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Abridged Audited Consolidated Financial Statements for the Period Ended 29 February 2016 and Notice of AGM
MIDDLE EAST DIAMOND RESOURCES LIMITED
(formerly Sable Metals and Minerals Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2001/006539/06)
JSE share code: MED ISIN: ZAE000211876
(“ME DIAMOND” or “the company” or “the group”)
Abridged Audited Consolidated Financial Statements for the Period Ended 29 February 2016 and
Notice of Annual General Meeting
GROUP HIGHLIGHTS
- BLA subscribed for 200 000 000 ordinary shares in the company for 4 cents per share for an
aggregate amount of R8,000,000.
- Sable Metals and Minerals Limited changed its name to Middle East Diamond Resources Limited
following the subscription of shares.
- ME DIAMOND divested all of its liabilities in the Company and Sable Platinum Holdings
Proprietary Limited to Sable Platinum Mining Limited.
- The Group was successfully restructured including the buyback of the shares held in Sable
Platinum Mining Limited by Sable Platinum Holdings Proprietary Limited effectively divesting SPM
from the Group.
- ME Diamond is investigating the acquisition of various producing diamond assets.
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 29 February 2016
29 February 29 February 28 February
2016 2016 2015
Restated
Notes (Audited) (Reviewed) (Audited)
ASSETS
Non-current assets 403,295 1,603,295 2,126,026
Property, plant and equipment - - 238,993
Intangible Assets 1.1 - 1,200,000 1,200,000
Investment in subsidiaries - - -
Financial assets 403,295 403,295 687,033
Current assets 613,831 613,831 284,879
Trade and Other Receivables 212,915 212,915 251,681
Cash and cash equivalents 400,916 400,916 33,198
Total assets 1,017,126 2,217,126 2,410,905
EQUITY AND LIABILITIES
Equity (2,069,313) (869,312) (11,348,997)
Share Capital 99,468,435 99,468,434 87,889,857
Other Reserves - - 1,778,618
Accumulated loss (101,199,790) (100,311,789) (100,928,894)
Equity attributable to owners of the parent (1,731,355) (843,355) (11,260,419)
Non-controlling interest 1.2 (337,958) (25,957) (88,578)
Non-current liabilities - - 11,348,562
Financial Liabilities - - 7,643,618
Deferred Present Value Adjustment - - 3,704,944
Current liabilities 3,086,439 3,086,438 2,411,340
Financial Liabilities - - 967,089
Trade and other payables 3,086,439 3,086,438 1,444,251
Total equity and liabilities 1,017,126 2,217,126 2,410,905
Issued shares 435,126,517 435,126,517 227,911,808
Net asset value per share (cents) (0.40) (0.19) (4.94)
Tangible net asset value per share (cents) (0.40) (0.47) (5.47)
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ending 29 February 2016
29 February 29 February 28 February
2016 2016 2015
Restated
Notes (Audited) (Reviewed) (Audited)
Continuing operations
Other Income 7,523,397 7,523,397 2,092,182
Operating Expenses 1.2 (8,343,403) (7,143,403) (4,889,592)
Operating loss (820,007) 379,994 (2,797,410)
Finance income 1.3 1,381,080 - 402,750
Finance costs 1.3 (1,475,494) (94,414) (516,873)
Loss before taxation (914,421) 285,580 (2,911,533)
Taxation - - -
Loss from continuing operations (914,421) 285,580 (2,911,533)
Profit / (loss) from discontinuing operations 331,525 331,525 (12,425,744)
(Loss) / profit for the period (582,896) 617,105 (15,337,277)
(Loss) / profit for the year attributable to
Owners of the parent (270,896) 617,105 (15,336,554)
Non-controlling interest 1.2 (312,000) - (723)
(Loss) / profit for the period (582,896) 617,105 (15,337,277)
Weighted average number of shares 247,727,422 247,727,422 206,406,866
Fully diluted WA number of shares 247,727,422 247,727,422 206,406,866
(Loss) / earnings per share (cents) 1.4 (0.24) 0.25 (7.43)
Diluted (loss) / earnings per share (cents) 1.4 (0.24) 0.25 (7.43)
Headline loss per share 1.4 (5.14) (4.78) (7.43)
Diluted headline loss per share 1.4 (5.14) (4.78) (7.43)
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ending 29 February 2016
