TIDMSKR
RNS Number : 7743K
Sunkar Resources PLC
27 June 2014
27 June 2014
SUNKAR RESOURCES PLC
("Sunkar" or the "Company")
Final Results for the Year Ended 31 December 2013
Sunkar (AIM: SKR) announces its audited final results for the
year ended 31 December 2013. Copies of the Company's full Annual
Report and Financial Statements will be posted to shareholders and
will also be made available to download from the Company's website
at www.sunkarresources.com.
Enquiries:
Sunkar Resources plc Tel: 020 7397 3730
Teck Soon Kong
Serikjan Utegen
Strand Hanson Limited Tel: 020 7409 3494
Stuart Faulkner
Andrew Emmott
James Dance
Bankside Consultants Tel: 07703 167 065
Simon Rothschild
or visit: www.sunkarresources.com
CHAIRMAN'S STATEMENT
Throughout the year, the Group continued to generate revenue by
producing Direct Application Rock ("DAR") and ground phosphate rock
from its milling plant, for sale to the Kazakh agricultural sector
and industrial customers in Russia which generated revenue of $1.5
million and through utilising its mining machinery assets to
undertake earth moving infrastructure contracts for the Kazakh
national railways.
Revenue of $4.4 million was generated from the completion of the
Group's first earth moving contract for the construction of a rail
track foundation on a stretch of new railway line in Western
Kazakhstan and $9.1 million from the completion of a second earth
moving contract signed in April 2013 with the same general
contractor for another stretch of the rail track foundation.
FINANCIAL RESULTS
The audited financial statements are prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. For 2013, the Group reported a loss of $4.4 million
(2012: $9.2 million). Group net cash outflow in the year was $0.2
million (2012: net cash inflow - $0.3 million).
DIRECT APPLICATION ROCK AND GROUND PHOSPHATE ROCK SALES
The Company continued the pursuit of its strategy for marketing
DAR to the local agricultural sector as well as ground phosphate
rock sales to industrial customers and generated revenue of $1.5
million from sales to farmers and industrial users. Temir-Service
LLP ("Temir") sold 16,711 tonnes during 2013, which were bagged to
farmers in Kazakhstan and Russia.
EARTH MOVING CONTRACTS
The Group completed its first earth moving contract during the
year generating revenues of $4.4 million and started a second
contract which generated a further $9.1 million.
The second earth moving contract was signed in April 2013 for an
approximate total value of $12 million inclusive of VAT.
The Group continued to pursue earth moving contracts in order to
generate additional cash flow and to make use of equipment left
idle due to the reduced mining commitments at Chilisai. Due to the
flat and shallow geological structure of the Company's phosphate
deposit, Temir uses earth moving equipment and mining techniques
similar to those used in laying foundation for major railways and
major highways on flat terrain. The Group holds the relevant state
licences for road construction and has experience of building roads
on its contract territory.
SUBSOIL USE CONTRACT
In March 2014, the Group received final approval of the revised
mining commitments applied for during 2013. In 2013 the Group mined
270,000 tons of phosphate ore under its revised ore mining
commitment of 300,000 tonnes of rock per year. This volume was
achieved in two months of work during October and November.
Management believes that this amount, which equates to 90 per cent.
of the target volume, will be sufficient to satisfy the relevant
authority's requirements under the Subsoil Use Contract, as the
early onset of winter meant that mining activity had to be aborted
earlier than expected. Accordingly, management considers this to be
sufficient to comply with the Subsoil Use Contract and, following
completion of the detailed feasibility study ("DFS"), the directors
do not consider that any impairment of the carrying value of
intangible assets is required.
The Company's commitment to meet associated cumulative
development expenditure of $115 million from the end of 2014 to
2020 has not changed.
GOING CONCERN
The Company requires additional funds to meet its mining
commitments and operational costs whilst also finding a strategic
partner to secure finance for the construction of the fertilizer
manufacturing complex. The Group's strategy was to achieve this
through an increase in the level of phosphate rock sales,
generation of positive cash flows from earth moving contracts and
continued management of its cost base.
However, the Company has not been consistently able to generate
sufficient revenue to maintain a viable business and, on several
occasions, most recently in April, May and June 2014, has had to
seek additional funding from Sun Avenue Partners Corporation
("SAPC"), the Company's majority shareholder, which is wholly owned
by Mr Almas Mynbayev. The Company has been able to access this
funding from SAPC pursuant to letters of support from Mr Mynbayev,
as first announced to the market on 28 September 2012 and
subsequently pursuant to a letter of support from JSC
"Interfarma-K" (the "Letter of Support"), a company in which Mr
Mynbayev is interested. The Letter of Support states that JSC
"Interfarma-K" will, subject to the agreement of mutually
acceptable terms, provide financial support to assist the Group in
meeting its liabilities as they fall due.
In April 2014, SAPC wrote to the Company to express its concern,
with regard to the Company's financial situation, and to seek to
work with the Company to find a structural alternative to it
providing further funding under the Letter of Support, in order to
provide a more permanent solution to the Company's ongoing funding
deficit, until sufficient funds were raised to progress with the
plans set out in the DFS.
As a result of these discussions, on 19 May 2014, SAPC put
forward a proposal to acquire the minority interests in Sunkar that
it did not already own, such that SAPC would own, on completion of
the transaction, 100 per cent. of Sunkar. At the same time, SAPC
confirmed that, should this proposal not receive the support of the
Board, it was highly unlikely that JSC "Interfarma-K" would renew
its Letter of Support for the coming twelve months or provide any
further funding to the Company.
Further to these discussions, the Board sought advice from an
independent firm of accountants and an independent firm of
insolvency practitioners as to the financial position of the
Company under such a scenario. This advice confirmed the Sunkar
Board's assessment that, without the financial support of SAPC, it
was highly probable that the Company would no longer be deemed a
going concern, would be unable to meet its debts as they became due
and would lead to the commencement of insolvency proceedings and
the Sunkar Shares would be suspended from trading on AIM.
In the event that the Company enters into insolvency
proceedings, the Sunkar Board believes that Temir would cease
trading and would also enter into insolvency proceedings in
Kazakhstan. Temir would then be unable to perform its obligations
under the terms of the Subsoil Use Contract, which would result in
the Subsoil Use Contract being revoked. If Sunkar were to lose its
rights under the Subsoil Use Contract, it is the Sunkar Board's
belief that Sunkar Shareholders would be unlikely to receive any
value for their Sunkar shares.
As a result of this advice, and the Board's assessment of the
Company's financial position, the Board urgently, but
unsuccessfully, explored alternative sources of finance, whether
equity, debt or a combination of both, but was unable to secure
such finance.
The Directors, in light of the above, and having been so advised
by the Company's Nominated Adviser, unanimously agreed to recommend
that shareholders accept the offer proposed by SAPC and Serik
Utegen and Nurdin Damitov, the Directors who currently own and
control shares agreed to irrevocably undertake to accept such an
offer in respect of their combined beneficial shareholding of 12.26
per cent. of the issued ordinary share capital of Sunkar.
Accordingly, on 17 June 2014, Sunkar and SAPC announced that
they had reached agreement on the terms of a recommended cash offer
to be made by SAPC for the entire issued and to be issued ordinary
share capital of Sunkar not already owned by SAPC, on the basis of
1.835 pence per Sunkar share (the "Offer").
Following the recommendation from the Directors that the
shareholders accept the Offer, as also announced on 17 June 2014,
SAPC has provided an unsecured term loan of $2.55 million to fund
the Company's working capital requirements throughout the duration
of the Offer period and, in any event, for a period of 120 days
following the date of the agreement.
The Directors remain confident that the completion of the Offer
will be successful and, based on the current cash flow projections,
including the revenue to be generated from sales of DAR, the
unsecured term loan referred to above and further support from SAPC
on completion of the Offer, sufficient funding will be made
available to enable the Group and Company to continue in
operational existence for the foreseeable future. Accordingly, the
financial statements have been prepared on a going concern
basis.
However, if the Offer does not complete by 16 August 2014 and
the Letter of Support is withdrawn and SAPC does not provide
further funding to the Company, the Board would immediately have to
seek alternative sources of funding to meet its working capital
requirements, which the Board, having previously investigated such
alternative sources of financing, does not believe would be
available to the Company. This would, in the view of the Board,
lead to the suspension of the admission of the ordinary shares to
trading on AIM and the announcement of an administration/insolvency
process.
CONCLUSION
The Offer made by SAPC provides a certain cash exit and secures
the future of the Company against the current backdrop of the
Group's particularly challenging financial position.
I would like to thank our management team, staff, consultants,
contractors and my fellow directors for their effort throughout the
year to market DAR and substantially complete the earth moving
contracts to generate revenue in order to fund the working
capital.
Teck Soon Kong
CHAIRMAN
26 June 2014
Strategic Report for the year ended 31 December 2013
The directors present their strategic report for the year ended
31 December 2013.
PRINCIPAL ACTIVITY
The principal activity of the Group for the period under review
was the mining of phosphate rock.
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS
The Company has a 100 per cent. interest in Temir, which holds
the Subsoil Use Contract for the Chilisai Deposit. The Chilisai
Deposit is one of the most significant phosphorite deposits in the
Commonwealth of Independent States, with a resource of
approximately 800 million tonnes of ore at 10 per cent. P(2) O(5)
.
The Group commenced mining operations at the Chilisai Deposit in
2008 and, in February 2011, Sunkar published the preliminary
results of the DFS, conducted by SNC-Lavalin, one of the leading
engineering and construction groups in the world, which was
subsequently completed and the results published in February
2013.
The DFS concluded that a large scale mono-ammonium phosphate
("MAP"), di-ammonium phosphate ("DAP") chemical processing plant
would require approximately $1.94 billion (+/- 15 per cent.) to
fund construction and working capital. The DFS includes, inter
alia, the economic model for the plant and a comprehensive
marketing study for future sales of the MAP, DAP and phosphoric
acid products.
The location of the Chilisai Deposit has certain key advantages
in the opinion of the Board, including access to a relatively low
cost source of sulphur, one of the key raw materials required for
phosphate fertilizer production, and well developed existing
transport and power infrastructure facilities.
Whilst the Company was in the process of attempting to raise the
funds required to develop the chemical processing plant, as
envisaged under the DFS, it utilised its heavy machinery and
workforce by entering into earth moving contracts with a general
contractor building a new railway in Western Kazakhstan, which
initially generated positive cash flows to fund the Group's general
working capital requirements.
In addition to the earth moving contracts, the Group has
continued to mine and market DAR to the local agricultural sector
as well as ground phosphate rock sales to industrial customers,
although this has historically represented a relatively small
amount of total revenue.
On 13 February 2013, the Company issued 174,476,283 ordinary
shares of 0.1 pence each to satisfy the conversion of $12.8 million
of loan notes held by SAPC, following being granted permission to
issue the shares by the National Bank of Kazakhstan. Following this
transaction, SAPC now holds approximately 51.15 per cent. of the
Company's issued share capital. Almas Mynbayev, owner of SAPC, is
the ultimate controlling party.
On 25 February 2013, the Company announced that the Ministry of
Industry and New Technologies of the Republic of Kazakhstan had
approved changes to the Company's mining plan and Work Programme
commitments regarding the development of the Chilisai Deposit.
On 28 February 2013, the Company announced the completion of its
DFS on its Chilisai Deposit which was expected to form the
foundation for a prospective project financing arrangement.
On 3 May 2013, the Company announced the signing of its second
earth moving contract. The new contract value is approximately $12
million and it was expected that the Group would have to outsource
some of the works in order to complete the 2 million m(3) earth
moving requirement by the deadline of November 2013.
Current trading and prospects
On 11 February 2014 the Kazakh Tenge was devalued by
approximately 20 per cent., which has led to financial uncertainty
within the domestic economy of Kazakhstan. The signing of many new
government contracts denominated in Kazakh Tenge have been put on
hold, which has also led to delays in the receipt of monies due to
the Group in respect of its existing earth moving contracts, as
well as delaying the agreement of the expected new contracts.
As previously disclosed, the earth moving contracts associated
with the Kazakh government's infrastructure development programmes
are a significant part of the Group's revenues and the Company has
been largely relying on the cash generated by these projects for
its ongoing working capital needs.
