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STRIKE RESOURCES LIMITED Interim / Quarterly Report 2013
65855_rns_2013-03-06_0b21153e-2a9d-4935-be9a-9d0d77b5926a.pdf
Interim / Quarterly Report
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Half-Year Financial Report
Strike Resources Limited and its controlled entities for the half year ended 31 December 2012
Strike Resources Limited ASX Code: SRK Share Registry A.B.N. 94 088 488 724
Local T | 1300 974 700
Level 2, 160 St Georges Terrace Advanced Share Registry Services Perth Western Australia 6000 Suite 2, 150 Stirling Highway Nedlands Western Australia 6009
T | + 61 8 9324 7100 T | + 61 8 9389 8033 F | + 61 8 9324 7199 F | + 61 8 9389 7879 E | [email protected] E | [email protected] W | www.strikeresources.com.au W | www.advancedshare.com.au
Contents
| CORPORATE DIRECTORY 2 | |
|---|---|
| DIRECTORS' REPORT 3 | |
| AUDITOR'S INDEPENDENCE DECLARATION 7 | |
| CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME 8 | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION 9 | |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 10 | |
| CONSOLIDATED STATEMENT OF CASH FLOWS 11 | |
| NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12 | |
| DIRECTORS' DECLARATION 21 | |
| AUDITOR'S INDEPENDENT REVIEW REPORT 22 |
Corporate Directory
| Directors | Mr Malcolm RichmondChairman / Non-Executive Director |
|---|---|
| Mr William JohnsonExecutive Director | |
| Mr Matthew HammondNon-Executive Director | |
| Ms Samantha ToughNon-Executive Director | |
| Chief Financial Officer | Mr Julian Tambyrajah |
| Company Secretary | Mr Stephen Gethin |
| Registered Office | Level 2, 160 St George's TerracePerth, Western Australia, 6000Telephone:+61 8 9324 7100Facsimile:+61 8 9324 7199Local telephone: 1300 974 700 |
| Website | www.strikeresources.com.au |
| Information Email | [email protected] |
| Share Registry | Advanced Share Registry ServicesSuite 2, 150 Stirling HighwayNedlands, Western Australia, 6009Telephone:+61 8 9389 8033Facsimile:+61 8 9389 7871Email:[email protected]Website:www.advancedshare.com.au |
| Auditors | BDO Audit (WA) P/L38 Station StreetSubiaco, Western Australia 6008Telephone:+61 8 9382 4600Facsimile:+61 8 9382 4601Website:www.bdo.com.au |
| Solicitors to the Company | AshurstLevel 36, Grosvenor Place225 George StSydney, NSW 2000Telephone:+61 2 9258 6000Facsimile:+61 2 9258 6999Website:www.ashurst.com |
| Stock Exchange Listing | Strike Resource Limited's shares are listed on the AustralianSecurities Exchange ("ASX") |
ASX Code: SRK
Directors' Report
Your Directors present their report on the Consolidated Entity consisting of Strike Resources Limited ("Company" or "Strike") and the entities it controlled at the end of, or during, the half-year ended 31 December 2012.
Directors
The following persons were Directors of Strike during the whole of the half-year and up to the date of this report: report:
Malcolm Richmond Matthew Hammond William Johnson Samantha Tough
Ken Hellsten was a director from the beginning of the financial year until his resignation on 19 January 2013.
Review of Operations
Profit for the half year
Prior to the acquisition of Apurimac Ferrum S.A. ("AF") Strike provided loans to AF which were fully provided (provision for non-recoverable loans). On consolidation of AF the provisions were reversed which has resulted in a $33,132,502 credit to the profit and loss (see note 3). Strike therefore has reported a profit of $29,627,619 for the half-year ended 31 December 2012.
Strike Moves to 100% of AF
In December 2013 completed a settlement agreement (Shootout Settlement Agreement) with its Peruvian joint venture partner D&C, to acquire the remaining 50% equity interest in Apurimac Ferrum S.A. (AF). Under the Shootout Settlement Agreement Strike moved to 100% ownership of AF. D&C has received the following consideration
The key commercial terms of the Settlement Agreement are detailed below.
- D&C transferred its 50% shareholding in AF to Strike.
- 2,800,000 Strike shares were issued to D&C, with D&C now holding just under 2% of Strike.
- AF repaid D&C's loans of approximately US$3.5M, funded by Strike.
- D&C will receive the following deferred payments if AF achieves the milestones below:
- o US$2M on AF defining a JORC Resource at the Apurimac project of 500 million tonnes (Mt) of iron ore with an average grade of at least 55% iron (Fe) or 275 Mt of contained iron at an average grade of 52.5% Fe or above.
- o US$3M on AF achieving environmental and community approvals for the construction of an iron ore mine and associated infrastructure with a design capacity of at least 10 million tonnes per annum (Mtpa) of iron ore product.
- o US$5M on formal AF Board approval to commence construction of an iron ore project, or the commencement of bulk earthworks for an iron ore processing plant, with a design capacity of at least 10 Mtpa of iron ore product (Construction Milestone).
AF is under no obligation to meet the milestones.
- D&C will receive the following royalties:
- o 1.5% of the net profits from sales of iron ore, and
- o 2% of the proceeds of sales of base and precious metals (on a net smelter return basis).
AF is under no obligation to commence production.
- AF may extinguish the royalties by paying D&C any one of the following amounts (Extinguishment Payment):
- o US$13M within 2 years from 20 December 2012 (Execution),
- o US$15M between 2 and 3 years from Execution,
- o US$20M between 3 and 4 years from Execution, or
- o US$30M1 after 4 years from Execution but before the Construction Milestone occurs or the 15th anniversary of the agreement (whichever is sooner).
Any royalty that is being paid on sales of base and precious metals at the date the Extinguishment Payment is made remains in place, up to a cap of US$500,000 per year.
1 This amount is indexed to changes in the US CPI, commencing on the second anniversary of the execution of the Shootout Settlement Agreement.
The Settlement Agreement represents the achievement of Strike's long-held objective of moving to 100% ownership of AF. Importantly, the acquisition terms were designed to preserve Strike's cash. Moving to full control of AF enables Strike to focus on driving exploration efforts and progressing key project milestones at Apurimac.
Management Restructure
On 18 January 2013 Mr Ken Hellsten announced his retirement as Managing Director, a position he had held since March 2010.
Following the successful move to 100% ownership of AF, the Company determined that it would be best served by having its key management and technical team based in Lima, Peru. Mr Hellsten is unable to relocate to Peru and the role that will remain in Perth does not warrant a person of his skills and experience. Mr Hellsten will remain in a consulting role until the end of February and retains his role as a Strike appointee on the Board of Cuervo Resources Inc.