Total Attributable to Equity of the Parent
Share Based Non
Payment Controlling
Stated Capital Reserve Accumulated loss Total Interest Total Equity
Balance at 1 March 2014 85,747,232 - (85,592,340) 154,892 (87,855) 67,037
Comprehensive Loss for the year - - (15,336,554) (15,336,554) (723) (15,337,277)
Issue of Shares 12,142,625 - - 12,142,625 - 12,142,625
Share Incentive Scheme - 1,778,618 - 1,778,618 - 1,778,618
Balance at 1 March 2015 (Audited) 97,889,857 1,778,618 (100,928,894) (1,260,419) (88,578) (1,348,997)
La Familia Loan restatement (10,000,000) - - (10,000,000) - (10,000,000)
Balance at 1 March 2015 (Restated) 87,889,857 1,778,618 (100,928,894) (11,260,419) (88,578) (11,348,997)
Comprehensive income for the year - - 617,105 617,105 - 617,105
Issue of Shares 8,000,000 - - 8,000,000 - 8,000,000
Disposal of subsidiary - - - - 62,621 62,621
Subscription costs capitalised (245,218) - - (245,218) - (245,218)
IFRS 2 Share Incentive Scheme charge - 2,045,178 - 2,045,178 - 2,045,178
Transfer from Share Based Payment Reserve 3,823,796 (3,823,796) - - - -
Balance at 29 February 2016 (Reviewed) 99,468,435 - (100,311,789) (843,354) (25,957) (869,311)
Balance at 1 March 2015 (Audited) 97,889,857 1,778,618 (100,928,894) (1,260,419) (88,578) (1,348,997)
La Familia Loan restatement (10,000,000) - - (10,000,000) - (10,000,000)
Balance at 1 March 2015 (Restated) 87,889,857 1,778,618 (100,928,894) (11,260,419) (88,578) (11,348,997)
Comprehensive loss for the year - - (270,896) (270,896) (312,000) (582,896)
Issue of Shares 8,000,000 - - 8,000,000 - 8,000,000
Disposal of subsidiary - - - - 62,621 62,621
Subscription costs capitalised (245,218) - - (245,218) - (245,218)
IFRS 2 Share Incentive Scheme charge - 2,045,178 - 2,045,178 - 2,045,178
Transfer from Share Based Payment Reserve 3,823,796 (3,823,796) - - - -
Balance at 29 February 2016 (Audited) 99,468,435 - (101,199,790) (1,731,355) (337,957) (2,069,312)
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ending 29 February 2016
29 February 29 February 28 February
2016 2016 2015
Restated
(Audited) (Reviewed) (Audited)
Cash flows from operating activities
Cash used in operations (8,920,360) (8,920,359) (12,619,551)
Interest Income - - 402,750
Finance costs (94,414) (94,414) (516,873)
Tax refunded - - -
Net Cash from Operating Activities (9,014,774) (9,014,773) (12,733,674)
Cash flows from investing activities
Proceeds from sale of plant and equipment 68,082 68,082 149,122
Proceeds from sale of subsidiary net of cash disposed (687,781) (687,781) -
Proceeds from sale of disposed subsidiary loan account 100,000 100,000 -
Loan advanced from subsidiary - - -
Loan advanced to subsidiary - - -
Increase in financial assets - - (123,527)
Net Cash from Investing Activities (519,699) (519,699) 25,595
Cash flows from financing activities
Proceeds from shares issued 7,754,782 7,754,782 12,142,625
Payment for cession of liabilities (5,000,000) (5,000,000) -
Proceeds from Financial Liabilities 7,397,519 7,397,519 -
Loan advanced from related parties - - 695,000
Loan repaid to related parties (55,000) (55,000) -
Loan repaid to director (195,111) (195,111) (2,362)
Net Cash from Investing Activities 9,902,190 9,902,190 12,835,263
Total cash movement for the year 367,718 367,718 127,184
Cash at the beginning of the year 33,198 33,198 (93,986)
Total cash at the end of year 400,916 400,916 33,198
NOTES TO THE FINANCIAL INFORMATION
1. Restatement of reviewed results for the year ended 29 February 2016
The reviewed financial results for the year ended 29 February 2016 which was released on
SENS on 28 June 2016, have been restated due to:
- The impairment of the prospecting right recorded as part of intangible assets.
- Application of the alternative method in accounting where the fair value of the financial
asset or financial liability at initial recognition differs from the transaction price.
- Minor rounding of the figures.
