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financial resuts for year ended 30 June 2013
Ferrum Crescent 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
Final Results for the Year Ended 30 June 2013
Ferrum Crescent Limited, the ASX, AIM and JSE quoted iron ore developer
in Northern South Africa, today announces its final results for the year
ended 30 June 2013.
- JORC compliant resource at Moonlight Iron Ore Project of 307.8
million tonnes (”Mt”) @ 26.9% Fe
- Inferred category of 172.1 Mt @ 25.3% Fe, Indicated of 83.0 Mt @
27.4% Fe, Measured of 52.6 Mt @ 31.3% Fe
- DANIELI C. Officine MeccanicheS. p.A. (“Danieli”) appointed as BFS
process engineer to supply engineering and other technical services
With extensive exploration already complete at Moonlight, during the
course of the year Ferrum prioritised increasing the economic
understanding of the existing mineralisation in order to provide the
data needed to complete a Bankable Feasibility Study (“BFS”) in the
next 12 to 18 months
- Discussions confirm logistical solutions (rail, power, water and port
services) required for progressing BFS
Financial Overview
- Cash at 30 June 2013 of $548,265 (2012: $3,340,076)
- Loss for year of $1,901,288 (2012:profit $4,479,716)
Headline earnings (1,901,273) 4,480,790
Basic profit /
(loss) per share (1,901,288) 4,479,716
Weighted average
shares in issue 315,876,561 292,246,705
Basic profit /
(loss) per share (cents) (0.60) 1.53
Headline profit /
(loss) (1,901,273) 4,480,790
Weighted average
shares in issue 315,876,561 292,246,705
Headline profit /
(loss) per share (cents) (0.60) 1.53
Post Period- BFS Investment Partner
- On 21 September 2013 the Group signed a legally binding letter of
Intent (LOI) with Anvwar Asian Investment (“AAI”), a company resident
in the Sultanate of Oman, for AAI to invest in the Group on condition
that certain conditions precedent are satisfied or waived by 30
November 2013
- The LOI upon its completion will result in the acquisition by AAI of
a 35% interest in the Moonlight Iron Ore Project for US$10 million,
with a further US$3.5 million to be contributed to BFS costs by AAI
- On 24 September 2013 the Group accessed its Investment Portfolio with
Momentum to cover the short term financial burden of the Group until
the above LOI becomes unconditional. (This investment portfolio was
established to underpin the environmental rehabilitation obligations
that attach to the Moonlight mining right)
Commenting on the final results, Chairman Ed Nealon said:
“The period saw us increase our knowledge of the Moonlight iron ore
project in Northern South Africa. Danieli, a world leader in engineering
for the iron and steel industry, was also appointed to provide key
service in design and construction for the Moonlight BFS. The progress
made on the BFS to date, proximity to infrastructure and the involvement
of major industry names assisted us greatly in negotiations with
potential development partners during the year. Post Period we announced
a preliminary agreement with Oman based Anvwar Asian Investment to move
the project through BFS and towards construction readiness. Moonlight is
a very unique project with metallurgy that shows a very high grade iron
product can be produced and shipped using existing rail infrastructure.”
Company and Project Overview
Ferrum seeks to capitalise on the future demand for iron and steel worldwide by
producing iron products in the Republic of South Africa, for both the domestic
and the export markets.
South Africa, a relatively under developed market, which was dominated
historically by Iscor (part of which is now Kumba Iron Ore Limited) and now by
Arcelor Mittal, has been largely overlooked, and FCR wishes to develop its
Moonlight Iron Ore Project and pursue other opportunities in Southern Africa.
The Moonlight Deposit (upon which the Moonlight Iron Ore Project or “Moonlight”
or the “Project” is based) is a magnetite deposit located on the farms
Moonlight, Gouda Fontein and Julietta in Limpopo Province in the north of South
Africa (see Figure 2) and it is the main operational focus for the Company.
Iscor, which explored the Project in the 1980s and '90s, reported
mineralisation, capable of producing a concentrate grading 68.7% iron. At the
time, Iscor concluded that the deposit, which was described as comparable to
the world's best, was easily mineable due to its low waste-to-ore ratio. The
beneficiation attributes of Moonlight ore are extremely impressive, with low-
intensity magnetic separation considered suitable for optimum concentration.
Metallurgical tests of Moonlight material, undertaken since by Ferrum, suggest
that Iscor's results are conservative, that good metal recoveries can be
achieved, and that the resulting concentrates have a high iron content and only
negligible impurities, at grind sizes considered to be the industry standard
(P80 of 75 microns).
Operational
Moonlight Deposit
The Company’s operational focus is the Moonlight Iron Ore Project in Limpopo
Province in the Republic of South Africa, which hosts iron ore occurrences that
are magnetite bearing banded iron formations (“BIF”) that have undergone
varying intensities of metamorphic alteration. The BIFs are of Archaean age and
located in the Limpopo Mobile Belt (“LMB”) in the Limpopo Province, some 350 km
north-east of Johannesburg.
It is anticipated that Moonlight will be developed as a contract, open-pit mine
with onsite concentrate production. A slurry concentrate pipeline to a
pelletising plant near railhead will be created, with return water to Moonlight
(100 - 220km); current preferred sites are at Lephalale and Thabazimbi. A
pelletising plant to produce iron ore pellets (68.5% Fe) for international and
domestic markets is planned with production at 6Mtpa direct reduction iron and
blast furnace pellets. With a high grade, pure product near existing rail
infrastructure and producing steel mills, an offtake agreement for initial
production has already been signed with Duferco SA.
With extensive exploration already complete at Moonlight, during the course of
the year Ferrum prioritised increasing the economic understanding of the
existing mineralisation in order to provide the data needed to complete a
Bankable Feasibility Study (“BFS”) for development of the project into near-
term production. Focussed work was also undertaken to examine the expansion
potential of Moonlight outside of the existing JORC delineation. With long lead
times often involved in procuring relevant licensing for development, the
Company also made it a clear objective to secure a full, granted mining licence
over all of the Moonlight area. The Group’s mining right has since been
granted, executed and registered.
In addition to work being carried out directly at the Moonlight Deposit,
detailed analysis of the infrastructure solutions for both the Moonlight open
pit mine and pelletising plant have been underway with providers such as
Transnet and Eskom. Located in the Limpopo Province of Northern South Africa,
Moonlight is located near two major rail hubs that potentially will have the
capacity to carry the project’s iron ore pellets for export and to local steel
producers. Given the high grade pellet product Ferrum is looking to produce,
the last twelve months saw a detailed examination of the most efficient
location for the plant in terms of power usage and ore versus pellet
transportation costs. Limpopo Province sits well to the north of traditional
iron ore mining operations in South Africa and is seeing a range of initiatives
currently undertaken in the region to promote the economy. During the year,
Ferrum and the infrastructure partners it is in consultation with have modelled
a series of scenarios that derive benefit from such government infrastructure
programmes.
During the 2012 financial year, Mineral Corporation Consultancy (Pty) Ltd of
South Africa (“The Mineral Corporation”) was commissioned by Ferrum 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”) that had been carried out in the previous financial year. Phase 3
consisted of 11 holes totalling 990m of diamond core drilling and 13 holes
totalling 1,600m of RC drilling, and the final assay results for this drilling
were received in July 2011.
The Mineral Corporation conducted a thorough re-interpretation of the
geological structure of Moonlight, based on historical Iscor data collated and
validated by the Group and the additional Group 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 307.8 million tonnes @ 26.9% Fe and are shown as
follows:
- JORC compliant resource at Moonlight Iron Ore Project of 307.8
million tonnes (”Mt”) @ 26.9% Fe
- Inferred category of 172.1 Mt @ 25.3% Fe, Indicated of 83.0 Mt @
27.4% Fe, Measured of 52.6 Mt @ 31.3% Fe
Based on these results, the Board believes that whilst the total average Fe
grade has decreased slightly (previously estimated to be a JORC compliant
resource of 74Mt @ 33% Fe in the Indicated Resource category and 225Mt @ 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, the Board is of the opinion that the depth
constraint of 250m (maximum) is conservative, particularly as the previous
estimation was not constrained in this way.
The revised structural interpretation presented by The Mineral Corporation also
identified several targets south, east and west of the Moonlight Deposit, and
the Company subsequently engaged The Mineral Corporation to provide
interpretation of the geophysical data generated from a high resolution
aeromagnetic survey conducted in June 2012. The report from The Mineral
Corporation highlighted several magnetic targets, including targets that
indicate the strong possibility of an extension of the iron ore mineralisation
within Moonlight Farm itself and a target on Julietta Farm outside of the area
previously planned to be drilled. However, given that the size of the resource
is sufficient for in excess of 20 years of mining operations, management’s
attention remained primarily focused on finding definitive answers to
logistical questions rather than on continued exploration. A summary of the
Mineral Resource estimate parameters is set out below in Table 5.
Competent Persons’ 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.
The Group now has a granted Mining Right with associated mining environmental
approvals. It has sufficient resources to carry out mining operations for 20
years or more and confidence from historical exploration records and from the
Group’s own airborne and ground magnetic programs that there is significant
scope for expansion of the mineralisation within the Mining Right area.
Additionally, in February 2013, the Company announced that it had signed an
agreement with (the ‘Agreement’) with DANIELI C. Officine MeccanicheS. p.A.
(“Danieli”), one of the largest three suppliers of plant and equipment to the
metals industry worldwide, for the Italian based group to fulfil the process
engineering and associated technical services to be used for the BFS in process
at the Moonlight Deposit.
As announced on 27 February 2013, the Agreement states that Danieli will carry
out the role of process engineer in the BFS and in that capacity develop a full
process engineering analysis, final study for the beneficiation plant and the
pelletising plant build and other associated technical services including:
- Beneficiation plant design at proposed Moonlight open pit location
comprising crushing, grinding and beneficiation, tailings storage
- Pelletising plant design, to produce DR grade pellets at a railhead for
further conveyance
- Laboratory testing and process work on Moonlight iron ore to define and
confirm the most suitable process configuration of the beneficiation and
pelletising plant to produce high quality DR grade pellet (based on
metallurgical testwork).
Additional engineering providers will be secured by Ferrum for other components
of the BFS (such as mine design).
Ferrum has sufficient confidence that the various upgrades to infrastructure
that have been announced by the South African government and by its statutory
enterprises such as Transnet and Eskom will allow Ferrum to export its product
through Richards Bay and be in production by 2018. In addition, initial
scoping financial models of the entire project indicate an attractive business
case which encourages the Company to progress completion of the BFS over the
next 12 to 18 month period.
Moonlight Iron Ore Project Concept
Recognising that adding value within the country is a strategic preference for
all mining operations within South Africa, Ferrum has consistently looked to
planning the Project with beneficiation and other value-adding processes to
take place within the country. Project concepts have previously included the
production of pig iron at or near the Moonlight site. It has since been
recognised by the Company, however, that the most sustainable development
concept for the Project is likely to involve mining at site and the production
there of an iron ore concentrate, which would be transported by way of slurry
pipeline to a manufacturing facility located at a place near a railhead. High
quality iron ore pellets (which would be a mixture of direct reduction iron
(“DRI”) quality pellets, which would be suitable for use in electric arc steel
furnaces, and blast furnace pellets) would be transported by rail to local
users and to a suitable port facility for export internationally.
Several pelletiser sites and rail and port combinations have been considered,
and the Company has continued to seek confirmation from infrastructure
providers (including rail, port and power suppliers) of allocation of capacity
for the Company. During the 2012 financial year, the South African Government
announced that significant capital would be applied in upgrading rail and port
facilities that service the Waterberg Region, which is close to where the
Moonlight Deposit is situated. These upgrades to rail and port in particular
are strategically necessary to unlock the value of the Waterberg Region, where
the country’s most significant remaining coal reserves are situated. For this
reason, rail, power, water and port facilities are all being upgraded as a
matter of national priority.
