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Interim results for period ended 31 December 2012
Ferrum Crescent Limited
(Previously Washington Resources Limited)
(Incorporated and registered in Australia and registered as an external company in the Republic of
South Africa)
(Registration number A.C.N. 097 532 137)
(External company registration number 2011/116305/10)
Share code on the ASX: FCR
Share code on AIM: FCR
Share code on the JSE: FCR ISIN: AU000000FCR2
(“Ferrum Crescent” or “the company” or “the group”)
INTERIM RESULTS FOR SIX MONTH PERIOD ENDED 31 DECEMBER 2012
FERRUM CRESCENT LIMITED TODAY ANNOUNCES ITS RESULTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2012.
HIGHLIGHTS
Moonlight Iron Ore Project
- JORC compliant resource of 307.8 Mt at 26.9% Fe consisting of 172.1 Mt at 25,3% Fe in the
Inferred Resource category, 83 Mt at 27.4% Fe in the Indicated Resource category and 52.6 Mt at
31.3% Fe in the Measured Resource category delineated
- New Order Mining Right located within the farms Moonlight, Julietta and Gouda Fontein farms
granted, effective for a term of thirty years
- Aeromagnetic survey over Moonlight, Julietta and Gouda Fontein farms consisting of 2,827 line
kilometres on 50m line spacing over an area of 129 km2 completed
- Positive discussions at high level relating to rail, power, ports and water between the Company,
Transnet and other South African infrastructure suppliers
- Net loss after tax of AUD1,109,961
Corporate
- Settlement of tranche 1 of the BEE “flip” transaction resulting in Ferrum holding 97% of the
Moonlight Iron Ore Project
- 4,078,060 shares issued to Company officers under salary sacrifice plan
Subsequent to reporting period
- BFS component agreement signed with Danieli at C. Officine Meccaniche S.p.A. for the supply of
engineering and technical services relating to plant design and beneficiation testwork
Commenting on the half yearly results, Chairman Ed Nealon said:
"During the half year the company continued to progress its Moonlight Iron Ore Project in Limpopo
Province, South Africa. The discussions in relation to infrastructure were very encouraging and the
high resolution aeromagnetic survey gave the Company even more confidence in the geological model and
the upside potential of the project. Following the securing of Danieli to assist with plant design
and final stage beneficiation testwork we look forward to progressing our bankable feasibility study
towards completion. Our intention is also to announce the results of our final infrastructure study
consultation imminently which will include a decision on location for the proposed DR pellet plant.”
Below is a summary of the Half-Yearly Financial Report, to obtain the full copy please visit the
company’s website www.ferrumcrescent.com
Review and results of operations
Operating Results
During the half-year 1 July 2012 to 31 December 2012, the Group recorded a net loss after tax of AUD
1,109,961 (1 July 2011 to 31 December 2011: net profit of AUD 5,160,255). As at 30 June 2011, a
financial liability was created in the accounting for the BEE share subscription agreement.
Australian Accounting Standards require this liability, which will be satisfied by the issue of the
shares, to be re-measured each reporting period to its fair value. The assessment of fair value is
significantly impacted by the market value of the shares to be issued in comparison with the
subscription price denominated in RAND. As at 31 December 2012, this liability had decreased as a
result of a movement in the underlying Company share price and the AUD/RAND exchange rates and the
settlement of the first tranche of the BEE share subscription which happened on 28 November 2012. The
second tranche was due to be finalised within 120 days from 28 November 2012 as per the terms of the
BEE share subscription agreement, however, this has been extended by 3 months to 28 June 2013.
Principal Activities during the half-year
Moonlight Iron Ore Project
Work during the past six months has focused on confirmation of availability of infrastructure
requirements for the various aspects of the project including the pipeline route, plant location and
pipeline access at Lephalale and beneficiation processes. The Company has also identified pipeline
engineering and mining contractors and received expressions of interest from suppliers of processing
plant equipment. The major infrastructure requirements of rail, power, water and port terminals are
to be supplied by State owned entities (Transnet, Eskom, Trans Caledon Water Authority and Transnet
Port Terminals) and various engagements with these entities have been progressed to co-ordinate the
needs of the project with the planned upgrades in progress to service the Waterberg coalfield
developments.
Mining Right
During the half-year, the Company announced the grant of its New Order mining right in respect of the
Moonlight Iron Ore Project for the iron ore deposit located within the farms Moonlight, Julietta and
Gouda Fontein.
The Company received written confirmation from the South African Department of Mineral Resources of
the grant of the new order mining right in terms of the Minerals and Petroleum Resources Development
Act 28 of 2002, effective for a term of thirty years.
The Moonlight Mining Right (which was granted in May 2012) was executed under applicable South
African law and registered.
