Half Yearly Report

29th Oct 2009 07:00



29 October 2009

 

STRATEGIC NATURAL RESOURCES PLC

Interim Results for the 6 months ended 31 August 2009

Strategic Natural Resources PLC ("SNR" or "the Company"; AIM: SNRP), the developer of natural resources assets, initially in South Africa, announces its interim results for the six months ended 31 August 2009.

For further information please contact:

Strategic Natural Resources Plc:	Nominated Adviser: Allenby Capital Limited	Broker: Religare Hichens, Harrison plc
Jeremy Metcalfe, CEO	Rod Venables/ James Reeve	Nicholas Malins-Smith / James Wood
+44 20 7793 5616	+44 20 3328 5656	+44 20 7382 4450

STRATEGIC NATURAL RESOURCES PLC

Interim results for the 6 months ended 31 August 2009

Chairman's Statement

I have pleasure in presenting our interim financial statements for the six months ending 31 August 2009. The Group has continued to invest in drilling and mine development. In addition, the Group has achieved its first revenues from sales of coal extracted under its mining right for test marketing purposes.

As expected for a mining company at our stage of development we achieved a slightly negative gross margin before expenses. The operating loss narrowed to £137,000. The net loss after tax attributable to shareholders was £79,000 compared with a gain of £4.1m in the same period in 2008.  This latter figure included profit on sale of a 26 per cent. interest in Elitheni Coal (Pty.) Limited, without which the loss would have been £189,000. The Group invested a further £138,000 in mine development during the period (period to 31 August 2008: £639,000) and now holds coal stock of £120,000 (period to 31 August 2008: nil).

Prior to the February year end the Company completed a fundraising of £309,450 before costs through the issue of 3,438,333 new ordinary shares, via a placing by HB Corporate ("the Placing"). The new shares were admitted to trading on AIM on 12 March 2009. The loan to our BBEE partners continues to be carried at 50 per cent. of its face value, following the writedown booked at the year end. We are working with our partners to fix a firm date for repayment of the loan and the Board continues to keep the situation under review. In June 2009 Elitheni drew down a loan in the amount of ZAR 4.5 million (£354,000, including interest to date).

We report a loss per share of 0.12p per share (period to 31 August 2008: headline loss per share of 0.29p and earnings (including one-off gain) of 6.37p).

This year has seen significant activity at the corporate level. During the first half of the year, in addition to the fundraising referred to above, we have looked at ways to expand our investor base and we have been in talks with Absolute Holdings (Pty) Limited, a company listed on the Johannesburg Stock Exchange, which might lead to an offer being made for Absolute. These talks have yet to reach a successful conclusion. Subsequently the Board was informed on 13 August that Atlantic Coal PLC ("Atlantic") had acquired 9.99 per cent. of our issued share capital and that were Atlantic to consider making an offer for the balance of our share capital then the offer price would be not less than 15pence/share.

The Board considered this possible offer very carefully and decided to advise Atlantic that their offer could not be recommended to shareholders as the values simply did not recognise SNR's significantly greater asset value for which the Company now also holds exclusive mining rights. Following further discussions it was announced on 20 October that these discussions had terminated and the following day the Board was informed that Atlantic had now sold all its holding in the Company to institutional investors. The speed and comparative ease with which this placing was achieved was most encouraging and shows the progress we have made in developing shareholder value over the last 6 months.

I am very pleased to bring your attention to the early October announcement by IPSA Group PLC, with whom we signed a coal supply contract in October 2008 for the supply of 1 million tonnes per annum for its mine mouth power plant development project, that it has entered in to an option agreement for the purchase of a site for the first phase of the proposed mine mouth power plant at Indwe and that it has also commenced the environmental approval process necessary to obtain permission for the plant's construction. This development illustrates the demand from major users for our Elitheni coal resource which is now becoming more evident as we look through the recession to the increased demand for power which has always been evident in South Africa.

