe that our two primary assets in Mexico and the Czech
Republic will become important sources of battery-grade lithium
carbonate from 2019 onward. Our two main investments and joint
ventures are targeting to produce, in aggregate, some 55,000 tonnes
of battery grade lithium carbonate, which based on analysts'
projections, could represent a very significant 7% to 10% of the
world's supply in 2025.
Our focus in 2016 was to continue our investment strategy and
vision of identifying, investing in and taking an active role in
low-cost, large and scalable critical metal deposits. The Group's
current investments have borne out our strategy and delivered both
excellent market returns and fundamental progress at the asset
level.
Our investment in the Sonora Lithium project (both directly and
indirectly through our holding in Bacanora Minerals Ltd and our
joint venture with them) continued to make excellent progress both
during the year and subsequent to the year-end with the publication
of a highly positive pre-feasibility study in 2016.
Further, in early 2017 the company signed a strategic agreement,
inclusive of up to a 100% off-take for lithium carbonate with
Hanwa, a major trading house based in Japan. The Sonora Lithium
project now has a sound base from which to embark on the next
stages of development, including the completion of its bankable
feasibility study and securing the capital financing necessary to
commence construction in 2018.
The Cinovec Lithium Project, via our significant holding in
European Metals Holdings, also continued to develop at a rapid
pace, with a 420% upgrade in resources announced during the year
and a pre-feasibility study 3published in April 2017. This study
confirmed our analysis of the project in 2015, in that it would
represent a low-cost and potentially significant producer of
battery grade lithium carbonate. One of the significant positive
aspects of Cinovec is the potential tin credits from any mining
operation would assist greatly in keeping the unit costs of lithium
in the lowest quartile of global producers.
The fundamental progress made with these assets, along with our
investment in Macarthur Minerals Ltd and Auroch Minerals Ltd in
Australia, has delivered absolute returns in excess of 104%. During
the year, our listed investments delivered an operating profit of
GBP2.8 million compared to GBP0.2 million in 2015.
Investment activity has also continued apace, with a further
GBP7.85 million invested over the period. These funds were used to
increase our exposure to both Bacanora Minerals Ltd (16.06% equity
interest), European Metals Holdings Ltd (20.76% equity interest),
and Macarthur Minerals Ltd (20.3% equity interest). In addition, we
also further increased our exposure to lithium exploration with the
purchase of a 7.7% stake in Auroch Minerals Ltd, which has
exploration assets in Portugal and Namibia.
Our strategy for delivering long-term material value to
shareholders will stay focused on three things: First, to support
existing projects through to production. Second, to identify new
strategic investments. Principally, these will be further lithium
exploration assets demonstrating a high probability of entering
into commercial production. Third, to evaluate the investment
potential in other key metals that are widely used in the rapidly
expanding energy storage sector, such as cobalt, copper and
nickel.
In this regard, we are focusing this year on acquiring stakes in
assets that are currently unlisted but fit our investment criteria,
which to date has delivered excellent returns. In this way we will
provide our shareholders access to assets that have the same
fundamentals as our previous investments but with potentially
higher returns.
We continue to view the medium and long term prospects for the
Company with confidence.
The directors would like to take this opportunity to thank our
shareholders, staff and consultants for their continued
support.
Andrew Suckling
Executive Chairman
30 May 2017
strategic report
Our focus in 2016 was to continue our investment strategy, that
is, to identify, invest and play an active role in the development
and progress in assets and companies that have unique access to
projects that have the right chemistry, are low cost and represent
a value investment.
Cadence typically invests at the early stage of the resource
development cycle. This can be as early as target delineation and
up to scoping study level. The risk associated with investing in
any resource projects at an early stage is high particularly within
the lithium sector, which is not commoditised and the success or
failure of a project is highly dependent on the metallurgical
risks.
Our approach to mitigate this risk is to obtain a deep
fundamental understanding of the resource, its chemistry and
management team. By doing so we can eliminate the many potential
investments that we review during the year and fund projects that
we believe will come to production and deliver value to our
shareholders. Importantly we also take an active approach to our
investments by either being part of the management team or, if not,
assisting incumbent management in their endeavours.
Table 1: Absolute Return Figures
31/12/2015 31/12/2016 28/04/2016
--------------------------- ----------- ----------- -----------
Mark to Market Equity
Value (GBGBP ,000) 13,994 24,152 36,303
--------------------------- ----------- ----------- -----------
Absolute Return on Equity
(%) 42% 36% 104%
--------------------------- ----------- ----------- -----------
LITHIUM MARKET REVIEW
During 2016, we continued to see further supply constraints in
the lithium supply markets, even with the addition of several new
projects providing additional supply. The result was continued
upward pressure on seaborne lithium carbonate prices, with battery
grade contracts at around US$12,000 per tonne of battery-grade
lithium carbonate.
Although the lithium market is opaque, reports have suggested
that lithium demand increased 15% year-on-year to 212kt Lithium
Carbonate Equivalent ("LCE") in 2016. 2016 global sales of Electric
Vehicles (EVs) and Plug-in Hybrids (PHEVs) were around 780,000
vehicles. Global supply has responded to this increased demand,
with year-on-year production growth from Chile (mainly SQM),
Argentina (ramp up of Orocobre) and China (high-cost domestic
feedstock production incentivised into the market). In 2016
Greenbushes, the world's largest hard rock operation, exports were
close to 70kt LCE, 20% higher than 2015 export volumes. This
incremental supply brought the market closer towards balance in the
second half of 2016, leading to battery-grade lithium compound
prices in China falling c.31% by the end of the year. In contrast,
seaborne lithium prices have continued to increase, reducing the
pricing spread between China and the rest of the world.
The key drivers of the continued growth in the market will
continue to be EVs. The larger catalyst for global mass- market
uptakes is EV technology in China. Morning Star has forecasted EV
penetration to surge from less than 1% of global auto sales in 2015
to 10% in 2025, well ahead of the market view for only 4%-6%
penetration by 2025. They forecast 16% annual lithium demand growth
over the next decade, faster than we've witnessed for almost any
major commodity over the past century. They project 2025 lithium
demand at 775,000 tonnes, well above the consensus outlook for
400,000 - 600,000 tonnes.
Cadence still maintains its belief that lithium prices will
remain strong and anticipates that this pattern will continue for
the foreseeable future. We believe that the assets that we have
invested in will form part of the medium-term lithium supply chain
from 2019 onwards.
INVESTMENT REVIEW
Bacanora Minerals Ltd ("Bacanora")
Cadence holds an interest in Bacanora through a 16.06%
(30/05/2017) direct equity holding, making Cadence the single
largest shareholder of Bacanora and a 30% stake in the joint
venture interests in each of Mexalit S.A. de CV ("Mexalit") and
Megalit S.A. de CV ("Megalit"), Which form part of the Sonora
Lithium Project. Bacanora is a Canadian and London-listed minerals
explorer (TSX-V: BCN and AIM: BCN).
Bacanora's has two key projects under development. The first is
the Sonora Lithium Project in Northern Mexico, which consists of
ten mining concession areas covering approximately 100 thousand
hectares in the northeast of Sonora State. The second is the
Zinnwald Lithium Projects in southern Saxony, Germany, which
Bacanora has agreed to acquire 50% for EUR 5 million.
Sonora Lithium Project
The Sonora Lithium project continued to progress up the
development curve, achieving several critical milestones during the
year and subsequent to the year-end.
First and foremost, Bacanora published its preliminary
feasibility study ("PFS") in March 2016. The PFS has an initial
targeted production of 17,500 tonnes (t) of lithium carbonate
(Li(2) CO(3) ) per annum, expanding to 35,000 t of Li(2) CO(3) per
annum two years later. The PFS has a pre-tax NPV of US$776 million
and an IRR of 29%. Bacanora has commenced the Bankable Feasibility
Study ("BFS"), which is scheduled for completion in Q3 2017.
The highlights of the Sonora PFS are summarised below:
-- Phase 1: 17,500 tonnes per year of battery-grade Li(2) CO(3) , for the first two years
-- Phase 2: Expansion to 35,000 tonnes Li(2) CO(3) per year
-- Potential to produce up to 50,000 tonnes per year of K(2)
SO(4) in the third year, for sale to the fertiliser industry
-- Estimated Project pre-tax IRR of 29%; NPV of US$776M, (at an
8% discount rate); and simple payback of five years, based on a
flat US$6,000/t for battery grade lithium carbonate over the Life
Of Mine
-- Average annual earnings before interest, taxes, depreciation
and amortisation estimated at US$134M per annum
-- Stage 1 capital cost estimate of US$240M includes processing
plant, on and off-site infrastructure, Tailings Management Facility
construction, and general administration costs
The PFS mine plan currently has some 16% of the plant feed being
mined from the 30% joint venture areas owned by Mexalit.
Both the equity stake in Bacanora and our ownership in the
Mexalit joint venture could represent a substantial return for
Cadence in the form of cash flow from the Sonora Lithium Project.
To understand the possible outcomes, we have varied the operational
costs and revenue per tonne of lithium carbonate to derive a matrix
of potential total NPV's (US$ millions) from the joint venture and
our 16.06% equity stake in Bacanora*.
Table 2: Matrix of potential total NPV returns from Cadence's
joint venture and indirect equity stakes in the Sonora Lithium
Project
+99.5 % Lithium Carbonate
Price US$
---------------------------------
6,000 7,000 8,000 9,000
------------ ------ ------- ------- ------- ------
US$
/ t
Lithium
Carbonate 3,000 140 203 265 328
------------ ------ ------- ------- ------- ------
3,500 108 171 233 296
------------ ------ ------- ------- ------- ------
4,000 76 139 201 264
------ ------- ------- ------- ------
4,500 44 107 169 232
------------ ------ ------- ------- ------- ------
* Company estimates are based on discounted cash flows from both
equity and joint venture or direct project interests. The Company
has used pre-feasibility or scoping studies in the public domain
and has estimated the future cash flows that it could receive
assuming all free cash flow is distributed to equity and that the
project is entirely equity funded with Cadence retaining its
interest and contributing on a pro rata basis.
On 23 November 2016 Cadence & Bacanora announced that the
financing condition in the conditional lithium hydroxide off-take
agreement previously announced on 28 August 2015 had not been met
under the terms of the agreement. The Company advised that it had
extensive discussions with the customer as to the feasibility of
securing project specific financing pursuant to the terms and
conditions of the agreement, that those discussions have now
concluded, and therefore further efforts discontinuing further
efforts to secure project specific financing pursuant to the
agreement.
Subsequent to this, and after the year end, Bacanoa entered into
an offtake agreement for up to 100% of the battery grade lithium
carbonate with Hanwa Co., LTD ("Hanwa"). Hanwa is a leading
Japan-based global trading company and one of the larger trades of
battery chemicals in the Asian region, with reported net sales of
more the Y1,500 million in 2016.The off-take agreement formed part
of a larger strategic partnership with Hanwa. In addition to the
70%- 100% off-take agreement Hanwa invested approximately GBP10.2
million to acquire an initial 10% interest in Bacanora and has the
option to increase its equity interest in Bacanora to 19.9%.
The strategic partnership, we believe, is critical to the
ongoing development of the Sonora Lithium project as it will
provide a funding platform for the project and will aid in securing
the long-term debt funding. Moreover, validates the quality of the
battery grade (+99.5%) lithium carbonate product produced from the
Sonora Lithium project.
In the coming year, we expect Bacanora to focus on the BFS which
is scheduled for publication in Q3 2017. We also expect significant
progress to be made with, banks, debt providers and strategic
investors to develop a project financing strategy. If this is
successful Bacanora anticipates the start of construction in H1 of
2018 with an 18 month build period.
Zinnwald Lithium Project
On 21 February 2017 Bacanora announced the acquisition of a 50%
interest in, and joint operational control of, the Zinnwald Lithium
Project ("Zinnwald") in southern Saxony, Germany from SolarWorld AG
("SolarWorld"). This was for a cash consideration of EUR5 million
and the completion of a Feasibility Study ("FS"). The agreement
also included an option for Bacanora to acquire the outstanding 50%
held by SolarWorld within a 24-month period for EUR30 million.