Updated Resource
The Mineral Corporation Consultancy (Pty) Ltd (“The Mineral Corporation”) was commissioned to carry
out an updated JORC compliant Mineral Resource estimate taking into account the results of the phase
3 drilling and assays on the Moonlight deposit (“the Report”). Phase 3 consisted of 11 holes
totalling 990m of diamond core drilling and 13 holes totalling 1,600m of reverse circulation (“RC”)
drilling. The Mineral Corporation has conducted a thorough re-interpretation of the geological
structure of Moonlight, based on historical South African Iron and Steel Industrial Corporation
(“Iscor”) data collated and validated by Ferrum and recent Ferrum exploration results. Within the
constraints of having a cut-off grade of 16% iron, geological losses of 5% and a depth constraint of
between 100m and 250m, depending upon dip and the number of mineralised zones present, the JORC
compliant Mineral Resources at Moonlight are now estimated to be as follows:
Category Gross Net (attributable to Ferrum Crescent at 97%)
Tonne Fe (%) SiO2 (%) Al2O3 Contai Tonne Fe (%) SiO2 (%) Al2O3 Contained
(Mt) (%) ned Fe (Mt) (%) Fe (Mt)
(Mt)
Inferred 172.1 25.3 51.2 4.8 43.5 166.9 25.3 51.2 4.8 42.3
Indicated 83.0 27.4 50.1 4.0 22.7 80.5 27.4 50.1 4.0 22.1
Measured 52.6 31.3 47.3 2.5 16.5 51.0 31.3 47.3 2.5 16.0
Total 307.7 26.9 50.3 4.2 82.8 298.5 26.9 50.3 4.2 80.3
Tonne are rounded
Note: Ferrum is the operator and owns 97% of the Moonlight Project
Based on these results, your directors believe that whilst the total average Fe grade has decreased
slightly (previously estimated to be a JORC compliant Mineral Resource of 74Mt at 33% Fe in the
Indicated Resource category and 225Mt at 29% Fe in the Inferred Resource category), the tonnage has
increased proportionately along with a substantial increase in the confidence and classification of
the Mineral Resource. Furthermore, your directors are of the opinion that the depth constraint of
250m (maximum) is conservative, particularly as the previous estimation was not constrained in this
way.
Drilling Technique
Drilling data from Iscor and three phases of Ferrum Crescent exploration inform the estimates.
The drilling comprised open hole, RC and diamond core drilling and was all vertical. A total of
122 RC holes and 89 diamond core holes were accepted for the estimates.
Sampling Technique
Limited information on the sampling techniques for the Iscor data is known. For the Ferrum
Crescent exploration, industry standard sampling techniques were adopted. RC samples (1m-2m) were
riffle split on site and diamond core samples were halved with a diamond saw. Primary samples and
quality control samples were submitted for analysis to Genalysis Laboratory Services
(Johannesburg) for analysis by Intertek Utama Services (Jakarta).
Drill Sample Recovery
Limited information on the sample recovery for the Iscor data is known. With the exception of
surficial rubble, the sample recovery through the mineralised zones for the Ferrum Crescent
exploration was acceptable.
Geological Logging
The Iscor data included electronic codes for the main lithological unit, certain sub-units, and
the core bedding angles. All geological information during Ferrum Crescent exploration was logged
in acceptable detail, and stored in an MS Access database. This included lithological, structural
and geotechnical information.
Quality of Assay Data / QAQC
No information on the quality of assay data for the Iscor data was obtained. The Ferrum Crescent
samples were analysed at an accredited laboratory (Genalysis / Intertek), and appropriate
standards, blanks and duplicates inserted in the sample stream. The Mineral Corporation has
reviewed the results from these control samples and considers the accuracy and reliability of the
analyses to be acceptable.
Verification of sampling and assaying
The Iscor data was verified by means of the identification and re-surveying of borehole collars
in the field, and by means of twin-drilling. On the basis of the twinning, the open-hole data
from Iscor (142 holes) was considered unacceptable for Mineral Resource estimation. The remaining
RC and diamond core drilling showed reasonably good correlation of mineralisation depth and
abundance, and was considered acceptable.
Surveying
All Ferrum Crescent boreholes were surveyed by a registered surveyor. Of the Iscor holes, 127
collars were re-surveyed by a registered surveyor, and good correlation between the historical
and Ferrum Crescent survey locations were found.
Auditing
No audits of the Iscor exploration results, with the exception of the verification described
above have been undertaken. The Mineral Corporation reviewed the results of the first two phases
of Ferrum Crescent’s drilling prior to carrying out the estimates. Phase 3 of Ferrum Crescent’s
exploration was carried out by The Mineral Corporation.
Database Integrity
The compiled database for the estimates was housed in an MS Access database. In addition to the
verification and QA/QC already described, validation of the sampling data for over-lapping
sampling intervals, duplicate samples and spurious data was carried out.
Geological Interpretation
A thorough re-interpretation of the geological structure and correlation between mineralised
zones was carried out. Magnetite is interpreted to be hosted in four zones (Zone A to D), which
have been subjected to folding, parallel to the regional (Limpopo Mobile Belt) orientation.
Younger faulting, oriented parallel to and orthogonal to this trend, is interpreted. The
geological interpretation is considered appropriate for the level of estimates, and the Mineral
Resource classification takes the confidence in the interpretation into account.
Dimensions
D Zone is approximately 200m x 400m x 30m
C Zone (West) is approximately 1400m x 250m x 35m
C Zone (East) is approximately 1100m x 700m x 30m
B Zone is approximately 1500m x 800m x 25m
A Zone is approximately 1600m x 1200m x 17m
Geological Modelling
Wireframes representing the geological interpretation were generated to constrain the block model.
Drillhole Compositing Procedures
5m vertical borehole composites were utilised, informed by an assumed minimum mining height.
These composites were not at right angles to the mineralised zones, but as the dips are shallow
(7° to 30° and typically less than 20°) and a 3-dimensional block model was used, the use of
vertical composites is unlikely to introduce any bias.
Variography
Variograms parallel to the dip of the mineralised zones were calculated and modelled. Vertical
grade distribution utilised downhole variograms. Variograms of between 150m and 250m were
obtained in the plane of the mineralised zone and between 7m and 30m downhole.