Earth moving contracts
Temir has been unsuccessful to date in concluding negotiations
for a third earth moving contract on the timescale previously
expected. Accordingly, Temir is now expected to generate materially
less cash during 2014. Temir is continuing to negotiate this
contract, but the Board reluctantly recognises that there can be no
certainty as to whether, or when, acceptable terms will be
agreed.
In March 2014, the Group agreed an extension to the second earth
moving contract with a value of approximately KZT79 million
($434,000). The majority of these works were completed during April
2014, in terms of volumes, and Temir expects to complete the final
works during the course of June 2014. Temir is yet to complete
26,282 m(3) of works under the first earth moving contract, as
these were delayed due to other critical path work streams, which
had to be completed prior to completion of an embankment. It is
expected these works will also be completed in June 2014.
DAR sales
During 2014, Temir has shipped 10,534 tonnes of DAR, both ground
and unground, including 5,658 tonnes to Russia, 4,738 tonnes to
Kazakhstan, and 138 tonnes to the EU. Shipments in May were 3,034
tonnes, which was slightly above management's expectations. The
total quantity contracted to date for delivery in 2014 is 32,496
tonnes of DAR.
Temir has continued working towards a feasibility study for the
proposed nitrophosphate granulation facility. However, due to
funding constraints, Temir has been unable to commission further
consultancy and design works from third party contractors to
progress this study.
INCOME STATEMENT
The Group made a loss after tax of $4.4 million for the year
ended 31 December 2013 compared with a loss of $9.2 million for the
year ended 31 December 2012 as follows:
Income Statement 2013 2012
$,000 $,000
Revenue 14,952 2,248
Cost of sales (11,651) (2,624)
UK administrative expenses (1,398) (2,109)
Kazakhstan administrative expenses (3,146) (2,697)
Other operating costs (959) (1,057)
Depreciation (27) (67)
Foreign exchange losses (1,212) (707)
Finance costs (719) (2,223)
Income tax (194) -
Loss after tax (4,354) (9,236)
======== =======
Revenue and cost of sales have increased due to earth moving
contracts carried out during the year. Gross profit of $3.3 million
was generated (2012: gross loss $0.4 million). Management and
administrative costs including depreciation have reduced by $0.3
million during the year mainly as a result of cost reductions in
the UK office. Other operating costs include idle time of $0.5
million and a write down of inventory of $0.4 million. Finance
costs include $0.3 million in respect of the convertible loan
notes.
BALANCE SHEET
The net assets of the Group are summarised as follows:
Balance Sheet 2013 2012
$,000 $,000
Tangible fixed assets 13,670 15,658
Intangible fixed assets 67,910 68,864
Long-term inventories 8,121 8,705
Current assets 4,232 4,955
======== ========
Total assets 93,933 98,182
Long-term liabilities (13,231) (14,089)
Current liabilities (5,724) (18,601)
======== ========
Net assets 74,978 65,492
======== ========
Net assets increased by $9.5 million to $75.0 million mainly as
a result of the conversion of loan notes of $12.8 million less
losses of $4.4 million during the year.
Property, plant and equipment decreased by $2.0 million
primarily as a result of depreciation in the period.
The decrease in intangible assets includes spending on the DFS
of $0.5 million offset by amortisation of $0.3 million and an
exchange difference of $1.1 million.
Inventory balances of $8.1 million have been included as
non-current to reflect the expected usage profile, with a further
$2.4 million included within current assets.
Current liabilities, excluding the convertible loan of $13.6
million in 2012, increased by $0.7 million mainly as a result of an
increase in trade payables.
Long-term liabilities relate to deferred tax, the non-current
portion of the ACB loan and a historical cost liability.
CASH FLOW
Net Cash Flow 2013 2012
$,000 $,000
Operating activities 1,033 (6,530)
Investing activities (777) (2,103)
Financing activities (480) 8,905
Effect of exchange rate fluctuations
on cash held (30) (23)
------ -------
Net cash increase/(decrease) (254) 249
Opening cash 462 213
------ -------
Closing cash 208 462
------ -------
The Group cash flows in 2013 relate to the funds generated from
earth moving contracts and the sale of DAR. The Group generated
cash of $1 million from operating activities compared with cash
utilised of $6.5 million in 2012 reflecting the reduced cash
operating losses during the year. Cash utilised in investing
activities reduced by $1.3 million reflecting lower capital
expenditure following completion of the DFS and lower spending on
property, plant and equipment.
Cash utilised in financing activities reflects the balance of
$0.5 million received from Asia Credit Bank ("ACB") less scheduled
repayments of the bank loan of $1 million.
GOING CONCERN
The Company requires additional funds to meet its mining
commitments and operational costs whilst also finding a strategic
partner to secure finance for the construction of the fertilizer
manufacturing complex. The Group's strategy was to achieve this
through an increase in the level of phosphate rock sales,
generation of positive cash flows from earth moving contracts and
continued management of its cost base.
However, the Company has not been consistently able to generate
sufficient revenue to maintain a viable business and, on several
occasions, had to seek additional funding from SAPC, as set out
below:
-- In April 2014, the Company raised $1.28 million via the issue
of the Convertible Loan Notes in order to make deferred ACB Loan
repayments and meet other creditor demands.
-- On 27 May 2014, the Company announced that its financial
position had worsened significantly and that the Sunkar Board
required an immediate working capital injection in order to make
further payments under the ACB Loan. Accordingly, SAPC agreed to
provide an additional $0.10 million new loan facility to the
Company.
-- On 17 June 2014, the Company secured a $2.55 million working
capital facility from SAPC, in order to fund the Company's working
capital requirements throughout the duration of the Offer Period
and, in any event, for a period of 120 days following the date of
the agreement.
The Company has been able to access this funding pursuant to the
Letter of Support, stating that JSC "Interfarma-K" will, subject to
the agreement of mutually acceptable terms, provide financial
support to assist the Group in meeting its liabilities as they fall
due.
However, in April 2014, SAPC wrote to the Company to express its
concern, with regard to the Company's financial situation, and to
seek to work with the Company to find a structural alternative to
the Letter of Support funding, which would provide a more permanent
solution to the Company's ongoing funding deficit, until sufficient
funds were raised to progress with the plans set out in the
DFS.
Subsequently, in May 2014, SAPC indicated to the Sunkar Board
that it was not prepared to continue to fund Sunkar on an ongoing
basis, without seeking full control of the Company and on 17 June
2014, Sunkar and SAPC announced that they had reached agreement on
the terms of the Offer.
In the absence of the Offer, the Sunkar Board, having sought
advice from an independent firm of accountants and an independent
firm of insolvency practitioners, determined that should SAPC not
provide further funding to the Company, the Board would immediately
have to seek alternative sources of funding to meet its working
capital requirements, which the Sunkar Board, having previously
investigated such alternative sources of financing, do not believe
would be available to the Company. This would, in the view of the
Board, lead to the suspension of trading of the Sunkar Shares on
AIM and the commencement of insolvency proceedings.
The Directors remain confident that the completion of the Offer
will be successful and based on the current cash flow projections
sufficient funding is or will be made available, to enable the
Group to continue in operational existence for the foreseeable
future. Accordingly, the financial statements have been prepared on
a going concern basis.
Risks, Uncertainties and Performance Indicators
Risk assessment and evaluation is an essential part of the
Group's planning and an important part of the Group's internal
control procedures. The key risks the Group faces have been
addressed as part of the DFS and are set out below.
General and economic risks
Continued financial and economic uncertainty in the world's
major economies and a protracted period of recovery. The Group's
response has been to conserve cash through efficient use of
resources and seeking to generate early cash flow through sales of
DAR and phosphate rock and utilisation of spare capacity performing
an earth moving contract.
Currency exchange fluctuations, particularly, in respect of the
relative prices of the US Dollar, Kazakhstan Tenge and GB Pound.
Foreign currency risk is managed by holding cash resources in USD
and purchasing currencies only when requirements can be forecast
with some degree of certainty.
Technical risk
The DFS, completed in February 2013, concluded that the Chilisai
chemical complex would be able to convert phosphate rock mined from
the Chilisai Deposit into high analysis fertilizers - DAP and MAP -
using traditional phosphoric acid and ammoniation/granulation
technology. Two options had been analysed in terms of quality of
final products.
The first and core option was to manufacture fertilizers from
phosphoric acid as is, without its purification to remove minor
elements, such as alumina, iron, and magnesia oxides. The resulting
products - DAP and MAP will then be of limited quality in terms of
their water solubility. The independent market study, prepared by
CRU Strategies, the well-known fertilizer market observer, for the
purposes of the DFS, has estimated that products of such limited
quality may have been priced approximately 5.5 per cent. lower at
FOB Black Sea market. The DFS concluded that unless there will be
specific demand for full quality fertilizers by a prospective
off-take arrangement, the limited quality fertilizers sales will be
the base option for chemical complex configuration. The conclusion
has been sourced from detailed financial model provided with the
DFS.
The second option is to manufacture full quality,
internationally accepted, DAP and MAP product. Sunkar's consultant,
SNC-Lavalin, has taken into consideration results of pilot plant
tests of phosphoric acid purification technologies to be used in
the manufacturing process. Two technologies, and their respective
test results, have been considered and recognized as feasible the
for purpose of the Chilisai phosphate rock originated phosphoric
acid purification - ion exchange technology and preliminary
ammoniation technology. Both technologies have been widely used at
an industrial scale, and are recognized to be applicable for the
Chilisai chemical complex's phosphoric acid purification unit. Both
technologies, if applied, will produce phosphoric acid clean enough
to be converted into full specification DAP and MAP, while
purification process's waste will be converted into lower analysis
fertilizers - single superphosphate in the case of ion exchange or
lower analysis ammoniated phosphate compound in the case of
preliminary ammoniation. Both by-products are expected to find
their niche in the market in Kazakhstan and adjacent regions. The
consultant has run basic economic sensitivity analysis of the use
of phosphoric acid purification technologies and has concluded that
the benefits from full specification products manufacturing and
elimination of quality discount during sales may have been offset
by the cost of processing and capital expenses for additional
equipment installation. The change in net present value of the
project after insertion of the effects of full quality fertilizer
manufacturing into the model fell well within +/-15 per cent.
margin, and therefore the difference between the base case and acid
purification case was not considered material.
Market risk
The pricing of agricultural minerals in Kazakhstan and Russia,
including DAR and phosphate rock, and finished products is not
transparent and customers usually do not buy from a terminal market
on the basis of common publicly disclosed prices. Transactions are
usually negotiated with multiple suppliers, each with differing
product availability and specifications, logistics, price and
credit terms.
There is a risk of DAR, phosphate rock and fertilizer demand
varying significantly from that predicted including that
attributable to weather-related factors. The Group's focus on its
target markets may negatively impact the Group's results in the
event of a slowdown in demand. There can be no assurance that the
current growth in the economies of the Group's target markets will
continue at the same pace. An overall slowdown in these markets, as
a result of either political or economic forces, could bring about
a decrease in demand for the Group's products. Some of the target
markets are expanding their own production of phosphates and this
could also bring about a decrease in demand for the Group's
products.
This is mitigated due to the Project's low cost base which is
essential if it is to trade profitably.
The high analysis final product's markets, such as Black and
Baltic seas ports, are quite well defined and observed by
well-established information agencies. Therefore, from the
beginning of Chilisai project's development, the Company has been
targeting high analysis products, which represent the majority of
P2O5 nutrient traded cross-border and/or overseas - DAP and MAP.
The detailed feasibility study accounts for past prices analysis
and future prices forecasts, it has precision of +/- 15 per cent.
and therefore enables the Company to conduct project finance
discussions.
Funding risk
The risk is that the Group may not be able to raise, either by
debt or further equity, sufficient funds to enable completion of
its planned fertilizer manufacturing project. Historically the
Group raised funds as and when required to achieve the next stage
of the Project's progress. The capital expenditure estimated to
build Stage I of the Group's fertilizer project is considerable and
raising funds has proved a significant challenge. The Group also
faces shorter-term funding risks as discussed in the Going Concern
section of this report.