The Company in June 2011 entered into an offtake agreement with Swiss based
Duferco SA, a leading private company in the trading, mining, and end use of
iron and steel products and raw materials for the steel industry. Following due
diligence on the mineral assets of the Company, Duferco concluded that the
Group should be able to produce direct reduction and/or blast furnace pellets
equal to or better than current world best product.
The offtake agreement with Duferco SA covers up to 6 Mpta of anticipated iron
ore pellet production from Ferrum Crescent’s Moonlight Project. Under the
agreement, Ferrum Crescent will sell Duferco all of their production available
for export (in total 4.5 Mpta) and will give Duferco a first right of refusal
over an additional 1.5 Mpta per year to the extent that the product is not sold
domestically, thus allowing Ferrum Crescent to follow a growth strategy at its
South African projects.
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2013
2013 2012
Note $ $
Revenue from continuing operations
Revenue 3(a) 86,285 205,183
Other income 3(b) 326,711 4,330
412,996 209,513
Administration expenses 3(c) (1,592,352) (2,323,292)
Occupancy expenses (54,981) (104,205)
Exploration expenditure (826,983) (1,620,768)
Profit on remeasurement of financial
liability/asset 14 608,414 8,321,244
Foreign exchange gain / (loss) (145,130) 407
Share based payments 20 (303,252) (3,183)
Profit / (loss) before taxation (1,901,288) 4,479,716
Income tax benefit / (expense) 5 - -
Profit / (loss) for the year (1,901,288) 4,479,716
Other comprehensive income
Other comprehensive income which may
subsequently be recycled through profit
and loss
Net exchange gain / (loss) on
translation of foreign operation 4,738 11,872
Fair value of available for sale
investments (net of tax effect) 25,803 -
Other comprehensive (loss) / income for
the year net of tax 30,541 11,872
Total comprehensive profit / (loss) for
the year (1,870,747) 4,491,588
Net Profit / (loss) for the period
attributable to:
Owners of the parent (1,901,288) 4,479,716
(1,901,288) 4,479,716
Total comprehensive profit / (loss) for
the period attributable to:
Owners of the parent (1,870,747) 4,491,588
(1,870,747) 4,491,588
Cents per Cents per
Earnings / (loss) per share share share
Basic profit / (loss) per share 8 (0.60) 1.53
Diluted profit / ( loss) per share (0.68) (1.30)
Consolidated Statement of Financial Position
As at 30 June 2013
2013 2012
Note $ $
Assets
Current assets
Cash and short term deposits 9 548,265 3,340,076
Trade and other receivables 10 269,305 128,447
Other financial assets 12 549,043 39,469
Prepayments 51,548 158,584
Total current assets 1,418,161 3,666,576
Non-current assets
Plant and equipment 11 73,488 110,325
Other financial assets 12 683,074 144,297
Total non-current assets 756,562 254,622
Total assets 2,174,723 3,921,198
Liabilities and equity
Current liabilities
Trade and other payables 13 282,174 1,212,832
Financial Liability 14 - 95,379
Provisions 15 27,057 20,320
Total current liabilities 309,231 1.328.531
Total liabilities 309,231 1,328,531
Equity
Contributed equity 16 28,366,383 27,392,728
Accumulated losses 19 (17,939,306) (16,038,018)
Reserves 18 (8,561,585) (8,762,043)
Equity attributable to owners
of the parent 1,865,492 2,592,667
Non-controlling Interest - -
Total equity 1,865,492 2,592,667
Total equity and liabilities 2,174,723 3,921,198
This Statement of Financial Position is to be read in conjunction with the
accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 30 June 2013
2013 2012
Note $ $
Cash flows from operating activities
Interest received 86,285 209,513
Exploration and evaluation expenditure (823,522) (2,113,911)
Payments to suppliers and employees (1,554,133) (2,696,209)
Net cash flows used in operating activities 24 (2,291,370) (4,600,607)
Investing activities
Payments for plant and equipment (1,105) (25,166)
Payments for available – for - sale
investments (512,974) -
Net cash flows (used in) / from investing
activities (514,079) (25,166)
Financing activities
Proceeds from issue of shares 780,000 -
Settlement of minority interest obligation (780,000) -
Costs of raising capital (10,687) -
Net cash flows (used in) / from financing
activities (10,687) -
Net increase/ (decrease) in cash and cash
equivalents held (2,816,135) (4,625,773)
Net foreign exchange difference 24,324 (150,160)
Cash and cash equivalents at beginning of
the period 3,340,076 8,116,009
Cash and cash equivalents at 30 June 2013 9 548,265 3,340,076
The above Statement of Cash Flows should be read in conjunction with the
accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 30 June 2013
Share based Foreign Available
Issued Accumulate payment Option exchange for sale Equity Total equity
capital d reserve reserve reserve reserve reserve $
$ losses $ $ $ $ $
$
(20,517,73 (10,126,0
At 1 July 2011
27,392,728 4) (169,303) 1,404,425 113,852 - 72) (1,902,104)
Profit for the period
- 4,479,716 - - - - 4,479,716
Other Comprehensive Income (net of
tax) - - - - 11,872 - - 11,872
Total comprehensive loss (net of tax)
- 4,479,718 - - 11.872 - - 4,491,590
Transactions with owners in their
capacity as owners:
Cost associated with shares issued
under employee share incentive plan - - 3,183 - - - - 3,183
At 1 July 2012 (16,038,0 (10,126,0
27,392,728 18) (166,120) 1,404,425 125,724 - 72) 2,592,667
(1,901,28
Loss for the period - 8) - - - - - (1,901,288)
Other Comprehensive Income (net of
tax) - - - - 4,738 25,803 - 30,541
(1,901,28
Total comprehensive loss (net of tax) - 8) - - 4,738 25,803 - (1,870,747)
Transactions with owners in their
capacity as owners:
Shares issued during the year net of
transaction costs 973,655 - (204,340) - - - - 769,315
Share based payments - - 374,257 - - - - 374,257
(17,939,306 (10,126,0
At 30 June 2013
28,366,383 ) 3,797 1,404,425 130,462 25,803 72) 1,865,492
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes
Note 1: Corporate information
The consolidated financial report of Ferrum Crescent for the year ended 30 June
2013 was authorised for issue in accordance with a resolution of directors on 30
September 2013.
Ferrum Crescent Limited is a for profit company limited by shares domiciled and
incorporated in Australia whose shares are publicly traded on the Australian Stock
Exchange (ASX), the London Stock Exchange (AIM) and the JSE Limited (JSE).
The nature of operations and principal activities of the Group are described in the
Directors’ Report.
Note 2: Statement of significant accounting policies
(a) Basis of preparation
The Financial Report is a general purpose financial report, which has been prepared
in accordance with the requirements of the Corporations Act 2001, Australian
Accounting Standards and Interpretations and complies with other requirements of
the law.
The accounting policies detailed below have been consistently applied to all of the
years presented unless otherwise stated. The financial statements are for the
consolidated entity consisting of Ferrum Crescent Limited and its subsidiaries.
The Financial Report has also been prepared on a historical cost basis, except for
available-for-sale investments and derivative financial instruments which have been
measured at fair value.
The Financial Report is presented in Australian dollars.
(b) Statement of compliance
The Financial Report complies with Australian Accounting Standards, as issued by
the Australian Accounting Standards Board, and complies with International
Financial Reporting Standards (IFRS), as issued by the International Accounting
Standards Board.
Note 2: Statement of significant accounting policies
(c) Adoption of new and revised standards
All new and amended Accounting Standards relevant to the operations of the Group
have been adopted from 1 July 2012, including:
- AASB 2011-9 Amendments to AASB Presentation of Other Comprehensive Income
[AASB 1,5,7,101,112,120,121,132,133,134, 1039 & 1049], requires entities to
group items presented in other comprehensive income on the basis of whether
they might be reclassified subsequently to profit or loss and those that will
not, effective 1July 2012
The adoption of these standards did not have any impact on the current period or
any prior period and is not likely to affect future periods.
Australian Accounting Standards and Interpretations that have recently been
issued or amended but are not yet effective and have not been adopted by the
Group for the year ended 30 June 2013. Relevant Standards and Interpretations
are outlined in the table below.
The impact of the adoption of these new and revised standards and interpretations
is not expected to have a material impact on the Group given its current operations
and structure.
Note 2: Statement of significant accounting policies (continued)
(e) Basis of consolidation
The financial statements of the subsidiaries are prepared for the same reporting
period as the parent entity, using consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and
transactions, income and expenses and profit and losses resulting from intra-group
transactions have been eliminated in full.
Subsidiaries are fully consolidated from the date on which control is transferred
to the Group and cease to be consolidated from the date on which control is
transferred out of the Group. Control exists where the Company has the power to
govern the financial and operating policies of an entity so as to obtain benefits
from its activities. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing when the Group
controls another entity.
Business combinations have been accounted for using the acquisition method of
accounting.
Unrealised gains or transactions between the Group and its associates are
eliminated to the extent of the Group’s interests in the associates. Unrealised
losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
Non-controlling interests represent the portion of profit or loss and net assets in
subsidiaries not held by the Group and are presented separately in the statement of
comprehensive income and within equity in the consolidated statement of financial
position. Losses are attributed to the non-controlling interests even if that
results in a deficit balance.
The Group treats transactions with non-controlling interests that do not result in
a loss of control as transactions with equity owners of the Group. A change in
ownership interest results in an adjustment between the carrying amounts of the
controlling and non-controlling interests to reflect their relative interests in
the subsidiary. Any difference between the amount of the adjustment to non-
controlling interests and any consideration paid or received is recognised within
equity attributable to owners of Ferrum Crescent Limited.
When the Group ceases to have control, joint control or significant influence, any
retained interest in the entity is remeasured to its fair value with the change in
carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint controlled entity or financial asset. In addition,
any amounts previously recognised in other comprehensive income in respect of that
entity are accounted for as if the group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
Where appropriate prior year disclosures have been reclassified for consistency
with current year classifications. The re-classification has not impacted the net
profit / (loss) for the prior year.
(f) Critical accounting estimates and judgements
The application of accounting policies requires the use of judgements, estimates
and assumptions about carrying values of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions are recognised in the period in which the estimate is revised if it
affects only that period or in the period of the revision and future periods if the
revision affects both current and future periods.
Note 2: Statement of significant accounting policies (continued)
(f) Critical accounting estimates and judgements (continued)
Share-based payment transactions:
The Group measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which they are
granted. The fair value is determined by an external valuer using a binomial model,
using the assumptions detailed in Note 20.
Forward subscription agreement
During the 2011 financial year the Group entered into a forward subscription
agreement as set out in Note 14. This agreement requires the Company to issue a
variable number of shares in exchange for ZAR 15 million. The assumptions used in
this estimation are discussed in Note 14.
Impairment of available-for-sale financial assets
The Group follows the guidance of AASB 139 Financial Instruments: Recognition and
Measurement to determine when an available-for-sale financial asset is impaired.
This determination requires significant judgement. In making this judgement, the
Group evaluates, among other factors, the duration and extent to which the fair
value of an investment is less than its cost and the financial health of and short-
term business outlook for the investee, including factors such as industry and
sector performance, changes in technology and operational and financing cash flows.
Derivatives
Derivatives are recognised initially at fair value, attributable transaction costs
are recognised in profit or loss when incurred. Subsequent to initial recognition,
derivative financial instruments are measured at fair value and changes in its fair
value are recognised immediately in profit or loss.
