Earnings Release • Jun 26, 2013
Earnings Release
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RNS Number : 8489H
Obtala Resources Limited
26 June 2013
26 June 2013
Obtala Resources Limited
("Obtala" or the "Company")
(AIM: OBT)
Annual Results
The Board of Obtala Resources Limited, the natural resources investment and development company, announces its annual results for the year ended 31 December 2012.
A copy of the Annual Report and notice of AGM is being posted to shareholders shortly and will be available on the Company's website - www.obtalaresources.com.
Highlights
Financial
· Profit for the year of £10.6 million (2011: £4.0 loss)
· Net assets increase 19% to £79.5 million (2011: £66.6 million)
· Group remains debt free
Operational
· Commenced production on its sustainable forestry business in Mozambique, realising a profit
· Forest concession portfolio in Mozambique strengthened with additional ground
· Undertook trial farming at its agricultural business in Tanzania
· Construction of a sun-dried tomato and horticultural enterprise underway in Tanzania
· 5 year off-take agreement signed to ensure all product is sold to market
Strategic
· Bushveld Minerals listed during 2012 Obtala currently holds 35%
· Paragon completed £1.5m funding post year end ensuring it is self financing
2012 was an eventful year for Obtala, which saw the Group commence production on its sustainable forestry business in Mozambique and commence trial farming at its agricultural business in Tanzania. In addition, through its investment in Paragon Diamonds Limited, the Group has continued its bulk sampling at the Lemphane Kimberlite project with the recovery of a number of large, high value diamonds that Lesotho is famous for. The Group also listed its investments in Bushveld and Greenhills Resources, initially retaining a 46% interest.
Montara
During 2012, the Group continued to expand and develop its agriculture and forestry business towards its goal of being a revenue generating, profitable and sustainable supplier of agricultural and timber products.
The Group currently holds 29,862 hectares of agricultural land with a further 14,000 hectares pending grant of final title deeds in Tanzania. In Mozambique the Group controls 210,618 hectares of forestry concessions through its Montara subsidiaries with a further 200,000 hectares under due diligence.
Agriculture
With the first trial crops planted at the beginning of the year, 2012 has proven to be a pivotal year for the Group's agricultural projects in Tanzania. A successful proof of concept harvest of sunflower, groundnut, canola, soya and sesame seed was completed and conclusions drawn that ground nuts were best suited to the local soil and climatic conditions. A healthy yield of up to 2.2 tonnes per hectare was recorded in some test paddocks, and it is anticipated that over the near term, yields will increase substantially as the soil fertility improves and matures, with the pH level of the soils balancing. Areas for farm expansion have been identified with land preparation expected to continue as the project grows.
In addition, the Group secured further land covering 9,875 hectares within Mozambique. The property has approximately 15km of river frontage, is generally flat lying, partially cleared and perceived to be very fertile. The current area for operational focus is the construction of a sun-dried tomato and horticultural enterprise as we work towards our objectives of optimising our margins and producing year round revenues. Presently, the Group is installing infrastructure with the building of stores, a processing house, packing rooms, administrative offices, upgrading of access roads and surface drainage measures. Irrigation equipment has been ordered and is being shipped, with nursery tunnels and equipment being installed.
Predictive yields for sun-dried tomatoes are expected to be in the order of 10 tonnes of final dried product per hectare, with each hectare being harvested 3 times per annum. Our expectation is that a total of 10 hectares will be harvested monthly on a rotational basis to provide c.100 tonnes of dried product per month. A recently signed 5 year off-take agreement will ensure that all product is sold to market.
Forestry
2012 was our first year of operations on our forestry concessions, with the production of wooden railway sleepers and cut timber for the export market. Significant progress has been made towards establishing a sustainable hard wood business with the manufacture of high specification engineered flooring which is being marketed in the European market place.
The Group signed a supply agreement with a Mozambican entity, commissioned by Vale, the Brazilian mining conglomerate, to provide sleepers for the upgrade of Mozambique's railway. The company successfully completed this contract in 2012 and has since signed further agreements for maintenance supply in 2013. Negotiations are ongoing for further sleeper supply agreements which will augment the existing contracts and ensure a pipeline of production for the remainder of 2013 and beyond.
During the year additional concessions of 160,618 hectares were added to the existing portfolio from outstanding application and new awards. The new areas allow for combined annual cutting volumes of 18,426 m3 in Mozambique.
The Group made its first sales of exported hardwood timber in December 2012 to buyers in South Africa, with timber also shipped to a European manufacturer of high specification engineered flooring which the Group is actively marketing. We also expect to see an upsurge in local timber demand in response to the expected growth associated with the recent oil and gas discoveries in the north of the country.
Paragon Diamonds
It has been a very productive year for Paragon with several key objectives having been achieved, including the establishment of a 1 million carat inferred resource on the Motete Dyke project and the valuation of an individual stone in excess of $2,300 per carat from the bulk sampling on the Lemphane Kimberlite.
Lemphane Kimberlite - Lesotho
Lemphane is one of five major diamondiferous kimberlite pipes in Lesotho and Paragon is currently undertaking an extensive bulk sampling programme with the intention of establishing an inferred resource by Q1/Q2 2014. The early indications for the Lemphane Kimberlite are for an initial grade in the order of 2-3 carats per hundred tonne ("cpht") with average diamond values in excess of US$1,000-1,500 per carat. The high average stone size reported is populated with many high quality clear white, yellow and pink-brown diamonds. The initial tonnage estimate of kimberlite is 27 million tonnes with the scope to increase this for the next mining stage.
In line with our intention to develop and bring the Lemphane Kimberlite into production as soon as possible, a Mining License Application ("MLA") was submitted to the Lesotho government in February 2013. Trial mining to process an additional 100,000 tonnes is scheduled to commence in Q4 2013 on approval of the MLA. It is anticipated that some 2,000-3,000 carats will be produced during trial mining with a potential value of $2m-$5m. The trial mining programme will be guided by the current delineation drilling programme which is intended to develop a detailed internal geological model, and will target the various kimberlite facies identified so as to estimate the diamond revenue per geological facies. The main objective is to determine an inferred resource by Q1/Q2 2014.
Motete - Lesotho
During 2012, a resource statement was defined with a net attributable tonnage of 1.33 million tonnes at a grade of 65 cpht for a contained 0.86 million carats, using a cut-off of 1.18mm. The average diamond value is currently $62/carat with values of $500 per carat noted in the +7 DTC sieve class. The next step in the Dyke resource evaluation and development is to collect additional bulk samples of kimberlite to confirm the higher $/ct values in the larger diamond sizes.
The Group has applied for three further prospecting licences with a combined area of 74 km² on adjacent ground, which is considered highly prospective for additional kimberlite dykes. Future discoveries on the applications will contribute additional tonnage and life of mine to the current established resource at Motete.
Sierra Leone
Paragon announced in December 2012 that it had disposed of its alluvial diamond mine in Sierra Leone. The operations had been on care and maintenance since August 2011 and losses from these discontinued operations of £4.0 million (2011:£3.1 million) has now been recognised in the year in Obtala's consolidated financial statements.
Bushveld Minerals
Since listing on AIM in March 2012, Bushveld has made good progress in meeting its objectives of upgrading and expanding the known resource on both iron and tin projects. At listing, Bushveld reported a JORC compliant resource in excess of 600 million tonnes of iron ore from a 4.5km strike length. Subsequently, the resources has been upgraded to 768 million tonnes delineated through additional drilling. More recently Bushveld announced the positive metallurgical test work results and also a highly encouraging Scoping Study which was undertaken by independent engineers. The Scoping Study indicates a start-up operation of 5 million tonnes per annum that will have an IRR of 34.2% and an NPV of $140 million (12.5% discount rate). As noted in the Study, the project is located close to supportive bulk commodity infrastructure and, more importantly, sufficient water resources have been identified.
Mineral exploration in Tanzania
The group holds several mineral licences in Tanzania carried at a value of £17.8 million. Minimal work has been undertaken on these licences during the year as the Group has been focussed on its agriculture, timber and diamond businesses as well as its investment in Bushveld minerals. We will continue the refocusing of the Group in 2013 by seeking to identify potential corporate deals in order extract the underlying value of these licences without actively pursuing significant exploration work ourselves. This may take the form of joint ventures, disposals or other corporate restructuring.
Financial results
The Group remained development focused in the year ended 31 December 2012 and generated £0.9 million of sales from its forestry business (2011: £0.7 million of sales from its alluvial diamond mine in Sierra Leone). The profit after tax for the year amounted to £10.6 million (2011: loss £4.0 million) after a £4.0 million loss from discontinued operations (2011: £3.1 million).
A gain of £0.5 million (2011: £4.8 million), arising on the deemed partial disposal of the Group's interest in Paragon has been recognised directly in equity during the year. This gain arose on the dilution of the Group's interest in Paragon after it completed a fund raising of £1.7 million in early 2012.
The Group has a strong balance sheet with net equity attributable to shareholders of Obtala at 31 December 2012 amounting to £61.9 million (2011: £46.2 million). Net assets, including those attributable to minority interests in Paragon, amounted to £79.5 million (2011: £66.6 million). Intangible exploration assets are carried at £59.0 million (2011: £61.4 million).
Directorate changes
Lord Anthony St John and Nick Clarke left the board of directors in 23 September 2012 and 9 May 2012 respectively. James Ede-Golightly also left the Board after the year end on 24 March 2013. I would like to take this opportunity to thank all of them for their contributions to the development of the Group and wish them the best for the future. Sam Small and Grahame Vetch were appointed to the board as Non-Executive director and Agriculture Operations Director on 23 September 2012 and 9 May 2012 respectively bringing with them a wealth of experience which will benefit the Group going forward.
Chairman's comment
Francesco Scolaro, Chairman of Obtala, commented: "2012 was a year of considerable change for the Group. I am confident 2013 will prove equally as exciting and look forward to reporting on the further development of our Montara timber and agriculture operations as well as our interest in Paragon Diamonds and Bushveld Minerals.
The Group's strong balance sheet, together with the subsequent fundraisings in early 2013 of £1.2 million and £1.5 million in Paragon, leaves the Group well placed to achieve its strategic objective of becoming a profitable, revenue generating combined agriculture and timber Group during the remainder of 2013, as well as advancing the Lesotho kimberlite project.
Finally, I would like to thank my colleagues and our employees for all their hard work throughout the year and look forward to a successful and eventful 2013."
| Obtala Resources Francesco Scolaro - Chairman Simon Rollason - Managing Director www.obtalaresources.com |
+44 (0) 20 7099 1940 |
| Macquarie Capital (Europe) Limited (Nomad and Broker) |
|
| Steve Baldwin | +44 (0) 20 3037 2000 |
| Nicholas Harland | |
Business review
Introduction
2012 has proven to be an exciting and pivotal year for the Group with first revenues being generated from the timber business in Mozambique and the development of an exciting horticulture opportunity in Tanzania. During 2012 Obtala has been focusing on becoming a timber and agriculture focused business with the emphasis being on developing our high quality soft commodity assets in East Africa. We remain extremely optimistic with the development plans to re-position the Group as a sustainable, profitable, African focused agribusiness and timber trading Group with our current land holdings providing the platform for establishing a vertically integrated company.
The business fundamentals of Montara Continental Limited ("Montara") remain highly attractive in an exciting and growing investment sector. Our intention for the agricultural business is to focus on high yielding crops, which when grown on small areas utilising best farming and irrigation practices will facilitate margin optimisation and year round revenues. Good progress has been made over the year in Mozambique on the forest concessions with a diverse product line being developed, and we look forward to working with the Forest Stewardship Council ("FSC") to gain certification. The revenue produced last year in Mozambique sent out a clear signal that attractive high margin returns can be made from the business model we are developing and the interest being expressed in the European market place for our high specification flooring products is highly encouraging.
Over 2012 Montara became a revenue producing company and we expect to see strong revenue growth over the foreseeable future. We have strengthened the management team with dedicated agricultural and timber specialists and have bolstered the portfolio asset base with additional land holdings in both Mozambique and Tanzania. The new horticultural business will prove to be an exciting opportunity with the potential to realise rapid returns on low initial capital expenditure, with revenues expected monthly once the operations achieve full capacity in late 2013. The long lead time items, such as land acquisition, have been completed and the off-take agreement, signed in April 2013 provides a direct route to market, enabling Montara to expand its activities and evaluate the development of in-country processing facilities to achieve value-added profit realisation.
The Group still retains significant investments in two AIM listed companies, Paragon Diamonds and Bushveld Minerals. Obtala controls Paragon and therefore the results are consolidated in these financial statements. The investment in Bushveld is classified as an associate as Obtala has significant influence but not control.
Montara Continental Limited
Agriculture
In January 2012 the company planted its maiden crop on its project in southern Tanzania. An area of c.80 hectares of local scrub land was cleared, prepared and planted with sunflower, groundnut, canola, soya and sesame seed. The objective was to evaluate which crops were best suited to the local soil and climatic conditions and understand the oil seed potential of the specific crop. Of the crops harvested the groundnut crop produced the best results with yields of up to 2.2 tonnes per hectare being recorded in some test paddocks, averaging 1.7 tonnes per hectare. It is anticipated that over the near term, yields will increase substantially as the soil fertility improves and matures, with the pH balancing. Areas for farm expansion have been identified with land preparation expected to continue as the project grows.
The second crop has been planted, with the company targeting 140 hectares of groundnuts with 5 hectares of broad beans being trialled. This will provide material to conduct additional oil seed testing and crop selection as the project expands. An additional area of approximately 700 hectares of accessible, mostly cleared land has been identified on the project along the Lutukira River with land preparation commencing once the river has been bridged during the dry season in Q3 2013.
In November 2012 the company received notification that its agriculture concession application in northern Mozambique has been authorised by the Ministry of Agriculture. The total land area authorised covers 9,875 hectares within the Namuno District of the Cabo Delgado Province. The property has c.15km of river frontage, is generally flat lying and partially cleared.
Horticulture and Sun-dried Tomatoes
The company is currently building a sun-dried tomato and horticultural enterprise as we work towards our objective of optimising our margins per hectare by utilising best farming and irrigation practices to facilitate regular, year round revenues. An area of 200 hectares is being prepared on land acquired under lease near Morogoro, which lies approximately 235km west of the port of Dar es Salaam. Presently the company is installing infrastructure with the building of stores, a processing house, packing rooms, administrative offices, upgrading of access roads and surface drainage measures. Irrigation equipment has been ordered and is being shipped, with nursery tunnels and equipment being installed. Two additional water well locations have been identified through a geophysical survey, with one well completed to a depth of 103m and a 5,000m3 water reservoir still to be constructed.
