13th Sep 2010 07:34
Noventa Limited
("Noventa" or the "Company")
Half-Yearly Report
13 September 2010
Noventa (AIM: NVTA) is pleased to announce its Half-Yearly Report for the six-month period to 30 June 2010, which has been prepared in accordance with the requirements of both the AIM Market of the London Stock Exchange (AIM) and the Toronto Stock Exchange (TSX) in preparation for the Company's intended listing on the TSX. Quarterly reporting is a requirement of the TSX; the Company will continue reporting on this basis henceforth. The Company's Quarterly Report for the period to 31 March 2010 follows the Half-Yearly Report.
Chairman's Statement
The first six months of the current year, and the period since, have seen Noventa make considerable and positive progress. April saw the Marropino Mine recommence production for the first time in almost a year, followed in August by our first shipment of tantalum concentrate since the restart. The Board has successfully:
·; Sold the remaining stockpile of morganite;
·; Signed a new off-take agreement with a new customer and renegotiated terms on its existing off-take agreement;
·; Raised £6.7m (approximately US$10.2m) of new equity capital;
·; Implemented Project Ligonha using graduates and under-graduates from Glasgow University, Scotland and Universidade Eduardo Mondlane, Maputo, Mozambique under the guidance of our consultant geologist, to explore for new tantalum deposits and other minerals at the Company's mining concessions and sites for which we have exploration licences, which we hope will shortly bear fruit with the recently announced possible find within the Marropino concession;
·; Defined and developed the plan to enhance the plant at Marropino and move towards production at Mutala and Morrua; and
·; Recovered $0.2m IVA (VAT) as a first tranche of IVA that was previously irrecoverable.
The Board of Noventa would like to thank publically the management and all the employees of the Company's operating subsidiary, Highland African Mining Company Limitada, at both the Marropino mine and at the Company's operational headquarters in Maputo for their tireless work in consistently achieving targets and timelines under what have, at times, been extremely difficult circumstances, and for their continued efforts in moving the Company forward.
Special thanks must also be extended to Mr. J Allan, who relinquished his appointment as Chief Executive Officer of Noventa on 30 June 2010 after his agreed tenure of one year; he remains on the Board as a Non-Executive Director. John Allan laid the groundwork and foundations for current progress at an especially difficult time and oversaw the Company's move back into production. His input on the implementation of the Company's strategic plan continues to be invaluable.
Eric F. Kohn TD
Chairman
For further information please contact:
Eric F. Kohn TD
Chairman
Noventa Limited
+41 22 8500560
+41 79 5030150
www.noventa.net
Nick Harriss/Emily Staples
Religare Capital Markets (Nomad)
+44 20 7444 0800
Daniel Briggs Religare Capital Markets (Broker) +44 20 7444 0500
Unaudited Condensed Consolidated Financial Statements
(including Management Discussion & Analysis)
for the 3 and 6 months ended 30 June 2010
Cautionary note regarding forward looking statements
This document contains "forward-looking" information which may include, but is not limited to, statements with respect to the future financial or operating performance of Noventa Limited ("the Company"), its subsidiaries (together "the Group"), the performance of the Marropino mine ("the Marropino Mine"), the timing and volume of estimated future production, estimated costs of future production, capital, operating and exploration expenditures and costs and timing of the development of the Mutala and Morrua Concessions.
Often, but not always, "forward-looking" information can be identified by the use of words such as "plans", "expects", "is expected", "is expecting", "budget", "schedules", "estimates", "forecasts", "intends", "anticipates", or "believes", or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. The purpose of "forward-looking" information is to provide the reader with information about management's expectations and plans for the future. Readers are cautioned that "forward-looking" information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Noventa Limited and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, amongst others, those factors discussed in the "Risk Factors" section of the "Business Review" in the Directors' Report - Management discussion and analysis. Although Noventa Limited has attempted to identify statements containing important factors that could cause actual actions, events or results to differ materially from those described in "forward-looking" information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking information contained herein are made as at the date of this report, based on the opinions and estimates of management on the date that these statements containing such "forward-looking" information are made, and Noventa Limited disclaims any obligation to update any "forward-looking" information, whether as a result of new information, estimates or opinions, future events or results or otherwise. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on "forward-looking" information.
Cautionary note regarding technical information
Technical information in this publication is summarised or extracted from the Independent Competent Persons' Report on the Material Properties of Highland African Mining Company Limited, prepared by SRK Consulting (South Africa) (Proprietary) Limited on 15 March 2007.
Readers are cautioned not to rely solely on the summary of such information contained in this annual report and financial statements, but should read the above mentioned report (which is available at www.noventa.net in the Noventa Limited AIM admission document) and any future amendments to such report. Readers are also directed to the cautionary notices and disclaimers contained therein.
Management discussion & analysis
This management discussion and analysis ('MD&A') has been prepared as of 12 September 2010 and should be read in conjunction with the Group's unaudited condensed consolidated financial statements and notes thereto for the three month period ended 30 June 2010 ('Quarter 2-2010'), the six month period ended 30 June 2010 ('Half 1-2010') and the audited financial statements and notes thereto for the year ended 31 December 2009 (available from www.noventa.net).
Principal activities
Noventa is a Jersey Corporation listed on the Alternative Investment Market ('AIM') market of the London Stock Exchange, which produces tantalum concentrate. Tantalum is a rare heavy metal that is used in the manufacture of electronic capacitors, turbine blades, medical applications, and industrial cutting tools.
The wholly owned Mozambican subsidiary of Noventa Limited, Highland African Mining Company Limitada, holds title to mining concessions at Marropino, Morrua and Mutala in the Zambezia province of Mozambique and exploration licences over various adjacent areas. The mining operations are currently at the Marropino Mine which has operated intermittently since 2003, but was placed in care and maintenance in May 2009. Operations at the Marropino Mine recommenced in April 2010 on a deliberately limited scale to test improvements to the process, and to train personnel. These personnel will be used to train others when full scale operations start. This is also the first step towards the Marropino Mine commencing production from the primary hard rock deposit.
In addition to tantalum, the Marropino ore body also contains a pink beryl gemstone commonly known as morganite. The morganite is associated with the quartz waste in the ore body and is extracted as and when encountered.
Strategic plan and outlook INCLUDING events subsequent to quarter 2-2010
On 10 June 2010 the Board of Directors approved a new three year strategic plan (the 'Plan') designed to optimise the profitability, cash generation and sustainability of the Group, enhancing value for shareholders.
The core development aspects of the Plan are:
·; to upgrade the Marropino plant capacity to in excess of 500,000 lbs of tantalum pentoxide per annum during 2010/11 (refer to the section of the MD&A titled 'Process plant upgrade');
·; to broaden the customer base for the Group's tantalum pentoxide and increase the average selling price (refer to the section of the MD&A titled 'Sales contracts');
·; to upgrade the capability and infrastructure of the Marropino plant to handle material from the Group's Mutala, Morrua and other surrounding sites during 2011;
·; to bring Mutala into production by 2012, and work towards bringing Morrua into production as soon as practicable, but no later than 2015, leveraging off the infrastructure at Marropino in both cases; and
·; to complete further geological exploration on the mining concessions and exploration licences held by the Group to assess the existence of economic tantalum deposits, or other materials.
Subsequent to Quarter 2-2010 in August 2010, the Group identified an additional deposit of Tantalum bearing ore on the existing Marropino concession, to be known as Marropino South. Marropino South is an area of soft rock, measuring approximately one kilometre square, lying two kilometres to the South East of the Marropino Mine. Samples from three pits have been independently assayed and show tantalum grades of 2,697 ppm, 3,836 ppm and 7,577 ppm. These compare to the average 220 ppm of the primary hard rock deposit at Marropino. Subject to additional sampling and assaying, the current results indicate that Marropino South is significant, could be economic to mine, and provide additional feed for the Marropino plant substantially increasing the life of the Marropino Mine.
The Board has decided to accelerate the assessment of Marropino South to accurately define its shape, average grade and tonnage, whilst concurrently executing the Plan. The additional cost of assessing Marropino South will be minimal, and could have the potential benefit of significantly enhancing the economics of the Plan, especially in the earlier years. The Board anticipates that the implementation of the Plan, even if Marropino South does not prove to be viable, will result in the Company becoming cash generative in 2011, with cash generation improving significantly during the rest of the period of the Plan. Cash generation between 2011 and 2013 is anticipated to be around $20,000,000 with cash margins expected to exceed 33% by 2013.
If Marropino South is viable and of high grade material, the processing of the ore body may be possible using the current plant, augmented by a suitable crushing circuit. Funding for the Plan might then be delivered from cash flow, reducing or eliminating the need for further external funding for the execution of the Plan. Until the evaluation of Marropino South is completed, there is no guarantee that it is viable or of consistently high grade. If the evaluation of Marropino South does not indicate that it is viable, the Group anticipates that a further $15,000,000 funding will be required in order to execute the Plan, in addition to the $2,158,000 raised in equity during Quarter 2-2010 and the $8,091,000 that has been secured in equity in September 2010 (refer to note 13.4).
Operations Overview
The Group has operated from a single mine in Marropino, Mozambique since 2003. The productivity and profitability of operations have been significantly lower than expectation since production began, with failure to achieve a profit in any year of operation. The continuing operating losses at the Marropino Mine led to it being placed in care and maintenance in May 2009. From July 2009 a new Board and Management team led by the Chairman, Mr. E Kohn TD, and the CEO, Mr. J Allan, worked on assessing the viability of re-opening the Marropino Mine on a sustainable and profitable basis. This work was completed in Quarter 2-2010 and the Marropino Mine recommenced production on 23 April 2010.
The results from this deliberately modest restart using tailings material have proved that the current process, with the improvements introduced by the new team running it, can deliver better results than have previously been achieved. These improvements are based on detailed test work carried out in The Republic of South Africa and separate analysis carried out by the University of Glasgow, all checked by independent experts in Canada.
Based on these improved results and the experience of recent production, with product quality verified by the customers and independently, the Board of Directors believes that the Marropino Mine, with further planned capital investment and modifications to the processing plant, can become a viable low cost producer of tantalum feedstock. The processing plant design and implementation should provide in excess of 500,000 lb per annum of tantalum contained in a concentrate at a minimum contained percentage of 25%. This new process requires capital investment and funding in 2010 to upgrade the existing plant, with the installation of a comminution circuit allowing the Group to mine the primary hard rock deposit at Marropino and in addition to increase the capacity of the plant for it to become economically viable.
The Group plans to supplement the production from Marropino with additional tantalum concentrate produced from the Group's Morrua and Mutala mining concessions, if geological tests currently underway provide evidence of an economically mineable and profitable ore body. The Group has also implemented a strategy of geological research on its further nine mining exploration sites (principally surrounding the Morrua concession) to assess the viability of economic extraction of tantalum concentrate from these sites. The initial phase of this geological research has been conducted during July and August 2010 in partnership with the University of Glasgow, United Kingdom, and Universidade Eduardo Mondlane, Maputo Mozambique, involving field work by eighteen students under the supervision of the Group's consultant geologist.
The Group raised $2,158,000 in equity from shareholders in June 2010 and a further $8,091,000 from shareholders in September 2010 in order to fund the Plan. This will provide funds for the purchase of key items of equipment in preparation for the plant upgrade in Quarter 4-2010, and working capital. A further $15,000,000 of funds will be required in 2010 and early 2011 to fully implement the Plan, subject to the economic viability of Marropino South (refer to the section of the MD&A titled 'Strategic plan and outlook') which may reduce or remove the requirement for additional funding.
Change in Directors
Mr. K Chung was appointed as a Non-executive Director of the Company on 30 March 2010.
Mr. P Lawless was appointed Chief Operating Officer and a Director of the Company on 19 April 2010.
Mr. P Cox did not stand for re-election as a Director of the Company and ceased to be a Director of the Company on 30 June 2010.
Mr. J Allan completed his agreed term as Chief Executive Officer on 30 June 2010 and became a Non-executive Director.
Mr P. Lawless was appointed Chief Executive Officer on 30 June 2010.
Production
The Group recommenced production at the Marropino Mine on 23 April 2010 on a deliberately limited scale basis, mining the tailings dams. Up to 10 September 2010 the Group has produced 33,907 lbs of tantalum concentrate at a minimum concentration of 25.0% (i.e. a minimum of 8,477 lbs of contained tantalum). Since July 2010, the Group has achieved a consistent daily output, resulting in a monthly production of 17,632 lbs of tantalum concentrate at a minimum concentration of 25.0% (i.e. a minimum of 4,408 lbs of contained tantalum). While these volumes are relatively low compared to the projected output from the Marropino Mine once the new processing plant is commissioned, they reflect the quality of the plant feed (which is relatively low in contained tantalum when compared to the run of mine material at Marropino) offset by a significant improvement on recovery of the tantalum in the ore body compared to the previous mining operations - the Group is consistently achieving recovery rates of 51.0%, which compares to the previous rates achieved of 30.0% to 35.0%. Processing tailings is intrinsically more technically challenging than processing run of mine material, so the high recovery rate is especially pleasing, and underpins the Group's approach to testing each stage of production in a measured and controlled manner in order to optimise the production process and increase overall recovery.
Sales contracts
During Half 1-2010 the Group had a single confidential exclusive long term off-take agreement for the sale of all of its production of tantalum concentrate, which was initially negotiated in 2007.
In June 2010, the Group successfully renegotiated and signed an amendment to this off-take agreement which will allow the Group to reduce annual quantities of tantalum and sell on a non-exclusive basis to this original customer. This will allow the Group to sell the remaining annual production to other parties, and to benefit from increased market prices and a more diversified customer base.
Subsequent to Quarter 2-2010 in July 2010 the Group signed a confidential 3 year off-take agreement for the sale of a substantial proportion of its projected production of tantalum concentrate with a new customer - a major processor and refiner of specialist metals and advanced ceramics. The agreement is for similar quantities as for the Group's existing renegotiated off-take agreement. The agreement is subject only to a sample shipment of material being chemically acceptable. This sample shipment left Mozambique for the customer on 24 August 2010.
Delivery chain
The Group has historically shipped its tantalum concentrate from Walvis Bay, Namibia. This shipping route was not cost effective due to the significant distance that the product had to travel from the Marropino Mine to shipping point (around 3,900 Km).
Subsequent to Quarter 2-2010, on 24 August 2010, the Group has succeeded in shipping material directly from the port of Quelimane (320 Km from the Marropino Mine). The Group anticipates significant cost savings from using shipping ports near the Marropino mine.
Supply chain
Due to the remote location of the Marropino Mine in Mozambique, and the relative reliance on The Republic of South Africa for the procurement of spares and equipment, the Group has focussed on the procurement process within the operating subsidiaries to ensure that parts and equipment are available in a timely manner, without tying up unnecessary working capital.
The Group has also initiated a full review of all items of inventory to identify inventory that is surplus to requirements. This inventory will be sold where the net realisable value is positive.
Subsequent to Quarter 2-2010, 1 August 2010, the Group has appointed a new Logistics and Procurement Manager, Mr B Cavel, to oversee the procurement process. He is based in Maputo and will oversee future improvements in the procurement and logistics process, which is now underpinned by a common ERP system across the Group operations in Mozambique and South Africa.
Infrastructure
The Group has established the appropriate infrastructure to support operations at the remote Marropino Mine.
The Marropino Mine was connected to the national electricity grid in December 2009. Initial connection issues have been resolved and the Marropino Mine now has a reliable power supply. This is supplemented by Diesel generators for back up. The mains electricity supply not only reduces the cost of power, but it also provides a continuous current which improves the productivity of the processing plant and increases the working lives of certain consumable items of the plant such as pump impellers.
Water is sourced on site from boreholes and the natural lake on the Marropino site providing a cost effective and reliable supply.
During Quarter 2-2010 the Group has completed an optimisation project of the buildings and facilities at the Marropino Mine, centralising the stores into one building, relocating the workshop and dry processing plant to more appropriate locations for production purposes, and refurbishing and expanding the accommodation at the Marropino Mine in order to provide appropriate conditions for employees and visitors to the site. The Group has also improved local sourcing of food products, with established relationships now in place to provide a reliable supply to the Mine.
The Marropino Mine infrastructure and support is considered to be sufficient now to support the current operations of the Mine.
Process plant upgrade
The Marropino Mine has made losses in every year of operation due to a combination of factors, including, but not limited to, the incorrect design of the processing plant and significant rejection of the ore body to oversize. These failings impacted significantly on the ability of the processing plant to recover the tantalum contained in the ore body.
In April 2010, the Group contracted Paradigm Project Management ('PPM') as the Equipment, Procurement and Construction Manager ('EPCM') for the Marropino Mine plant upgrade project. The design and test work for the new plant is now complete, and the Group is ready to commence the procurement phase, within a projected budget of $25,000,000 (including Working Capital).
The process plant has been redesigned to process all material to achieve higher recovery and efficiency. This has been possible through studies commissioned by the Group into the liberation process and separation technique of the ore body at Marropino, which show that a three size fraction separation is necessary to optimise recovery through gravity separation across different spiral banks and shaking tables.
Subsequent to Quarter 2-2010, the Group has placed orders for the necessary long lead time equipment in September 2010 and the Marropino Mine is forecast to increase production in Half 1-2011, when the upgraded plant is expected to be fully commissioned. This implementation plan has taken account of the timing necessary to place orders for long lead time items, the most significant of which have a lead time not exceeding 10 weeks, which include spiral banks and transformers.
The projected cash flows for the upgrade project are anticipated to be expended relatively evenly at around $3,000,000 per month from September 2010 through to January 2011, with the remaining $5,000,000 expended over February and March 2011. The Group anticipates that the necessary funds will be obtained through phased capital inflows arising either from shareholder investment, or debt funding. The financing for the initial phases was obtained in September 2010 (note 13.4).
The Directors believe that once commissioned, the plant upgrade will provide the levels of production needed at a production cost which is profitable based on current off-take agreements.
Non-Financial Resources
The Group's non financial resources relate to the Group's human resources, infrastructure, systems, technologies, and processes.
Human resources
The Group has recruited at all levels of the organisation, with a particular focus in Mozambique on the recruitment of Mozambican citizens who are experienced managers and skilled plant operatives. The Group always gives preference to Mozambican nationals, or Portuguese speaking individuals if Mozambican nationals are not available. This approach has proved invaluable to maintaining good working relationships with the Mozambican authorities, and the local community in the area in which the Marropino Mine is situated. It also promotes the economic and social development of Mozambique, and the participation of the workforce at the Marropino Mine in the overall development of the operations. The benefits of this approach are seen in the excellent results achieved by the Marropino Mine.
The Directors believe that the human resources in the Group are appropriate to the current and projected level of activity in the Group, both at the Marropino Mine, and in the administrative support functions.
Systems, technologies and processes
The Group has completed a review of all systems and processes throughout the Group, and identified areas for improvement. A new ERP system has been installed allowing a common platform for the Group operations at Marropino, Maputo and Johannesburg. This system provides a significantly enhanced stock management platform. Once integrated with the Group Maintenance system (On Key), this will provide a streamlined and efficient maintenance planning, stock control, and financial reporting system.
Markets and competition
Tantalum is a rare specialty metal that has become a crucial ingredient for the electronics industry and other new technologies such as the following:
|
Electronics |
·; Cellular phones/PDAs/GPS ·; Computers/laptops ·; Digital audio/video players ·; Car airbag electronics
|
|
Specialty Applications |
·; Jet turbine blades ·; Medical/surgical applications ·; Carbide cutting tools ·; Military ·; Nuclear power
|
|
New Technologies |
·; Green technologies (i.e., auto, wind, solar) ·; Hybrid and lithium-ion batteries ·; Oil drilling applications
|
With electronic devices becoming smaller, lighter, with more processing power, tantalum usage is increasing. Global tantalum demand is expected to grow at a CAGR of 6% per annum reaching 7Mlb by 2012 (Global Capital Magazine, October 2008). Global supply has fallen behind global demand and is expected to continue lagging for the foreseeable future.
Four developments have made the supply problem critical:
1 Suspended Production:
• Tanco, Talison's Greenbushes underground mine in South Western Australia suspended production in 2008 due to falling world prices and stated their requirement for the tantalum concentrate price to reach $80 to $100 per pound of contained tantalum before production wound recommence.
• Noventa, when the Marropino Mine was place in care and maintenance in May 2009.
2 Drained Inventories:
• The United States Defense Logistics Agency, the second largest supplier of tantalum during 2001 to 2007 (500,000+ lb per annum), exhausted its captive supply and stopped sales. It has now announced that it intends to rebuild stocks creating demand pressure.