Drillhole spacing
The combination of Ferrum Crescent’s exploration and the KIOL data has provided an acceptable
drillhole spacing which ranges from 100m x 100m to 200m x 300m.
Block Model
Horizontal block dimensions were 50m x 50m and 5m in the vertical, informed by borehole spacing
and a conceptual minimum mining unit. The block model was rotated to the average dip (12°).
Grade Estimation Methodology
Ordinary Kriging was employed for grade estimates. A three stage search strategy was employed. A
minimum of 5 and a maximum of 20 samples was used within the range of the variogram for the first
search. The second search was twice the volume of the first, and the third extended to the limits
of the mineralised zones. The search and variogram ellipse were oriented to local dip and strike
variations using “Dynamic Anisotropy” in Datamine Studio v3.
Accuracy and confidence
Plan and section plots were analysed to evaluate the adherence of the estimation methodology to
the geological model. The methodology was found to honour the grade continuity trends, which are
assumed to be parallel to the dip of the mineralised zones.
Moisture
Tonnage was calculated on a dry basis.
Bulk Density
The Iscor data included density measurements for all diamond core holes. No information was
provided on the methodology used to obtain these density data. The diamond core data from Ferrum
Crescent exploration included density measurements obtained by the ‘water immersion’ method. A
strong correlation between density and Fe was observed, and used to estimate block density after
grade estimation.
Mining Factors
A minimum mining unit of 50m x 50m x 5m aided in the selection of block size. Approximate
stripping ratios were calculated to inform the maximum depth constraint for the Mineral Resources.
Metallurgical Considerations
On the basis of preliminary test work, The Mineral Corporation has assumed that the Fe can be
extracted by means of comminution and magnetic separation to form a magnetite concentrate.
Cut-off Parameters
A cut-off of 16% Fe and a maximum depth of between 250m and 100m depending upon dip and the
number of mineralised zones was applied.
Resource classification
The borehole spacing, surface mapping, structural interpretation, variography and kriging error
estimates inform Mineral Resources which are classified as Inferred, Indicated and Measured. In
areas of well-defined geological structure and modest grade variability, the 100m x 100m grid is
sufficient for Measured Mineral Resources.
Resource Reporting
The Mineral Resource estimates have been compiled in accordance with the guidelines defined in
the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
(The JORC Code, 2004 Edition).
The Company announced the completion of an aeromagnetic survey over the Moonlight, Julietta and Gouda
Fontein farms of its Moonlight Iron Ore Project. The survey consisted of 2,827 line kilometres on 50m
line spacing over an area of 129 km2. The Company, having had a close involvement in the coordination
of the survey, is confident that the results of this survey will greatly assist in the planning of
future exploration on the area covered by the Mining Right and in future mining operations.
The Mineral Corporation and its associates quality controlled the raw geophysical data, extracted and
processed geophysical results from the data, provided a geological interpretation of the results,
integrated these with the existing geological modelling and analysed the implication of these results
for future exploration targets.
The magnetite-bearing quartzite, which comprises the Moonlight Deposit, provides high intensity
magnetic anomalies that have permitted a detailed interpretation.
With regard to the current Mineral Resource area on Moonlight Farm, The Mineral Corporation is of the
view that the geophysical results do not identify any significant inconsistencies in the existing
structural interpretation, which informs the current Mineral Resource estimate. The geophysical
results and interpretation support the existing structural interpretation with respect to the major
interpreted fault orientations and with respect to Zone A, Zone B and Zone C West. The geophysical
results suggest that the interpreted western extent of Zone C East and the sparsely drilled Zone D
warrant review and further exploration to test the potential for additional mineralised zones.
The Mineral Corporation concludes that these results have identified targets on Moonlight Farm which
could represent potential upside for the current Mineral Resources at a modest exploration cost. The
geophysical data interpretation on the adjacent Julietta Farm and Gouda Fontein Farm confirms and
significantly enhances the reconnaissance ground magnetic surveys that were carried out by Ferrum on
these farms, and an important anomaly close to, but outside, the previously planned exploration
drilling area has been identified. The improved understanding of the geology on Julietta and Gouda
Fontein should enable the proposed exploration drilling plans on these farms to be substantially
optimised.
The Company had announced previously that it advanced plans to implement a drilling programme on the
farms Julietta and Gouda Fontein (which are covered by the granted Mining Right, along with the farm
Moonlight) to increase the total resource estimate on the Moonlight Iron Ore Project. Your directors
have now determined, given that it has sufficient resources on the Moonlight Farm to support mining
for in excess of 20 years (for which the Group has an existing Mining Right and associated mining
environmental approvals), that management attention is best focused at this time on obtaining
definitive answers to logistical and related infrastructure questions including rail, power, water
and port services to achieve the optimal infrastructure mix for the definitive feasibility study.
Infrastructure
Positive discussions at a high level relating to rail, power, ports and water between the Company,
Transnet and other South African infrastructure suppliers were held during the half year. In
addition, Ferrum has been and continues discussing such infrastructure needs with other resources
companies within the Waterberg region (where the anticipated Moonlight Iron Ore Project is located).
These companies, particularly those within the coal mining sector, have similar infrastructure
requirements to Ferrum, and initial discussions have led to a potentially more optimal outcome than
being contemplated in the ongoing Definitive Feasibility Study (“DFS”).
