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Reviewed Provisional Consolidated Annual Financial Statements for the Year Ended 28 February 2017
Chrometco Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/026265/06)
Share code: CMO
ISIN: ZAE007020249
("Chrometco" or "the Group")
REVIEWED PROVISIONAL CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED
28 FEBRUARY 2017
Provisional condensed consolidated statement of financial position
Reviewed as at Audited as at
Note 28 Feb 2017 29 Feb 2016
R'000 R'000
Assets
Non-current assets 274,903 284,761
Property, plant and equipment 2,859 1,999
Intangible assets 9 268,886 279,755
Environmental rehabilitation
investment 10 3,158 3,007
Current assets 2,624 2,477
Trade and other receivables 64 792
Cash and cash equivalents 2,560 1,685
Total assets 277,527 287,238
Equity and liabilities
Capital and reserves 209,017 233,867
Stated capital 158,062 158,062
Retained earnings 29,716 49,960
Non-controlling interests 21,239 25,845
Non-current liabilities 67,327 53,041
Deferred taxation 56,528 49,010
Borrowings 11 5,221 -
Environmental rehabilitation
provision 12 5,578 4,032
Current liabilities 1,183 330
Trade and other payables 1,173 320
Environmental rehabilitation
provision 12 10 10
Total equity and liabilities 277,527 287,238
Provisional condensed consolidated statement of comprehensive income
Audited for
Reviewed for the year
the year ended ended
Note 28 Feb 2017 29 Feb 2016
R'000 R'000
Revenue 5 - 1,401
Cost of sales - -
Gross profit - 1,401
Other income 6 294 2,810
Depreciation of tangible assets (85) (88)
Amortisation of intangible
assets (10,869) (7,872)
Operating expenses (5,907) (9,046)
Loss before interest and
taxation (16,567) (12,794)
Finance income 54 246
Finance costs (819) (341)
Loss before taxation 7 (17,332) (12,890)
Taxation 8 (7,518) (18,046)
Loss for the year (24,850) (30,936)
Other comprehensive income - -
Total comprehensive loss for the
year (24,850) (30,936)
Loss and total comprehensive
loss for the year - -
attributable to:
Owners of the parent (20,245) (24,579)
Non-controlling interest (4,605) (6,357)
Basic loss per share (cents) 13 (7.36) (10.77)
Diluted loss per share (cents) 13 (7.36) (8.94)
Provisional condensed consolidated statement of cash flows
Reviewed for Audited for
the the year
year ended ended
Note 28 Feb 2017 29 Feb 2016
R'000 R'000
Cash flows from operating activities (3,948) (4,221)
Cash flows from investing activities (177) (1,428)
Cash flows from financing activities 5,000 -
Net increase/(decrease) in cash and
cash equivalents 875 (5,649)
Cash and cash equivalents at
beginning of year 1,685 7,334
Cash and cash equivalents at end of
year 2,560 1,685
Provisional condensed consolidated statement of changes in equity
Retained
earnings/ Non-
Stated (accumulated controlling
capital loss) interest Total
R'000 R'000 R'000 R'000
Balance at 1 March 2015 54,187 74,539 32,202 160,928
Total comprehensive loss
for the year - (24,579) (6,357) (30,936)
Issue of shares 103,875 - - 103,875
Balance at 28 February
2016 158,062 49,960 25,845 233,867
Total comprehensive loss
for the year - (20,245) (4,605) (24,850)
Balance at 28 February
2017 158,062 29,716 21,239 209,017
Commentary – Financial and operational overview.
1. The directors present the reviewed results for the year ended 28 February
2017.
2. Basis of preparation
The provisional condensed consolidated annual financial statements for the year
ended 28 February 2017 have been prepared in accordance with the framework concepts
and the recognition and measurement criteria of International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee,
contains as a minimum information required by IAS 34 – Interim Financial Reporting,
the Financial Reporting Pronouncements as issued by the Financial Reporting
Accountants Council, the JSE Limited Listings Requirements and the South African
Companies Act, 71 of 2008, as amended.
The accounting policies applied in the preparation of the condensed consolidated
preliminary financial statements are in terms of IFRS and are consistent with
those applied in the previous consolidated annual financial statements.
The provisional condensed consolidated annual financial statements were prepared
by the financial director, Mr NL Waisberg.
