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Keras Resources plc ('Keras' or the 'Company')
Interim Results
Keras Resources plc (AIM: KRS) announces its half year results for the six months ending 30 June 2022.
Overview
· Substantial progress has been made towards building our business into a cash-generative producer of high-grade premium organic fertiliser in the North American market
· Increased ownership of the Diamond Creek phosphate mine, Utah, US to 100% - now in full control of mine to market activities
· All permits and authorisation approvals renewed in line with the project's licence obligations at Diamond Creek - in the process of expanding permitted mining footprint
· Record sales in August 2022 of 700t (40% in excess of budget) and repeat forward orders resulted in extended mining campaign to produce additional tonnage
· Sales guidance of between 7,500 tons and 8,000 tons of phosphate product forecast from September 2022 to June 2023 at an all-in sustaining cost (AISC) margin of between $80 and $100 per ton
· Targeting 25,000 tons per annum of phosphate product as our medium-term annual sales objective into a market which is expected to grow at 8% per annum in tonnage terms as well as 14% in value terms
· As a result of the extended mining season, drilling programme to further define the ore reserve at Diamond Creek will now commence in spring 2023
· Successful placing of £1.95m (before expenses) raised at a premium supported by cornerstone investor First Uranium Resources Ltd
· Board changes implemented
o Graham Stacey appointed as CEO in June, with Russell Lamming moving to Non-Executive Chairman and Brian Moritz moving to Non-Executive Director
o Claire Parry joining as Independent Non-Executive Director with Dave Reeves stepping down
· Continued focus for 2022 and beyond is increasing the Company's market share in the North American organic fertiliser market and building Diamond Creek into the premier organic phosphate producer in the US
Graham Stacey, Keras Resources Chief Executive Officer, commented, "Our vision remains to build Diamond Creek into the premier organic phosphate producer in the US and we have made real progress over the past few months having acquired 100% in the business and focussing our efforts on resetting the business, starting to ramp up sales and timing production from our mine and milling facilities to meet our sales targets. We produce a high-grade, premium phosphate product that supports soil health, regenerative agriculture and provides investors with direct exposure to the buoyant global fertiliser industry. We believe we are ideally positioned to capitalise on the robust fundamentals of the sector and look forward to further building on the foundations we have laid to date, producing both a valuable and essential commodity whilst generating returns for our stakeholders."
The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under Article 7 of the Market Abuse Regulation (EU) No. 596/2014 (as amended) as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (as amended). Upon the publication of this Announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.
Graham Stacey Annabel Redford | Keras Resources plc |
|
Ewan Leggat / Charlie Bouverat Nominated Adviser & Joint Broker
Joint Broker Damon Heath / Erik Woolgar
Financial and Corporate Communications Felicity Winkles
| SP Angel Corporate Finance LLP
Shard Capital Partners LLP
Celicourt | +44 (0) 20 3470 0470
+44 (0) 207 186 9900
+44 (0) 774 884 3871 |
| | |
Chairman's Statement
This is my first statement since becoming Non-Executive Chairman on 1 September 2022 and it is a pleasure to provide an update on the Company's activities over the past six months during what has been a transformational period for the Company. The acquisition of the outstanding 49% of Falcon Isle Resources ("Falcon Isle"), which owns the Diamond Creek high-grade premium organic phosphate mine ("Diamond Creek") has now placed Keras in full control of the operation which markets organic fertilisers with the highest available phosphate (P2O5) in the US. The mine itself is situated high in the Wasatch mountains, 20 miles from the milling plant in Spanish Fork which provides convenient access to locally available contracting services, consumables, technical and financial service providers and easy access to distribution links.
Since taking control of the operation substantial progress has been made towards building our business into a cash-generative producer of high-grade premium organic fertiliser for the US market and establishing a strategic position in this fast-growing sector. The Spanish Fork processing plant is now back in production, two mining campaigns have been undertaken at the Diamond Creek mine and repeat customers are now beginning to make longer-term offtake commitments. We are now focussing on Falcon Isle's marketing efforts, which were previously the responsibility of our partner, and ensuring we continue to build our position in the US organic phosphate to fertiliser industry.
The Utah Department of Oil, Gas & Mining (UDOGM) and US Forest Service (USFS) carried out a routine inspection and site visit during April 2022 and all permits and authorisation approvals were renewed in line with the project's licence obligations. We are currently in the process of expanding our permitted mining footprint in line with new regulations. Two phases of summer mining have been completed as planned, a second phase as a required result of increased sales demand to ensure ample product availability for the 2022-2023 spring sales season. We are targeting 25,000 tons per annum as our medium-term annual sales objective into a market which is expected to grow at 8% per annum in tonnage terms as well as 14% in value terms. As an owner operator of our processing plant we are able to tailor our product mix to customer requirements which, in addition to product quality, gives us an important competitive advantage in the region. As a result of the extended mining season, our drilling programme which we will undertake to further define the ore reserve at Diamond Creek will now commence in spring next year. The Board continues to review and evaluate all areas of the business to look to further optimise efficiencies and create economies of scale.