(g) Going concern
The Group incurred an operating loss after income tax of $1,901,288 for the year
ended 30 June 2013. In addition, the Group has net current assets of $1,108,930,
which includes the forward subscription agreement, as at 30 June 2013 and
shareholders’ equity of $1,865,492. The Financial Report has been prepared on a
going concern basis and this basis is predicated on a number initiatives being
undertaken by the Group with respect to ongoing cost reductions and funding as set
out below.
At the board meeting held on 13 September 2013, the board resolved unanimously to
accept the waiver of directors’ fees and consulting fees that had accrued up to 30
June 2013 for 3 directors as well as to defer any future directors’ fees and
consulting fees until such time as is agreed at a future board meeting. This
measure has been put in place to assist the company with its ongoing financing
issues. On 21 September 2013 the Group signed a legally binding letter of intent
with Anvwar Asian Investment, a company resident in the Sultanate of Oman, for the
company to invest in the group a total of $10 million for a 35% effective interest
in the project on condition that certain conditions precedent are satisfied or
waived by 30 November 2013.
On 24 September 2013 the Group accessed its Investo Investment Portfolio with
Momentum to cover the short term financial burden of the Group until the above
letter of intent is converted into a binding contract
Notwithstanding the above, the Directors are cognisant that the Group is
significantly impacted by the successful development of existing projects,
reduction in expenditure commitments and / or the sourcing of additional funds and
the ongoing support of its shareholders. In the event that the asset sell-down
transaction to Anvwar Asian Investment does not complete or the Group is unable to
raise additional funds to meet the Group’s ongoing working capital requirements
when required, there is significant uncertainty as to whether the Group will be
able to meet its debts as and when they fall due and thus continue as a going
concern.
The financial report does not include any adjustments relating to the
recoverability and classification of recorded asset amounts or to the amounts and
classification of liabilities that might be necessary should the Group not continue
as a going concern.
Note 2: Statement of significant accounting policies (continued)
(h) Foreign Currency Translation
Both the functional and presentation currency of the Company and its Australian
controlled entity is Australian dollars (A$). Each entity in the Group determines
its own functional currency and items included in the financial statements of each
entity are measured using that functional currency.
The functional currency of the foreign operations is South African Rand (ZAR) and
United States dollars (US).
Transactions in foreign currencies are initially recorded in the functional
currency by applying the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated
at the rate of exchange ruling at the balance date.
All exchange differences in the parent Company’s financial report are taken to
profit or loss unless they relate to the translation of subsidiary related loans
and borrowings which are considered part of the net investment and are taken
directly to equity until the disposal of the net investment, at which time they are
recognised in profit or loss.
As at the reporting date the assets and liabilities of foreign subsidiaries are
translated into the presentation currency of the Company at the rate of exchange
ruling at the balance date and their statements of comprehensive income are
translated at the weighted average exchange rate for the year.
The exchange differences arising on the translation are taken directly to a
separate component of equity.
On disposal of a foreign entity, deferred cumulative amount recognised in equity
relating to that particular foreign operation is recognised in profit or loss.
(i) Exploration and evaluation expenditure
Exploration and evaluation costs are written off in the year they are incurred
apart from acquisition costs which are carried forward where right of tenure of the
area of interest is current and they are expected to be recouped through sale or
successful development and exploitation of the area of interest or, where
exploration and evaluation activities in the area of interest have not reached a
stage that permits reasonable assessment of the existence of economically
recoverable reserves.
Where an area of interest is abandoned or the directors decide that it is not
commercial, any accumulated acquisition costs in respect of that area are written
off in the financial period the decision is made. Each area of interest is also
reviewed at the end of each accounting period and accumulated costs written off to
the extent that they will not be recoverable in the future.
Amortisation is not charged on costs carried forward in respect of areas of
interest in the development phase until production commences.
(j) Plant & equipment
Plant and equipment is stated at cost less accumulated depreciation and any
impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful life
of the asset as follows:
Plant and equipment – over 2 to 15 years
Impairment
The carrying values of plant and equipment are reviewed for impairment when events
or changes in circumstances indicate the carrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the
recoverable amount is determined for the cash-generating unit to which the asset
belongs.
If any indication exists of impairment and where the carrying values exceed the
estimated recoverable amount, the assets or cash-generating units are written down
to their recoverable amount.
The recoverable amount of plant and equipment is the greater of fair value less
costs to sell and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset.
Derecognition
An item of plant and equipment is derecognised upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any
gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included
in the statement of comprehensive income in the period the item is derecognised.
(k) Income tax
Current tax assets and liabilities for the current period and prior periods are
measured at amounts expected to be recovered from or paid to the taxation
authorities based on the current period’s taxable income. The tax rates and tax
laws used for computations are enacted or substantively enacted by the balance
date.
Deferred income tax is provided on all temporary differences at balance date
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary
differences except:
- where the deferred income tax liability arises from the initial recognition
of goodwill of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss.
- Where the taxable temporary difference is associated with investments in
subsidiaries, associates or interests in joint ventures, and the timing of
the reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible temporary differences,
carry-forward of unused tax credits and unused tax losses, to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax assets and unused tax
losses can be utilised except:
- where the deferred income tax asset relating to the deductible temporary
difference arises from the initial recognition of an asset or liability in a
transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or
loss.
- where the deductible temporary difference is associated with investments in
subsidiaries, associates or interests in joint ventures, in which case a
deferred tax assets is only recognised to the extent that it is probable
that the temporary difference will reverse in the foreseeable future and
taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance date
and reduced to the extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred income tax asset to
be utilised.
Unrecognised deferred income tax assets are reassessed at each balance date and are
recognised to the extent that it has become probable that future taxable profit
will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are
expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the balance date.
Income taxes relating to items recognised directly in equity are recognised in
equity and not in the statement of comprehensive income.
Deferred tax assets and deferred tax liabilities are offset only if a legally
enforceable right exists to set off current tax assets against current tax
liabilities and the deferred tax assets and liabilities relate to the same taxable
entity and the same taxation authority.
(l) GST/VAT
Revenues, expenses and assets are recognised net of the amount of GST/VAT except:
- where the GST incurred on a purchase of goods and services is not recoverable
from the taxation authority, in which case the GST/VAT is recognised as part of
the cost of acquisition of the asset or as part of the expense item as
applicable; and
- receivables and payables are stated with the amount of GST/VAT included.
The net amount of GST/VAT recoverable from, or payable to, the taxation authority
is included as part of receivables or payables in the statement of financial
position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the
GST/VAT component of cash flows arising from investing and financing activities,
which is recoverable from, or payable to, the taxation authority, are classified as
operating cash flows.
(l) GST / VAT (continued)
Commitments and contingencies are disclosed net of the amount of GST/VAT
recoverable from, or payable to, the taxation authority.
(m) Provisions and employee benefits
Provisions are recognised when the Company has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and
a reliable estimate can be made of the amount of the obligation.
When the Company expects some or all of a provision to be reimbursed, for example
under an insurance contract, the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain. The expense relating to any
provision is presented in the statement of comprehensive income net of any
reimbursement.
Provisions are measured at the present value of management’s best estimate of the
expenditure required to settle the present obligation at the balance date. If the
effect of the time value of money is material, provisions are discounted using a
current pre-tax rate that reflects the time value of money and the risks specific
to the liability. The increase in the provision resulting from the passage of time
is recognised in finance costs.
Employee leave benefits
i. Wages and salaries, annual leave and sick leave
Liabilities for wages and salaries including non-monetary benefits, annual leave
and accumulating sick leave due to be settled within 12 months of the reporting
date are recognised in provisions in respect of employees’ services up to the
reporting date and are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised
when the leave is taken and measured at the rates paid or payable.
ii. Long service leave
The liability for long service leave is recognised and measured as the present
value of expected future payments to be made in respect of services provided by
employees up to the reporting date using the projected unit credit method.
Consideration is given to the expected future wage and salary levels, experience of
employee departures and periods of service. Expected future payments are discounted
using market yields at the reporting date on national government bonds with terms
to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
(n) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at
bank and in hand and short-term deposits with an original maturity of three months
or less.
For the purposes of the Statement of Cash Flow, cash and cash equivalents consist
of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
(o) Receivables
Receivables, which generally have 30-90 day terms, are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest rate
method, less an allowance for any uncollectible amounts.
Collectability of receivables is reviewed on an ongoing basis. Debts that are known
to be uncollectible are written off when identified. An allowance for doubtful
debts is raised when there is objective evidence that the Company will not be able
to collect the debt.
(p) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received
or receivable to the extent that it is probable that the economic benefits will
flow to the Company and the revenue can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognised:
Interest Revenue
Revenue is recognised as the interest accrues (using the effective interest method,
which is the rate that exactly discounts estimated future cash receipts through the
expected life of the financial instrument) to the net carrying amount of the
financial asset.
(q) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable
to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
The Group’s own shares, which are re-acquired for later use in the employee share
based payment arrangements, are deducted from equity.
(r) Trade and other payables
Trade payables and other payables are carried at amortised costs and represent
liabilities for goods and services provided to the Company prior to the end of the
financial year that are unpaid and arise when the Company becomes obliged to make
future payments in respect of the purchase of these goods and services.
(s) Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the
Company adjusted to exclude any costs of servicing equity (other than dividends)
divided by the weighted average number of ordinary shares, adjusted for any bonus
element.
Diluted earnings per share is calculated as net profit attributable to members of
the Company adjusted for:
- costs of servicing equity (other than dividends),
- the after tax effect of dividends and interest associated with dilutive
potential ordinary shares that have been recognised as expenses; and
- other non-discretionary changes in revenues or expenses during the period that
would result from the dilution of potential ordinary shares divided by the
weighted average number of ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.
(t) Financial Instruments – Initial recognition and subsequent measurement
Financial assets in the scope of AASB 139 Financial Instruments: Recognition and
Measurement are classified as either financial assets at fair value through profit
or loss, loans and receivables, held-to-maturity investments, or available-for-sale
financial assets. When financial assets are recognised initially, they are measured
at fair value, plus, in the case of investments not at fair value through profit or
loss, directly attributable transaction costs. The Company determines the
classification of its financial assets on initial recognition.
(i) Financial assets
Initial recognition and measurement
Financial assets within the scope of AASB 139 are classified as financial assets at
fair value through profit or loss, loans and receivables, held-to-maturity
investments, available-for-sale financial assets, or as derivatives designed as
hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial assets at initial recognition.
All financial assets are recognised initially at fair value plus transaction costs,
except in the case of financial assets recorded at fair value through profit or
loss.
Purchases or sales of financial assets that require delivery of assets within a
time frame established by regulation or convention in the market place (regular way
trades) are recognised on the trade date, i.e., the date that the Group commits to
purchase or sell the asset.
The Group’s financial assets include cash and short-term deposits, trade and other
receivables, loans and other receivables, quoted and unquoted financial instruments
and derivative financial instruments.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as
described below:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes financial assets
held for trading and financial assets designated upon initial recognition at fair
value through profit or loss. Financial assets are classified as held for trading
if they are acquired for the purpose of selling or repurchasing in the near term.
Derivatives, including separated embedded derivatives are also classified as held
for trading unless they are designated as effective hedging instruments as defined
by AASB 139.
Financial assets at fair value through profit and loss are carried in the statement
of financial position at fair value with net changes in fair value recognised in
finance costs in the income statement. Financial assets designated upon initial
recognition at fair value through profit and loss are designated at their initial
recognition date and only if the criteria under AASB 139 are satisfied. The Group
has not designated any financial assets at fair value through profit or loss.
The Group evaluates its financial assets held for trading, other than derivatives,
to determine whether the intention to sell them in the near term is still
appropriate. When in rare circumstances the Group is unable to trade these
financial assets due to inactive markets and management’s intention to sell them in
the foreseeable future significantly changes, the Group may elect to reclassify
these financial assets. The reclassification to loans and receivables, available-
for-sale or held to maturity depends on the nature of the asset. This evaluation
does not affect any financial assets designated at fair value through profit or
loss using the fair value option at designation, these instruments cannot be
reclassified after initial recognition.