3 Recycling Difficulties:
• Recycling has become more difficult due to the smaller size of electronic components.
4 Restrictions on Product from Conflict Regions:
• Increasing international sanctions on conflict minerals - Central African countries, Democratic Republic of Congo, Rwanda, and Uganda.
• US legislation which would make it illegal to buy or sell conflict minerals anywhere in the supply chain is advancing and gaining support (H.R. 4128 & S. 891).
In this context, the market is characterised by supply shortage from ethical producers, which is placing upwards pressure on spot prices of tantalum concentrate. Since 1 January 2010 to the date of this report, the price per pound of contained tantalum has increased from $37.0 to $85.0.
Although the spot price has shown significant increases in 2010, supply prices are normally set by way of long-term off-take deals between miners and processors. Noventa has recently renegotiated, or entered into new off-take agreements with major customers, that capitalise on the increasing tantalum price (refer to the section of this MD&A titled 'Sales contracts') and provide a stable price for economic production once the Marropino Mine upgrade is completed. As a member of the Electronics Industry Citizenship Coalition ('EICC'), an organization dedicated to ensuring worker safety and fairness, environmental responsibility and business efficiency in the electronics industry, Noventa is one of the few suppliers which can provide tantalum concentrate to these customers.
The Group believes that it is in a strong position in this market to expand operations on a profitable and sustainable basis.
Risk assessment
The following table summarises the principal risks and uncertainties faced by the Group, and the actions taken to mitigate these risks:
|
Area: |
Description of risk: |
Examples of mitigating activities: |
|
Regulation |
·; Changes to legislation (principally regarding the operation of mining in Mozambique) could result in the Group's mining concessions and mining licences becoming uneconomic or inoperable. |
·; The Group closely monitors regulatory developments across the mining industry in Mozambique. ·; The Group operates under a Mining Licence Agreement signed between Highland African Mining Company Limitada (one of the Group's wholly owned subsidiaries) and the Government of Mozambique. This contract establishes a number of benefits to the Group which cannot be altered by changes in law. The Group ensures that it complies with all the terms of the Agreement. |
|
|
·; The Group has various mining licences for research and exploration in the Zambezia Province of Mozambique. These licences could fail to be renewed by the Government of Mozambique. |
·; The licences require the Group, within a set time frame, to perform research and exploration in the areas covered by the licences. The Group has historically not completed the necessary work in the required timeframe. The Group has now agreed terms with Mozambique and UK universities to allow students to complete field work parts of their courses on these licence areas. |
|
Resources |
·; The Group's concessions may not contain the predicted quantity or grade of tantalum, causing revenues to decrease, or costs of production to increase.
|
·; The Group has updated geological studies completed at the Marropino site, and has confirmed the existence of the ore body, at an average 220ppm. ·; The Group is undertaking geological studies at the Mutala concession to confirm previous studies completed at this site. |
|
|
·; Exploration for mineral resources involves considerable risk and there is no certainty that expenditure incurred in the search and evaluation for mineral resources at the Group's concessions and licences will result in the discovery of commercial quantities of ore. |
·; The Group is implementing exploration projects at concessions and licences held by the Group in areas where tantalum is known to exist. This reflects the characteristics of the pegmatite body in the Zambezia Province of Mozambique. |
|
Predicted costs |
·; Unanticipated expenditure or unforeseen delays in re-opening the Marropino Mine and transitioning to hard rock could make operations unprofitable or not viable. |
·; The Group has detailed forecast costing models, which have been prepared by experts on the Board of Directors, and subject to expert third party validation. |
|
Predicted revenue |
·; There is no certainty that predicted production volumes, and consequently revenue, will be achieved by the Marropino Mine and the remaining mining concessions. |
·; The Group has detailed forecast production models, which have been prepared by experts on the Board of Directors, and subject to expert third party validation. |
|
|
·; Tantalum sales price is subject to worldwide supply and demand factors. The price of Tantalum may decrease, such that forecast revenues used to determine the viability of concessions are not applicable. |
·; The Group has confidential off-take agreements for the production from Marropino which assure customers for the majority of the Group's tantalum concentrate output at fixed forward prices. ·; The Group anticipates that the price for tantalum will increase in 2011/2012, reflecting the low production volumes worldwide and the decreasing inventory reserves of the major consumers. The Group anticipates that it will be able to find customers to sell the additional tantalum concentrate output to, at favourable prices. |
|
Dependence on Marropino |
·; The Group is currently dependent on the Marropino Mine. Adverse events at the Marropino Mine, including, but not limited to production related risks referred above, environmental, labour, industrial accidents, pollution, ground or slope failures, natural phenomenon such as rain and others could cause the mine to close temporarily, or permanently. |
·; The Group has initiated plans to develop further concessions, commencing with Mutala where further geological studies are being undertaken with a view to commencing commercial exploration in 2012. |
|
Availability of finance |
·; Subject to the assessment of the economic viability of the Marropino South site, the Group is dependent on being able to obtain additional investment to fund the plant upgrade at Marropino and develop remaining mining and exploration licences. There is no guarantee that this funding will be available. |
·; The Group is in discussions with brokers and investors regarding availability of equity finance. The Group is also in discussions with development and commercial banks regarding the availability of various sources of credit. The Directors believe that the finance required will be available. |
Financial Overview
The following table provides selected financial information for the three years to 31 December 2009 and quarterly and half yearly information that has been published for 2009 and 2010, prepared under International Financial Reporting Standards ('IFRS') and presented in thousands of United States Dollars, except per share amounts:
|
|
H1-2010 US$000
|
Q2-2010 US$000 |
Q1-2010 US$000
|
H1-2009 US$000
|
Q2-2009 US$000
|
Q1-2009 US$000
|
2009 US$000
|
2008 US$000
|
2007 US$000
|
|
Operations |
|
|
|
|
|
|
|
|
|
|
Revenue
|
1,000 |
- |
1,000 |
4,341 |
1,664 |
2,677 |
5,709 |
5,886 |
1,617 |
|
Gross (loss)/profit
|
(245) |
(592) |
347 |
(3,776) |
(2,551) |
(1,225) |
(3,190) |
(7,805) |
(8,558) |
|
Operating loss
|
(3,078) |
(1,742) |
(1,336) |
(5,513) |
(3,169) |
(2,344) |
(10,662) |
(22,264) |
(16,872) |
|
Loss for the period
|
(3,079) |
(1,741) |
(1,338) |
(5,590) |
(3,173) |
(2,417) |
(10,875) |
(29,390) |
(14,336) |
|
Basic and diluted loss per share (US cents) |
(1.3) |
(0.7) |
(0.6) |
(14.2) |
(8.1) |
(6.1) |
(7.7) |
(82.4) |
(47.0) |
|
Financial position |
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
1,080 |
1,080 |
351 |
- |
- |
- |
40 |
- |
19,166 |
|
Cash and cash equivalents
|
522 |
522 |
2,710 |
798 |
798 |
2,398 |
5,029 |
2,540 |
2,145 |
|
Borrowings
|
- |
- |
- |
- |
- |
(28) |
- |
(59) |
- |
|
Net current assets
|
1,450 |
1,450 |
1,749 |
468 |
468 |
3,377 |
3,181 |
2,746 |
2,288 |
|
Equity
|
2,267 |
2,267 |
1,840 |
216 |
216 |
3,128 |
2,963 |
2,501 |
21,220 |
|
|
|
|
|
|
|
|
|
|
|
|
Funds raised (pre issue expenses)
|
2,158 |
2,158 |
- |
- |
- |
- |
10,102 |
11,021 |
15,643 |
|
Share price at period end - UK pence |
6.0p |
6.0p |
7.7p |
3.6p |
3.6p |
17.0p |
5.3p |
20.0p |
152.5p |
Quarter 2-2010 results overview
It is not meaningful to compare the performance in Quarter 2-2010, during which the Marropino Mine recommenced operations, to Quarter 2-2009 when the Marropino Mine was placed under care and maintenance. The financial section of this MD&A focuses on the current reporting periods, events subsequent to the reporting period end, and management's future intentions.
During Quarter 2-2010, the Group reported a gross loss of $592,000. The loss reflects the operating costs required to maintain the Marropino Mine in care and maintenance up to 23 April 2010 and increasing operating costs thereafter as the Marropino Mine recommenced production without associated sales of tantalum concentrate in the Quarter. The Group's first sale of tantalum concentrate was completed subsequent to the period end (note 13.2).
Additional one off expenditure of $580,000 (refer to the section of this MD&A titled 'Administrative expenditure') was incurred in the Quarter.
During Quarter 2-2010 the Group released $925,000 of the provision recorded against IVA recoverable assets reflecting a revision to the assessment of recoverability of these assets following confirmation, and payment subsequent to the Quarter end, by the Mozambique Tax Authority of part of the Group's ongoing IVA recoverable claims.
The Group has continued to minimise capital expenditure in the quarter to conserve funds pending the finalisation of the detailed process plant upgrade plan and the receipt of investment necessary to implement the plant upgrade. Expenditure has principally been incurred on EPCM contractor fees, as the work has continued on finalising the detailed design of the upgraded plant. $591,000 is recorded within Assets in the course of construction included in Property, plant and equipment for these EPCM fees.
In June and July 2010, the Group raised $2,158,000 before expenses from the private placing of 22,295,914 Ordinary Shares of £0.00004 each for £0.065 per Ordinary Share. The proceeds raised were used to fund working capital and deposits on certain key items of property, plant and equipment required for the upgraded plant.
Subsequent to the Quarter end, in September 2010, the Group raised $8,091,000 before expenses from an unconditional private placing, subscription and additional subscription totalling 80,323,432 Ordinary Shares of £0.0004 each in the Company. The Company issued warrants exercisable at 10p to the subscribers on the basis of one warrant for every two Ordinary Shares subscribed. 50,563,921 Ordinary Shares were issued on 8 September 2010 at £0.065 per Ordinary Share raising $5,051,000 before expenses. The remaining 29,859,511 Ordinary Shares were secured under an irrevocable commitment and will be issued in three tranches on 30 September 2010, 31 December 2010 and 31 March 2011 at £0.06587 per Ordinary Share. Further details are included in the section of the MD&A titled 'Funds raised'. The funds will be used to finance working capital and provide the initial phased capital inflows required for the process plant upgrade programme (refer to the section of this MD&A titled 'Process plant upgrade').
During Quarter 1-2010, the Group initiated legal proceedings in South Africa against SRK Consulting (South Africa) Limited, a company incorporated in accordance with the laws of South Africa, for breach of contract and negligence in the preparation of the Independent Competent Persons' Report on the Material Properties of Highland African Mining Company Limited in March 2007. As at the date of this report, a statement of the defendant's exception to the claim has been received, but no court date has been set. During Quarter 2-2010 the Group incurred legal expenditure of $92,000 (Half 1 2010 - $169,000) with respect to this claim and deposited 700,000 Rand in a Trust Account as a deposit for costs. While this deposit is fully refundable if the claim is successful, the Group has provided against it in full in the Quarter as the Group is not virtually certain that the claim will be successful. In the event that the claim is not successful, the deposit will be applied against the defendant's costs with any balance refundable to the Company.
Going concern
The Group's mining activities are located in Mozambique, where the Group has historically produced tantalum concentrate (and recovered Morganite) from its Marropino Mine which was placed in care and maintenance in May 2009 due to continuing operating losses, processing plant deficiencies and past management failures to address the underlying production and logistical issues.
In July 2009, the Group commenced a turnaround strategy after the appointment of Mr. E F Kohn TD as Chairman to the Group, and Mr. J Allan as Chief Executive Officer. The entire Board of Directors was also replaced and wide-ranging changes made throughout the business at key management levels to support the turnaround and the mining operations in Mozambique. The new management team have implemented a rigorous assessment of the business in order to establish whether the mining operations in Mozambique could be performed on a profitable and sustainable basis.
While there can be no certainty, the studies commissioned by the new management team into the geological, metallurgical and processing of the ore body at Marropino Mine indicate that the concession can be operated on a profitable and sustainable basis. Accordingly, the Group recommenced mining operations at the Marropino Mine on 23 April 2010 on a limited scale to initially reprocess previously mined material contained in the tailings. The intention is to use the reprocessing of previously rejected tailings and oversize material to test and prove the validity of the proposed changes in design from the previous methods used and to provide additional revenue as well as training the new team. After the additions, upgrades and modifications have been completed the Directors anticipate that the plant will be able to return to full production using the substantially higher grade hard rock ore body at Marropino with results that will represent an improvement over those previously achieved. This is expected to make the mining operation sufficiently cash generative to fund all expenditure in the Group, and provide surplus cash to fund the subsequent development of the Mutala and Morrua concessions, subject to geological test work.
As at 10 September 2010 the Group had cash of $4,648,000, further unconditionally committed funds of $3,143,000 (of which $1,125,000 is due to be received in September 2010, $1,009,000 in December 2010 and $1,009,000 in March 2011) and no debt. Subject to the assessment of the viability of Marropino South which may reduce or eliminate the need for additional funding (refer to the section of the MD&A titled Strategic plan and outlook'), the Group believes it requires a further $15,000,000 to fund the Plan which will be used to fund working capital, provide the capital investment necessary at Marropino and fund the costs of further geological work at the other mining concessions and sites held under mining licences. The Group is currently exploring various funding opportunities. The Group's existing funds are expected to be sufficient to finance the Group operations providing the Group time to assess the economic viability of Marropino South and to obtain any additional funding required to implement the Plan.
The Directors have adopted the going concern basis in preparing the financial statements, having carried out a going concern review, on the basis that:
·; they have successfully recommenced operations on a limited basis at the Marropino Mine and demonstrated that the proposed modifications and changes to the plant should make the plant effective;
·; they have successfully raised $10,249,000 of interim financing in June and September 2010 to support the Group whilst additional funding to implement the Plan is secured;
·; they have taken all reasonable steps possible to assess the viability of the Plan, including the preparation of forecasts for a period exceeding twelve months from the date of approval of the financial statements, and believe that the Group will become profitable and will return high rates of return on shareholder investment in the future; and
·; they have a realistic expectation based on the feedback from their discussions with potential investors and potential debt providers that the strategy to secure the additional funding required of up to $15,000,000 to implement the Plan is realistic, subject to satisfactory market conditions prevailing.
The Directors believe they will be able to raise the additional funding required, subject to satisfactory market conditions prevailing, but acknowledge that there is a material uncertainty over their ability to secure the additional funding required to implement the Plan which may cast significant doubt on the Group's and the Company's ability to continue as a going concern and, therefore, its ability to discharge its liabilities in the normal course of business.
Revenue
The Group did not realise any sales during Quarter 2-2010. During Half 1-2010, the Group reached agreement with LJ International Limited for the sale of consignment stock held by Goldleaves Trading Limited and Miranda Gems (HK) under the Morganite Joint Venture Agreement between the Group, and these parties. The Morganite Joint Venture Agreement has been terminated, with payment due to the Group for the sale of the abovementioned inventory of $1,000,000. In accordance with this agreement, $300,000 was received in February 2010, $200,000 in March 2010, and $100,000 per month thereafter. Subsequent to Quarter 2-2010 and as at the date of this report, the total amount due under the settlement of $1,000,000 has been received.
Subsequent to Quarter 2-2010 the Group recommenced shipments of tantalum concentrate in August 2010 (note 13.2).
Gross loss
The Gross loss (Revenue less Cost of sales which includes Direct operating costs of the Marropino Mine irrespective of whether it is producing tantalum concentrate) was $592,000 in Quarter 2-2010 and $245,000 in Half 1-2010. The Gross loss in Quarter 2-2010 arises from higher Cost of sales in Quarter 2-2010 compared to Quarter 1-2010, reflecting an increase in operations at the Marropino Mine, offset by the absorption to inventory of $172,000 for tantalum concentrate in work in progress. The Gross loss in Half 1-2010 is lower than the Quarter 2-2010 loss due to the Gross profit arising on the sale of Morganite in Quarter 1-2010 which has no attributable Cost of sale (Morganite recovery arises as a by-product of the tantalum concentrate production and accordingly no cost of production is attributed to it).
Administrative expenses
During Quarter 2-2010 the Group recorded expenditure of a non recurring nature for the following items:
·; $16,000 (Half 1-2010 - $234,000) for sign on bonuses and direct recruitment costs for key management positions, $nil (Half 1-2010 - $54,000) of which was paid in Ordinary Shares of the Company;
·; $100,000 (Half 1-2010 - $415,000) of consulting costs directly related to the assessment of geological properties, engineering and metallurgical processing at the Marropino Mine;
·; $398,000 (Half 1-2010 - $521,000) of legal costs incurred (including $92,000 deposit for defendant costs which has been provided against in the Quarter) with respect to the claim against SRK Consulting (South Africa) Limited noted above and various reviews and revisions to the Group's contracts and agreements;
·; $66,000 (Half 1-2010 - $98,000) of legal and consulting fees related to the proposed TSX listing of the Company.
·; $16,000 (Half 1-2010 - $145,000) exchange loss arising on non US$ denominated bank balances. This loss is offset in full by exchange gains and losses on trading items through natural economic hedges (see note 9).
These were offset by the release of $925,000 of provisions against IVA recoverable assets (note 3.2) reflecting the Group's revised assessment of the recoverability of the IVA balances.
Exploration and evaluation expenses
During Quarter 2-2010, the Group incurred $40,000 of expenditure on bulk sampling at Marropino and initial geological evaluation at the Mutala concession.
Taxation
The Group has not incurred a tax expense during Quarter 2-2010, or Half 1-2010. The Group has significant tax losses in Mozambique which are expected to offset future taxable profits for the foreseeable future.
Liquidity and Capital Resources
The Group has no external credit lines and is funded solely through shareholder investment. As at 30 June 2010, Group cash balance was $522,000. The Group forecasts cash expenditure in the remainder of 2010 and 2011 to exceed the cash balance and future predicted cash inflows due to the expenditure required on property, plant and equipment for the upgrade of the Marropino plant, and the funding of working capital in the phase prior to upgrade and during the ramp up of production at the plant. The Group raised $2,158,000 in new equity in June 2010. Subsequent to Quarter 2-2010, in September 2010, the Group raised $8,091,000 of additional shareholder funding.
Cash flows from operating activities
Cash utilised by operations was $2,641,000 in Quarter 2-2010 (Half 1-2010 - $4,512,000) as a result of operating losses in the period, the deferred receipt of part of the income arising on the termination of the Morganite Joint Venture Agreement in accordance with the agreed payment schedule (refer to the section titled 'Revenue' above), and the build up of tantalum concentrate inventory. Non cash items in the period relate principally to $139,000 share based payments expense, and $925,000 release of provisions against IVA recoverable assets.
Cash flows from investing activities
Cash utilised by investing activities in Quarter 2-2010 was $138,000 (Half 1-2010 - $457,000) arising from the purchase of capital assets totalling $141,000 (Half 1-2010 - $461,000) offset by $3,000 interest received (Half 1-2010 - $4,000). The Company continued to minimise capital expenditure in Quarter 2-2010 in order to conserve cash in advance of the phased fundraisings required to implement the new processing plant at Marropino. Expenditure has been incurred on critical items and long lead time items which would delay the restart project if they are not acquired in a timely manner.
Cash flows from financing activities
In June 2010, the Group secured $2,158,000 additional shareholder funding through a placing (the 'June 2010 Placing'), a conditional placing (the 'June 2010 Conditional Placing Shares') and an additional conditional placing (the 'June 2010 Additional Conditional Placing') of Ordinary Shares of £0.0004 each in the Company. $652,000 was received on 11 June 2010, with the remaining $1,506,000 received after the end on Quarter 2-2010 on 2 July 2010.
Contractual obligations
As at 30 June 2010 the Group has capital commitments of approximately $3,400,000 principally related to long lead time items required for the plant upgrade and EPCM fees.
The Group has commitments under operating leases for the rental of premises, with $69,000 due in 2010 and $138,000 due in each of 2011 and 2012.
The Group expects that payment of contractual obligations will come from funds generated by operations subsequent to the commissioning of the new processing plant at Marropino, and from current funds and shareholder investment in the period prior to commissioning.
The Group does not have any off-balance sheet liabilities or transactions that are not recorded or disclosed in the financial statements.
Capital Stock
The Company has one class of Ordinary Shares which carry no right to fixed income. Each share carries the right to one vote at the general meetings of the Company.