We have previously reported on the delivery and commencement of construction of a granulator plant during the second half of 2021, this construction was paused as announced in November 2021 while the acquisition of the outstanding 49% in the business was negotiated and completed during March 2022, this pause gave us the opportunity to evaluate value-enhancing opportunities such as the incorporation of supplementary feed circuits to produce custom blended organic products including Nitrogen and Potassium feedstock to potentially supplement the phosphate-only granulates we'd previously planned. Decisions on the final configuration of the plant will be made during the coming months and construction will re-commence thereafter.
Marketing and Market Fundamentals
Sales has been a key focus for us as we are looking to continue to build market share for our products under the PhosAgri brand. Core to our marketing is highlighting the value that our premium >12% available P2O5 products can offer from a value-in-use basis along with the benefits of its high calcium content. Importantly we are also getting a deeper understanding of our client requirements and adapting our product mix to suit the cyclical seasonal agriculture business which will be key to increasing our market share in the dynamic North American organic fertiliser market. We have the flexibility within our operational set up to be able to adapt accordingly which will be an important aspect of ongoing discussions across our existing and prospective new customer bases.
We are delighted with a 40% increase in sales for August 2022 to 700t against our 500t forecast, as well as repeat forward orders off the back of which we have set out sales guidance of between 7,500 tons and 8,000 tons of phosphate product forecast from 1 September 2022 to June 2023 at an all-in sustaining cost (AISC) margin of between $80 and $100 per ton. Importantly, whilst we offer an organic product, we are not limited to the organic market as PhosAgri can be used as a blend, so widening our audience in this regard will enables us to investigate retail potential and further downstream avenues.
All of this ties into the market backdrop and we are excited by the significant opportunity offered to us by the North American fertiliser industry which research forecasts to grow at 8% per annum on a consolidated annual growth rate (CAGR) in volume terms, and more importantly 14% on a value basis which suggest a material disjoint between demand and supply growth. Synthetic fertiliser pricing has seen a 60% increase year on year which, albeit due to geopolitical pressure on the supply of fertiliser inputs, is forecast to continue which will both support pricing for organic fertilisers but also growers' substitution of synthetic fertilisers with organic substitutes. Demand is also underpinned by key long-term drivers, including security of supply, environmental factors, the ongoing education and awareness around soil health, as well as the increasing demand for organic food - all of which our PhosAgri products support, and particularly with our location close to the Central California Valley.
Carbon Market
As previously outlined, we are also looking to leverage our low carbon footprint relative to synthetic fertiliser producers and the net carbon sequestration that provides. This presents a revenue augmentation opportunity through the generation and trading of carbon credits. We are exploring this through partnering with growers and verification agencies to create and trade carbon credits and develop offset programmes. This would not deviate from our current business model but complement and augment our revenue model. Whilst early stage we are actively pursuing this avenue and will provide further updates as this project matures.
Togo
As reported previously, on the 18th October 2019 the Council of Ministers of the Republic of Togo published a decree granting the right for large-scale exploitation of the manganese deposit at Nayéga to the Company's subsidiary, Société Générale des Mines ("SGM"). Since that date the Company has concentrated its efforts on obtaining the required Exploitation Permit. The terms of the permit and associated protocols have been agreed, and SGM has been converted from a private to a public company, as required by law and in compliance with the draft Mining Convention. However, the exploitation permit approval has not been forthcoming. We continue to negotiate in good faith with the authorities in Togo to achieve a satisfactory outcome and will update the market in due course on developments.
Financial review
During the period we successfully completed a £1.95m (before expenses) capital raise. This was supported by the Directors and also saw First Uranium Resources Ltd come in as a cornerstone investor now owning 10% of Keras. Subsequently associates of First Uranium have acquired an additional 7% of Keras in the market. They share our view that the North American phosphate market will be a key growth market and we are very pleased to have them on board as a supportive shareholder. Since taking control of the operation in March 2022 Keras management has now progressed Falcon Isle into a cashflow positive entity. Although our reserves are low we do not believe that we will need to come back to the market for funding for our current development plan.
The results for the 6 months ended 30 June 2022 show a loss of £467,000. The incurred loss is partly driven by substantial legal costs incurred in connection with the dispute with our former partner in Falcon Isle, the dispute also resulted in the temporary shutdown of our processing plant in Utah, with a corresponding reduction in sales.