Predictive yields for sun-dried tomatoes are expected to be in the order of 10 tonnes of final dried product per hectare, with each hectare being harvested 3 times per annum. Our expectation is that a total of 10 hectares will be harvested monthly on a rotational basis to provide c.100 tonnes of dried product per month. All sundried products will be sold under the terms of a recently concluded off-take agreement.
In April 2013 the company entered into an exclusive Buy and Sell Agreement ("Off-Take Agreement") with a European based trading company (the "Purchaser") who will purchase all crops grown on the new horticulture business. The Off-Take Agreement is valid for five years and is renewable thereafter with the Purchaser having exclusive rights to sell our products in the European market, excluding the United Kingdom, and provides for a guaranteed market and, more importantly, a significant revenue stream guaranteed over the next 5 years for our produce. The importance of the agreement is that it allows the company to expand its activities and strategically plan cropping cycles to feed into the Purchaser's expanding demand and further allows for a partnership to be built with a European based trading company who has a pan-European customer base comprising food manufacturing companies across the continent. The initial requirement is for 1,600 tonnes per annum of mixed sun-dried tomato product expanding up to 5,000 tonnes per annum by 2014. The Company will also seek to achieve value added production by establishing an in-country processing facility to link in with the requirements of our purchasing partner.
Forestry
2012 proved a pivotal year for the timber operations in Mozambique with revenues being generated in-country and profits successfully repatriated.
The company's main focus was directed towards the manufacture and supply of wooden railway sleepers to a private Mozambican entity which had been commissioned by Vale, the Brazilian mining conglomerate, to upgrade the railway infrastructure in Mozambique. The company successfully completed its contract in 2012 producing over 27,000 sleepers with an attractive return. Sleeper production continues in 2013 with current supply under an agreed railway maintenance contract. Negotiations continue with a view to securing additional supply contracts for 2013 and beyond.
The revenues made last year allowed the Company to expand its operations in-country and now seven mobile saw mills are operational on the various concessions. The forest portfolio was expanded with the authorisation by the Minister of Agriculture in August 2012 of two outstanding concession applications. The combined area covers 117,618 hectares with management plans indicating combined annual cutting volumes for both concessions of 8,994 m3. Two additional concessions were awarded to the company in December 2012, covering 43,000 hectares, which are located adjacent to our main existing operational infrastructure. These concessions have Government approved management and forest inventory studies indicating a combined annual permissible cut volume of 9,432m3 timber.
The company made its first export of hardwood timber in December 2012 to buyers in South Africa. Timber has also been shipped to a manufacturer in Europe who has produced samples of high specification engineered flooring which the company is actively marketing within the United Kingdom. We are also experiencing an upsurge in demand for timber from the domestic Mozambican market in response to the expected growth associated with the recent oil and gas discoveries in the north of the country.
Investments - Paragon Diamonds Limited
Obtala's current shareholding in Paragon Diamonds ("Paragon") stands at 39.6% valued at £5.5 million with Paragon having a market capitalisation of £13.9 million (as at 21 June 2013).
Paragon continues to advance the development of its southern African diamond projects, with the main focus in Lesotho, an internationally renowned diamond producer of the largest and highest value diamonds in the world. With four established diamond mines already in operation, Lesotho offers great potential to develop economically successful mining operations and Paragon's Motete Kimberlite Dyke Project has already reached the indicated resource status, and work on the Lemphane Kimberlite Project is rapidly advancing with the submission of an application for a mining lease.
Paragon is rapidly advancing towards its objective of becoming a mid-tier diamond producing company, with the Lemphane Project in Lesotho in particular expected to offer a substantial resource capable of sustaining a large-scale mining operation over +15 years. Early indications are for a 3 million tonne per year operation with diamond values in excess of US$1,000 per carat.
Lemphane Kimberlite Project
The main milestones achieved in 2012 were the ongoing bulk sampling of over 15,000 tonnes of kimberlite, the successful export and valuation of initial parcels of diamonds, with values in excess of $2,300 per carat achieved on individual stones and the commencement of a delineation drilling program.
The early indications for the Lemphane Kimberlite are for an initial grade in the order of 2-3 cpht, and average diamond values in excess of US$1,000-1,500 per carat can be reached. Lemphane has a high average stone size with many high quality diamonds with a number of clear white, yellow and pink-brown diamonds.
Deep delineation drilling of the 6 hectare Lemphane Kimberlite started towards the end of the year and, to date, demonstrates geological continuity to a depth of at least 350m below surface, well beyond the likely depth of open-pit mining, confirming initial estimates of 30 million tonnes of kimberlite. In 2012 Paragon was granted a water extraction licence for the Malibamatso River and has installed a high-capacity pumping station, which is also capable of supplying process water for production-scale operations.
The intention in 2013 is to undertake trial mining at a rate of 200,000 tonnes per year, for an initial six months, generating a representative valuation parcel of 2-3,000 carats. Paragon will then continue with this during ramp-up to Stage One mining at a rate of 1.5 million tonnes per annum for 2 years before committing to full-scale mining at a rate of 3 million tonnes per annum over an open-pit life anticipated to exceed 10 years.
Motete Kimberlite Dyke
Paragon holds an 85% stake in the Motete Kimberlite Dyke; a 1.5m wide and 1,500m long diamondiferous kimberlite fissure, located c.7km NE of Lemphane. Detailed micro diamond work completed in early 2012 was followed up by comprehensive bulk sampling of nearly 1,000 tonnes of surface kimberlite, which recovered over 300 carats of diamonds, and the drilling of 10 deep delineation holes into the kimberlitic at depths of up to 250m below surface. A diamond export and valuation of the diamonds yielded values in excess of $500 per carat in the larger stones, although the relatively limited sample size yielded predominantly smaller diamonds.
Statistical modelling produced an inferred resource statement of 1.56 million tonnes of kimberlitic with a recoverable grade of 65 cpht at a 1.18mm cut-off for in excess of 1 million carats. Significantly, Paragon has secured a financing agreement with its local partner to finance US$10 million of development on the project on a loan basis, in return for a 5% increase in equity to 20%. This financing agreement is anticipated to cover the majority of the expected development costs, and is open-ended pending a decision to develop the project as a mine.
Investments - Bushveld Minerals Limited
Bushveld Minerals Limited ("Bushveld") successfully listed its shares on the AIM market of the London Stock Exchange plc ("AIM") in March 2012, through the acquisition of Bushveld Resources Limited ("BRL") and Greenhills Resources Limited ("GRL"), in each of which Obtala had acquired a 50 % interest. Obtala currently holds a 35.35% shareholding in the listed entity which as at 21 June 2013 is valued at approximately £9 million. Bushveld has proven to be operationally successful with updated resource estimates published and positive metallurgical test work and more recently a positive scoping study indicating that a start-up operation of 5 million tonnes per annum will have an IRR of 34.2% and an NPV of $140 million (12.5% discount rate).
On 2 April 2013 the Group conditionally agreed to dispose of 100,000,000 shares it held in Bushveld Minerals Limited for a total cash consideration of £13,000,000. As at the date of this report the transaction had not completed.
At listing Bushveld reported a JORC compliant resource in excess of 600 million tonnes of iron ore from a 4.5km strike length. Subsequently this has been upgraded to 768 million tonnes delineated through additional drilling. Preliminary metallurgical testwork on the iron project reported positive recoveries and concentrate grades for Fe2O3, TiO2 and V2O5. The results on the higher-grade P-Q material have shown that this material could be crushed to -12mm or -6mm and densimetrically separated to yield concentrates of 49-50% Fe, 18.50-19.00% TiO2 and 0.32-0.33% V2O5 at > 70% recoveries, which should eliminate or minimise the need to mill the product down to fines, thus significantly reducing energy and water requirements. The results of pyro-metallurgical tests on the P-Q Zone were very positive highlighting the potential to produce both pig iron and a saleable high-Ti slag which could significantly enhance the project economics.
In April 2013, Bushveld announced the positive results of a Scoping Study completed on the iron project. The results indicate that the project can be initiated as a low capital expenditure ("capex") project which results in first phase cashflows that can be leveraged to unlock the larger potential inherent in exploiting the deposit along strike and to lower depths, as well as pursuing downstream beneficiation opportunities. The study highlighted an NPV of US$140 million at a 12.5% discount rate with a 34.2% IRR (real) and a payback period of only 2 years from start of mining.
As noted in the Scoping Study the project is located close to supportive bulk commodity infrastructure with an existing rail line 45 km away, port options in the form of Matola / Maputo and Richards Bay, both undergoing capacity expansion, coal deposits with thermal and coking coal within a 100 km radius, electricity generation capacity in the form of the Medupi power station being added to the Kusile power station, both located 150 km from the project with existing and planned new transmission lines passing 20 km from the project area and, more importantly, sufficient water resources have been identified.
Tanzania
During the reporting period Obtala conducted no field based geological prospecting over its portfolio of assets in Tanzania, we continue to assess opportunities within the sector and are actively looking at strategic options for these exploration assets in order to realise the value they hold.
Outlook
We continue to be extremely optimistic with the development plans to re-position the Group as a self-sustainable, profitable, African focused agribusiness and timber trading Group with the objective of utilising our current land holdings as a platform for the creation of a vertically integrated business. The revenues produced last year in Mozambique sends out a clear signal that attractive high margin returns can be made from the business model we are developing. Our group of companies remain debt free and continue moving to cash generating, highly attractive margin producing businesses. Our investment companies have both performed well over the past year with significant advances being made on their projects and are both proving to represent highly attractive opportunities.
Simon Rollason
Managing Director
25 June 2013
The Directors submit their report on the affairs of the Group, together with the financial statements and auditor's report for the year ended 31 December 2012.
PRINCIPAL ACTIVITIES AND CORPORATE DEVELOPMENT
The principal activities of Obtala Resources Limited (the "Company") are the development of Agricultural and timber projects as well as mineral resource licences, projects and investment in other natural resources exploration and development companies. These activities are undertaken through both the Company and its subsidiaries. The Company is listed on AIM and is incorporated and domiciled in Guernsey.
Details of all of the Group's subsidiary companies held at 31 December 2012 are given in note 10 of the financial statements. The principal subsidiary companies comprise:
| Undertaking | Sector |
| Obtala Services Limited | Professional & administration services |
| Mindex Invest Limited | Resources |
| Obtala Resources (T) Limited | Resources |
| Montara Continental Limited | Resources |
| Paragon Diamonds Limited | Holding company |
| Meso Diamonds (Pty) Limited | Resources |
| Botle Diamonds Limited | Resources |
Obtala Services Limited provides accountancy, legal and administrative services to other Group companies.
BUSINESS REVIEW
A review of the Group's performance and future prospects is included in the Chairman's statement on pages 1 to 3 and in the Business Review on pages 4 to 7.
KEY PERFORMANCE INDICATORS
Key performance indicators are set out below:
| 2012 | 2011 | |
| £000 | £000 | |
| Net assets | 79,460 | 66,625 |
| Profit/(loss) before taxation from continuing operations | 14,516 | (828) |
| Cash and cash equivalents | 1,994 | 7,625 |
| Revenue from agriculture and forestry business | 929 | - |
| Exploration activities: | ||
| - Purchases of mining licences | 62 | 36,116 |
| - Expenditure on exploration and evaluation | 1,805 | 2,030 |
RESULTS AND DIVIDENDS
The consolidated profit for the year after taxation was £10,562,000 (2011: loss of £3,970,000).
The Directors do not recommend payment of an ordinary dividend.
SHARE CAPITAL AND FUNDING
Full details of the authorised and issued share capital, together with details of the movements in the Company's issued share capital during the year are shown in note 23. The Company has one class of ordinary shares which carry no right to fixed income. Each share carries the right to one vote at general meetings of the Company.
The Company has unlimited authorised share capital divided into ordinary shares of 1p each, of which 250,129,352 had been issued as at the reporting date.
POST BALANCE SHEET EVENTS
Please refer to note 31 for details.
DIRECTORS
The Directors, who served throughout the year except as noted, were as follows:
| Francesco Scolaro | (Executive Chairman) | |
| Simon Rollason | (Managing Director) | |
| Michael Bretherton | (Finance Director) | |
| Grahame Vetch (appointed 9 May 2012) | (Agriculture Operations Director) | |
| Nicholas Clarke (resigned 9 May 2012) | (Non-executive Director) | |
| James Ede-Golightly (resigned 24 March 2013) | (Non-executive Director) | |
| Lord St John of Bletso (resigned 23 September 2012) | (Non-executive Director) | |
| Sam Small (appointed 23 September 2012) | (Non-executive Director) |
Directors' interests
Directors' interests in the shares of the Company, including family interests at 31 December were:
Shareholdings
| Ordinary shares of 1p each | Ordinary shares of 1p each | ||
| 2012 | 2011 | ||
| Francesco Scolaro1,2 | 2,150,000 | 1,850,000 | |
| Simon Rollason2 | 335,000 | 160,000 | |
| Michael Bretherton | 300,000 | 300,000 | |
| Nicholas Clarke | - | - | |
| James Ede-Golightly2 | - | - | |
| Sam Small | - | - | |
| Grahame Vetch | - | - | |
| Lord St John of Bletso | - | - |
1In addition Grandinex International Corp, a company in which Francesco Scolaro holds a controlling interest, holds 70,000,000 shares in the Company.
2In addition, the following Directors have an interest in shares in Paragon Diamonds Limited: Francesco Scolaro - 37,027,894 (2011: 34,647,894), Simon Rollason - 1,250,000 (2011:1,250,000) and James Ede-Golightly - 35,000 (2011: 35,000).
Options
The following Directors held share options at 31 December:
| Number of share options |
Average exercise price (p) | Number of share options |
Average exercise price (p) | |
| 2012 | 2012 | 2011 | 2011 | |
| Simon Rollason | 500,000 | 37.6 | 500,000 | 37.6 |
The share options held by the Directors were all granted in 2008. The options vest over a period of 1 to 2 years. The share price of the Company at 31 December 2012 was 17.5 pence. The highest and lowest share prices in the year were 35.0 pence and 13.5 pence respectively. The terms of the options are detailed in note 28.