Regulatory Risk
The Group's production activities are subject to various laws
and regulations governing prospecting, mining, development,
royalties, permitting and licensing requirements, production,
taxes, labour standards and occupational health, mine safety,
protection of the environment, toxic substances, land use, water
use, land claims from local people and other matters. Although the
Group's development activities are currently carried out in
compliance with all applicable rules and regulations subject to the
comments under key performance indicators below, no assurance can
be given that new rules and regulations will not be enacted or that
existing rules and regulations will not be applied in a manner
which could limit or curtail exploration, development or
production.
The Group is at an early stage of its development and to date,
it has been successful in gaining support for the Project.
The Government has previously shown support for the Group's
development plans. The Group's projects to establish a phosphate
rock business and to develop a world scale phosphate fertilizer
complex have both been included in the Government of the
Kazakhstan's Industrial Development Program.
Key Performance Indicators
The key performance indicators which are monitored, together
with the results for the period are:
Target Performance
2013 SUC ore mining 300,000 tonnes 270,000 tonnes
commitment
Management believes that this amount, which is 90% of the target
volume, will be sufficient to satisfy the relevant authority's
requirements under the Subsoil Use Contract, as the unusually heavy
snow conditions in December 2013 meant that mining activity had to
be aborted earlier than expected.
By order of the Board
Charles de Chezelles
DIRECTOR
26 June 2014
Corporate Social Responsibility
The Group is committed to maintaining high standards of social
responsibility. The Corporate Social Responsibility and
Environmental Committee has the duty of establishing and guiding
evolving policies and practices. In particular we seek always to
abide by the rule of law and behave fairly in business and be
respectful of the rights of others. We strive to minimise the
environmental effects of our operations, provide a safe and healthy
workplace for all our employees and contractors and promote social
programmes in the communities where we operate.
Social Responsibility
Temir Service LLP paid KZT 234,000 in deductions for social and
infrastructure development in accordance with the work programme of
the SUC. The amount paid is based on total capital expenditure and
relates to 2012.
Local staff training expenses were KZT 338,000 compared to KZTT
377,000 per the work programme.
Environment
Highlights
-- No environmental incidents to date
-- Quarterly environmental monitoring was conducted and
environmental reports were approved by the Regulator
The Group views environmental protection as an essential part of
its operations and a key element of Group strategy. We have set
high standards for environmental protection and constantly monitor,
assess and collect data. Temir has contracted one of the most
experienced advisers in the area of environmental monitoring and
assessment to minimise any adverse effects its activities may
cause.
Government Inspections
The Group is compliant with local environmental and occupational
health legislation. No fines or sanctions have been imposed as a
result.
Environmental Protection
A baseline environmental impact assessment was carried out in
2009 in accordance with the Environment Code of Republic of
Kazakhstan. Temir has obtained permits for emissions until end of
2015.
Temir Service maintains an environmental monitoring programme of
its mining and milling activities which includes quarterly
monitoring of the following:
-- Air emissions
-- Soil
-- Water sources
-- Radioactivity
-- Waste generation and disposal
The monitoring is being performed by a local licensed
contractor.
The Group, as in past years, filed its reports on greenhouse gas
emissions in 2013.
Occupational Health and Safety
Safety awareness has been key to local management and HSE team's
success in maintaining a safe working environment and is promoted
through:
-- Walk-through inspections with Senior Management on site
-- On the job instructions and training
-- Continuous safety knowledge testing
During 2013, Temir had worked a total of 419,649 man hours. Out
of this total, 345,212 man hours has been worked at field
operations.
In 2013 no labour safety accidents, which may have resulted in
injury or other impairment of workers, have been recorded. Given
the remote nature of field operations during 2013, management put
particular emphasis on labour safety procedures and training,
including a dedicated safety specialist on the remote site.
Directors' Report
The directors present their report with the audited financial
statements for the year ended 31 December 2013.
Directors
The directors during the year under review and subsequently
were:
TS Kong Non-executive Chairman
S Utegen Chief Executive Officer
N Damitov Director, Corporate Affairs
C de Chezelles Non-executive director
Biographical details of the present directors of the Company are
given later in this Report.
Dividends
The directors do not recommend the payment of a dividend (2012:
$nil).
Interests of Directors
The interests of the directors, who held office at year end, in
the issued share capital of the Company are as follows:
Name Number Number
of shares of shares
held 31 held 31
December December
2013 2012
================ =========== ===========
TS Kong(1) 2,000,000 1,000,000
S Utegen(2) 20,413,500 20,413,500
N Damitov(3) 21,427,799 21,427,799
C de Chezelles - -
Notes:
[1] The shares are registered in the name of Hero Nominees
Limited, which holds the shares on behalf of Kongs Everlasting
Settlement, a family trust of which Mr Kong is a beneficiary.
2 16,413,500 shares are registered in the name of Novita
Advisors Corporation of which Mr Utegen is the beneficial
owner.
3 20,413,500 shares are registered in the name of Upminster
Advisors Corp of which Mr Damitov is the beneficial owner.
1,014,299 shares are held by The Bank of New York (Nominees)
Limited as custodian, for the ultimate beneficial ownership of Mr
Damitov.
Substantial Share Interests
The Company has been notified or is otherwise aware of the
following significant holdings of voting rights in its shares as at
30 April 2014:
Shareholder (* Number of Ordinary % of Share Capital
Director) Shares
Sun Avenue Partners
Corporation 174,476,283 51.15
N Damitov* 21,427,799 6.28
S Utegen* 20,413,500 5.98
Directors' indemnity insurance
Directors' and officers' liability insurance was maintained for
directors and other officers of the Group during the year ended 31
December 2013 as permitted by the Companies Act 2006.
Financial Risk Management
Details regarding the risks associated with the Group's use of
financial instruments are discussed in note 25 to the financial
statements.
Strategic Report
The Company has chosen, in accordance with Section 414C of the
Companies Act 2006, to set out the following information which
would otherwise be required to be contained in the report of the
directors within the Strategic report:
Review of business and future development; and
Principal risks and uncertainties.
Statement as to Disclosure of Information to the Auditor
So far as each director is aware, there is no relevant audit
information (as defined by Section 418 of the Companies Act 2006)
of which the Company's Auditor is unaware, and each director has
taken all the steps that he ought to have taken as a director in
order to make himself aware of any relevant audit information and
to establish that the Company's Auditor is aware of that
information.
Auditor
Deloitte LLP have expressed their willingness to continue in
office and a resolution will be proposed at the Annual General
Meeting for reappointment in accordance with Section 489 of the
Companies Act 2006.
By order of the Board
CHARLES DE CHEZELLES
DIRECTOR
26 June 2014
Directors
TECK SOON KONG
NON-EXECUTIVE CHAIRMAN
Teck Soon Kong was appointed as a non-executive director of the
Company on 23 October 2006 and the non-executive Chairman in May
2007. He is a chemical engineer with more than 48 years of
experience in the international oil and gas industry, mainly in
various senior roles with Shell across the globe. Teck Soon Kong's
other business and professional interests include marine
engineering, international finance, mining and IT. He has been
doing business in the FSU countries since 1996 with a particular
emphasis on Kazakhstan and Russia. He is an independent director of
Sterling Resources Limited which is listed on the Toronto Stock
Exchange, and a Trustee of Harapan, a UK registered charity.
SERIKJAN UTEGEN
CHIEF EXECUTIVE OFFICER
Serikjan Utegen was appointed as Chief Executive Officer of the
Company on 23 October 2006. He has previously held the positions of
director of operations and then President for KKM Holdings JSC
developing three oil fields in Western Kazakhstan and has
experience in the management of exploration, financing and
corporate development. He has worked for a range of Kazakhstan oil
companies, including the position of Head of the Transportation
Department of KazTransOil National Oil Pipeline Utility of
Kazakhstan.
NURDIN DAMITOV
EXECUTIVE DIRECTOR, CORPORATE AFFAIRS
Nurdin Damitov was appointed as Director, Corporate Affairs on 9
May 2008 and has been involved in various oil, gas and mineral
consulting activities and IPOs. He was appointed as General
Director of Temir Service in 2008 but stepped back from this role
in March 2011. He has extensive experience of banking and finance
from his time as a director of PricewaterhouseCoopers (Kazakhstan),
as a managing director of Halyk Bank of Kazakhstan and through his
work in the Government of Kazakhstan as a director of the State
Investment Committee of the Republic of Kazakhstan and Assistant
Chairman of the National Securities Commission of the Republic of
Kazakhstan.
CHARLES DE CHEZELLES
NON-EXECUTIVE DIRECTOR
Charles de Chezelles was appointed as a non-executive director
of the Company on 23 October 2006 and has spent most of his career
in the financial industry in the US and Europe as well as the
natural resources sector. He is currently managing director of
Camor Gold S.A. (Dubai) and Damerin Limited (London) and sits on
the boards of several public companies in the natural resource
field.
Officers, Advisers and Corporate Directory
Secretary: Maclay Murray & Spens LLP
Registered office: Maclay Murray & Spens LLP
One London Wall
London
EC2Y 5AB
United Kingdom
Registered number: 05759399 (England and Wales)
Website: www.sunkarresources.com
Email: info@sunkarresources.com
Chilisai Chemicals LLP: Office 402a
19, Al Farabi Avenue
Almaty 050059
Republic of Kazakhstan
Temir-Service LLP: Office 401
85 Abilkhaiyr Khan Avenue
Aktobe 030000
Republic of Kazakhstan
Auditor: Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Solicitors: Maclay Murray & Spens LLP
(as to English Law) One London Wall
London
EC2Y 5AB
Solicitors: Salans LLP
(as to Kazakhstan Law) 135 Abylai Khan Ave
Almaty 050000
Republic of Kazakhstan
Nominated adviser Strand Hanson Limited
and broker: 26 Mount Row
Mayfair
London
W1K 3SQ
Financial adviser: JSC Brokerage House Jazz Capital
(as to listing on the 4(th) Floor
Kazakhstan Stock Exchange) 59a Amangel'dy Street
Almaty 050012
Republic of Kazakhstan
Public relations advisors: Bankside Consultants Limited
6 Middle Street
London
EC1A 7PH
Registrars: Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Bankers: HSBC Bank PLC
City of London Commercial Centre
60 Queen Victoria Street
London
EC4N 4TR
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable laws and
regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have, as required by the AIM Rules for Companies (the "AIM Rules"),
prepared the Group financial statements in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union ("EU") and have also elected to prepare the
Company financial statements in accordance with those standards.
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 of the Company and the Group and of
the profit or loss of the Group for that period. In preparing these
financial statements, IAS 1 requires that the directors:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRS are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the Company's ability to continue as a going concern.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and the Group and to 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.
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 the financial statements and other
information included in annual reports may differ from legislation
in other jurisdictions.
We confirm to the best of our knowledge:
1. the financial statements, prepared in accordance with IFRS as
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company
and the undertakings included in the consolidation taken as a
whole; and
2. the management report, which is incorporated into the
Directors' Report, includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face.
By order of the Board
CHARLES DE CHEZELLES
DIRECTOR
26 June 2014
Corporate Governance Report for the Year ended 31 December
2013
In formulating the Group's corporate governance procedures, the
Board takes due regard of the principles of good governance set out
in the UK Corporate Governance Code issued by the Financial
Reporting Council (as appended to the Listing Rules of the
Financial Services Authority) as varied by the recommendations on
corporate governance of the Quoted Companies Alliance (QCA) for
companies with shares traded on the AIM Market of the London Stock
Exchange and the size and development of the Group.
The Board of the Company is currently comprised of the Chairman
(who is an independent non-executive director), two executive
directors and one independent non-executive director. It is the
Board's policy to maintain independence by having at least two
independent non-executive directors.
The directors have formed, and have adopted terms of reference
for, an audit committee, a remuneration committee, a nomination
committee and a corporate social responsibility and environmental
committee. The UK Corporate Governance Code requires that all the
members of the audit committee and remuneration committee and a
majority of the members of the nomination committee should be
independent non-executive directors.