Board Changes
We have made significant Board changes effective 1 September 2022. With Graham Stacey taking on the CEO role and in the process of relocating to the US we will have key management based on site and he will continue to build the team around him. I would like to reiterate my thanks to Dave Reeves for all his significant contributions to Keras during his tenure on the Board and as a significant shareholder, and Brian Moritz for his excellent stewardship of Keras as Chairman since listing in 2011. It was also a pleasure to welcome Claire Parry as Independent Non-Executive Director at the beginning of September 2022. She has previously advised Keras on accounting matters and she brings further financial and independent counsel to the Board. I look forward to working alongside Claire, Graham and Brian who remains as Company Secretary and a valued Non-Executive Director.
Outlook
As we outlined in our previous results, the Exploitation Permit for the Nayéga mine remains pending but we continue to engage with the Togolese authorities to seek a satisfactory outcome. We will announce further updates in due course. Our main thrust in the near term remains to progress our phosphate to fertiliser business, underlined by our recent rebrand of the Company and our updated website. We are mining an essential resource that can create value, be part of the greener economy and contribute to a more sustainable future. As a mining company we remain ever conscious of our obligations and commitments in line with best environmental, social and governance ("ESG") practice and will continue to take the initiative within this area.
I would like to thank our shareholders for their ongoing support. We are excited about what the future holds for Keras, both at Diamond Creek as an organic phosphate producer and as we broaden our remit into the carbon market. We will also pursue new opportunities should they fit within our strategy and be value generating for the business. We have set out our plans and goals as outlined, ramping up operations whilst rationalising costs, widening our customer base and accessing new markets, all with responsible mining at the centre of what we do. We are looking to develop and sustain a positive legacy whilst creating value for all stakeholders and I look forward to our progress in delivering this as we continue to build Keras and Diamond Creek into the premier organic phosphate producer in the US.
Russell Lamming
Chairman
27 September 2022
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2022
| 6 months to 30-Jun-22 (unaudited) £'000 |
| 6 months to 31-Mar-21 (unaudited) £'000 |
| 6 months to 30-Sep-21 (unaudited) £'000 |
| 15 months to 31-Dec-21 (audited) £'000 |
Continuing operations | | | | | | | |
Revenue | 212 | | 31 | | 311 | | 452 |
Cost of production | (104) | | (74) | | (229) | | (496) |
Gross profit/loss | 108 | | (43) | | 82 | | (44) |
Administrative and exploration expenses | (550) | | (517) | | (426) | | (1,448) |
Loss from operating activities | (442) | | (560) | | (344) | | (1,492) |
Finance income | - | | - | | - | | - |
Finance costs | (25) | | - | | (1) | | (43) |
Net finance costs | (25) | | - | | (1) | | (43) |
Share of net loss of associate accounted for using the equity method |
- | |
- | |
- | |
(116) |
Loss on change of ownership | - | | - | | - | | (363) |
Loss before taxation | (467) | | (560) | | (345) | | (2,014) |
Taxation | - | | - | | - | | - |
Loss for the period | (467) | | (560) | | (345) | | (2,014) |
| | | | | | | |
Other comprehensive income - items that may be subsequently reclassified to profit or loss | | | | | | | |
Exchange translation on foreign operations | 53 | | (47) | | 108 | | 66 |
Total comprehensive (loss) for the period | (414) | | (607) | | (237) | | (1,948) |
| | | | | | | |
(Loss)/profit attributable to: | | | | | | | |
Owners of the Company | (470) | | (497) | | (382) | | (1,729) |
Non-controlling interests | 3 | | (63) | | 37 | | (285) |
(Loss)/profit for the period | (467) | | (560) | | (345) | | (2,014) |
| | | | | | | |
Total comprehensive income/(loss) attributable to: | | | | | | | |
Owners of the Company | (414) | | (556) | | (268) | | (1,670) |
Non-controlling interests | - | | (51) | | 31 | | (278) |