Jointly owned shares
The following Directors held an interest in jointly owned shares at 31 December:
| Number of shares | Average purchase price (p) | Number of shares | Average purchase price (p) | |
| 2012 | 2012 | 2011 | 2011 | |
| Simon Rollason | 1,000,000 | 32.9 | 1,000,000 | 32.9 |
| Michael Bretherton | 800,000 | 32.9 | 800,000 | 32.9 |
| James Ede-Golightly (resigned 24 March 2013) | 300,000 | 32.7 | 300,000 | 32.7 |
The Obtala Resources Employee Share Trust ("the Trust") was established with Marlborough Trust Company Limited appointed as trustee ("the Trustee") to enable the Trustee to acquire ordinary shares in the Company and to make interests in those shares available for the benefit of current and future employees of the Company and its subsidiaries.
Certain Directors as well as employees have an interest in ordinary shares in the Company which were acquired jointly with the Trustee by way of subscription on 24 May 2010 at a price of 33 pence per share and on 18 October 2011 at a price of 32.75 pence per share. The shares were acquired pursuant to certain vesting criteria set out in the Joint Ownership Agreement. Subject to the vesting criteria being met, most of any future increase in the value of the shares will accrue to the Directors and employees, by way of receipt of a proportionate number of wholly owned shares or, at the option of the Trustee, an alternative realisation mechanism for an equivalent amount. The consequence of these conditions is that in most instances the Directors or employees will only be able to benefit from an increase in the value of the shares in two equal tranches on or after each of the two consecutive annual anniversaries of purchase and provided that the Directors and employees have not ceased employment with the Group on or before the date that these conditions are met. Details of all jointly owned shares held by the trust are set out in note 28 to the financial statements.
Directors' indemnity insurance
The Group has maintained insurance throughout the year for its Directors and Officers against the consequences of actions brought against them in relation to their duties for the Group.
Directors' remuneration
The remuneration of the individual Directors who served in the year to 31 December 2012 was:
| Salary & fees | Bonus | Benefits | Total 2012 | Total 2011 | |
| £000 | £000 | £000 | £000 | £000 | |
| Francesco Scolaro* | 150 | - | 71 | 221 | 480 |
| Simon Rollason | 155 | 25 | 37 | 217 | 196 |
| Michael Bretherton | 28 | - | - | 28 | 15 |
| Grahame Vetch | 53 | - | - | 53 | - |
| Nicholas Clarke | 10 | - | - | 10 | 18 |
| James Ede-Golightly* | 18 | - | - | 18 | 17 |
| Lord St John of Bletso | 19 | - | - | 19 | 18 |
| Sam Small | 7 | - | - | 7 | - |
| Total | 440 | 25 | 108 | 573 | 744 |
* In addition the following directors received remuneration from Paragon Diamonds Limited during the year: Francesco Scolaro - salary of £175,000 and bonus of £69,000 (2011: salary of £150,000 and bonus of £66,000), James Ede-Golightly - salary of £15,000 (2011: salary of £15,000).
It is the Company's policy that executive Directors should have contracts with an indefinite term providing for a maximum of 3-6 months notice. In the event of early termination, the Directors' contracts provide for compensation up to a maximum of basic salary for the notice year. The current salary payable to Francesco Scolaro is £150,000 per annum. The current salary payable to Simon Rollason is £155,000 per annum and to Michael Bretherton is £10,000 per annum. The current salary payable to Grahame Vetch £64,000 per annum.
Non-executive Directors are employed on letters of appointment which may be terminated on not less than 3 months notice. The current basic fee payable to Sam Small is £15,000 per annum.
Relocation and accommodation expenses of £108,000 (2011: £114,000) were paid on behalf of Francesco Scolaro and Simon Rollason during the year and reflected as benefits in kind.
Private medical insurance is provided for Simon Rollason.
ProfileS of the CURRENT Directors
Francesco Scolaro, Aged 49, Executive Chairman
Frank Scolaro is an active investor in publicly quoted companies in the resource, leisure and property sectors. Frank was Non-Executive Chairman of Regal Petroleum plc from October 2006 to November 2007, in which time he was instrumental in the successful resolution of local litigation issues in the Ukraine. Until March 2008 Frank was a Non-Executive Director of Regal Petroleum plc and in 2005 he was a Non-Executive Director of African Minerals Plc.
Simon Rollason, BSc (Hons) Geology, MIMMM, FGS, Aged 46, Managing Director
Simon Rollason has over 20 years of international experience in mining and geological exploration having worked in Africa, the Middle East, Central Asia and the Far East with both multi-nationals and junior resources companies. He has worked on nickel, gold, copper, base metals and gemstone projects, ranging from grassroots to producing assets. He has been involved with and managed operations which have varied from exploration and evaluation projects to successful feasibility studies.
Michael Bretherton, BA, ACA, Aged 56, Finance Director
Michael Bretherton graduated in Economics from the University of Leeds and then worked as an accountant and manager with PriceWaterhouse for 7 years in both London and the Middle East. He subsequently worked for The Plessey Company Plc before being appointed Finance Director of the fully listed Bridgend Group Plc in 1988 where he held the position for 12years. More recently, he has worked at the property and services company, Mapeley Limited as Financial Operations Director and then at the entertainment software games developer, Lionhead Studios Limited, where he helped to complete a trade sale of the business to Microsoft in March 2006. Michael is currently also a director of AIM listed ORA Capital Partners Limited.
Sam small, Aged 47, non-executive Director
Sam Small is Head of the Business Management Unit at ENRC PLC. Prior to this, he was an investment banker advising companies on transactions in a range of sectors. The majority of his career was at Citigroup (formerly Schroders) after which he was Head of Mergers and Acquisitions at Macquarie Capital (Europe). Sam is a qualified Chartered Accountant and holds a law degree.
SUBSTANTIAL SHAREHOLDERS
The Company is aware that the following have at 7 June 2013 an interest in three per cent. or more of the issued ordinary share capital of the Company:
| Name | Number of 1p ordinary shares | Percentage of the issued share capital |
| Grandinex International Corp* | 70,000,000 | 26.59 |
| Robert Quested | 22,678,627 | 8.61 |
| African Minerals Limited | 21,170,422 | 8.04 |
| Weiss Asset Management | 12,869,352 | 4.89 |
* Francesco Scolaro is the controlling shareholder of Grandinex International Corp. He holds a further 2,150,000 shares in the Company through nominee companies bringing his total interest to 72,150,000 (27.40%).
CORPORATE GOVERNANCE
The Directors recognise the importance of sound corporate governance and observe the principles of the UK Corporate Governance Code to the extent that they consider them to be appropriate for the Group's size.
The Board
The Board currently comprises four executive Directors and one non-executive Director.
Audit Committee
The Board has established an audit committee with formally delegated duties and responsibilities. The audit committee comprises the non-executive Director and currently has Sam Small as its Chairman. The committee meets at least twice in each financial year.
Remuneration Committee
The remuneration committee meets as and when required. The remuneration committee comprises the non-executive Director, although it is the intention to appoint more members in due course, currently Sam Small is its Chairman.
The policy of the committee is to reward executive Directors in line with the current remuneration of directors in comparable businesses in order to recruit, motivate and retain high quality executives within a competitive market place.
There are three main elements of the remuneration packages for executive Directors and senior management:
· Basic annual salary (including directors' fees) and benefits;
· Discretionary annual bonus to be paid in accordance with a bonus scheme developed by the remuneration committee. This takes into account individual contribution, business performance and commercial progress; and
· Discretionary share incentive scheme which takes into account the need to motivate and retain key individuals.
Nominations Committee
The Directors do not consider that, given the size of the Board, it is appropriate at this stage to have a nominations committee. However, this will be kept under regular review by the Board.
Internal Control
The Board is responsible for maintaining a sound system of internal control. The Board's measures are designed to manage, not eliminate, risk and such a system provides reasonable but not absolute assurance against material misstatement or loss.
Some key features of the internal control system are:
(i) Management accounts information, budgets, forecasts and business risk issues are regularly reviewed by the Board which meets at least 4 times per year;
(ii) The Company has operational, accounting and employment policies in place, including procedures to address the UK Bribery Act;
(iii) The Board actively identifies and evaluates the risks inherent in the business and ensures that appropriate controls and procedures are in place to manage these risks; and
(iv) There is a clearly defined organisational structure and there are well-established financial reporting and control systems.
Going Concern
Having made reasonable enquiries, the Directors are satisfied that the current cash balance is sufficient to cover all known financial liabilities for the next 12 months from the date of approval of the financial statements. The Directors have considered the guidance for directors issued by the Financial Reporting Council ("FRC") in respect of going concern. The Directors therefore confirm that they are satisfied that the Group has adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
RISK MANAGEMENT
The business of exploring for minerals and metals involves a high degree of technical, political and regulatory risk. The business of agriculture and forestry involves a high degree of risks, because in addition to technical, political and regulatory risk; the Group is exposed to weather, nutrient and pest risks. In addition, the Group is exposed to a number of financial risks which the Board seeks to minimise by adopting a prudent approach which is consistent with the corporate objectives of the Group. These risks are summarised below:
Technical Risk
Substantial expenditure is required to establish reserves and to conduct feasibility studies. Although substantial benefits may be derived from the discovery of a significant mineralised deposit, no assurance can be given that minerals will be discovered in sufficient quantities or having sufficient grade to justify commercial operations, or that funds required for development can be obtained on a timely basis.
Political and Regulatory Risk
The Group is currently conducting its mining operations mainly in Lesotho; however exploration work is undertaken in Zambia, Botswana, South Africa and Tanzania and forestry and agriculture in Mozambique and Tanzania. The Board believes that the Governments of all of the countries support the development of natural resources and the countries have established track records of promoting diamond mining. However, there is no assurance that future political and economic conditions in these countries will not result in the Governments changing their political attitude towards mining and adopting different policies in respect of the exploration, development and ownership of mineral resources. Any such changes in policy may result in changes in laws affecting ownership of assets, land tenure and mineral licences, taxation, environmental protection and repatriation of income and capital, which may adversely impact the Group's ability to carry out its activities.
exploration risk
The Group is exposed to exploration risk in respect of its mineral licence projects. The Group mitigates this risk by having established mineral investment project appraisal processes and asset monitoring procedures which are subject to overall review by the Board.
ENVIRONMENTAL RISK
The Group is exposed to climate, weather and the risk of pests effecting its agriculture and forestry operations. The availability of water for its irrigation as well as the abundance of too much water also pose a risk to the biological assets. These risks are managed by ongoing assessment of local pests and the adoption of irrigation methods.
Financial Risk
Market risk
Price risk
The Group is exposed to market risk in respect of its equity investments and also its derivative financial instruments as well as any potential market price fluctuations that may affect the revenues of the agriculture and forestry operations. The Group mitigates this risk by having established investment appraisal processes and asset monitoring procedures which are subject to overall review by the Board.
Liquidity risk
The Group seeks to manage liquidity by regularly reviewing cash levels and expenditure budgets to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group had net cash balances of £2.0 million as at 31 December 2012 (2011: £7.6m).
Credit risk
The Group's principal financial asset is cash. The credit risk associated with cash is considered to be limited. The Group receives payment immediately upon delivery of its agriculture and forestry products. The credit risk is considered to be minimal as no credit terms are offered and funds are received prior to the risk of ownership being transferred to the purchaser. From time to time cash is placed with certain institutions in support of trading positions. The credit risk is considered minimal as the Group only undertakes this with large reputable institutions.
DONATIONS
No political donations were made during the year (2011: nil). No charitable donations were made in the year (2011: nil)
POLICY ON PAYMENT OF SUPPLIERS
It is Group and Company policy to agree and clearly communicate the terms of payment as part of the commercial arrangements negotiated with suppliers and then to pay according to those terms based on the timely receipt of an accurate invoice.
The Group's trade payable days at 31 December 2012 were 14 (2011: 6 days).
EMPLOYMENT POLICIES
The Group supports employment of disabled people wherever possible through recruitment, by retention of those who become disabled and generally through training, career development and promotion.
The Group is committed to keeping employees as fully-informed as possible with regard to the Group's performance and prospects and seeks their views, wherever possible, on matters which affect them as employees.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
The Directors are required by the Companies (Guernsey) Law 2008 to prepare Group financial statements for each financial year in accordance with generally accepted accounting principles. the Directors are required by the AIM rules of the London Stock Exchange to prepare Group financial statements in accordance with International Financial Reporting Standards ("IFRS"), as adopted by the EU ("EU").
The Group financial statements are required by law and IFRS to give a true and fair view of the financial position and performance of the Group.
In preparing the financial statements, the directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRS as adopted by the EU; and
d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law 2008. 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 Obtala website, www.obtalaresources.com.
Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of these financial statements have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the Directors have confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor.
AUDITOR
Baker Tilly Channel Islands Limited has indicated its willingness to continue in office and a resolution for their re-appointment will be put to the members at the forthcoming Annual General Meeting.
On behalf of the Board
Michael Bretherton
Finance Director
25 June 2013
We have audited the consolidated financial statements of Obtala Resources Limited for the year ended 31 December 2012 which comprise the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated statement of financial position, consolidated statement of cash flows, and the related notes. The financial reporting framework that has been applied in their preparation is applicable Guernsey law and International Financial Reporting Standards as adopted by the European Union ("IFRS").
This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law 2008. 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 auditors
The Directors' responsibilities for preparing the financial statements in accordance with applicable law and IFRS are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. We consider the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
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 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 our opinion the financial statements:
· give a true and fair view, in accordance with IFRS of the state of the Group's affairs as at 31 December 2012 and of its profit for the year then ended; and
· have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law 2008, as amended.
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
· the company has not kept proper accounting records; or
· the financial statements are not in agreement with the accounting records and returns; or
· we have not received all the information and explanations which to the best of our knowledge and belief are necessary for the purposes of our audit.