Zinnwald, which reportedly produced lithium carbonate in the 1950s,
is in a granite hosted Sn/W/Li belt that has been mined
historically for tin, tungsten and lithium. The project benefits
from excellent access to the rapidly growing market for lithium in
Germany which is being driven by the automotive, renewable energy
storage and chemicals industries. Bacanora will earn 50% of the
project. This project is adjacent to and a continuation of the
Cinovec lithium project in the Czech Republic
The FS has begun, with bulk ore to be carried out during the
summer to provide samples for metallurgical test work for inclusion
in the flowsheet. Additionally, an infill drilling programme is
planned for late 2017 to upgrade the existing resource model in
accordance with National Instrument 43-101 - Standards of
Disclosure for Mineral Projects. The drilling will test for a
number of potential by-products including tin and tungsten. The
2014 resource estimate was reported in accordance with the Pan
European Code for Reporting of Exploration Results, Mineral
Resources and Reserves, and contained circa 700 Kt of LCE.
Details of REM's ownership
REM owns a direct interest of 16.06% of Bacanora. The Sonora
Lithium Project is comprised of the following lithium
properties:
-- La Ventana, La Ventana 1, and Megalit concessions, which are
100 percent owned by Minera Sonora Borax S.A. de C.V.("MSB"), a
wholly-owned subsidiary of Bacanora; REM, through its direct
interest of 16.06% of Bacanora, has an indirect interest in these
concessions of 16.06%.
-- El Sauz, El Sauz 1, El Sauz 2, Fleur and Fleur 1 concessions,
which are held by Mexilit S.A. de C.V. ("Mexilit"). REM has a 30%
direct interest in Mexalit through its Joint Venture with Bacanora,
and when combined with REM's direct interest of 16.06% in Bacanora,
has a total economic interest in Mexalit of 41.24%.
-- The Buenavista, and San Gabriel concessions, which are held
by Megalit S.A de C.V ("Megalit"). REM has a 30% direct interest in
Megalit through its Joint Venture with Bacanora, and when combined
with REM's direct interest of 16.06% in Bacanora, has a total
economic interest in Megalit of 41.24%
European Metals Holdings Limited (European Metals)
In June 2015 Cadence acquired an initial strategic interest in
the largest lithium deposit in Europe. REM has subsequently
increased its holding to 20.76% in the Cinovec deposit in the Czech
Republic through a direct holding in the share capital of European
Metals Holdings Limited (ASX code: EMH) that owns 100 per cent of
the exploration rights to the Cinovec lithium/tin deposit. The
Cinovec lithium and tin deposit is located in the Krusne Hory
mountain range. The deposit that straddles the border between
Germany and the Czech Republic and in Germany, it is known as the
Zinnwald deposit (50% owned by Bacanora). The district has an
extensive mining history, with various metals having been extracted
since the 14th Century.
Summary of Activities
European Metals made significant progress during 2016. With the
Company's efforts focusing on the completion of a PFS in April
2017. This primarily involved further drilling over the project as
well as extensive metallurgical work to determine and test flow
sheets for the production of battery grade LCE.
The initial drilling programme began in Dec 2015 and ended in
April 2016 with some 5,000 metres of drilling. This data was used
to calculate the updated mineral resource published in May 2016. As
second 7,500-metre drill programme began in June 2016 which
targeted higher grade, shallower lithium bearing zones and also had
the aim of converting a significant portion of the inferred lithium
and tin resource into an indicated resource.
The results from this programme led to a 420% increase in the
indicates Mineral Resources, which when combined with the Inferred
Mineral Resources, results in a total resource of an estimated 6.46
Mt of LCE. Highlights from the Mineral Resource Estimate
include:
-- Lithium Indicated Resource increased 420% to 2.6 Mt LCE,
contained in 232.8 Mt @ 0.45% Li(2) O (0.1% Li cutoff)
-- Lithium total resource increased 11.8% to 6.46 Mt LCE,
contained in 606.8 Mt @ 0.43% Li(2) O (0.1% Li cutoff)
-- Tin Indicated Resource increased by 64% to 28.6 Mt @ 0.23%
Sn, 0.54% Li2O (0.1% Sn cutoff) for 65.8 kt Sn, 0.38 Mt LCE
-- Lithium exploration target remains 350 to 450 Mt @ 0.39% to 0.47% for 3.4 Mt to 5.3 Mt of LCE
In addition to the drilling programme extensive metallurgical
test work was carried out over the year which resulted in the
successful manufacture of >99.5% pure lithium carbonate using an
industry proven, sodium sulphate roast-based flow-sheet from
mica-concentrate from the Cinovec Project. The roasting flow-sheet
reflected a simplified version of the well-proven technology that
converts spodumene concentrate to lithium carbonate. Numerous
lithium carbonate plants currently employ this technology
internationally.
Subsequent to the year-end European Metals released a PFS on the
Cinovec project, which confirmed the potential significance of the
Cinovec project, highlights of the PFS include:
* Net overall cost of production - * US$3,483 /tonne Li(2) CO(3)
* Net Present Value (NPV) - * US$540 M (post tax, 8%)
* Internal Rate of Return (IRR) - * 21 % (post tax)
* US$393 M
* Total Capital Cost -
* 20,800 tonnes
* Annual production of Battery Grade Lithium Carbonate
-
European Metals is no progressing it permits, environmental
studies and BFS and we look forward to 2017 and the progress that
will be made to bring this asset into production.
Details of Cadence's ownership
Cadence owns a direct interest of 20.76% of European Metals.
Yangibana Project, Australia
Since December 2011 REM has owned a 30% interest in the
Yangibana rare earth project situated in the Gascoyne region of
Western Australia. REM's interest is free carried up to the
commencement of the bankable feasibility study on Yangibana.
Summary of Activities
Hastings Technology Metals Limited ("Hastings") is the manager
of the Project and holds a 70% interest. Hastings continued to
explore and develop the Yangibana project during the year.
The most significant development during the year was the
publication of the PFS, which included the 30% joint venture with
extensive drilling and pre-feasibility work.
In April 2016 Hastings published its pre-feasibility study,
which showed a pre-tax NPV of US$700 - US$750 M at an 8% discount
rate and a 40% internal rate of return. The PFS was not specific as
to the total quantum that was to be mined from the joint venture
areas. However, the Company has used the mining inventory defined
in the mine plan to assess the potential NPV to Cadence under the
joint venture.
Subsequent to the publication of the PFS, Hastings has continued
to progress the project, with further drilling, target delineation
on the project as a whole. In May 2017 Hastings began its final DFS
drilling programme, with the primary objective of increasing
indicates resources to support a 10-year mine plan. In addition,
Hastings successfully tested the hydrometallurgical flowsheets and
produced 50kg high purity Mixed Rare Earth Carbonate for marketing
purposes.
Macarthur Minerals Limited ("Macarthur")
In March 2016 Cadence Minerals made a strategic investment in
Macarthur (TSX-V: MMS). During the year, it further increased its
position to 16.58% by exercising its warrants. Subsequent to the
year-end Cadence exercised its remaining warrants and increased its
position to 20.3%.
Summary of Activities
Macarthur has made progress on several fronts during the
year.
Australian Lithium Assets
Within the lithium space, Macarthur has applied for a total of
1,449 square kilometres in the Pilbara region of Western Australia.
Pilbara lithium acreage is adjacent to and covers similar
geological settings to the "world class" Pilgangoora lithium
deposits, which host the advanced lithium projects of ASX listed
companies, Pilbara Minerals Limited and Altura Mining Limited.
Macarthur has reported that initial reconnaissance across a
fraction of the Pilbara lithium acreage has been very encouraging,
justifying continued assessment.
During the year, Macarthur entered into three Memorandum of
Understandings. The first with an ASX listed company for a farm-in
and joint venture agreement for rights to lithium on their Sulphur
Springs and Whim Creek Projects in the Pilbara, which is contiguous
with some of Macarthur's lithium acreage. The second with a
Canadian lithium company for a farm-in to Macarthur lithium acreage
at Ravensthorpe for a minimum expenditure of A$2 million to earn a
51% interest. The last was covering an area of 191 square
kilometres in the Yalgoo region of Western Australia. The acreage
on which rights to lithium are acquired is in proximity to
Macarthur's existing Edah Hill lithium acreage and consists of
granted exploration licenses allowing immediate exploration for
lithium.
Stonewall Project
On October 21, 2016, the Macarthur acquired the Stonewall
Project located in both the Lida and Stonewall Flat Valleys, in
southern Nevada. The Stonewall Project area is within 50 km of the
Clayton Valley and has some similar geologic features the Clayton
Valley, which hosts North America's only producing lithium mine,
Albemarle's Silver Peak Lithium Mine.
The Stonewall Project is strategically located in the Nevada
lithium supply hub, 306 kilometres (191 miles) southeast of Tesla's
new Gigafactory and is located in the mining friendly Nye and
Esmeralda Counties of Nevada and is serviced by excellent
infrastructure with access to power, water, labour and is bisected
by the Veterans Memorial Highway Number 95. The regional climate
also favours natural and inexpensive evaporation for brine
concentration and allows year-round work.
Lithium has been located at Stonewall Project from a shallow
auger drilling program conducted as part of due diligence, for the
acquisition of the Stonewall Project. An initial shallow auger
drilling program on the Stonewall Project for the purposes of
collecting soil and brine samples for lithium was conducted. All
holes contained lithium with sediment assays ranging from 34.6
parts per million ("ppm") lithium ("Li") and up to 145.5 ppm
Li.
On November 4, 2016, the Company completed staking an additional
360 claims covering approximately 6,975 acres (28.22 square
kilometres) surrounding its Stonewall Lithium Project, increasing
the Company's footprint in the Lida and Stonewall Flat Valleys to a
total of approximately 12,019 acres (48.64 square kilometres)
covering almost all of the playa areas (i.e. 'dry lake bed') in
both of the valleys.
Macarthur Iron Ore Projects
Macarthur retains its two iron ore projects in Western
Australia; the Ularring hematite project (Indicated 54.46 million
tonnes @ 47.2% Fe, Inferred 25.99 million tonnes @ 45.4% Fe -
Pre-Feasibility Study) and the Moonshine magnetite project (1.3
billion tonnes @ 30.1% Fe - Preliminary Economic Assessment). We
previously received approval to develop an iron ore mine for the
Ularring project.
Subsequent to the year-end Macarthur announce that it has
entered into a non-exclusive mandate with the Tulshyan Group to
raise up to A$200 million with an initial tranche of A$50 million
to develop the Company's Ularring hematite iron ore project located
in Western Australia.
Macarthur Corporate Update
Subsequent to the year-end Macarthur announced that it intended
to list its Iron Ore and Lithium assets located in Australia on the
Australian stock exchange via an IPO. The prospectus was lodged in
March 2017 and was for the issue of 50 million shares in Macarthur
Australia at an issue price of A$0.20 per share to raise A$10
million. The minimum raise is for 25 million shares for A$5
million. Lodgement of the prospectus with ASIC and ASX for listing
Macarthur Australia on the ASX follows the successful, Pre-IPO
raising for A$1.4 million. Funds raised in the IPO will allow
Macarthur Australia to significantly advance its iron ore and
lithium projects.
Prior to the IPO, Macarthur Minerals has been issued 125 million
shares or approximately 90% of Macarthur Australia for
consideration for the sale of its subsidiaries, Macarthur Iron Ore
Pty Ltd ("MIO") and Macarthur Lithium Pty Ltd ("MLi") to Macarthur
Australia. MIO and MLi, respectively own the Australian iron ore
and 'hard rock' lithium projects. Pre-IPO investors have been
issued approximately 13 million shares or 9% of Macarthur Australia
for A$1.5 million. Pre-IPO Macarthur Australia has a total of
approximately 138 million shares on issue and on listing will have
between 189 and 164 million shares on issue for a raise of up to
A$10 million and a minimum of A$5 million. Post listing, Macarthur
Minerals will retain between approximately 76% and 66% of Macarthur
Australia.
Auroch Minerals Ltd ("Auroch")
In December 2016 Cadence took a 7.7% stake in Auroch. Auroch has
a strong financial position with some A$ 8 million in cash and
receivables. Auroch is an Australian ASX listed company which is
currently focusing on the exploration of two key assets.
The first is a joint venture to earn in 75% of the Alcoutim
Project a significant Cu-Zn-Pb-Au-Ag opportunity in south-eastern
Portugal located immediately along strike from the supergiant Neves
Corvo Mine in the western half of the world famous Iberian Pyrite
Belt.