The Company has authorised share capital of 1,250,000,000 Ordinary Shares of £0.0004 each, of which 256,724,836 are allotted and called up as at 30 June 2010. As at the date of this report, the Company has in issue 308,729,803 Ordinary Shares of £0.0004 each, an increase of 52,004,967 Ordinary Shares, reflecting the September 2010 Placing, Subscription and Additional Subscription (refer to the section of this MD&A titled 'Funds raised') and the issue of shares to certain Directors and employees (note 10.1). The Directors have the authority to issue up to 500,000,000 Ordinary Shares.
There are no specific restrictions on the size of a holding of shares nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.
At 30 June 2010, the Company had instruments that could result in the issue of 46,486,120 Ordinary Shares in the form of warrants, share options and bonus shares. Additionally, as at 30 June 2010, the Company was committed to issuing 825,765 Ordinary Shares to Directors for services provided, 1,011,671 Ordinary Shares as sign on bonuses to certain employees, and 48,976 Ordinary Shares to employees for remuneration contractually payable in Ordinary Shares of the Company. These obligations are reflected in the 'Shares to be issued' reserve, a component of the Company and Group equity. Details of employee share schemes, other call options and arrangements relating to the issue of Ordinary Shares in the Company are set out in notes 10 and 11.
No person has any special rights of control over the Company's share capital and all issued shares are fully paid.
On 15 March 2007, Highland African Ventures Limited, Kerias Management Trading Limited and Fleming Partners (Liechtenstein) AG (together the 'Connected Shareholders') entered into the 'Relationship Agreement' with the Company governing the exercise by the Connected Shareholders of their rights in relation to the Company following the admission of the Company to AIM. Subsequent to Quarter 2-2010 and as a result of the September 2010 Placing, Subscription and Additional Subscription, this relationship has automatically terminated as the combined shareholding of the Connected Shareholders fell below 30% and thus the Connected Shareholders no longer have certain rights and obligations granted or imposed upon them under the Relationship Agreement which included:
·; the right to appoint two Directors, one of which could be appointed as Chairman;
·; the right to withhold consent from the Company for the issuance of new Ordinary Shares;
·; the right to subscribe to any new Ordinary Shares in proportion to the Connected Shareholders' holdings to prevent dilution of the interests of the Connected Shareholders; and
·; the obligation to offer the Company first refusal of any investment opportunity relating to the tantalum and Morganite business carried on by the Group.
Funds raised
Funds raised during Quarter 2-2010
In June 2010, the Group secured $2,158,000 additional shareholder funding through a placing (the 'June 2010 Placing'), a conditional placing (the 'June 2010 Conditional Placing Shares') and an additional conditional placing (the 'June 2010 Additional Conditional Placing') of Ordinary Shares of £0.0004 each in the Company.
June 2010 Placing
The Group completed the private placing of 6,826,450 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £444,000 ($652,000) before expenses. The funds from the June 2010 Placing were received on 11 June 2010.
June 2010 Conditional Placing
The Group secured commitments for the conditional placing of 14,415,723 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £937,000 ($1,403,000) before expenses. The June 2010 Conditional Placing was conditional on the following conditions precedent:
1. the Directors obtaining shareholder approval at the AGM of the Company on 30 June 2010 for the issuance of the June 2010 Conditional Placing Shares;
2. the June 2010 Conditional Placing Shares issued being accepted to trading on AIM; and
3. there being no material adverse change in national or international financial, market, industrial, economic or political conditions, or any other occurrence of any nature which, in the reasonable opinion of the Company's corporate broker would, or would be reasonably likely to have, a material adverse effect on the business of the Company during the period from 8 June 2010 to the Company's AGM on 30 June 2010.
The conditions precedent for the conditional placing were met in full, and the funds from the June 2010 Conditional Placing were received on 2 July 2010, after the period end. The amounts due at 30 June 2010, when the June 2010 Conditional Placing became unconditional are reported within Trade and other receivables as at 30 June 2010.
June 2010 Additional Conditional Placing
During June 2010, the Group secured additional commitments under the same terms as the June 2010 Conditional Placing for 1,053,741 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £68,000 ($103,000) before expenses. The funds from this additional placing were received on 2 July 2010. The amounts due at 30 June 2010, when the June 2010 Additional Conditional Placing became unconditional are reported within Trade and other receivables as at 30 June 2010.
Funds raised subsequent to 30 June 2010
In September 2010, the Group secured shareholder investment of £5,247,000 (approximately $8,091,000) before expenses from an unconditional placing (the 'September 2010 Placing), a subscription (the 'September 2010 Subscription') and an additional subscription (the 'September 2010 Additional Subscription) totalling 80,323,432 Ordinary Shares in the Company.
On 3 September 2010, the Group completed a placing of 42,021,415 new Ordinary £0.0004 shares (the 'September Placing Shares') and a subscription of 8,442,506 new Ordinary Shares of £0.0004 each (the 'September Subscription Shares') (together the 'New Shares') at a price of £0.065 per New Share, raising a total of £3,280,000, approximately equivalent to $5,058,000. The funds will be used to fund working capital and provide the initial phased capital inflows required for the process plant upgrade programme (refer to the section of the MD&A titles 'Process plant upgrade'). The New Shares have been subscribed by a combination of new investors and existing shareholders.
In addition to the monies raised through the issue of the New Shares, the Company received an irrevocable commitment from Compagnie Internationale de Participations Bancaires et Financieres SA , ('CIPAF'), a subsidiary of General Mediterranean Holding SA, to subscribe for 29,859,511 new Ordinary Shares of £0.0004 each (the 'Additional Subscription Shares') at a price of 6.587p per share to raise a further £1,967,000, approximately equivalent to $3,033,000 (the 'Additional Subscription'). The Additional Subscription will take the form of three distinct tranches, as laid out below, with the Company receiving the subscription funds for each of the tranches at the time each tranche is subscribed, and the respective Additional Subscription Shares allotted to CIPAF within five working days of the subscription monies being received:
|
|
Number of Additional Subscription Shares
|
Subscription to be received by |
|
Tranche A |
9,953,170 |
30 September 2010 |
|
Tranche B |
9,953,170 |
31 December 2010 |
|
Tranche C |
9,953,171 |
31 March 2011 |
The subscribers for the New Shares and the Additional Subscription Shares will receive warrants to subscribe for one new Ordinary Share of £0.0004 for every two Ordinary Shares subscribed for (the 'September 2010 Warrants'). The September 2010 Warrants have an exercise price of £0.10 and a term ended 2 September 2012.
Proposed transactions
As at the date of this report, no agreements to merge with or acquire another entity have been entered into.
Significant proposed transactions relate solely to the issue of new Ordinary Shares for cash consideration, or raising of debt finance of up to $15,000,000 to fund the Plan, the terms of which have not yet been finalised.
Transactions with related parties
During Quarter 2-2010, consulting services were provided by certain Directors, and / or companies in which they have a beneficial ownership, amounting to $298,000 (Half 1-2010 - $529,000; year ended 31 December 2009 - $1,035,000; Quarter 2-2009 and Half 1-2009- $nil). These fees are included in the Condensed Consolidated Statement of Comprehensive Loss as Administrative expenses. Full details are provided in note 12. These transactions were conducted in the normal course of business and were accounted for at the fair value of the transactions, which is the exchange amount in all instances other than those involving share based payments, where the fair value is determined by means of a valuation model (note 11).
Critical accounting estimates
In the application of the Group's accounting policies which are described in note 3 to the Group financial statements for the year ended 31 December 2009, including consideration of the Going concern status of the Company and Group, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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 to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The effect on the financial statements of changes in estimates in future periods could be material.
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.
Carrying value of tangible fixed assets
As described more fully in the Group financial statements for the year ended 31 December 2009, the Group impaired all of its tangible operating fixed assets held at 31 December 2009. During Quarter 1-2010, the Group concluded the preliminary design of the new processing plant at the Marropino Mine, with a sufficiently reliable estimate of the capital investment required to modify the plant design, including the construction of a hard rock circuit, in order for the Marropino Mine to be net cash positive after future capital investment. In March 2010, in order to meet the Marropino Mine restart programme, the Group commissioned the construction of a key long lead time item for the hard rock circuit at Marropino. During Quarter 2-2010, the Group made significant advances with the detailed design of the Marropino plant upgrade, incurring capital expenditure (which remains unsettled at 30 June 2010) for EPCM fees of $591,000. These two items are the principal components of assets in the course of construction included within property, plant and equipment. Additionally, the Group has commenced the purchase of certain items of equipment, principally light transport vehicles, which are necessary for the current operations, and will continue to be utilised when the plant upgrade is completed.
The recoverability of the carrying value of the Property, plant and equipment asset is dependent on the Group's ability to secure additional shareholder investment to fund the remaining capital investment required at the Marropino Mine, and the ability of the Group to realise forecast budgeted results of operations.
Recoverability of input Value Added Tax
Mozambique Value Added Tax ("IVA"), operates in a similar manner to UK Value Added Tax ("VAT"). The Group is exempt from IVA on its exports from Mozambique under the terms of its Mining License Agreement and Mozambique tax law. The Group is able to recover input sales tax on all purchases within Mozambique. The Group is always therefore in a net recovery position of IVA. Since 2004, the Group had not succeeded in recovering IVA from the Mozambique Government. The Group has two ongoing IVA recovery claims submitted amounting to approximately $575,000 as at 30 June 2010, and further recoverable IVA of $780,000 due, but not yet claimed back. Due to the significant uncertainty over the recoverability of these IVA balances, the Group provided in full against the assets as at 31 December 2009.
During Quarter 2-2010 the Group was able to obtain copies of all of the documentation required by Mozambique Law to support the ongoing IVA claims. $502,000 of the ongoing IVA recoverable claims was approved for payment by the Mozambique Tax Authority in August 2010. The remaining $73,000 of the ongoing claims has been withheld, pending the Group providing additional information to support the amounts claimed. As at the date of this report, approximately $198,000 has been received by the Group in August 2010, with the approved balance of the two ongoing claims anticipated during Quarter 3-2010. The Group anticipates that a further $423,000 of the IVA recoverable, once claimed in Quarter 4-2010, will be received by the Group during Quarter 4-2010 and Quarter 1-2011.
The Group now has a reasonable expectation that $925,000 of the IVA recoverable balances will be collected in an orderly and timely manner, and accordingly in Quarter 2-2010 the Group has released $925,000 of the provision against IVA recoverable assets. The remaining IVA recoverable balance of $430,000 remains provided against, with recovery subject to the Group providing satisfactory responses to the additional information requested relating to the ongoing IVA claims and further discussions with the Mozambique Taxation Authority regarding the ability of the Group to reclaim IVA recoverable balances that were under declared during 2004 to 2007.
|
|
|
|
|
||||||
|
|
|
|
3 months ended 30 June |
6 months ended 30 June |
12 months ended 31 December |
||||
|
|
|
|
2010
|
2009
|
2010
|
2009 (Restated - note 14) |
2009
|
||
|
|
|
|
Unaudited |
Unaudited |
Audited |
||||
|
|
Note |
|
US$000 |
US$000 |
US$000 |
||||
|
|
|
|
|
|
|
|
|
||
|
Revenue |
|
|
|
|
|
|
|
||
|
Tantalum concentrate |
|
|
- |
1,383 |
- |
4,060 |
5,394 |
||
|
Morganite |
|
|
- |
281 |
1,000 |
281 |
315 |
||
|
|
4 |
|
- |
1,664 |
1,000 |
4,341 |
5,709 |
||
|
Cost of sales |
|
|
(592) |
(4,215) |
(1,245) |
(8,117) |
(8,899) |
||
|
Gross loss |
|
|
(592) |
(2,551) |
(245) |
(3,776) |
(3,190) |
||
|
|
|
|
|
|
|
|
|
||
|
Administrative expenses |
|
|
(1,110) |
(483) |
(2,793) |
(1,407) |
(7,000) |
||
|
Impairment of fixed assets |
|
|
- |
(132) |
- |
(327) |
(469) |
||
|
Exploration and evaluation expenses |
|
|
(40) |
(3) |
(40) |
(3) |
(3) |
||
|
Operating loss |
|
|
(1,742) |
(3,169) |
(3,078) |
(5,513) |
(10,662) |
||
|
|
|
|
|
|
|
|
|
||
|
Net finance income/(expense) |
5 |
|
1 |
(4) |
(1) |
(77) |
(111) |
||
|
Loss before taxation |
|
|
(1,741) |
(3,173) |
(3,079) |
(5,590) |
(10,773) |
||
|
|
|
|
|
|
|
|
|
||
|
Taxation |
|
|
- |
- |
- |
- |
(102) |
||
|
Loss for the period |
|
|
(1,741) |
(3,173) |
(3,079) |
(5,590) |
(10,875) |
||
|
Other comprehensive loss |
|
|
|
|
|
|
|
||
|
Foreign currency translation loss on foreign operations |
|
|
(2) |
(185) |
(2) |
(183) |
(192) |
||
|
Total comprehensive loss for the period |
|
|
(1,743) |
(3,358) |
(3,081) |
(5,773) |
(11,067) |
||
|
|
|
|
US cents |
US cents |
US cents |
||||
|
Basic and diluted loss per share |
|
|
(0.7) |
(8.1) |
(1.3) |
(14.2) |
(7.7) |
||
|
Weighted average number of shares outstanding |
|
|
236,158,288 |
39,447,104 |
235,118,543 |
39,447,104 |
142,151,358 |
||
All results derive from continuing operations. The loss and total comprehensive loss for all periods presented are wholly attributable to equity holders of Noventa Limited.
009
|
|
|
|
|
30 June 2010
Unaudited |
|
30 June 2009 (Restated - note 14) Unaudited |
|
31 December 2009
Audited |
|
|||||||
|
|
|
Note |
|
US$000 |
|
US$000 |
|
US$000 |
|
|||||||
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|||||||
|
Intangible assets |
|
6 |
|
- |
|
- |
|
- |
|
|||||||
|
Property, plant and equipment |
|
7 |
|
1,080 |
|
- |
|
40 |
|
|||||||
|
Deferred tax asset |
|
|
|
- |
|
- |
|
- |
|
|||||||
|
|
|
|
|
1,080 |
|
- |
|
40 |
|
|||||||
|
Current assets |
|
|
|
|
|
|
|
|
|
|||||||
|
Inventories |
|
8 |
|
926 |
|
949 |
|
488 |
|
|||||||
|
Trade and other receivables |
|
|
|
2,880 |
|
1,456 |
|
100 |
|
|||||||
|
Cash and cash equivalents |
|
9 |
|
522 |
|
798 |
|
5,029 |
|
|||||||
|
|
|
|
|
4,328 |
|
3,203 |
|
5,617 |
|
|||||||
|
Total assets |
|
|
|
5,408 |
|
3,203 |
|
5,657 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|||||||
|
Trade and other payables |
|
|
|
2,729 |
|
2,735 |
|
2,156 |
|
|||||||
|
Current tax liabilities |
|
|
|
149 |
|
- |
|
280 |
|
|||||||
|
Derivative financial liabilities |
|
|
|
- |
|
- |
|
- |
|
|||||||
|
|
|
|
|
2,878 |
|
2,735 |
|
2,436 |
|
|||||||
|
Net current assets |
|
|
|
1,450 |
|
468 |
|
3,181 |
|
|||||||
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|||||||
|
Long-term provisions |
|
|
|
263 |
|
252 |
|
258 |
|
|||||||
|
|
|
|
|
263 |
|
252 |
|
258 |
|
|||||||
|
Total liabilities |
|
|
|
3,141 |
|
2,987 |
|
2,694 |
||||||||
|
Net assets |
|
|
|
2,267 |
|
216 |
|
2,963 |
||||||||
|
Equity |
|
|
|
|
|
|
|
|
||||||||
|
Share capital |
|
10 |
|
170 |
|
32 |
|
156 |
|
|||||||
|
Share premium |
|
|
|
56,473 |
|
43,066 |
|
54,335 |
|
|||||||
|
Shares to be issued reserve |
|
10 |
|
168 |
|
- |
|
76 |
|
|||||||
|
Convertible loan note reserve |
|
|
|
- |
|
4,976 |
|
- |
|
|||||||
|
Merger reserve |
|
|
|
8,858 |
|
8,858 |
|
8,858 |
|
|||||||
|
Translation reserve |
|
|
|
24 |
|
32 |
|
22 |
|
|||||||
|
Accumulated losses |
|
|
|
(63,426) |
|
(56,748) |
|
(60,484) |
|
|||||||
|
Equity attributable to equity holders of the parent |
|
|
|
2,267 |
|
216 |
|
2,963 |
|
|||||||
Approved by the Board of Directors on 12 September 2010 and signed on behalf of the Board of Directors:
|
P Lawless Chief Executive Officer |
|
T J Griffiths Chairman of the Audit Committee |
|
CONSOLIDATED CASH FLOW STATEMENT FOR THE 3 MONTHS ENDED 31 MARCH 2010
|
|
3 months ended 30 June
|
6 months ended 30 June
|
12 months ended 31 December
|
||
|
|
|
2010
|
2009
|
2010
|
2009 Restated |
2009 |
|
|
|
Unaudited |
Unaudited |
Audited |
||
|
|
Note |
US$000 |
US$000 |
US$000 |
||
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Loss for the period |
|
(1,741) |
(3,173) |
(3,079) |
(5,590) |
(10,875) |
|
Adjustments for: |
|
|
|
|
|
|
|
Depreciation |
|
5 |
- |
13 |
- |
- |
|
Impairment of property, plant and equipment |
7 |
- |
133 |
- |
327 |
469 |
|
Decrease in provision against IVA recoverable |
|
(925) |
- |
(925) |
- |
- |
|
Share based payment expense |
11 |
139 |
446 |
353 |
499 |
2,236 |
|
Foreign exchange profit |
|
(12) |
(183) |
(64) |
(183) |
(115) |
|
Finance expense |
5 |
2 |
4 |
5 |
78 |
114 |
|
Finance income |
5 |
(3) |
- |
(4) |
(1) |
(3) |
|
Taxation |
|
- |
- |
- |
- |
102 |
|
Operating cash out flow before changes in working capital and provisions |
|
(2,535) |
(2,773) |
(3,701) |
(4,870) |
(8,072) |
|
|
|
|
|
|
|
|
|
Decrease/(increase) in trade and other receivables |
|
326 |
274 |
(350) |
(819) |
767 |
|
(Increase) / decrease in inventories |
|
(363) |
1,153 |
(376) |
2,590 |
2,822 |
|
Decrease in trade and other payables |
|
(69) |
(97) |
(85) |
(1,176) |
(1,653) |
|
Net cash used in operating activities |
|
(2,641) |
(1,443) |
(4,512) |
(4,275) |
(6,136) |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
Interest received |
|
3 |
- |
4 |
1 |
3 |
|
Acquisition of property, plant and equipment |
|
(141) |
(132) |
(461) |
(327) |
(509) |
|
Net cash used in investing activities |
|
(138) |
(132) |
(457) |
(326) |
(506) |
|
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
Proceeds from issue of new shares |
|
652 |
- |
652 |
- |
6,470 |
|
Share issue expenses |
|
(45) |
- |
(45) |
- |
(809) |
|
Proceeds from issue of convertible loan notes |
|
- |
- |
- |
3,000 |
3,632 |
|
Convertible loan note issue expenses |
|
- |
- |
- |
(11) |
(41) |
|
Repayment of borrowings |
|
- |
(29) |
- |
(59) |
(59) |
|
Interest paid |
|
- |
- |
- |
(71) |
(71) |
|
Net cash inflow/(outflow) from financing activities |
|
607 |
(29) |
607 |
2,859 |
9,122 |
|
Net (decrease) / increase in cash and cash equivalents |
|
(2,172) |
(1,604) |
(4,362) |
(1,742) |
2,480 |
|
Effect of exchange rates on cash and cash equivalents |
|
(16) |
4 |
(145) |
- |
9 |
|
Cash and cash equivalents at beginning of period |
9 |
2,710 |
2,398 |
5,029 |
2,540 |
2,540 |
|
Cash and cash equivalents at end of period |
9 |
522 |
798 |
522 |
798 |
5,029 |
1. Basis of preparation
The condensed consolidated financial statements of the Group for the three and six months ended 30 June 2010, which are unaudited and have not been reviewed by the Company's auditor, have been prepared in accordance with the International Financial Reporting Standards ('IFRS') accounting policies adopted by the Group and set out in the annual report for the year ended 31 December 2009. The Group does not anticipate any change in these accounting policies for the year ended 31 December 2010. The comparative information for the six month period ended 30 June 2009 has been restated as set out in note 14 for the correction of material errors. These corrections are consistent with the restatements made to the 31 December 2008 results, as reported in the Group financial statements for the year ended 31 December 2009.