Baker Tilly Channel Islands Limited
Chartered Accountants
St. Helier, Jersey
25 June 2013
| Notes | 2012 | 2011 | |
| Continuing operations | £000 | £000 | |
| Revenue | 3 | 929 | - |
| Loss on investments | 2 | (276) | (172) |
| Operating costs | 3 | (1,352) | (382) |
| Administrative expenses | 3 | (2,955) | (3,152) |
| Depreciation | 14 | (251) | (27) |
| Share based payments | 28 | (306) | (400) |
| Impairment of assets | 13,14 | (961) | (1,063) |
| OPERATING LOSS | 4 | (5,172) | (5,196) |
| Share of losses of associate | 11 | (736) | - |
| Gain on acquisition of subsidiary | 12 | - | 4,349 |
| Provision of pre IPO services | 17 | 20,280 | - |
| Finance income | 6 | - | 19 |
| Finance costs | 7 | (11) | - |
| PROFIT/(LOSS) BEFORE TAXATION | 14,361 | (828) | |
| Taxation | 8 | 155 | - |
| PROFIT/(LOSS) FOR THE YEAR fRom continuing operations | 14,516 | (828) | |
| discontinued operations | |||
| loss for the year from discontinuing operations | 11 | (3,954) | (3,142) |
| total profit/(LOSS) for the year | 10,562 | (3,970) | |
| ATTRIBUTABLE TO: | |||
| Owners of the parent | 13,475 | (3,706) | |
| Non-controlling interests | (2,913) | (264) | |
| 10,562 | (3,970) | ||
| Other comprehensive income: | |||
| Exchange differences on translation of foreign operations |
(3,916) | 1,016 | |
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 6,646 | (2,954) | |
| ATTRIBUTABLE TO: | |||
| Owners of the parent | 10,989 | (3,321) | |
| Non-controlling interests | (4,343) | 367 | |
| 6,646 | (2,954) | ||
| EARNINGS/(LOSS) PER SHARE | |||
| From continuing and discontinuing operations | |||
| Basic and diluted (pence) | 9 | 4.34 | (1.71) |
| From continuing operations | |||
| Basic and diluted (pence) | 9 | 5.97 | (0.36) |
The notes on pages 22 to 51 form an integral part of the consolidated financial statements.
| Share capital | Share premium | Merger reserve | Foreign exchange reserve | Share based payment reserve | Revenue reserve | Total | Non-controlling interests | Total equity | |
| £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | £000 | |
| At 1 january 2011 | 2,241 | 131 | 28,543 | 5,968 | 277 | 1,123 | 38,283 | 5,838 | 44,121 |
| Loss for the year | - | - | - | - | - | (3,706) | (3,706) | (264) | (3,970) |
| Other comprehensive income: | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | 385 | - | - | 385 | 631 | 1,016 |
| Total comprehensive income for the year | - | - | - | 385 | - | (3,706) | (3,321) | 367 | (2,954) |
| Transactions with owners: | |||||||||
| Issue of shares | 141 | 6,546 | - | - | - | - | 6,687 | - | 6,687 |
| Share based payment | - | - | - | - | 400 | - | 400 | - | 400 |
| Purchase of own shares | - | - | - | - | - | (681) | (681) | - | (681) |
| Non-controlling interest acquired with subsidiary | - | - | - | - | - | - | - | 3,428 | 3,428 |
| Dilution of interest in subsidiary | - | - | - | - | - | 4,829 | 4,829 | 10,795 | 15,624 |
| At 31 December 2011 | 2,382 | 6,677 | 28,543 | 6,353 | 677 | 1,565 | 46,197 | 20,428 | 66,625 |
| Profit for the year | - | - | - | - | - | 13,475 | 13,475 | (2,913) | 10,562 |
| Other comprehensive income: | |||||||||
| Exchange differences on translation of foreign operations | - | - | - | (2,486) | - | (2,486) | (1,430) | (3,916) | |
| Total comprehensive income for the year | - | - | - | (2,486) | - | 13,475 | 10,989 | (4,343) | 6,646 |
| Transactions with owners: | |||||||||
| Issue of shares | 119 | 3,764 | - | - | - | - | 3,883 | - | 3,883 |
| Share based payment | - | - | - | - | 306 | - | 306 | - | 306 |
| Cancellation of options | - | - | - | - | (14) | 14 | - | - | - |
| Dilution of interest in subsidiary | - | - | - | - | - | 539 | 539 | 1,461 | 2,000 |
| At 31 December 2012 | 2,501 | 10,441 | 28,543 | 3,867 | 969 | 15,593 | 61,914 | 17,546 | 79,460 |
The notes on pages 22 to 51 form an integral part of the consolidated financial statements.
| 2012 | 2011 | ||
| Notes | £000 | £000 | |
| ASSETS | |||
| Non-current assets | |||
| Investments in associates | 17 | 25,370 | - |
| Available for sale investments | 17 | 261 | - |
| Intangible exploration and evaluation assets | 13 | 58,957 | 61,406 |
| Property, plant and equipment | 14 | 2,830 | 6,370 |
| Total non-current assets | 87,418 | 67,776 | |
| Current assets | |||
| Trade and other receivables | 15 | 477 | 2,269 |
| Inventory | 16 | 55 | 67 |
| Financial investment assets | 18 | - | 18 |
| Cash and cash equivalents | 19 | 1,994 | 7,625 |
| Total current assets | 2,526 | 9,979 | |
| TOTAL ASSETS | 89,944 | 77,755 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 20 | (390) | (238) |
| Financial investment liabilities | 18 | (43) | - |
| Current tax liabilities | (2) | (504) | |
| TOTAL CURRENT LIABILITIES | (435) | (742) | |
| NON-CURRENT LIABILITIES | |||
| Site restoration provision | 22 | (148) | (469) |
| Loans | 21 | (774) | (369) |
| Deferred tax | 8 | (9,127) | (9,550) |
| Total non-current liabilities | (10,049) | (10,388) | |
| TOTAL LIABILITIES | (10,484) | (11,130) | |
| NET ASSETS | 79,460 | 66,625 | |
| EQUITY | |||
| Share capital | 23 | 2,501 | 2,382 |
| Share premium | 24 | 10,441 | 6,677 |
| Merger reserve | 25 | 28,543 | 28,543 |
| Foreign exchange reserve | 3,867 | 6,353 | |
| Share based payment reserve | 969 | 677 | |
| Revenue reserve | 26 | 15,593 | 1,565 |
| Equity attributable to the owners of the parent | 61,914 | 46,197 | |
| Non-controlling interests | 29 | 17,546 | 20,428 |
| TOTAL EQUITY | 79,460 | 66,625 |
The notes on pages 22 to 51 form an integral part of the consolidated financial statements.
Approved by the Board and authorised for issue on 25 June 2013.
Francesco Scolaro Michael Bretherton
Executive Chairman Finance Director
| 2012 | 2011 | ||
| Notes | £000 | £000 | |
| OPERATING ACTIVITIES | |||
| Profit/(loss) before taxation | 14,361 | (828) | |
| Adjustment for: | |||
| Provision of pre-IPO services | (20,280) | - | |
| Depreciation of property, plant and equipment | 14 | 251 | 878 |
| Profit on disposal of property, plant and equipment | - | (15) | |
| Foreign exchange gains | (19) | (60) | |
| Share based payments | 28 | 306 | 400 |
| Losses on investments | 2 | 43 | 172 |
| Impairment of assets | 13,14 | 961 | 1,063 |
| Gain on acquisition of subsidiary | 11 | - | (4,349) |
| Finance income | 6 | - | (19) |
| Finance costs | 7 | 11 | - |
| Share of losses of associate | 736 | - | |
| Decrease/(increase) in trade and other receivables | (257) | 185 | |
| (Decrease)/increase in trade and other payables | 248 | (219) | |
| (Increase)/decrease in inventory | (55) | 130 | |
| CASH OUTFLOW FROM OPERATIONS | (3,694) | (2,662) | |
| Income taxes paid | 8 | (502) | - |
| Net cash OUTFLOW from CONTINUING operations | (4,196) | (2,662) | |
| Net cash OUTFLOW from DISCONTINUING operations | (281) | (1,891) | |
| Net cash OUTFLOW from operationING ACTIVITIES | (4,477) | (4,553) | |
| INVESTING ACTIVITIES | |||
| Expenditure on property, plant and equipment | 14 | (1,528) | (1,511) |
| Purchase of licences | 13 | (62) | - |
| Disposal of property, plant and equipment | 14 | - | 95 |
| Expenditure on intangible exploration and evaluation assets | 13 | (1,805) | (2,030) |
| Proceeds from disposal of financial investment assets | 18 | 253 | 538 |
| Purchase of financial investment assets | 18 | (126) | (553) |
| Loans received/(advanced) | 15 | 405 | (1,958) |
| Purchase of available for sale investments | 17 | - | (123) |
| Net cash OUTFLOW from investing activities | (2,863) | (5,542) | |
| FINANCING ACTIVITIES | |||
| Proceeds from issue of share capital | 23,24 | - | 6,007 |
| Funds raised by subsidiary | 12 | 1,725 | 2,890 |
| Expenses of issue of subsidiary shares | 12 | - | (25) |
| Finance income | 6 | - | 19 |
| Finance costs | 7 | (11) | - |
| Net cash inflow from financing activities | 1,714 | 8,891 | |
| DECREASE IN CASH AND CASH EQUIVALENTS | (5,626) | (1,204) | |
| Cash and cash equivalents at beginning of year | 7,625 | 8,825 | |
| Effect of foreign exchange rate variation | (5) | 4 | |
| CASH AND CASH EQUIVALENTS AT end of YEAR | 1,994 | 7,625 |
The notes on pages 22 to 51 form an integral part of the consolidated financial statements
1. ACCOUNTING POLICIES
BASIs OF ACCOUNTING
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted in the European Union ("IFRS"). The financial statements have been prepared under the historical cost convention except for financial investments and derivative trading assets and liabilities, which are included at fair value.
Obtala Resources Limited is an AIM-quoted mineral exploration and agriculture investment company. The Company is incorporated and domiciled in Guernsey.
Obtala Resources Limited was incorporated in Guernsey on 20 July 2010.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate those of Obtala Resources Limited and all of its subsidiary undertakings for the year.
During the year the Group's interest in AIM listed Paragon Diamonds Limited was reduced due to the issue of shares by Paragon. As at 31 December the Group's interest was 45.3%, however Obtala has been deemed to exert control over Paragon as Francesco Scolaro's shareholdings combined with the position of Executive Chairman he held on the board during the year. These financial statements consolidate the results of Paragon Diamonds Limited for the year as if it were a subsidiary undertaking.
Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
Subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than half of the voting rights. The existence and effects of potential voting rights are considered when assessing whether the Group controls the entity. Subsidiaries are fully consolidated from the date control passes.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are initially measured at fair value at acquisition date irrespective of the extent of any minority interest. The difference between the cost of acquisition of shares in subsidiaries and the fair value of the identifiable net assets acquired is capitalised as goodwill and reviewed annually for impairment. Any deficiency of the cost of acquisition below the fair value of identifiable net assets acquired (i.e. discount on acquisition) is recognised directly in profit or loss.
The purchase in prior years of the entire share capital of Mindex Invest Limited and Uragold Limited by Obtala Limited, the purchase of Montara Continental Limited by Mindex Invest Limited and the purchase of African Rock Resources Limited by Paragon Diamonds Limited have all been treated as purchases of assets. Assets held by the respective companies at the time of their acquisition have been recognised at cost. These transactions are outside the scope of IFRS 3 Business Combinations because the entities acquired do not meet the definition of a business at the date of acquisition.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation are valued at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets.
When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group obtains 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.
Investments in associates and joint ventures
An associate is an entity over which the Group is in a position to exercise significant influence, but not control or jointly control, through participation in the financial and operating policy decisions of the investee.
A joint venture is an entity in which the Group holds an interest on a long-term basis and which is jointly controlled by the Group and one or more other venturers under a contractual arrangement.
Investments in associates and joint ventures are recognised in the financial statements using the equity method of accounting unless they fall to be classified as held for sale. They are initially carried at cost. The Group's share of post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition movements in other comprehensive income are recognised directly in other comprehensive income. The carrying value of the investment (including goodwill) is tested for impairment when there is objective evidence of impairment. Losses in excess of the Group's interest in those associates or joint ventures are not recognised unless the Group has incurred obligations or made payments on behalf of the associate or joint venture.
Where a group company transacts with an associate or joint venture of the Group, unrealised gains are eliminated to the extent of the Group's interest in the relevant associate or joint venture. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred in which case appropriate provision is made for impairment.
Where necessary, adjustments are made to the financial statements of associates and joint ventures to bring the accounting policies used into line with those used by the Group.
Intra-group transactions
All intra-group transactions, balances, and unrealised gains on transactions between Group companies are eliminated on consolidation. Subsidiaries' accounting policies are amended where necessary to ensure consistency with the policies adopted by the Group. All financial statements are made up to 31 December each year.
SEGMENTAL REPORTING
The reportable segments are identified by the Board (which is considered to be the Chief Operating Decision Maker) by the way management has organised the Group. The Group operates within four separate operational divisions comprising production, exploration and development activities, agriculture and forestry and investing activities.
The Directors review the performance of the Group based on total revenues and costs, for these four divisions and not by any other segmental reporting.
Revenue recognition
· the costs incurred in respect of the transaction can be measured reliably.
Realised profits and losses on the disposal of investments is the difference between the fair value of the consideration received less any directly attributable costs on the sale and the carrying value of the investments at the start of the accounting period or acquisition date if later.
Unrealised profits and losses on the revaluation of investments is the movement in carrying value of investments between the start of the accounting period or acquisition date if later and the end of the accounting period.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Dividend income from investments is recognised when the shareholders' rights to receive payment have been established (provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably).
An assessment of going concern is made by the Directors at the date the Directors approve the annual financial statements, taking into account the relevant facts and circumstances at that date including:
· Review of profit and cashflow forecasts
· Review of actual results against forecast
· Timing of cashflows
· Financial or operational risks
After making enquiries the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and that it is therefore appropriate to adopt the going concern basis in preparing the financial statements. The Directors have satisfied themselves that the Group is in a sound financial position and will be able to meet the Group's foreseeable cash requirements.
Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling, which is the Company's functional and presentation currency.
Transactions and balances
In individual companies, transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary assets and liabilities 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. Gains and losses arising on retranslation are included in profit or loss for the year.
In the consolidated financial statements, the assets and liabilities of subsidiaries with different functional currencies to the Company are retranslated into sterling at the rate ruling at the reporting date. The results and cash flows are retranslated into sterling using average rates of exchange. Exchange adjustments arising when the opening net assets and the results for the year are translated into sterling are taken directly to a foreign exchange reserve and reported directly in equity. Exchange gains and losses arising on long-term intragroup foreign currency loans used to finance the subsidiary undertakings, which are deemed to be part of the net investment in the subsidiary, are also taken directly to equity. On disposal of a subsidiary with a different functional currency to the Company, the deferred cumulative exchange differences recognised in equity relating to that particular operation are recognised in profit or loss.
Foreign currency translation rates (against sterling) for the significant currencies used by the Group were:
| At 31 December 2012 |
Annual average for 2012 | At 31 December 2011 |
Annual average for 2011 | |
| US dollars | 1.617 | 1.590 | 1.545 | 1.606 |
| South African Rand | 13.72 | 12.99 | 12.58 | 11.69 |
| Mozambique Metical | 48.10 | 44.78 | 41.42 | 46.60 |
| Tanzanian shilling | 2,558 | 2,549 | 2,477 | 2,575 |
INTANGIBLE EXPLORATION AND EVALUATION ASSETS
All costs associated with mineral exploration and evaluation including the costs of acquiring prospecting licences and rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and other activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource, are capitalised as intangible exploration and evaluation assets and subsequently measured at cost. The costs are allocated to base mineral/gemstone groupings within a region ("field"), which are treated as cash-generating units ("CGUs")/projects because the underlying geology and risks and rewards of exploration within a field are considered to be similar.