COMMITTEES OF THE DIRECTORS
Audit Committee
The audit committee is chaired by Charles de Chezelles and its
other member is Teck Soon Kong. It will normally meet not less than
four times a year. This committee is comprised exclusively of
non-executive directors. The audit committee has responsibility
for, amongst other things, the planning and review of the Group's
annual report and accounts and half-yearly reports and the
involvement of the Group's Auditor in that process. The committee
focuses in particular, on compliance with legal requirements,
accounting standards and the AIM Rules and on ensuring that an
effective system of internal financial control is maintained. The
ultimate responsibility for reviewing and approving the annual
report and accounts and the half-yearly reports remains with the
Board. The terms of reference of the audit committee cover such
issues as membership and the frequency of meetings, as mentioned
above, together with the role of the secretary and the requirements
of notice of and quorum for and the right to attend meetings. The
duties of the audit committee covered in the terms of reference
are: financial reporting, internal controls and risk management
systems, whistle blowing, internal audit, external audit, and
reporting responsibilities. The terms of reference also set out the
authority of the committee to exercise its duties.
Remuneration Committee
The remuneration committee is chaired by Charles de Chezelles
and its other member is Teck Soon Kong. It normally meets not less
than twice a year. This committee will be staffed exclusively by
non-executive directors. The remuneration committee has
responsibility for making recommendations to the Board in respect
of the Group's policy on the remuneration of certain senior
executives (including senior management), the implementation and
operation of share incentive schemes and for the determination,
within agreed terms of reference, of specific remuneration packages
for each of the executive directors, including pension rights and
any compensation payments.
The terms of reference of the remuneration committee cover such
issues as membership and frequency of meetings, as mentioned above,
together with the role of secretary and the requirements of notice
of and quorum for and the right to attend meetings. The duties of
the remuneration committee covered in the terms of reference relate
to the following: determining and monitoring policy on
remuneration, early termination, performance related pay, pension
arrangements, authorising claims for expenses from the Chief
Executive and Chairman, reporting and disclosure, and remuneration
consultants. The terms of reference also set out the reporting
responsibilities and the authority of the committee to exercise its
duties.
Nomination Committee
The nomination committee is chaired by Teck Soon Kong and its
other members are Charles de Chezelles and Serikjan Utegen. It
normally meets twice a year. This committee will always have a
majority of independent non-executive directors. The nomination
committee has responsibility for regularly reviewing the structure,
size and composition (including the skills, knowledge and
experience) of the Board and making recommendations to the Board
with regard to any changes. Its duties include: giving full
consideration to succession planning for directors and other senior
executives in the course of its work, taking into account the
challenges and opportunities facing the Company, and the skills and
expertise needed on the Board in the future and reporting to the
Board regularly; identifying and nominating for the approval of the
Board, candidates to fill Board vacancies as and when they arise,
save that appointments as Chairman or Chief Executive should be
matters for the whole Board; and, before any appointment is made by
the Board, evaluating the balance of skills, knowledge and
experience on the Board, and, in the light of this evaluation
preparing a description of the role and capabilities required for a
particular appointment. The nomination committee will also make
recommendations to the Board as to the composition of the audit and
remuneration committees.
The terms of reference for the nomination committee also cover
such issues as the role of the secretary, notice of and quorum for
and the right to attend meetings, as well as the reporting
responsibilities of the committee and the authority of the
committee to exercise its duties.
Corporate Social Responsibility and Environmental ("CSRE")
Committee
The CSRE committee is chaired by Teck Soon Kong and its other
members are Serikjan Utegen and Nurdin Damitov. It normally meets
not less than two times per year. The CSRE committee has
responsibility for reviewing the policies and conduct of the Group
with respect to corporate responsibility, health and safety of its
employees and the community in which the Group operates, the
environment in which the Group operates, and the social impact of
the Group on the communities in which the Group operates, with the
aim of assisting the board of directors to efficiently and
effectively manage the Company.
The terms of reference for the CSRE committee also cover such
issues as the role of the secretary, notice and quorum for and the
right to attend meetings, as well as the reporting responsibilities
of the committee and the authority of the committee to exercise its
duties.
GUIDELINES FOR DEALING WITH MAJOR SHAREHOLDERS
Corporate governance guidelines have been put in place with
certain major shareholders, including Sun Avenue Partners Corp and
directors Serikjan Utegen, Nurdin Damitov and, in order to ensure
that:
1. The Board can operate in a manner independent of those major
shareholders and therefore in the interest of shareholders as a
whole; and
2. Any dealings with major shareholders are on an arm's length
basis and on normal commercial terms.
Independent Auditor's Report to the Members of Sunkar Resources
PLC
We have audited the financial statements of Sunkar Resources plc
for the year ended 31 December 2013 which comprise the Consolidated
Income Statement, the Consolidated Statement of Comprehensive
Income, the Consolidated and Company Balance Sheets, the
Consolidated and Company Statements of Changes in Equity, the
Consolidated and Company Cash Flow Statements, and the related
notes 1 to 29. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
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 directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities, 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
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's and the parent company's circumstances
and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial
statements. In addition we read the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the Group's and of the parent company's affairs as at 31
December 2013 and of the Group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Emphasis of matter - going concern
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosure made in
note 3 to the financial statements concerning the Company's and the
Group's ability to continue as a going concern. The Group is
reliant on securing significant additional sales volumes of
phosphate rock, generating cash from earth moving contracts and
securing additional sources of funding (including support from the
majority shareholder, Sun Avenue Partners Corp ("SAPC")) during the
next twelve months in order to continue to meet its obligations as
they fall due. The group has drawn down a $1.28 million convertible
loan from SAPC in April 2014 and a $0.1m working capital facility
from SAPC in May 2014 in order to meet the payments due under its
credit line facility with Asia Credit Bank (Kazakhstan) ("ACB
Loan"). SAPC also provided a $2.55 million working capital facility
in June 2014, of which $1 million has been drawn down by the Group
to date.
As at the 17(th) June, SAPC have issued a formal offer to
purchase the remaining shares in the company. They have made it
clear that if the offer is not accepted then they will withdraw
their continuing support for the company. The Directors of the
Group have recommended the offer and believe it will be accepted by
the shareholders. The Group's ability to continue as a going
concern is dependent upon ongoing financial support from SAPC.
These conditions, along with other matters explained in note 3 to
the financial statements, indicate the existence of a material
uncertainty which may cast doubt about the Company's and the
Group's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
Company and Group were unable to continue as a going concern.
Emphasis of Matter - Carrying Value of Intangible Assets and
Inventory
We have also considered the adequacy of the disclosure made in
note 3 to the financial statements concerning the impairment of
intangible assets and carrying value of inventory. The existence of
a material uncertainty around going concern casts doubt in relation
to the group's ability to meet the minimum commitments required
under the Subsoil Use Contract. The Group must meet minimum
criteria for the volume of ore to be extracted from the contract
area, as well as other capital commitments. At present the Group's
forecasts indicate it has insufficient funds to meet the volume
commitments for the year ending 31 December 2014. Meeting these
commitments will remain uncertain even if additional funding is
secured due to the limited time available to ramp up operations.
Furthermore the group was not able to meet the volume requirements
for 2013, as detailed in note 3 to the financial statements.
The carrying value of the intangible assets relating to the
Subsoil Use Contract of $67.9 million and the carrying value of
inventory of $6.9m is dependent on continued access to the contract
area and the construction of the initial and final plant, as set
out in the detailed feasibility study compiled by SNC - Lavalin
International in February 2013 in respect of the Chilisai Project
(the "Project"). Development of the Project will be dependent on
continued compliance with the Subsoil Use Contract and the ability
to obtain financing.
The financial statements do not include the adjustments that
would result if the Company and Group were unable to secure funding
to develop the Chilisai Project, or lost the right to develop the
project as a result of a breach in the terms of the Subsoil Use
Contract.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company 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.
TIM BIGGS (SENIOR STATUTORY AUDITOR)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
26 June 2014
Consolidated income statement
FOR THE YEAR ENDED 31 DECEMBER 2013
Notes 2013 2012
$'000 $'000
Continuing operations
Revenue 14,952 2,248
Cost of sales (11,651) (2,624)
========== =============
Gross profit/(loss) 3,301 (376)
Other operating costs (959) (1,057)
Administrative expenses (4,571) (4,873)
Foreign exchange losses (1,212) (707)
==========
Operating loss before financing
costs 7 (3,441) (7,013)
Finance costs 10 (719) (2,223)
---------- -------------
Loss before tax (4,160) (9,236)
Income tax charge 11 (194) -
Loss for the year (4,354) (9,236)
---------- -------------
Attributable to:
Equity holders of the parent (4,354) (9,236)
(4,354) (9,236)
---------- -------------
2013 2012
Basic and diluted loss per share
(cents) 12 (1.4) (5.5)
===== =====
Consolidated statement of comprehensive income
FOR THE YEAR ENDED 31 DECEMBER 2013
2013 2012
$'000 $'000
Loss for the year (4,354) (9,236)
------- -------
Exchange differences on translation
of foreign operations (101) (202)
------- -------
Other comprehensive (loss) for the
year (101) (202)
Total comprehensive loss for year (4,455) (9,438)
------- -------
Attributable to:
Equity holders of the parent (4,455) (9,438)
(4,455) (9,438)
-------
Sunkar Resources PLC
Consolidated and Company balance sheets
AS AT 31 DECEMBER 2013
Notes Group Company Group Company
2013 2013 2012 2012
$'000 $'000 $'000 $'000
Assets
Property, plant and equipment 13 13,670 1 15,658 2
Intangible assets 14 67,910 8,747 68,864 8,525
Investments 15 - 51,016 - 51,016
Loans and finance lease receivables 16 - 52,099 - 51,946
Inventories 17 8,121 - 8,705 -
Total non-current assets 89,701 111,863 93,227 111,489
======== ======== ======== ========
Inventories 17 2,426 - 2,044 -
Trade and other receivables 18 1,598 102 2,449 314
Cash and cash equivalents 19 208 130 462 111
======== ======== ========
Total current assets 4,232 232 4,955 425
======== ======== ======== ========
Total assets 93,933 112,095 98,182 111,914
======== ======== ======== ========
Equity
Issued capital 20 582 582 309 309
Share premium 20 127,041 127,041 112,641 112,641
Share warrant reserve 20 - - 100 100
Translation reserve 20 (8,822) - (8,721) -
Convertible loan note reserve 20 - - 732 732
Accumulated losses (43,823) (16,751) (39,569) (16,798)
======== ======== ======== ========
Total equity 74,978 110,872 65,492 96,984
Liabilities
Interest bearing loans and
borrowings 21 1,186 - 1,667 -
Other payables 22 663 - 822 -
Deferred tax liabilities 23 11,382 - 11,600 -
Total long-term liabilities 13,231 - 14,089 -
======== ======== ======== ========
Interest bearing loans and
borrowings 21 1,433 600 15,072 14,238
Trade and other payables 24 4,291 623 3,529 692
======== ========
Total current liabilities 5,724 1,223 18,601 14,930
======== ======== ======== ========
Total liabilities 18,955 1,223 32,690 14,930
======== ======== ========
Total equity and liabilities 93,933 112,095 98,182 111,914
======== ======== ======== ========
ON BEHALF OF THE BOARD:
CHARLES DE CHEZELLES
DIRECTOR
Approved and authorised for issue by the Board on 26 June
2014
Consolidated statement of changes in equity
Share Share Share Translation Retained Convertible Total
capital premium warrant reserve Losses loan Equity
reserve note
$,000 $,000 $,000 $,000 $,000 Reserve $,000
$,000
Balance at 1 January 2012 309 112,641 100 (8,519) (30,333) 74,198
======== ======== ======== =========== ======== =========== =======
Loss for the year - - - - (9,236) (9,236)
======== ======== ======== =========== ======== =========== =======
Other comprehensive loss - - - (202) - (202)
Total comprehensive loss for
the year - - - (202) (9,236) (9,438)
======== ======== ======== =========== ======== =========== =======
Equity element of convertible
loan - - - - - 732 732
732 732
-------- -------- -------- ----------- -------- ----------- -------
