Wrap Text
Reviewed condensed consolidated results for the period ended 31 August 2016
MIDDLE EAST DIAMOND RESOURCES LIMITED
(formerly Sable Metals and Minerals Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2001/006539/06)
JSE share code: MED ISIN: ZAE000211876
(“MEDR” or “the company” or “the group”)
REVIEWED CONDENSED CONSOLIDATION FINANCIAL RESULTS FOR THE 6 MONTHS ENDED
31 AUGUST 2016
CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 31 AUGUST 2016
Reviewed 6 Audited year Unaudited 6
months ended months
ended 29 Feb 2016 ended
31 Aug 2016 31 Aug 2015
ASSETS
Non-current assets 403,295 403,295 2,172,980
Property, plant and equipment - - 143,316
Intangible Assets - - 1,200,000
Investment in subsidiaries - - -
Other Financial assets 403,295 403,295 829,664
Current assets 280,328 613,831 1,670,515
Trade and Other Receivables 273,646 212,915 124,229
Cash and cash equivalents 6,682 400,916 1,546,286
Total assets 683,623 1,017,126 3,843,495
EQUITY AND LIABILITIES
Equity attributable to equity holders (3,595,782) (2,069,314) (11,158,843)
Stated capital 99,468,434 99,468,434 91,594,801
Share Based Payment Reserve - - 1,778,618
Accumulated loss (102,726,258) (101,199,790) (105,057,855)
Cash received on shares to be sold - - 614,170
Non-controlling interest (337,958) (337,958) (88,577)
Non-current liabilities 472,500 - 8,289,049
Other Financial Liabilities 472,500 - 8,289,049
Deferred Finance Charge - - -
Current liabilities 3,806,905 3,086,440 6,713,289
Trade and other payables 3,806,905 3,086,440 713,289
Other Financial Liabilities - - 6,000,000
Total equity and liabilities 683,623 1,017,126 3,843,495
Issued shares 435,126,517 435,126,517 227,911,808
Net asset value per share (cents) (0.75) (0.40) (4.86)
Tangible net asset value per share (cents) (0.75) (0.40) (5.38)
CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE 6 MONTHS ENDED
31 AUGUST 2016
Reviewed 6 Audited year Unaudited 6
months ended 29 months
ended Feb 2016 ended
31 Aug 2016 31 Aug 2015
Continuing operations
Other Operating Income - 7,523,397 167,700
Operating Expenses (1,526,468) (8,343,404) (1,439,610)
Operating Loss (1,526,468) (820,007) (1,271,910)
Finance income - 1,381,080 -
Finance cost - (1,475,494) -
Profit / (loss) before taxation (1,526,468) (914,421) (1,271,910)
Taxation - -
Profit / (loss) from continuing operations (1,526,468) (914,421) (1,271,910)
Profit / (loss) from discontinuing operations - 331,525 (2,857,051)
Loss for the period (1,526,468) (582,896) (4,128,961)
Loss for the year attributable to
Owner of the parent (1,526,468) (270,896) (4,128,961)
Non-controlling interest - (312,000) -
Loss for the year (1,526,468) (582,896) (4,128,961)
Headline loss reconciliation – continuing
operations
Net loss for the year (1,526,468) (914,421) (1,271,910)
Less: profit on sale of assets / liabilities - (6,718,629) -
Less: non-controlling interest - (312,000) -
Headline loss (1,526,468) (7,945,050) (1,271,910)
Headline loss reconciliation – discontinuing
operations
Net loss for the year - 331,525 (2,857,051)
Less: profit on sale of assets / liabilities - (5,740,710) -
Less: non-controlling interest - - -
Headline loss - (5,409,185) (2,857,051)
Weighted average number of shares 435,126,517 247,727,422 227,911,808
Fully diluted WA number of shares 435,126,517 247,727,422 227,911,808
Loss per share (cents) (0.35) (0.24) (1.81)
From continuing operations (cents) (0.35) (0.37) (0.56)
From discontinued operations (cents) 0.00 0.13 (1.25)
Diluted loss per share (cents) (0.35) (0.24) (1.81)
From continuing operations (cents) (0.35) (0.37) (0.56)
From discontinued operations (cents) 0.00 0.13 (1.25)