Non-Executive Director William Johnson was appointed Executive Director to succeed Mr Hellsten in the senior management role. Mr Johnson has been a Strike Director since 2006, serving in an executive capacity until 2010.
Since securing 100% of AF, Strike's key focus is on negotiating the community approvals necessary to enable it to re-start drilling on those concessions that have the best prospects of increasing the Company's resource inventory. Mr Johnson's immediate task as senior executive is to review AF's management structure, resource levels and forward plans to ensure that it is best positioned to achieve this outcome.
Apurimac Iron Ore Project Regional exploration review
During the half year ending 31 December 2012 AF completed a review of previous exploration data within the Apurimac concessions and the interpretation of high-quality remote sensing data. The objective of the review was to assess the potential for iron ore and copper/gold within its concessions and adjacent areas, to prioritise exploration targets and community relations programs to secure exploration access agreements.
The data review included a compilation of the available airborne and ground magnetic surveys, geological mapping at the reconnaissance and prospect level, regional geochemistry, surface sampling and drilling results and the interpretation of detailed multi-spectral remote sensing (ASTER) data by an independent expert. The outcome of the review was the creation of a series of ranked exploration targets.
The review also identified a number of high-priority satellite deposits in the Apurimac concessions, warranting further magnetic surveys and additional reconnaissance mapping and sampling prior to drill testing. The key potential satellite targets are Sillaccassa and Colcabamba.
The top priority drilling area remains the Opaban prospect and, in particular, the extension of the existing resources at both Opaban I and Opaban III. The strike length of the magnetic anomaly on Opaban I and III is approximately 5.4 kilometres in Strike-owned concessions. Drilling presently only covers 50% of this area, so there is strong potential to discover additional iron ore on these properties. Analysis to identify the relative contributions of exoskarn (limestone hosted) and endoskarn (intrusive hosted) to the current Opaban resource will be undertaken. The results of this analysis will affect the design of the proposed Opaban resource extension the drilling and exploration programs for adjacent AF concessions that have the potential to extend and/or repeat the Opaban deposits.
Re-commencement of drilling at Opaban depends upon securing access approvals from the communities on whose land the concessions are located; which is discussed further in the Social Approvals and Community Relations section below.
Cusco Project, Santo Tomas Prospect Regional exploration review
Strike's Cusco concessions were included in the regional review referred to in the Apurimac Project section above. Two concessions show ASTER iron and alteration anomalies. The ASTER interpretation has also shown numerous copper anomalies on the periphery of Santo Tomas. Two strong circular/semi-circular magnetic anomalies with apparent alteration overprint consisting of gossan/high sulphidation type are also present. The review recommended conducting further drilling, aimed at increasing the iron ore resource estimate for Santo Tomas, based on applying an interpretation using stratigraphic rather than structural controls.
The review also assessed the copper/gold potential of the Cusco concessions. Malachite and azurite were identified in surface mapping and artisanal (informal) gold mining is occurring in the area. Although generally low levels of copper and gold were identified during previous drilling, an interval of 28 metres averaging 1%Cu was intersected in the southern portion of the project. An Induced Polarization (IP) survey was undertaken in order to assess the potential for a large porphyry copper/gold system. The surface extent of this survey was limited by community access agreements. There was no indication of a large porphyry system to a depth of 700 m but several small chargeable bodies were identified. Given the presence of artisanal mining, these anomalies may be associated with high grade gold and/or copper mineralisation and will be followed up during a subsequent drilling campaign.
Cuervo Resources Inc. Drilling Campaign
During the half year Cuervo Resources Inc. (Cuervo) completed its initial 4,500 m diamond-drilling program at the "Bob 1" zone of its Cerro Ccopane iron ore project in southern Perú, with 18 holes completed. The campaign commenced during the June 2012 quarter, with two rigs in the field from July 2012, and continued until November 2012.
This drilling program was designed to test below-surface exposures of magnetite mineralisation and coincident gravity and magnetic anomalies to a depth of around 200 m and outlined a broad zone of massive and semi-massive magnetite extending over at least 2 kilometres of strike length. The mineralised zone dips moderately to the west and remains open in all directions. Further drilling will be required to fully assess the extent of the Bob1 mineralisation as well as its extension to the north known as Parco.
Assay results for the first 18 drill holes have been received and are summarised below.
Table 1 - Significant intersections in drill holes BDH12-01 to BDH12-18
| Hole | From | To | Length | Fe (%) | SiO2 (%) | S (%) | P (%) | Mn (%) | Cu (%) |
|---|---|---|---|---|---|---|---|---|---|
| BDH12-01 | 86.2m | 219.2m | 133m | 49.6 | 14.4 | 2.36 | 0.09 | 0.14 | 0.11 |
| BDH12-02 | 12.35m | 194.35m | 182m | 39.6 | 23.2 | 2.3 | 0.08 | 0.16 | 0.1 |
| BDH12-03 | 19.2m | 175.2m | 156m | 40.9 | 23.3 | 2.92 | 0.06 | 0.19 | 0.12 |
| BDH12-04 | 66.1m | 255m | 188.9m | 32.6 | 28.5 | 1.8 | 0.08 | 0.23 | 0.06 |
| BDH12-05 | 35.8m | 179.55m | 143.75m | 38.3 | 22.6 | 1.83 | 0.09 | 0.2 | 0.08 |
| BDH12-06 | 71.3m | 181.9m | 110.6m | 41.1 | 21.1 | 2.79 | 0.08 | 0.17 | 0.1 |
| BDH12-07 | 219.45m | 311.45m | 92m | 36.6 | 24.5 | 2.64 | 0.07 | 0.22 | 0.09 |
| BDH12-08 | 45.1m | 230m | 184.9m | 47.5 | 16.7 | 2.3 | 0.09 | 0.11 | 0.11 |
| BDH12-09 | abandoned | ||||||||
| BDH12-10 | 83.10m | 210.20m | 217.10m | 54.1 | 10 | 2.67 | 0.06 | 0.12 | 0.13 |
| BDH12-11 | 25.70m | 112.25m | 86.55m | 33.8 | 25.8 | 0.55 | 0.06 | 0.23 | 0.04 |
| BDH12-12 | 216.80m | 390.15m | 173.35m | 30.1 | 26.5 | 2.17 | 0.07 | 0.2 | 0.08 |
| BDH12-13 | 272.40m | 299.20m | 26.80m | 23.3 | 34 | 1.22 | 0.12 | 0.22 | 0.05 |
| BDH12-14 | 267.75m | 291.00m | 23.25m | 29.6 | 27.9 | 2.41 | 0.06 | 0.21 | 0.07 |
| BDH12-15 | 190.30m | 237.00m | 46.70m | 19.9 | 35.4 | 1.7 | 0.07 | 0.22 | 0.06 |
| BDH12-16 | 18.30m | 83.40m | 65.10m | 40.9 | 21.2 | 1.27 | 0.06 | 0.17 | 0.09 |
| BDH12-17 | 67.3m | 179.8m | 112.5m | 49.3 | 14.7 | 2.81 | 0.04 | 0.11 | 0.12 |
| BDH12-18 | 5.3m | 40.7m | 35.4m | 52.4 | 11.2 | 1.46 | 0.12 | 0.14 | 0.09 |
The independent geologist conducting the resource estimate has monitored all drilling, sampling and assaying and has commenced the formal resource estimate process now that the final assay results have been received. The resource estimate is expected to be released in the first quarter of 2013.