We have also made considerable progress during the period on plans to enter the industrial boiler market. Working in partnership and based on an exclusive technology agreement concluded with a British designer and manufacturer of burners that can be retrofitted to existing boiler capacity, we anticipate installing the first burner during the December/January period. Successful installation and commissioning of this burner will significantly increase our marketing potential. Delayed by the global economic crisis and the uncertainties it engendered, we expect to see sales to the larger scale industrial boiler market commence in the second quarter of 2010 as confidence returns to the manufacturing sector in South Africa. Elitheni Coal is targeting sales of 1.2 million tonnes per annum to this segment of the market over the next five years, based on current market size. 

The management continues to explore other promising markets, such as exports, and we have made significant progress during the year towards sales on a larger scale commencing in the latter half of 2010. 

In the absence of loan repayments from our BBEE partners, these developments have brought forward the need for further funding for both investment and working capital. We are actively progressing funding opportunities.

I am looking forward to a promising second half of the year as the South African economy recovers from the economic gloom. We are already seeing mining and smelting activities increase. This will result in increasing interest in the Elitheni resource, the sole coal mine active in the Eastern Cape with access to export facilities and a supply contract for a new power plant at its mine mouth. 

R. H. R. Latham

Chairman

Date: 

  

STRATEGIC NATURAL RESOURCES PLC

CONDENSED CONSOLIDATED INCOME STATEMENT (unaudited)

for the half year ended 31 August 2009

(expressed in thousands of pounds)

	Notes	Unaudited	Unaudited	Audited
		Six months	Six months	Year
		to 31.08.09	to 31.08.08	to 28.02.09
		£'000	£'000	£'000
Revenues		72	-	-
Cost of sales		(91)	-	-
Gross profit		(19)	-	-
Administrative expenses		(173)	(265)	(664)
Profit on sale of investment		-	4,309	4,317
Impairment of loan notes		-	-	(2,100)
Finance income		60	81	157
Finance expense		(5)	(5)	(11)
(Loss) / profit before tax		(137)	4,120	1,699
Tax expense		-	-	-
(Loss) / profit for the period		(137)	4,120	1,669
(Loss) / profit attributable to:
Equity shareholders		(79)	4,139	1,781
Minority interests		(58)	(19)	(82)
		(137)	4,120	1,699
(Loss) /earnings per share	3	(0.12p)	6.37p	2.74p
(basic and diluted)
Other financial information:
Headline loss per share	3	(0.12p)	(0.29p)	(0.84p)

STRATEGIC NATURAL RESOURCES PLC

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (unaudited)

for the half year ended 31 August 2009

(expressed in thousands of pounds)

	Unaudited	Unaudited	Audited
	Six months	Six months	Year
	to 31.08.09	to 31.08.08	to 28.02.09
	£'000	£'000	£'000
(Loss) / profit for the period	(79)	4,139	1,781
Other comprehensive income:
Exchange differences on translation	41	(20)	(6)
of overseas operation
Total recognised (expense) / income	(38)	4,119	1,775
for the period attributable to equity interests

  STRATEGIC NATURAL RESOURCES PLC

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (unaudited)

at 31 August 2009

(expressed in thousands of pounds)

	Notes	Unaudited	Unaudited	Audited
		as at	as at	as at
		31.08.09	31.08.08	28.02.09
		£'000	£'000	£'000
Assets
Non-current assets
Property, plant and equipment		150	155	152
Intangible assets	4	3,265	2,643	3,026
		3,415	2,798	3,178
Current assets
Trade and other receivables		106	217	65
Stock		120	-	-
Loan note	5	2,264	4,251	2,209
Cash and cash equivalents		412	1,058	369
		2,902	5,526	2,643
Total assets		6,317	8,324	5,821
Equity and liabilities
Equity attributable to shareholders
of the parent
Share capital	6	684	650	650
Share premium		3,586	3,337	3,337
Translation reserve		75	20	34
Profit and loss reserve		988	3,425	1,067
		5,333	7,432	5,088
Minority interest		409	507	452
Total equity		5,742	7,939	5,540
Non-current liabilities
Trade and other payables		122	70	122
Current liabilities
Trade and other payables		99	315	159
Loans	7	354	-	-
		453	315	159
Total liabilities		575	385	281
Total equity and liabilities		6,317	8,324	5,821