Derivatives embedded in host contracts are accounted for as separate derivatives
and recorded at fair value if their economic characteristics and risks are not
closely related to those of the host contracts and the host contracts are not held
for trading or designated at fair value though profit or loss. These embedded
derivatives are measured at fair value with changes in fair value recognised in the
income statement. Reassessment only occurs if there is a change in the terms of the
contract that significantly modifies the cash flows that would otherwise be
required.
Note 2: Statement of significant accounting policies (continued)
(t) Financial Instruments – Initial recognition and subsequent measurement
(continued)
(i) Financial assets (continued)
Financial assets at fair value through profit or loss (continued)
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed
maturity are classified as held-to-maturity when the Group has the positive
intention and ability to hold to maturity. After initial measurement, held-to-
maturity investments are measured at amortised cost using the EIR, less impairment.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance income in the income statement. The losses
arising from impairment are recognised in the income statement in finance costs.
The Group did not have any held-to-maturity investments during the years ended 30
June 2012 and 2013.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. After initial
measurement, such financial assets are subsequently measured at amortised cost
using the EIR method, less impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs that are an
integral part of EIR. The EIR amortisation is included in finance income in the
income statement. The losses arising from impairment are recognised in the income
statement in finance costs or loans and in cost of sales or other operating
expenses for receivables.
Available-for-sale financial investments
Available-for-sale financial investments include equity investments and debt
securities. Equity investments classified as available-for-sale are those that are
neither classified as held for trading nor designated at fair value through profit
or loss. Debt securities in this category are those that are intended to be held
for an indefinite period of time and that may be sold in response to needs for
liquidity or in response to changes in the market conditions.
After initial measurement, available-for-sale financial investments are
subsequently measured at fair value with unrealised gains or losses recognised as
other comprehensive income in the available-for-sale reserve until the investment
is derecognised, at which time the cumulative gain or loss is recognised in other
operating income, or the investment is determined to be impaired, when the
cumulative loss is reclassified from the available-for-sale reserve to the income
statement in finance costs. Interest earned whilst holding available-for-sale
financial investments is reported as interest income using the EIR method.
The Group evaluates whether the ability and intention to sell its available-for-
sale financial assets in the near term is still appropriate. When, in rare
circumstances, the Group is unable to trade these financial assets due to inactive
markets and management’s intention to do so significantly changes in the
foreseeable future, the Group may elect to reclassify these financial assets.
Reclassification to loans and receivables is permitted when the financial assets
meet the definition of loans and receivables and the Group has the intent and
ability to hold these assets for the foreseeable future or until maturity.
Reclassification to the held-to-maturity category is permitted only when the entity
has the ability and intention to hold the financial asset accordingly.
(t) Financial Instruments – Initial recognition and subsequent measurement
(continued)
(i) Financial assets (continued)
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a
group of similar financial assets) is derecognised when:
- The rights to receive cash flows from the asset have expired.
- The Group has transferred its rights to receive cash flows from the asset or
has assumed an obligation to pay the received cash flows in full without
material delay to a third party under a ”pass-through” arrangement; and
either (a) the Group has transferred substantially all the risks and rewards
of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or
has entered into a pass-through arrangement, it evaluates if and to what extent it
has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and
rewards of the asset, nor transferred control of the asset, the asset is recognised
to the extent of the Group’s continuing involvement in the asset. In that case, the
Group also recognises an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects the rights and
obligations that the Group has retained.
(ii) Impairment of financial assets
The Group assesses, at each reporting date, whether there is any objective evidence
that a financial asset or a group of financial assets is impaired. A financial
asset or a group of financial assets is deemed to be impaired if, and only if,
there is objective evidence of impairment as a result of one or more events that
has occurred after the initial recognition of the asset (an incurred “loss event”)
and that loss event has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtors or a group of
debtors is experiencing significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will enter bankruptcy or
other financial reorganisation and when observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears
or economic conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether
objective evidence of impairment exists individually for financial assets that are
individually significant, or collectively for financial assets that are not
individually significant. If the Group determines that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and for which an
impairment loss is, or continues to be, recognised are not included in a collective
assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows (excluding future
expected credit losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial asset’s original
effective interest rate. If a loan has a variable interest rate, the discount rate
for measuring any impairment loss is the current EIR.
The carrying amount of the asset is reduced through the use of an allowance account
and the amount of the loss is recognised in the income statement. Interest income
continues to be accrued on the reduced carrying amount and is accrued using the
rate of interest used to discount the future cash flows for the purpose of
measuring the impairment loss. The interest income is recorded as part of finance
income in the income statement.
Note 2: Statement of significant accounting policies (continued)
(t) Financial Instruments – Initial recognition and subsequent measurement
(continued)
(ii) Impairment of financial assets (continued)
Loans together with the associated allowance are written off when there is no
realistic prospect of future recovery and all collateral has been realised or has
been transferred to the Group. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an event occurring
after the impairment was recognised, the previously recognised impairment loss is
increased or reduced by adjusting the allowance account. If a future write-off is
later recovered, the recovery is credited to finance costs in the income statement.
Available-for-sale financial investments
For available-for-sale financial investments, the Group assesses at each reporting
date whether there is objective evidence that an investment or a group of
investments is impaired.
In the case of equity investments classified as available-for-sale, objective
evidence would include a significant or prolonged decline in the fair value of the
investment below its cost. “Significant” is evaluated against the original cost of
the investment and “prolonged” against the period in which the fair value has been
below its original cost. When there is evidence of impairment, the cumulative loss
– measured as the difference between the acquisition cost and the current fair
value, less any impairment loss on that investment previously recognised in the
income statement – is removed from other comprehensive income and recognised in the
income statement. Impairment losses on equity investments are not reversed through
the income statement; increases in their fair value after impairment are recognised
directly in other comprehensive income.
In the case of debt instruments classified as available-for-sale, impairment is
assessed based on the same criteria as financial assets carried at amortised cost.
However, the amount recorded for impairment is the cumulative loss measured as the
difference between the amortised cost and the current fair value, less any
impairment loss on that investment previously recognised in the income statement.
Future interest income continues to be accrued based on the reduced carrying amount
of the asset, using the rate of interest used to discount the future cash flows for
the purpose of measuring the impairment loss. The interest income is recorded as
part of finance income. If, in a subsequent year, the fair value of a debt
instrument increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in the income statement, the
impairment loss is reversed through the income statement.
(iii) Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of AASB 139 are classified as financial
liabilities at fair value through profit or loss, loans and borrowings, or as
derivatives designated as hedging instruments in an effective hedge, as
appropriate. The Group determines the classification of its financial liabilities
at initial recognition.
All financial liabilities are recognised initially at fair value plus, in the case
of loans and borrowings, directly attributable transaction costs. The Group’s
financial liabilities include trade and other payables, bank overdrafts, loans and
borrowings, financial guarantee contracts, and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification, described as
follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial
liabilities held for trading and financial liabilities designated upon initial
recognition as at fair value through profit or loss. Financial liabilities are
classified as held for trading if they are acquired for the purpose of selling in
the near term. This category includes derivative financial instruments entered into
by the Group that are not designated as hedging instruments in hedge relationships
as defined by AASB 139. Separated embedded derivatives are also classified as held
for trading unless they are designated as effective hedging instruments.
Note 2: Statement of significant accounting policies (continued)
(t) Financial Instruments – Initial recognition and subsequent measurement
(continued)
(iii) Financial liabilities (continued)
Gains or losses on liabilities held for trading are recognised in the income
statement.
Financial liabilities designated upon initial recognition at fair value through
profit and loss so designated at the initial date of recognition, and only if
criteria of AASB 139 are satisfied. The Group has not designated any financial
liability as at fair value through profit or loss.
During 2011 the Group entered into a forward subscription agreement as set out in
Note 14. This forward subscription agreement is treated as a derivative financial
instrument, as its value changes in response to the Company’s share price. Based on
the current valuation it is classified as a financial liability.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognised in
the income statement when the liabilities are derecognised as well as through the
EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included in finance costs in the income statement.
Derecognition
A financial liability is derecognised when the obligation under the liability is
discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new liability. The
difference in the respective carrying amounts is recognised in the income
statement.
(iv) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported
in the consolidated statement of financial position if, and only if:
- There is a currently enforceable legal right to offset the recognised amounts
- There is an intention to settle on a net basis, or to realise the assets and
settle the liabilities simultaneously
(u) Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each
reporting date is determined by reference to quoted market prices or dealer price
quotations (bid price for long positions and ask price for short positions),
without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is
determined using appropriate valuation techniques. Such techniques may include:
- Using recent arm’s length market transactions
- Reference to the current fair value of another instrument that is
substantially the same
- A discounted cash flow analysis or other valuation models
(v) Share-based payment transactions
The Company provides benefits to its employees (including key management personnel)
in the form of share-based payments, whereby employees render services in exchange
for shares or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with employees is measured by
reference to the fair value of the equity instruments at the date at which they are
granted. The fair value is determined by using a binomial model, further details of
which are given in Note 20.
In valuing equity-settled transactions, no account is taken to any vesting
conditions, other than conditions linked to the price of the shares of the Company
if applicable.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity on the date the equity right is granted. The
statement of comprehensive income charge or credit for a period represents the
movement in cumulative expense recognised as at the beginning and end of that
period.
If the terms of an equity-settled award are modified, as a minimum an expense is
recognised as if the terms had not been modified. An additional expense is
recognised for any modification that increases the total fair value of the share
based arrangement, or is otherwise beneficial to the employee, as measured at the
date of modification
If an equity-settled award is cancelled, it is treated as if it had vested on the
date of cancellation, and any expense not yet recognised for the award is
recognised immediately. However, if a new award is substituted for the cancelled
award and designated as a replacement award on the date that it is granted, the
cancelled and new award are treated as if they were a modification of the original
award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional
share dilution in the computation of diluted earnings per share (see note 8).
(w) Business combinations
Business combinations are accounted for using the acquisition method. The
consideration transferred in a business combination shall be measured at fair
value, which shall be calculated as the sum of the acquisition-date fair values of
the assets transferred by the acquirer and the amount of any non-controlling
interest in the acquire. For each business combination, the acquirer measures the
non-controlling interest in the acquiree either at fair value or at the
proportionate share of the acquiree’s identifiable net assets. Acquisition-related
costs are expensed as incurred and included in administrative expense.
When the Group acquires a business, it assesses the financial assets and
liabilities assumed for appropriate classification and designation in accordance
with the contractual terms, economic conditions the Group’s operating and
accounting policies and other pertinent condition as at the acquisition date. This
includes the separation of the embedded derivatives in those contracts by the
acquiree.
If the business combination is achieved in stages, the acquisition date fair value
of the acquirer’s previously held equity interest in the acquiree is remeasured at
fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised
at fair value at the acquisition date. Subsequent changes to the fair value of the
contingent consideration which is deemed to be an asset or liability will be
recognised in accordance with AASB 139 either in the profit or loss as a change to
other comprehensive income. If contingent consideration is classified as equity, it
should not be remeasured until it is finally settled within equity.
(x) Leases
The determination on whether an arrangement is or contains a lease is based on the
substance of the arrangement at inception date, whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets or the
arrangement conveys a right to use the asset, even if that right is not explicitly
specified in an arrangement.
Finance leases, which transfer to the Group substantially all the risks and
benefits incidental to ownership of the leased term, are capitalised at the
inception of the lease at the fair value of the leased asset or, if lower, at the
present value of the minimum lease payments. Lease payments are apportioned between
the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance
charges are cognised in finance costs in the profit or loss.