If an exploration project is successful, the related expenditures will be transferred at cost to property, plant and equipment and amortised over the estimated life of the commercial ore reserves on a unit of production basis.
Where a project does not lead to the discovery of commercially viable quantities of mineral resources and is relinquished, abandoned, or is considered to be of no further commercial value to the Group, the related costs are written off to profit or loss as an impairment charge.
Property, PLANT AND EQUIPMENT and mine properties
Property, plant and equipment and mine assets are stated at historical cost less subsequent accumulated depreciation and any accumulated impairment losses.
Depreciation is provided at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life, as follows:
Mine over the life of the mine
Mining equipment over 2 - 5 years
Camp buildings over 5 years
Motor vehicles over 3 years
Fixtures and equipment over 3 years
Agricultural plant and machinery over 2 - 5 years
Accumulated mine development costs within producing mines are depreciated/amortised on a unit-of-production basis from the date of commencement of commercial production over the economically recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in which case the straight line method is applied.
The unit-of-production rate for the depreciation/amortisation of mine development costs takes into account expenditure incurred to date.
The estimated useful lives, residual values and depreciation method are reviewed at each period end, with the effect of any changes in estimate accounted for on a prospective basis.
LAND AND BUILDINGS
Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Land that is held under lease for the use in agriculture and forestry is stated at cost less any subsequent depreciation.
Depreciation is recognised so as to write off the cost of the assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. For leasehold land and buildings, the useful life is the period of the lease. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Freehold land is not depreciated.
IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS AND PROPERTY, PLANT AND EQUIPMENT
Whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, an asset is reviewed for impairment. An asset's carrying value is written down to its estimated recoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than the asset's carrying value. Impairment losses are recognised in profit or loss immediately.
Impairment reviews for intangible exploration and evaluation assets are carried out on the basis of mineral/gemstone fields with each field representing a single CGU. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances applies:
· unexpected geological occurrences that render the resources uneconomic;
· title to the asset is compromised;
· variations in mineral/gemstones prices that render the project uneconomic;
· variations in the foreign currency rates; and
· the Group determines that it no longer wishes to continue to evaluate or develop the field.
biological assets
A biological asset is defined as a living plant managed by an enterprise which is involved in the agricultural activity of the transformation of biological assets for sale, into agricultural produce, or into additional biological assets.
Forestry
The acquisition of land for the forest projects is recorded at cost and classified as property, plant and equipment. Biological assets are not accounted for using the fair value less estimated point of sale costs basis because this cannot be measured reliably due to the nature of the business (sustainable management of tropical forest) on which there is not enough information available to determine the fair value.
Agriculture
Crops which are planted from seed to undergo the process of transformation until they become mature and productive are also stated at fair value less costs to sell. Management review the crops on an ongoing basis and should these be deemed to be unsuitable for further cultivation, full provision for impairment loss is made at that time.
A gain or loss arising on initial recognition of biological assets at fair value less costs to sell and from a change in fair value less costs to sell is recognised in profit or loss in the period in which it arises.
Agricultural produce harvested from the Group's biological assets is measured at its fair value less costs to sell. The fair value of agricultural produce is based on market prices of agricultural produce of similar size and weight or alternative estimates of fair value.
Costs incurred prior to the demonstration of commercial feasibility of forestry and agriculture in a particular area are written-off to profit and loss as incurred.
FINANCIAL ASSETS AND LIABILITIES
The Group classifies its financial assets and liabilities as follows:
Trade and other receivables
Trade and other receivables do not carry any interest and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method, less any provision for impairment.
Impairment provisions are recognised when there is objective evidence that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable.
Financial assets at FAIR VALUE THROUGH THE PROFIT OR LOSS ("FVTPL")
Financial investment assets are classified at fair value through profit or loss when either they are held for trading or when they are initially designated at fair value through the profit or loss.
The fair value is derived from the closing bid-market price at the reporting date. Gains and losses arising from changes in fair value are recognised directly in profit or loss.
A financial asset is classified as held for trading if:
· it has been acquired principally for the purpose of selling in the near future; or
· it is part of an identified portfolio of financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or
· it is a derivative that is not designated and effective as a hedging instrument.
A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:
· such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or
· the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or
· it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
AVAILABLE FOR SALE INVESTMENTS
Available for sale investments are non-derivative financial assets that are either designated in this category or not classified in any other category of financial asset. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Available for sale investments are initially recognised at fair value plus transaction costs and subsequently carried at fair value. Changes in fair value are recognised in equity. When available for sale investments are sold or impaired, the accumulated fair value adjustments recognised in equity are included in profit or loss as gains or losses from available for sale investments.
Available for sale investments are assessed for indicators of impairment at the end of each reporting period. They are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively affected.
Derivative Financial Assets and Liabilities
Purchases and sales of derivative financial instruments are recognised at the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group only trades in derivative financial instruments that are quoted in active markets and the related financial assets and liabilities are stated at fair values based on the contracted actual costs and the quoted market prices of those instruments. Changes in the fair value of derivative financial instruments are recognised in profit or loss as they arise.
FINANCIAL LIABILITIES
Financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Financial liabilities are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments over the expected life of the financial liability, or (where appropriate) a shorter period, to the net carrying amount on initial recognition.
The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or expire.
Trade and other payables
Trade and other payables are not interest bearing and are initially recognised at fair value. They are subsequently measured at amortised cost using the effective interest rate method.
Cash and cash equivalents
Cash and cash equivalents comprise cash at hand and deposits on a term of not greater than 3 months.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax from proceeds.
LEASES
Leases where the lessor retains substantially all of the risks and rewards of ownership are classified as operating leases and the rentals payments are charged to profit or loss on a straight-line basis over the lease term.
SHARE BASED PAYMENTS
Share options and Warrants
Share option programmes entitle certain employees and Directors to acquire shares of the Company. In addition warrants may be issued as consideration for services provided. These options and warrants are granted by the Company. The fair value of options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black Scholes valuation model for options without market conditions and using the binomial method for those with market conditions, taking into account the terms and conditions under which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest.
Employee Share Trust
Where an employee acquires an interest in shares in the Company jointly with the Obtala Resources Employee Share Trust, the fair value benefit at the purchase date is recognised as an expense, with a corresponding increase to the share based payment reserve within equity on a straight-line basis, over the period to the earliest date on which the employee becomes entitled to benefit from a realisation mechanism.
The fair value benefit is measured using a Black Scholes valuation model, taking into account the terms and conditions upon which the jointly owned shares were purchased.
The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, sale restrictions, and behavioural considerations.
INVENTORIES
Inventories, are stated at the lower of cost-of-production on the weighted average basis or estimated net realisable value. Cost of production includes direct labour, other direct costs and related production overheads. Net realisable value is the estimated selling price in the ordinary course of business.
PENSION COSTS
Contributions by the Group to personal pension schemes are charged to profit or loss on a straight-line basis as they become due.
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax payable is based on taxable profit for the year. The Group's liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method.
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled based upon rates enacted and substantively enacted at the reporting date. Deferred tax is charged or credited in profit or loss, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.
CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
The preparation of the consolidated financial statements requires management to make estimates and judgements and form assumptions that affect the reported amounts of the assets, liabilities, revenue and costs during the periods presented therein, and the disclosure of contingent liabilities at the date of the financial statements. Estimates and judgements are continually evaluated and based on management's historical experience and other factors, including future expectations and events that are believed to be reasonable. The estimates and assumptions that have a significant risk of causing a material adjustment to the financial results of the Group in future reporting periods are discussed below.
Impairment of intangible exploration and evaluation assets
The Group is required to perform an impairment review, for each CGU, when facts and circumstances suggest that the carrying amount of the assets may exceed its recoverable amount. The recoverable amount is based upon the Directors' judgements and is dependent upon the discovery of economically recoverable ore reserves, the ability of the Group to obtain necessary financing to complete development until the technical feasibility and commercial viability of extracting a mineral resource becomes demonstrable, at which point the value is estimated based upon the present value of the discounted future cash flows. An impairment charge of £961,000 (2011: £2,314,000) was recognised in the year and the carrying value of intangible exploration and evaluation assets at 31 December 2012 was £58,957,000 (2011: £61,406,000.
Site restoration provision
Provisions for long-term environmental obligations are based on estimates of costs of compliance with current environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. The estimated cost of rehabilitation is reviewed annually and adjusted as appropriate for changes in legislation or technology. As at 31 December 2012 the Group's site restoration provision was £148,000 (2011: £469,000).
Carrying value of investments
The group has to consider whether the carrying value of its investment in associate is impaired. After the year end the Group entered into an agreement to dispose of some of its shares in its associate in exchange for buying back certain shares in the Company. In addition the Group also entered into a conditional agreement and sought shareholder approval to dispose of up to 100,000,000 shares in Bushveld for 13p per share. The conditions related to exchange control approval and final approval from the funding partners, the completion of this agreement is not assured and no fixed completion date has yet been set. The Directors have considered the value of the investment at the year end and have carried the investment in Bushveld at its original cost less any accumulated losses to date in line with the accounting policy adopted for accounting for associates. The carrying value of the investment in associate as at 31 December 2012 was £25,370,000, representing a share price of 19.3p.
Control of investments
The group has to make certain judgements when determining the categorisation of the investments it holds as either subsidiaries, associates or held from trading. Factors considered include the shareholding held, whether control is exerted as well as the intention and strategy with regards to the specific investment.
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED
At the date of authorisation of these financial statements, the following standards and interpretations relevant to the Group that have not been applied in these financial statements were in issue but not yet effective or endorsed (unless otherwise stated):
| Effective date | ||
| IAS 19 | Employee Benefits (revised June 2011) | 1 January 2013 |
| IFRS 13 | Fair Value Measurement | 1 January 2013 |
| IFRS 12 | Disclosure of Interests in Other Entities | 1 January 2013 |
| IFRS 11 | Joint Arrangements | 1 January 2013 |
| IFRS 10 | Consolidated Financial Statements | 1 January 2013 |
| IFRS 9 | Financial Instruments - Classification and Measurement | 1 January 2015 |
| IAS 28 | Investments in Associates and Joint Ventures (revised May 2011) | 1 January 2013 |
| IAS 27 | Separate Financial Statements (revised May 2011) | 1 January 2013 |
| IFRIC 20 | Stripping Costs in the Production Phase of a Surface Mine | 1 January 2013 |
The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group. No standards or interpretations adopted in the year had any material impact on the financial statements of the Group.
2. LOSS ON INVESTMENTS
| 2012 | 2011 | |
| £000 | £000 | |
| (Loss)/gain on disposal of investments | (233) | 5 |
| Decrease in fair value of financial investment assets | (43) | (177) |
| Loss on investments | (276) | (172) |
3. SEGMENTAL REPORTING
Segmental information is presented on the basis of the information provided to the chief operating decision maker ("CODM"), which is the board of directors.
The Group is currently in the process of exploration and development of mineral projects, as well as agriculture and forestry. In addition, the Group undertakes investing activities, which are based in Guernsey. These are the Group's primary reporting segments.
The production operations in West Africa were discontinued during the year.
The following table shows the segment analysis of the Group's loss before tax for the year and net assets at 31 December 2012:
| Discontinued operations - Production | Exploration and development | Agriculture and forestry | Investing activities | Intra-group elimination | Total | ||
| £000 | £000 | £000 | £000 | £000 | £000 | ||
| Income statement | |||||||
| Revenue | - | - | 929 | - | - | 929 | |
| Losses on investments | - | - | - | (276) | - | (276) | |
| Provision of pre IPO services | - | - | - | 20,280 | - | 20,280 | |
| Share of losses of associate | - | - | - | (736) | - | (736) | |
| Operating costs | - | (20) | (1,332) | - | - | (1,352) | |
| Administrative expenses | - | - | - | (2,955) | - | (2,955) | |
| Depreciation | - | - | (247) | (4) | - | (251) | |
| Share based payment | - | - | - | (306) | - | (306) | |
| Disposal | (3,954) | - | - | - | - | (3,954) | |
| Impairment of assets | - | (961) | - | - | - | (961) | |
| Segment operating (loss)/profit before interest | (3,954) | (981) | (650) | 16,003 | - | 10,418 | |
| Finance income | - | - | - | - | - | - | |
| Finance costs | - | - | - | (11) | - | (11) | |
| (Loss)/profit before tax | (3,954) | (981) | (650) | 15,992 | - | 10,407 | |
| Taxation | 155 | ||||||
| Profit after tax | 10,562 | ||||||
| NET ASSETS | |||||||
| Assets | - | 61,017 | 2,202 | 37,674 | (10,950) | 89,942 | |
| Liabilities: | |||||||
| Deferred tax liability | - | (9,127) | - | - | - | (9,127) | |
| Other | - | (7,274) | (3,484) | (1,547) | 10,950 | (1,355) | |
| Net assets | - | 44,616 | (1,282) | 36,127 | - | 79,460 | |
| OTHER SEGMENT ITEMS | |||||||
| Capital expenditure: | |||||||
| Property, plant and equipment | - | 272 | 1,310 | - | - | 1,582 | |
| Intangible exploration and evaluation assets | - | 2,103 | - | - | - | 2,103 |
The following table shows the segment analysis of the Group's loss before tax for the year and net assets at 31 December 2011:
| Discontinued operations - Production | Exploration and development | Agriculture and forestry | Investing activities | Intra-group elimination | Total | ||
| £000 | £000 | £000 | £000 | £000 | £000 | ||
| Income statement | |||||||
| Revenue | 731 | - | - | - | - | 731 | |
| Losses on investments | - | - | - | (172) | - | (172) | |
| Gain on acquisition of subsidiary | - | - | - | 4,349 | - | 4,349 | |
| Management charges | - | 928 | - | - | (928) | - | |
| Operating costs | (1,610) | (827) | (483) | - | 928 | (1,992) | |
| Administrative expenses | (162) | (542) | - | (2,609) | - | (3,313) | |
| Depreciation | (852) | - | (16) | (10) | - | (878) | |
| Share based payment | - | - | - | (400) | - | (400) | |
| Impairment of assets | (1,249) | (1,063) | - | - | - | (2,314) | |
| Segment operating (loss)/profit before interest | (3,142) | (1,506) | (499) | 1,158 | - | (3,989) | |
| Finance income | - | - | - | 19 | - | 19 | |
| (Loss)/profit before tax | (3,142) | (1,506) | (499) | 1,177 | (3,970) | ||
| Taxation | - | ||||||
| Loss after tax | (3,970) | ||||||
| NET ASSETS | |||||||
| Assets | 4,615 | 65,074 | 1,037 | 18,726 | (11,697) | 77,755 | |
| Liabilities: | |||||||
| Deferred tax liability | - | (9,550) | - | - | - | (9,550) | |
| Current tax liability | - | - | - | (504) | - | (504) | |
| Other | (2,080) | (9,125) | - | (1,568) | 11,697 | (1,076) | |
| Net assets | 2,535 | 46,399 | 1,037 | 16,654 | - | 66,625 | |
| OTHER SEGMENT ITEMS | - | ||||||
| Capital expenditure: | - | ||||||
| Property, plant and equipment | - | 584 | 927 | - | - | 1,511 | |
| Intangible exploration and evaluation assets | - | 38,146* | - | - | - | 38,146 |
All the revenue generated in the year was from one customer. At the reporting date, the Group had an exclusive distribution agreement with this customer.