  

STRATEGIC NATURAL RESOURCES PLC

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (unaudited)

for the half year ended 31 August 2009

(expressed in thousands of pounds)

	Attributable to equity shareholders
	Share	Share	Foreign	Retained	Total	Minority	Total
	capital	premium	currency	earnings		interest	equity
			reserve
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1.3.08	650	3,337	40	(714)	3,313	-	3,313
Sale on interest to minority	-	-	-	-	-	518	518
Profit for the period	-	-	-	4,139	4,139	(19)	4,120
Exchange differences	-	-	(20)	-	(20)	8	(12)
Total recognised income and	-	-	(20)	4,139	4,119	(11)	4,108
expense for the period
Balance at 31.8.08	650	3,337	20	3,425	7,432	507	7,939
Loss for the period	-	-	-	(2,358)	(2,358)	(63)	(2,421)
Exchange differences	-	-	14	-	14	8	22
Total recognised income and	-	-	14	(2,358)	(2,344)	(55)	(2,399)
expense for the period
Balance at 28.2.09	650	3,337	34	1,067	5,088	452	5,540
expense for the period
Issue of shares (net of costs)	34	249	-	-	283	-	283
Loss for the period	-	-	-	(79)	(79)	(58)	(137)
Exchange differences	-	-	41	-	41	15	56
Total recognised income and	-	-	41	(79)	(38)	(43)	(81)
expense for the period
Balance at 31.8.09	684	3,586	75	988	5,333	409	5,742

  STRATEGIC NATURAL RESOURCES PLC

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (unaudited)

for the half year ended 31 August 2009

(expressed in thousands of pounds)

	Notes	Unaudited	Unaudited	Audited
		Six months	Six months	Year
		to 31.08.09	to 31.08.08	to 28.02.09
		£'000	£'000	£'000
Net cash outflow from	8	(427)	(326)	(599)
operating activities
Cash flows from investing
activities
Interest received		5	29	48
Drilling and exploration costs		(138)	(639)	(1,062)
Cash received from sale of		-	636	636
minority interest
Plant additions		(20)	(44)	(62)
Net cash outflow from		(153)	(18)	(440)
investing activities
Net cash outflow before		(580)	(344)	(1,039)
financing activities
Cash flows from financing
activities
Issue of shares		283	-	-
(net of costs)
Issue of loan note		354	-	-
Interest paid		(5)	(5)	(11)
Finance leases		(9)	(10)	2
Net cashflow from financing		623	(15)	(9)
activities
Increase / (decrease) in cash		43	(359)	(1,048)
and cash equivalents
Reconciliation and analysis of
change in cash
Increase / (decrease) in cash		43	(359)	(1,048)
during the period
Cash and cash equivalents		369	1,417	1,417
at start of period
Cash and cash equivalents		412	1,058	369
at end of period

  

STRATEGIC NATURAL RESOURCES PLC

NOTES TO THE INTERIM STATEMENT

for the half year ended 31 August 2009

1. Basis of preparation

The interim financial statements do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The comparative figures for the year ended 28 February 2009 were derived from the Statutory Accounts for that year which have been delivered to the Registrar of Companies. Those Accounts received a modified audit opinion in respect of emphasis of matter on going concern and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The financial information contained in this interim statement has been prepared in accordance with all relevant International Reporting Standards ('IFRS') in force and is expected to apply to the Group's results for the year ending 28 February 2010 and on interpretations of those Standards released to date.

2. Accounting policies

These condensed consolidated interim financial statements have been prepared in accordance with the accounting policies set out in the Group's financial statements for the year ended 28 February 2009 except for the adoption of IAS 1 Presentation of Financial Statements (Revised 2007).