Capitalised lease assets are depreciated over the shorter of the estimated useful
life of the asset and the lease term if there is no reasonable certainty that the
Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an operating expense in the statement of
comprehensive income on a straight-line basis over the lease term. Operating lease
incentives are recognised as a liability when received and subsequently reduced by
allocating lease payments between rental expense and reduction of the liability.
(y) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the
consideration received less directly attributable transaction costs. After initial
recognition, interest-bearing loans and borrowings are subsequently measured at
amortised cost using the effective interest method. Fees paid on the establishment
of loan facilities that are yield related are included as part of the carrying
amount of the loans and borrowing.
Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the reporting date.
(z) Government grants
Grants from the government including, Australian Research and Development Tax
incentive, are recognised at their fair value where there is a reasonable assurance
that the grant will be received and the group will comply with all the attached
conditions. Government grants related to depreciable assets are recognised by
reducing the carrying amount of the asset. When the grant relates to an expense
item it is recognised in income over the period necessary to receive the grant on a
systematic basis.
Note 3: Revenue and expenses
Revenue and Expenses from Continuing Operations
2013 2012
Note $ $
(a) Revenue
Finance revenue:
Interest received 86,285 205,183
(b) Other income
R&D Government grant income 326,711 -
Other income - 4,330
362,711 4,330
(c) profit and loss
Other expenses include the following:
Depreciation 29,394 38,322
Gain on disposal of plant and equipment 15 1,074
Bad debt expenses - -
Consulting services 599,211 698,863
Employment related
- Directors fees 120,000 236,705
- Wages 224,552 231,137
- Superannuation 5,778 5,824
Corporate 240,725 524,046
Travel 128,279 223,276
Other 244,398 364,045
1,592,352 2,323,292
Note 4: Segment information
Identification of Reportable Segments
The Group has based its operating segment on the internal reports that are reviewed
and used by the executive management team in assessing performance and in
determining the allocation of resources.
The Group currently does not have production and is only involved in exploration.
As a consequence, activities in the operating segment are identified by management
based on the manner in which resources are allocated, the nature of the resources
provided and the identity of the manager and country of expenditure. Information is
reviewed on a whole of entity basis.
Based on these criteria the Group has only one operating segment, being
exploration, and the segment operations and results are reported internally based
on the accounting policies as described in Note 2 for the computation of the
group’s results presented in this set of financial statements.
Note 4: Segment information (continued)
Note Australia South Africa Consolidation
2013 2012 2013 2012 2013 2012
$ $ $ $ $ $
Revenue from
external
customers - - - - - -
Non - current 11,1
assets 2 674 1,089 755,888 253,533 756,562 254,622
Note 5: Income tax expense
2013 2012
$ $
Reconciliation of income tax expense/(income) to the
pre-tax net loss
Profit / (Loss) before income tax 1,901,288 4,479,716
Income tax calculated at 30% on loss before income tax 570,386 1,343,915
Add tax effect of: non-deductible expenses 104,949 (2,623,682)
Legal fees deduction - (4,859)
Unused tax losses and temporary differences not
brought to account (675,335) 1,284,626
Income tax expense/(income) - -
Analysis of deferred tax balances 2013 2012
Deferred tax liabilities $ $
Assessable temporary differences
Prepayments (3,752) (47,575)
Financial asset (153,911) -
Deferred tax liabilities offset by deferred tax assets 157,623 47,575
Net deferred tax liabilities - -
Deferred tax assets
Share issue expenses 251,511 380,726
Legal expense amortised 4,859 -
Payables and provions 413 6,096
Financial liability - 28,614
Unused tax losses 2,824,804 5,091,548
3,081,587 5,506,984
Total unrecognised deferred tax assets (2,923,264) (5,459,409)
Deferred tax assets 157,623 47,575
Deferred tax assets offset by deferred tax liabilities (157,623) (47,575)
Net deferred tax assets - -
Unused tax losses set out above have not been recognised due to uncertainty of
future taxable profit streams.
Note 6: Related party disclosures
(a) Compensation of Key Management Personnel
2013 2012
$ $
Short-term employee benefits 1,033,116 1,153,142
Post-employment benefits 3,303 3,303
Share based payments 291,186 71,000
Termination benefits 103,919 -
1,431,524 1,227,445
Note 6: Related party disclosures (continued)
(b) Share and option holdings
2013 Shares Options/share rights
Options/
On rights Net
Balance Received as Exercise Net Change Balance Balance Received as exercised Change Balance
1-July- Other
2012 Remuneration of Options Other (i) 30-Jun-13 1-July-2012 Remuneration Exercised (i) 30-Jun-13
Directors
3,757,19 2,648,61
Ed Nealon 3,145,000 - 612,197 427,334 7 - 3,688,149 (612,197) - 7
Klaus Borowski - - - - - 500,000 - - - 500,000
Kofi Morna - - - - - 500,000 - - - 500,000
Ted Droste - - - - - 500,000 - - - 500,000
1,436,00
Grant Button 1,436.000 - - - 0 - 552,504 - - 552,504
1,561,10 7,696,11 (1,561,10 2,777,18
Robert Hair 5,045,310 - 3 1,09,705 8 - 4,338,289 3) - 6
Executives
Lindsay Cahill 832,500 - - - 832,500 - - - - -
1,032,13 1,986,45
Andrew Nealon 644,413 - 387,719 - 2 - 2,374,181 (387,719) - 2
2,956,02
Scott Huntly 2,956,022 - - - 2 600,000 - - - 600,000
Vernon Harvey - - - - - - 400,000 - - 400,000
Dave Richards - - - - - - - - - -
Beverley Gardner - - - - - - - - - -
*Issued under the employee share plan
(i) Net change other includes:
- acquisitions and disposals on market
- issue in settlement of fees
- subscribed in share issue
- subscription for options
- sales / transfers
- appointment / resignation as director
- exchange of options for shares
Note 6: Related party disclosures (continued)
(b) Share and option holdings (continued)
2012 Shares Options
On
Balance Received as Exercise Net Change Balance Balance Received as Options Net Change Balance
1-July- of 1-July- Remuneratio
2011 Remuneration Options Other (i) 30-Jun-12 2011 n Expired Other (i) 30-Jun-12
Directors
3,145,00
Ed Nealon 1,145,000 - 2,000,000 0 - - - - -
Klaus Borowski - - - - - 500,000 - - - 500,000
Kofi Morna - - - - - 500,000 - - - 500,000
Ted Droste - - - - - 500,000 - - - 500,000
1,436,00
Grant Button 1,436,000 - - - 0 - - - - -
5,045,31
Robert Hair 4,665,310 - - 380,000 0 - - - -
Executives
Lindsay Cahill 878,939 - - (46,439) 832,500 - - - - -
Andrew Nealon 644,413 - - - 644,413 - - - - -
(1,490,98 2,956,02
Scott Huntly 4,447,007 - - 5) 2 - 600,000 - - 600,000
Vernon Harvey - - - - - - - - - -
Dave Richards - - - - - - - - - -
Beverley Gardner - - - - - - - - - -
(ii) Net change other includes:
- acquisitions and disposals on market
- issue in settlement of fees
- subscribed in share issue
- subscription for options
- sales / transfers
- appointment / resignation as director
- exchange of options for shares
Note 6: Directors’ and executives’ remuneration (continued)
(c) Number of employee shares (under non-recourse loan schemes) held by directors
and executives:
2013
Balance Received as Options Net Change Balance
Directors 1-July-12 Remuneration Exercised Other 30-Jun-13
Ed Nealon 1,100,000 - - - 1,100,000
Robert Hair 1,000,000 - - - 1,000,000
Kofi Morna - - - - -
Ted Droste - - - - -
Grant Button 900,000 - - - 900,000
Klaus Borowski - - - - -
Executives
Lindsay Cahill 450,000 - - - 450,000
Vernon Harvey - - - - -
Andrew Nealon 240,000 - - - 240,000
Scott Huntly - - - - -
Dave Richards - - - - -
Beverley Gardner - - - - -
2012
Balance Received as Options Net Change Balance
Directors 1-July-11 Remuneration Exercised Other 30-Jun-12
Ed Nealon 1,100,000 - - - 1,100,000
Robert Hair 1,000,000 - - - 1,000,000
Kofi Morna - - - - -
Ted Droste - - - - -
Grant Button 900,000 - - - 900,000
Klaus Borowski - - - - -
Executives
Lindsay Cahill 450,000 - - - 450,000
Vernon Harvey - - - - -
Andrew Nealon 240,000 - - - 240,000
Scott Huntly - - - - -
Dave Richards - - - - -
Beverley Gardner - - - - -
Note 7: Auditor’s remuneration
2013 2012
$ $
Remuneration of the auditor of the Company for:
-auditing or reviewing the financial report
Ernst & Young Australia 32,500 55,000
Ernst & Young South Africa 27,000 44,204
59,500 99,204
-other assurance related services
Ernst & Young Australia - -
59,500 99,204
Note 8: Earnings per share
2013 2012
$ $
Basic earnings/(loss) per share (cents per share) (0.60) 1.53
Diluted earnings/(loss) per share (cents per
share) (0.68) (1.30)
(1,901,288
Net profit /(loss) ) 4,479.716
Profit / (loss) used in calculating basic (1,901,288
earnings / (loss) per share ) 4,479,716
Adjustments to basic profit / (loss) used to
calculate dilutive earnings /(loss) per share (8,321,244
(2012 only, anti-dilutive in 2013) (608,414) )
Profit / (loss) used in calculating dilutive (2,509,072 (3,841,528
earnings / (loss) per share ) )
Number
Number
Weighted average number of ordinary shares used
in the calculation of basic (loss)/earnings per 315,876,56 292,246,70
share 1 5
Adjustments to weighted average number of
ordinary shares used in the calculation of
diluted earnings / (loss) per share– Add back
potential shares related to financial
asset/liability 51,303,500 2,890,273
Weighted average number of ordinary shares used
in the calculation of diluted (loss)/earnings 367,180,06 295,136,97
per share 1 8
There have been no transactions involving ordinary shares or potential shares that
would significantly change the number of ordinary shares or potential ordinary
shares outstanding between the reporting date and the date of completion of these
financial statements.
Potential dilutive shares not included in dilutive earnings per share was
24,114,672 (2012: 24,446,727)
Note 9: Cash and cash equivalents
Cash at the end of the financial year as shown
in the cash flow statement is reconciled to
items in the statement of financial position as 2013 2012
follows:
$ $
Cash at bank 548,265 3,340,076
Note 10: Trade and other receivables
2013 2012
$ $
Current
Sundry debtors 176,345 19,931
GST / VAT 92,960 108,516
269,305 128,447
Non-trade debtors are non-interest bearing and are generally on 30-90 days terms.
The carrying amounts of these receivables represent fair value and are not
considered to be impaired.