The effect of the restatement only applies to the reviewed 29 February 2016 figures, and the
effect on the individual line items are contained in the notes below:
1.1 Intangible assets
29 February 2016 29 February 2016 Adjustment
(Audited) (Reviewed)
Intangible assets - 1,200,000 1,200,000
(prospecting right)
The prospecting right refers to the right issued on 14 November 2006 to prospect for platinum
group metals on portions 3,5,39,40,42 of the remaining extent of portion 4 and the remaining
farm Leeuwkopje 415 KQ as well as the remaining extent of portion 1, the remaining extent of
portion 3, the remaining extent of portion 5, portions 6,7,8,10 and 11 of the farm Kaalvlakte
416 KQ situated in the magisterial district of Thabazimbi.
This prospecting right expired on 13 March 2015. Fast Pace Trade and Invest 32 Proprietary
Limited, a 74% held subsidiary, applied for a retention permit before the right expired.
At the time of reporting the reviewed interim results for the period ending 29 February 2016,
management was of the opinion that either the retention permit or the new application will be
sufficient in retaining the prospecting right and that no impairment was required.
For sake of prudence and in the light of the current uncertainty around the awarding of the
retention permit and after consultation with the auditors, management has decided to impair
the prospecting right in full until such time that the retention permit is awarded.
1.2 Non-Controlling interest
29 February 2016 29 February 2016 Adjustment
(Audited) (Reviewed)
Non-controlling interest (337,958) (25 957) (312,001)
The effect on statement of comprehensive income as result of the impairment noted in 1.1 is
as follows:
29 February 2016 29 February 2016 Adjustment
(Audited) (Reviewed)
Operating expenses (8,343,403) (7,143,403) (1,200,00)
The group owns 74% of Fast Pace Trade and Invest 32 Proprietary Limited. The non-controlling
interest of 26% amounts to R312,001 of this impairment.
1.3 Deferred Value adjustment
When a financial asset or financial liability is recognised initially, an entity shall measure it at its
fair value plus, in the case of a financial asset or financial liability not at fair value through profit
or loss, transaction costs that are directly attributable to the acquisition or issue of the financial
asset or financial liability.
Where the fair value of the financial asset or financial liability at initial recognition differs from
the transaction price, a different treatment is followed.
The best evidence of the fair value of a financial instrument at initial recognition is normally the
transaction price (i.e. the fair value of the consideration given or received). If the group
determines that the fair value at initial recognition differs from the transaction price, the group
shall account for that instrument at that date as follows:
- defer the difference between the fair value at initial recognition and the transaction price.
After initial recognition, the entity shall recognise that deferred difference as a gain or loss
only to the extent that it arises from a change in a factor (including time) that market
participants would take into account when pricing the asset or liability.
Management has used the unwinding of the present value charge debited to profit and loss as
the method for measurement for how the deferred difference will amortise and be released to
profit and loss as the fair value of the liability would increase as it nears redemption date. The
unwinding charge calculates this differential.
Readers are referred to the restatement of the Familia Loan narrated in detail in note 28 of the
financial statements as published as part the Integrated Annual report.
The accounting treatment selected has had the following effect on the statement of
comprehensive income for the period 29 February 2016:
29 February 2016 29 February 2016 Adjustment
(Audited) (Reviewed)
Finance income 1,381,080 - 1,381,080
Finance costs (1,475,494) (94,414) (1,381,080)
The increase in finance income represents the recognition of the portion of the deferred
difference applicable to the financial tear to the extent that it arises from a change in time. The
finance cost portion incremental represents the reciprocal unwinding of the present value
Page 7 of 11
charge to profit and loss. The measurement is the same for both the charge and the release to
profit.
1.4 Headline earnings per share
29 February 2016 29 February 2016
(Audited) (Reviewed) Adjustment
(Loss) / profit attributable to
ordinary shareholders (582,896) 617,105 (1,200,001)
Basic earnings per share
(cents) (0.24) 0.25 (0.49)
Diluted basic earnings per
share (cents) (0.24) 0.25 (0.49)
Reconciliation of headline
earnings:
(Loss) / profit attributable to
ordinary shareholders (582,896) 617,105 (1,200,001)
Profit on disposal of assets
and liabilities (12,459,339) (12,459,339) -
Total tax effect of adjustments - - -
Non-controlling interest 312,000 - 312,000
Headline earnings
attributable to ordinary
shareholders (12,730,235) (11,842,234) (1,200,001)
Headline earnings per share
(cents) (5.14) (4.78) (0.36)
Diluted headline earnings per
share (cents) (5.14) (4.78) (0.36)
Weighted average number of
shares in issue 247,727,422 247,727,422 -
1.5 Cash flow statement
There were no changes to the statement of cash flows as the changes noted above are all of a
non cash flow nature.