3. Auditors report
The modified review report issued on these provisional condensed consolidated
annual financial statements by Chrometco group’s auditors, Mazars, is available
for inspection at the group's registered office during normal office hours. The
review report included an emphasis of matter paragraph referring to the going
concern note in the provisional financial information. The Group has incurred
operating losses for a number of years due to limited trading. The ability of the
Group to fund operations in the foreseeable future is largely dependent on the
ability of the directors to arrange for alternative sources of funding and the
realisation of the income from potential expansion opportunities as more fully
described in the note pertaining to going concern.
These conditions, along with the matters set forth in the notes to the accompanying
provisional financial information, indicate the existence of a material
uncertainty which may cast significant doubt about the Group’s ability to continue
as a going concern.
4. Nature of business
The Group is involved in the exploration of mineral resources and the possible
beneficiation thereof. The Group’s mineral resources and reserves statement has
been updated to be 2016 SAMREC compliant. The full report was included in the
Circular published on 30 May 2017.
5. Revenue
The Group did not sell any chrome ore in the period under review after the
arrangement, in terms of which a third party extracted chrome ore from the
Rooderand Mine, came to an end during the period ended 29 February 2016. Revenue
for the year decreased to Rnil (2016: R1.4 million).
6. Other income
The Group recovered bad debts amount to R0.3 million from International Ferro
Metals Limited.
7. Loss for the year
Net loss for the year is arrived at after taking the following items into account:
Legal and professional fees of R1.1 million (2016: R1.2 million). Legal fees
relate to transaction costs in respect of the transaction with Sail.
Directors’ remuneration for the year amounted to R0.8 million (2016: R1.3
million).
Provision for doubtful debts of Rnil (2016: R2.5 million). During 2016, an amount
of R2.5 million, relating to International Ferro Metals Limited (“IFM”) for the
recovery of rehabilitation expenditure, was recognised as a provision for doubtful
debts.
Finance charges of R0.60 million (2016: R0.34 million) on the Environmental
rehabilitation provision, were incurred during 2017.
8. Taxation
A deferred tax charge of R7.5 million was recognised for the year (2016: R18.0
million). No deferred tax asset is being recognised.
9. Intangible assets
New order
mining Geological
right information
Rooderand Rooderand Total
R'000 R'000 R'000
Useful life 30 years 29 years
Carrying amount 1 March 2015 165,877 17,875 183,752
Cost 186,030 19,500 205,530
Accumulated depreciation 20,153 1,625 21,778
Additions 103,875 - 103,875
Amortisation 7,200 672 7,872
Carrying amount 29 February
2016 262,552 17,203 279,755
Cost 289,905 19,500 309,405
Accumulated depreciation 27,353 2,297 29,650
Amortisation 10,196 673 10,869
Carrying amount 28 February
2017 252,356 16,530 268,886
Cost 289,905 19,500 309,405
Accumulated depreciation 37,549 2,970 40,519
10. Environmental rehabilitation investment
During the year, the Group contributed approximately R0.18 million to an
environmental rehabilitation investment fund (managed by Guardrisk Insurance
Company Limited).
2017 2016
R’000 R'000
Balance at beginning of the year 3,007 1,579
Cash contributions to fund 176 1,483
Net investment management fees (25) (55)
Balance at the end of the year 3,158 3,007
11. Borrowings
On 30 September 2016, Sail Minerals Proprietary Limited (“Sail”) granted a
standby loan facility to Chrometco to the amount of R10 000 000. In terms of the
agreement, Chrometco drew R5 000 000 of the facility within 1 business day from
opening the facility.
The facility carry the following payment terms:
Interest rate: Bears interest at the Prime Rate, calculated on a nominal annual
compounded monthly in arrears basis
Repayment terms: The facility will be repaid from:
a) Amounts received by Chrometco in terms of any share subscription agreements
concluded between Sail and Chrometco; and
b) Income and/or distributions that Chrometco receives or becomes entitled to.
Additionally, the entire outstanding facility becomes repayable by Chrometco if:
a) Any of the following agreements is cancelled by Sail and/or GSE as direct
result of a breach of any provision therein by Chrometco:
- the Share Subscription Agreement
- the Black Chrome Agreement; and
- the Palm Chrome Agreement.
b) Any of the following agreements are not in force or effect of each respective
agreement outlined below, other than to the extent that they are not within the
control of Chrometco:
- the Share Subscription Agreement
- the Black Chrome Agreement; and
- the Palm Chrome Agreement.
Security provided: Chrometco provided all the shares, including any preference
shares, owned or held by Chrometco in the share capital of Rooderand as security
on the facility.