Social Approvals and Community Relations
During the December 2012 quarter AF reopened dialogue with the important community of Huinchos, located on its Opaban I concession, which was put on hold earlier in the year following the increase in regional activism that began in late 2011.
In November 2012 AF completed construction of a multipurpose sports field for the Huinchos community, which has been very well received. AF is now planning to open a community information office in the community. Through this office AF will be able to provide information to community members about the iron exploration and development process. AF is in discussions with other villages within the Huinchos community about the potential to build them additional sporting facilities and open further information offices.
Huinchos sports field
In 2012 the Peruvian Government commenced a program to encourage artisanal (informal) miners to bring their activities within the law. In general terms, the new regime permits informal miners to continue to operate if they obtain the support of the relevant concession owners and comply with certain environmental and safety standards. AF considers that there may be potential mutual benefits in assisting informal miners on its concessions to register under the new system. Informal mining on AF's concessions is on a small scale and does not have a significant impact on the Group's operations, but can be an important source of revenue for locals. AF organised a meeting between Huinchos community leaders and the Regional Mining Office to discuss the formalisation process and environmental management issues.
The AF community relations team was restructured during the Shoot-out and Luis Romero was appointed as the new Manager – Social Responsibility and is performing well in this role. Strike is hopeful of obtaining community approvals to recommence drilling on the Opaban I and III concessions during the first half of calendar 2013 and will keep shareholders updated on developments.
Berau Thermal Coal Project – Indonesia
On 7 December 2012, after protracted negotiations, Strike and its partner signed a set of agreements to settle the dispute over the Berau Coal Project. In summary, Strike will receive US$4.3M by June 2013 and exit the project.
JORC Code Competent Person Statement
The information in this document that relates to exploration results and mineral resources has been compiled by Mr Ken Hellsten, B.Sc. (Geology), who is a consultant to Strike Resources Limited and is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr Hellsten has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Mineral Resources and Ore Reserves" (the JORC Code). Mr Hellsten consents to the inclusion in this document of the matters based on this information in the form and context in which it appears.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 7.
This report is made in accordance with a resolution of directors.
William Johnson Executive Director 6 March 2013
Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
6 March 2013
Strike Resources Limited The Board of Directors Level 2 160 St Georges Terrace PERTH WA 6000
Dear Sirs,
DECLARATION OF INDEPENDENCE BY WAYNE BASFORD TO THE DIRECTORS OF STRIKE RESOURCES LIMITED
As lead auditor for the review of Strike Resources Limited for the half-year ended 31 December 2012, I declare that, to the best of my knowledge and belief, the only contraventions of:
- the auditor independence requirements of the Corporations Act 2001 in relation to the review; and
- any applicable code of professional conduct in relation to the review.
This declaration is in respect of Strike Resources Limited and the entities it controlled during the period.
Wayne Basford Director
BDO Audit (WA) Pty Ltd Perth, Western Australia
Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the half-year ended 31 December 2012
| Consolidated | |||
|---|---|---|---|
| 31 December | 31 December | ||
| 2012 | 2011 | ||
| Note | $ | $ | |
| Revenue | 1,221,706 | 5,311,975 | |
| Other income | 3 | 33,132,50234,354,208 | -5,311,975 |
| Occupancy costs | (98,183) | (130,159) | |
| Finance costs | (6,461) | (4,706) | |
| Personnel costsCash remuneration | (804,566) | (951,011) | |
| Director's and employee's options expense | - | (326,951) | |
| Corporate costsProfessional fees | (516,925) | (528,273) | |
| Other corporate expenses | (234,290) | (699,656) | |
| Foreign exchange gain/(loss)Impairment loss | (563,128) | 1,851,760 | |
| Exploration and evaluation costs | (188,398) | (1,774) | |
| Loan to Cuervo Resources Inc. | (851,985) | (5,189,462) | |
| Investment in associate | - | (22,407) | |
| Financial assets at fair value through profit or loss | (1,407,303) | (1,210,571) | |
| Loss on disposal of fixed assets | - | (43,437) | |
| Profit/(Loss) before income tax | 29,682,969 | (1,944,672) | |
| Income tax expense | (55,350) | (119,460) | |
| Profit/(Loss) for the half year | 29,627,619 | (2,064,132) | |
| Other comprehensive income | |||
| Items that will be reclassified to profit or loss | |||
| Exchange differences on translation of foreign operations | (46,609) | (45,364) | |
| Other comprehensive (loss) for the half year | (46,609) | (45,364) | |
| Total comprehensive profit/(loss) for the period, net of | |||
| income tax attributable to the owners | 29,581,010 | (2,109,496) | |
| Basic profit/(loss) per share from profit/(loss) from continuing | |||
| operations attributable to the ordinary equity holders of theCompany | 20.78 | (0.01) | |
| Diluted earnings per share from profit/(loss) from continuing | |||
| operations attributable to the ordinary equity holders of theCompany | 20.78 | n/a |
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
as at 31 December 2012
| Consolidated | ||
|---|---|---|
| 31 December | 30 June | |