Balance at 31 December 2012 309 112,641 100 (8,721) (39,569) 732 65,492
-------- -------- -------- ----------- -------- ----------- -------
Balance at 1 January 2013 309 112,641 100 (8,721) (39,569) 732 65,492
======== ======== ======== =========== ======== =========== =======
Loss for the year - - - - (4,354) (4,354)
======== ======== ======== =========== ======== =========== =======
Other comprehensive loss - - - (101) - (101)
Total comprehensive loss for
the year - - - (101) (4,354) (4,455)
======== ======== ======== =========== ======== =========== =======
Issue of share capital 273 14,400 - - - (732) 13,941
Expiry of warrants - - (100) - 100 - -
======== ======== ======== =========== ======== =========== =======
273 14,400 (100) - 100 (732) 13,941
======== ======== ======== =========== ======== =========== =======
Balance at 31 December 2013 582 127,041 - (8,822) (43,823) - 74,978
-------- -------- -------- ----------- -------- ----------- -------
Sunkar Resources PLC
Company statement of changes in equity
Share Convertible
Share Share warrant Retained loan
capital premium reserve losses note Total
$,000 $,000 $,000 $,000 Reserve $,000
$,000
Balance at 1 January 2012 309 112,641 100 (14,582) - 98,468
======== ======== ======== ========= =========== =======
Loss for the year - - - (2,216) - (2,216)
======== ======== ======== ========= =========== =======
Total comprehensive loss
for the year - - - (2,216) - (2,216)
Equity element of convertible
loan - - - - 732 732
Balance at 31 December 2012 309 112,641 100 (16,798) 732 96,984
-------- -------- -------- --------- ----------- -------
Balance at 1 January 2013 309 112,641 100 (16,798) 732 96,984
======== ======== ======== ========= =========== =======
Loss for the year - - - (53) - (53)
======== ======== ======== ========= =========== =======
Total comprehensive loss
for the year - - - (53) - (53)
Issue of share capital 273 14,400 - - (732) 13,941
Expiry of warrants - - (100) 100 - -
Balance at 31 December 2013 582 127,041 - (16,751) - 110,872
-------- -------- -------- --------- ----------- -------
Consolidated and Company statement of cash flows
FOR THE YEAR ENDED 31 DECEMBER 2013
Note Group Company Group Company
2013 2013 2012 2012
$'000 $'000 $'000 $'000
Cash flows from operating activities
Operating loss before financing
costs (3,441) (1,218) (7,013) (1,934)
Depreciation and amortisation 2,462 1 2,080 3
Exchange rate differences 1,059 (180) 629 (95)
(Increase) in inventories 201 - (191) -
(Increase)/decrease in receivables 851 175 (1,246) (72)
(Decrease)/increase in payables 257 (129) (343) (1,779)
Cash utilised in operations 1,389 (1,351) (6,084) (3,877)
Interest paid (356) - (446) (4)
======= ======= ------- -------
Net cash utilised in operating
activities 1,033 (1,351) (6,530) (3,881)
======= ======= ------- -------
Cash flows from investing activities
Loan advances to subsidiary - - - (7,003)
Loan repayments from subsidiary - 1,585 - -
Acquisition of intangible fixed
assets (395) (222) (1,031) (180)
Acquisition of property, plant
and equipment (382) - (1,072) (2)
Net cash utilised in investing
activities (777) 1,363 (2,103) (7,185)
======= ======= ------- -------
Cash flows from financing activities
Bank loan received 500 - 2,500 -
Bank loan repaid (980) - (4,966) -
Directors Loan (repaid)/received - - (294) (294)
Loan from Sun Avenue (Investor) - - 11,665 11,665
Loan to subsidiary - 37 - (189)
Net cash from financing activities (480) 37 8,905 11,182
======= ======= ------- -------
Net increase/(decrease) in
cash and cash equivalents (224) 49 272 116
Cash and cash equivalents at
beginning of year 462 111 213 18
Effect of exchange rate fluctuations
on cash held (30) (30) (23) (23)
======= ======= ------- -------
Cash and cash equivalents at
end of year 19 208 130 462 111
======= ======= ------- -------
Sunkar Resources PLC
Notes to the consolidated financial statements
1. GENERAL INFORMATION
Sunkar Resources plc (the "Company") is a Company registered in
England and Wales. The consolidated financial statements of the
Company for the year ended 31 December 2013 comprise the Company
and its subsidiaries Temir Service LLP and Chilisai Chemicals LLP
(together referred to as the "Group").
These financial statements are presented in US Dollars because
that is the currency of the primary economic environment in which
the Group operates. Foreign operations are included in accordance
with the policies set out in note 3. At 31 December 2013, the
closing rate of exchange of US Dollars to one GB Pound was 1.65 (31
December 2012: 1.62) and the average rate of exchange of US Dollars
to one GB Pound for the year was 1.56 (2012: 1.58). At 31 December
2013, the closing rate of exchange of Kazakhstan Tenge to one US
Dollar was 153.61 (2012: 150.74) and the average rate was 152.18
(2012: 149.57).
2. ADOPTION OF NEW AND REVISED STANDARDS
The Group has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards
Board ("IASB") that are relevant to its operations and effective
for accounting periods beginning 1 January 2013. The adoption of
these new and revised Standards and Interpretations had no material
effect on the profit or loss or financial position of the
Group.
The Group has not adopted any standards or interpretations in
advance of the required implementation dates. It is not expected
that adoption of standards or interpretations which have been
issued by the International Accounting Standards Board but have not
been adopted will have a material impact on the financial
statements.
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:
IAS 16 (amended) - Property, plant and equipment
IAS 19 (amended) - Employee benefits
IAS 24 (amended) - Related Party Disclosures
IAS 27 (amended) - - Separate financial statements
IAS 32 (amended) - Financials instruments: Presentation
IAS 36 (amended) - Impairment of Assets
IAS 38 (amended) - Intangible Assets
IAS 39 (amended) - Financial Instruments: Recognition and
Measurement
IFRS 2 - Share-based Payment
IFRS 3 - Business Combinations
IFRS 8 - Operating Segments
IFRS 9 -Financial instruments
IFRS 14 - Regulatory Deferral accounts
IFRS 15 - Revenue from Contracts with Customers
3. SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
and their interpretations as issued by the International Accounting
Standards Board ("IASB"), adopted by the European Union. They have
also been prepared with those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated
financial statements have been prepared for the year ended 31
December 2013.
The financial statements have been prepared on the historical
cost basis. The accounting policies set out below have been applied
consistently by Group entities to the periods presented in these
consolidated financial statements.
GOING CONCERN
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chairman's Statement. The financial position of
the Group, its cash flows and liquidity position are described in
the Strategic Report. In addition, note 25 to the financial
statements includes the Group's objectives, policies and processes
for managing its capital, its financial risk management objectives,
details of its financial instruments and its exposure to credit
risk and liquidity risk.
The Company requires additional funds to meet its mining
commitments and operational costs whilst also finding a strategic
partner to secure finance for the construction of the fertilizer
manufacturing complex. The Group's strategy was to achieve this
through an increase in the level of phosphate rock sales,
generation of positive cash flows from earth moving contracts and
continued management of its cost base.
However, the Company has not been consistently able to generate
sufficient revenue to maintain a viable business and, on several
occasions, had to seek additional funding from SAPC, as set out
below:
-- In April 2014, the Company raised $1.28 million via the issue
of the Convertible Loan Notes in order to make deferred ACB Loan
repayments and meet other creditor demands.
-- On 27 May 2014, the Company announced that its financial
position had worsened significantly and that the Sunkar Board
required an immediate working capital injection in order to make
further payments under the ACB Loan. Accordingly, SAPC agreed to
provide an additional $0.10 million new loan facility to the
Company.
-- On 17 June 2014, the Company secured a $2.55 million working
capital facility from SAPC, in order to fund the Company's working
capital requirements throughout the duration of the Offer Period
and, in any event, for a period of 120 days following the date of
the agreement.
The Company has been able to access this funding pursuant to the
Letter of Support, stating that JSC "Interfarma-K" will, subject to
the agreement of mutually acceptable terms, provide financial
support to assist the Group in meeting its liabilities as they fall
due.
However, in April 2014, SAPC wrote to the Company to express its
concern, with regard to the Company's financial situation, and to
seek to work with the Company to find a structural alternative to
the Letter of Support funding, which would provide a more permanent
solution to the Company's ongoing funding deficit, until sufficient
funds were raised to progress with the plans set out in the
DFS.
Subsequently, in May 2014, SAPC indicated to the Sunkar Board
that it was not prepared to continue to fund Sunkar on an ongoing
basis, without seeking full control of the Company and on 17 June
2014, Sunkar and SAPC announced that they had reached agreement on
the terms of the Offer.
In the absence of the Offer, the Sunkar Board, having sought
advice from an independent firm of accountants and an independent
firm of insolvency practitioners, determined that should SAPC not
provide further funding to the Company, the Board would immediately
have to seek alternative sources of funding to meet its working
capital requirements, which the Sunkar Board, having previously
investigated such alternative sources of financing, do not believe
would be available to the Company. This would, in the view of the
Board, lead to the suspension of trading of the Sunkar Shares on
AIM and the commencement of insolvency proceedings.
The Directors remain confident that the completion of the Offer
will be successful and based on the current cash flow projections
sufficient funding is or will be made available, to enable the
Group to continue in operational existence for the foreseeable
future. Accordingly, the financial statements have been prepared on
a going concern basis.
(B) BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) for each calendar year to 31 December. Control
is achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
(C) BUSINESS COMBINATIONS
Acquisitions of subsidiaries and businesses are accounted for
using the acquisition method. The consideration for each
acquisition is measured at the aggregate of the fair values (at the
date of exchange) of assets given, liabilities incurred or assumed,
and equity instruments issued by the Group in exchange for control
of the acquiree. Acquisition-related costs are recognised in profit
or loss as incurred.
Where applicable, the consideration for the acquisition includes
any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value.
Subsequent changes in such fair values are adjusted against the
cost of acquisition where they qualify as measurement period
adjustments (see below). All other subsequent changes in the fair
value of contingent consideration classified as an asset or
liability are accounted for in accordance with relevant IFRSs.
Changes in the fair value of contingent consideration classified as
equity are not recognised.
Where a business combination is achieved in stages, the Group's
previously-held interests in the acquired entity are remeasured to
fair value at the acquisition date (i.e. the date the Group attains
control) and the resulting gain or loss, if any, is recognised in
profit or loss. Amounts arising from interests in the acquiree
prior to the acquisition date that have previously been recognised
in other comprehensive income are reclassified to profit or loss,
where such treatment would be appropriate if that interest were
disposed of.
The acquiree's identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under IFRS
3(2008) are recognised at their fair value at the acquisition date,
except that:
-- deferred tax assets or liabilities and liabilities or assets
related to employee benefit arrangements are recognised and
measured in accordance with IAS 12 Income Taxes and IAS 19 Employee
Benefits respectively;
-- liabilities or equity instruments related to the replacement
by the Group of an acquiree's share-based payment awards are
measured in accordance with IFRS 2 Share-based Payment; and
-- assets (or disposal groups) that are classified as held for
sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations are measured in accordance with that
Standard.
If the initial accounting for a business combination is
incomplete by the end of the reporting period in which the
combination occurs, the Group reports provisional amounts for the
items for which the accounting is incomplete. Those provisional
amounts are adjusted during the measurement period (see below), or
additional assets or liabilities are recognised, to reflect new
information obtained about facts and circumstances that existed as
of the acquisition date that, if known, would have affected the
amounts recognised as of that date.
The measurement period is the period from the date of
acquisition to the date the Group obtains complete information
about facts and circumstances that existed as of the acquisition
date, and is subject to a maximum of one year.
(D) FOREIGN CURRENCIES
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in US Dollars, which
is the functional currency of the Company, and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the balance sheet date. Non-monetary items carried at
fair value that are denominated in foreign currencies are
translated at the rates prevailing at the date when the fair value
was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated. The
resulting exchange differences are recorded in the Income
Statement.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
classified as equity and recognised in the Group's foreign currency
translation reserve. Such translation differences are recognised as
income or as expenses in the period in which the operation is
disposed of.
Fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
(E) INTANGIBLE ASSETS
Mining licences in the exploration and evaluation phases arising
from a business combination are recognised as an intangible asset
and initially measured at estimated fair value, generally based on
the excess of the cost of the business combination over the Group's
interest in the net fair value of the other identifiable assets,
liabilities and contingent liabilities recognised, unless a more
reliable indicator of fair value is available.
Expenditure on the acquisition of the licence and subsequent
exploration and evaluation expenditure are carried as intangible
assets until such a time as it is determined that there are
commercially exploitable reserves, at which time such costs are
transferred to mineral properties to be amortised over the expected
productive life of the asset.
Mineral properties relate to those properties where commercial
extraction is demonstrable. Mineral properties acquired in a
business combination are recognised as an intangible asset, being
the excess of the present value of the economic reserves over the
allocated amount of related property, plant and equipment and
exploration and evaluation costs.
Exploration and evaluation assets are carried forward during the
exploration and evaluation stage and are assessed for impairment in
accordance with the indicators of impairment as set out in IFRS 6
'Exploration for and Evaluation of Mineral Resources'. In
circumstances where a property is abandoned or otherwise determined
not to be commercial, the cumulative capitalised costs relating to
the property are written off in the period. Overburden costs
incurred, relating to the removal of materials required to access
the ore body are initially capitalised and subsequently amortised
in full when the related rehabilitation activity takes place. No
other amortisation is charged prior to the commencement of
production.
(F) PROPERTY, PLANT AND EQUIPMENT
On initial recognition, land, property, plant and equipment are
valued at cost, being the purchase price and the directly
attributable cost of acquisition or construction required to bring
the asset to the location and condition necessary for the asset to
be capable of operating in the manner intended by the Group.
DEPRECIATION
Depreciation is charged to the income statement on a
straight-line basis over the estimated useful lives of each part of
an item of property, plant and equipment. The estimated useful
lives are as follows:
-- motor vehicles 4 years
-- fixtures and fittings 4 years
-- plant and equipment based on hours of operation
-- land and buildings 10 years
The residual value, if not insignificant, is reassessed
annually.
(G) IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
At each balance sheet date, the Group reviews the carrying
amounts of its property, plant and equipment assets to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash inflows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time, value of money and the risks specific to the asset for
which the estimates of future cash flows have not been
adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised as an expense
immediately.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years. A reversal of
an impairment loss is recognised as income immediately.
(H) INVESTMENTS
Investments are stated at cost less any provision for permanent
diminution in value.
(I) INVENTORIES
Stockpiled ore, phosphate concentrate and milled concentrate are
valued at the lower of cost and net realisable value. Net
realisable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and costs of
selling the final product.
Cost is determined by the weighted average method and comprises
direct purchase costs and an appropriate portion of fixed and
variable overhead costs, including depreciation and amortisation,
incurred in converting materials into finished product.
Materials and supplies are valued at the lower of cost and net
realisable value. Cost is determined by the FIFO method. Any
provision for obsolescence is determined by reference to specific
items of stock. A regular review is undertaken to determine the
extent of any provision for obsolescence.
(J) FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised in the
Group's balance sheet when the Group becomes a party to the
contractual provisions of the instrument.
(K) TRADE AND OTHER RECEIVABLES
Trade and other receivables are measured at initial recognition
at fair value, and are subsequently measured at amortised cost
using the effective interest rate method. Appropriate allowances
for estimated irrecoverable amounts are recognised in the income
statement when there is objective evidence that the asset is
impaired. The allowance recognised is measured as the difference
between the asset's carrying amount and the present value of
estimated future cash flows discounted at the effective interest
rate computed at initial recognition.
(L) CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
(M) PROVISIONS
A provision is recognised in the balance sheet when the Group
has a present legal or constructive obligation as a result of a
past event and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are measured
at the directors' best estimate of the expenditure required to
settle the obligation and, if the effect is material, provisions
are determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability.
(N) TRADE AND OTHER PAYABLES
Trade payables are initially measured at fair value and are
subsequently measured at amortised cost using the effective
interest rate method.
(O) CONVERTIBLE LOAN
The proceeds received on issue of the Group's convertible debt
are allocated into their liability and equity components. The
amount initially attributed to the liability component equals the
discounted cash flows using a market rate of interest that would be
payable on a similar debt instrument that does not include an
option to convert. Subsequently, the debt component is accounted
for as a financial liability measured at amortised cost until
extinguished on conversion or maturity of the bond. The remainder
of the proceeds is allocated to the conversion option and
recognised in the "Convertible loan note reserve" within
shareholders' equity and is not remeasured. Issue costs are
apportioned between the liability and equity components based on
their relative carrying value at the date of issue. The portion
relating to the equity component is charged directly against
equity. The interest expense on the liability component is
calculated by applying the prevailing market rate referred to above
to the liability component.
(P) OPERATING LEASE PAYMENTS
Payments made under operating leases are recognised in the
income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense.
(Q) INCOME TAX
Income tax on the profit or loss for the year comprises current
and deferred tax. Income tax is recognised in the income statement
except to the extent that it relates to items recognised directly
in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantially enacted at
the balance sheet date, and any adjustment to tax payable in
respect of previous years. Taxable profit differs from net profit
as reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. The following temporary
differences are not provided for: goodwill not deductible for tax
purposes, the initial recognition of assets or liabilities that
affect neither accounting nor taxable profit, and differences
relating to investments in subsidiaries to the extent that they
will probably not reverse in the foreseeable future. The amount of
deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to
the extent that it is no longer probable that the related tax
benefit will be realised.
(R) FINANCE LEASE PAYMENTS
It is the Company's policy to lease certain plant and equipment
to its subsidiaries under finance leases. The average lease term is
five years. Interest rates are calculated on average yearly LIBOR
plus two per cent. For the year ended 31 December 2013, the average
effective borrowing rate was 3.6% (2012: 3.6%). All leases are on a
fixed repayment basis and no arrangements have been entered into
for contingent rental payments.
The lease obligations are denominated in US Dollars and Euro.
The fair value of the Companies' finance lease assets approximates
to their carrying amount.
(S) BORROWING: FINANCE COSTS
Borrowing costs are recognised in the income statement where
they do not meet the criteria for capitalisation. Borrowing costs
directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised.
(T) REVENUE RECOGNITION
Sale of phosphate rock and flour
Revenue from the sales of phosphate rock and flour is recognised
when the Group has transferred the significant risks and rewards of
ownership to the buyer and it is probable that the Group will
receive the previously agreed upon payment. These criteria are
considered to be met when the goods are delivered to the buyer.
Earth Moving Contract
Revenue from the earth moving contract is recognised on the
basis of cubic metres of earth moved during the period as agreed
with the customer, multiplied by the unit rate specified in the
contract in accordance with IAS 11 Construction Contracts
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
CRITICAL JUDGEMENTS IN APPLYING THE GROUP'S ACCOUNTING
POLICIES
In the process of applying the Group's accounting policies,
which are described in note 3, management has made the following
judgements that have the most significant effect on the amounts
recognised in the financial statements (apart from those involving
estimations, which are dealt with below).
IMPAIRMENT OF INTANGIBLE ASSETS
The assessment of intangible assets (see note 14) for any
indication of impairment involves judgement. If an indication of
impairment, as defined in IFRS 6, Exploration for and Evaluation of
Mineral Resources, exists a formal estimate of recoverable amount
is performed and an impairment loss recognised to the extent that
carrying amount exceeds recoverable amount. Recoverable amount is
determined as the higher of fair value less costs to sell and value
in use. The calculation of recoverable amount requires an
estimation of the value in use of the cash-generating units to
which the intangible assets are allocated. In assessing value in
use, the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows
have not been adjusted.
KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of financial statements requires management to
make estimates and assumptions that affect the amounts reported for
assets and liabilities as at the balance sheet date and the amounts
reported for revenues and expenses during the year. The nature of
estimation means that actual outcomes could differ from those
estimates. The key sources of estimation uncertainty that have a
significant risk of causing material adjustment to the carrying
amounts of assets and liabilities within the next financial year
are discussed below.
INVENTORIES
Inventories of ore and beneficiated rock are valued at the lower
of cost and net realisable value. In determining the net realisable
value the Group has made its own estimates of regional selling
prices of phosphate rock adjusted for P(2) O(5) grade, budgeted
costs of milling and selling DAR and considered that the value of
the ore will be recovered by building the DAP/MAP plant. Should the
plant not be built the ore could be processed into concentrate and
subsequently sold. However based on historical sales volumes this
would result in only a limited level of sales per annum made at a
loss based on current market prices. As a result an impairment loss
would arise. A write down was recorded in 2013 as described further
in note 17.
SUBSOIL USE CONTRACT
At each balance sheet date an assessment is made as to whether
the carrying amount of the SUC asset is recoverable. The review
will take into consideration whether the title to the SUC is
compromised, DAP prices render the project uneconomic or other
significant adverse conditions exist. In undertaking the review a
detailed project economic model requiring forecasts for capital and
operational costs, operational variables and product prices is
prepared. Future net cash flows are discounted and compared with
the carrying amount. If the recoverable amount is less than the
carrying amount an impairment charge is made. See note 14 for a
summary of the considerations made at 31 December 2013.
5. OPERATING SEGMENTS
Operating segments are identified on the basis of internal
reports about components of the Group that are regularly reviewed
by S Utegen, the chief operating decision maker in order to
allocate resources to the segments and to assess their
performance.
In the previous year the Group's operations related to the
evaluation and development of the Chilisai Phosphate project and as
such the Group had only one segment. In 2012 the Group expanded its
operations to include both construction contracts to utilise spare
capacity and the leasing of beneficiation equipment to a third
party. Revenue and direct costs are reported separately in respect
of these activities and accordingly it has been concluded that
these represent separate operating segments. All the Group's
activities are in Kazakhstan with administrative support provided
from the UK. Additional information regarding geographical location
is provided below.
DAR Earth Total DAR Earth Beneficiation Total
and moving and moving equipment
rock rock leasing
sales 2013 2013 sales 2012 2012 2012
2013 2012
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Revenue 1,463 13,489 14,952 1,490 514 244 2,248
Cost of sales (1,707) (9,944) (11,651) (1,684) (557) (383) (2,624)
------- ------- -------- ------- ======= ============= =======
Gross loss (244) 3,545 3,301 (194) (43) (139) (376)
------- ------- -------- ------- ======= ============= =======
Geographical information
2013 2012
$'000 $'000
Total non-current assets excluding
financial assets
Kazakhstan 89,700 93,225
UK 1 2
====== ======
Total 89,701 93,227
====== ======
Capital expenditure on deferred
exploration and evaluation costs
Kazakhstan 479 937
UK - -
====== ======
Total 479 937
====== ======
Capital expenditure on property,
plant and equipment
Kazakhstan 381 1,072
UK - 2
====== ======
Total 381 1,074
====== ======
Depreciation
Kazakhstan 2,148 1,212
UK 1 3
====== ======
Total 2,149 1,215
====== ======
Liabilities
Kazakhstan 17,732 17,858
UK 1,223 14,832
====== ======
Total 18,955 32,690
====== ======
Information about major customers
Revenues from transactions with a single customer exceeding 10%
of total revenues were as follows:
DAR Earth Total DAR Earth Beneficiation Total
and moving and moving equipment
rock rock leasing
sales 2013 2013 sales 2012 2012 2012
2013 2012
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Customer A - 13,342 13,342 - 514 - 514
Customer B - - - - - 244 244
Customer C 293 - 293 390 - - 390
Customer D 199 199
Customer E 193 193
Customer F 153 153
Others 625 147 772 1,100 - - 1,100
------ ------- ------ ------ ======= ============= =====
1,463 13,489 14,952 1,490 514 244 2,248
------ ------- ------ ------ ======= ============= =====
6. RESULT OF THE COMPANY
As permitted by section 408 of the Companies Act 2006, the
income statement of the Company has not been presented as part of
these financial statements. The Company made a loss of $52,859
(2012: loss $2,215,294) during the year.