* includes £36.1 million of additions which are non cash as a result of the acquisition of subsidiary (refer to note 12).
4. OPERATING LOSS
| 2012 | 2011 | |
| £000 | £000 | |
| Operating loss is stated after charging/(crediting): | ||
| Depreciation of property, plant and equipment | 251 | 878 |
| Staff costs (see note 5) | 2,150 | 2,491 |
| Agriculture and forestry costs | 1,350 | 509 |
| Profit on disposal of property, plant and equipment | - | (15) |
| Professional and regulatory fees | 486 | 639 |
| Impairment of assets (see notes 13 and 14) | 961 | 2,314 |
| Foreign exchange gain on operating activities | (19) | (60) |
| Share based payments | 306 | 400 |
| Operating lease rentals: | ||
| Land and buildings | 56 | 28 |
| Auditor's remuneration: | ||
| Audit services | ||
| - fees payable to the Company auditor for the audit of the parent and consolidated accounts | 46 | 46 |
| - fees payable to the Company auditor for the audit of subsidiaries pursuant to legislation | - | 39 |
| Fees payable to associates of the Company auditor for other services | ||
| - auditing the accounts of subsidiaries pursuant to legislation | 48 | 10 |
5. STAFF COSTS
| 2012 | 2011 | |
| Number | Number | |
| The average monthly number of persons (including Directors) employed by the Group during the year was: | ||
| Administration and management | 32 | 48 |
| Agriculture and foretry | 145 | - |
| Mining | 55 | 114 |
| 232 | 162 | |
| £000 | £000 | |
| The aggregate remuneration comprised: | ||
| Wages and salaries | 1,796 | 1,963 |
| Social security costs | 45 | 128 |
| Share based payments | 309 | 400 |
| 2,150 | 2,491 | |
| Director's remuneration included in the aggregate remuneration above comprised: | £000 | £000 |
| Emoluments for qualifying services | 639 | 814 |
Included above are emoluments of £254,000 (2011: £400,000) in respect of the highest paid Director. In addition the Directors received emoluments of £259,000 (2011: £231,000) from Paragon Diamonds Limited, of which £nil (2011: £216,000) related to the highest paid Director.
No pension contributions were made on behalf of the Directors.
6. FINANCE INCOME
| 2012 | 2011 | |
| £000 | £000 | |
| Bank interest receivable | - | 19 |
7. FINANCE COSTS
| 2012 | 2011 | |
| £000 | £000 | |
| Bank interest payable | (11) | - |
8. TAXATION
| 2012 | 2011 | |
| £000 | £000 | |
| Current tax: | ||
| Corporation tax on loss for the year | - | - |
| Adjustments in respect of prior period | - | - |
| Deferred tax: | ||
| Origination and reversal of temporary differences | - | - |
| Tax on PROFIT/(loss) on ordinary activities | - | - |
| Factors affecting tax charge for the year: | ||
| Guernsey (Country of domicile) | ||
| The tax assessed for the year varies from the standard rate of corporation tax as explained below: | ||
| Profit/(loss) on ordinary activities before tax | 15,812 | 1,133 |
| Profit/(loss) on ordinary activities multiplied by the average rate of corporation tax of nil | - | - |
| Guernsey tax charge for the year | - | - |
| Group | ||
| The tax assessed for the year varies from the standard rate of corporation tax as explained below: | ||
| Loss on ordinary activities before tax | (5,250) | (5,103) |
| Loss on ordinary activities multiplied by the average rate of corporation tax of 24.5% (2011: 27.5%) | (1,286) | (1,353) |
| Effects of: | ||
| Different tax rates in areas of operations | - | 87 |
| Expenses not deductible for tax purposes | 1,266 | 846 |
| Utilised tax losses from prior year | - | |
| Deferred tax asset not recognised on losses in period | 20 | 420 |
| Adjustments in respect of prior period | 155 | - |
| GROUP Tax CREDIT for the year | 155 | - |
The prevailing tax rates of the operations of the Group range between 20% and 35%. Therefore a rate of 24.5% has been used as it best represents the weighted average tax rate experienced by the Group. The Group has estimated losses of £2.0m (2011: £38 million) available for carry forward against future profits generated in Lesotho. No deferred tax assets have been recognised in respect of losses due to the unpredictability of future profit streams. Unused tax losses may be carried forward indefinitely.
The movement in the year in the Group's net deferred tax position was as follows:
| 2012 | 2011 | |
| Deferred tax liabilities | £000 | £000 |
| At 1 January | 9,550 | - |
| Acquisition of subsidiary | - | 9,112 |
| Effects of foreign exchange | (423) | 438 |
| At 31 December | 9,127 | 9,550 |
9. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the loss/profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding own shares held jointly by the Obtala Resources Employee Share Trust, "The Trust", and certain employees.
Dilutive earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the year to assume conversion of all dilutive potential ordinary shares, being share options and the shares held by the Trust and certain employees.
| 2012 | 2011 | |
| £000 | £000 | |
| Profit/(loss) for the year from continuing and discontinuing operations : | 10,562 | (3,970) |
| Weighted average number of ordinary shares | ||
| Weighted average number of ordinary shares in issue during the year | 247,680,709 | 234,335,864 |
| Less: weighted average number of own shares held during the year | (4,350,000) | (2,675,753) |
| Weighted average number of ordinary shares used in calculating earnings per share | 243,330,709 | 231,660,111 |
| Number of options and own shares with dilutive effects | - | - |
| Weighted average number of ordinary shares used in calculating diluted earnings per share | 243,330,709 | 231,660,111 |
| Profit/(loss) per share from continuing and discontinuing operations | ||
| Basic (pence) | 4.34 | (1.71) |
| Diluted (pence) | 4.34 | (1.71) |
| Profit/(loss) per share from continuing operations: | ||
| Profit/(loss) from continuing operations | 14,516 | (828) |
| Basic (pence) | 5.97 | (0.36) |
| Diluted (pence) | 5.97 | (0.36) |
There is no dilutive effect of options and own shares due to the Group's share price during the year.
10. INVESTMENTS IN SUBSIDIARIES
At 31 December 2012 the Company has investments in subsidiaries where it held 50% or more of the issued ordinary share capital or exerted control over operations of the following companies:
| Undertaking | Sector | Country of incorporation | % of issued ordinary share capital and voting rights |
| Obtala Limited 1 | Holding Company | England & Wales | 100.0 |
| Obtala Services Limited 1 | Professional & administration | England & Wales | 100.0 |
| Obtala Resources (T) Limited 2 | Resources | Tanzania | 100.0 |
| Mindex Invest Limited 2 | Resources | British Virgin Islands | 100.0 |
| Uragold Limited 2 | Holding Company | England & Wales | 100.0 |
| Uragold (T) Limited 4 | Resources | Tanzania | 75.0 |
| Montara Continental Limited 3 | Forestry | Seychelles | 75.0 |
| Montara Mozambique Limitada 5 | Dormant | Mozambique | 58.5 |
| Montara Land Company Limited 3 | Agriculture | Tanzania | 75.0 |
| Montara Forest Limited 5 | Dormant | Mozambique | 58.5 |
| Renholn Holdings Inc3 | Resources | British Virgin Islands | 80.0 |
| Paragon Diamonds Limited* 1 | Holding Company | Guernsey | 46.5 |
| African Rock Resources Limited 6 | Resources | England & Wales | 46.5 |
| ARR (Tanzania) Limited 6 | Resources | Tanzania | 46.5 |
| Gemstones of Africa Limited 7 | Dormant | England & Wales | 82.9 |
| International Diamond Consultants 6 | Holding Company | British Virgin Islands | 47.3 |
| Meso Diamonds (Pty) Limited 6 | Resources | Lesotho | 40.2 |
| Botle Diamonds (Pty) Limited 6 | Resources | Lesotho | 40.2 |
| Tamarisk Investments 6 | Resources | Zambia | 47.3 |
| Kopje (Pty) Limited 6 | Resources | Botswana | 47.3 |
| Altadis International Limited 1 | Dormant | British Virgin Islands | 100.0 |
| Bendell Enterprise Limited 1 | Dormant | British Virgin Islands | 100.0 |
| Halkyn Incorporated 1 | Dormant | Seychelles | 100.0 |
| Ilakon Limited 1 | Dormant | Seychelles | 100.0 |
1 Held directly by the Company
2 Held by Obtala Limited
3 Held by Mindex Invest Limited
4 Held by Uragold Limited.
5 Held by Montara Continental Limited
6 Held by Paragon Diamonds Limited
7 Held by Obtala Services Limited
* Quoted on AIM
Obtala Limited and Uragold Limited operate wholly or mainly in England & Wales; Mindex Invest Limited, Obtala Resources (T) Limited, Uragold (T) Limited, Montara Continental Limited, Montara Forest Limited and Montara Mozambique Limitada operate wholly or mainly in Tanzania and Mozambique.
All of the subsidiaries are included in the consolidated financial statements.
11. Discontinued operations
On 30 November 2012, the Group entered into a sale agreement to dispose of Sierra Leone Hard Rock Limited, which carried out all of the Group's operations in Sierra Leone. The disposal was effected in order to reduce costs and to focus on the primary assets of the Group in Lesotho. The disposal was completed on 30 November 2012, on which date control of Sierra Leone Hard Rock passed to the acquirer.
The results of the discontinued operations, which have been included in the consolidated income statement, were as follows:
| Year ended 31 December 2012 | Year ended 31 December 2011 | ||
| £000 | £000 | ||
| Revenue | - | 731 | |
| Operating expenses | (282) | (1,869) | |
| Depreciation | - | (755) | |
| Impairment of assets | - | (1,249) | |
| Loss before tax | (282) | (3,142) | |
| Tax | - | - | |
| Loss on disposal of subsidiary | (3,672) | - | |
| Net loss attributable to discontinued operations (attributable to owners of the Company) | (3,954) | (3,142) | |
A loss of £3,672,000 arose on the disposal of Sierra Leone Hard Rock Limited, being the proceeds of the disposal less the carrying amount of the subsidiary's net assets.
The net assets of Sierra Leone Hard Rock at the date of disposal and at 31 December 2011 are shown below.
| 30 November 2012 |
31 December 2011 |
||
| £000 | £000 | ||
| Property, plant and equipment | 4,297 | 4,615 | |
| Inventory | 63 | 67 | |
| Trade payables | (93) | (97) | |
| Site restoration provision | (294) | (307) | |
| 3,973 | 4,278 | ||
| Realisation of foreign exchange differences | (301) | ||
| Loss on disposal | (3,672) | ||
| Total consideration | - |
12. DEEMED PARTIAL DISPOSAL of subsidiary undertaking
On 25 January 2012 Paragon Diamonds Limited issued 5,948,275 new ordinary shares at a price of 29 pence per share raising gross cash proceeds of £1,725,000. The issue of new shares in Paragon to non-controlling interests created a deemed disposal for the Group resulting in a gain recognised in equity of £0.4 million.
On 25 April 2012 Paragon Diamonds Limited issued 970,588 new ordinary shares in the Company to Obtala Resources Limited as consideration for acquiring the remaining 1.5% interest in International Diamond Consultants. This subsequent issue of new ordinary shares in Paragon to non-controlling interests resulted in further dilution to Obtala and generated an additional gain of £0.1 million on the deemed disposal which has been recognised in equity.
During 2011 Paragon Diamonds issued 8,500,000 new ordinary shares of £0.01 each at a price of 34 pence per share raising gross cash proceeds of £2,890,000 and issued 36,994,235 new ordinary shares in Paragon Diamonds Limited at a market price of 34p per share as consideration for the remaining 54.2 per cent of the issued share capital of International Diamond Consultants Limited. These issues of new ordinary shares in Paragon to non-controlling interests resulted in dilution to Obtala and generated an additional gain of £4.8 million on the deemed disposal which was recognised in equity.
Paragon Diamonds, a subsidiary of the Company acquired a subsidiary during 2011 by way of issuing 36,994,235 new ordinary shares in Paragon Diamonds Limited at a market price of 34p. In accordance with IFRS 3 a gain on the acquisition of a subsidiary was recognised in profit or loss for £4,349,000 representing the increase in value of the assets acquired between the issuance of the first tranche of consideration and the second tranche of consideration. The book value and fair value of assets acquired has been set out below.
| Book value | Fair value | |||
| £000 | £000 | |||
| Net assets acquired: | ||||
| Property plant and equipment | 92 | 92 | ||
| Intangible exploration and evaluation assets | 1,323 | 36,116 | ||
| Trade and other payables | (328) | (328) | ||
| Site restoration provision | (46) | (46) | ||
| Deferred tax liability | - | (9,112) | ||
| Non-controlling interests | - | (3,428) | ||
| 1,041 | 23,294 | |||
| Total consideration | ||||
| Consideration satisfied by: | ||||
| Issue of new shares by Paragon Diamonds Limited | 12,578 | |||
| Transfer from investments | 6,367 | |||
| Gain in profit or loss | 4,349 | |||
| 23,294 |
13. INTANGIBLE EXPLORATION AND EVALUATION ASSETS
| Renholn licences | Mindex licences | Paragon Diamonds licences | Uragold licences | Montara & Altadis licences |
Total licences | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| at 1 January 2011 | 291 | 18,960 | 2,524 | 641 | 209 | 22,625 |
| Purchase of mining licences | - | - | 36,116 | - | - | 36,116 |
| Expenditure on exploration and evaluation | 195 | 964 | 832 | 39 | - | 2,030 |
| Impairment charge for the year | (330) | (526) | - | - | (209) | (1,065) |
| Foreign exchange differences | - | 23 | 1,675 | 2 | - | 1,700 |
| at 31 December 2011 | 156 | 19,421 | 41,147 | 682 | - | 61,406 |
| Purchase of mining licences | - | - | - | - | 62 | 62 |
| Expenditure on exploration and evaluation | - | - | 2,041 | - | - | 2,041 |
| Impairment charge for the year | (156) | (496) | - | (309) | - | (961) |
| Foreign exchange differences | - | (1,181) | (2,037) | (373) | - | (3,591) |
| at 31 December 2012 | - | 17,744 | 41,151 | - | 62 | 58,957 |
During the year depreciation of mining equipment of £236,000 was capitalised (2011: £nil).