| 2012 | 2012 | |
| Note | $ | $ |
| Current assets | ||
| Cash and cash equivalents | 14,411,638 | 20,551,679 |
| Trade and other receivables | 375,630 | 570,256 |
| Financial assets at fair value through profit or loss4 | - | - |
| Assets classified as held for sale10 | 4,092,835 | 4,353,106 |
| Total current assets | 18,880,103 | 25,475,041 |
| Non-current assets | ||
| Trade and other receivables | 2,180,608 | 3,039,536 |
| Financial assets at fair value through profit or loss4 | 570,017 | 1,856,617 |
| Property, plant and equipment5 | 594,400 | 59,291 |
| Exploration and evaluation expenditure6 | 46,052,125 | - |
| Total non-current assets | 49,397,150 | 4,955,444 |
| Total assets | 68,277,253 | 30,430,485 |
| Current liabilities | ||
| Trade and other payables | 1,164,054 | 499,151 |
| Provisions7 | 2,478,757 | 61,418 |
| Total current liabilities | 3,642,811 | 560,569 |
| Non-current liabilities | ||
| Trade and other payables | - | 219,395 |
| Provisions7 | 5,067,142 | - |
| Total non-current liabilities | 5,067,142 | 219,395 |
| Total liabilities | 8,709,953 | 779,964 |
| Net assets | 59,567,300 | 29,650,521 |
| Equity | ||
| Contributed equity8 | 148,445,024 | 148,109,255 |
| Reserves | 11,958,296 | 12,004,905 |
| Retained earnings | (100,836,020) | (130,463,639) |
| Total equity | 59,567,300 | 29,650,521 |
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Consolidated Statement of Changes in Equity
for the half-year ended 31 December 2012
| Contributedequity | Currencytranslationreserve | Share-basedpaymentsreserve | Retainedearnings | Total equity | |
|---|---|---|---|---|---|
| Consolidated entity | $ | $ | $ | $ | $ |
| At 1 July 2011 | 145,632,412 | (630,900) | 12,780,333 | (116,705,135) | 41,076,710 |
| Total comprehensive income for the period | |||||
| Loss for the half-year | - | - | - | (2,064,132) | (2,064,132) |
| Other comprehensive incomeExchange differences on translation of foreign | |||||
| operations | - | (45,364) | - | - | (45,364) |
| Total comprehensive lossfor the half year | - | (45,364) | - | (2,064,132) | (2,109,496) |
| Transactions with owners in their capacity | |||||
| as owners: | |||||
| Issue of share options | 235,303 | - | 326,951 | (235,303) | 326,951 |
| Issue of shares | 2,250,000 | - | - | - | 2,250,000 |
| Share issue costs | (8,460) | - | - | - | (8,460) |
| At 31 December 2011 | 148,109,255 | (676,264) | 13,107,284 | (119,004,570) | 41,535,705 |
| At 1 July 2012 | 148,109,255 | (1,186,121) | 13,191,026 | (130,463,639) | 29,650,521 |
| Total comprehensive income for the period | |||||
| Profit for the half-year | - | - | - | 29,627,619 | 29,627,619 |
| Other comprehensive income | |||||
| Exchange differences on translation of foreignoperations | - | (46,609) | - | - | (46,609) |
| Total comprehensive income/(loss)for the | |||||
| half year | - | (46,609) | - | 29,627,619 | 29,581,010 |
| Transactions with owners in their capacity | |||||
| as owners: | |||||
| Issue of share options | - | - | - | - | - |
| Issue of shares | 335,769 | - | - | - | 335,769 |
| Share issue costs | - | - | - | - | - |
| At 31 December 2012 | 148,445,024 | (1,232,730) | 13,191,026 | (100,836,020) | 59,567,300 |
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
for the half-year ended 31 December 2012
| 31 December | 31 December | ||
|---|---|---|---|
| 2012 | 2011 | ||
| Note | $ | $ | |
| Cash flows from operating activities | |||
| Payments to suppliers and employees | (1,783,441) | (2,127,882) | |
| Receipts from customers | - | 123,144 | |
| Income tax payments | (55,350) | (119,460) | |
| Net cash outflow from operating activities | (1,838,791) | (2,124,198) | |
| Cash flows from investing activities | |||
| Payments for exploration and evaluation expenditure | (1,858) | (2,352) | |
| Payments for plant and equipment | - | (24,050) | |
| Payments for investment in associate | - | (2,626) | |
| Payments for financial assets at fair value through profit or loss | (120,702) | (204,879) | |
| Interest received | 564,823 | 1,241,487 | |
| Net cash inflow from acquisition of subsidiary | 13 | 209,723 | - |
| Proceeds from disposal of fixed assets | - | 70,000 | |
| Loans to associate/expenses paid on behalf of associate | (4,954,844) | (2,889,484) | |
| Loans to Cuervo Resources Inc. | - | (5,001,943) | |
| Net cash outflow from investing activities | (4,302,858) | (6,813,847) | |
| Cash flows from financing activities | |||
| Share issue costs | - | (8,460) | |
| Net cash outflow from financing activities | - | (8,460) | |
| Net decrease in cash and cash equivalents held | (6,141,649) | (8,946,505) | |
| Cash and cash equivalents at the beginning of the financial year | 20,551,679 | 34,176,329 | |
| Effect of exchange rate changes on cash held | 1,608 | 22,572 | |
| Cash and cash equivalents at end of the period | 14,411,638 | 25,252,396 |
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
for the half-year ended 31 December 2012
1. Basis of preparation of half-year report
This consolidated interim financial report for the half-year reporting period ended 31 December 2012 has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001.
This consolidated interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2012 and any public announcements made by Strike Resources Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.
The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.
Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2012 interim reporting period and have not been applied in these financial statements. New, amended and revised standards that are mandatory for the period to 31 December 2012 did not result in any changes to the accounting policies. Where applicable certain comparative amounts have been reclassified to conform to the current period's presentation.