In preparing this report, the Group has adopted the guidance in the AIM Rules for half yearly accounts which do not require that the interim condensed consolidated financial statements are prepared in accordance with IAS 34, 'Interim financial reporting'. In anticipation of the Company's proposed listing on The Toronto Stock Exchange, these condensed consolidated financial statements have also been prepared to comply with applicable Canadian legal requirements. While the financial figures included in this report have been computed in accordance with IFRSs applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as that term is defined in IFRSs.
The financial information contained in this report also does not constitute statutory accounts under the Companies (Jersey) Law 1991, as amended. The financial information for the year ended 31 December 2009 is based on the statutory accounts for the year ended 31 December 2009. The auditors reported on those accounts: their report, while unqualified, included an emphasis of matter regarding the Group's and Company's ability to continue as a going concern. Readers are referred to the auditors' report to the Group financial statements as at 31 December 2009 (which is available at www.noventa.net), and the section titled "Going Concern" in the Management Discussion and Analysis section of this report.
These condensed financial statements for the three and six months ended 30 June 2010 have been prepared in accordance with the IFRS principles applicable to a going concern, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations. The conditions and risks noted in the section titled "Going Concern" in the Management Discussion and Analysis section of this report cast significant doubt on the validity of that assumption. Having carried out a going concern review in preparing these consolidated condensed financial statements for the three and six months ended 30 June 2010, the Directors have concluded that there is a reasonable basis to adopt the going concern principle, but acknowledge that there is a material uncertainty over the ability of the Group and Company to remain a going concern, and therefore to discharge its liabilities in the normal course of business.
2. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group's accounting policies which are described in note 3 to the Group financial statements for the year ended 31 December 2009, including consideration of the Going Concern status of the Company and Group, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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 to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The effect on the financial statements of changes in estimates in future periods could be material.
2.1 Critical judgements in applying the Group's accounting policies
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
2.1.1 Carrying value of tangible fixed assets
As described more fully in the Group financial statements for the year ended 31 December 2009, the Group impaired all of its tangible operating fixed assets held at 31 December 2009. During Quarter 1-2010, the Group concluded the preliminary design of the new processing plant at the Marropino Mine, with a sufficiently reliable estimate of the capital investment required to modify the plant design, including the construction of a hard rock circuit, in order for the Marropino Mine to be net cash positive after future capital investment. In March 2010, in order to meet the Marropino Mine restart programme, the Group commissioned the construction of a key long lead time item for the hard rock circuit at Marropino. During Quarter 2-2010, the Group made significant advances with the detailed design of the Marropino plant upgrade, incurring capital expenditure (which remains unsettled at 30 June 2010) for EPCM fees of $591,000. These two items are the principal components of assets in course of construction included within property, plant and equipment. Additionally, the Group has commenced the purchase of certain items of equipment, principally light transport vehicles, which are necessary for the current operations, and will continue to be utilised when the plant upgrade is completed.
The recoverability of the carrying value of the Property, plant and equipment asset is dependent on the Group's ability to secure additional shareholder investment to fund the remaining capital investment required at the Marropino Mine, and the ability of the Group to realise forecast budgeted results of operations.
2.1.2 Recoverability of input Value Added Tax
Mozambique Value Added Tax ("IVA"), operates in a similar manner to UK Value Added Tax ("VAT"). The Group is exempt from IVA on its exports from Mozambique under the terms of its Mining License Agreement and Mozambique tax law. The Group is able to recover input sales tax on all purchases within Mozambique. The Group is always therefore in a net recovery position of IVA. Since 2004, the Group had not succeeded in recovering IVA from the Mozambique Government. The Group has two ongoing IVA recovery claims submitted amounting to approximately $575,000 as at 30 June 2010, and further recoverable IVA of $780,000 due, but not yet claimed back. Due to the significant uncertainty over the recoverability of these IVA balances, the Group provided in full against the assets as at 31 December 2009.
During Quarter 2-2010 the Group was able to obtain copies of all of the documentation required by Mozambique Law to support the ongoing IVA claims. $502,000 of the ongoing IVA recoverable claims was approved for payment by the Mozambique Tax Authority in August 2010. The remaining $73,000 of the ongoing claims has been withheld, pending the Group providing additional information to support the amounts claimed. As at the date of this report, approximately $198,000 has been received by the Group in August 2010, with the approved balance of the two ongoing claims anticipated during Quarter 3-2010. The Group anticipates that a further $423,000 of the IVA recoverable, once claimed in Quarter 4-2010, will be received by the Group during Quarter 4-2010 and Quarter 1-2011.
The Group now has a reasonable expectation that $925,000 of the IVA recoverable balances will be collected in an orderly and timely manner, and accordingly has released $925,000 of the provision against IVA recoverable assets in Quarter 2-2010. The remaining IVA recoverable balance of $430,000 remains provided against, with recovery subject to the Group providing satisfactory responses to the additional information requested relating to the ongoing IVA claims and further discussions with the Mozambique Taxation Authority regarding the ability of the Group to reclaim IVA recoverable balances that were under declared during 2004 to 2007.
3. Segment Information
The Directors consider that the primary reporting format is by business segment. The Directors consider there to only be one business segment, being the mining, extraction and production of tantalum concentrate, currently undertaken solely from the Marropino Mine in Mozambique. Morganite production is incidental to this principal activity and arises as a by-product of the tantalum concentrate production. All administrative expenditure is allocated to this sole segment.
The Group is currently in the process of restarting the Marropino Mine, and developing an appropriate internal reporting structure, including a revision of the key performance indicators "KPIs". Currently, the Chief Executive Officer monitors the performance of the business on the basis of current and forecast cash balances and cash utilisation and operational performance indicators (including recovery rates, plant and mobile fleet availability). Segment information provided on the basis of the information previously presented to the Chief Executive Officer is not considered meaningful and is not presented.
No geographical analysis of the results by region is reported due to the dominance of the Group's operations in Southern Africa (The Republic of South Africa and The Republic of Mozambique) relative to those in Jersey (Channel Islands) other than for 'Cash and cash equivalents'. 'Cash and cash equivalents' balances are predominantly maintained in Jersey (note 9).
4. Revenue
An analysis of the Group's revenue is as follows:
|
|
|
3 months ended 30 June |
6 months ended 30 June |
12 months ended 31 December |
||
|
|
|
2010
|
2009
|
2010
|
2009 (Restated - note 14) |
2009
|
|
|
|
Unaudited |
Unaudited |
Audited |
||
|
|
|
US$000 |
US$000 |
US$000 |
||
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
Tantalum concentrate |
|
- |
1,383 |
- |
4,060 |
5,394 |
|
Morganite |
|
- |
281 |
1,000 |
281 |
315 |
|
|
|
- |
1,664 |
1,000 |
4,341 |
5,709 |
|
Finance income |
|
3 |
- |
4 |
1 |
3 |
|
|
|
3 |
1,664 |
1,004 |
4,342 |
5,712 |
The Group did not realise any sales during Quarter 2-2010. During quarter 1 2010, the Group reached agreement with LJ International Limited for the sale of consignment stock held by Goldleaves Trading Limited and Miranda Gems (HK) under the Morganite Joint Venture Agreement between the Group, and these parties. The Morganite Joint Venture Agreement has been terminated, with payment due to the Group of $1,000,000. In accordance with this agreement, $300,000 was received in February 2010, $200,000 in March 2010, and $100,000 per month thereafter. As at the date of this report, the total amount due under the settlement of $1,000,000 has been received.
5. Net finance expense
|
|
|
3 months ended 30 June |
6 months ended 30 June |
12 months ended 31 December |
||
|
|
|
2010
|
2009
|
2010
|
2009 (Restated - note 14) |
2009
|
|
|
|
Unaudited |
Unaudited |
Audited |
||
|
|
|
US$000 |
US$000 |
US$000 |
||
|
|
|
|
|
|
|
|
|
Interest income on bank deposits |
|
3 |
- |
4 |
1 |
3 |
|
Finance income |
|
3 |
- |
4 |
1 |
3 |
|
|
|
|
|
|
|
|
|
Interest expense on trade finance loans |
|
- |
- |
- |
(71) |
(71) |
|
Issue expenses of convertible loan notes |
|
- |
- |
- |
- |
(30) |
|
Discount unwind on environmental provision |
|
(2) |
(4) |
(5) |
(7) |
(13) |
|
Finance expense |
|
(2) |
(4) |
(5) |
(78) |
(114)
|
|
Net finance income/(expense) |
|
1 |
(4) |
(1) |
(77) |
(111) |
6. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited 30 June 2010 and 30 June 2009 Audited 31 December 2009 (Restated - note 14) |
||||
|
|
|
Cost |
|
Accumulated amortisation and impairment |
|
Net book value |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
|
Mining rights |
2,798 |
|
(2,798) |
|
- |
|
|
Marropino |
150 |
|
(150) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
2,948 |
|
(2,948) |
|
- |
The Group's intangible assets relate principally to an acquired mining concession in the Zambezia Province of Mozambique. While the Group has full title to the mining concession, as at all reporting dates, the development of the mining concession is uncertain. Once further geological, metallurgical and engineering studies have been completed, and if a viable resource is determined, development will need to be funded through either external funding (shareholder investment or loan arrangements) or through positive cash flows from operations. The timing of any development in this mining concession is therefore uncertain. Due to these factors, there is a significant level of estimation uncertainty regarding the carrying value of the intangible assets and the intangible assets have therefore been impaired in full. The remaining life of the estimated reserves in the principal concession amounts to 10 years.
7. Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
As at 30 June 2010 |
|
|
|
|
|
|
|
|
Unaudited at 30 June 2010
|
||||
|
|
|
Cost |
|
Accumulated depreciation and impairment |
|
Net book value |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
|
Assets under construction |
1,257 |
|
(484) |
|
773 |
|
|
Mining assets |
14,444 |
|
(14,210) |
|
234 |
|
|
Office furniture, equipment and computers |
475 |
|
(402) |
|
73 |
|
|
Buildings |
1,628 |
|
(1,628) |
|
- |
|
|
|
17,804 |
|
(16,724) |
|
1,080 |
|
|
As at 30 June 2009
|
Unaudited at 30 June 2009 (Restated - note 14)
|
||||
|
|
|
Cost |
|
Accumulated depreciation and impairment |
|
Net book value |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
|
Assets under construction |
484 |
|
(484) |
|
- |
|
|
Mining assets |
13,952 |
|
(13,952) |
|
- |
|
|
Office furniture, equipment and computers |
379 |
|
(379) |
|
- |
|
|
Buildings |
1,774 |
|
(1,774) |
|
- |
|
|
|
16,589 |
|
(16,589) |
|
- |
|
|
As at 31 December 2009
|
Audited at 31 December 2009
|
||||
|
|
|
Cost |
|
Accumulated depreciation and impairment |
|
Net book value |
|
|
|
$'000 |
|
$'000 |
|
$'000 |
|
|
Assets under construction |
484 |
|
(484) |
|
- |
|
|
Mining assets |
14,217 |
|
(14,217) |
|
- |
|
|
Office furniture, equipment and computers |
423 |
|
(383) |
|
40 |
|
|
Buildings |
1,628 |
|
(1,628) |
|
- |
|
|
|
16,752 |
|
(16,712) |
|
40 |
The Group impaired all of its operating tangible fixed assets held as at 1 January 2009 and 31 December 2009, reflecting the uncertainty over the future profitability of the Marropino Mine due to the lack of available funding for the Group to successfully install a comminution circuit at Marropino. The net book value at 30 June 2010 principally reflects the initial equipment for the Marropino comminution circuit, EPCM fees directly attributable to the Marropino process plant upgrade and light transport vehicles (note 2.1).
If the Group is successful in implementing its plans and making the Marropino Mine a profitable operation, the Directors anticipate that a portion of the impairment will be written back in future periods.
|
|
|
|
8. Inventories
|
|
|
|
30 June 2010
Unaudited US$000
|
|
30 June 2009 (Restated - note 14) Unaudited US$000 |
|
31 December 2009
Audited US$000 |
|
|
Consumables |
|
59 |
|
59 |
|
55 |
|
|
Spare parts |
|
695 |
|
- |
|
429 |
|
|
Work-in-progress |
|
172 |
|
4 |
|
4 |
|
|
Finished goods |
|
- |
|
886 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
926 |
|
949 |
|
488 |
9. Financial instruments
Details of the capital risk management policy of the Group are provided in note 10.
This note provides further information on the financial instruments of the Group including the risks associated to these instruments and the Group financial risk management policies to address these risks.
9.1 Significant accounting policies and classification of financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the Group financial statements for the year ended 31 December 2009.
9.2 Financial risk management objectives
The Group actively manages the risks arising from its operations, and financial instruments at Board level. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully the financial risks that the Group faces.
While the Group does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close involvement of the Board of Directors in the day to day operations of the Group ensures that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group. Financial instruments are not traded, nor are speculative positions taken. The principal risks that the Group faces with an impact on financial instruments are summarised below. Further details by class of financial instrument are described later in this note.
The Group's key financial market risks arise from changes in foreign exchange rates ('currency risk'). The Group is also exposed to credit risk.
Currency risk
The Group is exposed to foreign currency exchange risk mainly in relation to the US Dollar, to South African Rand, Mozambique Metical and Great British Pound. The potential currency exposures are:
·; Transactional exposure in respect of:
§ operating costs, capital expenditures and, to a lesser extent, sales incurred in currencies other than the functional currency of operations;
§ certain exchange control restrictions which require funds to be maintained in currencies other than the functional currency of operations; and
§ financial assets and liabilities denominated in currencies other than the functional currency of Group companies, such as bank balances held in currencies other than US$, and trade payables denominated in national currency in Mozambique and South Africa.
·; Translational exposures in respect of investments in overseas operations which have functional currencies other than US Dollars.
The Group's policy is to minimise transactional exposure through maintaining detailed forecast cash flows by principal currency in which cash inflows and outflows are made, allowing the Group to retain funds in the relevant currencies to create natural hedges against exchange fluctuations.
Credit risk
The Group principally has exposure to credit risk on its bank balances and trade receivables. This risk is managed through the selection of bank counterparties based on the financial security of the counterparty, credit assessment of customers and contractual terms and conditions and monitoring.
Interest rate risk
The Group is, to a limited extent, exposed to interest rate risk which arises principally from the Group's bank and cash balances.
Liquidity risk
The Group has limited liquidity risk as at 30 June 2010 due to the net current asset position of the Group, and the ability of the Group to defer payments to certain creditors. Details of the liquidity position of the Group as at the date of these financial statements is provided in the section titled 'Going concern' of the Management Discussions and Analysis section of this report.
9.3 Classes of financial assets and liabilities
The Group analyses its financial instruments into the following classes based on the differing risks to which the instruments expose the Group:
|
|
Book Value 30 June 2010
|
Book Value 30 June 2009
|
Book Value 31 December 2009
|
Fair Value 30 June 2010
|
Fair Value 30 June 2009
|
Fair Value 31 December 2009
|
|
|
UnauditedUS$000 |
UnauditedUS$000 |
Audited US$000 |
UnauditedUS$000 |
UnauditedUS$000 |
Audited US$000 |
|
|
|
|
|
|
|
|
|
Short term operating assets |
2,718 |
1,167 |
12 |
2,718 |
1,167 |
12 |
|
Bank balances and cash in hand |
522 |
798 |
5,029 |
522 |
798 |
5,029 |
|
|
|
|
|
|
|
|
|
Total financial assets |
3,240 |
1,965 |
5,041 |
3,240 |
1,965 |
5,041 |
|
|
|
|
|
|
|
|
|
Short term operating liabilities |
2,842 |
2,708 |
2,156 |
2,842 |
2,708 |
2,156 |
|
Warrants |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Total financial liabilities |
2,842 |
2,708 |
2,156 |
2,842 |
2,708 |
2,156 |
Fair value
The assumptions used by the Group to estimate the fair values of financial instruments are summarised below:
(i) For 'Short term operating assets' and 'Short term operating liabilities' the fair value approximates to book value because of the short maturities of these assets and liabilities.
(ii) For 'Bank balances and cash in hand', the fair value has been determined to approximate book value. The Group has no fixed rate deposits.
(iii) For warrants the fair value has been calculated using a Black Scholes valuation model due to the short term of the derivative instruments (18 months). The warrants are carried at fair value and accordingly the book value and the fair value of the warrants is the same.
Short term operating assets
These assets are principally subject to credit risk. The balance at 30 June 2010 principally comprises trade receivables from the sale of Morganite in the period (see note 4), IVA recoverable assets and amounts due from the subscribers to the June 2010 Conditional Placing (the balance at 31 December 2010 principally comprises recoverable input VAT in South Africa; the balance at 30 June 2009 principally comprises amounts due from the sale of tantalum concentrate). Credit risk arises due to changes in the credit rating of the counterparty. The Group's credit risk is reduced as it only transacts with a small number of counterparties who have a sound credit rating. The Group's exposure to credit risk is further controlled by reviewing its credit exposure to counterparties at regular intervals.
The maximum exposure at 30 June 2010 was $2,718,000 (31 December 2009 - $12,000; 30 June 2009 - $1,167,000).
No amounts included in 'Short term operating assets' are past due and not impaired at 30 June 2010, 31 December 2009 or 30 June 2009. The Group does not hold any security against the receivables in 'Short term operating assets'.
Included in the 'Short term operating assets' are receivables which have been provided against. Movements in the provision account against 'Short term operating assets', which principally relates to the input IVA recoverable in Mozambique (see note 2.1.2) is as follows:
|
|
2010
|
|
2009 Restated |
|
|
US$000 |
|
US$000 |
|
At 1 January (Audited) |
1,664 |
|
1,001 |
|
(Decrease)/increase in allowance |
(164) |
|
66 |
|
At 31 March (Unaudited) |
1,500 |
|
1,067 |
|
(Decrease)/increase in allowance |
(918) |
|
155 |
|
At 30 June (Unaudited) |
582 |
|
1,222 |
|
Increase in allowance |
|
|
442 |
|
At 31 December (Audited) |
|
|
1,664 |
The increase in the allowance account during 2009 reflects the increase in the underlying input IVA balance recorded by the Group. The decrease in the allowance account in Quarter 1-2010 reflects the effect of the devaluation of the Mozambique Metical on the IVA recoverable balance, offset by an increase in input IVA. The decrease in the allowance account in Quarter 2-2010 principally reflects the revision to the assessment of recoverability of the IVA balances of $925,000 (note 2.1.2), the effect of the devaluation of the Mozambique Metical on the IVA recoverable balance and an increase in allowance against deposits for defendant legal costs of $92,000.
Bank balances and cash in hand
All amounts are carried at amortised cost, and, other than cash in hand, are interest bearing assets, with interest rates arranged with counterparty financial institutions based on commercial negotiations, reflecting the term, currency and amount of each deposit. Due to the short term cash requirements of the Group in the turnaround phase, as at 30 June 2010 interest rates are mainly nominal rates on current account bank balances.
The principal risk arising for 'Bank balances and cash in hand' is credit risk in terms of counterparty default. In the current economic climate, the Group actively manages this risk through the monitoring of the credit status of the counterparty financial institutions. As at the balance sheet date the Group's assets in 'Bank balances and cash in hand' are principally held with the following banks, which are all high quality financial institutions:
|
|
Location of funds |
30 June 2010 Unaudited US$000 |
30 June 2009 Unaudited US$000 |
31 December 2009 Audited US$000 |
|
|
|
|
|
|
|
Deutsche Bank |
Jersey |
180 |
487 |
4,782 |
|
Standard Bank |
Mozambique |
153 |
201 |
150 |
|
First National Bank |
South Africa |
171 |
97 |
88 |
|
Other |
|
18 |
13 |
9 |
|
|
|
|
|
|
|
|
|
522 |
798 |
5,029 |
The maximum amount subject to credit risk is the total book value.
'Bank balances and cash in hand' is also subject to the risk of changes in foreign currency exchange rates. As at the reporting dates, the assets in 'Bank balances and cash in hand' were carried in the following currencies:
|
|
|
|
||||
|
|
30 June 2010 Unaudited US$000 |
30 June 2009 Unaudited US$000 |
31 December 2009 Audited US$000 |
|
||
|
|
|
|
|
|
||
|
US Dollar |
174 |
531 |
690 |
|
||
|
£ Sterling |
69 |
150 |
4,190 |
|
||
|
Rand South Africa |
176 |
98 |
89 |
|
||
|
Mozambique Metical |
103 |
19 |
59 |
|
||
|
Other |
|
- |
1 |
|
||
|
|
|
|
|
|
||
|
|
522 |
798 |
5,029 |
|
||
The impact of changes in foreign currency exchange rates on the carrying value of 'Bank balances and cash in hand' is shown along with all other financial instruments, in the foreign currency sensitivity analysis below.