Total comprehensive loss for the period | (414) | | (607) | | (237) | | (1,948) |
| | | | | | | |
Earnings per share - continuing operations | | | | | | | |
Basic and diluted (loss)/earnings per share (pence) |
(0.015) | |
(0.017) | |
(0.006) | |
(0.033) |
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
|
|
|
Notes | 30-Jun-22 (unaudited) £'000 |
| 31-Mar-21 (unaudited) £'000 |
| 30-Sep-21 (unaudited) £'000 |
| 31-Dec-21 (audited) £'000 | |
Assets | | | | | | | | | |||
Non-current assets | | | | | | | | | |||
Intangible assets | 7 | 4,875 | | 3,637 | | 4,282 | | 4,606 | |||
Property, plant and equipment | 8 | 591 | | 493 | | 691 | | 554 | |||
Right of use asset | 9 | | 185 | | - | | - | | 215 | ||
| | 5,651 | | 4,130 | | 4,973 | | 5,375 | |||
| |
| | | | | | | |||
Current assets | |
| | | | | | | |||
Inventory | 10 | 484 | | 135 | | 245 | | 273 | |||
Trade and other receivables | 11 | 115 | | 391 | | 243 | | 94 | |||
Cash and cash equivalents | | 440 | | 886 | | 299 | | 166 | |||
| | 1,039 | | 1,412 | | 787 | | 533 | |||
| |
| | | | | | | |||
Total assets | | 6,690 | | 5,542 | | 5,760 | | 5,908 | |||
| |
| | | | | | | |||
Equity | |
| | | | | | | |||
Equity attributable to owners of the Company |
|
| | | | | | | |||
Share capital | 12 | 798 | | 629 | | 629 | | 630 | |||
Share premium | 12 | 5,838 | | 4,027 | | 4,027 | | 4,033 | |||
Other reserves | | 173 | | 68 | | 95 | | 111 | |||
Retained deficit | | (2,885) | | (590) | | (878) | | (1,721) | |||
| | 3,924 | | 4,134 | | 3,873 | | 3,053 | |||
Non-controlling interests | | (133) | | 934 | | 965 | | 229 | |||
Total equity | | 3,791 | | 5,068 | | 4,838 | | 3,282 | |||
| |
| | | | | | | |||
Liabilities |
| |
| | | | | | | ||
Current liabilities | |
| | | | | | | |||
Trade and other payables | 13 | 1,423 | | 474 | | 922 | | 1,658 | |||
Lease liabilities - current | 9 | 120 | | - | | - | | 107 | |||
| | 1,543 | | 474 | | 922 | | 1,765 | |||
Non-current liabilities | | | | | | | | | |||
Trade and other payables | 13 | 1,293 | | - | | - | | 749 | |||
Lease liabilities - non-current | 9 | 63 | | - | | - | | 112 | |||
| | 1,356 | | - | | - | | 861 | |||
Total liabilities | | 2,899 | | 474 | | 922 | | 2,626 | |||
| | | | | | | | | |||
Total equity and liabilities | | 6,690 | | 5,542 | | 5,760 | | 5,908 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDING 31 MARCH 2021
| Total attributable to owners of the Company |
| |||||||
|
Share capital £'000
|
Share premium £'000 | Share option/ warrant reserve £'000 |
Exchange reserve £'000 |
Financial assets at FVOCI £'000 | Retained earnings/ (deficit) £'000 | Total £'000 | Non-controlling interests £'000 |
Total equity £'000 |
| | | | | | | | | |
Balance at 1 October 2020 (audited) | 487 | 2,637 | 63 | (47) | - | 8 | 3,148 | (140) | 3,008 |
| | | | | | | | | |
| | | | | | | | | |
Loss for the period | - | - | - | - | - | (497) | (497) | (63) | (560) |
Other comprehensive income | - | - | - | 42 | - | (101) | (59) | 12 | (47) |
Total comprehensive loss for the period | | - | - | 42 | - | (598) | (556) | (51) | (607) |
| | | | | | | | | |
Issue of ordinary shares | 142 | 1,463 | - | - | - | - | 1,605 | - | 1,605 |
Issue costs | - | (73) | - | - | - | - | (73) | - | (73) |
Non-controlling interest on acquisition of subsidiary |
- |
- |
- |
- |
- |
- |
- |
1,125 |
1,125 |
Share based payment transactions | - | - | 10 | - | - | - | 10 | - | 10 |
| 142 | 1,390 | 10 | - | - | - | 1,542 | 1,125 | 2,667 |
| | | | | | | | | |
Balance at 31 March 2021 (unaudited) | 629 | 4,027 | 73 | (5) | - | (590) | 4,134 | 934 | 5,068 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2021
| Total attributable to owners of the Company |
| |||||||
|
Share capital £'000 |
Share premium £'000 |
Share option/ warrant reserve £'000 |
Exchange reserve £'000 |
Financial assets at FVOCI £'000 |
Retained earnings/ (deficit) £'000 |
Total £'000 |
Non-controlling interests £'000 |
Total equity £'000 |
| | | | | | | | | |
Balance at 1 April 2021 (unaudited) | 629 | 4,027 | 73 | (5) | - | (590) | 4,134 | 934 | 5,068 |
| | | | | | | | | |
| | | | | | | | | |
Loss for the period | - | - | - | - | - | (382) | (382) | 37 | (345) |
Other comprehensive income | - | - | - | 20 | - | 94 | 114 | (6) | 108 |