7. OPERATING LOSS
The operating loss is stated after charging:
2013 2012
$,000 $,000
Depreciation of property, plant
and equipment 2,149 1,215
Write down of inventory 334 403
Directors' emoluments (see
note 9) 612 623
Foreign exchange losses 1,212 707
Operating lease rentals 132 251
====== ======
8. AUDITOR'S REMUNERATION
The analysis of Auditor's remuneration is as follows:
2013 2012
$,000 $,000
Fees payable to the Company's
Auditor for the audit of the
Company's annual accounts 56 60
Fees payable to the Company's
Auditor and their associates
for other services to the Group:
The audit of the Company's
subsidiary pursuant to legislation 40 64
------ ------
Total audit fees 96 124
Audit related assurance services:
interim review 31 20
Corporate finance - 58
------ ------
Total Fees 127 202
------ ------
9. STAFF COSTS
2013 2012
$,000 $,000
Wages and salaries 3,537 2,381
Compulsory social security contributions 337 243
3,874 2,624
====== ======
The Group does not provide pension arrangements for its
employees.
The average number of employees (including executive directors)
during the year was as follows:
2013 2012
No. No.
Directors 2 2
Management and administration 47 41
Production 190 75
====
239 118
==== ====
Directors' remuneration
Fees Salary 2013 2012
$,000 $,000 $,000 $,000
TS Kong 94 - 94 98
S Utegen - 266 266 272
N Damitov - 190 190 190
C de Chezelles 62 - 62 63
156 456 612 623
====== ====== ====== ======
10. FINANCE COSTS
2013 2012
$,000 $,000
Bank and other loan interest 397 422
Convertible loan interest 303 1,782
Unwinding of discount on historic
cost liability payable under SUC 19 19
719 2,223
====== ======
11. INCOME TAX
2013 2012
$,000 $,000
Current tax 194 -
Deferred tax (Note 23) - -
====== ======
Total income tax expense in income
statement 194 -
====== ======
UK corporation tax is calculated at 23.25% (2012: 24.5%) of the
estimated taxable loss for the year. Taxation of other
jurisdictions is calculated at the rates prevailing in the
respective jurisdictions.
The charge for the year can be reconciled to the loss per the
income statement as follows:
2013 2012
$,000 $,000
Loss before tax (4,159) (9,236)
======= =======
Income tax using the UK domestic corporation
tax rate of 23.25% (2011: 24.5%) (967) (2,263)
Effect of differences between UK and
overseas tax rates 123 310
Items permanently disallowed for tax
purposes 660 340
Other temporary differences 65 700
Effect of tax losses not recognised 313 913
194 -
======= =======
Deferred tax assets have not been recognised in respect of the
following items:
2013 2012
$,000 $,000
UK tax losses 14,781 14,820
Overseas tax losses expiring 2023 1,464 -
Overseas tax losses expiring 2022 1,569 1,428
Overseas tax losses expiring 2021 4,158 4,238
Overseas tax losses expiring 2020 3,190 3,251
Overseas tax losses expiring 2019 9,388 9,567
Overseas tax losses expiring 2018 2,773 2,825
37,323 36,129
====== ------
UK tax losses may be carried forward indefinitely and set off
against future taxable profits. The overseas tax losses are
available to be carried forward as stated above. Deferred tax
assets have not been recognised in respect of these items because
it is not probable that future taxable profit will be available
against which the Group can utilise the benefits therefrom. In
March 2013, the UK government announced reductions in the UK tax
rate in stages, falling to 20% by 2015
12. LOSS PER SHARE
Basic loss per share
2013 2012
Basic and diluted loss per share
(cents) (1.4) (5.5)
===== =====
The calculation of basic loss per share is based on the
following data:
Loss attributable to ordinary shareholders
2013 2012
$,000 $,000
Loss for the year (4,354) (9,236)
=======
Loss attributable to ordinary shareholders (4,354) (9,236)
======= -------
Weighted average number of ordinary Shares
shares ,000
Issued ordinary shares at 1 January
2012 166,634
Effect of shares issued during year -
Weighted average number of ordinary
shares at 31 December 2012 166,634
-------
Issued ordinary shares at 1 January
2013 166,634
Effect of shares issued during year 153,865
-------
Weighted average number of ordinary
shares at 31 December 2013 320,499
-------
13. PROPERTY, PLANT AND EQUIPMENT
GROUP Plant Land Motor Fixtures
and equipment and vehicles and Total
buildings fittings
$,000 $,000 $,000 $,000 $,000
Cost
Balance at 1 January
2012 14,264 8,520 297 67 23,148
Additions 188 (224) 94 42 100
Reclassification - (200) - 200 -
Exchange differences (81) (129) (5) (1) (216)
============== ==========
Balance at 31 December
2012 14,371 7,967 386 308 23,032
============== ========== ========= ========= ======
Balance at 1 January
2013 14,371 7,967 386 308 23,032
Additions 124 15 223 19 381
Disposals (5) - (13) (31) (49)
Exchange differences (164) (149) (9) (5) (327)
============== ==========
Balance at 31 December
2013 14,326 7,833 587 291 23,037
============== ========== ========= ========= ======
Depreciation
Balance at 1 January
2012 5,333 737 203 56 6,329
Depreciation charge
for the year 624 473 70 48 1,215
Exchange differences (151) (15) (4) - (170)
Balance at 31 December
2012 5,806 1,195 269 104 7,374
===== ===== ==== ==== ======
Balance at 1 January
2013 5,806 1,195 269 104 7,374
Depreciation charge
for the year 1,601 485 58 5 2,149
Disposals (1) - (13) (31) (45)
Exchange differences (76) (27) (6) (2) (111)
Balance at 31 December
2013 7,330 1,653 308 76 9,367
===== ===== ==== ==== ======
Carrying amounts
At 31 December 2012 8,565 6,772 117 204 15,658
===== ===== ==== ==== ======
At 31 December 2013 6,996 6,180 279 215 13,670
===== ===== ==== ==== ======
14. INTANGIBLE ASSETS
GROUP Subsoil
Use
Cost Contract
$,000
Balance at 1 January 2012 70,442
Additions 939
Exchange differences (948)
=========
Balance at 31 December 2012 70,433
=========
Balance at 1 January 2013 70,433
Additions 479
Exchange differences (1,181)
=========
Balance at 31 December 2013 69,731
=========
Amortisation
Balance at 1 January 2012 701
Charge for the year 866
---------
Balance at 31 December 2012 1,567
---------
Balance at 1 January 2013 1,567
Charge for the year 309
Exchange differences (51)
Balance at 31 December 2013 1,825
=========
Carrying amounts
At 31 December 2012 68,864
=========
At 31 December 2013 67,910
=========
IMPAIRMENT TESTS FOR INTANGIBLE ASSETS
The directors have considered whether there is an indication of
impairment of the Subsoil Use Contract ("SUC") intangible asset at
the balance sheet date, in accordance with IFRS 6: Exploration for
and Evaluation of Mineral Resources.
During 2012 the Group applied to MINT for the ore volumes to be
produced under the Subsoil Use Contract ("SUC") to be amended to
300,000 tonnes per annum for 2012-2014, 5 million tonnes per annum
for 2015-2017 and 10 million tonnes from 2018. The proposed
amendment to the Work Programme under the SUC was approved by the
Kazakh authorities in 2013 pending final ministerial approval which
was obtained in March 2014. The Group produced 306,000 tonnes of
ore in 2012 and 270,000 tonnes in 2013 which management believes
will be sufficient to satisfy the relevant authority's requirements
under the SUC. There were also immaterial underpayments in respect
of training and taxes which together with the 30,000 tonne
production shortfall will be made up in 2014. Subject to
confirmation of management's belief that provided the production
shortfall of 30,000 tonnes and the underpayments are made good in
2014 then the requirements under the SUC will be satisfied and,
following completion of the DFS in February 2013 which provides
support for the carrying value, the directors do not consider that
any impairment of the carrying value of intangible assets is
required.
The Company's commitment to meet associated cumulative
development expenditure of $115 million from the end of 2014 to
2020 has not changed.
Development of the Project will be dependent on continued
compliance with the Subsoil Use Contract and the ability to obtain
financing.
Subsoil
COMPANY Use
Contract
$,000
Cost
Balance at 1 January 2012 8,345
Additions 180
=========
Balance at 31 December 2012 8,525
=========
Balance at 1 January 2013 8,525
Additions 222
=========
Balance at 31 December 2013 8,747
=========
Carrying amounts
At 31 December 2012 8,525
=========
At 31 December 2013 8,747
=========
15. INVESTMENTS - COMPANY
Investment
in subsidiaries
$,000
Cost
Balance at 1 January 2012 and 31 December 2012 51,016
================
Balance at 1 January 2013 and 31 December 2013 51,016
================
At 31 December 2013, the Company's investments in subsidiaries
comprise 100% of the issued share capital of Temir Service LLP and
Chilisai Chemicals LLP (see note 28 for further detail).
16. LOANS AND FINANCE LEASE RECEIVABLES - COMPANY
Finance
Loans Leases Total
$,000 $,000 $,000
Balance at 1 January 2012 34,188 9,139 43,327
Advances 7,003 - 7,003
Exchange difference - 116 116
Interest 1,210 290 1,500
Balance at 31 December 2012 42,401 9,545 51,946
======= ======= =======
Balance at 1 January 2013 42,401 9,545 51,946
Repayments (1,585) - (1,585)
Exchange difference - 210 210
Interest 1,266 262 1,528
Balance at 31 December 2013 42,082 10,017 52,099
======= ======= =======
The Company has provided two loan facilities to Temir Service
LLP for $12 million and $35 million. The first loan facility was
entered into in 2006 and was interest free for the first 12 months
and then subject to interest at LIBOR plus 2%. The second loan is
subject to interest at LIBOR plus 2%. The loans are effectively
repayable within five years from the date of the agreements (17
April 2008 and 12 December 2008). These loans are not expected to
be repaid until Temir Service LLP is profitable and will be
rescheduled in due course. An amount of $6.2 million remains
undrawn under these loan facilities.
The Company has various finance lease agreements for plant and
equipment with Temir Service LLP. The finance leases are interest
free for the first 12 months. The payment schedules for lease
repayments are to be agreed between the Company and Temir Service
LLP not later than 30 days after the subsoil use operations become
profitable for Temir Service LLP, and are accordingly considered to
fall due between one and five years. At 31 December 2013, the total
future payments receivable are $10,292,000 (31 December 2012:
$10,047,000) and unearned interest income is $1,490,000 (31
December 2012: $1,454,000). Residual values in the leases are
considered to be $nil and no write-down has been made at 31
December 2013.
17. INVENTORIES
Group Company Group Company
2013 2013 2012 2012
$,000 $,000 $,000 $,000
Raw materials 758 - 1,005 -
Stockpiled ore 6,859 - 6,453 -
Phosphate flour 176 - 223 -
Phosphate concentrate 2,754 - 3,068 -
====== ======= ====== =======
10,547 - 10,749 -
====== ======= ====== =======
Realisable within one year 2,426 - 2,044 -
Realisable after one year 8,121 - 8,705 -
10,547 - 10,749 -
====== ======= ====== =======
At 31 December 2013 raw material, ore and flour inventories have
been recognised at cost. Phosphate concentrate has been written
down by $334,000 to reflect its estimated net realisable value.
18. TRADE AND OTHER RECEIVABLES
Group Company Group Company
2013 2013 2012 2012
$,000 $,000 $,000 $,000
Trade receivables 412 - 151 -
Overseas VAT recoverable 858 - 1,368 -
Other receivables and prepayments 328 102 819 203
Deposits - - 111 111
1,598 102 2,449 314
====== ======= ------ -------
There are no trade receivables which are past due.
19. CASH AND CASH EQUIVALENTS
Group Company Group Company
2013 2013 2012 2012
$,000 $,000 $,000 $,000
Cash and cash equivalents 208 130 462 111
====== ======= ====== =======
20. CAPITAL AND RESERVES - GROUP AND COMPANY
The Company had 341,110,357 ordinary shares of 0.1p each in
issue at 31 December 2013 (2012: 166,634,074). The movements in
share capital were as follows:
Number Share Share Number Share Share
of shares capital premium of shares capital premium
2013 2013 2013 2012 2012 2012
No.