Short term operating liabilities
'Short term operating liabilities' represents trade, and other payables arising in the normal course of business. No interest is chargeable on any of the items included in 'Short term operating liabilities', as long as the Group adheres to the agreed payment terms with each supplier.
The principal risks associated with 'Short term operating liabilities' are liquidity risk and the risk of changes in foreign currency exchange rates. The impact of these risks is shown below in the sections respectively on liquidity risk and foreign currency sensitivity analysis along with all other financial instruments of the Group.
Warrants
'Warrants' contains warrants issued by the Company which are classified as derivative financial liabilities as the warrants are issued in a currency other than the functional currency of the Company. The warrants have nil value as at 30 June 2010 and 31 December 2009. The warrants do not create any obligation on the Company other than to deliver shares in the Company for a fixed price (18p per share), at the option of the holder, for 18 months from the date of issuance in September 2009. 'Warrants' does not therefore expose the Company or Group to any risks as at the balance sheet date.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group raises funds as and when required on the basis of forecast expenditure and inflows. When funding is required, the Group balances the costs and benefits of equity and debt financing. When funds are received they are deposited with banks of high standing in order to obtain competitive market interest rates.
Due to the operations of the Group being in turnaround, and the specific requirement to bring the Marropino Mine back into operation, the liquidity as at 30 June 2010 is not representative of the planned ongoing liquidity of the Group. The Going Concern section of the Management Discussion & Analysis section of this report provides further information on the planned future liquidity and the Going Concern basis of the Group.
Foreign currency sensitivity analysis
The Group's foreign currency assets and liabilities are exposed to foreign currency transaction risk.
The following are the exchange rates with United States Dollars of the significant foreign currency assets and liabilities as at each period end:
|
|
30 June 2010 |
30 June 2009 |
31 December 2009 |
|
|
|
|
Unaudited 1 US$ = |
Unaudited 1 US$ = |
Audited 1 US$ = |
|
|
|
|
|
|
|
|
|
|
£ Sterling |
0.66 |
0.68 |
0.63 |
|
|
|
South African Rand |
7.65 |
7.88 |
7.42 |
|
|
|
Mozambique Metical |
34.85 |
26.50 |
27.50 |
|
|
The table below illustrates the hypothetical sensitivity of the Group's reported profit and equity to a 10% increase and decrease in the United States Dollar exchange rate to £ Sterling, South African Rand and Mozambique Metical at the period-end assuming that all other variables remain unchanged. 10% represents the Directors assessment of a reasonably possible change in the relevant exchange rates. A positive number below indicates an increase in profit and equity.
|
|
Income statement
|
Equity
|
|
|||
|
|
30 June
2010
|
30 June
2009
|
31 December 2009
|
30 June
2010
|
30 June
2009
|
31 December 2009
|
|
|
Unaudited
US$000
|
Unaudited
US$000
|
Audited
US$000
|
Unaudited
US$000
|
Unaudited
US$000
|
Audited
US$000
|
|
|
|
|
|
|
|
|
|
US$ strengthens by 10%
|
(6)
|
187
|
(225)
|
(6)
|
187
|
(225)
|
|
US$ weakens by 10%
|
25
|
(233)
|
225
|
25
|
(233)
|
225
|
|
|
|
|
|
|
|
|
The Group publishes its consolidated financial statements in United States Dollars and, as a result, is also subject to foreign currency exchange translation risk in respect of the translation of the results and underlying net assets of its non United States Dollars functional currency entities into United States Dollars. The impact of translation risk is not quantified in the table above.
10. Share capital, Call options over equity and Capital risk management
10.1 Share capital
|
|
30 June 2010 Unaudited |
|
30 June 2009 Unaudited |
|
31 December 2009 Audited |
|
|||||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
|
Share capital |
|
£ |
|
£ |
|
£ |
|
||||
|
Authorised |
|
|
|
|
|
|
|
||||
|
1,250,000,000 (31 December 2009 - 125,000,000; 30 June 2009 - 125,000,000) Ordinary Shares of £0.0004 each |
|
500,000 |
|
50,000 |
|
500,000 |
|
||||
|
|
|
US$000 |
|
US$000 |
|
US$000 |
|
||||
|
Allotted, called up and fully paid |
|
|
|
|
|
|
|
||||
|
256,724,836 (31 December 2009 - 232,734,868; 30 June 2009 - 39,447,104) Ordinary Shares of £0.0004 each |
|
170 |
|
32 |
|
156 |
|
||||
|
|
|
|
|
|
|
||||||
The Company has one class of Ordinary Shares. The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Shares issued
Quarter 2-2010
During Quarter 2-2010, 22,295,914 Ordinary Shares were allotted, called up and fully paid at £0.065 each for cash consideration at a premium of £0.0646 per share raising $2,157,000 before expenses.
Details of Ordinary Shares allotted and called up subsequent to 30 June 2010 are provided in note 13.
Half 1-2010
During Half 1-2010, 22,295,914 Ordinary Shares were issued at £0.065 each for cash consideration at a premium of £0.0646 per share raising $2,157,000 before expenses. A further 1,694,054 Ordinary Shares were issued at an average issue price of £0.046 each as joining bonuses for staff, or contractual fees due for Directors Services for Quarter 4 2009. The amounts due for Directors' Services in Quarter 4-2009 were reported within the Shares to be issued reserve as at 31 December 2009.
Year ended 31 December 2009
During the year ended 31 December 2009, 102,272,832 Ordinary Shares were issued at £0.04 for cash consideration at a premium of £0.0396 per share. A further 76,499,388 Ordinary Shares were issued at £0.04 upon conversion of the $5,000,000 Existing Loan Notes (refer to note 24 of the 31 December 2009 financial statements) and 10,000,000 were issued at £0.04 upon conversion of the £400,000 Loan Notes (refer to note 24 of the 31 December 2009 financial statements). In addition, the Company issued 4,515,544 Ordinary Shares in lieu of services rendered, of which 1,000,000 were issued at £0.04, 3,000,000 as a bonus issue and 531,311 at the average of the previous 30 days mid-market price prior to allotment, ranging between £0.0411 and £0.0595.
S (continued)
Shares to be issued reserve
At the period end, the Group had obligations to deliver 1,886,412 (December 2009 - 1,080,622) Ordinary Shares to Directors and employees in consideration for services received or sign on bonuses with a fair value of $169,000 ($76,000). This obligation is reflected in the Shares to be issued reserve.
1,837,436 Ordinary Shares were issued in July 2010 in settlement of $164,000 of these obligations.
10.2 Call options over equity
During Quarter 2-2010, the Company issued 2,000,000 call options over Ordinary Shares in the Company (Half 1-2010 - 5,456,836; year ended 31 December 2009 - 40,695,974; Quarter 2-2010 - none; Half 1- 2009 - 3,345,008). See note 11.
The following table summarises the principal terms of options, bonus shares and warrants outstanding at 30 June 2010 which could result in the issuance of Ordinary Shares in the Company:
|
|
Outstanding at 30 June 2010 |
Exercisable at period end |
Weighted average exercise price |
Expiry date |
Comments |
|
Options issued by employee share options plans in 2007 |
1,042,057 |
1,027,438 |
£0.0004 |
2017 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share options plans in 2008 |
297,000 |
123,600 |
£1.15 |
2018 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share option plans in 2009 - 1 |
2,339,261 |
1,639,256 |
£0.16 |
2019 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share option plans in 2009 - 2
|
6,890,000 |
890,000 |
£0.04 |
2019 |
None |
|
Options issued outside of the share option plans - 2009
|
2,000,000 |
2,000,000 |
£0.04 |
2016 |
None |
|
Warrants 2009 -1 |
11,585,966 |
- |
£0.04 |
2016 |
Share price to reach 25p on a 30 day moving average for the warrants to be exercised.
|
|
Warrants 2009 -2
|
1,500,000 |
1,500,000 |
£0.04 |
2016 |
None |
|
Warrants 2009 - 3
|
9,375,000 |
9,375,000 |
£0.18 |
2011 |
None |
|
Bonus shares 2009 - 1 |
3,000,000 |
- |
£0.04 |
No expiry |
Share price to reach 10p on a 30 day moving average for the bonus shares to vest.
|
|
Bonus shares 2009 - 2 |
3,000,000 |
- |
£0.04 |
No expiry |
Share price to reach 15p on a 30 day moving average for the bonus shares to vest.
|
|
Options issued by employee share option plans in 2010
|
4,000,000 |
500,000 |
£0.04 |
2019 |
None |
|
Options issued outside of the share option plans - 2010
|
1,456,836 |
1,456,836 |
£0.05 |
2017 |
None |
|
|
46,486,120 |
18,512,130 |
|
|
|
10.3 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders. The Directors consider that the capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued capital and reserves net of retained losses, as disclosed in the equity section of the Consolidated statement of financial position.
The Group's Board of Directors reviews the capital structure regularly as part of the annual review of the Group structure and more regularly when funding is required. As part of the review, the Board of Directors considers the cost of capital and the risks associated with each class of capital.
11. Share based payments
A summary of all options, warrants and other call options over Ordinary Shares in the Company is provided in note 10.
11.1 Equity-settled share options and warrants
The Company has a share option scheme for all employees of the Group - the Noventa Unapproved Share Option Scheme (the 'Share Plan'). Options are granted annually to employees and certain Directors and are exercisable at a price equal to the average quoted market price of the Company's shares on the 30 days preceding the date of grant. Generally the options are granted annually with vesting over one, two, three and four years, subject to certain production related performance criteria being met, and the employee remaining in continued employment with the Group. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest, unless certain conditions apply. On the retrenchment of staff, options vest in full immediately. This was applicable in the year ended 31 December 2009 when the Marropino Mine was placed in care and maintenance.
The Group also issues options under the terms of the Share Plan which do not have performance conditions, and have either no service period or a one or two year service period. These options are granted to Directors and key management.
Further options and warrants over Ordinary Shares in the Company are issued to Directors and certain service providers. These options are not granted under the terms of the Share Plan.
11.2 Quarter 2-2010 and Half 1-2010
Charge in the period
The total charge recorded in the income statement for share based payments in Quarter 2-2010 was $139,000 (Half 1- 2010 - $353,000). Of this amount, $93,000 (Half 1-2010 - $216,000) arises on shares issued to Directors as contractual Directors' fees, employee sign on bonuses, or salary payments made in shares under employment contracts. The number of Ordinary Shares issued in payment of Directors' fees, sign on bonuses and other contractual arrangements is determined based on the contractual amounts due, and relevant market prices for the Company's Ordinary Shares. The compensation expense recorded is therefore the contractual amount due.
$46,000 (Half 1-2010 - $137,000) of the charge arises from the issuance of share options to certain employees and Directors of the Group, under the Noventa Unapproved Share Option Scheme, or through options outside of the Noventa Unapproved Share Option Scheme.
Employee share option plans
The number of options in the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust are as follows:
|
|
Three months ended 30 June 2010 Unaudited |
Six months ended 30 June 2010 Unaudited |
||||
|
|
Number of options |
|
Weighted average exercise price |
Number of options |
|
Weighted average exercise price |
|
At beginning of period |
12,658,318 |
|
£0.17 |
10,731,548 |
|
£0.20 |
|
Granted during the period |
2,000,000 |
|
£0.04 |
4,000,000 |
|
£0.04 |
|
Terminated during the period |
- |
|
- |
(163,230) |
|
£0.36 |
|
At end of period |
14,658,318 |
|
£0.15 |
14,568,318 |
|
£0.17 |
|
|
The following options have been issued by the Share Plan during Half 1-2010:
|
|
|
Number |
Grant date |
Expiry date |
Exercise price |
Fair value at grant date |
|
1.1 |
|
|
|
|
|
|
|
|
Share Plan - Issue 7 |
2,000,000 |
26 April 2010 |
25 April 2020 |
£0.040 |
$0.049 |
|
|
Share Plan - issue 6 |
2,000,000 |
1 January 2010 |
31 December 2019 |
£0.040 |
$0.045 |
During Half 1-2010, no options became exercisable and no share options were exercised under the Share Plan or the EBT.
The weighted average fair value of options granted during Quarter 2-2010 by the Share Plan was $0.049 (Half 1-2010 - $0.047). No options were granted by the Noventa EBT during the period. The fair value of the options granted has been recognised in accordance with the respective vesting periods applicable to the options. The options were priced using the Black-Scholes model. Where relevant, the expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Expected volatility has been based on the historical volatility of the Company's shares price. The charge to the income statement for Quarter 2-2010 for the unapproved share option plan and the EBT was $46,000 (Half 1-2010 - $83,000).
The aggregate estimated fair value of all options granted under the Share Plan in Quarter 2-2010 is $98,000 (Half 1-2010 - $189,000).
The fair value of options granted by the Share Plan has been determined using a Black Scholes valuation model with the following inputs:
|
|
2010 (issue 7) |
2010 (issue 6) |
|
|
|
|
|
Weighted average share price |
5.2p |
5.3p |
|
Weighted average exercise price |
4.0p |
4.0p |
|
Expected volatility |
82% |
84% |
|
Risk-free rate |
1.99% |
1.44% |
|
Expected dividend yield |
0% |
0% |
The volatility assumption has been determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance.
Options issued outside of the Share Plan
No options were granted outside of the Share Plan in Quarter 2-2010.
The following options were issued outside of the Share Plan in Half 1-2010:
|
Beneficiary |
Number |
|
Grant date |
|
Expiry date |
Exercise price |
|
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
|
Mr T Griffiths |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
Mr G Coltman |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
Mr G Moseley |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
1,456,836 |
|
|
|
|
|
|
|
These options have no future service, or performance conditions attached. The fair value of $54,000, determined using a Black Scholes valuation model with the following inputs has been expensed in Half 1-2010.
|
|
|
|
|
|
|
Weighted average share price |
5.1p |
|
Weighted average exercise price |
5.1p |
|
Expected volatility |
95% |
|
Risk-free rate |
1.04% |
|
Expected dividend yield |
0% |
The volatility assumption has been determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance.
11.3 Year ended 31 December 2009
Details of all share options and warrants outstanding during the year ended 31 December 2009 which are accounted for as share based payments are as follows:
|
|
|
Number of options and warrants |
|
At 1 January 2009 |
|
1,787,880 |
|
Granted during the year |
|
34,320,974 |
|
Lapsed during the year |
|
(1,291,340) |
|
Exercised in the year |
|
(3,000,000) |
|
|
|
|
|
At 31 December 2009 |
|
31,817,514 |
The total charge recorded in the consolidated statement of comprehensive loss for share based payments (including $91,000 for shares issued to Directors under service contracts) in the year ended 31 December 2009 was $2,236,000.
Employee share option plans
The number of options in the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust during the year was as follows:
|
|
|
Number of options |
|
Weighted average exercise price |
|
At 1 January 2009 |
|
1,787,880 |
|
£1.12 |
|
Granted during the year |
|
10,235,008 |
|
£0.08 |
|
Lapsed during the year (1) |
|
(1,291,340) |
|
£0.46 |
|
|
|
|
|
|
|
At 31 December 2009 |
|
10,731,548 |
|
£0.20 |
|
(1) Options lapsed due to performance criteria not being achieved and / or option holders leaving the employment of the Group. |
|
|
The following options were issued by the Share Plan in the year ended 31 December 2009:
|
|
|
Number |
Grant date |
Expiry date |
Exercise price |
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
Share Plan - issue 5 |
6,000,000 |
20 October 2009 |
2019 |
£0.040 |
$0.02 |
|
|
Share Plan - issue 4 |
890,000 |
17 July 2009 |
2019 |
£0.040 |
$0.02 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.06 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.07 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.09 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.10 |
|
|
|
|
|
|
|
|
|
|
|
10,235,008 |
|
|
|
|
|
|
|
|
|
|
|
|
During the year 2,680,294 options became exercisable. No share options were exercised during the year under the Share Plan or the EBT.
The weighted average fair value of options granted during the year by the Share Plan was $0.03 (2008: $0.85). No options were granted by the Noventa EBT during the year (2008: Nil). The fair value of the options granted was recognised in accordance with the respective vesting periods applicable to the options. The options were priced using the Black-Scholes model. Where relevant, the expected life used in the model was adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Expected volatility was based on the historical volatility of the Company's share price. The charge to the income statement for the year for the unapproved share option plan and the EBT was $845,000.
The aggregate estimated fair value of all options granted under the Share Plan in 2009 was $240,000.
The fair value of options granted by the Share Plan was determined using a Black Scholes valuation model with the following inputs:
|
|
2009 (issue 4 and 5) |
2009 (issue 3) |
|
|
|
|
|
Weighted average share price |
4.0p |
15.5p |
|
Weighted average exercise price |
4.0p |
15.5p |
|
Expected volatility |
60% |
59% to 70% |
|
Expected life
|
1.5 years |
1.5 years to 4.5 years |
|
Risk-free rate |
2.01% |
2.21% |
|
Expected dividend yield |
0% |
0% |
The volatility assumption was determined based on the volatility of the Company's share price over comparable terms to the expected option life.
Options, warrants and bonus shares issued outside of the Share Plan
The following options, warrants and bonus shares that are required to be accounted for under IFRS 2, Share based payments, were issued during the year ended 31 December 2009 outside of the Share Plan:
|
Beneficiary |
Number |
|
Grant date |
|
Expiry date |
Exercise price |
|
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
|
Religare Capital Markets (UK) Ltd |
1,000,000 |
|
14 October 2009 |
|
14 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
11,585,966 |
|
14 October 2009 |
|
14 October 2016 |
£0.04 |
|
$733,000 |
|
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
6,000,000 |
|
17 July 2009 |
|
No expiry |
£0.00 |
|
$254,000 |
|
|
|
|
|
|
|
|
|
|
|
Ekasure Limted |
3,000,000 |
|
27 August 2009 |
|
No expiry |
£0.00 |
|
$127,000 |
|
|
|
|
|
|
|
|
|
|
|
Pope & Co |
500,000 |
|
14 October 2009 |
|
No expiry |
£0.04 |
|
$12,000 |
|
|
|
|
|
|
|
|
|
|
|
P Cox |
1,000,000 |
|
20 October 2009 |
|
20 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
Dr EJ Martin |
1,000,000 |
|
20 October 2009 |
|
20 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
24,085,966 |
|
|
|
|
|
|
|
The options and warrants awarded to Religare Capital Markets (UK) Limited, Pope & Co, Mr. P Cox and Dr. ES Martin were valued using the Black Scholes valuation model, with the same inputs as those used for Issue 4 and Issue 5 of the Share Plan. The options and warrants were awarded in consideration for services rendered in the period. There were no future service, or performance conditions attached to these options and warrants. The fair value was expensed in full in the year ended 31 December 2009.
The bonus shares and warrants granted to Barons Financial Services Limited (a company in which Mr. E Kohn TD has a beneficial interest), and Ekasure Limited (a company in which Mr. J Allan has a beneficial interest) were awarded as turnaround incentives with the following vesting conditions and fair values:
|
Beneficiary |
|
Type |
Share price target |
Strike price |
Number of shares |
|
Fair value at grant date of the award |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
6p on 30 day moving average |
- |
1,000,000 |
|
$46,000 |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
10p on 30 day moving average |
- |
1,000,000 |
|
$42,000 |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
15p on 30 day moving average |
- |
1,000,000 |
|
$39,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
|
Bonus shares |
6p on 30 day moving average |
- |
2,000,000 |
|
$92,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
|
Bonus shares |
10p on 30 day moving average |
- |
2,000,000 |
|
$84,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited
|
|
Bonus shares |
15p on 30 day moving average |
- |
2,000,000 |
|
$78,000 |
|
Barons Financial Services Limited |
|
Warrants |
25p on 30 day moving average |
- |
5% of the equity of Noventa -11,585,966 |
|
$733,000 |
These awards had no future service conditions. The fair value of the awards of $1,114,000 was expensed in the year ended 31 December 2009, to reflect the benefit of the services provided by Barons Financial Services Limited and Ekasure Limited in the turnaround of the Group operations. The awards were valued using a Monte Carlo Simulation model to account for the market condition in the determination of the fair value of the awards with the following inputs:
|
|
Bonus shares |
Warrants |
|
|
|
|
|
Weighted average share price |
3.0p |
6.13p |
|
Weighted average exercise price |
- |
4.0p |
|
Expected volatility |
65% |
69% |
|
Expected life |
6, 8 or 9 years |
6 years |
|
Risk-free rate |
3.1%, 3.4% or 3.6% |
2.7% |
|
Expected dividend yields |
0% |
0% |
The volatility assumption was determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance. The expected life of the options was determined as an output of the Monte Carlo Simulation model and determined the expected vesting date applicable for the risk free interest rate assumption.