Note 11: Plant and equipment
Furniture,
fittings and Motor Leasehold
equipment vehicles improvements Total
$ $ $ $
Year ended 30 June 2012
Opening net carrying
value 35,220 88,296 23,397 146,913
Additions 25,166 - - 25,166
Disposals (1,074) - - (1,074)
Depreciation charge for
the year (17,012) (20,090) (1,220) (38,322)
Exchange differences (7,974) (10,719) (3,665) (22,358)
Closing net carrying
amount 34,326 57,487 18,512 110,325
At 30 June 2012
Cost 56,689 80,250 19,486 156,425
Accumulated depreciation (22,363) (22,763) (974) (46,100)
Net carrying value 34,326 57,487 18,512 110,325
Year ended 30 June 2013
Opening net carrying
value 34,326 57,487 18,512 110,325
Additions 2,041 - - 2,041
Disposals (392) - - (392)
Depreciation charge for
the year (13,656) (14,837) (901) (29,394)
Exchange differences (2,734) (4,776) (1,582) (9,092)
Closing net carrying
amount 19,585 37,874 16,029 73,488
At 30 June 2013
Cost 51,881 73,348 17,810 143,039
Accumulated depreciation (32,296) (35,474) (1,781) (69,551)
Net carrying value 19,585 37,874 16,029 73,488
Note 12: Other financial assets
2013 2012
$ $
Current assets
Rental and Other Deposits 6,868 7,586
Rehabilitation Trust 29,140 31,883
Financial asset at fair value through profit and
loss – forward subscription agreement (refer to
note 14) 513,035 -
549,043 39,469
Non- current assets
Available for sale investments (at fair value) 683,074 144,297
683,074 144,297
The available for sale investment is an Investo Linked Investment portfolio has
been setup with Momentum Insurance from 1 April 2012 to cover the rehabilitation of
all subsidiary mining activities in accordance with the requirements of the mining
leases.
This portfolio has an initial savings term of 10 years with an automatic increase
of 10% to the contributions on an annual basis. After the initial 10 years the
investment automatically continues in periods of 5 years. After automatic
continuation the investment will qualify for a loyalty bonus at the end of each 5
year period. The investment will be levied with allocation and management fees on a
monthly basis.
Cash withdrawals may be made up to a restricted percentage of the net fund value at
the time of the withdrawal. The withdrawn amounts will not be taken into
consideration when calculating the loyalty bonus due on the portfolio. Withdrawals
may be made at the discretion of the cessionary (CICL).
On 16th July 2012 a Deed of Surety and Indemnity was signed ceding this investment
portfolio to Constantia Insurance Company Limited (CICL) in return for a guarantee
to the Directorate Mineral Regulation (DMR) for the confirmed amount of R7,517,000.
R4,000,000 (approx. AUD432,144 at the prevailing AUD: ZAR exchange rate of
9.25618) was accessed on 25 September 2013 to assist the Group with it financial
commitments until the Anwar Asian Investments deal set out above and the rights
issue have been finalised. The session still stands and CICL gave written approval
for this on condition that the Group continued to make its monthly contributions of
R462,000 (approx. AUD49,913).
The fair value of the available for sale investment is based on quoted prices
(unadjusted) in active markets for identical assets or liabilities (Level 2).
Note 13: Trade and other payables
2013 2012
$ $
Current
Trade payables and other payables (i) 282,174 349,582
Minority interest obligation (ii) - 863,250
1,212,83
282,174 2
(i) Trade and other payables are non-interest bearing and are normally settled on
30-day terms.
(ii) During the 2011 financial year, various agreements were entered into in
respect of the minority interest in the Moonlight Iron Ore Project.
A company, Mkhombi Investments (Pty) Ltd (“Mkhombi Investments”), 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 Ferrum Iron Ore (Pty) Ltd, previously Turquoise Moon Trading 157 (Pty)
Ltd (“TMT”) to purchase that holder’s right, title and interest in TMT for
ZAR30 million (then approximately AUD4.4 million) (“TMT Sale Agreement”). The
South African Department of Mineral Resources expressed its support of the
transaction.
Ferrum South Africa (Pty) Ltd, previously Nelesco 684 (Pty) Ltd (“FSA”), a
wholly owned subsidiary of the Company, entered into agreements with Mkhombi
Investments and its holding company, Mkhombi AmaMato (Pty) Ltd (“AmaMato”), the
terms of which provide for the following to take place:
a) FSA would be issued shares in Mkhombi Investments such that it holds an
initial 32.17% interest in Mkhombi Investments, with the remaining 67.83%
held by AmaMato;
b) AmaMato lent the sum of ZAR 7.5 million to Mkhombi Investments, 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) FSA lent the sum of ZAR 22.5 million to Mkhombi, 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) Mkhombi Investments would issue shares and/ or FSA will transfer some of its
shares in Mkhombi Investments so that 11.54% of Mkhombi Investment’s shares
on issue are held by a trust representing the locally impacted community,
with the resulting shareholdings being AmaMato 60%, Nelesco 28.46%, and the
locally impacted community 11.54%; and
e) AmaMato, 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, Mkhombi Investments to FSA for ZAR 7.5 million (2012:
A$863,250).
A subscription agreement was entered into between the Company and AmaMato on 4
November 2010 (the “Subscription Agreement”). On completion of the Subscription
Agreement (subject to the fulfilment of the conditions precedent to that
agreement), AmaMato will 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 of the Shares under the First Subscription
will be ZAR 7.5 million.
AmaMato was to, on or before the later of (i) the date falling 10 business days
after the Closing Date (as defined in the Subscription Agreement and extension to
the Subscription Agreement) and (ii) 30 November 2012 (the “Subscription Period”),
which period will be extended by the Company for a period of 1 year in the event
that it raises not less than ZAR7.5 million in 2011, 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 ZAR
7.5 million. This further subscription has been extended by mutual consent until 31
January 2014.
The conditions precedent to the Subscription Agreement, include 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 listing rules, including shareholder
approval.
In the event that the conditions precedent to the Subscription Agreement were not
fulfilled by 1 November 2012, then AmaMato will have the right, for 60 days, to
require Nelesco to purchase all of AmaMato’s rights, title and interest in, and all
its claims against, Mkhombi Investments for the price of ZAR 12.5 million. The
conditions precedent to the Subscription Agreement have been met.
Kofi Morna, a Director of Ferrum Crescent Limited (“Company”), is also a director
of AmaMato and Mkhombi Investments. He became a Director of the Company during the
2011 financial year for the purposes of the above transaction. He holds an
indirect non-controlling interest in AmaMato.
Upon completion of the Subscription Agreement, the Company will legally own
directly and indirectly through its wholly owned subsidiary, Mkhombi Investments,
97% of Ferrum Iron Ore (Pty) Ltd with the remaining 3% held by the GaSeleka
Community. AmaMato will own 15.6% of the Company.
In the opinion of the Directors, the conditions precedent to the Subscription
Agreement are essentially procedural in nature, following the completion of the
Company’s capital raising of 10 million pounds Sterling (“GBP”) (equal to
approximately AUD 16 million) before expenses, completed on 16 December 2010. As
such, while the Company’s legal interest in the Moonlight Iron Ore Project
increased from 74% to approximately 81.5%, the Directors hold an effective interest
in the underlying project of 97% as at 31 December 2010 as a result of the minority
purchase obligation.
Note 14: Financial liability
2013 2012
$ $
Current
Financial liability at fair value through
profit and loss – forward subscription
agreement - 95,379
- 95,379
The above liability will be settled in the Company’s shares and not in cash.
As described above, in the opinion of the Directors, the remaining procedural
conditions precedent under the Subscription agreement will be fulfilled within one
year from balance date. Under the Subscription Agreement, the Company has agreed
to issue shares to AmaMato equal to 15.6% of the issued share capital of the
Company for ZAR15 million. 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 (incomplete 2nd tranche as at 30 June 2013). Refer
to Note 25 for the Group’s exposure to equity price risk on this amount. The gain
on revaluation of the financial liability/asset during the period amounts to
$608,414 (financial asset – refer to note 12) (2012 of $8,321,244) which has been
recognised through the profit and loss. The valuation of the forward subscription
agreement is $513,035 at balance date due to variations in the AUD/ZAR exchange
rate (30 June 2013: 9.506 RAND/AUD) and Ferrum Crescent Limited’s share price (30
June 2013: AUD$0.01).
Note 15: Provisions
2013 2012
$ $
Employee benefits 27,057 20,320
Note 16: Issued Capital
2013 2012 2013 2012
No. of shares No. of $ $
shares
(a) Share Capital
Ordinary Shares
Ordinary shares fully
paid 328,201,385 298,841,705 28,366,383 27,392,728
Employee share plan
shares (6,595,000) (6,595,000) (509,905) (509,905)
321,606,385 292,246,705 27,856,478 26,882,823
Capital management
When managing capital (which is defined as the Company’s total equity),
management’s objective is to ensure the entity continues as a going concern as well
as to maintain optimal returns to shareholders and benefits for other stakeholders.
Management also aims to maintain a capital structure that ensures the lowest cost
of capital available to the entity. As the equity market is constantly changing
management may issue new shares to provide for future exploration and development
activity. The Company is not subject to any externally imposed capital
requirements.
(b) Movements in ordinary share capital
Number of
Date Details shares $
01 July 2011 Opening Balance 298,691,705 27,392,728
23 February 2012 Issued at 10 cents per share 150,000 -
30 June 2012 Closing Balance 298,841,705 27,392,728
28 November 2012 First tranche of BEE transaction 25,281,620 780,000
Salary sacrifice share scheme
14 December 2012 issue 4,078,060 204,340
Costs associated with share issues - (10,685)
30 June 2013 Closing Balance 328,201,385 28,366,383
- Employee share plan shares on
issue (6,595,000) (509,905)
321,606,385 27,856,478
If, any time during the exercise period, an employee ceases to be the employee, all
share options held by that employee will lapse one month after the employment end
date. Therefore above employee shares are recognised in issued capital when issued
to the employees.
(c) Movements in employee share plan shares issued with limited recourse
employee loans
Number of
Date Details shares $
1 July 2011 Opening balance 6,445,000 (509,905)
Issued during 2012 150,000 -
30 June 2012 Closing balance 6,595,000 (509,905)
30 June 2013 Closing balance 6,595,000 (509,905)
No employee share plan shares were issued in the current financial year.
This account is used to record the value of shares issued under the Executive Share
Incentive Plan (ESIP). The ESIP is accounted for as an “in-substance” option plan
due to the limited recourse nature of the loan between employees and the Company to
finance the purchase of ordinary shares. The total fair value of the “in substance”
options issued under the plan is recognised as a share-based payment expense over
the vesting period, with a corresponding increase in equity. Information on the
valuation of shares issued under the ESIP during the period is disclosed in Note
19.
Note 17: Listed Options
2013 2012
No of Options No of Options
Options
At year end the following options were on issue:
- 31 December 2013 Options exercisable at 40 cents
per share 21,496,727 21,496,727
- 07 December 2013 Options exercisable at 10 cents
per share 2,350,000 2,950,000
- 14 December 2015 Options exercisable at 10 cents
per share 400,000 -
24,246,727 24,446,727
Movements in 31 December 2013 Options
Beginning of the financial year 21,496,727 21,496,727
Options issued during the year - -
Options cancelled during the year - -
End of the financial year 21,496,727 21,496,727
Movements in 7 December 2013 Options
Beginning of the financial year 2,950,000 2,950,000
Options issued during the year - -
Options cancelled during the year (600,000) -
End of the financial year 2,350,000 2,950,000
Movements in 14 December 2015 Options
Beginning of the financial year - -
Options issued during the year 400,000 -
Options cancelled during the year - -
End of the financial year 400,000 -
Note 18: Reserves
Share Availabl
based Foreign e for
payment Option exchange Equity sale
reserve Reserve reserve reserve reserve Total
$ $ $ $ $ $
(169,303 1,404,42 (10,126,07 (8,777,09
At 1 July 2011 ) 5 113,852 2) - 8)
Currency
translation
differences - - 11,872 - - 11,872
Cost associated
with Shares issued
employee share
incentive scheme 3,183 - - - - 3,183
(166,120 1,404,42 (10,126,07 (8,762,04
At 30 June 2012 ) 5 125,724 2) - 3)
Currency
translation
differences - - 4,738 - - 4,738
(204,340
Shares issued ) - - - - (204,340)
Growth in
investment
portfolio - - - - 25,803 25,803
Share based
payments^ 374,257 - - - - 374,257
1,404,42 (10,126,07 (8,561,58
At 30 June 2013 3,797 5 130,462 2) 25,803 5)
^
This amount includes $71,000 of remuneration in 2012 which was accrued and
ultimately settled in shares under the Company’s salary sacrifice scheme.