Corporate
Shareholder approvals were obtained during the half-year for the BEE “flip” (effectively the swap of
Black Economic Empowerment interest in the Moonlight Iron Ore Project from the Turquoise Moon or
project level for shares in Ferrum) and for the implementation of a salary sacrifice plan under which
directors and executives may forego fees and salary and subscribe for shares in the Company.
During the half-year, tranche 1 of the BEE “flip” settled, resulting in the issue to the Company’s
BEE partner, Mkhombi AmaMato (Pty) Ltd of 25,281,620 fully paid ordinary shares in the Company and
the transfer to the Group of Mkhombi AmaMato’s shares in Mkhombi Investments (Pty) Ltd (“Mkhombi”),
with the effect that the Group now legally holds 97% of the Moonlight Iron Ore Project. For
accounting purposes Ferrum was considered to have acquired this ownership interest in Mkhombi in
prior periods and accordingly already accounted for its effective interest of 97%.
Three officers elected to participate in the Ferrum salary sacrifice plan, with the result that
4,078,060 shares were issued to those officers during the half-year. In addition, 400,000 options
with an exercise price of AUD 0.10 per option, were granted to a member of management.
600,000 options were also cancelled during July 2012.
Going Concern
The Group has current assets of AUD 2,667,817 as at 31 December 2012 (June 2012: AUD 3,666,576),
incurred a net decrease in cash and cash equivalents for the six month period ended 31 December 2012
of AUD 1,505,865 (six months ended December 2011, a net decrease of AUD 3,035,666).Further, the Group
will require additional funds to meet its forecasted expenditure for a period of not less than 12
months from the date of this report.
The Group’s ability to continue as a going concern and meet its debts and future commitments as and
when they fall due is therefore dependent upon a number of factors, including obtaining additional
funding as and when required.
This financial report has been compiled on a going concern basis. In arriving at this position the
directors are satisfied that the Group will have access to sufficient cash as and when required to
enable it to fund administrative and other committed expenditure for a period of not less than 12
months from the date of this report.
In forming this view the directors have taken into consideration the fact that the Group continues to
work on its Bankable Feasibility Study for the Moonlight Project and will source funding for that
study from the market or from third party investment in the Moonlight Project.
The financial statements do not include any adjustments relating to the recoverability or
classification of recorded asset amounts, or to the amounts or classification of liabilities that
might be necessary should the Group not be able to continue as a going concern.
Events subsequent to reporting date
On 22 February 2013 the Company signed a contract with Danieli & C. Officine Meccaniche S.p.A for the
supply of engineering and technical services for the Moonlight Iron Ore Project. This contract forms
part of the Bankable Feasibility Study that the Company is proceeding with and is expected to be
carried out in approximately 15 months.
Competent Person’s Statement:
The information that relates to Exploration Results and Mineral Resources in the report of which this
statement is a summary, is based on information compiled by Stewart Nupen, who is registered with the
South African Council for Natural Scientific Professionals (Reg. No. 400174/07) and is a member of
the Geological Society of South Africa. Mr. Nupen is employed by The Mineral Corporation, which
provides technical advisory services to the mining and minerals industry. Mr. Nupen has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration
and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004
Edition of the ‘Australasian Code for Reporting Exploration Results, Mineral Resources and Ore
Reserves’ and as defined in the June 2009 Edition of the AIM Note for Mining and Oil and Gas
Companies. Mr. Nupen consents to the inclusion in this statement of the matters based on his
information in the form and context in which it appears.
Consolidated Statement of Comprehensive Income
For the half-year from 1 July 2012 to 31 December 2012
6 months to 6 months to
31 December 31 December
2012 2011
Note AUD AUD
Revenue from continuing operations
Revenue 3(a) 73 354 128,032
73 354 128,032
Other income / (loss) 3(b) 27,734 7,458,910
Exploration expenditure (398,156) (964,515)
Foreign exchange gain/(loss) 41,593 (16,654)
Share based payments (4,665) -
Other expenses 3(c) (953,403) (1,445,518)
Profit / (Loss) before income tax (1,213,543) 5,160,255
Income tax benefit / (expense) 201,643 -
Net Profit / (Loss) for the period (1,011,900) 5,160,255
Other comprehensive income
Other comprehensive income which
will recycle to profit and loss
Net exchange gain / (loss) on
translation of foreign operation (98,061) 23,561
Other comprehensive (loss)/income
for the period, net of tax (98,061) 23,561
Total comprehensive profit / (loss)
for the period (1,109,961) 5,183,816
Net profit/ (loss) for the period
is attributable to:
Non-controlling interest - -
Owners of the parent (1,011,900) 5,160,255
(1,011,900) 5,160,255
Total comprehensive profit / (loss)
for the period attributable to:
Non-controlling interest - -
Owners of the parent (1,109,961) 5,183,816
(1,109,961) 5,183,816
Profit / (Loss) per share attributable to the ordinary
equity holders of the Company
Cents per Cents per
Earnings per share share share
basic profit / (loss) per share (0.34) 1.77
diluted profit / (loss) per share (0.35) (0.74)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes
As at 31 December 2012
31 December 30 June
2012 2012
Note AUD AUD
Current Assets
Cash and cash equivalents 1,795,784 3,340,076
Trade and other receivables 399,899 128,447
Other financial assets 423,395 39,469
Prepayments 48,739 158,584
Total Current Assets 2,667,817 3,666,576
Non-current Assets
Plant and equipment 90,613 110,325
Other financial assets - 144,297
Total Non-current Assets 90,613 254,622
Total Assets 2,758,430 3,921,198
Current Liabilities
Trade and other payables 4 213,973 1,212,832
Provisions 12,363 20,320
Financial liabilities 5 17,586 95,379
Total Current Liabilities 243,922 1,328,531
Total Liabilities 243,922 1,328,531
NET ASSETS 2,514,508 2,592,667
Equity
Contributed equity 6 28,419,886 27,392,728
Reserves 8 (8,855,460) (8,762,043)
Accumulated losses (17,049,918) (16,038,018)
PARENT INTEREST 2,514,508 2,592,667
NON-CONTROLLING INTEREST - -
TOTAL EQUITY 2,514,508 2,592,667
The above consolidated statement of financial position should be read in conjunction with the
accompanying note.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the half-year from 1 July 2012 to 31 December 2012
Foreig
Employee
n
Share Exchan Tot
Issued Accumulated Option
Incentive ge Equity al
Reserv Reserv
Capital Reserve Losses e e Reserve Equity
AUD AUD AUD AUD AUD AUD AUD
At 1 July 2011 27,392,728 (169,303) (20,517,73 1,404, 113,85 (10,126,072) (1,902,104)
4) 425 2
Profit for the - - 5,160,255 - - - 5,160,255
period
Other
comprehensive
income (net of
tax) - - - - 23,561 - 23,561
Total
comprehensive loss
(net of tax) - - 5,160,255 - 23,561 - 5,183,816
At 31 December (15,357,47 1,404, 137,41
2011 27,392,728 (169,303) 9) 425 3 (10,126,072) 3,281,712
(16,038,01 1,404, 125,72
At 1 July 2012 27,392,728 (166,120) 8) 425 4 (10,126,072) 2,592,667
Profit for the (1,011,900
period - - ) - - - (1,011,900)
Other
comprehensive (98,06
income - - - - 1) - (98,061)
Total
comprehensive loss (1,011,900 (98,06
(net of tax) - - ) - 1) - (1,109,961)
Transactions with - - - - - - -
owners in their
capacity as owners
Shares issued
during the period
net of transaction
costs 1,027,158 - - - - - 1,027,158
Options issued - 4,644 - - - - 4,644
At 31 December (17,049,91 1,404,
2012 28,419,886 (161,476) 8) 425 27,663 (10,126,072) 2,514,508
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period 1 July 2012 to 31 December 2012
6 months to 31 6 months to 31
December 2012 December 2011
Note AUD AUD
Cash flows from operating
activities
Interest received 51,260 128,032
Investment income received 22,094 -
Payments to suppliers and employees (1,675,808) (2,193,931)
Exploration and evaluation costs (675,253) (965,199)
Net cash flows used in operating
activities (2,277,707) (3,031,098)
Cash flows from investing
activities
Payments for plant and equipment (917) (4,568)
Net cash flows (used in) / from
investing activities (917) (4,568)
Cash flows from financing
activities
Proceeds from issue of shares 780,000 -
Costs of capital raising (7,241) -
Net cash flows from financing
activities 772,759 -
Net increase in cash and cash
equivalents (1,505,865) (3,035,666)
Cash and cash equivalents at
beginning of period 3,340,076 8,116,009
Effect of foreign exchange on cash (38,427) (408,705)
Cash and cash equivalents at end of
period 1,795,784 4,671,638
The above consolidated statement of cash flows should be read in conjunction with the accompanying
notes
NOTE 1: GENERAL INFORMATION AND BASIS OF PREPARATION AND ACCOUNTING POLICIES
Corporate infomation
The financial report of Ferrum Crescent Limited for the half-year ended 31 December 2012 was
authorised for issue in accordance with a resolution of the directors on 12 March 2013. Ferrum
Crescent Limited is a company incorporated in Australia and limited by shares, which are publicly
traded on the Australian Stock Exchange (ASX), Johannesburg Stock Exchange Limited (JSE) and London
Stock Exchange (AIM).
The nature of operations and principle activities of the Group are described in the Director’s
Report.
Basis of preparation
The half-year financial report is a general purpose financial report prepared in accordance with the
requirements of the Corporations Act 2001 and AASB 134: Interim Financial Reporting. Compliance with
AASB 134 ensures compliance with IAS 34 ‘Interim Financial Reporting’.
This half-year financial report does not include full disclosures of the type normally included in an
annual financial report. Therefore, it cannot be expected to provide as full an understanding of the
financial performance, financial position and cash flows of the Company as in the full financial
report.
It is recommended that this half-year financial report be read in conjunction with the annual
financial report for the year ended 30 June 2012 and any public announcements made by Ferrum Crescent
Limited during the half-year in accordance with continuous disclosure requirements arising under the
Corporations Act 2001 and the ASX Listing Rules.
The accounting policies adopted are consistent with those of the previous financial year and
corresponding interim report period.
Since 1 July 2012 the Group has adopted all the Standards and Interpretations mandatory for annual
reporting periods beginning on or after 1 July 2012. Adoption of these Standards and Interpretations
did not have any effect on the financial position or performance of the Group. The Group has not
elected to early adopt any new standards or interpretations that are not mandatorily effective.
The interim report has been prepared on a historical cost basis except for the forward subscription
agreement which is measured at fair value. The Company is domiciled in Australia and all amounts are
presented in Australian dollars, unless otherwise noted.