No.000 $000 $000 000 $000 $000
Balance at beginning of
year 166,634 309 112,641 166,634 309 112,641
174,476,283 issued on
13 February on conversion
of loan notes 174,476 273 14,400 - - -
Balance at end of year 341,110 582 127,041 166,634 309 112,641
---------- -------- -------- ---------- -------- --------
SHARE WARRANT RESERVE - GROUP AND COMPANY
2013 2013 2012 2012
No.
No.000 $000 000 $000
Balance at beginning of year 1,000 100 1,000 100
Expired during the year (1,000) (100) - -
======= ===== ===== ====
Balance at end of year - - 1,000 100
------- ----- ----- ----
1,000,000 warrants issued during 2010 expired on 29 June
2013.
TRANSLATION RESERVE - GROUP
The translation reserve is used to record exchange differences
arising from the translation of the financial statements of the
foreign subsidiary.
CONVERTIBLE LOAN NOTE RESERVE - GROUP AND COMPANY
2013 2012
$000 $000
Balance at beginning of year 732 -
Equity portion of convertible loan - 732
Transfer to share capital on issue of
shares (732) -
----- ----
Balance at end of year - 732
----- ----
The convertible loan note reserve represented the amount of
proceeds on issue of the convertible debts relating to the equity
component.
21. INTEREST BEARING LOANS AND BORROWINGS
Group Company Group Company
2013 2013 2012 2012
$'000 $'000 $'000 $'000
Bank loan repayable within
one year 833 - 834 -
Convertible loan - - 13,638 13,638
Directors' loans repayable
within one year (see note 27) 600 600 600 600
Total loans repayable within
one year 1,433 600 15,072 14,238
====== ======= ====== =======
Bank loan repayable within
one to two years 833 - 833 -
Bank loan repayable within
two to three years 353 - 834 -
----- -----
Total bank loan repayable after
one year 1,186 -1,667 -
----- -----
In December 2012 Asia Credit Bank ("ACB") agreed to provide a
credit line of up to $3 million. The Group received $2.5 million on
27 December 2012 with balance of $0.5 million received in early
2013. The Group provided security over its physical assets with a
year-end carrying value of $8.8 million.
The ACB loan is repayable over three years and carries interest
at 9.5%.
22. OTHER LONG-TERM PAYABLES
Group Company Group Company
2013 2013 2012 2012
$'000 $'000 $'000 $'000
Historic cost liability payable
under the Subsoil Use Contract 663 - 822 -
663 - 822 -
====== ======= ====== =======
Under the terms of the Subsoil Use Contract an amount of
$644,000 remains payable at 31 December 2013 in relation to access
to historic geological exploration data. This is payable over the
life of the contract and its carrying amount has been recorded at
its net present value calculated on the basis of equal quarterly
instalments over this period using a 2% discount factor.
23. DEFERRED TAX LIABILITIES
Deferred
tax
$,000
Balance at 1 January 2012 11,782
Exchange differences (182)
========
Balance at 31 December 2012 11,600
========
Balance at 1 January 2013 11,600
Exchange differences (218)
--------
Balance at 31 December 2013 11,382
--------
The deferred tax balance reflects the temporary difference on
the fair value adjustment to the Subsoil Use Contract made on the
acquisition of the subsidiary. As described in note 12, deferred
tax assets have not been recognised in respect of UK or overseas
tax losses because of the uncertainty of whether future taxable
profits will be available against which the Group can utilise the
benefits therefrom.
There were no temporary differences in relation to the Company's
investment in the subsidiary for which deferred tax liabilities
have not been recognised.
24. TRADE AND OTHER PAYABLES
Group Company Group Company
2013 2013 2012 2012
$'000 $'000 $'000 $'000
Trade payables 2,623 - 469 -
Non trade payables 1,035 388 881 508
Advance for Earth Moving Contract 271 - 1,995 -
Accrued expenses 362 235 184 184
===== ======= ----- -------
4,291 623 3,529 692
===== ======= ----- -------
25. FINANCIAL INSTRUMENTS
The Board determines, as required, the degree to which it is
appropriate to use financial instruments and hedging techniques to
mitigate risks. The main risks for which such instruments may be
appropriate are foreign exchange risk, interest rate risk and
liquidity risk, each of which is discussed below. There were no
derivative instruments outstanding at 31 December 2013 (2012:
$nil).
LIQUIDITY RISK AND CAPITAL MANAGEMENT
The Group's objectives when managing capital are to safeguard
the entity's ability to continue as a going concern so that it can
continue to increase the value of the entity for the benefit of
shareholders.
Given the nature of the Group's current activities the entity
will remain dependent on short-term financing and equity funding in
the short to medium term until such time as the Group becomes
self-financing from the commercial production of phosphate
fertilizers. Management monitors forecasts of the Group's liquidity
by projecting rolling 18 month cash flows.
The Group cash position at 31 December 2013 was $0.2 million
(2012 $0.5 million).
INTEREST RATE RISK
The Group's exposure to the risk of changes in market interest
rates relates to the Group's cash holdings and ACB Loan.
The following table demonstrates the sensitivity to a reasonably
possible change in interest rates, with all other variables held
constant, of the Group's profit before tax through the impact on
short-term deposits on year end cash and cash equivalents and bank
loans.
EFFECT ON LOSS BEFORE TAX FOR THE YEAR 2013 2012
ENDED:
Increase/ Increase/
(Decrease) (Decrease)
$,000 $,000
+1.0% (20) (25)
-0.5% 10 13
=========== ===========
CREDIT RISK
The Board considers that there is minimal credit risk in respect
of other receivables as it primarily relates to VAT due from the
Kazakhstan government which will be offset against VAT arising on
future sales. The Board reviews the credit ratings of the financial
institutions used for holding cash balances in order to minimise
the credit risk. The maximum credit risk to which the Group was
exposed at 31 December 2013 was $1,806,000 (2012: $2,911,000).
FOREIGN CURRENCY RISK
The presentational currency of the Group is US Dollars. The
functional currency of the Company is US Dollars and the functional
currency of its subsidiaries is Kazakhstan Tenge. The Group is
exposed to foreign currency risk due to movements in the Kazakhstan
Tenge against the US Dollar exchange rate in relation to
transactions and balances of the subsidiaries and movements in GB
Pounds and Euros against the US Dollar Exchange rate in respect of
transactions and balances of the Company.
The Group has a general policy of not hedging against foreign
currency risks. The Group manages foreign currency risk by
reviewing and matching forecasted foreign currency payments with
foreign currency balances.
The primary currency of international fertilizer trading is the
US Dollar.
The Group had the following financial instruments in currencies
other than the presentational currency of the parent company. The
amounts are stated in US Dollar equivalents.
2013 2012
$,000 $,000
Cash and cash equivalents 190 421
Trade and other receivables 1,467 3,223
Trade and other payables (4,137) (3,432)
======= =======
(2,480) 212
======= =======
An analysis of financial instruments by currency:
2013 2013 2012 2012
GBP,000 KZT,000 GBP,000 KZT,000
Cash and cash
equivalents 69 11,757 44 52,710
Trade and other
receivables 24 219,331 133 453,378
Trade and other
payables (69) (618,013) (125) (480,160)
------- --------- ------- ---------
24 (386,925) 52 25,928
------- --------- ------- ---------
Exchange rate fluctuations may adversely affect the Group's
financial position and results. The following table details the
Group's sensitivity to a 10% strengthening and weakening in the US
Dollar against the relevant foreign currencies of GB Pound and
Kazakhstan Tenge. 10% represents management's assessment of the
reasonable possible exposure, calculated on cash and cash
equivalents, trade and other receivables/payables.
Profit Equity sensitivity
or loss
sensitivity
10% 10% 10% 10%
strengthening weakening strengthening weakening
$'000 $'000 $'000 $'000
GB Pounds (4) 4 (4) 4
Kazakhstan Tenge 229 (252) 229 (252)
225 (248) 225 (248)
============== ========== -------------- ----------
The above risk exposures are also considered to apply to the
Company in relation to the movement of the US
Dollar exchange rate against GB Pounds.
FAIR VALUES
In the directors' opinion there is no material difference
between the book value and fair value of any of the Group's
financial instruments.
The classes of financial instruments are the same as the line
items included on the face of the balance sheet and have been
analysed in more detail in the notes to the accounts. Financial
assets comprise cash and cash equivalents and trade and other
receivables (excluding overseas VAT). Financial liabilities
comprise loans and borrowings and trade and other payables
(excluding the earth moving advance payment). All the Group's
financial assets are categorised as loans and receivables and
recognised at amortised cost using the effective interest rate
method and all financial liabilities are measured at amortised
cost.
26. COMMITMENTS
Under the SUC, the Group's current financial obligations are to
spend $115 million cumulatively by the end of 2020. It has invested
$32.3 million cumulatively at 31 December 2013.
Obligations under operating leases at 31 December 2013 were
$133,000 (2012: $150,000).
27. RELATED PARTIES
IDENTITY OF RELATED PARTIES
The Group has a related party relationship with its
subsidiaries, its directors and executive officers and the
directors of its subsidiaries.
Sunkar Resources plc was the ultimate controlling entity of the
Group at 31 December 2013.
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Key management personnel comprise directors and the chief
financial officer of the Company.
The key management personnel compensation is set out below:
Key management personnel
2013 2013 2013 2012 2012 2012
Directors Other Total Directors Other Total
$'000 key management $'000 $,000 key $'000
$'000 management
$'000
Salaries and fees 612 - 612 623 103 726
Termination payment - - - - 53 53
Compulsory social security
contributions 42 - 42 69 14 83
654 - 654 692 170 862
========= =============== ====== ========= =========== ======
No share options were granted to directors and key management
during the year and there were no unexercised options held by
directors and key management at 31 December 2013 (2012: nil).
Loans due to Directors were as follows:
2013 2012
$,000 $,000
S Utegen 300 300
N Damitov 300 300
Total 600 600
===== =====
The loans are unsecured and carry an annual interest rate of 10
per cent.. The loans were initially to be repaid by 28 March 2012.
A new repayment date has not yet been determined in respect of the
loans from S Utegen and N Damitov. Interest of $65,000 and $67,000
has been accrued on the respective loans during 2013 (2012:
$72,000)
TRANSACTIONS WITH SUBSIDIARY UNDERTAKINGS
Details of loans advanced to Temir Service LLP, a subsidiary
undertaking are included in note 16. Interest income earned under
these arrangements during the year was $1.5 million (2012: $1.5
million).
At 31 December 2013 the Company was owed $62,000 (2012: owed to
$99,000) by Chilisai Chemicals LLP, a subsidiary undertaking.
OTHER RELATED PARTY TRANSACTIONS
The Company had no other related party transactions for the year
under review.
28. GROUP ENTITIES
SIGNIFICANT SUBSIDIARIES
Country Ownership Nature
of incorporation interest of business
Temir Service LLP Kazakhstan 100% Mining
Chilisai Chemicals LLP Kazakhstan 100% Chemicals
29. SUBSEQUENT EVENTS
In March 2014 the Company announced that the Ministry of
Industry and New Technologies of the Republic of Kazakhstan
executed an addendum to the SUC approving the revised mining
commitments.
On 7 April 2014, the Company announced that it had raised $1.28
million through the issue of 1,280,000 Convertible Loan Notes of $1
each (the "CLN") to Sun Avenue Partners Corporation ("SAPC"). The
CLN is convertible into a maximum of 34,065,202 ordinary shares of
0.1p each in the Company at a price of approximately $0.0376
(approximately 2.2p) per share
On 26 May 2014, the Company drew $100,000 under a loan facility
from SAPC. A further $2.55 million facility was announced on 17
June 2014 which is repayable by 15 October 2014.
On 17 June 2014, the Company announced that it had reached an
agreement on the terms of a recommended, all cash offer to be made
by SAPC for the entire issued and to be issued ordinary share
capital of Sunkar not already owned by it (the "Offer") under the
contractual offer route, as set out in the City Code on Takeovers
and Mergers. The Offer will be made on the basis of 1.835 pence for
each Sunkar share and values the Company at approximately GBP6.3
million.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAAKXAEKLEFF
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