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 to directors, employees and consultants as part of their remuneration.
Foreign Currency Translation Reserve
The foreign currency translation 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.
Available-for-sale Reserve
Used to record changes in the fair value of the Group’s available-for-sale
financial assets.
Note 19: Accumulated losses
2013 2012
$ $
Accumulated losses at the beginning of the (20,517,734) (16,038,018)
financial year )
Net profit / (loss) for the reporting period 4,479,716 (1,901,288)
Accumulated losses at the end of the financial (16,038,018) (17,939,306)
year
Note 20: Share Based Payments
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the
year were as follows:
2013 2012
$ $
Options issued in consideration for services (i) 4,644 -
Amounts expensed for shares issued under the Company’s
Executive Share Incentive Plan (ii) 7,427 3,183
Share based payment - in respect of Moonlight Iron Ore
Project (refer note 12) - -
Shares based payment salary sacrifice scheme (iii) 291,181 -
303,252 3,183
Included in the share based payment salary sacrifice scheme is AUD$122,846 related
to the directors remuneration that has been waived by the directors concerned
subsequent to balance date (see remuneration report for breakdown).
(i) Options issued in consideration for services
Fair value of options granted
The fair value at grant date of options issued is determined using a binomial
option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the non-tradable nature of the option, the share
price at grant date and expected price volatility of the underlying share, the
expected dividend yield and the risk-free interest rate for the term of the option.
The table below summarises the model inputs (post consolidation) for options
granted during the period year ended 30 June 2013:
Options granted for no consideration 400,000
Exercise price (AUD cents) 10.00
Issue date 14 December 2012
Expiry date 14 December 2015
Underlying security spot price at grant date (AUD 0.30
cents)
Expected price volatility of the Company’s shares 100%
Expected dividend yield 0%
Expected life 3
Risk-free interest rate 2.81%
binomial model valuation per option (AUD cents per 1.16
share)
The expected price volatility is based on the historic volatility of the Company’s
share price in the market.
There were no options issued in 2012
Note 20: Share Based Payments (continued)
(ii) Shares issued under the Executive Share Incentive Plan (ESIP)
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.
During the prior reporting period, the Company issued the following shares under
the ESIP:
1. 150,000 shares at 10 cents per share to Ms Jackie Barry, Administration
Officer, on 23 February 2012 after shareholder approval.
If any time during the exercise period an employee ceases to be the employee, all
options held by that employee vest immediately and will lapse one month after the
employment end date. As such, there is not considered to be any service conditions
attaching to the grant of shares under the ESIP, and the full expense is recognised
at grant date.
Fair value of award granted
Shares granted under the ESIP are accounted for as “in-substance” options due to
the limited recourse nature of the loan between the employees and the Company to
finance the purchase of ordinary shares. The fair value at grant date for the
various tranches of rights issued under the ESIP is determined using a binomial
model using the following model inputs:
2012
Shares issued 150,000
Loan price per share (AUD cents) 10.00
Valuation date 23 February 2012
Loan expiry date 25 February 2015
Underlying security spot price at valuation date 10
(AUD cents)
Expected price volatility of the Company’s shares 89%
Expected dividend yield 0%
Expected life 3.00
Risk-free interest rate 2.1%
binomial model valuation per share (AUD cents per 10.00
share)
There were no shares issued under the ESIP in 2013.
(iii) Shares issued under the Salary Sacrifice 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.
Four individuals have elected during the year 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)
30 June 30 June 30 June 30 June
2013 Number 2013 Number 2013 Number 2013 $
of Shares of Shares of rights Total value
rights rights outstanding of Share
exercised rights
E Nealon 3,260,814 1,039,532 2,648,617 80,005
RW Hair 4,338,289 2,650,808 2,777,186 153,000
A Nealon 2,374,181 387,719 1,986,452 50,000
G Button 552,504 - 552,504 8,181
4,078,060 7,964,759
Total 10,525,778 291,186
The value of the rights per tranche of rights issued are set out below:
The grant date of the share based payments is considered to be when the directors
elect to have their compensation paid to them in the form of shares.
E Nealon RW Hair A Nealon G Button
Rights issued - Jul 2012 95,238 242,857 - -
Value of rights issued -
Jul 2012 $0.07 $0.07 $0.07 -
Rights issued - Sep 2012 133,333 340,000 100,000 -
Value of rights issued -
Sep 2012 $0.05 $0.05 $0.05 -
Rights issued - Oct 2012 161,404 411,579 121,053 -
Value of rights issued -
Oct 2012 $0.04 $0.04 $0.04 -
Rights issued - Nov 2012 222,222 566,667 166,667 -
Value of rights issued -
Nov 2012 $0.03 $0.03 $0.03 -
Rights issued - Dec 2012 241,546 615,942 181,159 -
Value of rights issued -
Dec 2012 $0.03 $0.03 $0.03 $0.00
Rights issued - Jan 2013 155,763 397,196 116,822 -
Value of rights issued -
Jan 2013 $0.04 $0.04 $0.04 -
Rights issued - Feb 2013 308,642 787,037 231,481 75,745
Value of rights issued -
Feb 2013 $0.02 $0.02 $0.02 $0.02
Rights issued - Mar 2013 383,142 977,011 287,356 94,029
Value of rights issued -
Mar 2013 $0.02 $0.02 $0.02 $0.02
Rights issued - Apr 2013 416,667 0 312,500 102,256
Value of rights issued -
Apr 2013 $0.02 $0.02 $0.02 $0.02
Rights issued - May 2013 666,667 0 500,000 163,610
Value of rights issued -
May 2013 $0.01 $0.01 $0.01 $0.01
Rights issued - Jun 2013 476,190 0 357,134 116,864
Value of rights issued -
Jun 2013 $0.01 $0.01 $0.01 $0.01
Total rights 3,260,814 4,338,289 2,374,171 552,504
Exercised 612,197 1,561,103 387,719 -
Unexercised rights 2,648,617 2,777,186 1,986,452 552,504
Note 21: Commitments
(i) At this stage the Company has no minimum obligations with respect to
tenements expenditure requirements.
(ii) Operating lease commitments are as follows:
2013 2012
$ $
Within 1 year 31,170 34,780
2 to 3 years 24,753 60,865
Total 55,923 95,645
The Company disposed of its Australian tenements during 2011 and whilst the Company
still holds tenements in South Africa, expenditure commitments in relation to these
tenements have been met. The Company has converted their South African prospecting
rights into mining rights and applied for new prospecting rights over adjacent
land. The Company is subject to new commitments in relation to mining and
prospecting expenditure.
A subsidiary of the Group entered into a 36 month commercial office lease on 01
April 2012, with an 8% annual escalation, for their head office in Johannesburg,
South Africa. The value of the lease has been annualised over the life of the Lease
agreement as per the above.
Note 22: Contingent liabilities
There are no contingent liabilities as at 30 June 2013.
Note 23: Related party transactions
Transactions between related parties are on normal commercial terms and conditions
no more favourable than those available to other parties unless otherwise stated.
Subsidiaries
The consolidated financial statements include the financial statements of Ferrum
Crescent Limited and the subsidiaries listed in the following table.
% Beneficial Equity
Interest
Name Country of 2013 2012
Incorporation
Ferrum Metals Pty Ltd Australia 100 100
Batavia Ltd Mauritius 100 100
Ferrum South Africa (Pty) South Africa 100 100
Ltd, (previously, Nelesco 684
(Pty) Ltd)
Ferrum Iron Ore (Pty) Ltd, South Africa 97.14 97.14
(previously, Turquoise Moon
Trading 157 (Pty) Ltd)
Mkhombi Investments (Pty) Ltd South Africa 88.46 88.46
Ferrum Crescent Limited is the ultimate Australian parent entity and the ultimate
parent of the Group. Transactions between Ferrum Crescent Limited and its
controlled entities during the year consisted of loan advances by Ferrum Crescent
Limited. All intergroup transactions and balances are eliminated on consolidation.
Note 23: Related party transactions ( continued)
Loans to / (from) related parties
The following transactions were undertaken between the Company, executive officers
and director-related entities during 2012 and 2013
2013 2012
$ $
Consulting secretarial fees were paid or accrued to
Athlone International Consultants Pty Ltd, a company
with which Andrew Nealon is associated 60,000 60,000
Consulting fees were paid or accrued to Camcove Pty
Ltd, a company of which Robert Hair is a director
and shareholder. 264,000 249,000
Consulting fees were paid to T.C Droste Investments
Pty Ltd, a company of which Ted Droste is a director
and shareholder 94,500 90,000
Consulting fees were paid to Torbinup Resources Pty
Ltd, a company of which Lindsay Cahill is a director
and shareholder - 29,756
Kofi Morna, a Director of the Company, is also a director and shareholder of
Mkhombi AmaMato (Pty) Ltd, who, prior to entering into the BEE subscription
agreement had a majority interest in Mkhombi Investments (Pty) Ltd. Upon completion
of the subscription agreement detailed in the review of operations section and Note
12 above, Mkhombi AmaMato will directly own 15.6% or approximately 55,208,419
shares in the Company.
Note 24: Cash flow information
2013 2012
$ $
Reconciliation of cash flow from operations with
(loss) / profit from ordinary activities after
income tax
Profit / (loss) from ordinary activities after
income tax (1,901,288) 4,479,716
Impairment of available for sale investments - -
Depreciation 15,286 38,322
Loss / (profit) on sale of plant and equipment 15 1,074
Profit on sale of available for sale financial
assets - -
Loss / (profit) on remeasurement of financial
liability (608,414) (8,321,244)
Share based payment compensation 303,252 3,183
Net exchange differences (9,214) 11,140
Changes in assets and liabilities
Increasease )/ decrease in receivables (140,831) 31,648
(Increase) / decrease in other operating assets 110,496 (144,297)
Increase / (decrease) in payables and provisions (60,672) (700,149)
Cash flows from operations (2,291,370) 4,600,607
Note 25: Financial risk management objectives and policies
The Group’s principal financial instruments comprise cash, short term deposits,
held-for-trading and derivative instruments.
The main purpose of the financial instruments is to finance the Group’s operations.
The Company also has other financial instruments such as trade debtors and
creditors which arise directly from its operations.
The main risks arising from the Group’s financial instruments are interest rate
risk, liquidity risk, foreign currency risk and credit risk. The board reviews and
agrees policies for managing each of these risks and they are summarised below:
(a) Interest Rate Risk
The Group’s exposure to interest rate risk, which is the risk that a financial
instrument’s value will fluctuate as a result of changes in market interest rates
and the effective weighted average interest rate for each class of financial assets
and financial liabilities, is set out in the following table. Also included is the
effect on profit and equity after tax if interest rates at that date had been 10%
higher or lower with all other variables held constant as a sensitivity analysis.
The Group has not entered into any hedging activities to manage interest rate risk.
In regard to its interest rate risk, the Group continuously analyses its exposure.
Within this analysis consideration is given to potential renewals of existing
positions, alternative investments and the mix of fixed and variable interest
rates.