11.4 Quarter 2-2009 and Half 1-2009
No share options were issued by the Company in Quarter 1-2009.
Details of all share options and warrants outstanding during the period ended 30 June 2009, which were all issued under the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust are as follows:
|
|
|
Number of options |
|
Weighted average exercise price |
|
At 1 January 2009 |
|
1,787,880 |
|
£1.12 |
|
Granted during the period |
|
3,345,008 |
|
£0.155 |
|
|
|
|
|
|
|
At 30 June 2009 |
|
5,132,888 |
|
£0.49 |
The total charge recorded in the income statement for share based payments in Quarter 1-2009 was $446,000 (Half 1-2009 - $449,000).
|
|
The following options were issued by the Share Plan in the period:
|
|
|
|
|
|
|
|
|
|||
|
1.2 |
|
|
|
|
|
|
|
|||
|
|
Number |
Grant date |
Expiry Date
|
Exercise price |
Fair value at grant date
|
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.06 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.07 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.09 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.10 |
|||||
|
|
|
|
|
|
|
|||||
|
|
3,345,008 |
|
|
|
|
|||||
|
|
|
|
|
|
|
|||||
During Quarter 2-2009 and Half 1-2009 1,790,294 options became exercisable. No share options were exercised under the Share Plan or the EBT.
The options were valued using the Black-Scholes model as disclosed above for the full year ended 31 December 2009. The charge to the consolidated statement of comprehensive loss for the period for the unapproved share option plan and the EBT in Quarter 1-2009 was $446,000 (Half 1-2009 - $449,000).
The aggregate estimated fair value of all options granted under the Share Plan in Half 1-2009 was $268,000.
12. Related party transactions
|
|
Transactions between the company and its subsidiaries have been eliminated upon consolidation and are therefore not disclosed in this note. Details of transactions and balances between the Group and other related parties are detailed below. The amounts reported are the fair value of the transaction in US$. Directors' fees and expenses are excluded unless they are invoiced to the Group by means of a separate Company.
|
||||||||
|
|
|
3 month period ended 30 June |
6 month period ended 30 June |
12 month period ended 31 December |
|
||||
|
|
|
2010 |
2009 |
2010 |
2009 |
2009 |
|
||
|
|
|
Unaudited |
Unaudited |
Audited |
|
||||
|
|
|
US$000 |
US$000 |
US$000 |
|
||||
|
|
Highland African Ventures Limited |
|
|
|
|
|
|
||
|
|
Convertible loan notes issued for cash |
- |
- |
- |
3,000 |
3,000 |
|
||
|
|
Convertible loan notes converted to Ordinary Shares |
- |
- |
- |
- |
4,200 |
|
||
|
Fleming Family & Partners (Suisse) AG Subscription of Ordinary Shares on behalf of clients |
- |
- |
- |
- |
170 |
|
|||
|
Bridgewater Pension Trustees Ltd A/C Pathfinder Private Pension No. 0450 Subscription of Ordinary Shares |
- |
- |
- |
- |
140 |
|
|||
|
Barons Financial Services SA |
|
|
|
|
|
|
|||
|
Consulting fees |
78 |
- |
161 |
- |
282 |
|
|||
|
Fees due for the services of Mr. E Kohn TD as Chairman paid in cash |
19 |
- |
40 |
- |
37 |
|
|||
|
Commission arising on fund raising on the same terms as those provided by the Company's broker |
- |
- |
- |
- |
221 |
|
|||
|
Funds advanced to the Company (representing expenditure incurred on the Company's behalf and recharged to the Company) |
162 |
- |
104 |
- |
247 |
|
|||
|
Balance due to Barons Financial Services SA at period end |
- |
- |
- |
- |
24 |
|
|||
|
Funds due to the Company from Barons Financial Services SA for advances against expenses |
38 |
- |
38 |
- |
14 |
|
|||
|
Barons Financial Services Limited |
|
|
|
|
|
|
|||
|
Fees due for the services of Mr. E Kohn TD as Chairman paid in shares |
19 |
- |
39 |
- |
37 |
|
|||
|
Fair value of 6,000,000 conditional bonus shares issued to Barons Financial Services Limited |
- |
- |
- |
- |
254 |
|
|||
|
Fair value of 11,585,956 warrants issued to Barons Financial Service Limited |
- |
- |
- |
- |
733 |
|
|||
|
Balance due to Barons Financial Services Limited in shares at period end |
39 |
- |
39 |
- |
22 |
|
|||
|
Carey Olsen |
|
|
|
|
|
|
|||
|
Legal fees and expenses |
86 |
- |
97 |
- |
167 |
|
|||
|
Balance due to Carey Olsen at period end |
86 |
- |
86 |
- |
124 |
|
|||
|
Ekasure Limited |
|
|
|
|
|
|
|||
|
Fees due for the services of Mr. J Allan |
90 |
- |
180 |
- |
260 |
|
|||
|
Balance due to Ekasure Limited in shares at period end |
- |
- |
- |
- |
10 |
|
|||
|
Re-imbursement of expenses incurred on behalf of Noventa |
6 |
- |
23 |
- |
54 |
|
|||
|
Fair value of 3,000,000 conditional bonus shares issued to Ekasure Limited |
- |
- |
- |
- |
127 |
|
|||
|
Balance due to Ekasure Limited at period end |
61 |
- |
61 |
- |
30 |
|
|||
|
Goldline Global Consulting |
|
|
|
|
|
|
|||
|
Fees due for the services of Mr P. Cox as Director |
6 |
- |
12 |
- |
31 |
|
|||
|
Balance due to Goldline Global Consulting in shares at period end |
6 |
- |
6 |
- |
17 |
|
|||
|
Balance due to Goldline Global Consulting at period end |
6 |
- |
6 |
- |
2 |
|
|||
Highland African Ventures Limited is a related party of the Company by virtue of its significant shareholding in the Company. Fleming Family & Partners (Suisse) AG and Bridgewater Pension Trustees Ltd A/C Pathfinder Private Pension No. 0450 are related parties of the Company by virtue of their relationship with Mr. R J Fleming, who has a significant shareholding in the Company. Highland African Ventures Limited is owned by a trust whose trustee is Fleming Family & Partners Liechtenstein and Mr. R J Fleming is one of the potential beneficiaries. As at the date of this report Fleming Family & Partners Liechtenstein has a total interest, including through Highland African Ventures Limited, in a total of 89,203,154 shares (28.89% of the issued shares). As at the date of this report Mr. R J Fleming has an interest, including through Highland African Ventures Limited, in a total of 85,208,892 shares (27.6% of the issued shares).
Barons Financial Services SA, Barons Financial Services Limited, Ekasure Limited, Carey Olsen and Goldline Global Consulting are related parties to the Group by virtue of common directorship as follows:
|
Related party |
Common Director |
|
Barons Financial Services SA and Barons Financial Services Limited |
Mr. E Kohn TD |
|
Ekasure Limited |
Mr. J Allan |
|
Carey Olsen |
Mr. G Coltman |
|
Goldline Global Consulting |
Mr. P Cox |
TES (continued)
All related party transactions are transacted on an arm's length basis, in accordance with standard commercial terms applicable to the type of transaction.
13. Events subsequent to the balance sheet date
13.1 New Tantalum off-take agreement
In July 2010 the Group signed a confidential 3 year off-take agreement for the sale of a substantial proportion of its projected production of tantalum concentrate with a new customer which is a major processor and refiner of specialist metals and advanced ceramics. The agreement is for similar quantities as for the Group's existing renegotiated off-take agreement with pricing that reflects market prices at the date the agreement was signed. The agreement is subject only to a sample shipment of material being chemically acceptable. This shipment left Mozambique on 24 August 2010.
13.2 First shipment since the Marropino Mine returned to production
The Group completed its first commercial export of 8,000 Kg (17,632 Lb) of tantalum concentrate from the Marropino Mine in August 2010 to one of the Group's two major customers. The shipment was loaded on 22 August 2010 at the port of Quelimane, Mozambique and sailed from port on the 24 August 2010. A further shipment to the Group's other major customer is scheduled for September 2010.
These shipments are to confirm the logistics pathway for future shipments to the Group's customers, and to revise and adjust shipping routes and procedures in advance of the full production at the Marropino Mine in 2011.
13.3 New tantalum discovery at Marropino
In August 2010, the Group discovered a new tantalum deposit at the Marropino Mine. Independent assays from three pits show that average tantalum grades for the individual pits are 2,697 ppm, 3,836 ppm and 7,577 ppm. These compare to the average 220 ppm for the primary hard rock deposit at Marropino. The new area is entirely soft ore, measuring approximately one square kilometre and lying two kilometres to the south east of the Marropino Mine processing plant. The discovery, known as Marropino South, is being geologically studied to determine the estimated tantalum in the deposit. If it is proven that Marropino South is viable, the enhanced economics may reduce, or eliminate further need for external financing for the execution of the Group's plans. Until the evaluation of the Marropino South is completed, there is no guarantee that it is viable or of consistently high grade.
13.4 Fundraising
In September 2010, the Group secured shareholder investment of £5,247,000 (approximately $8,091,000) before expenses from an unconditional placing (the 'September 2010 Placing) a subscription (the 'September 2010 Subscription') and an additional subscription (the 'September 2010 Additional Subscription) totalling 80,323,432 Ordinary Shares in the Company.
On 3 September, 2010 the Group completed a placing of 42,021,415 new Ordinary Shares of £0.0004 each (the 'September Placing Shares') and a subscription of 8,442,506 new Ordinary Shares of £0.0004 each (the 'September Subscription Shares') (together the 'New Shares') at a price of £0.065 per New Share, raising a total of £3,280,000, approximately equivalent to $5,058,000. The funds will be used to fund working capital and provide the initial phased capital inflows required for the process plant upgrade programme (refer to the section of the MD&A titles 'Process plant upgrade'). The New Shares have been subscribed by a combination of new investors and existing shareholders.
In addition to the monies raised through the issue of the New Shares, the Company received an irrevocable commitment from Compagnie Internationale de Participations Bancaires et Financieres SA , ('CIPAF'), a subsidiary of General Mediterranean Holding SA, to subscribe for 29,859,511 new Ordinary Shares of £0.0004 each (the 'Additional Subscription Shares') at a price of 6.587p per share to raise a further £1,967,000, approximately equivalent to $3,033,000 (the 'Additional Subscription'). The Additional Subscription will take the form of three distinct tranches, as laid out below, with the Company receiving the subscription funds for each of the tranches at the time each tranche is subscribed, and the respective Additional Subscription Shares allotted to CIPAF within five working days of the subscription monies being received:
|
|
Number of Additional Subscription Shares
|
Subscription to be received by |
|
Tranche A |
9,953,170 |
30 September 2010 |
|
Tranche B |
9,953,170 |
31 December 2010 |
|
Tranche C |
9,953,171 |
31 March 2011 |
The subscribers for the New Shares and the Additional Subscription Shares will receive warrants to subscribe for one new Ordinary Share of £0.0004 each for every two Ordinary Shares subscribed for (the 'September 2010 Warrants'). The Warrants have an exercise price of £0.10 and a term ended 2 September 2012.
14. Restatement of the comparative information
During the preparation of the financial statements for the year ended 31 December 2009, the Group identified certain material errors in the 31 December 2008 financial statements, as disclosed in note 5 to the Group consolidated financial statements for the year ended 31 December 2009. These errors were not identified or corrected at the date of preparation of the Unaudited condensed consolidated financial statements for the six month period ended 30 June 2009 ('Half 1-2009). The comparative information is restated for the correction of these errors.
The Group has changed the classification of certain balances in the current reporting period and the prior year comparatives have been restated to be consistent with the current period.
14.1 Restatement of the Unaudited consolidated income statement for the six months ended 30 June 2009
The Group presents below a reconciliation of the adjustments that are required to the Unaudited consolidated income statement for Half 1-2009. The nature of these adjustments is discussed in note 14.3 below.
|
|
As previously presented US$'000 |
Fixed asset impairment - IAS 36 |
IVA provision - IAS 12 |
Inventory adjustment - IAS 2 |
Revenue adjustment - IAS 18 |
Share option charge - IFRS 2 |
Recognition of liabilities - IAS 39 |
Other |
As restated US$000 |
|
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Tantalum concentrate |
1,923 |
- |
- |
- |
2,137 |
- |
- |
- |
4,060 |
|
|
Morganite |
281 |
- |
- |
- |
- |
- |
- |
- |
281 |
|
|
|
2,204 |
- |
- |
- |
2,137 |
- |
- |
- |
4,341 |
|
|
Cost of sales |
(5,708) |
- |
- |
(17) |
(2,137) |
- |
(255) |
- |
(8,117) |
|
|
Gross loss |
(3,504) |
- |
- |
(17) |
- |
- |
(255) |
- |
(3,776) |
|
|
Administrative expenses |
(1,720) |
666 |
(229) |
- |
- |
(430) |
- |
306 |
(1,407) |
|
|
Impairment of fixed assets |
- |
(327) |
- |
- |
- |
- |
- |
- |
(327) |
|
|
Loss on disposal of fixed assets |
(10) |
10 |
- |
- |
- |
- |
- |
- |
- |
|
|
Exploration and evaluation expenses |
(3) |
- |
- |
- |
- |
- |
- |
- |
(3) |
|
|
Operating loss |
(5,237) |
349 |
(229) |
(17) |
- |
(430) |
(255) |
306 |
(5,513) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
307 |
- |
- |
- |
- |
- |
- |
(306) |
1 |
|
|
Finance expense |
(113) |
- |
- |
- |
- |
- |
- |
35 |
(78) |
|
|
Loss before taxation |
(5,043) |
349 |
(229) |
(17) |
- |
(430) |
(255) |
35 |
(5,590) |
|
|
Taxation |
- |
- |
- |
- |
- |
- |
- |
- |
- |
|
|
Loss for the period |
(5,043) |
349 |
(229) |
(17) |
- |
(430) |
(255) |
35 |
(5,590) |
|
|
Basic and diluted loss per share |
(13.0) |
|
|
|
|
|
|
|
(14.2) |
|
14.2 Restatement of the Unaudited consolidated statement of financial position as at 30 June 2009
The Group presents below a reconciliation of the adjustments that are required to the Unaudited consolidated statement of financial position as at 30 June 2009. The nature of these adjustments is discussed in note 14.3 below.
|
|
As previously presented US$'000 |
Fixed asset impairment - IAS 36 |
IVA provision - IAS 12 |
Inventory adjustment - IAS 2 |
Revenue adjustment - IAS 18 |
Share option charge - IFRS 2 |
Recognition of liabilities - IAS 39 |
Other |
As restated US$000 |
||
|
Non-current assets |
|
|
|
|
|
|
|
|
|
||
|
Intangible assets |
1,694 |
(1,694) |
- |
- |
- |
- |
- |
- |
- |
||
|
Property, plant and equipment |
4,542 |
(4,542) |
- |
- |
- |
- |
- |
- |
- |
||
|
|
6,236 |
(6,236) |
- |
- |
- |
- |
- |
- |
- |
||
|
Current assets |
|
|
|
|
|
|
|
|
|
||
|
Inventories |
654 |
- |
295 |
- |
- |
- |
- |
- |
949 |
||
|
Trade and other receivables |
2,679 |
- |
- |
(1,170) |
- |
- |
- |
(53) |
1,456 |
||
|
Cash and cash equivalents |
797 |
- |
- |
- |
- |
- |
- |
1 |
798 |
||
|
|
4,130 |
- |
295 |
(1,170) |
- |
- |
- |
(52) |
3,203 |
||
|
Total assets |
10,366 |
(6,236) |
295 |
(1,170) |
- |
- |
- |
(52) |
3,203 |
||
|
|
|
|
|
|
|
|
|
|
|
||
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
||
|
Trade and other payables |
2,561 |
- |
- |
- |
- |
- |
255 |
(81) |
2,735 |
||
|
|
2,561 |
- |
- |
- |
- |
- |
255 |
(81) |
2,735 |
||
|
Net current assets |
1,569 |
- |
295 |
(1,170) |
- |
- |
(255) |
29 |
468 |
||
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
||
|
Long-term provisions |
245 |
- |
- |
- |
- |
- |
- |
7 |
252 |
||
|
|
245 |
- |
- |
- |
- |
- |
- |
7 |
252 |
||
|
Total liabilities |
2,806 |
- |
- |
- |
- |
- |
255 |
(74) |
2,987 |
||
|
Net assets |
7,560 |
(6,236) |
295 |
(1,170) |
- |
- |
(255) |
22 |
216 |
||
|
Equity |
|
|
|
|
|
|
|
|
|
||
|
Share capital |
32 |
- |
- |
- |
- |
- |
- |
- |
32 |
||
|
Share premium |
42,876 |
- |
- |
- |
- |
- |
- |
190 |
43,066 |
||
|
Convertible loan note reserve |
4,987 |
- |
- |
- |
- |
- |
- |
(11) |
4,976 |
||
|
Share incentive reserve |
548 |
- |
- |
- |
- |
- |
- |
(548) |
- |
||
|
Merger reserve |
8,858 |
- |
- |
- |
- |
- |
- |
- |
8,858 |
||
|
Translation reserve |
31 |
- |
- |
- |
- |
- |
- |
- |
31 |
||
|
Accumulated losses |
(49,772) |
(6,236) |
295 |
(1,170) |
- |
- |
(255) |
391 |
(56,747) |
||
|
Equity |
7,560 |
(6,236) |
295 |
(1,170) |
- |
- |
(255) |
22 |
216 |
||
14.3 Nature of the prior period restatements and re-presentations
14.3.1 Fixed asset impairment - IAS 36
In the financial year ended 31 December 2008, the impairment review of intangible and tangible fixed assets did not reflect the relevant information that was, or should have been, known by the Directors of the Group. Had all relevant information been taken into consideration, intangible and tangible fixed assets would have been impaired in full. A prior year adjustment was recorded in the 31 December 2009 Group financial statements to correct this error. This adjustment reflects the impairment as at 31 December 2008 by reversing depreciation charged in the 30 June 2009 financial statements as previously presented and impairing the fixed assets.
This adjustment results in a decrease in net assets of $6,236,000 as at 30 June 2009 and a decrease in the loss for the Half 1-2009 of $349,000.
14.3.2 IVA provision - IAS 12
In the financial year ended 31 December 2008, the impairment review of tax recoverable balances that had been accumulating since 2004 did not reflect the relevant information that was, or should have been known by the Directors of the Group at that time. In particular, it did not take account of the legal requirements for the recovery of IVA taxation balances in Mozambique which include the requirement to be able to present original documents evidencing all recoverable input IVA, and evidence that all sales were exported. A prior year adjustment was recorded in the 31 December 2009 Group financial statements to correct this error. This adjustment reflects the impairment of the IVA balance as at 30 June 2009.
This adjustment results in a decrease in net assets as at 30 June 2009 of $1,170,000 and an increase in loss for Half 1-2009 of $229,000.
14.3.3 Inventory adjustment - IAS 2
IAS 2, Inventory, requires that inventory is valued at the lower of cost and net realisable value. The tantalum concentrate stock held by the Group as at 30 June 2009 was valued at the lower of cost and net realisable value within the Mozambique subsidiary undertaking. Due to the gross loss reported in Mozambique, cost exceeded net realisable value and the inventory was valued at the intergroup sales price. At the Group level, the final sales price is higher than the intra group sales price. This adjustment increases the cost of inventory to correctly state the inventory at the lower of cost and net realisable value at Group level.
This adjustment results in an increase in net assets as at 30 June 2009 of $295,000 and an increase in loss for the Half 1-2009 of $17,000.