| AASBreference | Title andAffectedStandard(s) | Nature of Change | Applicationdate | Impact on Initial Application |
|---|---|---|---|---|
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Introduces a single 'control model' for allentities, including special purpose entities(SPEs), whereby all of the followingconditions must be present:•Power over investee (whetheror not power used in practice)•Exposure, or rights, to variablereturns from investee•Ability to use power overinvestee to affect the entity's returns frominvestee. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adopted forthe year ended 30 June 2014, there willbe no impact on transactions andbalances recognised in the financialstatements because the entity does nothave any special purpose entities. |
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Introduces the concept of 'de facto'control for entities with less than a 50%ownership interest in an entity, but whichhave a large shareholding compared toother shareholders. This could result inmore instances of control and moreentities being consolidated. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adopted forthe year ended 30 June 2014, there willbe no impact on transactions andbalances recognised in the financialstatements. |
| AASB10(issuedAugust 2011) | ConsolidatedFinancial Statements | Potentialvotingrightsareonlyconsidered when determining if there iscontrol when they are substantive (holderhas practical ability to exercise) and therights are currently exercisable. This mayresult in possibly fewer instances ofcontrol. | Annualreportingperiodscommencingon or after 1January 2013 | Potentialvotingrightsarenotsubstantive. |
| AASB11(issuedAugust 2011) | Joint Arrangements | Joint arrangements will be classified aseither 'joint operations' (where partieswith joint control have rights to assetsand obligations for liabilities) or 'jointventures' (where parties with joint controlhave rights to the net assets of thearrangement).Joint arrangements structured as aseparate vehicle will generally be treatedas joint ventures and accounted for usingtheequitymethod(proportionateconsolidation no longer allowed). | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is first adopted forthe year ended 30 June 2014, there willbe no impact on transactions andbalances recognised in the financialstatements because the entity has notentered into any joint arrangements. |
| AASB13(issuedSeptember2011) | FairValueMeasurement | Currently,fairvaluemeasurementrequirements are included in severalAccountingStandards.AASB13establishes asingle framework formeasuring fair value of financial and nonfinancial items recognised at fair value inthe statement of financial position ordisclosed in the notes in the financialstatements. | Annualreportingperiodscommencingon or after 1January 2013 | The entity has yet to conduct a detailedanalysis of the differences between thecurrent fair valuation methodologies usedand those required by AASB13.However, when this standard is adoptedfor the first time for the year ended 30June 2014, there will be no impact on thefinancial statements because the revisedfair value measurementrequirementsapply prospectively from 1 July 2013. |
STRIKE RESOURCES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| AASB | Title and | Nature of Change | Application | Impact on Initial Application |
|---|---|---|---|---|
| reference | AffectedStandard(s) | date | ||
| AASB13(issuedSeptember2011) | FairValueMeasurement | Additional disclosures required for itemsmeasured at fair value in the statement offinancial position, as well as items merelydisclosed at fair value in the notes to thefinancial statements. Extensive additionaldisclosurerequirementsforitemsmeasured at fair value that are 'level 3'valuations in the fair value hierarchy thatare not financial instruments, e.g. landand buildings, investment properties etc. | Annualreportingperiodscommencingon or after 1January 2013 | When this standard is adopted for thefirst time for the year ended 30 June2014, additionaldisclosures will berequired about fair values. |
| AASB119(reissuedSeptember2011) | Employee Benefits | Main changes include:•Elimination of the 'corridor'approach for deferring gains/losses fordefined benefit plans•Actuarialgains/lossesonremeasuring the defined benefit planobligation/asset to be recognised in OCIrather than in profit or loss, and cannotbe reclassified in subsequent periods•Subtle amendments to timingfor recognition of liabilities for terminationbenefits•Employee benefits expectedto be settled (as opposed to due tosettled under current standard) whollywithin 12 months after the end of thereporting period are short-term benefits,and therefore not discounted whencalculating leave liabilities. Annual leavenot expected to be used wholly within 12months of end of reporting period will infuture be discounted when calculatingleave liability. | AnnualperiodscommencingonorafterJanuary 2013 | The entity currently calculates its liabilityfor annual leave employee benefits onthe basis that it is due to be settled within12 months of the end of the reportingperiod because employees are entitled touse this leave at any time. Theamendments to AASB 119 require thatsuch liabilities be calculated on the basisof when the leave is expected to betaken, i.e. expected settlement.When this standard is first adopted for 30June 2014 year end, annual leaveliabilities will be recalculated on 1 July2012 as short-term benefits because theyare expected to be settled wholly within12 months after the end of the reportingperiod, there will be no impact on theclassification and balances recognised inthe financial statements. |
| AASB 2012-9(issuedDecember2012) | AmendmenttoAASB 1048 arisingfrom the WithdrawalofAustralianInterpretation 1039 | Deletes Australian Interpretation 1039Substantive Enactment of Major Tax BillsIn Australia from the list of mandatoryAustralian Interpretations to be applied byentities preparing financial statementsunder the Corporations Act 2001 or othergeneral purpose financial statements. | Annualreportingperiodsbeginning onorafter1January 2013 | There will be no impact on first-timeadoption of this amendment as the groupdoes not account for proposed changesin taxation legislation until the relevantBill has passed through both Houses ofParliament, which is consistent with theviews expressedby the AustralianAccounting Standards Board in theiragenda decision of December 2012. |
| AASB12(issuedAugust 2011) | DisclosureofInterests in OtherEntities | CombinesexistingdisclosuresfromAASB 127 Consolidated and SeparateFinancialStatements,AASB128Investments in Associates and AASB 131Interests in Joint Ventures. Introducesnew disclosure requirements for interestsin associates and joint arrangements, aswellasnewrequirementsforunconsolidated structured entities. | Annualreportingperiodsbeginning onorafter1January 2013 | As this is a disclosure standard only,there will be no impact on amountsrecognised in the financial statements.However, additional disclosures will berequired for interests in associates andjoint arrangements, as well as forunconsolidated structured entities. |
2. Segment information
Description of segments
Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to make strategic decisions.
The Board of Directors considers the business from both a product and a geographic perspective and has identified three reportable segments as follows:
- Australia
- Indonesia (Thermal Coal)
- Peru (Iron Ore)
Segment information provided to the Board of Directors
The segment information provided to the Board of Directors for the reportable segments for the half-year 31 December 2012 and 31 December 2011 are as follows:
STRIKE RESOURCES LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| Half-year 2012 | Indonesia | Peru | Australia | Total |
|---|---|---|---|---|
| Interest revenue | 1,079 | - | 1,036,128 | 1,037,207 |
| Fees for consulting to Apurimac Ferrum S.A. | - | - | 184,499 | 184,499 |
| Other income | - | 218,462 | 32,914,040 | 33,132,502 |
| Inter-segment revenue | - | - | - | - |
| Revenue from external customers | 1,079 | 218,462 | 33,134,667 | 34,354,208 |
| Adjusted EBITDA | (254,188) | 215,918 | (10,293,544) | (10,331,814) |
| Depreciation and amortisation | - | - | (14,729) | (14,729) |
| Personnel costs | - | - | (804,566) | (804,566) |
| Impairment losses: | ||||
| - Resource projects | (109,562) | - | (1,859) | (111,421) |
| - Land | (76,977) | - | - | (76,977) |
| - Loan to Cuervo Resources Inc | - | - | (851,985) | (851,985) |
| Fair value adjustment – financial assets held as | - | - | (1,407,303) | (1,407,303) |
| fair value through profit or loss | ||||
| Total segment assets | 4,117,343 | 47,144,070 | 18,040,012 | 69,301,425 |
| Total segment liabilities | (10,561,375) | (49,114,039) | (946,787) | (60,622,201) |
| Half-year 2011 | Indonesia | Peru | Australia | Total |
|---|---|---|---|---|
| Interest revenue | 13 | - | 4,870,930 | 4,870,943 |
| Fees for consulting to Apurimac Ferrum S.A. | - | - | 600,614 | 600,614 |
| Inter-segment revenue | - | - | (159,582) | (159,582) |
| Revenue from external customers | 13 | - | 5,311,962 | 5,311,975 |
| Adjusted EBITDA | 170,124 | (29,158) | (5,974,083) | (5,833,117) |
| Depreciation and amortisation | (2) | - | (49,747) | (49,749) |
| Personnel costs | - | - | (1,277,962) | (1,277,962) |
| Impairment losses: | ||||
| - Resource projects | - | - | (1,773) | (1,773) |
| - Loans to associated entity and subsidiaries | - | - | (5,156,788) | (5,156,788) |
| Fair value adjustment – financial assets held as | - | - | (1,232,976) | (1,232,976) |
| fair value through profit or loss | ||||
| Total segment assets 30 June 2012 | 4,363,184 | 477,501 | 25,810,008 | 30,650,693 |
| Total segment liabilities 30 June 2012 | (10,619,550) | (3,443,885) | (426,889) | (14,490,324) |
Other segment information
(i) Adjusted EBITDA
A reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows:
| Half-year | ||
|---|---|---|
| 2012 | 2011 | |
| $ | $ | |
| Adjusted EBITDA | (10,331,814) | (5,833,117) |
| Intersegment eliminations | 40,029,512 | 3,938,194 |
| Depreciation | (14,729) | (49,749) |
| 29,682,969 | (1,944,672) | |
| Profit/(loss) before tax from continuing operations | 29,682,969 | (1,944,672) |
| 29,682,969 | (1,944,672) |
(ii) Segment assets and segment liabilities
Reportable segments' assets and liabilities are reconciled to total assets and liabilities respectively as follows:
| 31 December | 30 June | |
|---|---|---|
| 2012 | 2012 | |
| $ | $ | |
| Segment assets | 69,301,425 | 30,650,693 |
| Intersegment eliminations | (1,024,172) | (220,208) |
| Total assets as per the Consolidated Statement of Financial | ||
| Position | 68,277,253 | 30,430,485 |
| Segment liabilities | (60,622,201) | (14,490,324) |
| Intersegment eliminations | 51,912,248 | 13,710,360 |
| Total liabilities as per the Consolidated Statement of Financial | ||
| Position | (8,709,953) | (779,964) |
The amounts provided to the Board of Directors with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset.