For the purpose of preparing the half-year financial report, the half-year has been treated as a
discrete reporting period.
The preparation of the half-year financial reports requires management to make judgements, estimates
and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expense. Actual results may differ from these estimates.
In preparing this half-year financial report, the significant judgements made by management in
applying the Company’s accounting policies and the key sources of estimation uncertainty were the
same as those applied to the financial report for the year ended 30 June 2012.
Going Concern
The Group has current assets of AUD 2,667,817 as at 31 December 2012 (June 2012: AUD 3,666,576),
incurred a net decrease in cash and cash equivalents for the six month period ended 31 December 2012
of AUD 1,505,865 (six months ended December 2011, a net decrease of AUD 3,035,666).The Group will
require additional funds to meet its forecasted expenditure for a period of not less than 12 months
from the date of this report.
The Group’s ability to continue as a going concern and meet its debts and future commitments as and
when they fall due is therefore dependent upon a number of factors, including obtaining additional
funding as and when required.
This half-year financial report has been compiled on a going concern basis. In arriving at this
position the directors are satisfied that the Group will have access to sufficient cash as and when
required to enable it to fund administrative and other committed expenditure for a period of not less
than 12 months from the date of this report.
In forming this view the directors have taken into consideration the uncertainty of the fact that the
Group will continues to work on its Bankable Feasibility Study for the Moonlight Project and will
source funding for that study from the market or from third party investment in the Moonlight Project.
The half-year financial report does not include any adjustments relating to the recoverability or
classification of recorded asset amounts, or to the amounts or classification of liabilities that
might be necessary should the Group not be able to continue as a going concern.
NOTE 2: SEGMENT INFORMATION
For management purposes, the Group is organised into one main operating segment, which involves
mining exploration for iron ore in South Africa. All of the Group’s activities are interrelated, and
discrete financial information is reported to the Board (Chief Operating Decision Makers) as a single
segment. Accordingly, all significant operating decisions are based upon analysis of the Group as one
segment. The financial results from this segment are equivalent to the financial statements of the
Group as a whole.
NOTE 3: REVENUE AND EXPENSES
The profit for the half-year includes the following items:
Dec 2012 Dec 2011
AUD AUD
(a) Revenue
Interest received 51,260 128,032
Investment income 22,094 -
Total Revenue 73,354 128,032
(b) Other Income
Fair value gain on financial
liability (note 5) 27,734 7,458,910
27,734 7,458,910
(c) Other expenses
Other expenses include the
following:
- Depreciation 15,286 15,548
- Disposal of plant and
equipment - 435
- Consulting services 156,987 236,625
- Employment related
services 101,695 118,182
- Other 679,435 1,074,728
953,403 1,445,518
NOTE 4: TRADE AND OTHER PAYABLES
Dec 2012 Jun 2012
AUD AUD
Current
Trade and other payables 213,973 349,582
Minority purchase obligation (i) - 863,250
213,973 1,212,832
(i) In 2010, various agreements were entered into in respect of the minority interest in the Moonlight
Iron Project.
A company, Mkhombi Investments (Pty) Ltd (“MI”), which meets the requirements of applicable South
African legislation in respect of historically disadvantaged persons (referred to in South Africa as
being “BEE controlled”), entered into an agreement on 26 October 2010 with the then current holder of
26% of Turquoise Moon Trading 157 (Pty) Ltd (“TMT”) to purchase that holder’s right, title and
interest in TMT for ZAR30 million (approximately AUD4.4 million) (“TMT Sale Agreement”). The South
African Department of Mineral Resources expressed its support of the transaction.
Nelesco 684 (Pty) Ltd (“Nelesco”), a wholly owned subsidiary of the Company, entered into agreements
with MI and its holding company, Mkhombi AmaMato (Pty) Ltd (“MA”), the terms of which provide for the
following to take place:
a) Nelesco was issued shares in MI such that it holds an initial 32.17% interest in MI, with the
remaining 67.83% held by MA;
b) MA lent the sum of ZAR7.5 million to MI, to be applied as part of the purchase price under the
TMT Sale Agreement. The advance, which was made as at 31 December 2010, does not attract
interest and is only repayable in certain circumstances (namely, the failure of the conditions
precedent set out in the Subscription Agreement, as defined below);
c) Nelesco lent the sum of ZAR22.5 million to MI, to be applied as paying the balance of the
purchase price under the TMT Sale Agreement. The advance, which was made as at 31 December
2010, does not attract interest and is repayable in certain circumstances (namely, the failure
of the conditions precedent set out in the Subscription Agreement, as defined below);
d) MI would issue shares and / or Nelesco will transfer some of its shares in MI so that 11.54% of
MI’s shares on issue are held by a trust representing the locally impacted community, with the
resulting shareholdings being MA 60%, Nelesco 28.46%, and the locally impacted community
11.54%; and
e) MA would, subject to the conditions precedent to the Subscription Agreement, as defined below,
sell its entire right, title and interest in, and all of its claims against, MI to Nelesco for
ZAR7.5 million (AUD 780,000).
A subscription agreement was entered into between the Company and MA on 4 November 2010 (the
“Subscription Agreement”). On completion of the Subscription Agreement (subject to the fulfilment of
the conditions precedent to that agreement), MA would subscribe for such number of shares in the
Company as is equal to 7.8% of the issued shares at that time (the “First Subscription”). The price
payable for the subscription for the Shares under the First Subscription was set at ZAR7.5 million.