14.3.4 Revenue adjustment - IAS 18
In the year ended 31 December 2008, the Group recognised revenue on the sale of Quarter 4-2008 production of tantalum concentrate of $2,137,000. Under the Group accounting policy, revenue is recognised when the risks and rewards of ownership of the tantalum concentrate pass to the end customer. Under contract terms, this is when the tantalum concentrate 'crosses ship rails' on its passage to the final customer. As at 31 December 2008, the abovementioned product had not crossed ship rails, and accordingly the revenue should not have been recognised in the year ended 31 December 2008. This adjustment recognises the revenue and associated cost of sales in the income statement in the correct period. This adjustment has no impact on the reported gross loss, profit after tax, current assets or net assets of the Group.
14.3.5 Share option charge - IFRS 2
In Half 1-2009, the Group did not take account of the requirements of IFRS 2, Share based payments, with respect to the charge arising from the accelerated vesting of options when certain employees became redundant due to retrenchment upon the Marropino Mine entering care and maintenance in May 2009. This adjustment records the charge in accordance with IFRS 2.
This adjustment results in an increase in the loss for half 1-2009 of $430,000. The adjustment has no impact on the reported net assets or equity of the Group as at 30 June 2009.
14.3.6 Recognition of liabilities - IAS 39
As at 30 June 2009, the Group failed to accurately record liabilities arising to a supplier in Mozambique due to inadequate controls at the Marropino Mine for goods received. This adjustment records the additional liability due as at 30 June 2009.
This adjustment results in a decrease in net assets as at 30 June 2009 of $255,000 and an increase in loss in Half 1-2009 of $255,000.
14.3.7 Other
In order to conform the prior year classification to the classification used in the current period, the Group has re-presented certain comparative information. Additionally, immaterial errors have been corrected in the 30 June 2009 financial statements.
14.3.7.1 Re-presentations
14.3.7.1.1 Presentation of foreign exchange gains and losses
The Group previously reported all exchange gains and losses within 'Finance income' and 'Finance expense' respectively. The amounts reported do not represent foreign exchange gains and losses on financing items that should be reported in these line items in the consolidated income statement. The amounts previously reported have been reclassified to "Administrative expenses", resulting in a decrease in operating loss of $341,000 and a decrease in net finance expense of $341,000. This adjustment has no impact on the reported loss for the comparative period.
14.3.7.1.2 Bad debt provision
As at 30 June 2009, the Group reported a receivable balance of $52,000 within 'Trade and other receivables', with a corresponding provision included within 'Trade and other payables'. An adjustment has been recorded to net the provision against the receivable balance by recording the provision in the same caption in the consolidated statement of financial position.
14.3.7.1.3 Share premium
In the financial year ended 31 December 2007, the Group reported a decrease in the 'Share premium' account for the fair value of a derivative over own equity arising from the initial listing of the Company. This balance should have been reported as a separate component of equity with the movement in the fair value of this balance being reflected as a transfer from this component to 'Accumulated losses'. As at 30 June 2009 an adjustment has been recorded to increase the 'Share premium' account, and increase 'Accumulated losses' by $190,000.
14.3.7.1.4 Employee share incentive reserve
Up to and including the period ended 30 June 2009, the Group reported the credit to equity arising on equity settled share based payments within a separate reserve, the 'Employee share incentive reserve'. This reserve accumulated the IFRS 2 credits to equity. As this separate line item in equity is not a requirement of IFRS the Group has reclassified the balance in this reserve to 'Accumulated losses', which have reduced as a result by $548,000 as at 30 June 2009.
14.3.7.2 Immaterial corrections
14.3.7.2.1 Environmental provision
In accordance with IAS 37, Provisions, Contingent Liabilities and Contingent Assets, on initial measurement, the Group records long term provisions for rehabilitation at the present value of the liability. The discount is unwound such that when the liability crystallises it is stated at the amount payable. In the 30 June 2009 financial statements, the Group did not record the unwinding of the discount in Half 1-2009.
An adjustment has been recorded in Half 1-2009 increasing finance expense, increasing loss before taxation, and decreasing net assets at 30 June 2009 by $7,000 for the unwinding of the discount.
14.3.7.2.2 Convertible debt issue expenses
In accordance with IAS 39, Financial Instruments: Recognition and Measurement, issue expenses of convertible debt instruments are required to be reported within equity if the convertible instrument is classified as a component of equity. $11,000 of expenses incurred in the issuance of convertible debt that was wholly treated as equity were expensed to the consolidated income statement in Half 1-2009.
An adjustment has been recorded decreasing administrative expenses and loss before taxation in Half 1-2010 by $11,000 to record this expenditure directly to equity. This adjustment has no impact on reported net assets or equity.
14.3.7.2.3 Revaluation of liabilities
In accordance with IAS 21, Effects of Changes in Foreign Exchange Rates, monetary assets and liabilities should be revalued at each period end to reflect the asset or liability at the correct amount in the functional currency of the entity. As at 30 June 2009 the Group did not revalue certain liabilities denominated in Mozambique Metical.
An adjustment has been recorded in Half 1-2009 decreasing administrative expenses and loss before taxation by $29,000 to record these liabilities at the correct US Dollar amount. This adjustment results in a decrease in net assets as at 30 June 2009 of $29,000.
Country of incorporation Jersey, Channel Islands
Registration number 95036
Legal form Public listed company
Shares Listed Alternative Investment Market of the London Stock Exchange ('AIM')
RIC Code- NVTA
Registered address Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Telephone: +44 (0)1534 869 403
Fax: +44 (0)1534 866 859
Email: [email protected]
Website: noventa.net
Directors Mr EF Kohn TD (Chairman)
Mr P Lawless (Chief Operating Officer until 30 June 2010, thereafter Chief Executive Officer)
Mr JN Allan ((Chief Executive Officer until 30 June 2010, thereafter Non-executive director)
Mr TJ Griffiths (Non-executive director)
Dr EJ Martin (Non-executive director)
Mr G Coltman (Non-executive director)
Mr K Chung (Non-executive director)
Management Noventa Limited:
Mr EF Kohn TD (Chairman)
Mr JN Allan (Chief Executive Officer until 30 June 2010, thereafter Non-executive director)
Mr P Lawless (Chief Operating Officer until 30 June 2010, thereafter Chief Executive Officer)
Mr DL Cassiano-Silva (Chief Financial Officer)
Highland African Mining Company Limitada:
Mr DM Whitehouse (Executive Director & Chief Projects Officer Highland African Mining Company Limitada)
Mr DD Darsamo (Executive Director & Engineering Manager Highland African Mining Company Limitada)
Mr N Norris (Metallurgical Manager Highland African Mining Company Limitada)
Mr M José (Pit Manager, Highland African Mining Company Limitada)
Mr LN Juliasse (Human Resources Manager, Highland African Mining Company Limitada)
Company secretary Grange Corporate Services Limited
Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Auditors Deloitte LLP
London Gatwick Office
Global House
High Street, Crawley
West Sussex, RH10 1DL
England
Legal advisors In the United Kingdom:
Skadden, Arps, Slate, Meagher & From (UK)
LLP
40 Bank Street
Canary Wharf,
London, E14 5DS
England
In Jersey:
Carey Olsen
47 Esplanade
St. Helier
In Mozambique:
Sal & Caldeira
Avenida Julius Nyerere, 3412
Maputo, 2830
Mozambique
Jersey, JE1 0BD
Channel Islands
In South Africa:
Webber Wentzel
10 Fricker Road
Illovo Boulevard
Johannesburg, 2107
South Africa
In Canada:
Blake, Cassels & Graydon LLP Canadian Barristers & Solicitors 23 College Hill 5th Floor London EC4R 2RP England
Nominated advisor Religâre Capital Markets (UK) Limited
100 Cannon Street
London, EC4N 6EU
England
Corporate broker Religâre Capital Markets plc
100 Cannon Street
London, EC4N 6EU
England
AIM AIM market of the London Stock Exchange
Ta2O5 Tantalum pent-oxide
kg kilogramme
klb thousand pounds
km kilometre
lb pound
m metre
mlbs million pounds
Mt million tonnes
pa per annum
ppm parts per million
$ or US$ US Dollar, legal currency of the United States of America
£ Pound Sterling, legal currency of the United Kingdom
Mining concession land where the Group has a granted right to extract economic minerals including, but not limited to tantalum concentrate
Mining licence land where the Group has a granted right to explore for economic minerals including, but not limited to tantalum concentrate
Quarter 1 The three month period ended 31 March of the Company's financial year ended 31 December
Quarter 2 The three month period ended 30 June of the Company's financial year ended 31 December
Half 1 The six month period ended 30 June of the Company's financial year ended 31 December
Mineral resource - a concentration, or occurrence, of material of economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a mineral resource is known, estimated from specific geological evidence and knowledge, or interpreted from a well constrained and portrayed geological model. Mineral resources are sub-divided in order of increasing confidence, in respect of geo-scientific evidence, into inferred, indicated and measured categories.
Inferred resource - that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, working and drill holes which may be limited or of uncertain quality and reliability. This category of resource should not be used in any economic valuation exercise.
Indicated resource - that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, working and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
Measured resource - is that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Note - Definitions of mineral resource, inferred resource, indicated resource and measured resource are based on the South African Code for the Reporting of Mineral Resources and Mineral Reserves (the "SAMREC" code).
NOVENTA LIMITED
Unaudited Condensed Consolidated Financial Statements
(including Management Discussion & Analysis)
for the 3 months ended 31 March 2010
Cautionary note regarding forward looking statements
This document contains "forward-looking" information which may include, but is not limited to, statements with respect to the future financial or operating performance of Noventa Limited ("the Company"), its subsidiaries (together "the Group"), the performance of the Marropino mine ("the Marropino Mine"), the timing and volume of estimated future production, estimated costs of future production, capital, operating and exploration expenditures and costs and timing of the development of the Mutala and Morrua Concessions.
Often, but not always, "forward-looking" information can be identified by the use of words such as "plans", "expects", "is expected", "is expecting", "budget", "schedules", "estimates", "forecasts", "intends", "anticipates", or "believes", or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might", or "will" be taken, occur or be achieved. The purpose of "forward-looking" information is to provide the reader with information about management's expectations and plans for the future. Readers are cautioned that "forward-looking" information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Noventa Limited and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include, amongst others, those factors discussed in the "Risk Factors" section of the "Business Review" in the Directors' Report - Management discussion and analysis. Although Noventa Limited has attempted to identify statements containing important factors that could cause actual actions, events or results to differ materially from those described in "forward-looking" information, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking information contained herein are made as at the date of this report, based on the opinions and estimates of management on the date that these statements containing such "forward-looking" information are made, and Noventa Limited disclaims any obligation to update any "forward-looking" information, whether as a result of new information, estimates or opinions, future events or results or otherwise. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on "forward-looking" information.
Cautionary note regarding technical information
Technical information in this publication is summarised or extracted from the Independent Competent Persons' Report on the Material Properties of Highland African Mining Company Limited, prepared by SRK Consulting (South Africa) (Proprietary) Limited on 15 March 2007.
Readers are cautioned not to rely solely on the summary of such information contained in this annual report and financial statements, but should read the above mentioned report (which is available at www.noventa.net in the Noventa Limited AIM admission document) and any future amendments to such report. Readers are also directed to the cautionary notices and disclaimers contained therein.
Management discussion & analysis
This management discussion and analysis has been prepared as of 12 September 2010 and should be read in conjunction with the Group's unaudited condensed consolidated financial statements and notes thereto for the three month period ended 31 March 2010 (Quarter 1-2010) and with the audited financial statements and notes thereto for the year ended 31 December 2009 (available from www.noventa.net).
Principal activities
Noventa is a Jersey Corporation listed on the Alternative Investment Market ('AIM') market of the London Stock Exchange, which produces tantalum concentrate. Tantalum is a rare heavy metal that is used in the manufacture of electronic capacitors, turbine blades, medical applications, and industrial cutting tools.
The wholly owned Mozambican subsidiary of Noventa Limited, Highland African Mining Company Limitada, holds title to mining concessions at Marropino, Morrua and Mutala in the Zambezia province of Mozambique and exploration licences over various adjacent areas. The mining operations are currently at the Marropino Mine which has operated intermittently since 2003, but was placed in care and maintenance in May 2009. Subsequent to Quarter 1-2010, operations at the Marropino Mine recommenced in April 2010 on a deliberately limited scale to test improvements to the process and to train personnel. These personnel will be used to train others when full scale operations start. This is also the first step towards the Marropino Mine commencing production from the primary hard rock deposit.
In addition to tantalum, the Marropino ore body also contains a pink beryl gemstone commonly known as morganite. The morganite is associated with the quartz waste in the ore body and is extracted as and when encountered.
Strategic plan and outlook SUBSEQUENT TO QUARTER 1-2010
On 10 June 2010 the Board of Directors approved a new three year strategic plan (the 'Plan') designed to optimise the profitability, cash generation and sustainability of the Group, enhancing value for shareholders.
The core development aspects of the Plan are:
·; to upgrade the Marropino plant capacity in excess of 500,000 lbs of tantalum pentoxide per annum during 2010/11 (refer to the section of the MD&A titled 'Process plant upgrade');
·; to broaden the customer base for the Group's tantalum pentoxide and increase the average selling price (refer to the section of the MD&A titled 'Sales contracts');
·; to upgrade the capability and infrastructure of the Marropino plant to handle material from the Group's Mutala, Morrua and other surrounding sites during 2011;
·; to bring Mutala into production by 2012, and work towards bringing Morrua into production as soon as practicable, but no later than 2015, leveraging off the infrastructure at Marropino in both cases; and
·; to complete further geological exploration on the mining concessions and exploration licences held by the Group to assess the existence of economic tantalum deposits, or other minerals.
In August 2010, the Group identified an additional deposit of Tantalum bearing ore on the existing Marropino concession, to be known as Marropino South. Marropino South is an area of soft rock, measuring approximately one kilometre square, lying two kilometres to the South East of the Marropino Mine. Samples from three pits have been independently assayed and show tantalum grades of 2,697 ppm, 3,836 ppm and 7,577 ppm. These compare to the average 220 ppm of the primary hard rock deposit at Marropino. Subject to additional sampling and assaying, the current results indicate that Marropino South is significant, could be economic to mine, and provide additional feed for the Marropino plant substantially increasing the life of the Marropino Mine.
The Board has decided to accelerate the assessment of Marropino South to accurately define its shape, average grade and tonnage, whilst concurrently executing the Plan. The additional cost of assessing Marropino South will be minimal, and could have the potential benefit of significantly enhancing the economics of the Plan, especially in the earlier years. The Board anticipates that the implementation of the Plan, even if Marropino South does not prove to be viable, will result in the Company becoming cash generative in 2011, with cash generation improving significantly during the rest of the period of the Plan. Cash generation between 2011 and 2013 is anticipated to be around $20,000,000 with cash margins expected to exceed 33% by 2013.
If Marropino South is viable and of high grade material, the processing of the ore body may be possible using the current plant, augmented by a suitable crushing circuit. Funding for the Plan might then be delivered from cash flow, reducing or eliminating the need for further external funding for the execution of the Plan. Until the evaluation of Marropino South is completed, there is no guarantee that it is viable or of consistently high grade. If the evaluation of Marropino South does not indicate that it is viable, the Group anticipates that a further $15,000,000 funding will be required in order to execute the Plan, in addition to the $2,158,000 raised in equity in June 2010 and the $8,091,000 that has been secured in equity in September 2010 (refer to note 13.4).
Operations Overview
The Group has operated from a single mine in Marropino, Mozambique since 2003. The productivity and profitability of operations have been significantly lower than expectation since production began, with failure to achieve a profit in any year of operation. The continuing operating losses at the Marropino Mine led to it being placed in care and maintenance in May 2009. From July 2009 a new Board and Management team led by the Chairman, Mr. E Kohn TD, and the CEO, Mr. J Allan, worked on assessing the viability of re-opening the Marropino Mine on a sustainable and profitable basis. Subsequent to Quarter 1-2010 this work was completed and the Marropino Mine recommenced production on 23 April 2010.
The results from this deliberately modest restart using tailings material have proved that the current process, with the improvements introduced by the new team running it, can deliver better results than have previously been achieved. These improvements are based on detailed test work carried out in The Republic of South Africa and separate analysis carried out by the University of Glasgow, all checked by independent experts in Canada.
Based on these improved results and the experience of recent production, with product quality verified by the customers and independently, the Board of Directors believes that the Marropino Mine, with further planned capital investment and modifications to the processing plant, can become a viable low cost producer of tantalum feedstock. The processing plant design and implementation should provide in excess of 500,000 lb per annum of tantalum contained in a concentrate at a minimum contained percentage of 25%. This new process requires capital investment and funding in 2010 to upgrade the existing plant, with the installation of a comminution circuit allowing the Group to mine the primary hard rock deposit at Marropino and in addition to increase the capacity of the plant for it to become economically viable.
The Group plans to supplement the production from Marropino with additional tantalum concentrate produced from the Group's Morrua and Mutala mining concessions if geological tests currently underway provide evidence of an economically mineable and profitable ore body. The Group has also implemented a strategy of geological research on its further nine exploration sites (principally surrounding the Morrua concession) to assess the viability of economic extraction of tantalum concentrate from these sites. The initial phase of this geological research has been conducted during July and August 2010 in partnership with the University of Glasgow, United Kingdom, and Universidade Eduardo Mondlane, Maputo Mozambique, involving field work by eighteen students under the supervision of the Group's consultant geologist.
Subsequent to the quarter end, the Group raised $2,158,000 in equity from shareholders in June 2010 and a further $8,091,000 in equity from shareholders in September 2010 in order to fund the Plan. This will provide funds for the purchase of key items of equipment in preparation for the plant upgrade in Quarter 4-2010 and working capital. A further $15,000,000 of funds will be required in 2010 and early 2011 to fully implement the Plan, subject to the economic viability of Marropino South (refer to the section of the MD&A titled 'Strategic plan and outlook') which may reduce or remove the requirement for additional funding.
Change in Directors
Mr. K Chung was appointed as a Non-executive Director of the Company on 30 March 2010.
Change in Directors Subsequent to Quarter 1-2010:
Mr. P Lawless was appointed Chief Operating Officer and a Director of the Company on 19 April 2010.
Mr. P Cox did not stand for re-election as a Director of the Company and ceased to be a Director of the Company on 30 June 2010.
Mr. J Allan completed his agreed term as Chief Executive Officer on 30 June 2010 and became a Non-executive Director.
Mr P Lawless was appointed Chief Executive Officer on 30 June 2010.
Production (Subsequent to Quarter 1-2010)
The Group recommenced production at the Marropino Mine on 23 April 2010 on a deliberately limited scale basis, mining the tailings dams. Up to 10 September 2010 the Group has produced 33,907 lbs of tantalum concentrate at a minimum concentration of 25.0% (i.e. a minimum of 8,477 lbs of contained tantalum). Since July 2010, the Group has achieved a consistent daily output, resulting in a monthly production of 17,632 lbs of tantalum concentrate at a minimum concentration of 25.0% (i.e. a minimum of 4,408 lbs of contained tantalum). While these volumes are relatively low compared to the projected output from the Marropino Mine once the new processing plant is commissioned, they reflect the quality of the plant feed (which is relatively low in contained tantalum when compared to the run of mine material at Marropino) offset by a significant improvement on recovery of the tantalum in the ore body compared to the previous mining operations - the Group is consistently achieving recovery rates of 51.0%, which compares to the previous rates achieved of 30.0% to 35.0%. Processing tailings is intrinsically more technically challenging than processing run of mine material, so the high recovery rate is especially pleasing, and underpins the Group's approach to testing each stage of production in a measured and controlled manner in order to optimise the production process and increase overall recovery.
Sales contracts
During Quarter 1-2010, the Group had a single confidential exclusive long term off-take agreement for the sale of all of its production of tantalum concentrate, which was initially negotiated in 2007.
Subsequent to Quarter 1-2010, the Group successfully renegotiated and signed an amendment to this off-take agreement in June 2010, which will allow the Group to reduce annual quantities of tantalum and sell on a non-exclusive basis to this original customer. This will allow the Group to sell the remaining annual production to other parties, and to benefit from increased market prices and a more diversified customer base.
The Group signed a confidential 3 year off-take agreement in July 2010 for the sale of a substantial proportion of its projected production of tantalum concentrate with a new customer - a major processor and refiner of specialist metals and advanced ceramics. The agreement is for similar quantities as for the Group's existing renegotiated off-take agreement. The agreement is subject only to a sample shipment of material being chemically acceptable. This sample shipment left Mozambique for the customer on 24 August 2010.
Delivery chain
The Group has historically shipped its tantalum concentrate from Walvis Bay, Namibia. This shipping route was not cost effective due to the significant distance that the product had to travel from the Marropino Mine to shipping point (around 3,900 Km).