Impairment
The Directors have considered the following factors when undertaking their impairment review of the intangible assets:
a) Geology and lithology on each licence as outlined in the most recent CPRs (independent Competent Person's Reports from mining and earth resources consultants)
b) The expected useful lives of the licenses and the ability to retain the license interests when they come up for renewal
c) Comparable information for large mining and exploration companies in the vicinity of each of the licenses
d) History of exploration success in the regions being explored
e) Local infrastructure
f) Climatic and logistical issues
g) Geopolitical environment
After considering these factors the Directors have chosen to make a charge of £961,000 (2011: £1,065,000) relating to the impairment of 6 licences that have expired and the Directors have not undertaken to renew.
As at 31 December 2012 applications to renew one licence with a carrying value of £8.5 million (2011: £2.3 million) had been submitted to the Tanzanian government but at the date of issuance of this report these renewals had not been completed. The Directors however, have no reason to believe the renewals will be unsuccessful.
| Land & buildings | Motor vehicles | Plant & equipment | Mine property | Fixtures & IT | Total | |
| £000 | £000 | £000 | £000 | £000 | £000 | |
| Cost | ||||||
| AT 1 JANUARY 2011 | 176 | 59 | 2,248 | 4,944 | 58 | 7,485 |
| Additions | 765 | 65 | 681 | - | - | 1,511 |
| Acquired with subsidiary | 88 | - | 4 | - | - | 92 |
| Disposals | - | - | (143) | - | - | (143) |
| Effects of foreign exchange | 12 | 2 | 16 | 6 | - | 36 |
| At 31 December 2011 | 1,041 | 126 | 2,806 | 4,950 | 58 | 8,981 |
| Additions | 55 | 140 | 1,333 | - | - | 1,528 |
| Disposals | (73) | (45) | (1,652) | (4,781) | - | (6,551) |
| Effects of foreign exchange | (11) | - | (104) | (169) | - | (283) |
| At 31 December 2012 | 1,012 | 221 | 2,383 | - | 58 | 3,675 |
| Depreciation | ||||||
| AT 1 JANUARY 2011 | 17 | 18 | 402 | 78 | 32 | 547 |
| Disposals | - | - | (63) | - | - | (63) |
| Impairment | - | - | - | 1,249 | - | 1,249 |
| Charge for the year | 20 | 25 | 755 | 67 | 11 | 878 |
| At 31 December 2011 | 37 | 43 | 1,094 | 1,394 | 43 | 2,611 |
| Disposals | (19) | (22) | (819) | (1,394) | - | (2,254) |
| Charge for the year | 96 | 57 | 332 | - | 3 | 488 |
| At 31 December 2012 | 114 | 78 | 607 | - | 46 | 845 |
| Net book value | ||||||
| At 31 December 2012 | 899 | 143 | 1,776 | - | 12 | 2,830 |
| AT 31 December 2011 | 1,004 | 83 | 1,712 | 3,556 | 15 | 6,370 |
| At 31 December 2010 | 159 | 41 | 1,846 | 4,866 | 26 | 6,938 |
*During the year depreciation of mining equipment of £236,000 (2011: £nil) was capitalised to intangible exploration and evaluation assets.
15. TRADE AND OTHER RECEIVABLES
| 2012 | 2011 | |||
| £000 | £000 | |||
| Trade receivables | 68 | - | ||
| Other receivables | 317 | 2,049 | ||
| Prepayments and accrued income | 92 | 220 | ||
| 477 | 2,269 |
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
16. INVENTORIES
| 2012 | 2011 | |||
| £000 | £000 | |||
| Diamonds held for sale | - | 67 | ||
| Timber held for sale | 55 | - | ||
| 55 | 67 |
17. Investments
| Available for sale investments | Investments in associate | Total | ||
| £000 | £000 | £000 | ||
| COST AND FAIR VALUE AT 1 JANUARY 2011 | 317 | 5,927 | 6,244 | |
| Additions | 123 | - | 123 | |
| Acquisition of subsidiary | (440) | (5,927) | (6,367) | |
| COST AND FAIR VALUE AT 31 DECEMBER 2011 | - | - | - | |
| Additions | 261 | 26,106 | 26,367 | |
| Share of post acquisition losses | - | (736) | (736) | |
| COST AND FAIR VALUE AT 31 DECEMBER 2012 | 261 | 25,370 | 25,631 |
In 2011 the investment in associate contributed £nil to profit and loss for the year as it was undertaking exploration activities. It held assets of £187,000.
On 17 May 2011 Paragon Diamonds completed the acquisition of a further 54.2% interest in International Diamond Consultants Limited bringing the total ownership by the Group to 100%. The amounts included within available for sale investments and investment in associates relate to the International Diamond Consultants Limited Group and therefore have been treated as consideration for acquiring the remaining interest in the subsidiary. A gain of £4.3 million was recognised in the income statement in the prior year in respect of this acquisition.
During the year the Group acquired a 46% interest in Bushveld Minerals Limited prior to it listing on AIM. Consideration was satisfied by way of provision of pre-IPO services, by issuing 11,949,378 new ordinary shares at a market price of 32.5 pence per share and capitalising loans that were previously advanced to Bushveld totalling £2 million.
The market value of the shares acquired on the date of acquisition was £26.1 million which has been treated as the cost of investment. This generated a gain attributable to the provision of pre-IPO services of £20.2 million which has been recognised in the statement of comprehensive income.
Bushveld Minerals Limited has a reporting date of 28 February and as such the results included with these financial statements are the latest publicly available, being the unaudited loss for the period to 31 August 2012. In 2012 the investment in associate contributed a £736,000 loss for the year, had assets of £55.5 million and liabilities of £0.5 million.
18. financial investment assets/(LIABILITIES)
| Quoted investments | Quoted investments | |||
| 2012 | 2011 | |||
| £000 | £000 | |||
| Financial assets carried at fair value through profit or loss | ||||
| Equity investments | - | 18 | ||
| Derivative liabilities | (43) | |||
The summary of those equity investments is as follows:
| Quoted investments | Quoted investments | |||
| 2012 | 2011 | |||
| £000 | £000 | |||
| Fair value at beginning of period | 18 | 180 | ||
| Additions at cost | 40 | 553 | ||
| Disposals | (20) | (538) | ||
| Decrease in fair value | (38) | (177) | ||
| - | 18 |
Equity investments
Equity investments represent short-term investments in listed equity securities in mining and exploration companies which are treated as fair value through profit or loss.
19. FINANCIAL INSTRUMENTS
Capital risk management
The Company manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. The overall strategy of the Company and Group is to minimise costs and liquidity risk.
The capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in Equity.
The Group is exposed to a number of risks through its normal operations, the most significant of which are exploration, credit, foreign exchange and liquidity risks. The management of these risks is vested in the Board of Directors.
Categorisation of financial instruments
| 2012 Financial assets/(liabilities) |
Held for trading/designated as FVTPL | Available for sale investments | Loans and receivables | Financial liabilities at amortised cost | Total | |
| £000 | £000 | £000 | £000 | £000 | ||
| Trade and other receivables | - | - | 477 | - | 477 | |
| Available for sale investments | - | 261 | 261 | |||
| Derivative liabilities | (43) | - | - | - | (43) | |
| Cash and cash equivalents | - | - | 1,994 | - | 1,994 | |
| Trade and other payables | - | - | - | (391) | (391) | |
| Loan | - | - | - | (774) | (774) | |
| (43) | 261 | 2,471 | (1,166) | 1,524 |
| 2011 Financial assets/(liabilities) |
Held for trading/designated as FVTPL | Loans and receivables | Financial liabilities at amortised cost | Total | |
| £000 | £000 | £000 | £000 | ||
| Trade and other receivables | - | 2,269 | - | 2,269 | |
| Equity investments | 18 | - | - | 18 | |
| Cash and cash equivalents | - | 7,625 | - | 7,625 | |
| Trade and other payables | - | - | (239) | (239) | |
| Loan | - | - | (369) | (369) | |
| 18 | 9,894 | (608) | 9,304 |
Equity price Risk
The Group is exposed to equity price risks arising from equity investments. Equity investments are held for both strategic and trading purposes.
The Group's sensitivity to equity prices has decreased in 2012 as the Group has reduced its investment portfolio.
Management of exploration risk
The Group is exposed to exploration risk in respect of its mineral licence projects. The Group mitigates this risk by having established mineral investment project appraisal processes and asset monitoring procedures which are subject to overall review by the Board.
Management of market risk
The most significant area of market risk to which the Group and Company are exposed is interest risk.
As the Group has no significant borrowings its risk is limited to the reduction of interest received on cash surpluses held.
| 2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |
| Fixed rate |
Fixed rate |
Floating rate |
Floating rate |
Total | Total | |
| Group | £000 | £000 | £000 | £000 | £000 | £000 |
| Cash and cash equivalents | - | - | 1,994 | 7,625 | 1,994 | 7,625 |
The impact of a 10% increase/decrease in the average base rates would be £nil (2011: £2,000) on the total cash and cash equivalents balances and on equity.
Management of credit risk
The principal financial instruments of the Group are bank balances. The Group deposits surplus liquid funds with counterparty banks that have high credit ratings. Cash is sometimes placed with certain institutions in support of trading positions. The Group deposits such funds with large well known institutions and the Directors consider the credit risk to be minimal.
No aged analysis of financial assets is presented as no financial assets are past due at the reporting date.
Management of foreign exchange risk
The Group has a limited level of exposure to foreign exchange rate risk through their foreign currency denominated cash balances.
| 2012 | 2011 | ||||
| £000 | £000 | ||||
| Cash and cash equivalents | |||||
| GBP | 1,959 | 7,551 | |||
| ZAR | 5 | 20 | |||
| TZS | 16 | - | |||
| MZN | 2 | - | |||
| USD | 12 | 54 | |||
| Total | 1,994 | 7,625 |
The table below summarises the impact of a 10% increase/decrease in the relevant foreign exchange rates versus the pound sterling rate, on the Group's pre tax profit for the year and on equity:
| 2012 | 2011 | |
| Impact of 10% rate change | £000 | £000 |
| Cash and cash equivalents | 1 | 7 |
Management of liquidity risk
The Group seeks to manage liquidity risk by regularly reviewing cash flow budgets and forecasts to ensure that sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. The Group deems there is sufficient liquidity for the foreseeable future.
The Group had cash and cash equivalents at 31 December as set out below.
| 2012 | 2011 | |||
| £000 | £000 | |||
| Cash at bank | 1,994 | 7,625 | ||
| Cash with institutions in support of trading | - | - | ||
| 1,994 | 7,625 |
20. TRADE AND OTHER PAYABLES
| 2012 | 2011 | |||
| £000 | £000 | |||
| Trade payables | 282 | 156 | ||
| Other payables | 40 | 25 | ||
| Accruals | 68 | 57 | ||
| 390 | 238 |
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
21. LOANS
| 2012 | 2011 | |||
| £000 | £000 | |||
| Loan from minority shareholder | 774 | 369 |
Under the terms of the shareholders agreement for Group's two operating subsidiaries in Lesotho the holder of the 15% non-controlling interest has to contribute 15% of the running costs of the operation. This contribution has been treated as a loan.
The loans have been reclassified as non-current liabilities to reflect the expected repayment dates. The comparative has been restated appropriately.
22. SITE RESTORATION PROVISION
| £000 | ||||
| AT 1 JANUARY 2011 | 307 | |||
| Acquired with subsidiary undertaking | 46 | |||
| Increase in provision | 114 | |||
| Foreign exchange differences | 2 | |||
| AT 31 DECEMBER 2011 | 469 | |||
| Disposal | (294) | |||
| Foreign exchange differences | (27) | |||
| AT 31 DECEMBER 2012 | 148 |
The Group is exposed to restoration, rehabilitation and environmental liabilities relating to its mining operations. Estimates of the cost of this work, including reclamation costs, close down costs and pollution control, are made on an ongoing basis, based on the estimated life of the mine.
23. SHARE CAPITAL
| Number | £000 | ||
| Authorised: | |||
| Ordinary shares of 1p each | |||
| AT 1 JANUARY 2011, 31 DECEMBER 2011 AND 2012 | Unlimited | Unlimited | |
| Allotted, issued and fully paid: | |||
| Ordinary shares of 1p each | |||
| AT 1 JANUARY 2011 | 224,079,974 | 2,241 | |
| Issued in period | 14,100,000 | 141 | |
| AT 31 DECEMBER 2011 | 238,179,974 | 2,382 | |
| Issued in period | 11,949,378 | 119 | |
| AT 31 DECEMBER 2012 | 250,129,352 | 2,501 |
Balances classified as share capital include the nominal value on issue of the Company's equity share capital, comprising ordinary shares of 1p each.
On 16 March 2012 the Company issued 11,949,378 new ordinary shares in the company at a price of 32.5p per share in consideration for its 46% interest in Bushveld Minerals Limited.
24. SHARE PREMIUM ACCOUNT
| 2012 | 2011 | |
| £000 | £000 | |
| At beginning of year | 6,677 | 131 |
| Premium on issue of shares (see note 23) | 3,764 | 6,546 |
| At 31 December | 10,441 | 6,677 |
Balances classified as share premium include the net proceeds in excess of the nominal share capital on issue of the Company's equity share capital.
25. MERGER RESERVE
| 2012 | 2011 | |
| £000 | £000 | |
| At 31 December | 28,543 | 28,543 |
The merger reserve arose on shares issued by Obtala Services Limited to acquire Obtala Resources Limited and on shares issued by Obtala Resources Limited to the previous owners of Obtala Services Limited under a scheme of arrangement concluded in August 2010.