Total comprehensive loss for the period | | - | - | 20 | - | (288) | (268) | 31 | (237) |
| | | | | | | | | |
Issue of ordinary shares | - | - | - | - | - | - | - | - | - |
Issue costs | - | - | - | - | - | - | - | - | - |
Non-controlling interest on acquisition of subsidiary |
- |
- |
- |
- | - |
- |
- |
- |
- |
Share based payment transactions | - | - | 7 | - | - | - | 7 | - | 7 |
| - | - | 7 | - | - | - | 7 | - | 7 |
| | | | | | | | | |
Balance at 30 September 2021 (unaudited) | 629 | 4,027 | 80 | 15 | - | (878) | 3,873 | 965 | 4,838 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE THREE MONTHS ENDED 31 DECEMBER 2021
|
|
|
| Total attributable to owners of the Company |
|
| |||
|
Share capital £'000 |
Share premium £'000 | Share option/ warrant reserve £'000 |
Exchange reserve £'000 |
Financial assets at FVOCI £'000 |
Retained Earnings/ (deficit) £'000 |
Total £'000 |
Non-controlling interests £'000 |
Total equity £'000 |
|
|
|
|
|
|
|
|
|
|
Balance at 1 October 2021 (unaudited) | 629 | 4,027 | 80 | 15 | - | (878) | 3,873 | 965 | 4,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period | - | - | - | - | - | (850) | (850) | (259) | (1,109) |
Other comprehensive income | - | - | - | (4) | - | 7 | 3 | 2 | 5 |
Total comprehensive income for the period | - | - | - | (4) | - | (843) | (847) | (257) | (1,104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of ordinary shares | 1 | 6 | - | - | - | - | 7 | - | 7 |
Issue costs | - | - | - | - | - | - | - | - | - |
Non-controlling interest on acquisition of subsidiary | - | - | - | - | - | - | - | (479) | (479) |
Share based payment transactions | - | - | 20 | - | - | - | 20 | - | 20 |
| 1 | 6 | 20 | - | - | - | 27 | (479) | (452) |
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2021 (audited) | 630 | 4,033 | 100 | 11 | - | (1,721) | 3,053 | 229 | 3,282 |
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2022
|
|
|
| Total attributable to owners of the Company |
|
| |||
|
Share capital £'000 |
Share premium £'000 |
Share option/ warrant reserve £'000 |
Exchange reserve £'000 |
Financial assets at FVOCI £'000 |
Retained earnings £'000 |
Total £'000 |
Non-controlling interests £'000 |
Total equity £'000 |
| | | | | | | | | |
Balance at 1 January 2022 (audited) | 630 | 4,033 | 100 | 11 | - | (1,721) | 3,053 | 229 | 3,282 |
| | | | | | | | | |
| | | | | | | | | |
Loss for the period | - | - | - | - | - | (470) | (470) | 3 | (467) |
Total other comprehensive income | - | - | - | 56 | - | - | 56 | (3) | 53 |
Total comprehensive loss for the period | - | - | - | 56 | - | (470) | (414) | - | (414) |
| | | | | | | | | |
Issue of ordinary shares | 168 | 1,845 | - | - | - | - | 2,013 | - | 2,013 |
Issue costs | - | (40) | - | - | - | - | (40) | - | (40) |
Acquisition of NCI without a change in control (note 15)
|
- |
- |
- |
- |
- |
(694) |
(694) |
(362) |
(1,056) |
Share based payment transactions | - | - | 6 | - | - | - | 6 | | 6 |
| 168 | 1,805 | 6 | - | - | (694) | 1,285 | (362) | 923 |
| | | | | | | | | |
Balance at 30 June 2022 (unaudited) | 798 | 5,838 | 106 | 67 | - | (2,885) | 3,924 | (133) | 3,791 |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
|
|
|
|
| 31-Jun-22 (unaudited) £'000
|
| 31-Mar-21 (unaudited) £'000 |
| 30-Sep-21 (unaudited) £' 000 |
| 31 -Dec-21 (audited) £'000 |
Cash flows from operating activities | | | | | | | | ||||
Loss from operating activities | (467) | | (560) | | (345) | | (2,014) | ||||
Adjustments for: | | | | | | | | ||||
Depreciation and amortisation | | | 99 | | 18 | | 17 | | 172 | ||
Share of loss of equity accounted associate | | | - | | 71 | | | | 116 | ||
Loss on disposal of property, plant and equipment | - | | - | | - | | - | ||||
Foreign exchange differences | | | (356) | | 117 | | 124 | | 73 | ||
Equity-settled share-based payment transactions | 6 | | 10 | | 7 | | 37 | ||||
| | | (718) | | (344) | | (197) | | (1,616) | ||
Changes in: | | | | | | | | | | ||
- inventories | | | (211) | | 7 | | (110) | | (216) | ||
- trade and other receivables | | | (21) | | (186) | | 148 | | 111 | ||
- trade and other payables | | | (747) | | 45 | | 448 | | 540 | ||
Cash used in operating activities | | | (1,697) | | (478) | | 289 | | (1,181) | ||
| | |
| | | | | | | ||
Finance costs | | | - | | - | | - | | - | ||