Under the Subscription Agreement, MA would also, on or before the later of (i) the date falling 10
business days after the Closing Date (as defined in the Subscription Agreement) and (ii) 30 November
2011 (the “Subscription Period”), which period was extended by the Company for a period of 1 year,
subscribe for a further 7.8% of the issued shares of the Company (calculated by reference to the
issued share capital of the Company at the time of the First Subscription adjusted for any subsequent
share splits, consolidations or bonus capitalisations) for a further ZAR7.5 million(“ second
subscription”). The date by which the conditions precedent to the completion of the Subscription
Agreement had to be met was specified as 21 December 2011. During the half-year, an addendum to the
Subscription Agreement was entered into whereby this date was amended to 1 November 2012. Further
addendums were entered into extending the date to 20 November 2012.
The second tranche of the Subscription Agreement, where MA would subscribe for a further 7.8% of the
issued shares of the Company for a further ZAR7.5 million, which was due to be concluded on 28th March
2013 has been extended by 3 months to 28 June 2013.
The conditions precedent to the Subscription Agreement included no insolvency event occurring, the
granting of a mining right in respect of the Project, necessary South African Reserve Bank approvals
and shareholder and other approvals required under the Corporations Act and the AIM / ASX / JSE
listing rules, including shareholder approval. The shareholder approval was obtained on 8 August
2012
Kofi Morna, a Director of the Company, is also a director of MA and of MI. He became a Director of
the Company on 15 October 2010 for the purposes of the above transaction. He holds an (AUD1.45m)
indirect non-controlling interest in MA.
Upon completion of the first tranche of the Subscription Agreement which occurred during the half
year, the Company legally owns directly and indirectly through its wholly owned subsidiary, MI, 97%
of TMT, with the remaining 3% held by the GaSeleka Community.
NOTE 5: FINANCIAL LIABILITIES
Dec 2012 Jun 2012
AUD AUD
Current
Financial liability at fair
value through profit and loss –
forward subscription agreement 17,586 95,379
17,586 95,379
The above liability will be settled in the Company’s shares and not in cash. Under the subscription
agreement, the Company will issue shares to MA equal to 7.8% of the issued share capital of the
Company for ZAR7,5 million which is the “second subscription”. The above financial liability,
measured at fair value through profit and loss, represents the Company’s best estimate of the fair
value of this contractual arrangement.
The forward subscription agreement valuation is very sensitive to the movement in the Group’s share
price (31 December 2012: AUD0.030; 30 June 2012: AUD0.033) and the RAND / AUD exchange rate (31
December 2012: AUD0.1094; 30 June 2012: AUD0.1151), accordingly the large changes in these market
rates has seen a corresponding impact on the fair value movement at 31 December 2012.
Dec 2012 June 2012 Dec 2012 June 2012
NOTE 6: ISSUED CAPITAL No. of Shares No. of AUD AUD
Shares
(a) Share Capital
Ordinary Shares
Ordinary Shares 328,201,385 298,841,705 28,419,886 27,392,728
fully paid
Employee share plan (6,595,000) (6,595,000) (509,905) (509,905)
shares
321,606,385 292,246,705 27,909,981 26,882,823
(b) Movements in ordinary share capital
Half-Year
31 December 2012
Number AUD
At beginning of reporting 298,841, 27,392,728
period 705
28 November - first tranche of 25,281,6 830,059
BEE transaction 20
14 December – Salary Sacrifice 4,078,06 197,099
share scheme issue 0
At reporting date 328,201, 28,419,886
385
Employee share plan shares on (6,595,0 (509,905)
issue 00)
321,606, 27,909,981
385
Number AUD
(c) Movements in employee share plan shares
issued with limited recourse loans.
At beginning of reporting period 6,595,000 509,905
At reporting date 6,595,000 509,905
Executive Share Incentive Plan
Under the plan, eligible employees are offered shares in the Company at prices determined by the
Board. The Board has the ultimate discretion to impose special conditions on the shares issued under
the ESIP and can grant a loan to a participant for the purposes of subscribing for plan shares.
Shares issued under loan facilities are held on trust for the benefit of the participant and will
only be transferred into the participant’s name once the loan has been fully repaid. ESIP
participants receive all the rights associated with the ordinary shares.
Loans granted to participants are limited recourse and interest free unless otherwise determined by
the Board. The loans are to be repaid via the application of any dividends received from the shares
and/or the sale of the plan shares. Where the loan is repaid by the sale of shares, any remaining
surplus on sale is remitted to the participant while any shortfall is borne by the Group.
No new shares have been issued on the Executive Share Incentive Plan for the 6 months ended 31
December 2012.
Salary Sacrifice Share Scheme
Shareholder approvals were obtained on 8 August 2012 for the implementation of a salary sacrifice
plan under which directors and executives may forego agreed fees and salary and subscribe for shares
in the Company.
Three individuals have elected during the six months to participate in the salary sacrifice plan, and
the shares that have “accrued” or been “issued” (calculated on a monthly basis by way of volume
weighted average share prices for Ferrum shares as traded on the Australian Securities Exchange
during that month) as a result of such participation are as follows:
Shares Issued 31 December 30 June
2012 2012
No of Shares No of
Shares
E Nealon 1,039,532 -
RW Hair 2,650,808 -
A Nealon 387,720 -
Total 4,078,060 -
Shares Accrued 31 December 30 June
2012 2012
No of Shares No of
Shares
E Nealon 44,444 -
RW Hair 113,333 -
A Nealon 33,333 -
Total 191,110 -
In accordance with AASB 2 the share based payment is valued in accordance with the goods and services
provided by the directors and executives in line with their agreed remuneration and to the extent
they wish to have their remuneration paid in the form of shares.