Drilling has already commenced on the first hole which is
situated in the Foupana priority target, one of 5 priority targets
to be drilled, a large magmatic centre with corresponding EM
anomalies potentially representing massive sulphide orebodies. The
Alcoutim targets occur along strike of the supergiant Neves Corvo
Cu-Zn-Pb-Ag- Au mine operated by Lundin Mining Corporation.
Auroch's initial drill program will comprise three to five holes
targeting geological environments similar to Neves Corvo in
combination with significant geophysical anomalies along the Neves
Corvo Trend.
The second is some highly prospective lithium acreage in
Namibia. This acreage forms the Karibib Lithium Project. The
Karibib Lithium Project is situated in the same region as Namibia's
two historic lithium producing mines, Helikon and Rubikon. The
company has five existing Exclusive Prospecting Licenses (EPLs) in
the region and recently announced an Option and JV agreement to
earn up to 90% of granted EPL 5751, which lies South West of
Helikon and Rubikon.
Auroch Minerals has applied five EPLs in the Erongo region of
Namibia which expands the potential for Auroch to identify a
commercial lithium resource. The EPLs are distinguished by the
presence of significant historical lithium production within the
geological terrain and include untested pegmatites with strongly
fractionated geochemistry indicative of potential lithium tantalum
mineralisation.
Over 90% of Namibia's previous lithium production has been
sourced from these EPLs. The EPLs in the Karibib area of Namibia
occur in the same geological terrain that hosts the Rubikon and the
Helikon mines, Namibia's two historical lithium producing mines.
The Karibib area has seen little modern exploration and almost no
drilling of the many lithium known occurrences.
Greenland Rare Earth Projects
Cadence owns 100% of three Exploration Licences. Two of these
licences abut the northern and eastern boundaries of Greenland
Minerals and Energy Limited's 'GGG' licences that encompass the
world-class Kvanefjeld, Sørenson, Zone 3 and Steenstrupfjeld Rare
Earth Element (REE) deposits.
An extensive exploration programme was carried out on all four
of Cadence's exploration licences in south Greenland from June to
August 2014. We have continued to review these licenses on an
annual basis. Subsequent to the year we renewed the exploration
licenses over two that were expiring at the end of 2016. We will
continue to review these licenses on an annual basis, and will
watch the progress that GGG makes over the coming year as it
progresses the Kvanefjeld REE deposits.
FINANCIAL REVIEW
During the period the Group made an operating profit of GBP2.84
million compared to GBP0.24 million for the year ending 31 December
2015. This was primarily driven by a GBP3.21 million increase in
unrealised profits on available for sale asset, which included our
investments in Bacanora and European Metals. This resulted in total
income for the period of GBP5.78 million (2015: GBP2.29 million).
Profit before taxation was adversely affected by a one-off
financing (GBP1.6 million) charge associated with the issue of
warrants linked to the US$15 million convertible loan note issued
during the year. Diluted earnings per share were 0.08p (2015: loss
per share 0.06p).).
Administrative costs increased by GBP0.69 million to GBP2.94
million (2015: 2.25 million), this was primarily to an increase in
administrative expenses associated with the detailed due diligence
on potential new assets and development and support of our current
assets. These fees were paid to third party providers.
During the year, the total Directors cash remuneration reduced
by some 14% with some directors reducing their salary by up to 38%.
According to the GCI survey of director's remuneration for 2016
Cadence's total director's remuneration falls below the median of
AIM listed companies with a market capitalisation of between GBP20
and 50 million and below the lower quartile of companies with
market capitalizations of GBP50 and GBP100 million.
The total assets of the Group increased from GBP19.58 million at
the end of last year (31 December 2015) to GBP35.42 million. Total
liabilities increased from GBP2.64 at the end of last year (31
December 2015) to GBP10.92 million at the end of this year. This
was driven by an increase in borrowings associated with the
convertible loan note issue during the year
During the period our net cash outflow from operating activities
was GBP1.83 million, which was higher than the GBP0.97 million
during the same period last year. We invested GBP7.85 million in
available for sale assets and had receipts of GBP1 million on the
sale of available for sale investments we spent GBP0.01 million in
exploration assets which represented our net cash outflow from
investing activities.
These investments plus other costs were funded by cash flows
from financing activities totalling GBP12.04 million. This included
GBP3.72 million of proceeds from the issue of share capital and net
proceeds of GBP9.33 million from the issue of convertible loan
notes. At the end of the period, the Company had cash and cash
equivalents of GBP4.19 million.
Kiran Morzaria
Chief Executive Officer
30 May 2017
Report of the directors
For the year ended 31 December 2016
The Directors present their annual report together with the
audited consolidated financial statements of the Group and the
Company for the Year Ended 31 December 2016.
Principal activity
The principal activity of the Group and the Company is that of
the identification, investment and development of Lithium and rare
earth assets. The Group is also exploring other mining related
opportunities.
Domicile and principal place of business
Cadence Minerals plc is domiciled in the United Kingdom, which
is also its principal place of business.
Business review
The directors do not recommend the payment of a dividend.
Key Performance Indicators
Due to the current status of the Group, the Board has not
identified any performance indicators as key.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group involve
the ability to raise funding in order to finance the acquisition
and exploitation of mining opportunities and the exposure to
fluctuating commodity prices.
In addition, the amount and quality of minerals available and
the related costs of extraction and production represent a
significant risk to the group.
Financial risk management objectives and policies
The Group's principal financial instruments are available for
sale assets, trade receivables, trade payables, convertible loans
and cash at bank. The main purpose of these financial instruments
are to fund the Group's operations.
It is, and has been throughout the period under review, the
Group's policy that no trading in financial instruments shall be
undertaken, with the exception of the equity swap arrangement ,
based on the Company's own share price, which has now been
concluded. The main risks arising from the Group's financial
instruments are liquidity risk and interest rate risk. The board
reviews and agrees policies for managing each of these risks and
they are summarised below.
Liquidity risk
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of equity and
its cash resources. Further details of this are provided in the
principal accounting policies, headed 'going concern' and note 18
to the financial statements.
Interest rate risk
The Group only has borrowings at a fixed coupon rate of 5% and
therefore minimal interest rate risk, as this is deemed its only
material exposure thereto. The Group seeks the highest rate of
interest receivable on its cash deposits whilst minimising
risk.
Market risk
The Group is subject to market risk in relation to its
investments in listed Companies held as available for sale
assets.
Directors
The membership of the Board is set out below. All directors
served throughout the period unless otherwise stated.
Andrew Suckling
Kiran Morzaria
Don Strang
Adrian Fairbourn
Substantial shareholdings
Interests in excess of 3% of the issued share capital of the
Company which had been notified as at 11 May 2017 were as
follows:
Ordinary Percentage
shares of capital
held Number %
Barclayshare Nominees Limited 989,619,760 12.72%
Hargreaves Lansdown (Nominees)
Limited Des:15942 826,734,658 10.63%
Hargreaves Lansdown (Nominees)
Limited Des:VRA 505,747,127 6.50%
TD Direct Investing Nominees (Europe)
Limited Des:SMKTNOMS 463,959,308 5.97%
HSDL Nominees Limited Des:MAXI 456,239,464 5.87%
TD Direct Investing Nominees (Europe)
Limited Des:SMKTISAS 380,875,207 4.90%
Hargreaves Lansdown (Nominees)
Limited Des:HLNOM 379,392,616 4.88%
HSDL Nominees Limited 360,135,097 4.63%
HSBC Client Holdings Nominee (UK)
Limited Des:731504 284,792,318 3.66%
Forest Nominees Limited Des:GC1 280,826,000 3.61%
Payment to suppliers
It is the Group's policy to agree appropriate terms and
conditions for its transactions with suppliers by means ranging
from standard terms and conditions to individually negotiated
contracts and to pay suppliers according to agreed terms and
conditions, provided that the supplier meets those terms and
conditions. The Group does not have a standard or code dealing
specifically with the payment of suppliers.
Trade payables at the year end all relate to sundry
administrative overheads and disclosure of the number of days
purchases represented by year end payables is therefore not
meaningful.
Events after the Reporting Period
Events after the Reporting Period are outlined in Note 19 to the
Financial Statements.
Going concern
The Directors note the substantial losses that the Group has
made for the Year Ended 31 December 2016. The Directors have
prepared cash flow forecasts for the period ending 31 May 2018
which take account of the current cost and operational structure of
the Group.
The cost structure of the Group comprises a high proportion of
discretionary spend and therefore in the event that cash flows
become constrained, costs can be quickly reduced to enable the
Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash
funds available to allow it to continue in business for a period of
at least twelve months from the date of approval of these financial
statements. Accordingly, the financial statements have been
prepared on a going concern basis.
Directors' responsibilities statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the Group financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs). Under company law the
directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs and profit or loss of the group for that period. In
preparing these financial statements, the directors are required
to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group will continue
in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and disclose with reasonable accuracy at any time the
financial position of the Group and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
In so far as each of the Directors are aware:
-- there is no relevant audit information of which the Group's auditors are unaware; and
-- the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditors are aware of that
information.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Auditors
Chapman Davis LLP, offer themselves for re-appointment as
auditor in accordance with Section 489 of the Companies Act
2006.
ON BEHALF OF THE BOARD
Kiran Morzaria
Director
Date: 30 May 2017
Corporate governance
For the year ended 31 December 2016
Directors
The Group supports the concept of an effective board leading and
controlling the Group. The Board is responsible for approving Group
policy and strategy. It meets on a regular basis and has a schedule
of matters specifically reserved to it for decision. Management
supply the Board with appropriate and timely information and the
Directors are free to seek any further information they consider
necessary. All Directors have access to advice from the Company
Secretary and independent professional advice at the Group's
expense.
The Board consists of four Directors, who hold the key
operational positions in the Company. The Chairman of the Board is
Andrew Suckling and the Group's business is run by the Chief
Executive, Kiran Morzaria.
Relations with shareholders
The Company values the views of its shareholders and recognises
their interest in the Group's strategy and performance. The Annual
General Meeting will be used to communicate with private investors
and they are encouraged to participate. The Directors will be
available to answer questions. Separate resolutions will be
proposed on each issue so that they can be given proper
consideration and there will be a resolution to approve the annual
report and financial statements.
Internal control
The Board is responsible for maintaining a strong system of
internal control to safeguard shareholders' investments and the
Group's assets. The system of internal financial control is
designed to provide reasonable, but not absolute, assurance against
material misstatement or loss.
The Board has considered the need for an internal audit function
but has decided the size of the Group does not justify it at
present. However, it will keep the decision under annual
review.
Board Committees
Audit and Remuneration Committees have been established. The
Audit committee comprises Adrian Fairbourn (Chairman), Donald
Strang, and Andrew Suckling, and the Remuneration Committee
comprises, Andrew Suckling and Adrian Fairbourn (Chairman).
The role of the Remuneration Committee is to review the
performance of the executive Directors and to set the scale and
structure of their remuneration, including bonus arrangements. The
Remuneration Committee also administers and establishes performance
targets for the Group's employee share schemes and executive
incentive schemes for key management. In exercising this role, the
terms of reference of the Remuneration Committee require it to
comply with the Code of Best Practice published in the Combined
Code.
The Audit Committee is responsible for making recommendations to
the Board on the appointment of the auditors and the audit fee, and
received and reviews reports from management and the Company's
auditors on the internal control systems in use throughout the
Group and its accounting policies.
Report on remuneration
For the year ended 31 December 2016
Directors' remuneration
The Board recognises that Directors' remuneration is of
legitimate concern to the shareholders. The Group operates within a
competitive environment, performance depends on the individual
contributions of the Directors and employees and it believes in
rewarding vision and innovation.
Policy on executive Directors' remuneration
The policy of the Board is to provide executive remuneration
packages designed to attract, motivate and retain Directors of the
calibre necessary to maintain the Group's position and to reward
them for enhancing shareholder value and return. It aims to provide
sufficient levels of remuneration to do this, but to avoid paying
more than is necessary. The remuneration will also reflect the
Directors' responsibilities and contain incentives to deliver the
Group's objectives.