Net cash used in operating activities | | | (1,697) | | (478) | | 289 | | (1,181) | ||
| | | | | | | | | | ||
Cash flows from investing activities | | | | | | | | | | ||
Cash acquired on acquisition | - | | 158 | | - | | 158 | ||||
Acquisition of property, plant and equipment | - | | (93) | | (209) | | (188) | ||||
Exploration and licence expenditure | (2) | | (161) | | (667) | | (538) | ||||
Investment in associate to date of control | - | | (455) | | - | | - | ||||
Net cash used in investing activities | (2) | | (551) | | (876) | | (568) | ||||
| | | | | | | | | | ||
Cash flows from financing activities | | | | | | | | | | ||
Net proceeds from issue of share capital | | | 1,973 | | 1,477 | | - | | 1,477 | ||
Loans (to)/repaid by subsidiaries | | | - | | - | | - | | - | ||
Net cash flows from financing activities | | | 1,973 | | 1,477 | | - | | 1,477 | ||
| | | | | | | | | | ||
Net (decrease)/increase in cash and cash equivalents | 274 | | 448 | | (587) | | (272) | ||||
Cash and cash equivalents at beginning of period | 166 | | 438 | | 886 | | 438 | ||||
Effect of foreign exchange rate changes | | | | | - | | - | | - | ||
Cash and cash equivalents at end of period | 440 | | 886 | | 299 | | 166 |
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2022
1. Reporting entity
Keras Resources plc (the "Company") is a company domiciled in England and Wales. The unaudited condensed consolidated interim financial statements of the Company as at and for the six months ended 30 June 2022 comprise the Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates and jointly controlled entities. The Group currently operates as an explorer and developer.
2. Basis of preparation
(a) Statement of compliance
This condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial performance and position of the Group since the last consolidated financial statements as at and for the period ended 31 December 2021. This condensed consolidated interim financial report does not include all the information required for full annual financial statements prepared in accordance with International Financial Reporting Standards.
This condensed consolidated interim financial report was approved by the Board of Directors on 27 September 2022.
(b) Judgements and estimates
Preparing the interim financial report requires Management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing this condensed consolidated interim financial report, significant judgements made by Management in applying the Group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the audited consolidated financial statements as at and for the period ended 31 December 2021.
3. Significant accounting policies
The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its audited consolidated financial statements as at and for the period ended 31 December 2021.
4. Financial instruments
Financial risk management
The Group's financial risk management objectives and policies are consistent with those disclosed in the audited consolidated financial statements as at and for the period ended 31 December 2021.
5. Segment information
The Group considers that it operates in two distinct business areas, manganese mining in West Africa and phosphate mining in Utah, USA. These business areas form the basis of the Group's operating segments. For each segment, the Group's CEO (the chief operating decision maker) reviews internal management reports on at least a quarterly basis.
Other operations relate to the group's administrative functions conducted at its head office and by its intermediate holding company together with consolidation adjustments.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax, as included in the internal management reports that are reviewed by the Group's CEO. Segment results are used to measure performance as Management believes such information is the most relevant in evaluating the performance of certain segments relative to other entities that operate within the exploration industry.
Information about reportable segments
For the six months ended 30 June 2022 (unaudited)
|
|
Manganese £'000 | | |
Phosphate £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 212 | | - | | 212 |
| | | | | | | | | |
Profit/(loss) before tax | | 22 | | | 9 | | (498) | | (467) |