 

3. Earnings / (loss) per share

The basic and diluted earnings / (loss) per share has been calculated by dividing the result for the respective period attributable to shareholders by the weighted average number of shares in issue during the relevant period.

	Six months	Six months	Year
	to 31.08.09	to 31.08.08	to 28.02.09
(Loss) / profit attributable to	(£79)	£4,139	£1,781
equity shareholders of the Company
Average number of shares in issue	68,214	65,000	65,000
Basic and diluted (loss) /earnings	(0.12p)	6.37p	2.74p
per share (pence)
Headline loss per share (pence)	(0.12p)	(0.29p)	(0.84p)

Headline loss per share excludes the profit on sale of investment, net of the impairment of loan notes arising on the sale of 26 per cent. of Elitheni in June 2008.

4. Intangible assets (exploration costs) £'000

At 1 March 2009  3,026

Drilling and exploration costs in period 138

Amortisation  (120)

Exchange adjustment 221

At 31 August 2009  3,265

5. Loan note

The loan note represents the instrument under which the deferred consideration arising on the sale of the Group's 26% interest in Elitheni Coal (Pty.) Ltd is secured. The loan note comprises two loan notes:

a) Payable by 31 May 2009 (initially payable by 12 December 2008) - £3.3m. Interest is payable at 6 month LIBOR plus 2.25%. This loan note is secured on 21% of the share capital of Elitheni.

b) Payable by 31 May 2009 - £0.9m. Interest is payable at 12 month LIBOR plus 2.25%. This loan note is secured on 5% of the share capital of Elitheni.

The balance owing at 31 August 2009 in respect of accrued interest amounts to £329,000.

As explained in the Group financial statements for the year ended 28 February 2009, the directors have made a 50% provision against the amount owing on the loan notes and the accrued interest. The directors consider this level of provision remains appropriate.

£'000

Total owing under loan notes 4,199

Add: accrued interest 329

Less: 50% provision (2,264)

Balance, net of provision 2,264

6. Share capital  £'000

a) Authorised

500,000,000 ordinary shares of 1p each 5,000

b) Allotted, called up and fully paid

68,438,333 ordinary shares of 1p each 684

In March 2009, the Company issued 3,438,333 ordinary 1p shares for cash at 9p per share.

7. Loan note

On 17th June 2009 Elitheni Coal entered into a loan agreement with Ulitorque (Pty.) Limited, a private company registered in South Africa, the loan principal being ZAR4.5m (£320k). The loan agreement provides the lender with the opportunity to convert the outstanding balance due under the agreement into a 10 per cent equity interest in Elitheni 9 months after drawdown, or into new shares of the Company equal to such outstanding loan amount, depending on the outcome of merger discussion between Absolute Holdings Pty. and the Company. Notice of these preliminary discussions was announced on 16th July, 2009. Under the loan agreement interest accrues and is compounded monthly on the basis of 1 month JIBAR plus a margin of 3.5 per cent.

8. Reconciliation of profit before tax to cash generated from operations

	Six months	Six months	Year
	to 31.08.09	to 31.08.08	to 28.02.09
	£'000	£'000	£'000
Result for the period	(137)	4,120	1,699
Depreciation	22	16	36
Amortisation of intangible assets	120	-	-
Changes in working capital	(377)	(77)	29
Finance income	(60)	(81)	(157)
Finance expense	5	5	11
Profit on sale of investment	-	(4,309)	(2,217)
Net cash outflow from	(427)	(326)	(599)
operating activities

9. The Board of directors approved this interim statement on 28 October 2009. This interim statement has not been audited.

10. Copies of this statement are being sent to all shareholders. Otherwise, shareholders will be able to download a copy of the interim report from the Group's website www.snrplc.co.uk

Copies may also be obtained from the Company's registered office - 5th Floor, Prince Consort House, Albert Embankment, London SE1 7TJ.

ENDIR DVLFLKBBZFBK

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Related Shares:

SNRP.L