The remuneration of the Directors was as follows:
A Fairbourn A Suckling D Lenigas K Morzaria D Strang Total
(1)
GBP GBP GBP GBP GBP GBP
Short-term
employment
benefits:
Year
to 31
December
2016
Salary
and fees 48,000 150,000 - 150,000 150,000 498,000
Share
based
payments
(2) 143,280 286,560 - 143,280 143,280 716,400
Total 191,280 436,560 - 293,280 293,280 1,214,400
============ =========== ========== =========== ========== ===========
Year
to 31
December
2015
Salary
and fees 48,000 25,000 210,000 85,000 210,000 578,000
Share - - - - - -
based
payments
(2)
Total 48,000 25,000 210,000 85,000 210,000 578,000
============ =========== ========== =========== ========== ===========
At 31 December 2016 the following amounts were outstanding in
fees to directors; A Suckling GBPNil (2015: GBP25,000), D Strang
GBP150,000 (2015: GBPNil), K Morzaria GBPNil (2015: GBP25,000).
(1) D Lenigas resigned on 21 December 2015.
(2) Share based payments represent a Black and Scholes valuation
of the incentive options granted to the directors during the year.
Options are used to incentivise directors and are a non-cash form
of remuneration.
Pensions
The company does not operate a pension scheme for its
directors.
Benefits in kind
No benefits in kind were paid during the year to 31 December
2016 or the year ended 31 December 2015.
Bonuses
No amounts were payable for bonuses in respect of the Year ended
31 December 2016 or the year ended 31 December 2015.
Notice periods
Andrew Suckling, Kiran Morzaria, Don Strang and Adrian
Fairbourn, each have a 12 months rolling notice period.
Share option incentives
At 31 December 2016 the following options were held by the
Directors:
Date of grant Exercise Number of
price options
K Morzaria 21 May 2014 0.48p 60,000,000
K Morzaria 1 July 2016 0.44p 60,000,000
120,000,000
------------
13 December
A Fairbourn 2012 0.06p 20,000,000
A Fairbourn 21 May 2014 0.48p 40,000,000
A Fairbourn 1 July 2016 0.44p 60,000,000
120,000,000
------------
D Strang 21 May 2014 0.48p 60,000,000
D Strang 1 July 2016 0.44p 60,000,000
120,000,000
------------
A Suckling 1 July 2016 0.44p 120,000,000
120,000,000
------------
All options are exercisable between three and ten years from the
date of grant.
The high and low share price for the year were 0.925p and 0.404p
respectively (year ended 31 December 2015: 1.23p and 0.555p). The
share price at 31 December 2016 was 0.5p (31 December 2015:
0.745p).
REPORT OF THE INDEPENT AUDITORS TO THE MEMBERS OF
CADENCE MINERALS PLC (FORMERLY RARE EARTH MINERALS PLC)
We have audited the Group and Parent Company financial
statements of Cadence Minerals plc for the Year ended 31 December
2016 which comprise the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
Company statement of financial position, the consolidated statement
of changes in equity, the company statement of changes in equity,
the consolidated statement of cash flows, the company statement of
cash flows, the accounting policies, and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRS) as adopted by the European Union.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of the Directors and auditor
The Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Group and
Company's affairs as at 31 December 2016 and of the Group's loss
for the period then ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Report of the
Directors for the financial period for which the financial
statements are prepared is consistent with the group financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- Adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- The financial statements are not in agreement with the accounting records and returns; or
-- Certain disclosures of directors' remuneration specified by law are not made; or
-- We have not received all the information and explanations we require for our audit.
Keith Fulton
Senior Statutory Auditor
for and on behalf of Chapman Davis LLP
Statutory Auditor, Chartered Accountants
LONDON
Date: 30 May 2017
Consolidated Statement of comprehensive income
For the year ended 31 December 2016
Year ended Year ended
Note 31 December 31 December
2016 2015 (restated)
GBP'000 GBP'000
Income
Unrealised profit on available
for sale assets 9 5,701 2,493
Realised loss on available
for sale assets 9 (107) -
Other income 1 189 -
------------ -----------------
5,783 2,493
Share based payments (717) (641)
Depreciation, amortisation
and fixed asset write
offs - (63)
Other administrative expenses (2,223) (1,548)
------------ -----------------
Total administrative expenses (2,940) (2,252)
Operating profit 1 2,843 241
Share of associates losses 8 (200) (129)
(Loss) on equity swap
settlements - (545)
Finance cost 3 (2,027) (419)
Profit/(loss) before taxation 616 (852)
Taxation 4 - -
Profit/(loss) attributable
to the equity holders
of the Company 616 (852)
------------ -----------------
Other comprehensive income
Foreign exchange (484) (92)
Fair value adjustment
of equity swap - 389
------------ -----------------
Total other comprehensive
income for the period,
net of tax (484) 297
------------ -----------------
Total comprehensive profit/(loss)
for the year, attributable
to the equity holders
of the company 132 (555)
============ =================
Earnings per ordinary
share
Basic earnings/(loss)
per share (pence) 5 0.008 (0.01)
============ =================
Diluted earnings/(loss)
per share (pence) 5 0.007 (0.01)
============ =================
Consolidated statement of financial position
At 31 December 2016
31 December 31 December
2016 2015 (restated)
ASSETS Note GBP'000 GBP'000
Non-current
Intangible assets 6 1,909 1,706
Investment in associate 8 12,982 2,804
14,891 4,510
------------ -----------------
Current
Trade and other receivables 10 402 229
Available for resale
asset 9 15,967 13,944
Cash and cash equivalents 4,192 893
Total current assets 20,561 15,066
Total assets 35,452 19,576
------------ -----------------
LIABILITIES
Current
Trade and other payables 11 603 230
Borrowings 12 10,324 2,407
Total current liabilities 10,927 2,637
------------ -----------------
Total liabilities 10,927 2,637
------------ -----------------
EQUITY
Issued share capital 13 1,192 1,098
Share premium 27,145 22,161
Share based premium
reserve 4,410 2,783
Hedging, Loan & Exchange
reserve (254) (277)
Retained earnings (7,968) (8,826)
Equity attributable 24,525 16,939
to equity holders of
the Company
Total equity and liabilities 35,452 19,576
============ =================
The consolidated financial statements were approved by the Board
on 30 May 2017, and signed on their behalf by;
Kiran Morzaria Don Strang
Director Director
Company number 05234262
Company statement of financial position
At 31 December 2016
31 December 31 December
2016 2015 (restated)
ASSETS Note GBP'000 GBP'000
Non-current
Investment in associates 8 10,297 -
Investment in subsidiaries 7 906 906
11,203 906
------------ -----------------
Current
Trade and other receivables 10 4,632 4,354
Available for resale
asset 9 15,967 13,944
Cash and cash equivalents 4,192 893
Total current assets 24,791 19,191
Total assets 35,994 20,097
------------ -----------------
LIABILITIES
Current
Trade and other payables 11 603 230
Borrowings 12 10,324 2,407
Total current liabilities 10,927 2,637
------------ -----------------
Total liabilities 10,927 2,637
------------ -----------------
EQUITY
Issued share capital 13 1,192 1,098
Share premium 27,145 22,161
Share based premium
reserve 4,410 2,783
Hedging, Loan & Exchange
reserve (178) (103)
Retained earnings (7,502) (8,479)
Equity attributable 25,067 17,460
to equity holders of
the Company
Total equity and liabilities 35,994 20,097
============ =================
The Company financial statements were approved by the Board on
30 May 2017, and signed on their behalf by;
Kiran Morzaria Don Strang
Director Director
Company number 05234262
consolidated statement of changes in equity
At 31 December 2016
Share Share Share Hedging, Retained Total
capital premium based Loan earnings equity
payment & Exchange
reserves reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January 2015
(restated) 1,067 19,865 2,240 (574) (8,072) 14,526
Share based
payments - - 641 - - 641
Transfer on
lapse of options - - (98) - 98 -
Share issue 31 2,469 - - - 2,500
Share placing
costs - (173) - - - (173)
Transactions
with owners 31 2,296 543 - 98 2,968
--------- --------- ---------- ------------ ---------- --------
Foreign exchange - - - (92) - (92)
Transfer to
income statement - - - 389 - 389
Loss for the
year - - - - (852) (852)
Total comprehensive
loss for the
period - - - 297 (852) (555)
--------- --------- ---------- ------------ ---------- --------
Balance at
31 December
2015 (restated) 1,098 22,161 2,783 (277) (8,826) 16,939
========= ========= ========== ============ ========== ========
Share based
payments - - 717 - - 717
Warrants issued - - 1,152 - - 1,152
Transfer on
lapse of options - - (80) - 80 -
Transfer on
exercise of
options - - (162) - 162 -
Equity component
on issue of
loan notes - - - 507 - 507
Share issue 94 5,123 - - - 5,217
Share placing
costs - (139) - - - (139)
Transactions
with owners 94 4,984 1,627 507 242 7,454
--------- --------- ---------- ------------ ---------- --------
Foreign exchange - - - (484) - (484)
Profit for
the period - - - - 616 616
------------ ---------- --------
Total comprehensive
income for
the period - - - (484) 616 132
--------- --------- ---------- ------------ ---------- --------
Balance at
31 December
2016 1,192 26,746 4,410 (254) (7,968) 24,525
========= ========= ========== ============ ========== ========
Company statement of changes in equity
At 31 December 2016
Share Share Share Hedging, Retained Total
capital premium based Loan earnings equity
payment & Exchange
reserves reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 January 2015
(restated) 1,067 19,865 2,240 (436) (7,877) 14,859
Share based
payments - - 641 - - 641
Transfer on
lapse of options - - (98) - 98 -
Share issue 31 2,469 - - - 2,500
Share placing
costs - (173) - - - (173)
Transactions
with owners 31 2,296 543 - 98 2,968
--------- --------- ---------- ------------ ---------- --------
Foreign exchange - - - (56) - (56)
Fair value
adjustment
on equity swap - - - 389 - 389
Loss for the
year - - - - (700) (700)
Total comprehensive
loss for the
period - - - 333 (700) (367)
--------- --------- ---------- ------------ ---------- --------
Balance at
31 December
2015 (restated) 1,098 22,161 2,783 (103) (8,479) 17,460
========= ========= ========== ============ ========== ========
Share based
payments - - 717 - - 717
Warrants issued - - 1,152 - - 1,152
Transfer on
lapse of options - - (80) - 80 -
Transfer on
exercise of
options - - (162) - 162 -
Equity component
on issue of
loan notes - - - 507 - 507
Share issue 94 5,123 - - - 5,217
Share placing
costs - (139) - - - (139)
Transactions
with owners 94 4,984 1,627 507 242 7,454
--------- --------- ---------- ------------ ---------- --------
Foreign exchange - - - (582) - (582)
Profit for
the period - - - - 735 735
------------ ---------- --------
Total comprehensive
income for
the period - - - (582) 735 153
--------- --------- ---------- ------------ ---------- --------
Balance at
31 December
2016 1,192 27,145 4,410 (178) (7,502) 25,067
========= ========= ========== ============ ========== ========
Consolidated statement of cash flows
For the year ended 31 December 2016
Year ended Year ended
31 December 31 December
2016 2015 (restated)
GBP'000 GBP'000
Cash flow from operating
activities
Continuing operations
Operating profit 2,843 241
Amortisation of intangibles - 29
Net realised/unrealised
profit on AFSA (5,594) (2,493)
Exploration costs written-off - 37
Equity settled share
based payments 717 641
(Increase)/decrease in
trade and other receivables (173) 818
Increase/(decrease) in
trade and other payables 373 (245)
Net cash (outflow) from
operating activities
from continuing operations (1,834) (972)
------------ -----------------
Cash flows from investing
activities
Investment in exploration
costs (105) (635)
Payments for investments
in AFS assets (7,847) (5,743)
Receipts on sale of AFS
assets 1,040 -
Net cash outflow from
investing activities (6,912) (6,378)
------------ -----------------
Cash flows from financing
activities
Proceeds from issue of
share capital 3,728 2,500
Proceeds from equity
swap - 3,155
Share issue costs (139) (173)
Net borrowings 9,331 1,717
Finance cost (875) (419)
Net cash inflow from
financing activities 12,045 6,780
------------ -----------------
Net change in cash and
cash equivalents 3,299 (570)
Cash and cash equivalents
at beginning of period 893 1,463
Cash and cash equivalents
at end of period 4,192 893
============ =================
Company statement of cash flows
For the year ended 31 December 2016
Year ended Year ended
31 December 31 December
2016 2015 (restated)
GBP'000 GBP'000
Cash flow from operating
activities
Continuing operations
Operating profit 2,843 262
Amortisation of intangibles - 7
Profit on AFSA (5,594) (2,493)
Exploration costs written-off - 37
Equity settled share
based payments 717 641
(Increase)/decrease in
trade and other receivables (278) 184
Increase/(decrease) in
trade and other payables 373 (245)
Net cash (outflow) from
operating activities
from continuing operations (1,939) (1,607)
------------ -----------------
Cash flows from investing
activities
Payments for investments
in AFS assets (7,847) (5,743)
Receipts on sale of AFS
assets 1,040 -
Net cash outflow from
investing activities (6,807) (5,743)
------------ -----------------
Cash flows from financing
activities
Proceeds from issue of
share capital 3,728 2,500
Proceeds from equity
swap - 3,155
Share issue costs (139) (173)
Net borrowings 9,331 1,717
Finance cost (875) (419)
Net cash inflow from
financing activities 12,045 6,780
------------ -----------------
Net change in cash and
cash equivalents 3,299 (570)
Cash and cash equivalents
at beginning of period 893 1,463
Cash and cash equivalents
at end of period 4,192 893
============ =================
Principal accounting policies
For the year ended 31 December 2016
GENERAL INFORMATION
Cadence Minerals plc is a company incorporated in the United
Kingdom. The Company's shares are listed on the AIM market of the
London Stock Exchange, and on the NEX Exchange Growth Market as
operated by NEX Exchange Limited ("NEX"). On 24 March 2017, the
Company changed its name from Rare Earth Minerals Plc to Cadence
Minerals Plc by way of a statutory notice of change filed at
Companies House.