Headline loss per share (0.35) (5.39) (1.81)
From continuing operations (cents) (0.35) (3.21) (0.56)
From discontinued operations (cents) 0.00 0.13 (1.25)
Diluted headline loss per share (0.35) (5.39) (1.81)
From continuing operations (cents) (0.35) (3.21) (0.56)
From discontinued operations (cents) 0.00 0.13 (1.25)
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Share Accumulated Non- Total
Capital Based Loss controlling Equity
Payment Interest
Reserve
Balance at 1 March 87,889,857 1,778,618 (100,928,894) (88,578) (11,348,997)
2015 (restated)
Comprehensive loss - - (270,896) (312,000) (582,896)
for the year
Transactions with
owners in their
capacity as owners
of equity
Subscription for 8,000,000 - - - 8,000,000
shares
Capitalised costs on (245,219) - - - (245,219)
subscription
Share incentive - 2,045,178 - - 2,045,178
scheme charge
Disposal of - - - 62,620 62,620
subsidiary
Transfer from share 3,823,796 (3,823,796) - - -
based payment
reserve
Balance at 1 March 99,468,434 - (101,199,790) (337,958) (2,069,314)
2016
Comprehensive loss - - (1,526,468) - (1,526,468)
for the period
Transactions with
owners in their
capacity as owners
of equity
- - - -
Balance at 31 99,468,434 - (102,726,258) (337,958) (3,595,782)
August 2016
CONDENSED STATEMENT OF CASH FLOWS
Reviewed 6 Audited year Unaudited 6
months ended months
ended 29 Feb 2016 ended
31 Aug 2016 31 Aug 2015
Cash flows from operating
activities
Cash used in operations (866,734) (8,920,360) (4,112,249)
Finance costs - (94,414) -
Net cash from operating activities (866,734) (9,014,774) (4,112,249)
Proceeds from sale of plant and - 68,082 70,299
equipment
Proceeds from sale of subsidiary net - (687,781) -
of cash disposed of in subsidiary
Proceeds from sale of disposed - 100,000 -
subsidiary loan account
Increase in financial assets - - (142,632)
Net cash from investing activities - (519,699) (72,333)
Cash flows from financing activities
Proceeds from shares issued - 7,754,783 614,170
Payment for cession of liabilities - (5,000,000) -
Proceeds from financial liabilities 472,500 7,397,519 5,000,000
Loan (repaid) to related parties - (55,000) -
Loan advanced from related parties - - 125,000
Loan repaid to director - (195,111) (41,500)
472,500 9,902,191 5,697,670
Total cash movement for the year (394,234) 367,718 1,513,088
Cash at the beginning of the year 400,916 33,198 33,198
Total cash at the end of the year 6,682 400,916 1,546,286
OPERATIONS, MARKETS AND FINANCIAL PERFORMANCE
Financial performance for the 6 months ended 31 August 2016
The group is still in the exploration phase and is investigating various acquisitions and therefore does not
generate cash from its activities. The group made a net loss of R1.5 million for the period (August 2015:
R4.1 million).
The company’s expenses mainly consist of salaries and general costs related to a listed entity.
Management continue to monitor the cash flow situation on an ongoing basis, and take steps to reduce
expenditure. Monthly expenses have been reduced to less than R250 000 per month by 31 August 2016
and have subsequently been reduced to less than R120 000 per month.
As is common with many junior exploration and mining companies, the group raises capital for exploration
and other projects as and when required.
TRANSACTIONS
In terms of the Blain transaction, Sable Platinum Holdings (Pty) Ltd (“SPH”), a wholly owned subsidiary of
MEDR will acquire the sale assets of Blain consisting of equipment and residue stockpile in situ on the
dumps situated at remaining Extent of Portion 4 of the farm Roode Pan No. 70, Kimberley (“the Property”)
owned by Kamfersdam Diamond Mining (Pty) Ltd, known as the Kamfersdam Dumps.