STATEMENT OF COMPLIANCE, BASIS OF PREPARATION AND AUDIT REPORT
The summary consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for abridged reports, and the requirements of the Companies
Act applicable to summary financial statements. The Listings Requirements require abridged reports
to be prepared in accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standards Council and to also, as a minimum, contain the information required
by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of the
consolidated financial statements from which the summary consolidated financial statements were
derived are in terms of International Financial Reporting Standards and are consistent with those
accounting policies applied in the preparation of the previous consolidated annual financial
statements.
AUDITOR’S REPORT
This summarised report is extracted from audited information, but is not itself audited. The annual
financial statements were audited by PKF (VGA) Chartered Accountants, who disclaimed thereon.
We were unable to confirm or dispel whether it is appropriate to prepare the consolidated and
separate financial statements using the going concern basis of accounting.
The opinion changed from the reviewed results due to the prospecting rights not being renewed by
the Department of Minerals at date of the audit opinion where the likelihood of the renewal of the
right at the date of the review conclusion was greater. The inconsistent payment of the R450,000
payment agreed upon between the parties since the reviewed results also had the implication of
change in audit opinion.
The audited annual financial statements and the auditor’s report thereon are available for inspection
at the company’s registered office.
The directors take full responsibility for the preparation of the abridged report and that the financial
information has been correctly extracted from the underlying annual financial statements.
PREPARER
These results were prepared by Morne du Plessis under the supervision of the Chief Executive Officer, James Allan.
GOING CONCERN
The group has a cash burn of approximately R450,000 per month with no revenue being generated.
A letter of commitment was signed subsequent to year end whereby the majority shareholder
confirms to inject an amount of R450,000 per month to cover the general and administration costs,
however regular payments have not been made by the majority shareholder as agreed upon.
Middle East Diamond Resources Limited took the following steps to mitigate the going concern risk:
- Implementation of an approved Scheme of Arrangement to divest itself of all historical
liabilities;
- The specific issue of 200,000,000 shares for cash;
- Entered into an agreement with Blain Capital Solutions (Pty) Ltd to acquire the Kamfersdam
dumps and equipment in Kimberley.
The due diligence of Kamfersdam was not completed at year end and no supporting documentation
could be obtained to substantiate the projected sales forecast expected from mining the dumps.
The prospecting rights registered under Fast Pace Invest (Pty) Ltd expired during the year under
review. The group has two prospecting rights registered for various portions to farms in Gauteng. The
one prospecting rights expires on 03 December 2016 and the other right expires on 29 April 2017
thereafter the group has no registered mining or prospecting rights from which to generate revenue.
The group has applied for various prospecting rights (NW30/5/1/1/3/2/1/11227PR, LP
30/5/1/1/2/11000PR, LP 30/5/1/1/2/11032 PR, LP 30/5/1/1/2/11011PR, LP 30/5/1/1/2/10434PR, LP
30/5/1/1/2/603PR & NW 30/5/1/1/2/11270PR) as well as the renewal of prospecting right NW
30/5/1/1/2/1385PR.
The application process with the Department of Minerals is a lengthy process and uncertainty exists
whether the rights will be granted or renewed.
EVENTS SUBSEQUENT TO PERIOD END
The directors are not aware of any significant events, other than noted above, that have occurred
between the period ended 29 February 2016 and the date of this report that may materially affect the
results of the Group for the period or its financial position as at 29 February 2016.
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the company’s shareholders will be held at
the offices of the company, Kingsley Office Park, 85 Protea Road, Chistlehurston, Sandton on Friday,
11 November 2016 at 10h00 (“the annual general meeting” or “the AGM”), to deal with the business
as set out in the notice of annual general meeting in the annual report.
By order of the board
James Allan
Chief Executive Officer
4 October 2016
DIRECTORS
Executive directors
James Allan (Chief executive officer)
Afzal Jagot (Financial director)
Non-executive directors
Abdulla Khalfan Humaid Nasser (Non-executive chairman)
Richard Mhlontlo*
Said Tinawi*
Mohammed Bassam*
*Independent
COMPANY SECRETARY: JUBA Statutory Services Proprietary Limited
REGISTERED OFFICE: Kingsley Office Park, 85 Protea Road, Chistlehurston, Sandton, 2196
TRANSFER SECRETARIES: Computershare Investor Services Proprietary Limited
SPONSOR: Exchange Sponsors 2008 (Pty) Ltd
Date: 04/10/2016 03:54:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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