The Financial Statements are for the year ended 31 December 2016
and have been prepared under the historical cost convention and in
accordance with International Financial Reporting Standards as
adopted by the EU ("adopted IFRS"). These Financial Statements (the
"Financial Statements") have been prepared and approved by the
Directors on 30 May 2017 and signed on their behalf by Donald
Strang and Kiran Morzaria.
The accounting policies have been applied consistently
throughout the preparation of these Financial Statements, and the
financial report is presented in Pound Sterling (GBP) and all
values are rounded to the nearest thousand pounds (GBP'000) unless
otherwise stated.
INVESTING POLICY
The Company's investing policy, which was approved at a General
Meeting on 29 November 2010, is to acquire a diverse portfolio of
direct and indirect interests in exploration and producing rare
earth minerals and/or other metals projects and assets ('Investing
Policy'). In light of the nature of the assets and projects that
will be the focus of the Investing Policy, the Company will
consider investment opportunities anywhere in the world.
The Directors have considerable investment experience, both in
structuring and executing deals and in raising funds. Further
details of the Directors' expertise are set out on the Company
website. The Directors will use this experience to identify and
investigate investment opportunities, and to negotiate
acquisitions. Wherever necessary, the Company will engage suitably
qualified technical personnel to carry out specialist due diligence
prior to making an acquisition or an investment. For the
acquisitions that they expect the Company to make, the Directors
may adopt earn-out structures with specific performance targets
being set for the sellers of the businesses acquired and with
suitable metrics applied.
The Company may invest by way of outright acquisition or by the
acquisition of assets - including the intellectual property - of a
relevant business, partnership or joint venture arrangement. Such
investments may result in the Company acquiring the whole or part
of a company or project (which, in the case of an investment in a
company, may be private or listed on a stock exchange, and which
may be pre-revenue), and such investments may constitute a minority
stake in the company or project in question. The Company's
investments may take the form of equity, joint venture, debt,
convertible documents, licence rights, or other financial
instruments such as the Directors deem appropriate.
The Company may be both an active and a passive investor
depending on the nature of the individual investments in its
portfolio. Although the Company intends to be a long-term investor,
the Directors will place no minimum or maximum limit on the length
of time that any investment may be held.
There is no limit on the number of projects into which the
Company may invest, or on the proportion of the Company's gross
assets that any investment may represent at any time, and the
Company will consider possible opportunities anywhere in the
world.
The Directors may offer new ordinary shares in the capital of
the Company by way of consideration as well as cash, thereby
helping to preserve the Company's cash for working capital and as a
reserve against unforeseen contingencies including, by way of
example and without limit, delays in collecting accounts
receivable, unexpected changes in the economic environment and
unforeseen operational problems. The Company may, in appropriate
circumstances, issue debt securities or otherwise borrow money to
complete an investment. There are no borrowing limits in the
Articles of Association of the Company. The Directors do not intend
to acquire any cross-holdings in other corporate entities that have
an interest in the ordinary shares.
GOING CONCERN
The Directors note the substantial losses that the Group has
made for the Year ended 31 December 2016. The Directors have
prepared cash flow forecasts for the period ending 31 May 2018
which take account of the current cost and operational structure of
the Group.
The cost structure of the Group comprises a high proportion of
discretionary spend and therefore in the event that cash flows
become constrained, costs can be quickly reduced to enable the
Group to operate within its available funding.
These forecasts demonstrate that the Group has sufficient cash
funds available to allow it to continue in business for a period of
at least twelve months from the date of approval of these financial
statements. Accordingly, the financial statements have been
prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Group
and Company remains a going concern. At 31 December 2016 the
Company had cash and cash equivalents of GBP4,192,000 and
borrowings of GBP10,831,000. The Group has minimal contractual
expenditure commitments and the Board considers the present funds
sufficient to maintain the working capital of the Company for a
period of at least 12 months from the date of signing the Annual
Report and Financial Statements. For these reasons the Directors
adopt the going concern basis in the preparation of the Financial
Statements.
STATEMENT OF COMPLIANCE WITH IFRS
The Group and the Company's financial statements have been
prepared under the historical cost convention and the financial
statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006. The principal accounting policies adopted by
the Group and Company are set out below.
BASIS OF CONSOLIDATION
The Group financial statements consolidate those of the Company
and all of its subsidiary undertakings drawn up to
the balance sheet date. Subsidiaries are entities over which the
Company has the power to control, directly or indirectly, the
financial and operating policies so as to obtain benefits from
their activities. The Company obtains and exercises control through
voting rights. Subsidiaries are fully consolidated from the date at
which control is transferred to the Company. They are
deconsolidated from the date that control ceases.
Unrealised gains on transactions between the Company and its
subsidiaries are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the
asset transferred. Amounts reported in the financial statements of
subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition
method. The acquisition method involves the recognition at fair
value of all identifiable assets and liabilities, including
contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial
statements of the subsidiary prior to acquisition. On initial
recognition, the assets and liabilities of the subsidiary are
included in the consolidated balance sheet at their fair values,
which are also used as the bases for subsequent measurement in
accordance with the Group accounting policies. Goodwill is stated
after separating out identifiable intangible assets. Goodwill
represents the excess of acquisition cost over the fair value of
the Group's share of the identifiable net assets of the acquired
subsidiary at the date of acquisition. Acquisition costs are
written off as incurred.
Investments in associates are initially recognised at cost and
subsequently accounted for using the equity method. Any goodwill or
fair value adjustment attributable to the Group's share in the
associate is not recognised separately and is included in the
amount recognised as investment in associate. The carrying amount
of the investment in associates is increased or decreased to
recognise the Group's share of the profit or loss and other
comprehensive income of the associate, adjusted where necessary to
ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and
its associates are eliminated to the extent of the Group's interest
in those entities. Where unrealised losses are eliminated, the
underlying asset is also tested for impairment.
TURNOVER
Other income represents the total value, excluding VAT of income
receivable from professional services. Income is recognised as the
services are provided.
RESTATEMENT OF MARKET VALUE MOVENTS IN AFSA
The Group has changed its accounting policy for Available For
Sale Assets. The unrealised profits of these quoted investments are
now taken into income, less any related costs of purchase. This has
resulted in a restatement of the financial statements for 31
December 2015.
TAXATION
Current income tax assets and/or liabilities comprise those
obligations to, or claims from, fiscal authorities relating to the
current or prior reporting period, that are unpaid at the balance
sheet date. They are calculated according to the tax rates and tax
laws applicable to the fiscal periods to which they relate, based
on the taxable result for the period. All changes to current tax
assets or liabilities are recognised as a component of tax expense
in the income statement.
Deferred income taxes are calculated using the liability method
on temporary differences. This involves the comparison of the
carrying amounts of assets and liabilities in the consolidated
financial statements with their respective tax bases. In addition,
tax losses available to be carried forward as well as other income
tax credits to the Group are assessed for recognition as deferred
tax assets.
Deferred tax liabilities are always provided for in full.
Deferred tax assets are recognised to the extent that it is
probable that they will be able to be offset against future taxable
income. Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are
recognised as a component of tax expense in the income statement.
Only changes in deferred tax assets or liabilities that relate to a
change in value of assets or liabilities that is charged directly
to equity are charged or credited directly to equity.
FINANCIAL ASSETS
The Group's financial assets include cash, other receivables and
available for sale assets. All financial assets are recognised when
the Group becomes party to the contractual provisions of the
instrument. All financial assets are initially recognised at fair
value, plus transaction costs. Trade and other receivables are
provided against when objective evidence is received that the Group
will not be able to collect all amounts due to it in accordance
with the original terms of the receivables. The amount of the
writedown is determined as the difference between the asset's
carrying amount and the present value of estimated future cash
flows.
Derivative instruments are recorded at costs, and adjusted for
their market value as applicable. They are assessed for any equity
and debt component which is subsequently accounted for in
accordance with IFRS's. The Group's and Company's only derivative
is considered to be the Convertible loan as detailed in Note 12,
which is accounted for at cost, with accrued interest in accordance
with the terms of the loan notes.
AVAILABLE-FOR-SALE FINANCIAL ASSETS
Available-for-sale financial assets are non-derivative financial
assets that are either designated to this category or do not
qualify for inclusion in any of the other categories of financial
assets. The Group's available-for-sale financial assets include
listed securities. These available-for-sale financial assets are
measured at fair value. Gains and losses are recognised in the
statement of comprehensive income as revenue. Interest calculated
using the effective interest method and dividends are recognised in
profit or loss within finance income. Reversals of impairment
losses are recognised in other comprehensive income.
INTANGIBLE ASSETS - LICENCES
Licences are recognised as an intangible asset at historical
cost and are carried at cost less accumulated amortisation and
accumulated impairment losses. The licences have a finite life and
no residual value and are amortised over the life of the
licence.
EXPLORATION OF MINERAL RESOURCES
Acquired intangible assets, which consist of mining rights, are
valued at cost less accumulated amortisation.
The Group applies the full cost method of accounting for
exploration and evaluation costs, having regard to the requirements
of IFRS 6 'Exploration for and Evaluation of Mineral Resources'.
All costs associated with mining development and investment are
capitalised on a project by project basis pending determination of
the feasibility of the project. Such expenditure comprises
appropriate technical and administrative expenses but not general
overheads.
Such exploration and evaluation costs are capitalised provided
that the Group's rights to tenure are current and one of the
following conditions is met:
(i) such costs are expected to be recouped through successful
development and exploitation of the area of interest or
alternatively by its sale; or
(ii) the activities have not reached a stage which permits a
reasonable assessment of whether or not economically recoverable
resources exist; or
(iii) active and significant operations in relation to the area are continuing.
When an area of interest is abandoned or the directors decide
that it is not commercial, any exploration and evaluation costs
previously capitalised in respect of that area are written off to
profit or loss.
Amortisation does not take place until production commences in
these areas. Once production commences, amortisation is calculated
on the unit of production method, over the remaining life of the
mine. Impairment assessments are carried out regularly by the
directors. Exploration and evaluation assets are assessed for
impairment when facts and circumstances suggest that the carrying
amount may exceed its recoverable amount. Such indicators include
the point at which a determination is made as to whether or not
commercial reserves exist.
The asset's residual value and useful lives are reviewed and
adjusted if appropriate, at each reporting date. An assets'
carrying value is written down immediately to its recoverable value
if the assets carrying amount is greater than its listed
recoverable amount.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash at bank and in hand,
bank deposits repayable on demand, and other short term highly
liquid investments that are readily convertible into known amounts
of cash and which are subject to an insignificant risk of changes
in value, less advances from banks repayable within three months
from the date of advance if the advance forms part of the Group's
cash management.
GOODWILL
Goodwill representing the excess of the cost of acquisition over
the fair value of the Group's share of the identifiable net assets
acquired is capitalised and reviewed annually for impairment.
Goodwill is carried at cost less accumulated impairment losses.
Negative goodwill is recognised immediately after acquisition in
profit or loss.
On disposal of a subsidiary, the attributable amount of goodwill
is included in the determination of the profit or loss on
disposal.