26. MOVEMENT IN REVENUE RESERVE AND OWN SHARES
| Retained earnings | Own shares |
Revenue reserve | |
| £000 | £000 | £000 | |
| At 1 JANUARY 2011 | 1,858 | (735) | 1,123 |
| Loss for the year | (3,706) | - | (3,706) |
| Dilution of interest in subsidiary | 4,829 | - | 4,829 |
| Purchase of own shares | - | (681) | (681) |
| At 31 December 2011 | 2,981 | (1,416) | 1,565 |
| Profit for the year | 13,475 | - | 13,475 |
| Cancellation of options | 14 | - | 14 |
| Dilution of interest in subsidiary | 539 | - | 539 |
| At 31 December 2012 | 17,009 | (1,416) | 15,593 |
Retained earnings represents the cumulative profit attributable to the equity holders of the parent company.
Own shares represents the cost of Obtala Resources Limited shares purchased in the market and held by the Obtala Resources Limited Employee Share Trust jointly with a number of the Group's employees. At 31 December 2012 4,350,000 (2011: 4,350,000) shares in the Company were held by the trust (refer to note 28 for details of own shares).
27. CAPITAL AND OPERATING LEASE COMMITMENTS
The Group had total commitments at the reporting date under non-cancellable operating leases falling due as follows:
| Land & buildings and mining licences | Land & buildings and mining licences | |
| 2012 | 2011 | |
| £000 | £000 | |
| Within one year | 6 | 8 |
| Between one and two years | 7 | 7 |
| 13 | 15 |
28. SHARE BASED PAYMENTS
Obtala Option Scheme
The Group operates a share option plan, under which certain Directors and employees have been granted options to subscribe for ordinary shares. All options are equity settled. The options have an exercise price of 37.6p which was based upon the average value of the Group's ordinary shares for the ten days prior to the date of grant. The vesting period was generally 1 or 2 years. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. The Group has no legal or constructive obligation to repurchase or settle the options in cash. The number and weighted average exercise prices of share options are as follows:
| 2012 | 2011 | |||
| Number of share options |
Weighted average exercise price per share (pence) | Number of share options |
Weighted average exercise price per share (pence) | |
| At beginning of year | 1,150,000 | 37.6 | 1,150,000 | 37.6 |
| Lapsed during the year | 150,000 | 37.6 | - | 37.6 |
| Outstanding at 31 December | 1,000,000 | 37.6 | 1,150,000 | 37.6 |
There were 1,150,000 share options outstanding at 31 December 2012 which were eligible to be exercised with a weighted average remaining contractual life of 6 years and 10 months (2011: 7 years and 10 months). To date no share options have been exercised. There are no market based vesting conditions attached to any of the share options outstanding at 31 December 2012.
The fair value of services received in return for share options granted is measured by reference to the fair value of the share options granted. This is estimated based on the Black Scholes model which is considered most appropriate considering the effects of the vesting conditions, expected exercise price and the payment of the dividends by the Company. The fair value of each option is 5.14p (2011: 5.14p). A charge has been recognised in profit or loss of £nil (2011: £nil) for the year.
Paragon Option Scheme
Paragon Diamonds Limited established a share option plan during the year, under which certain Directors and employees have been granted options to subscribe for ordinary shares. All options are equity settled and the Group has no legal or constructive obligation to settle the options in cash. The options were issued on 27 July 2011 and vest in three equal tranches on the first, second and third anniversary of the grant date. There were 5,550,000 options outstanding as at the year end with exercise prices between 25.25p and 42.75p.
Certain performance criteria are required to be fulfilled before the share options issued to employees and directors will vest.
These share options with market conditions issued to employees of the Group have been valued using the binomial method. The inputs of the binomial model are as follows:
| 2012 | 2011 | ||
| Weighted average share price | 30p | 30p | |
| Weighted average exercise price | 34p | 34p | |
| Expected volatility | 50% | 50% | |
| Expected life | 2.5 yrs | 2.5 yrs | |
| Risk free rate | 2.5% | 2.5% | |
| Expected dividends | n/a | n/a |
Expected volatility was determined by calculating the historical volatility of the Group's share price over the previous year. The expected life used in the model has been adjusted, based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations.
The number and weighted average exercise prices of the share options are as follows:
| Number of share options | Weighted average exercise price per share (pence) | ||
| At beginning of year | - | - | |
| Granted during the year | 5,700,000 | 34 | |
| Lapsed during the year | (150,000) | 34 | |
| Outstanding at 31 December 2011 | 5,550,000 | 34 | |
| Granted during the year | - | - | |
| Lapsed during the year | (825,000) | 34 | |
| Outstanding at 31 December 2012 | 4,725,000 | 34 |
The weighted average fair value of each option is 6.8p and the Group recognised an expense of £184,000 (2011: £296,000) during the year for these options.
In addition to the scheme for directors and employees, Paragon issued 3,000,000 options to certain existing employees and consultants of International Diamond Consultants as part of the acquisition of the subsidiary. These all vest one year after the date of grant at an exercise price of 34p. These have been valued using a Black Scholes model using the same inputs as above.
No options were exercised during the year (2011: nil).
Jointly Owned Shares
The Obtala Resources Employee Share Trust ("the Trust") was established with Marlborough Trust Company Limited appointed as trustee ("the Trustee") to enable the Trust to acquire shares in the Company and to make interests in those shares available for the benefit of current and future employees of the Company and its subsidiaries.
On 18 October 2011, the Trustee purchased 2,100,000 ordinary shares of 1p each in the Company at a price of 32.75p per share. These shares were acquired jointly with a number of employees of the Group ("the Employees") pursuant to certain conditions set out in Joint Ownership Agreements ("JOAs"). Purchase of all the shares was initially funded in full by way of a loan contribution from the Company of £687,750 to the Trustee and the Employees have subsequently repaid to the Company the 1% of the purchase cost attributable to their initial interest in the jointly owned shares, amounting to £6,877. The Trust's interest in all the above shares have been classified as own shares and deducted from equity (see note 26).
Subject to meeting the conditions set out in the JOAs, most of any future increase in the value of the shares will accrue to the Employees by way of receipt of a proportionate number of wholly owned shares or at the option of the Trustee, an alternative realisation mechanism for an equivalent amount. The consequence of these conditions is that in most instances an Employee will only be able to benefit from an increase in the value of the Shares in equal tranches on or after each of the two consecutive annual anniversaries of purchase and provided the Employee has not ceased employment with the Group on or before the date that these conditions are met.
The Employees are also, under certain circumstances, able to benefit from an increase in the value of the shares on a takeover, change of control, scheme of arrangement or a voluntary winding-up of the Company. Where these conditions are not met, the Trustee has an option to acquire the Employee interests in the shares at a price equal to the original purchase cost paid by the Employee so that none of any increase in the value of the shares will accrue to the Employee. The following tables illustrate the number and weighted average market purchase prices of, and movements in, jointly owned shares during the year:
| 2012 | 2011 | |||
| Number of shares |
Weighted average purchase price per share (pence) | Number of shares |
Weighted average purchase price per share (pence) | |
| At beginning of year | 4,350,000 | 32.9 | 2,250,000 | - |
| Jointly purchased during the year | - | - | 2,100,000 | 32.9 |
| Outstanding at 31 December | 4,350,000 | 32.9 | 4,350,000 | 32.9 |
The market purchase price for all of the jointly owned shares purchased during the year was 32.75p (2011: 32.75p). No jointly owned shares were sold or redeemed during the year.
None of the relevant JOA conditions had been met by 31 December 2012.
The fair value of jointly owned shares purchased is estimated as at the date of purchase using a Black Scholes model, taking into account the terms and conditions upon which the jointly owned shares were purchased. The weighted average fair value of each share is 8p and a charge of £122,000 has been recognised as an expense in the year (2011: £104,000).
20,000,000 Warrants with an exercise price of 40p were issued to GEM as part of an equity line of credit agreement that was signed in November 2012, providing the Group with access to placing up to £10 million of new shares over a period of 3 years at a price of 10% below the market price prior to the instalments being requested. As at the date of this report, no funds had been drawn down under this agreement. The warrants have been valued using the Black Scholes model and will be charged through the profit and loss over the life of the equity line of credit. The assumptions used in valuing the warrants are a risk free rate of 2.5%, volatility of 50% an expected life of 3 year and a fair value calculated at 3.27p each.
There were no options exercisable at the reporting date (2011: nil).
29. NON-CONTROLLING INTERESTS
| £000 | ||
| AT 1 JANUARY 2011 | 5,838 | |
| Non-controlling interests in net assets on partial disposal | 10,795 | |
| Non-controlling interests share of losses in the year | (264) | |
| Non-controlling interests in share of foreign exchange movements | 631 | |
| Non-controlling interests acquired with subsidiary undertakings | 3,428 | |
| AT 31 DECEMBER 2011 | 20,428 | |
| Non-controlling interests share of losses in the year | (2,913) | |
| Non-controlling interests in share of foreign exchange movements | (1,430) | |
| Non-controlling interests in net assets on partial disposal | 1,461 | |
| AT 31 DECEMBER 2012 | 17,546 |
The non-controlling interest in net assets on partial disposal represents the interest attributable to non-controlling interest as a result of the dilution of the Group's interest in Paragon Diamonds Limited to 45.3% at 31 December 2012.
The non-controlling interest acquired with subsidiary undertakings represent the portion of the net assets of International Diamond Consultants attributable to the non-controlling interests, which was acquired during the prior year.
The share of losses in the year represent the losses attributable to non-controlling interests for the year.
30. RELATED PARTY TRANSACTIONS
Trading transactions
During the year the Group companies entered into the following transactions with related parties:
| 2012 | 2011 | |||
| Transactions in year | Balance at 31 December | Transactions in year | Balance at 31 December | |
| £000 | £000 | £000 | £000 | |
| Loans to subsidiary undertakings | 1,305 | 7,541 | 493 | 6,236 |
| Loans from subsidiary undertakings | (20,657) | (111) | (20,068) | (20,068) |
| Loans between subsidiary undertakings | 2,142 | 4,828 | 388 | 2,686 |
| 2012 | 2011 | |||
| Transactions in year | Balance at 31 December | Transactions in year | Balance at 31 December | |
| £000 | £000 | £000 | £000 | |
| Transactions with other related parties: | ||||
| Prepayments | - | - | 135 | 135 |
| Expense recharges | 45 | - | - | - |
| Property recharges | 68 | - | 68 | - |
The advisory fees and property recharges are from ORA Capital Services Limited, a subsidiary of a former shareholder of the Company.
The prepayments relate to advances made and costs incurred on behalf of Rustington Inc in relation to a subscription for shares in Rustington Inc in March 2012. Grandinex International, a company over which Francesco Scolaro exerts control, is a shareholder of Rustington Inc.
The expense recharge is to recover some costs from Edenville energy, a Company which Simon Rollason used to be a Director of, for shared travel and expenses incurred by Simon Rollason.
Transactions with key management personnel
The Group's key management personnel comprised only the Executive Directors of the Company.
| 2012 | Short-term employment benefits | ||||
| Salaries & fees | Employer's national insurance contributions | Relocation expenses | Share based payments | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Francesco Scolaro* | 150 | - | 71 | - | 221 |
| Simon Rollason | 155 | 7 | 37 | 31 | 230 |
| Michael Bretherton | 28 | 4 | - | 20 | 52 |
| 333 | 11 | 108 | 51 | 503 |
* In addition Francesco Scolaro received a salary of £175,000 and bonus of £69,000 from Paragon Diamonds Limited
| 2011 | Short-term employment benefits | ||||
| Salaries & fees | Employer's national insurance contributions | Relocation expenses | Share based payments | Total | |
| £000 | £000 | £000 | £000 | £000 | |
| Francesco Scolaro* | 400 | - | 80 | - | 480 |
| Simon Rollason | 155 | 7 | 34 | 25 | 221 |
| Michael Bretherton | 15 | 1 | - | 22 | 38 |
| 570 | 8 | 114 | 47 | 739 |
* In addition Francesco Scolaro received a salary of £150,000 and bonus of £66,000 from Paragon Diamonds Limited
31. POST BALANCE SHEET EVENTS
On 21 February 2013 the Company issued 4,377,104 new ordinary shares at a price of 14.85 pence per share for a cash consideration of £650,000.
On 21 February 2013 the Company issued 4,377,104 warrants over the share capital of the Company, exercisable at a price of 18.56 pence per share and valid for four years.
On 6 April 2013 the Company purchased 11,949,378 of its own shares and disposed of 30,120,482 shares in Bushveld Minerals Limited as consideration. The market prices for the shares at completion date were 7.375p and 11.75 p respectively. The shares are currently held in treasury.
On 9 April 2013 the Company issued 4,377,104 new ordinary shares at a price of 6.75 pence per share for a cash consideration of £295,541.
On 9 April 2013 the Company issued 4,377,104 warrants over the share capital of the Company, exercisable at a price of 8.44 pence per share and valid for four years.
On 22 May 2013 the Company issued 4,377,104 new ordinary shares at a price of 6.15 pence per share for a cash consideration of £269,192.
On 22 May 2013 the Company issued 4,377,104 warrants over the share capital of the Company, exercisable at a price of 7.69 pence per share and valid for four years.
On 2 April 2013 the Group conditionally agreed to dispose of 100,000,000 shares it held in Bushveld Minerals Limited for a total cash consideration of £13,000,000. The conditions are obtaining exchange control clearance and approval from the funding partner. As at the date of this report a completion date had not been set and the conditions required for completion had yet to be satisfied.
On 28 May 2013 Paragon Diamonds Limited conditionally raised £1.55 million (before expenses) by way of issuing 31,000,000 ordinary shares of 1p at a price of 5p per share.
On 4 June 2013 Paragon Diamonds Limited issued 28,200,000 new ordinary shares of the total 31,000,000, with the remaining 2,800,000 due to be issued after shareholder approval is sought at the Paragon's upcoming AGM to be held in 2013.
On 4 June 2013 Paragon Diamonds Limited entered into an Equity Swap Agreement which allows Paragon to retain much of the economic interest in 25,000,000 of the newly issued shares. £1 million has been pledged as credit support for the equity swap agreement.
Paragon Diamonds Limited has agreed to pay a value payment of £200,000 in connection with the Equity Swap Agreement within 60 days of Admission of the Subscription Shares which Paragon may elect to settle by the issue of a further 2,500,000 new ordinary shares.
As part of the above placing agreed on 28 May 2013 Obtala Resources Limited agreed to subscribe for 2,000,000 shares in Paragon Diamonds Limited.
32. ULTIMATE PARENT COMPANY
At 31 December 2012 the Directors do not believe that there was an ultimate controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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