3. Profit for the half-year
| Half-year | ||
|---|---|---|
| 2012 | 2011 | |
| Profit for the half year includes the following items that are unusual | $ | $ |
| because of their nature, size or incidence: | ||
| Other income | ||
| Reversal of provision for loans and receivables due from AF as a result of | ||
| the acquisition on 28 December 2012: | ||
| Loan and interest – AF Settlement Agreement 21 July 20091 | 20,240,010 | - |
| Loan and interest – AF Finance Agreement 16 May 20122 | 2,948,220 | - |
| Loan and interest – Purchase from Iron Associates Corporation | 2,791,377 | - |
| Loan and interest – AF Settlement Agreement 21 July 20093 | 6,959,299 | - |
| Other receivables4 | 193,596 | - |
| 33,132,502 | - |
Prior to the acquisition of Apurimac Ferrum S.A. ("AF") Strike provided loans to AF which were fully provided (provision for non-recoverable loans). On consolidation of AF the provisions were reversed which has resulted in the above $33,132,502 credit to the profit and loss.
-
- On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement with AF in which US$20 million may be advanced to AF to undertake exploration on the Apurimac and Cusco Iron Ore projects. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under the AF Settlement Agreement.
-
- On 16 May 2012, AF entered into the AF Finance Agreement with Strike Finance Pty Ltd for a principal amount US$6m, interest rate is 10% for principal amounts drawn and repaid before 31 December 2012 and 15% for principal amounts repaid after 31 December 2012. The latest repayment date is 31 January 2014.
-
- On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement with AF in which debts outstanding to Strike Resources Limited and Strike Resource Peru S.A.C. of A$6,426,993 were acknowledged. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under the AF Settlement Agreement.
-
- According to the Technical Service Agreement between Strike Resources Limited and AF, Strike Resources Limited will invoice AF expenses of personnel who provide services to AF. This has been effective since 10 November 2009.
4. Current financial assets at fair value through profit or loss
The following table presents the Consolidated Entity's financial assets measured and recognised at fair value at 31 December 2012 and 30 June 2012.
| At 31 December 2012 | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|
| $ | $ | $ | $ | |
| Assets | ||||
| Financial assets at fair value through profit or loss | ||||
| − Trading securities | 209,394 | 360,623 | - | 570,017 |
| Available-for-sale financial assets | ||||
| − Equity securities | - | - | - | - |
| Total assets | 209,394 | 360,623 | - | 570,017 |
| At 30 June 2012 | Level 1 | Level 2 | Level 3 | Total |
| $ | $ | $ | $ | |
| Assets | ||||
| Financial assets at fair value through profit or loss | ||||
| − Trading securities | 114,364 | 1,742,253 | - | 1,856,617 |
| Available-for-sale financial assets | ||||
| − Equity securities | - | - | - | - |
| Total assets | 114,364 | 1,742,253 | - | 1,856,617 |
5. Property, plant and equipment
| Plant and | Leasehold | ||||
|---|---|---|---|---|---|
| Capital WIP | Land | equipment | improvements | Total | |
| At 30 June 2012 | |||||
| Cost or fair value | 280 | - | 169,323 | 14,936 | 184,539 |
| Accumulated | |||||
| depreciation and | |||||
| impairment | - | - | (124,573) | (675) | (125,248) |
| Net carrying amount | 280 | - | 44,750 | 14,261 | 59,291 |
| Half-year ended 31 | |||||
| December 2012Opening carrying | |||||
| amount | 280 | - | 44,750 | 14,261 | 59,291 |
| Exchange differences | - | - | 48 | - | 48 |
| Additions | - | 427,290 | 122,500 | - | 549,790 |
| Transfers out of CWIP | - | - | - | - | - |
| Transfers from CWIP | - | - | - | - | - |
| Depreciation expense | - | - | (13,725) | (1,004) | (14,729) |
| Carrying amount at 31 | |||||
| December 2012 | 280 | 427,290 | 153,573 | 13,257 | 594,400 |
| At 31 December 2012 | |||||
| Cost or fair value | 280 | 427,290 | 523,408 | 14,936 | 965,914 |
| Accumulated | |||||
| depreciation andimpairment | - | - | (369,835) | (1,679) | (371,514) |
| Net carrying amount | 280 | 427,290 | 153,573 | 13,257 | 594,400 |
6. Exploration and Evaluation Expenditure
| 31 December2012 | 30 June | |
|---|---|---|
| $ | 2012$ | |
| Beginning balance | - | 8,239,883 |
| Exchange differences | - | (1,345,053) |
| Exploration and evaluation expenditure additions – Apurimac Ferrum S.A. | 46,052,125 | 2,134 |
| Exploration and evaluation expenditure additions – Paulsens East | 1,859 | - |
| Impairment loss – exploration and evaluation | (1,859) | (2,875,936) |
| Reclassed to assets classified as held for sale | - | (4,021,028) |
| Ending balance | 46,052,125 | - |
7. Provision
The Group recognised deferred consideration to acquire 50% shares of Apurimac Ferrum S.A from D&C Group. A provision of $1,607,691 and $5,067,142 were recognised as current and non-current provision respectively during the period. Refer to note 13.