| | | | | | | | | |
Segment assets | | 1,228 | | | 4,744 | | 718 | | 6,690 |
|
|
|
|
|
|
|
|
| |
For the six months ended 31 March 2021 (unaudited)
| |||||||||
| |
Manganese £'000 | | |
Phosphate £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 31 | | - | | 31 |
| | | | | | | | | |
Loss before tax | | (60) | | | (110) | | (390) | | (560) |
| | | | | | | | | |
Segment assets | | 1,082 | | | 2,958 | | 1,502 | | 5,542 |
| | | | | | | | | |
For the six months ended 30 September 2021 (unaudited)
| |||||||||
| |
Manganese £'000 | | |
Phosphate £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 311 | | - | | 311 |
| | | | | | | | | |
Profit/(loss) before tax | | (52) | | | 20 | | (313) | | (345) |
| | | | | | | | | |
Segment assets | | 1,076 | | | 4,036 | | 648 | | 5,760 |
| | | | | | |
For the three months ended 31 December 2021 (audited)
| |
Manganese £'000 | | |
Phosphate £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 109 | | - | | 109 |
| | | | | | | | | |
Profit/(loss) before tax | | 52 | | | (479) | | (682) | | (1,109) |
| | | | | | | | | |
Segment assets | | 1,535 | | | 4,229 | | 144 | | 5,908 |
Information about geographical segments:
For the six months ended 30 June 2022 (unaudited)
|
|
West Africa £'000 | | |
US £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 212 | | - | | 212 |
| | | | | | | | | |
Profit/(loss) before tax | | 22 | | | 9 | | (498) | | (467) |
| | | | | | | | | |
Segment assets | | 1,228 | | | 4,744 | | 718 | | 6,690 |
|
|
|
|
|
|
|
|
| |
For the six months ended 31 March 2021 (unaudited)
| |||||||||
| |
West Africa £'000 | | |
US £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 31 | | - | | 31 |
| | | | | | | | | |
Loss before tax | | (60) | | | (110) | | (390) | | (560) |
| | | | | | | | | |
Segment assets | | 1,082 | | | 2,958 | | 1,502 | | 5,542 |
| | | | | | | | | |
For the six months ended 30 September 2021 (unaudited)
| |||||||||
| |
West Africa £'000 | | |
US £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 311 | | - | | 311 |
| | | | | | | | | |
Profit/(loss) before tax | | (52) | | | 20 | | (313) | | (345) |
| | | | | | | | | |
Segment assets | | 1,076 | | | 4,036 | | 648 | | 5,760 |
| | | | | | |
For the three months ended 31 December 2021 (audited)
| |
West Africa £'000 | | |
US £'000 | | Other operations £'000 | |
Total £'000
|
External revenue | | - | | | 109 | | - | | 109 |
| | | | | | | | | |
Profit/(loss) before tax | | 52 | | | (479) | | (682) | | (1,109) |
| | | | | | | | | |
Segment assets | | 1,535 | | | 4,229 | | 144 | | 5,908 |
6. Seasonality of operations
Mining at Falcon Isle takes place between May and November due to winter snow cover at the mine site and on the approach road. The fertiliser produced is used primarily during the planting and growing seasons, but sales by Falcon Isle take place throughout the year.
7. Intangible assets
|
30-Jun-22 (Unaudited) £'000 |
|
31-Mar-21 (unaudited) £'000 |
|
30-Sep-21 (unaudited) £'000 |
|
31-Dec-21 (audited) £'000 |
Cost |
|
|
|
|
|
|
|
Balance at beginning of period | 4,643 |
| 1,227 |
| 3,637 |
| 1,227 |
Additions | 3 |
| 2,629 |
| 607 |
| 3,584 |
Disposals Effect of movement in exchange rates | - 298 |
| (158) (61) |
| - 38 |
| (158) (10) |
Balance at end of period | 4,944 |
| 3,637 |
| 4,282 |
| 4,643 |
|
|
|
|
|
|
|
|
Impairment losses |
|
|
|
|
|
|
|
Balance at beginning of period | 37 |
| 158 |
| - |
| 158 |
Impairment | 26 |
| - |
| - |
| - |
Amortisation |
|
| - |
| - |
| 37 |
Disposals |
|
| (158) |
| - |
| (158) |
Effect of movement in exchange rates | 6 |
| - |
| - |
| - |
Balance at end of period | 69 |
| - |
| - |
| 37 |
Carrying amounts |
|
|
|
|
|
|
|
Balance at end of period | 4,875 |
| 3,637 |
| 4,282 |
| 4,606 |
Balance at beginning of period | 4,606 |
| 1,069 |
| 3,637 |
| 1,069 |
|
|
|
|
|
|
|
|
Intangible assets comprise the fair value of prospecting and exploration rights.
8. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 June 2022 the Group acquired assets with a cost of £nil (six months ended 31 March 2021: £263,000, six months ended 30 September 2021: £209,000, three months ended 31 December 2021: (£112,000)).
No assets were disposed of during the six months ended 30 June 2022 or any comparative period.