The purchase price of R14 million will be subject to a reduction, pro-rata, if the profit target of R3.45 million
every six months for a period of 24 months after the effective date, achieved through the sale of diamonds,
is not met.
The purchase price will be payable by the issue to Blain of 40 000 000 shares in MEDR at a price of 35
cents each per share, as follows:
- 10 000 000 shares will be issued on each fulfilment of the profit target at 6 monthly intervals for a
period of two years calculated from the effective date;
- In the event that a profit target is not achieved, there shall be a pro-rata reduction of the purchase price
to be paid relative to the profit target actually achieved.
SEGMENT REPORTING
Whilst the company retains various platinum prospecting rights, during the period the group currently
operated in one segment relating to the expenditure on acquisitions in the diamond sector.
BASIS OF PREPARATION
The group’s financial results for the 6 months ended 31 August 2016 constitute a summary prepared in
accordance with the JSE Listings Requirements, the South African Companies Act, 2008 as amended (the
Companies Act), and the recognition and measurement requirements of International Financial Reporting
Standards (IFRS) and the presentation and disclosure requirements of IAS 34 and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee or its successor of the group’s audited
financial statements.
The accounting policies applied in the preparation of these reviewed condensed consolidated interim
financial statements comply with IFRS and are consistent with those used in the annual financial
statements for the year ended 29 February 2016.
This reviewed interim report is extracted from the reviewed information, but is not itself audited. The
directors take full responsibility for the preparation of the reviewed interim report and for ensuring that the
financial information has been correctly extracted from the underlying audited financial statements. A copy
of the reviewed opinion is available for inspection at the company’s registered office.
The interim financial statements have been prepared under the supervision of Morné du Plessis CA (SA),
the financial consultant.
GOING CONCERN
The group continued to incur losses in the 6 month period. The interim results have been prepared on the
basis of accounting policies applicable to a going concern. This basis presumes that funds will be available
to finance future operations and that the realisation of assets and settlement of liabilities, contingent
obligations and commitments, will occur in the ordinary course of business.
MEDR is an exploration company not yet in a cash generating position which is obliged to fund exploration
through equity investments. The group is currently exploring options available to it to enable it to raise
further capital in order to continue its exploration and acquisition programme and to cover all general and
administration costs. The group's future prospects and stability rely on its ability to raise further capital for
the ensuing year.
At 31 August 2016 the group had negative equity attributable to equity holders of R3.6 million. The group
incurred a net loss of R1.5 million for the 6 months ended (compared to the R4.1 million in the comparative
period) and, as that date, the group's total liabilities, fairly valued, exceeded its total assets by R3.6 million.
It should be noted that the majority of this liability is to Sable Platinum Mining Limited, the company that
was spun off in terms of the restructuring of the group in January 2016, and to current directors.
During the period to August 2016 the company had an average expense of R250 000 per month. The CEO,
James Allan did not draw a salary for five of the six months and will continue to not draw a salary until the
finances are in a sounder position. Excluding the costs of the circular and general meeting required for the
specific issue of shares for cash the monthly expenses have been reduced to approximately R120 000 per
month.
In mitigation of the going concern, the group has done the following:
- reduced monthly expenditure;
- concluded an agreement with Sheikh Abdulla Khalfan Humaid Nasser (“the Chairman”) or (“the
Sheikh”) for an interest free loan and subscription of shares agreement (“specific issue”); and
- renegotiated the purchase of the sale assets of Blain Capital Solutions (Pty) Ltd.
The group is currently in discussions with the Middle Eastern investors to inject further cash into the group
to cover general and administration costs and to fund acquisitions.
These measures are taken in anticipation of projects being evaluated.
DIVIDEND POLICY
No dividend has been declared for the interim period.
CHANGES TO THE BOARD
Following the subscription of shares by Broken Land Adventures Proprietary Limited (“BLA”), they
nominated for appointment the Sheikh and Said Tinawi on 29 February 2016.