8. Equity securities issued
| Consolidated Entity | ||
|---|---|---|
| 2012 | 2011 | |
| 145,334,268 (2011: 142,534,268) fully-paid ordinary shares | 148,445,024 | 148,109,255 |
Each fully-paid, ordinary share carries one vote per share and the right to participate in dividends.
| Date ofmovement | No. | $ | |
|---|---|---|---|
| Movement in ordinary share capital | |||
| At 1 July 2011 | 133,534,268 | 145,632,412 | |
| Shares issued on exercise of options | - | 235,303 | |
| Shares issued | 5 Aug 2011 | 9,000,000 | 2,250,000 |
| Share issue expenses | - | (8,460) | |
| At 31 December 2011 | 142,534,268 | 148,109,255 | |
| Shares issued on exercise of options | - | - | |
| Share issued | 28 Dec 2012 | 2,800,000 | 336,000 |
| Adjustments | - | (231) | |
| Share issue expenses | - | - | |
| At 31 December 2012 | 145,334,268 | 148,445,024 |
9. Dividends
No dividends were paid or provided for during the half-year ended 31 December 2012.
10. Assets and Liabilities classified as held for sale
a. Description
The Group having undertaken a strategic review of its operations during the year ended 30 June 2012, and due to the legal dispute, the Board resolved to seek a settlement which involves an exit of the operations in Indonesia.
The results of Land and Exploration and Evaluation of Berau Thermal Coal Project have been recorded in these financial statements as being held for sale. Under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, an asset is either held for recovery through use or for sale. As the Group is seeking settlement it has been classified as held for sale. The impairment of Berau Exploration and Evaluation to $4,092,835 is not a reflection of its commercial value rather a result of a prolonged dispute with the Indonesian partner which has excluded the possibility of a commercial sale. Related financial information is set out below. Further information is set out in note 2 – Segment Information.
b. Assets classified as held for sale
| 31 December2012 | 30 June2012 | |
|---|---|---|
| $ | $ | |
| Land | 237,956 | 332,078 |
| Exploration and Evaluation | 3,854,879 | 4,021,028 |
| 4,092,835 | 4,353,106 |
c. Liabilities directly associated with assets classified as held for sale
| 31 December2012 | 30 June2012 | |
|---|---|---|
| $ | $ | |
| Trade creditorsProvision | -- | -- |
| - | - |
11. Contingent Liabilities and Contingent Assets
a. Strike Resources Peru S.A.C. option
Strike Resources Peru S.A.C. (the Company's Peruvian subsidiary) granted Apurimac Ferrum S.A. an option over its mining concessions exercisable for US$1.75 million.
b. Cristoforo Agreement
On 15 June 2010, Strike Resources Peru S.A.C. ("Strike Peru") entered into an assignment of mining rights and option agreement with the Peruvian owner of three mineral concessions in the Apurimac District totalling 1,900 hectares, being the Cristoforo 14, Cristoforo 28 and Ferroso 29 concessions ("Cristoforo Agreement"). The consideration paid (and payable) under the agreement was US$31,250 (paid on execution), US$50,000 payable within 12 months and 15 business days from execution, US$50,000 payable within 6 months thereafter and a further US$1.05 million is payable if Strike Peru exercises the option to acquire the concessions. The option may be exercised on or before 13 June 2013. Under the terms of the AF Settlement Agreement Strike Peru was required to assign the Cristoforo Agreement to Apurimac Ferrum S.A. (AF) for no consideration (other than reimbursement of the money paid by Strike Peru to the Cristoforo vendor). Accordingly, Strike Peru assigned this option to AF on 15 March 2011.
c. Native Title
The Consolidated Entity's tenements in Australia may be subject to native title applications in the future. At this stage it is not possible to quantify the impact (if any) that native title may have on the operations of the Consolidated Entity.
d. Government Royalties
The Consolidated Entity is liable to pay royalties on production obtained from its mineral tenements/concessions. For example, the applicable Government royalties in Peru are between 1% to 3% based on the value of production. At this stage it is not possible to quantify the potential financial obligation of the Consolidated Entity under Government royalties
e. Berau Thermal Coal Project Royalties
The Consolidated Entity is liable to pay a royalty to PT Kaltim Jaya Bara ("KJB"), the owner of the mining concession on which the Consolidated Entity's Berau Thermal Coal Project is located. As a result of changes to the Indonesian mining law it is unclear if Strike would legally be able to pay this royalty should it commence production at Berau. Due to uncertainty created by the mining law changes and issues concerning the estimation of such a royalty at this stage of the project, it is not possible to quantify the potential financial obligation of the Consolidated Entity to pay a royalty to KJB.
f. Directors' Deeds
The Consolidated Entity has entered into deeds of indemnity with certain Strike Resources Limited Directors, indemnifying them against liability incurred in discharging their duties as Directors/officers of the Consolidated Entity. As at the reporting date, no claims have been made under any such indemnities and, accordingly, it is not possible to quantify the potential financial obligation of the Consolidated Entity under these indemnities.
g. Millenium Legal Dispute
In 2011 Millenium Trading SAC (Millenium) commenced court proceedings against AF seeking to invalidate a 2006 agreement under which it (Millenium) relinquished options over certain mining concessions to enable AF to buy them from their then owner (Cancellation Agreement). In December 2011 the court dismissed Millenium's claim. An appeal lodged by Millennium was also dismissed on procedural grounds. Minera Apu S.A.C. (Apu), which is believed to be related to or acting in concert with Millennium, sought to be joined into the proceedings as co-plaintiff, however this application was also dismissed.
Apu also commenced separate court proceedings against AF on similar grounds to those in Millenium's claim. A defence has been filed but the matter has not yet been determined. Millennium and Apu have adopted the tactic of filing various procedural motions, and appeals from the dismissals of such motions, which is having the effect of prolonging proceedings.
Under the Cancellation Agreement Millenium is permitted to conduct a small-scale mining operation on a single AF concession, the identity of which is to be agreed. As the parties were unable to agree on the identity of the concession despite AF's good faith efforts to agree, AF referred the matter to arbitration for determination in 2010. During the course of the arbitration a conflict of interest arose involving the arbitrator and he withdrew from the case. A replacement arbitrator was appointed in December 2012. The arbitration is continuing.
A Milllenium mining operation of the kind permitted by the Cancellation Agreement will not materially affect AF's development plans.
h. Royalties paid to D&C Group
Under the terms of Shootout Settlement Agreement, Apurimac Ferrum S.A will pay D&C Group the following royalties:
- 1.5% of the net profits from sales of iron ore.