IMPAIRMENT TESTING OF GOODWILL AND OTHER INTANGIBLE ASSETS
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at
which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that
include goodwill and other intangible assets with an indefinite
useful life are tested for impairment at least annually.
An impairment loss is recognised for the amount by which the
asset's or cash-generating unit's carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of fair
value, reflecting market conditions less costs to sell, and value
in use. Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is
charged pro rata to the other assets in the cash generating unit.
With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised may no longer exist.
EQUITY
Share capital is determined using the nominal value of shares
that have been issued.
The share premium account represents premiums received on the
initial issuing of the share capital. Any transaction costs
associated with the issuing of shares are deducted from share
premium, net of any related income tax benefits.
The share based payment reserve represents the cumulative amount
which has been expensed in the income statement in connection with
share based payments, less any amounts transferred to retained
earnings on the exercise of share options.
The hedging, loan and exchange reserve represents the change in
value of the equity swap, the equity component of the issued
convertible loan notes, and currency translation movements in
foreign exchange.
Retained earnings include all current and prior period results
as disclosed in the income statement.
FOREIGN CURRENCIES
The financial statements are presented in Sterling, which is
also the functional currency of the parent Company.
In the individual financial statements of the consolidated
entities, foreign currency transactions are translated into the
functional currency of the individual entity using the exchange
rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions
and from the translation of monetary assets and liabilities
denominated in foreign currencies at year-end exchange rates are
recognised in profit or loss.
In the consolidated financial statements, the financial
statements of subsidiaries, originally presented in a functional
currency, have been translated into Sterling. Assets and
liabilities have been translated into Sterling at the exchange
rates ruling at the balance sheet date. Profit and losses have been
translated at an average monthly rate for the period. Any
differences arising from this procedure are taken to the foreign
exchange reserve. Goodwill and fair value adjustments arising on
the acquisition of a foreign entity have been treated as assets and
liabilities to the foreign entity and translated into Sterling at
the closing rates.
SHARE BASED PAYMENTS
The Group issues equity-settled share-based payments to certain
employees (including directors). Equity-settled share-based
payments are measured at fair value at the date of grant. 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, together with a corresponding increase in equity,
based upon the Group's estimate of the shares that will eventually
vest.
Fair value is measured using the Black-Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
The expense is allocated over the vesting period, based on the
best available estimate of the number of share options expected to
vest. Non-market vesting conditions are included in assumptions
about the number of options that are expected to become
exercisable. Estimates are subsequently revised, if there is any
indication that the number of share options expected to vest
differs from previous estimates.
No adjustment is made to the expense or share issue cost
recognised in prior periods if fewer share options are, ultimately
exercised than originally estimated. Upon exercise of share
options, the proceeds received net of any directly attributable
transaction costs up to the nominal value of shares issued are
allocated to share capital with any excess being recorded as share
premium.
FINANCIAL LIABILITIES
The Group's financial liabilities include trade and other
payables. Financial liabilities are obligations to pay cash or
other financial assets and are recognised when the Group becomes a
party to the contractual provisions of the instrument.
All financial liabilities are recognised initially at fair
value, net of direct issue costs, and are subsequently recorded at
amortised cost using the effective interest method with interest
related charges recognised as an expense in the income
statement.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Significant judgments and estimates
The preparation of financial statements requires management to
make estimates and judgments that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenditure during the reported
period. The estimates and associated judgments are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making judgments about carrying values of assets and
liabilities that are not readily apparent from other sources.
-- The estimates and underlying judgments are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
-- In the preparation of these consolidated financial
statements, estimates and judgments have been made by management
concerning calculating the fair values of the assets acquired on
business combinations, and the assumptions used in the calculation
of the fair value of the share options. Actual amounts could differ
from those estimates.
-- Management has made the following estimates that have the
most significant effect on the amounts recognised in the financial
statements.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Impairment of goodwill
The basis of review of the carrying value of goodwill is as
detailed in note 6. The carrying value of goodwill is GBP630,000 at
the balance sheet date. Management do not consider that any
reasonably foreseeable changes in the key assumptions would result
in an impairment. Further details of management's assessment of the
goodwill for impairment are included in note 6.
Business combinations
On initial recognition, the assets and liabilities of the
acquired business and the consideration paid for them are included
in the consolidated financial statements at their fair values. In
measuring fair value, management uses estimates of future cash
flows. Any subsequent change in these estimates would affect the
amount of goodwill if the change qualifies as a measurement period
adjustment. Any other change would be recognised in the income
statement in the subsequent period.
Share-based payments
The Group measures the cost of the equity-settled transactions
with employees & third parties by reference to the fair value
of the equity instruments at the date at which they are granted.
The charge for the period ended 31 December 2016 of GBP1,869,000
(2015: GBP641,000) is determined using a Black-Scholes Valuation
model, using the assumptions detailed in note 14.
Treatment of exploration and evaluation costs
IFRS 6 "Exploration for and Evaluation of Mineral Resources"
requires an entity to consistently apply a policy to account for
expenditure on exploration and evaluation of a mineral resource.
The directors have set out their policy in respect of the treatment
of these costs in the accounting policies. Amounts capitalised in
the year to 31 December
2016 were GBP105,000 (2015: GBP635,000).
Treatment of licenses
The Company purchased the entire share capital of Mojito
Resources Limited during the period ended 31 December 2011. Mojito
Resources Limited is the beneficial owner of a 30% interest in the
Tenements in the Yangibana Rare Earth Project. These have been
treated in the accounting records of Mojito Resources Limited and
on consolidation as an intangible asset. The directors consider the
fair value of the tenements to be equal to the book value in Mojito
Resources Limited at the date of acquisition as the interest in the
tenements were purchased during the financial period. In addition
Mojito Resources Limited has entered into an Agreement with GTI
Resources Limited and Gascoyne Metals Pty Limited in respect of the
Yangibana Project. Mojito Resources is not however liable for any
of the exploration costs in the initial sole funding period until a
Feasibility Report is produced by the operators (GTI Resources
Limited). At this stage therefore the directors have treated the
licenses as an intangible asset. Following the completion of the
Feasibility report the directors will review the accounting
treatment going forward giving consideration to their respective
responsibilities for the development of the project.
ADOPTION OF NEW OR AMED IFRS
New standards, amendments and interpretations adopted by the
Company
No new and/or revised Standards and Interpretations have been
required to be adopted, and/or are applicable in the current year
by/to the Company, as standards, amendments and interpretations
which are effective for the financial year beginning on 1 January
2016 are not material to the Company.
New standards, amendments and interpretations not yet
adopted
At the date of authorisation of these financial statements, the
following Standards and Interpretations which have not been applied
in these financial statements, were in issue but not yet effective
for the year presented:
-- IFRS 9 in respect of Financial Instruments which will be
effective for the accounting periods beginning on or after 1
January 2018.
-- IFRS 15 in respect of Revenue from Contracts with Customers
which will be effective for accounting periods beginning on or
after 1 January 2018.
-- IFRS 16 in respect of Leases which will be effective for
accounting periods beginning on or after 1 January 2019.
There are no other IFRSs or IFRIC interpretations that are not
yet effective that would be expected to have a material impact on
the Company.
Notes to the financial statements
For the year ended 31 December 2016
1 Operating profit and segmental information
Operating profit - continuing operations
The operating profit is attributable to the principal activities
of the Group.
The operating profit is stated after charging:
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Share based payment charge 717 641
Amortisation charge - 29
Exploration costs written
off - 37
Foreign exchange (gain)/loss (104) 96
Directors fees (see note
2) 498 578
Fees payable to the Company's
auditor for the audit of
the financial statements 21 19
Fees payable to the Company's
auditor and its associates
for other services:
Other services relating to - -
taxation compliance
=============== ===============
Segmental information
An operating segment is a distinguishable component of the Group
that engages in business activities from which it may earn revenues
and incur expenses, whose operating results are regularly reviewed
by the Group's chief operating decision maker to make decisions
about the allocation of resources and assessment of performance and
about which discrete financial information is available.
The chief operating decision maker has defined that the Group's
only reportable operating segment during the period is mining.
Subject to further acquisitions the Group expects to further
review its segmental information during the forthcoming financial
year.
The Group generated revenues from external customers totalling
GBP189,000 (2015: GBPnil) during the period.
In respect of the total assets, GBP4,592,000 (2015:
GBP1,121,000) arise in the UK, and GBP618,000 (2015: GBP1,130,000)
arise in Greenland, GBP17,646,000 arise in Mexico (2015:
GBP15,074,000), GBPNil arise in USA (2015: GBP641,000),
GBP11,646,000 (2015: GBP1,575,000) arise in Australia and
GBP950,000 arise in Canada (2015: GBP35,000).
2 Employee remuneration
Employee benefits expense
The expense recognised for employee benefits, including
Directors' emoluments, is analysed below:
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Wages and salaries 521 578
Share based payments 717 -
1,238 578
------------ ------------
The average number of employees (including directors) employed
by the Group and Company during the period was:
2016 2015
No. No.
Directors 4 4
Other 1 -
5 4
----- -----
Included within the above are amounts in respect of Directors,
who are considered to be the key management personnel, as
follows:
Group and Company
Year ended Year ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Salaries 498 578
Share based payments 717 -
1,215 578
------------ ------------
3 Finance costs
Year Year
ended ended
31 December 31 December
2016 2015
GBP'000 GBP'000
Loan interest 381 97
Finance Fees 1,646 322
2,027 419
============= =============
4 Taxation
The tax assessed for the period differs from the standard rate
of corporation tax in the UK as follows:
Year Year
ended ended
31 December 2016 31 December 2015
2016 2015
(restated)
GBP'000 % GBP'000 %
Profit/(loss) before taxation 616 (852)
Profit/(loss) multiplied
by standard rate 123 20 (173) 20.25
of corporation tax in
the UK
Effect of:
Offset against losses/deferred
tax asset not recognised (270) (93)
Expenses not deductible
for tax purposes 147 266
------------
Total tax charge for year - -
============ ============
The Group has tax losses in the UK, subject to Her Majesty's
Revenue and Customs approval, available for offset against future
operating profits. The Group has not recognised any deferred tax
asset in respect of these losses, due to there being insufficient
certainty regarding its recovery.
There is no tax credit on the loss for the current or prior
period
5 Earnings per share
The calculation of the basic earnings per share is calculated by
dividing the consolidated loss attributable to the equity holders
of the Company by the weighted average number of ordinary shares in
issue during the period.
Year ended Year ended
31 December 31 December
2016 2015 (restated)
GBP'000 GBP'000
Profit/(loss) attributable
to equity holders of the
Company 616 (852)
--------------- -----------------
2016 2015
Number Number
Weighted average number
of shares for calculating
basic earnings/(loss) per
share 7,418,126,097 6,802,811,028
--------------- -----------------
Share options and warrants
exercisable 1,738,283,823 582,123,201
Weighted average number
of shares for calculating
diluted earnings/(loss per
share) 9,156,409,920 7,384,934,229
--------------- -----------------
2016 2015
Pence Pence
Basic earnings/(loss) per
share 0.008 (0.01)
Diluted earnings/(loss)
per share 0.007 (0.01)
--------------- -----------------
The impact of the share options are considered anti-dilutive
when the group's result for a period is a loss.
6 Intangible assets
Group Intangible Assets
Exploration
costs Goodwill Licences Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 576 567 207 1,350
Additions 635 - - 635
Costs written-off (37) - - (37)
Exchange Difference - (35) - (35)
------------ --------- --------- --------
At 31 December
2015 1,174 532 207 1,913
Additions 105 - - 105
Licence expiry - - (33) (33)
Exchange Difference - 98 - 98
At 31 December
2016 1,279 630 174 2,083
------------ --------- --------- --------
Amortisation and
impairment
At 1 January 2015 - - (176) (176)
Amortisation charge
in the year - - (29) (29)
Exchange difference - - (2) (2)
------------ --------- --------
At 31 December
2015 - - (207) (207)
Amortisation charge -
in the year - - -
Elimination on
licence expiry - - 33 33
--------
At 31 December
2016 - - (174) (174)
------------ --------- --------- --------
Net book value
at 31 December
2016 1,279 630 - 1,909
------------ --------- --------- --------
Net book value
at 31 December
2015 1,174 532 - 1,706
------------ --------- --------- --------
Net book value
at 1 January 2015 576 567 31 1,174
------------ --------- --------- --------
In the year to 31 December 2016 GBPnil (2015: GBP90,000) was
invested in Greenland and GBP105,000 (2015: GBP545,000) was
invested in Exploration costs by REM Mexico Ltd
Goodwill of GBP692,000 arose on the acquisition of Mojito
Resources Limited, the licences being the only asset held within
that company. The directors are continuing to review their
provisional assessment of the fair value of the licences acquired
although do not expect any material adjustment. The directors have
therefore identified only one cash generating unit to which the
goodwill is allocated. As set out in the accounting policies
Goodwill is reviewed annually or in the event of an indication of
impairment. The recoverable amount of goodwill has been determined
by the fair value less costs to sell. The directors consider that
there have been no changes in circumstances between acquisition on
1 December 2013 and 31 December 2016 that would give rise to an
impairment charge.