BLA further nominated and appointed Mohammed Bassam and Richard Mhlontlo as non-executive
directors on 29 July 2016 and Mike Rogers, Mpho Mokgatlhe and Charles Mostert resigned subsequently
on the same date.
The Sheikh was appointed as non-executive chairman and Richard Mhlontlo was appointed as lead
independent to the Sheikh. Eshaan Singh resigned as part-time financial director and Afzal Jagot was
appointed as financial director of the company effective 29 July 2016. David Levithan resigned 20
September 2016.
LITIGATION
The company is not aware of any legal or arbitration proceedings (including any such proceedings
which are pending or threatened), which may have or may have had, in the last 6 months, a material
effect on the group’s financial position.
LOOKING FORWARD
The company has been in a period of cost reduction whilst finalising capital raising with the Chairman and
will be concentrating on finalising the specific issue in terms of preparing a circular and holding the general
meeting for shareholders to approve the specific issue of shares to the Chairman.
The Blain acquisition will be brought into production and a process of investigating and analysing various
assets for further acquisition will continue.
EVENTS AFTER THE REPORTING PERIOD
The subscription agreement for the specific issue with the Chairman for the injection of R12 million into the
company was concluded after the reporting period.
Shareholders are referred to the SENS announcement released by the JSE on 6 December 2016 regarding
the suspension of the listing.
The Company has subsequently received a bank guarantee for USD 417 000 dated for 19 December 2016
and it is expected that a further bank guarantee for the balance of USD 456 000 will be received by 19
December 2016. The subscription agreement will be amended to reflect these changes.
Application will be made to the JSE to lift the suspension of the listing today.
INDEPENDENT REVIEWERS REPORT
These interim condensed consolidated financial statements for the period ended 31 August 2016 have
been reviewed by PKF (VGA), which expressed an unqualified review conclusion, with an emphasis of
matter paragraph:
Emphasis of Matter
Without qualifying our conclusion, we draw attention to the fact that the group has not generated revenue in
the past 6 months and no evidence could be obtained that the group will be generating revenue in the near
future. The ability of the group to continue as a going concern over the next twelve months depends
primarily on a swift guarantee received from PLG Capital Bank Limited. The guarantee is dated 19
December 2016 for an amount of USD 417 000. The amount is to be converted into equity after approval
by shareholders in a general meeting. If the funds are not received and converted into equity then these
conditions, along with other matters, indicate the existence of a material uncertainty which may cast
significant doubt on the group’s ability to continue as a going concern.
Other Matters
This is the first interim condensed consolidated financial statements which have been subject to reviewed
for the group, the comparative figures are part of the current period’s financial statements as required by
relevant legislation and applicable accounting standards. Therefore no opinion is expressed on the
comparative figures.
Conclusion
Based on our review, except for the items noted in the above paragraph , nothing has come to our
attention that causes us to believe that the accompanying condensed consolidated financial statements of
Middle East Diamond Resources Limited and its subsidiaries for the six months ended 31 August 2016 are
not prepared, in all material respects, in accordance with IAS 34, Interim Financial Reporting, the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and the requirements of the
Companies Act of South Africa.
PKF (VGA) Chartered Accountants
Chartered Accountants (S.A.)
Register Auditor
Per: Mr. H. Nieuwoudt
Partner
Registered Auditor
By order of the board
Sandton
7 December 2016
Executive directors: James Allan (chief executive officer), Afzal Jagot (financial director)
Non-executive directors: Sheikh Abdulla Khalfan Humaid Nasser, Said Tinawi
Independent non-executive directors: Richard Mhlontlo, Muhammed Bassam
Registration number: 2001/006539/06
Registered address: Kingsley Office Park, 85 Protea Road, Chislehurston, 2196
Business postal address: PO Box 411130, Craighall, 2024
Company secretary: Juba Statutory Services Proprietary Limited
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Exchange Sponsors (2008) Proprietary Limited
Date: 07/12/2016 05:14:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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