- 2% of the proceeds of sales of other metals (on a net smelter return basis).
Or Apurimac Ferrum S.A may extinguish the royalties by paying D&C Group any one of the following amounts (Extinguishment Payment):
- US$13 million within 2 years from 20 December 2012, or
- US$15 million between 2 and 3 years from 20 December 2012, or
- US$20 million between 3 and 4 years from 20 December 2012, or
- US$30 million after 4 years from today but before the Construction Milestone occurs or the 15th anniversary of the agreement (whichever is sooner).
12. Commitments
No new commitments have been entered into by the Group since 30 June 2012.
13. Acquisition of subsidiary
On 28 December 2012, the Group obtained control of Apurimac Ferrum S.A. (AF), an iron ore explorer, by acquiring the remaining 50% shares (13,126,085 shares) from its existing shareholders. As a result, the Group's equity interest in AF increased from 50% to 100%.
The acquisition of AF was assessed by the Board in the current period and it was determined that the acquisition was an asset acquisition, rather than a business combination as the substance and intent of the transaction was for the Group to acquire the exploration and evaluation assets of AF for the purpose of expanding the Group's overall resource base.
The value of net assets acquired at the date of acquisition were as follows:
| Cash and cash equivalents | 209,723 |
|---|---|
| Trade and other receivables | 258,568 |
| Land | 427,290 |
| Property, plant and equipment | 122,500 |
| Exploration and evaluation expenditure | 46,052,125 |
| Trade and other payables | (1,456,177) |
| Loans and interests from Strike Resources Limited and Strike Finance Pty Ltd | (37,992,172) |
| Net assets acquired | 7,621,857 |
| Acquisition consideration: | |
| Shares issued (2,800,000 shares at $0.12 each), at fair value | 336,000 |
| Deferred payments | 6,674,833 |
| Acquisition costs | 611,024 |
Total purchase consideration 7,621,857
Deferred payments
D&C Group receives the following deferred payments if certain milestones are achieved:
a. US$2 million on Apurimac Ferrum defining a JORC Resource at the Apurimac project of 500 Mt of iron ore with an average grade of at least 55% iron (Fe) or 275 Mt of contained iron at an average grade of 52.5% Fe or above.
- b. US$3 million on Apurimac Ferrum S.A achieving environmental and community approvals for the construction of an iron ore mine and associated infrastructure with a design capacity of at least 10Mtpa of iron ore product.
- c. US$5 million on formal Apurimac Ferrum Board approval to commence construction of an iron ore project, or the commencement of bulk earthworks for an iron ore processing plant, with a design capacity of at least 10Mtpa of iron ore product (Construction Milestone).
The Company estimated the US$2 million, US$3 million and US$5 million were discounted at 20% and were estimated to be paid in 1 year, 2 years and 2.5 years respectively.
Contingent consideration
Refer to note 11(h). Royalties were not recognised in the consolidated financial statements as at 31 December 2012.
| 209,723 |
|---|
| - |
| 209,723 |
14. Related party transactions
Apurimac Ferrum S.A is an associate of the Group from beginning of the year until 27 December 2012. Refer to note 13.
Loans to associates - Apurimac Ferrum
On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement with Apurimac Ferrum S.A.("AF") in which US$20 million may be advanced to AF to undertake exploration on the Apurimac and Cusco Iron Ore projects. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under the AF Settlement Agreement.
On 16 May 2012, Apurimac Ferrum S.A. entered into the AF Finance Agreement with Strike Finance Pty Ltd for a principal amount US$6m, interest rate is 10% for principal amounts drawn and repaid before 31 December 2012 and 15% for principal amounts repaid after 31 December 2012. The latest repayment date is 31 January 2014.
| 27 December | 30 June | |
|---|---|---|
| 2012 | 2012 | |
| $ | $ | |
| Beginning balance | 33,160,045 | 25,714,498 |
| Loans advanced | 1,584,900 | 9,310,500 |
| Interest charged | 597,880 | 607,044 |
| Loan and interest purchased from IAC (Iron Associates Corporation) | - | - |
| Loan and interest sold to D&C Group S.A.C | - | (2,715,628) |
| Expenses paid on behalf of AF | - | 543,578 |
| Reclassed to Expense Claim | - | (1,708,378) |
| Reclassed to other receivable | (220,208) | |
| Foreign exchange movements | (591,966) | 1,408,431 |
| Ending balance | 34,530,651 | 33,160,045 |
| Less provision for impairment | 34,530,651 | 33,134,249 |
| Carrying value | - | 25,796 |
Claimable expenses - Apurimac Ferrum
According to the Technical Service Agreement between Strike Resources Limited and Apurimac Ferrum S.A. (AF), Strike Resources Limited will invoice AF expenses of personnel who provide services to AF. This has been effective since 10 November 2009.
| 27 December | 30 June |
|---|---|
| 2012 | 2012 |
| $ | $ |
| 193,596 | 80,014 |
| - | 1,708,378 |
| 153,614 | 146,256 |
| - | (1,741,052) |
| 347,210 | 193,596 |
| - | - |
| 347,210 | 193,596 |
15. Events occurring after the reporting period
There have been no significant events occurring after the reporting date.
Directors' Declaration
In the Directors' opinion:
-
- the consolidated financial statements and notes as set out on pages 8 to 20 are in accordance with the Corporations Act 2001, including:
- a) complying with Accounting Standards, the Corporations Regulations 2001, and other mandatory professional reporting requirements, and
- b) giving a true and fair view of the Consolidated Entity's financial position as at 31 December 2012 and of its performance for the half-year ended on that date, and
-
- there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
This declaration is made in accordance with a resolution of the Directors.
William Johnson Director 6 March 2013
38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia
INDEPENDENT AUDITOR'S REVIEW REPORT TO THE MEMBERS OF STRIKE RESOURCES LIMITED
Report on the Half-Year Financial Report
We have reviewed the accompanying half-year financial report of Strike Resources Limited, which comprises the consolidated statement of financial position as at 31 December 2012, and the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the disclosing entity and the entities it controlled at the half-year's end or from time to time during the half-year.
Directors' Responsibility for the Half-Year Financial Report
The directors of the disclosing entity are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2012 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Strike Resources Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.
A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Strike Resources Limited, would be in the same terms if given to the directors as at the time of this auditor's review report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
Conclusion
Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Strike Resources Limited is not in accordance with the Corporations Act 2001 including:
- (a) giving a true and fair view of the consolidated entity's financial position as at 31 December 2012 and of its performance for the half-year ended on that date; and
- (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001.
BDO Audit (WA) Pty Ltd
Wayne Basford Director
Perth, Western Australia Dated this 6th day of March 2013