9. Right of use asset
|
|
|
|
|
|
| 30-Jun-22 (unaudited) |
| 31-Mar-21 (unaudited) |
| 30-Sep-21 (unaudited) |
| 31-Dec-21 (audited) |
| £'000 | | £'000 |
| £'000 |
| £'000 | ||||||
Balance at beginning of period | 215 | | - | | - | | - | ||||||
Additions Depreciation | - (66) | | - - | | - - | | 314 (99) | ||||||
Effects of movements in exchange rates | 36 | | - | | - | | - | ||||||
| 185 | | - | | - | | 215 |
Lease liability
| £'000 | | £'000 |
| £'000 |
| £'000 |
Balance at beginning of period | 219 | | - | | - | | - |
Additions Principal reduction Finance cost | - (64) 5 | | - - - | | - - - | | 314 (105) 10 |
Effects of movements in exchange rates | 23 | | | | | | - |
| 183 | | - | | - | | 219 |
Current portion Non current portion | 120 63 | | - - | | - - | | 107 112 |
| 183 | | - | | - | | 219 |
10. Inventories
|
|
|
|
|
| 30-Jun-22 (unaudited) |
|
| 31-Mar-21 (unaudited) |
| 30-Sep-21 (unaudited) |
| 31-Dec-21 (audited) |
| £'000 | | £'000 |
| £'000 |
| £'000 | ||||||
Phosphate | 484 | | 135 | | 245 | | 273 | ||||||
| 484 | | 135 | | 245 | | 273 |
11. Trade and other receivables
|
|
|
|
|
|
| 30-Jun-22 (unaudited) £'000 |
| 31-Mar-21 (unaudited) £'000 |
| 30-Sep-21 (unaudited) £'000 |
| 31-Dec-21 (audited) £'000 |
Trade receivables | - |
| - |
| - |
| 7 | ||||||
Other receivables | 95 | | 352 | | 226 | | 87 | ||||||
Prepayments | 20 | | 39 | | 17 | | - | ||||||
| 115 | | 391 | | 243 | | 94 |
Trade receivables and other receivables are stated at their nominal values less allowances for non-recoverability.
12. Share capital and reserves
Ordinary shares
On 26 April 2022 the Company announced the raising of a total of £1,950,000 (before expenses) by the issue of 1,625,000,000 new ordinary shares of 0.01p each ("Ordinary Shares") at a price of 0.12p per share. On 4 May 2022 1,000,000,000 new Ordinary Shares were issued for cash consideration to raise £1,200,000 and the balance of 625,000,000 new Ordinary Shares were issued on 18 May 2022 through a Broker Option following approval at a General Meeting of the company held on 16 May 2022. In addition, a further 52,500,000 new Ordinary shares were issued on 18 May 2022 at a price of 0.12p per share in settlement of liabilities.
Each of the 1,677,500,000 new Ordinary Shares issued had attached a warrant entitling the registered holder to subscribe for one new Ordinary Share at a price of 0.18p at any time up to 31 May 2024.
Subsequent to 30 June 2022, following approval at a General Meeting of the company held on 25 July 2022, the Ordinary Shares were consolidated on the basis that every 100 Ordinary Shares were be consolidated into 1 ordinary share of 1p ("Consolidated Ordinary Share"). Following the consolidation, the Company's issued share capital comprises 79,735,731 Consolidated Ordinary Shares. The subscription rights of the warrants referred to above were varied accordingly.
Dividends
No dividends were declared or paid in the six months ended 30 June 2022 (six months ended 31 March 2021: £nil, six months ended 30 September 2021: £nil, three months ended 31 December 2021: £nil)).
13. Trade and other payables
Current |
|
|
|
|
|
| 30-Jun-22 (unaudited) |
| 31-Mar-21 (unaudited) |
| 30-Sep-21 (unaudited) |
| 31-Dec-21 (audited) |
| £'000 | | £'000 |
| £'000 |
| £'000 | ||||||
Trade payables | 401 | | 146 | | 567 | | 962 | ||||||
Accruals Amounts due to Falcon Isle' minority interest Other payables | 210 - 814 | | 230 - 98 | | 249 - 106 | | 93 593 11 | ||||||
| 1,425 | | 474 | | 922 | | 1,658 |
Non-current |
|
|
|
|
| 30-Jun-22 (unaudited) |
| 31-Mar-21 (unaudited) |
| 30-Sep-21 (unaudited) |
| 31-Dec-21 (audited) |
| £'000 | | £'000 |
| £'000 |
| £'000 | |||||
Amounts due to Falcon Isle' minority interest Other payables | - 1,293 | | - - | | - - | | 749 - | |||||
| 1,293 | | - | | - | | 749 |
There is no material difference between the fair value of trade and other payables and their book value.
14. Acquisition of non-controlling interest ("NCI") in Falcon Isle
In March 2022, the Group agreed to acquire the outstanding 49% equity interest in Falcon Isle, together with loans totalling $1,816,527 made by the vendor to Falcon Isle for total consideration of $3.2 million payable in four annual tranches of $800,000 commencing on 1 July 2022. The first payment was made on 30 June 2022., The second payment, due by 1 July 2023, has been treated as a current liability and is included in other payables. The final two instalments have been treated as non-current liabilities.
The following table summarises the effect of changes in the Company's ownership interest in Falcon Isle.
| £'000 |
| |
Carrying amount of NCI acquired | 362 |
Consideration less value of loan acquired
|
1,056 |
| 694 |
|
The decrease in equity attributable to the owners of the Company comprised:
- A decrease in retained earnings of £694,000.
15. Related parties
The total amount due to Dave Reeves at the period end was £2,000 in respect of unpaid remuneration (six months ended 31 March 2021: £43,000, six months ended 30 September 2021: £55,000, fifteen months ended 31 December 2021: £25,000).
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