2017 2016
R’000 R'000
Loan raised 5,000 -
Finance charges 221 -
Balance at the end of the year 5,221 -
For the 2017 financial year, the loan carried interest at a rate of 10.5%.
12. Environmental rehabilitation provision
2017 2016
R’000 R'000
Balance at beginning of the year 4,042 2,912
Decommissioning cost capitalised to property,
plant and equipment 947 (180)
Increase in rehabilitation provision
for the period - 969
Interest unwind on rehabilitation provision 599 341
Balance at the end of the year 5,588 4,042
Short-term portion 10 10
Long-term portion 5,578 4,032
13. Reconciliation between loss and headline loss per share
2017 2016
Headline loss attributable to equity holders (20,245) (24,579)
Headline loss per share (cents) (7.36) (10.77)
Diluted headline loss per share (cents) (7.36) (8.94)
Weighted average number of shares (`000) 274,929 228,262
Potential ordinary shares with dilutive effect - 46,667
Diluted weighted average number of shares 274,929 274,929
There were no reconciling items on the Headline loss attributable to equity
holders for 2017.
14. Contingent liability – the Long-Term Incentive Plan (LTIP)
The Group has identified that in terms of the LTIP, a potential liability exist
in case of a take-over of Chrometco. In terms of the scheme, if a similar scheme
which contains materially similar terms and conditions of the current LTIP is
not offered by the acquirer, the Board may, in its absolute discretion,
determine, in respect of all of the LTIP Awards, that the restrictions imposed
become unconditional at the date of take-over.
A contingent liability exist as the following events have not occurred:
-Resolution by the Board to lift the restrictions imposed by the LTIP, making
the awards unconditional.
-Occurrence of a take-over (refer to the going concern note for more detail
regarding the transaction with Sail).
15. Segment Information
Segment information is not disclosed as the Group is currently not operational.
16. Events after the reporting date
There were no events that could have a material impact on the financial results
of the Group after 28 February 2017, except for the following:
The Group issued the Circular for the approval of the Sail transaction on 30 May
2017.
17. Going Concern
The directors have reviewed the Group’s financial budgets with their underlying
business plans. In light of the current financial position and existing borrowing
facilities, they consider it appropriate that the Group and company annual
financial statements be prepared on the going concern basis. However, sufficient
short-term liquidity to sustain operations until the transaction discussed below
is concluded is dependent on the drawing of further funds from the facility
discussed in note 11 above. Furthermore, as discussed below the conclusion of the
pending transaction is dependent on a number of outstanding conditions. These
factors represent a material uncertainty that may cast significant doubt about
the Group’s and Company’s ability to continue as a going concern.
Notwithstanding the fact that Chrometco did not trade during the 2017 financial
year the transaction with Sail Minerals and Grand Slam Enterprise (Pty) Ltd has
a very high probability of being concluded. The transaction includes the
acquisition of a fully functional chrome mine (Black Chrome), a chrome prospecting
right (Palm Chrome) and a minerals trading company (Sail Minerals). The
transaction will result in the recapitalisation of Chrometco and reposition the
Group in the market as a resource holding and active minerals trading company.
The outstanding conditions precedent for the conclusion of the transaction
includes the following:
-The approval by the Company’s shareholders of a waiver of the mandatory offer to
minority shareholders;
-The approval of the transaction by Chrometco shareholders;
-All other regulatory approvals required; and
-Section 11 approval by the DMR for change in ownership of the assets.
The board is of the opinion that the transaction has a very high probability of
being concluded. Chrometco has appointed a corporate advisor (PSG) who has
assisted in the submission of the Circular and the Competent Persons Reports.
In light of the high probability of conclusion of the above transaction the
company is well placed to have the beneficial use of Black Chrome in the 2018
financial year and is of the opinion that it is and will remain a going concern
for both a cash flow and operational perspective.
18. Dividends
No dividend has been declared for the period (2016: R nil).
Signed on behalf of the Board of Directors
PJ Cilliers
Managing Director
Johannesburg
31 May 2017
Directors:
JG Scott+ (Chairman), PJ Cilliers (MD), NL Waisberg (FD), R Rossiter*, E
Bramley*, IWS Collair+,
* non-executive
+ independent non-executive
CORPORATE INFORMATION
Designated Advisor:
PSG Capital
Company Secretary:
The Green Board CC
Registered Office
71 Van Beek Avenue
Glenanda
Johannesburg
2091
Postal address
PO Box 758
Mondeor
2110
Auditors
Mazars
Date: 31/05/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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