NOTE 7: LISTED OPTIONS
31 December 30 June 2012
2012 No. of
No. of Options
Options
Options
At end of reporting period the
following options were on issue:
- 31 December 2013 Options
exercisable at 40 cents per 21,496,727 21,496,727
share
- 14 December 2015 Options
exercisable at 10 cents per 400,000
share
- Options not listed on the ASX 2,350,000
Total Options 24,246,727 21,496,767
31 December 30 June 2012
2012 No. of
No. of Options
Options
Movement
At beginning of the reporting period 24,446,727 21,496,727
Options cancelled during the period (600,000) -
Options issued during the period 400,000 -
At reporting date 24,246,727 21,496,727
Options issued in consideration for services
400,000 options were issued at 10 cents per share during the period 1 July 2012 to 31 December 2012.
600,000 options were cancelled in July 2012.
NOTE 8: RESERVES
Share based
payment Foreign
reserve Option exchange Equity reserve
Reserve reserve Total
AUD AUD AUD AUD AUD
At 1 July 2011 (169,303) 1,404,425 113,852 (10,126,072) (8,777,098)
Currency translation
differences - - 23,561 23,561
At 31 December 2011 (169,303) 1,404,425 137,413 (10,126,072) (8,753,537)
At 1 July 2012 (166,120) 1,404,425 125,724 (10,126,072) (8,762,043)
Currency translation
differences - - (98,061) - (98,061)
Options Issued 4,644 - - - 4,644
At 31 December 2012 (161,476) 1,404,425 27,663 (10,126,072) (8,855,460)
Nature and purpose of reserves
Share based payments reserve
This reserve is used to record the value of equity benefits provided to employees, consultants and
directors as part of their remuneration.
Options reserve
This reserve is used to record the value of options issued, other than share-based payments.
Foreign Exchange Reserve
The foreign exchange reserve is used to record exchange differences arising from the translation of
the financial statements of foreign subsidiaries.
Equity Reserve
The Equity reserve is used to record the acquisition of the non-controlling interest by the Group and
to record differences between the carrying value of non-controlling interests and the consideration
paid / received, where there has been a transaction involving non-controlling interests that do not
result in a loss of control.
The reserve is attributable to the equity of the parent.
NOTE 9: EARNINGS PER SHARE
December 2012 December 2011
(a) Basic (loss) / earnings per share – (0.34) 1.77
cents per share
Diluted (loss) / earnings per share is
calculated by dividing the net profit
for the period attributable to
ordinary shareholders by the weighted
average number of ordinary shares
outstanding during the period.
(b) Diluted (loss) / earnings per share (0.35) (0.74)
– cents per share
Diluted (loss) / earnings per share is
calculated by dividing the net profit
for the period attributable to
ordinary shareholders by the weighted
average number of ordinary shares
outstanding during the period.
(c) Reconciliations (1,011,900) 5,160,255
Net (loss) profit used in calculating
basic and diluted earnings per share
(d) Headline (Loss) / Earnings per
share disclosed as required by the JSE
Limited
(Loss) / profit attributable to
ordinary equity holders of the parent (1,011,900) 5,160,255
entity.
Adjusted net of tax:
Profit on disposal of plant and - 435
equipment
Headline Earnings (1,011,900) 5,160,690
Number of Number of
Shares Shares
Weighted average number of shares used in
basis (loss) / earnings per share 297,184,522 292,246,705
Weighted average number of shares used in
diluted (loss) / earnings per share 297,770,688 311,791,868
NOTE 10: CONTINGENCIES AND COMMITMENTS
The group has committed to rental payments on office premises in Perth and Johannesburg. The
current commitments to the end of the lease periods are as follows:-
Duration AUD Value
Johannesburg April 2012 to 71,644
March 2015
There are no minimum expenditure requirements in South Africa in relation to mining tenements.
NOTE 11: RELATED PARTY TRANSACTIONS
Other than those transactions disclosed elsewhere in the financial report there have been no
material related party transactions with Directors, key management personnel or related parties in
the current period.
NOTE 12: EVENTS OCCURRING SUBSEQUENT TO THE REPORTING DATE
On 22 February 2013 the Company signed a contract with Danieli & C. Officine Meccaniche S.p.A for
the supply of engineering and technical services for the Moonlight Iron Ore Project. This contract
forms part of the Bankable Feasibility Study that the Company is proceeding with and is expected
to be carried out in approximately 15 months.
Australia and Company enquiries:
Ferrum Crescent Limited
Ed Nealon T: +61 8 9380 9653
Executive Chairman
Bob Hair T: +61 414 926 302
Managing Director
UK enquiries:
Ocean Equities Limited (Broker)
Guy Wilkes T: +44 (0) 20 7786 4370
RFC Ambrian Limited (Nominated Adviser)
Richard Morrison T: +44 (0) 20 3440 6800
Jen Boorer T: +44 (0) 20 3440 6800
Ferrum Crescent Limited
Laurence Read (UK representative)
T: +44 7557672432
South Africa enquiries:
Sasfin Capital
Leonard Eiser T: +27 11 809 7500
12 March 2013
Johannesburg
Sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 12/03/2013 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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