At this stage the Feasibility Study has not been completed to
fully assess the potential future cash flows of developing the area
under licence. The directors, however, having given consideration
to the past exploration of the Project which has identified nine
individual occurrences of rare earth elements known to occur within
the Project areas consider that the goodwill is not impaired.
Management's review of the recoverable amount is most sensitive to
changes in the commodity prices of the underlying minerals and the
existence of the rare earth elements within the Project Area. Since
the acquisition date there has been no significant fluctuation in
the commodity prices of the underlying minerals or any material
changes to the Project Area. The directors consider that no
impairment is required at 31 December 2016.
Company only Intangible Assets
Exploration
costs Licences Total
GBP'000 GBP'000 GBP'000
Cost
At 1 January 2015 37 33 70
Costs written off (37) - (37)
------------ --------- --------
At 31 December 2015 - 33 33
Licence expired - (33) (33)
At 31 December 2016 - - -
------------ --------- --------
Amortisation and impairment
At 1 January 2015 - (26) (26)
Amortisation charge
in the year - (7) (7)
At 31 December 2015 - (33) (33)
Eliminated on Licence
expiry - 33 33
At 31 December 2016 - - -
------------ --------- --------
Net book value at - - -
31 December 2016
------------ --------- --------
Net book value at - - -
31 December 2015
------------ --------- --------
Net book value at
1 January 2015 37 7 44
------------ --------- --------
On 10 January 2016, the Company's exploration licence in the Cup
Lake project in Canada expired and the no renewal application has
been made by the Company in respect of this licence.
7 Investments in subsidiaries - company
Investment
in group
undertakings
GBP'000
Cost and carrying value
At 31 December 2016 and 31 December
2015 906
==============
Subsidiary Proportion Nature Country
of ordinary of business of incorporation
share capital
held
Mojito Resources 100% Mining British
Ltd Virgin
Islands
Rare Earth Minerals 100% Mining UK
Mexico Limited
Rare Earth Resources 100% Mining UK
Limited
All subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertaking
held directly by the parent company do not differ from the
proportion of the ordinary shares held. The following companies are
taking an exception from the audit of the financial statements as
per S479A of the Companies Act; REM Mexico Ltd (08022329), Rare
Earth Resources Ltd (08390571).
8 Investment in associates
Group
31 December 31 December
2016 2015
GBP'000 GBP'000
Changes in equity
accounted investment
Carrying value at
beginning of year 2,804 2,933
Investment in associate
- transferred from
AFSA 10,378 -
Share of retained
(losses) attributable
to the group (200) (129)
Investment carrying
value as at year
end 12,982 2,804
------------ ------------
The Group's two Mexican associate companies have a reporting
date of 30 June. These shares are not publicly listed on a stock
exchange and hence published results are not available. Therefore
the fair value of the Group's investment equates to the carrying
book value of GBP2,685,000 (31 December 2015: GBP2,804,000).
On 24 November 2016 the Company's investment in European Metal
Holdings Ltd ("EMH") increased above a 20% shareholding, therefore
this has been reclassified as an associate. EMH is listed on the
ASX and on AIM. The market value of the shareholding at 31 December
2016 was GBP9,101,086, with a carrying value of GBP10,297,000.
8 INVESTMENT IN ASSOCIATES CONTINUED
The Group's share of results of its associate, which are
unlisted, and their aggregated assets and liabilities, are as
follows:
Country % interest
Name of incorporation Assets Liabilities Revenues Profit/(Loss) held
As at 31 December Year to 31
2016 December 2016
Mexilit
S.A. de
C.V. Mexico GBP1,463,806 (GBP1,162,229) GBPnil (GBP294,017) 30%
Minera
Megalit
S.A. de
C.V. Mexico GBP607,771 (GBP450,629) GBPNil (GBP104,803) 30%
European
Metals
Holding
Ltd (1) BVI GBP6,539,158 (GBP364,853) GBPnil (GBP1,858,231) 20.76%
(1) EMH's results are for the 6 months to 31 December 2016.
Company
31 December 31 December
2016 2015
GBP'000 GBP'000
Changes in equity accounted
investment
Carrying value at beginning - -
of year
Investment in associate
- transferred from
AFSA 10,378 -
Share of retained (losses)
attributable to the
group (81) -
Investment carrying 10,297 -
value as at year end
------------ ------------
9 Available for sale investments
Available for sale assets 31 December 31 December
2016 2015
GBP'000 GBP'000
Current Assets - Listed Investments
Valuation at 1 January 13,944 5,708
Additions at cost 7,847 5,743
Disposal proceeds (1,040) -
Realised (loss) on disposal (107) -
Reclassified as investment (10,378)
in associate -
Change in fair value recognised
in income statement 5,701 2,493
Valuation at 31 December 15,967 13,944
------------ ------------
During the year ended 31 December 2016 the company acquired a
further 4,550,000 shares in Bacanora Minerals Limited, 16,525,926
CDIs in European Metal Holdings Inc. 22,500,000, shares in
MacArthur Minerals Ltd, and 6,500,000 shares in Auroch Minerals
Ltd. The company also disposed of 1,436,084 shares in Hastings Rare
Metals Ltd, its entire shareholding of 3,579,000 shares in Western
Lithium Corporation.
Available-for-sale assets comprise investments in listed
securities which are traded on stock markets throughout the world,
and are held by the Group as a mix of strategic and short term
investments.
10 Trade and other receivables
Group Company
31 December 31 December 31 December 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Current assets
Trade receivables 43 - 43 -
Other receivables 210 161 210 161
Amounts owed by
subsidiaries - - 4,230 4,125
Prepayments and
accrued income 149 68 149 68
402 229 4,632 4,354
============ ============ ============ ============
There is no impairment of receivables and no amounts are past
due at 31 December 2016 or 31 December 2015.
The fair value of these financial assets is not individually
determined as the carrying amount is a reasonable approximation of
fair value.
11 Trade and other payables
Group Company
31 December 31 December 31 December 31 December
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Current liabilities
Trade payables 404 123 404 123
Tax and social
security 11 - 11 -
Other payables 3 - 3 -
Accruals and deferred
income 185 107 185 107
603 230 603 230
============ ============ ============ ============
The fair value of trade and other payables has not been
disclosed as, due to their short duration, management considers the
carrying amounts recognised in the balance sheet to be a reasonable
approximation of their fair value.
12 Borrowings
Group and Company
31 December 31 December
2016 2015
GBP'000 GBP'000
Current liabilities
Loans - YAGM (unsecured) - 2,407
Convertible loan notes 10,148 -
Accrued loan note interest 176 -
10,324 2,407
============ ============
YAGM Loan Facility
On 13 June 2014, the Company agreed a US$10million debt facility
with YA Global Master SPV ("YAGM"), and drew down the first
US$3million on that date. This loan facility carries a twelve month
repayment schedule at a fixed rate coupon of 10%. Any subsequent
drawdowns will be on the same terms and subject to approval by
YAGM. The Company made two further drawdowns against the facility
both of US$1million each in 2014. As part of the terms of the
facility, on each drawdown the Company issues Warrants over
ordinary shares to YAGM in accordance with the terms of the
agreement. Total warrants issued to YAGM under this agreement in
2014 were 73,718,850, each with a 3 year term and exercise prices
ranging from 1.1p to 1.8p per share.
On 3 October 2015 the loan facility was amended and during the
year to 31 December 2015, further drawdowns amounting to
US$6.5million were made. Total warrants issued to YAGM under this
agreement during 2015 were 180,579,351, each with a 3 year term and
exercise prices ranging from 0.79p to 1.20p per share. In October
2016 this debt facility was repaid in full.
Convertible Loan Notes
On 8 August 2016, the Company agreed a $15million Convertible
Loan Facility with Iskandar Mineral Asset Fund. The Convertible
Loan is secured by a pledge over the assets of the Company, and has
an interest rate of 5%. The principle is convertible at 0.65 pence
which represents a premium of 5 % over the closing price on 8
August 2016. The noteholders shall have the right to convert the
Convertible Loan into shares of REM on the earlier of: (i) the 12
month anniversary of the date the Convertible Note is issued to the
noteholders; and (ii) the achievement by REM of certain performance
measures, including the volume weighted average price of REM shares
being above the 0.65 pence for 90 consecutive days or relating to
potential future investments. In addition, each US$1 of the
Convertible Loan has forty warrants attached with the right to
subscribe to forty new ordinary shares at a price of 0.8 pence per
share for a period of 2 years. The warrant exercise price is a 23%
premium to the closing price on the 8 August 2016. The Loan Note is
redeemable at the Company's option prior to conversion.
The full $15million was drawn down during the year and
600million warrants issued. During the year $1,850,000 of the
capital was converted into 229,063,331 ordinary shares of 0.01p at
an exercise price of 0.8p per share, leaving the balance
outstanding of $13,150,000 plus interest accrued.
Since the year end, on 31 January 2017, the Company announced
that a further US$200,000 of the convertible loan has been
converted into 24,529,629 new ordinary shares in the Company at a
price of 0.65 pence per share, reducing the capital balance to
$12,950,000.
The Loan Note was initially recognised as a liability of
GBP10,672,000 (USD$14,286,000) and an equity element of GBP534,000
(USD$714,000).
13 Share capital
31 December 31 December
2016 2015
GBP'000 GBP'000
Allotted, issued and fully
paid
173,619,050 deferred shares
of 0.24p 417 417
7,753,160,709 ordinary shares
of 0.01p (31 December 2015:
6,815,653,495) 775 681
1,192 1,098
============ ============
Ordinary
shares
No. GBP'000
Allotted and issued
At 31 December 2015 6,815,653,495 681
Total issue of shares during
the year 937,507,214 94
At 31 December 2016 7,753,160,709 775
=============== ========
Shares Issued during the year
-- On 29 February 2016, 645,619,670 Ordinary Shares of 0.01p
were issued at 0.55p per share for proceeds of GBP3,550,908 before
share placing costs.
-- On 26 August 2016, 17,574,213 warrants were exercised for
Ordinary Shares of 0.01p at 0.8p per share for proceeds of
GBP140,594.
-- On 7 September 2016, 1,250,000 warrants were exercised for
Ordinary Shares of 0.01p at 0.8p per share for proceeds of
GBP10,000.
-- On 3 October 2016, $600,000 of the loan was converted into
71,452,658 Ordinary Shares of 0.01p at 0.65p per share.
-- On 14 October 2016, 44,000,000 warrants were exercised for
Ordinary Shares of 0.01p at 0.06p per share for proceeds of
GBP26,400.
-- On 14 October 2016, $250,000 of the loan was converted into
31,340,633 Ordinary Shares of 0.01p at 0.65p per share.
-- On 18 October 2016, $500,000 of the loan was converted into
63,135,020 Ordinary Shares of 0.01p at 0.65p per share.
-- On 3 November 2016, $500,000 of the loan was converted into
63,135,020 Ordinary Shares of 0.01p at 0.65p per share.
-- (During year ended 31 December 2015, 312,500,000 shares were issued.)
The deferred shares have no voting rights and are not eligible
for dividends.
Warrants issued
Each warrant issued is governed by the provisions of warrant
instruments representing the warrants which have been adopted by
the Company. The rights conferred by the warrants are transferable
in whole or in part subject to and in accordance with the transfer
provisions set out in the Articles. The holders of warrants have no
voting rights, pre-emptive rights or other rights attaching to
Ordinary Shares. All warrants issued vest in full. Warrants fall
outside the scope of IFRS2 if they have been issued to shareholders
in their capacity as shareholders and have therefore not been
treated as share based payments. Warrants were issued to YAGM in
connection with further loan drawdowns during the year ended 31
December 2015, and their treatment has been covered in Note 14.