Weighte Floatin Interest Rate
d g Fixed Non Risk Sensitivity
Average
Effecti Interes Intere Interes
ve t st t
-10% +10%
Interes
t Rate Rate Rate Bearing Total Profit Equity Profit Equity
% $ $ $ $ $ $ $ $
2013
Financial Assets
244,48 (9,143
Cash 2.36% 142,956 0 160,829 548,265 ) - 9,143 -
Trust deposits 0.00% 1,052 - 34,956 36,008 - - - -
Receivables 0.00% - - 269,305 269,305 - - - -
Investments 0.00% 683,074 - - 683,074 - - - -
Financial asset 0.00% - - 513,035 513,035
Total Financial 244,48 2,049,6
Assets 827,082 0 978,125 87
Financial
Liabilities
Trade and other
payables - - 282,174 282,174 - - - -
Financial
liability(*) - - - - - - - -
Total Financial
Liabilities - - 282,174 282,174
(*)re-classified to equity in 2013
2012
Financial Assets
2,670,6 413,71 3,340,0 (20,95
Cash 3.06% 00 7 255,760 76 1) - 20,951 -
Trust deposits 0.11% 1,151 - 38,318 39,469 - - - -
Receivables 0.54% 74,258 - 54,189 128,447 - - - -
Investments 0.75% 144,297 - - 144,297 - - - -
Total Financial 2,890,3 413,71 3,652,2
Assets 06 7 348,267 89
Financial
Liabilities
Trade and other 1,182,2 1,182,2
payables - - 08 08 - - - -
Financial liability - - 95,379 95,379 - - - -
Total Financial 1,277,5 1,277,5
Liabilities - - 87 87
Note 25: Financial risk management objectives and policies (continued)
(a) Interest Rate Risk (continued)
A sensitivity of 10% has been selected as this is considered reasonable given the
current level of both short term and long term Australian dollar interest rates. A
-10% sensitivity would move short term interest rates at 30 June 2013 from around
2.85% to 2.57% representing a 28 basis point downwards shift (19.60 basis points
net of tax).
Based on the sensitivity analysis mainly interest revenue from variable rate
deposits, cash balances and investment is impacted resulting in a decrease or
increase in overall income.
(b) Liquidity Risk
The Group manages liquidity risk by maintaining sufficient cash reserves and
marketable securities required to meet the current exploration and administration
commitments, through the continuous monitoring of actual cash flows.
Ultimate responsibility for liquidity risk management rests with the board of
directors, who have built an appropriate liquidity risk management framework for
the management of the Group’s short, medium and long term funding and liquidity
management requirements.
Less than 1 – 3 3 months 1 – 5 5+ years Total
1 month months – 1 year years
% $ $ $ $ $
2013
Liquid financial
Assets
Cash 548,265 - - - - 548,265
Trust deposits - - - 36,008 - 36,008
Receivables - 269,305 - - - 269,305
Investments - - - 683,074 - 683,074
548,265 269,305 - 719,082 - 1,536,652
Financial
liabilities:
Non-interest
bearing - (282,174) - - - (282,174)
- (282,174) - - - (282,174)
Net cash inflow /
(outflow) 548,265 (12,869) - 719,082 - 1,254,478
2012
Liquid financial
Assets
Cash 3,340,076 - - - - 3,340,076
Trust deposits - - - 39,469 - 39,469
Receivables - 128,447 - - - 128,447
Investments - - - 144,297 - 144,297
3,340,076 128,447 - 183,766 - 3,652,289
Financial
liabilities:
Non-interest
bearing - (318,958) (863,250) - - (1,182,208)
Financial liability (95,379) (95,379)
- (318,958) (863,250) (95,379) - (1,277,587)
Net cash inflow /
(outflow) 3,340,076 (190,511) (863,250) 88,387 - 2,374,702
(c) Credit Risk
Credit risk arises in the event that counterparty will not meet its obligations
under a financial instrument leading to financial losses. The Company is exposed
to credit risk from its operating activities, financing activities including
deposits with banks. The credit risk control procedures adopted by the Company is
to assess the credit quality of the institution with whom funds are deposited or
invested, taking into account its financial position and past experiences.
The maximum exposure to credit risk on financial assets of the Company which have
been recognised on the statement of financial position is generally limited to the
carrying amount.
Cash is maintained with National Australia Bank and the Standard Bank of South
Africa.
(d) Foreign Exchange Risk
The Group undertakes certain transactions denominated in foreign currencies, hence
exposures to exchange rate fluctuations arise. The carrying amount of the Group’s
foreign currency denominated monetary assets and monetary liabilities at the
reporting date is as follows, excluding forward subscription agreement obligation
the sensitivity for which is disclosed in section (e) below:
Liabilities Assets
2013 2012 2013 2012
$ $ $ $
Great British Pounds (GBP) - 6,149 1,322 187,153
South African Rand (ZAR) 167,396 1,022,666 1,128,870 799,720
United States dollars (US) 3,160 4,806 - -
Foreign currency sensitivity analysis
The Group is exposed to Great British Pound (GBP), United States (US) and South
African Rand (ZAR) currency fluctuations.
The following table details the Group’s sensitivity to a 10% increase and decrease
in the Australian Dollar (AUD) against the relevant currencies. 10% is the
sensitivity rate used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the possible change
in foreign exchange rates. The sensitivity analysis includes only outstanding
foreign currency denominated monetary items and adjusts their translation at the
period end for a 10% change in foreign currency rates.
The sensitivity analysis includes cash balances held in GBP, external loans as well
as loans to foreign operations within the Group held in ZAR and US but denominated
and repayable in AUD which give rise to a foreign currency gain or loss on
revaluation. A positive number indicates an increase in profit and other equity
where the AUD strengthens against the ZAR. In relation to cash balances held in GBP
a positive number indicates an increase in profit and other equity where the
Australian Dollar strengthens against the respective currency. For a weakening
Australian Dollar against the respective currency there would be an equal and
opposite impact on the profit and other equity and the balances below would be
negative.
2013 2012
Equity Equity
Profit / increase / Profit / increase /
(loss) (decrease) (loss) (decrease)
$ $ $ $
AUD - ZAR (87,531) 87,531 22,395 (22,395)
strengthens - GBP (143) 143 (18,100) 18,100
10% - US 351 (351) 481 (481)
AUD weakens - ZAR 87,531 (87,531) (22,395) 22,395
10% - GBP 143 (143) 18,100 (18,100)
- US (351) 351 (481) 481
Note 25: Financial risk management objectives and policies (continued)
Note: foreign currency gains or losses on intercompany loans are transferred to
equity in accordance with Note 18. Therefore there is no impact on profit.
(e) Fair value
The fair value of a financial asset or financial liability is the amount at which
the asset could be exchanged or liability settled in a current transaction between
willing parties after allowing for transaction costs.
The fair values of cash, trade and other receivables and trade and other payables
approximate their carrying values, as a result of their short maturity or because
they carry floating rates.
(i) Fair value of financial instruments measure at fair value
Last financial year the Group entered into a forward subscription agreement,
details of which are provided in Note 12. This agreement requires the Company to
issue a variable number of shares in exchange for ZAR 15 million. A change in the
Group’s share price impacts the value of the subscription agreement obligations and
as a result the Group is exposed to equity price risk.
For financial instruments carried at fair value the Group adopts various methods in
estimating fair value. The methods comprise:
Level 1 – the fair value is calculated using quoted prices in an active market
Level 2 – the fair value is estimated using inputs other than quoted prices
included in the Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices).
Level 3 – the fair value is estimated using inputs for the asset or liability that
are not based on observable market data.
For financial instruments not quoted in active markets, the Group uses valuation
techniques such as other relevant models used by market participants which may
include inputs derived from quoted prices in an active market (Level 2). This
valuation techniques use both observable and unobservable market inputs. The fair
value of this the forward subscription agreement is based on this valuation
technique so too is the investment classified as an available for sale investment
with movements going through the equity reserve.
The following table details the Group’s sensitivity to a 10% increase and decrease
in the share price of the Company (AUD) against the forward subscription agreement
obligation (2013: $513,035 (asset);2012: $95,379 (liability)), which is designated
as “Level 2”. 10% represents management’s assessment of the possible change in the
Company’s share price. The sensitivity analysis includes only the forward
subscription obligation which is equity settled and adjusts the obligation at the
period end for a 10% change in the share price of the Company.
2013 2012
Equity Equity
Profit / increase / Profit / increase /
(loss) (decrease) (loss) (decrease)
$ $ $ $
+ 10% (27,596) 27,596 (182,187) 182,187
- 10% 27,596 (27,596) 182,187 (182,187)
The following table details the Group’s sensitivity to a 10% increase and decrease
in the AUD/ZAR exchange rate against the forward subscription agreement obligation.
10% represents management’s assessment of the possible change in foreign currency
rates. The sensitivity analysis includes only the forward subscription obligation
which is equity settled and adjusts the obligation at the period end for a 10%
change in foreign currency rates.
2013 2012
Equity Equity
Profit / increase / Profit / increase /
(loss) (decrease) (loss) (decrease)
$ $ $ $
+ 10% (71,727) 71,727 (156,953) 156,953
- 10% 71,727 (71,727) 156,953 (156,953)
Note 26: Parent Entity Information
2013 2012
$ $
Current assets 505,417 2,869,355
Total assets 1,189,165 3,095,003
Current liabilities 292,617 281,460
Total liabilities 292,617 281,460
Issued capital 25,620,916 24,647,262
(26,920,51
Retained earnings 4) (23,991,990)
Reserves 2,196,146 2,158,272
Total shareholders’ equity 896,548 2,813,543
Profit / (loss) of the parent entity 2,928,525 10,907,638
Total comprehensive income 2,928,525 10,907,638
On 30 November 2009, Ferrum Crescent Limited (formerly Washington Resources Ltd)
(“FCR”) completed the legal acquisition of Ferrum Metals Limited (formerly Ferrum
Crescent Limited) (”FML”). Under the terms of AASB 3 Business Combinations
(Revised), FML was deemed to be the accounting acquirer in the business
combination. The transaction was therefore accounted for as a reverse acquisition.
The Parent entity therefore has issued capital of $25,620,916 as opposed to the
Group’s consolidated issued capital of $28,366,383. For further details please
refer to the disclosures contained within the 30 June 2010 financial report.
There have been no guarantees entered into by the parent entity in relation to any
debts of its subsidiaries.
The parent entity has no contingent liabilities as at 30 June 2012 (2011: Nil)
Note 27: Subsequent events
At the board meeting held on 13 September 2013, the board resolved unanimously
to waiver directors fees and consulting fees that had accrued up to 30 June
2013 for 3 directors as well as to waiver any future directors fees and
consulting fees until such time as agreed in a future board meeting. This
measure has been put in place to assist the company with its ongoing financing
issues.
On 21 September 2013 the Group signed a letter of Intent (LOI) with Anwar
Asian Investments, a company resident in the Sultanate of Oman for them to
invest in the group on condition that certain conditions precedent were
completed by 30 November 2013.
On 24 September 2013 the Group accessed its Investo Investment Portfolio with
Momentum to cover the short term financial burden of the Group until the above
LOI is converted into a binding contract.
JSE LIMITED REQUIREMENTS
Headline earnings reconciliation
2013 2012
$ $
Profit / (loss) attributable to ordinary equity holders
of the parent entity (1,901,288) 4,479,716
Add back IAS 16 loss on the disposal of plant
and equipment 15 1,074
Headline earnings/(loss) (1,901,273 4,480,790
Basic profit / (loss) per share (1,901,288) 4,479,716
Weighted average shares in issue 315,876,561 292,246,705
Basic profit / (loss) per share (cents) (0.60) 1.53
Headline profit / ( loss) (1,901,273) 4,480,790
Weighted average shares in issue 15,876,561 292,246,705
Headline profit / (loss) per share (cents) (0.60) 1.53
DIRECTORS RESPONSIBILITY STATEMENT AND AUDIT REPORT.
The directors accept full responsibility for the information contained
in this announcement. The auditor’s unqualified report is available for
inspection at the Company’s registered office in Australia and at the
Company’s office at Block B, Regent Hill Office Park, cnr Leslie &
Turley Rds, Lonehill, 2062 for 28 business days from release of this
announcement.
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)
Sarah Wharry/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
1 October 2013
Johannesburg
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 01/10/2013 08:00:03 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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