During the year ended 31 December 2016, 322,809,835 warrants were
issued to shareholders in their capacity as shareholders and
600,000,000 warrants were issued in connection with the Convertible
Loan. The treatment of these has been covered in Note 14.
The following table shows details of the warrants granted and
exercised during the year:
31 December 31 December
2016 2015
Number WAEP Number WAEP
GBP GBP
Outstanding at the
beginning of the
year 254,298,201 0.0105 73,718,850 0.01259
Granted 922,809,835 0.00784 180,579,351 0.0097
Exercised (18,824,213) 0.0080 - -
Outstanding at the
end of the year 1,158,283,823 0.00855 254,298,201 0.0105
============== ======== ============ ========
Exercisable at year
end 1,158,283,823 254,298,201
14 Share based payments
Share Options
The Group operates share option schemes for certain employees
(including directors). Options are exercisable at the option price
agreed at the date of grant. The options are settled in equity once
exercised. The expected life of the options varies between 1 and 6
years. If the options remain unexercised after a period of ten
years from the date of grant, the options expire. Options all
vested immediately, there are no vesting requirements.
Details of the number of share options and the weighted average
exercise price (WAEP) outstanding during the period are as
follows:
31 December 31 December
2016 2015
Number WAEP Number WAEP
GBP GBP
Outstanding at the
beginning of the year 327,825,000 0.00457 332,925,000 0.0045
Granted 300,000,000 0.0044 - -
Exercised (44,000,000) (0.006) - -
Lapsed (3,825,000) (0.03) (5,100,000) (0.03)
Outstanding at the
end of the year 580,000,000 0.00437 327,825,000 0.00457
============= ======== ============ ========
Exercisable at year
end 580,000,000 327,825,000
The share options outstanding at the end of the period have a
weighted average remaining contractual life of 4.24 years (31
December 2015: 4.87 years) and have the following exercise prices
and fair values at the date of grant:
First exercise Grant Exercise Fair 31 December 31 December
date (when date price value 2016 2015
vesting
conditions
are met)
GBP GBP Number Number
6 March 6 March
2009 2006 0.00325 0.020776 - 3,825,000
28 January 28 January
2013 2010 0.0006 0.0004 10,000,000 24,000,000
29 November 29 November
2013 2010 0.005 0.003537 - 30,000,000
13 December 13 December
2012 2012 0.0006 0.00055 20,000,000 20,000,000
28 June 28 June
2013 2013 0.0006 0.000371 10,000,000 10,000,000
21 May
21 May 2014 2014 0.0048 0.004711 200,000,000 200,000,000
23 May
23 May 2014 2014 0.0058 0.005574 40,000,000 40,000,000
1 July
1 July 2016 2016 0.0044 0.002388 300,000,000 -
580,000,000 327,825,000
============ ============
The share options can be exercised up to seven years after the
date first exercisable.
At 31 December 2016 all 580,000,000 options were exercisable (31
December 2015: 327,825,000).
Share Warrants
During the year ended 31 December 2016, 322,809,835 warrants
were issued to shareholders in their capacity as shareholders and
600,000,000 warrants were issued in connection with the Convertible
Loan.
Additionally during the year ended 31 December 2016 Nil (2015:
180,579,351) warrants were issued to YAGM in connection with the
further $6.5 million loans drawn down.
Share warrants
First exercise Grant Exercise 31 December 31 December
date (when date price 2016 2015
vesting
conditions
are met)
GBP Number Number
13 June 13 June
2014 2014 0.011 49,068,529 49,068,529
19 September 19 September
2014 2014 0.018 10,848,654 10,848,654
22 October 22 October
2014 2014 0.014 13,801,667 13,801,667
29 June 29 June
2015 2015 1.2 33,574,598 33,574,598
29 July 29 July
2015 2015 1.13 17,656,007 17,656,007
02 October 02 October
2015 2015 0.96 34,341,188 34,341,188
23 October 23 October
2015 2015 0.95 34,366,078 34,366,078
16 November 16 November
2015 2015 0.84 19,647,535 19,647,535
20 November 20 November
2015 2015 0.79 40,993,945 40,993,945
29 February 29 February
2016 2016 0.8 303,985,622 -
09 August 09 August
2016 2016 0.8 600,000,000 -
1,158,283,823 254,298,201
============== ============
These warrants can be exercised up to three years after the date
first exercisable. At 31 December 2016 all of the 1,158,283,823
warrants were exercisable (31 December 2015: 254,298,201).
For those options and warrants granted where IFRS 2 "Share-Based
Payment" is applicable, the fair values were calculated using the
Black-Scholes model. The inputs into the model were as follows:
Risk free Share price Expected Share
rate volatility life price
at date
of grant
29 June 2015 2.00% 73% 3 years GBP0.0094
29 July 2015 2.00% 64% 3 years GBP0.0091
02 October 2015 2.00% 62% 3 years GBP0.0102
23 October 2015 2.00% 52% 3 years GBP0.0094
16 November
2015 2.00% 50% 3 years GBP0.0080
20 November
2015 2.00% 51% 3 years GBP0.0081
01 July 2016 2.00% 63% 5 years GBP0.0044
09 August 2016 2.00% 68% 2 years GBP0.0063
Expected volatility was determined by calculating the historical
volatility of the Company's share price for 12 months prior to the
date of grant. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
The Group recognised total expenses of GBP1,869,000 (year ended
31 December 2015: GBP641,000) relating to equity-settled
share-based payment transactions during the period.
15 Contingent liabilities
There were no contingent liabilities at 31 December 2016 or 31
December 2015.
16 Capital commitments
There were no capital commitments at 31 December 2016 or 31
December 2015.
17 Financial instruments
The Group is exposed to a variety of financial risks which
result from both its operating and investing activities. The Board
is responsible for co-ordinating the Group's risk management and
focuses on actively securing the Group's short to medium term cash
flows. Long term financial investments are managed to generate
lasting returns.
The Group has purchased shares in Companies which are listed on
public trading exchanges such as the TSX, AIM and ASX, and these
shares are held as an available-for-sale asset. The most
significant risks to which the Group is exposed are described
below:
a Credit risk
The Group's credit risk will be primarily attributable to its
trade receivables. At 31 December 2016, the Group had minimal trade
receivables and therefore minimal risk arises.
Generally, the Group's maximum exposure to credit risk is
limited to the carrying amount of the financial assets recognised
at the balance sheet date, as summarised below:
31 December 2016 31 December 2015
AFS Loans Derivative Statement AFS Loans Derivative Statement
(carried and financial of (carried and financial of
at receivables assets Financial at receivables assets financial
fair position fair position
value total value) total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Available-for-sale
financial
asset 15,967 - - 15,967 13,944 - - 13,944
Other
long term
financial
assets 15,967 - - 15,967 13,944 - - 13,944
--------- ------------ ----------- ---------- --------- ------------ ----------- ----------
Trade
receivables - 43 - 43 - - - -
Other
receivables - 210 - 210 - 161 - 161
Prepayments
and accrued
income - 149 - 149 - 68 - 68
Cash and
cash equivalents - 4,192 - 4,192 - 893 - 893
Total 15,967 4,594 - 20,561 13,944 1,122 - 15,066
========= ============ =========== ========== ========= ============ =========== ==========
Financial instruments that are measured subsequent to initial
recognition at fair value, grouped into Levels 1 to 3 based on the
degree to which the fair value is observable:
-- 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).
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases,
an investment's level within the fair value hierarchy is based on
the lowest level of input that is significant to the fair value
measurement. Management's assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgement, and considers factors specific to the
investment.
Investments
The Group's investment in shares in Listed Companies are
included as an available-for-sale asset has been classified as
Level 1, as market prices are available and the market is
considered an active, liquid market.
The credit risk on liquid funds is limited because the Group
only places deposits with leading financial institutions in the
United Kingdom.
b Liquidity risk
The Group seeks to manage financial risk by ensuring sufficient
liquidity is available to meet foreseeable needs and to invest cash
assets safely and profitably. The Directors prepare rolling cash
flow forecasts and seek to raise additional equity funding whenever
a shortfall in funding is forecast. Details of the going concern
basis of preparing the financial statements are included in the
principal accounting policies.
c Market risk
The amount and quality of minerals available and the related
costs of extraction and production represent a significant risk to
the group. The group is exposed to fluctuating commodity prices in
respect of the underlying assets. The Group seeks to manage this
risk by carrying out appropriate due diligence in respect of the
projects in which it invests.
The Group is exposed to the volatility of the stock markets
around the world, on which it holds shares in various listed
entities, and the fluctuation of share prices of these underlying
companies. The Group manages this risk through constant monitoring
of its investments share prices and news information, but does not
hedge against these investments.
Interest rate risk
The Group only has borrowings at a loan note rate of 5% with
various loan note holders and therefore minimal interest rate risk,
as this is deemed its only material exposure thereto.
d Financial liabilities
The group's financial liabilities are classified as follows:
31 December 2016 31 December 2015
Other Liabilities Total Other Liabilities Total
financial not financial not
liabilities within liabilities within
at amortised the at amortised the
cost scope cost scope
of IAS of IAS
39 39
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Trade
payables 404 - 404 123 - 123
Tax and
social
security 11 - 11 - - -
Other
payables 3 - 3 - - -
Accruals
and deferred
income - 185 185 - 107 107
Borrowings 10,324 - 10,324 2,407 - 2,407
Total 10,742 185 10,927 2,530 107 2,637
============== ============ ======== ============== ============ ========
Maturity of financial liabilities
All financial liabilities at 31 December 2016 and 31 December
2015 mature in less than one year.
Borrowing facilities for the period ended 31 December 2016
The Group has committed borrowing facilities at 31 December 2016
of GBP10,324,000 (31 December 2015: GBP2,407,000). See Note 12 for
details.
e Capital risk management
The Group's objectives when managing capital are:
- to safeguard the Group's ability to continue as a going
concern, so that it continues to provide returns and benefits for
the shareholders;
- to support the Group's stability and growth; and
- to provide capital for the purpose of strengthening the Group's risk management capability.
The Group actively and regularly reviews and manages its capital
structure, to ensure an optimal capital structure, and equity
holder returns, taking into consideration the future capital
requirements of the Group and capital efficiency, prevailing and
projected profitability, projected operating cash flows, projected
capital expenditures and projected strategic investment
opportunities. Management regards total equity as capital and
reserves, for capital management purposes.
18 Related party transactions
There are no related party transactions to disclose.
19 Events after the end of the reporting period
On 31 January 2017, the Company announced that a further
US$200,000 of its US$15 million convertible loan has been converted
into 24,529,629 new ordinary shares in the Company at a price of
0.65 pence per share, reducing the balance to $12,950,000.
On 24 March 2017, the Company changed its name from Rare Earth
Minerals Plc to Cadence Minerals Plc by way of a statutory notice
of change filed at Companies House.
20 Ultimate controlling party
In the opinion of the directors there is no controlling
party.
21 Profit and loss account of the parent company
As permitted by section 408 of the Companies Act 2006, the
profit and loss account of the parent company has not been
separately presented in these accounts. The parent company profit
for the year was GBP735,000 (2015 restated: loss GBP700,000).
About Cadence Minerals:
Cadence is dedicated to smart investments for a greener world.
The planet needs rechargeable batteries on a global scale -
upcoming supersized passenger vehicles, lorries and buses - require
lithium and other technology minerals to power their cells. Cadence
is helping find these minerals in new places and extracting them in
new ways, which will meet the demand of this burgeoning market.
With over GBP40 million vested in key assets globally, Cadence is
helping us reach tomorrow, today.
Cadence invests across the globe, principally in lithium mining
projects. Its primary strategy is taking significant economic
stakes in upstream exploration and development assets within
strategic metals. We identify assets that have strategic cost
advantages that are not replicable, with the aim of achieving lower
quartile production costs. The combination of this approach and
seeking value opportunities allows us to identify projects capable
of achieving high rates of return.
The Cadence board has a blend of mining, commodity investing,
fund management and deal structuring knowledge and experience, that
is supported by access to key marketing, political and industry
contacts. These resources are leveraged not only in our investment
decisions but also in continuing support of our investments,
whether it be increasing market awareness of an asset, or advising
on product mix or path to production. Cadence Mineral's goal is to
assist management to rapidly develop the project up the value curve
and deliver excellent returns on its investments.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SDLFMSFWSESI
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