Subsequent to Quarter 1-2010, on 24 August 2010, the Group has succeeded in shipping material directly from the port of Quelimane (320 Km from the Marropino Mine).The Group anticipates significant cost savings from using shipping ports near the Marropino mine.
Supply chain
Due to the remote location of the Marropino Mine in Mozambique, and the relative reliance on The Republic of South Africa for the procurement of spares and equipment, the Group has focussed on the procurement process within the operating subsidiaries to ensure that parts and equipment are available in a timely manner, without tying up unnecessary working capital.
The Group has also initiated a full review of all items of inventory to identify inventory that is surplus to requirements. This inventory will be sold where the net realisable value is positive.
Subsequent to Quarter 1-2010, on 1 August 2010, the Group has appointed a new Logistics and Procurement Manager, Mr. B Cavel, to oversee the procurement process. He is based in Maputo and will oversee future improvements in the procurement and logistics process, which is now underpinned by a common ERP system across the Group operations in Mozambique and South Africa.
Infrastructure
The Group has established the appropriate infrastructure to support operations at the remote Marropino Mine.
The Marropino Mine was connected to the national electricity grid in December 2009. Initial connection issues have been resolved and the Marropino Mine now has a reliable power supply. This is supplemented by Diesel generators for back up. The mains electricity supply not only reduces the cost of power, but it also provides a continuous current which improves the productivity of the processing plant, and increases the working lives of certain consumable items of the plant such as pump impellers.
Water is sourced on site from boreholes and the natural lake on the Marropino site providing a cost effective and reliable supply.
Subsequent to Quarter 1-2010, the Group has completed an optimisation project of the buildings and facilities at the Marropino Mine, centralising the stores into one building, relocating the workshop and dry processing plant to more appropriate locations for production purposes, and refurbishing and expanding the accommodation at the Marropino Mine in order to provide appropriate conditions for employees and visitors to the site. The Group has also improved local sourcing of food products, with established relationships now in place to provide a reliable supply to the Mine.
The Marropino Mine infrastructure and support is considered to be sufficient now to support the current operations of the Mine.
Process plant upgrade
The Marropino Mine has made losses in every year of operation due to a combination of factors, including, but not limited to, the incorrect design of the processing plant and significant rejection of the ore body to oversize. These failings impacted significantly on the ability of the processing plant to recover the tantalum contained in the ore body.
Subsequent to Quarter 1-2010, the Group contracted Paradigm Project Management ('PPM') as the Equipment, Procurement and Construction Manager ('EPCM') for the Marropino Mine plant upgrade project. The design and test work for the new plant is now complete, and the Group has commenced the procurement phase, within a projected budget of $25,000,000 (including Working Capital).
The process plant has been redesigned to process all material to achieve higher recovery and efficiency. This has been possible through studies commissioned by the Group into the liberation process and separation technique of the ore body at Marropino, which show that a three size fraction separation is necessary to optimise recovery through gravity separation across different spiral banks and shaking tables.
The Group has placed orders for the necessary long lead time equipment in September 2010 and the Marropino Mine is forecast to increase production in Half 1-2011, when the upgraded plant is expected to be fully commissioned. This implementation plan has taken account of the timing necessary to place orders for long lead time items, the most significant of which have a lead time not exceeding 10 weeks, which include spiral banks and transformers.
The projected cash flows for the upgrade project are anticipated to be expended relatively evenly at around $3,000,000 per month from September 2010 through to January 2011, with the remaining $5,000,000 expended over February and March 2011. The Group anticipates that the necessary funds will be obtained through phased capital inflows arising either from shareholder investment, or debt funding. The financing for the initial phases was obtained in September 2010 (note 13.4).
The Directors believe that once commissioned, the plant upgrade will provide the levels of production needed at a production cost which is profitable based on current off-take agreements.
Non-Financial Resources
The Group's non financial resources relate to the Group's human resources, infrastructure, systems, technologies, and processes.
Human resources
The Group has recruited at all levels of the organisation, with a particular focus in Mozambique on the recruitment of Mozambican citizens who are experienced managers and skilled plant operatives. The Group always gives preference to Mozambican nationals, or Portuguese speaking individuals if Mozambican nationals are not available. This approach has proved invaluable to maintaining good working relationships with the Mozambican authorities, and the local community in the area in which the Marropino Mine is situated. It also promotes the economic and social development of Mozambique, and the participation of the workforce at the Marropino Mine in the overall development of the operations. The benefits of this approach are seen in the excellent results achieved by the Marropino Mine subsequent to the quarter end.
The Directors believe that the human resources in the Group are appropriate to the current and projected level of activity in the Group, both at the Marropino Mine, and in the administrative support functions.
Systems, technologies and processes
The Group has completed a review of all systems and processes throughout the Group, and identified areas for improvement. A new ERP system has been installed allowing a common platform for the Group operations at Marropino, Maputo and Johannesburg. This system provides a significantly enhanced stock management platform. Once integrated with the Group Maintenance system (On Key), this will provide a streamlined and efficient maintenance planning, stock control, and financial reporting system.
Markets and competition
Tantalum is a rare specialty metal that has become a crucial ingredient for the electronics industry and other new technologies such as the following:
|
Electronics |
·; Cellular phones/PDAs/GPS ·; Computers/laptops ·; Digital audio/video players ·; Car airbag electronics
|
|
Specialty Applications |
·; Jet turbine blades ·; Medical/surgical applications ·; Carbide cutting tools ·; Military ·; Nuclear power
|
|
New Technologies |
·; Green technologies (i.e., auto, wind, solar) ·; Hybrid and lithium-ion batteries ·; Oil drilling applications
|
With electronic devices becoming smaller, lighter, with more processing power, tantalum usage is increasing. Global tantalum demand is expected to grow at a CAGR of 6% per annum reaching 7Mlb by 2012 (Global Capital Magazine, October 2008). Global supply has fallen behind global demand and is expected to continue lagging for the foreseeable future.
Four developments have made the supply problem critical:
5 Suspended Production:
• Tanco, Talison's Greenbushes underground mine in South Western Australia suspended production in 2008 due to falling world prices and stated their requirement for the tantalum concentrate price to reach $80 to $100 per pound of contained tantalum before production wound recommence.
• Noventa, when the Marropino Mine was place in care and maintenance in May 2009.
6 Drained Inventories:
• The United States Defense Logistics Agency, the second largest supplier of tantalum during 2001 to 2007 (500,000+ lb per annum), exhausted its captive supply and stopped sales. It has now announced that it intends to rebuild stocks creating demand pressure.
7 Recycling Difficulties:
• Recycling has become more difficult due to the smaller size of electronic components.
8 Restrictions on Product from Conflict Regions:
• Increasing international sanctions on conflict minerals - Central African countries, Democratic Republic of Congo, Rwanda, and Uganda.
• US legislation which would make it illegal to buy or sell conflict minerals anywhere in the supply chain is advancing and gaining support (H.R. 4128 & S. 891).
In this context, the market is characterised by supply shortage from ethical producers, which is placing upwards pressure on spot prices of tantalum concentrate. In Quarter 1-2010, the price per pound of contained tantalum has remained static at $37.0 per lb, but subsequent to the quarter end it has increased to $85.0 per lb as at the date of this report.
Although the spot price has shown significant increases in 2010, supply prices are normally set by way of long-term off-take deals between miners and processors. Noventa has recently renegotiated, or entered into new off-take agreements with major customers, that capitalise on the increasing tantalum price (refer to the section of this MD&A titled 'Sales contracts') and provide a stable price for economic production once the Marropino Mine upgrade is completed. As a member of the Electronics Industry Citizenship Coalition (EICC), an organization dedicated to ensuring worker safety and fairness, environmental responsibility and business efficiency in the electronics industry, Noventa is one of the few suppliers which can provide tantalum concentrate to these customers.
The Group believes that it is in a strong position in this market to expand operations on a profitable and sustainable basis.
Risk assessment
The following table summarises the principal risks and uncertainties faced by the Group, and the actions taken to mitigate these risks:
|
Area: |
Description of risk: |
Examples of mitigating activities: |
|
Regulation |
·; Changes to legislation (principally regarding the operation of mining in Mozambique) could result in the Group's mining concessions and mining licences becoming uneconomic or inoperable. |
·; The Group closely monitors regulatory developments across the mining industry in Mozambique. ·; The Group operates under a Mining Licence Agreement signed between Highland African Mining Company Limitada (one of the Group's wholly owned subsidiaries) and the Government of Mozambique. This contract establishes a number of benefits to the Group which cannot be altered by changes in law. The Group ensures that it complies with all the terms of the Agreement. |
|
|
·; The Group has various mining licences for research and exploration in the Zambezia Province of Mozambique. These licences could fail to be renewed by the Government of Mozambique. |
·; The licences require the Group, within a set time frame, to perform research and exploration in the areas covered by the licences. The Group has historically not completed the necessary work in the required timeframe. The Group has now agreed terms with Mozambique and UK universities to allow students to complete field work parts of their courses on these licence areas. |
|
Resources |
·; The Group's concessions may not contain the predicted quantity or grade of tantalum, causing revenues to decrease, or costs of production to increase.
|
·; The Group has updated geological studies completed at the Marropino site, and has confirmed the existence of the ore body, at an average 220ppm. ·; The Group is undertaking geological studies at the Mutala concession to confirm previous studies completed at this site. |
|
|
·; Exploration for mineral resources involves considerable risk and there is no certainty that expenditure incurred in the search and evaluation for mineral resources at the Group's concessions and licences will result in the discovery of commercial quantities of ore. |
·; The Group is implementing exploration projects at concessions and licences held by the Group in areas where tantalum is known to exist. This reflects the characteristics of the pegmatite body in the Zambezia Province of Mozambique. |
|
Predicted costs |
·; Unanticipated expenditure or unforeseen delays in re-opening the Marropino Mine and transitioning to hard rock could make operations unprofitable or not viable. |
·; The Group has detailed forecast costing models, which have been prepared by experts on the Board of Directors, and subject to expert third party validation. |
|
Predicted revenue |
·; There is no certainty that predicted production volumes, and consequently revenue, will be achieved by the Marropino Mine and the remaining mining concessions. |
·; The Group has detailed forecast production models, which have been prepared by experts on the Board of Directors, and subject to expert third party validation. |
|
|
·; Tantalum sales price is subject to worldwide supply and demand factors. The price of Tantalum may decrease, such that forecast revenues used to determine the viability of concessions are not applicable. |
·; The Group has confidential off-take agreements for the production from Marropino which assure customers for the majority of the Group's tantalum concentrate output at fixed forward prices. ·; The Group anticipates that the price for tantalum will increase in 2011/2012, reflecting the low production volumes worldwide and the decreasing inventory reserves of the major consumers. The Group anticipates that it will be able to find customers to sell the additional tantalum concentrate output to, at favourable prices. |
|
Dependence on Marropino |
·; The Group is currently dependent on the Marropino Mine. Adverse events at the Marropino Mine, including, but not limited to production related risks referred above, environmental, labour, industrial accidents, pollution, ground or slope failures, natural phenomenon such as rain and others could cause the mine to close temporarily, or permanently. |
·; The Group has initiated plans to develop further concessions, commencing with Mutala where further geological studies are being undertaken with a view to commencing commercial exploration in 2012. |
|
Availability of finance |
·; Subject to the assessment of the economic viability of the Marropino South site, the Group is dependent on being able to obtain additional investment to fund the plant upgrade at Marropino and develop remaining mining and exploration licences. There is no guarantee that this funding will be available. |
·; The Group is in discussions with brokers and investors regarding availability of equity finance. The Group is also in discussions with development and commercial banks regarding the availability of various sources of credit. The Directors believe that the finance required will be available. |
Financial Overview
The following table provides selected financial information for the three years to 31 December 2009 and quarterly information that has been published for 2009 and 2010, prepared under International Financial Reporting Standards ('IFRS') and presented in thousands of United States Dollars except per share amounts:
|
|
Q1-2010 US$000 |
Q1-2009 US$000 |
2009 US$000
|
2008 US$000 |
2007 US$000
|
|
Operations |
|
|
|
|
|
|
Revenue |
1,000 |
2,677 |
5,709 |
5,886 |
1,617 |
|
Gross profit / (loss) |
347 |
(1,225) |
(3,190) |
(7,805) |
(8,558) |
|
Operating loss |
(1,336) |
(2,344) |
(10,662) |
(22,264) |
(16,872) |
|
Loss for the period |
(1,338) |
(2,417) |
(10,875) |
(29,390) |
(14,336) |
|
Basic and diluted loss per share (US cents) |
(0.6) |
(6.1) |
(7.7) |
(82.4) |
(47.0) |
|
Financial position |
|
|
|
|
|
|
Non-current assets |
351 |
- |
40 |
- |
19,166 |
|
Cash and cash equivalents |
2,710 |
2,398 |
5,029 |
2,540 |
2,145 |
|
Borrowings |
- |
(28) |
- |
(59) |
- |
|
Net current assets |
1,749 |
3,377 |
3,181 |
2,746 |
2,288 |
|
Equity |
1,840 |
3,128 |
2,963 |
2,501 |
21,220 |
|
|
|
|
|
|
|
|
Funds raised (pre issue expenses) |
- |
- |
10,102 |
11,021 |
15,643 |
|
Share price at period end - UK pence |
7.7p |
17.0p |
5.3p |
20.0p |
152.5p |
Quarter 1-2010 results overview
It is not meaningful to compare the performance in Quarter 1-2010, during which the Marropino Mine was in care and maintenance, to Quarter 1-2009 when the Marropino Mine was in operation. The financial section of this MD&A focuses on the current reporting period, events subsequent to the reporting period end, and management's future intentions.
During Quarter 1-2010, the Group reported an operating loss of $1,336,000. The loss reflects the operating costs required to maintain the Marropino Mine in care and maintenance and one off expenditure of $704,000 (refer to the section of the MD&A titled 'Administrative expenses') incurred to prepare the Group operations for the recommencement of production at Marropino in April 2010, offset by sales in the period of inventory of Morganite held at 31 December 2009 of $1,000,000.
The Group paid a deposit on 26 March 2010 for a crusher. This item accounts for the majority of the increase in the reported Property, plant and equipment balance at 31 March 2010 when compared to 31 December 2009. 90% of the cost of this item is payable upon delivery and represents the Group's sole capital commitments at the period end. The Group anticipates that delivery of the crusher will be made in Quarter 4-2010.
The Group issued 1,677,286 Ordinary Shares of £0.00004 each at an average issue price of £0.046 as joining bonuses for staff, or contractual fees due for Directors' Services in Quarter 4-2009. The amounts due for Directors' Services in Quarter 4-2009 were reported within the shares to be issued reserve as at 31 December 2009. Further obligations assumed in Quarter 1-2010 to issue shares to employees as sign on bonuses and for contractual fees due for Directors' Services amount to $75,000 as at 31 March 2010. This obligation is reflected in the Shares to be issued reserve, a component of Group equity.
During the quarter the Group initiated legal proceedings in South Africa against SRK Consulting (South Africa) Limited, a company incorporated in accordance with the laws of South Africa, for breach of contract and negligence in the preparation of the Independent Competent Persons' Report on the Material Properties of Highland African Mining Company Limited in March 2007. As at the date of this report, a statement of the defendant's exception to the claim has been received, but no court date has been set. During the quarter the Group incurred legal expenditure of $77,000 with respect to this claim. Subsequent to the quarter end, the Group has incurred further legal expenditure of $110,000 on this claim and deposited 700,000 Rand in a Trust Account as a deposit for costs. While this deposit is fully refundable if the claim is successful, the Group has provided against it in full subsequent to the quarter end in Quarter 2-2010 as the Group is not virtually certain that the claim will be successful. In the event that the claim is not successful, the deposit will be applied against the defendant's costs with any balance refundable to the Company.
Subsequent to Quarter 1-2010, in June 2010, the Group raised $2,158,000 before expenses from the private placing of 22,295,914 Ordinary Shares of £0.00004 each for £0.065 per Ordinary Share. The proceeds raised were used to fund working capital and deposits on certain key items of property, plant and equipment required for the upgraded plant. Additionally, in September 2010, the Group raised $8,091,000 before expenses from an unconditional private placing, subscription and additional subscription totalling 80,323,432 Ordinary Shares of £0.0004 each in the Company. The Company issued warrants exercisable at 10p to the subscribers on the basis of one warrant for every two Ordinary Shares subscribed. 50,563,921 Ordinary Shares were issued on 8 September 2010 at £0.065 per Ordinary Share raising $5,051,000 before expenses. The remaining 29,859,511 Ordinary Shares were secured under an irrevocable commitment and will be issued in three tranches on 30 September 2010, 31 December 2010 and 31 March 2011 at £0.06587 per Ordinary Share. Further details are included in the section of the MD&A titled 'Funds raised'. The funds will be used to finance working capital and the initial phased capital purchases required for the process plant upgrade programme (refer to the section of this MD&A titled 'Process plant upgrade').
Going concern
The Group's mining activities are located in Mozambique, where the Group has historically produced tantalum concentrate (and recovered Morganite) from its Marropino Mine which was placed in care and maintenance in May 2009 due to continuing operating losses, processing plant deficiencies and past management failures to address the underlying production and logistical issues.
In July 2009, the Group commenced a turnaround strategy after the appointment of Mr. E F Kohn TD as Chairman to the Group, and Mr. J Allan as Chief Executive Officer. The entire Board of Directors was also replaced and wide-ranging changes made throughout the business at key management levels to support the turnaround and the mining operations in Mozambique. The new management team have implemented a rigorous assessment of the business in order to establish whether the mining operations in Mozambique could be performed on a profitable and sustainable basis.
While there can be no certainty, the studies commissioned by the new management team into the geological, metallurgical and processing of the ore body at Marropino Mine indicate that the concession can be operated on a profitable and sustainable basis. Subsequent to Quarter 1-2010, the Group recommenced mining operations at the Marropino Mine on 23 April 2010 on a limited scale to initially reprocess previously mined material contained in the tailings. The intention is to use the reprocessing of previously rejected tailings and oversize material to test and prove the validity of the proposed changes in design from the previous methods used and to provide additional revenue as well as training the new team. After the additions, upgrades and modifications have been completed the Directors anticipate that the plant will be able to return to full production using the substantially higher grade hard rock ore body at Marropino with results that will represent an improvement over those previously achieved. This is expected to make the mining operation sufficiently cash generative to fund all expenditure in the Group, and provide surplus cash to fund the subsequent development of the Mutala and Morrua concessions, subject to geological test work.
As at 10 September 2010 the Group had cash of $4,648,000, further unconditionally committed funds of $3,143,000 (of which $1,125,000 is due to be received in September 2010, $1,009,000 in December 2010 and $1,009,000 in March 2011) and no debt. Subject to the assessment of the viability of Marropino South which may reduce or eliminate the need for additional funding (refer to the section of the MD&A titled Strategic plan and outlook'), the Group believes it requires a further $15,000,000 to fund the Plan which will be used to fund working capital, provide the capital investment necessary at Marropino and fund the costs of further geological work at the other mining concessions and sites held under mining licences. The Group is currently exploring various funding opportunities. The Group's existing funds are expected to be sufficient to finance the Group operations providing the Group time to assess the economic viability of Marropino South and to obtain any additional funding required to implement the Plan.
The Directors have adopted the going concern basis in preparing the financial statements, having carried out a going concern review, on the basis that:
·; they have successfully recommenced operations on a limited basis at the Marropino Mine and demonstrated that the proposed modifications and changes to the plant should make the plant effective;
·; they have successfully raised $10,249,000 of interim financing in June and September 2010 to support the Group whilst additional funding to implement the Plan is secured;
·; they have taken all reasonable steps possible to assess the viability of the Plan, including the preparation of forecasts for a period exceeding twelve months from the date of approval of the financial statements, and believe that the Group will become profitable and will return high rates of return on shareholder investment in the future; and
·; they have a realistic expectation based on the feedback from their discussions with potential investors and potential debt providers that the strategy to secure the additional funding required of up to $15,000,000 to implement the Plan is realistic, subject to satisfactory market conditions prevailing.
The Directors believe they will be able to raise the additional funding required, subject to satisfactory market conditions prevailing, but acknowledge that there is a material uncertainty over their ability to secure the additional funding required to implement the Plan which may cast significant doubt on the Group's and the Company's ability to continue as a going concern and, therefore, its ability to discharge its liabilities in the normal course of business.
Revenue
On 9 February 2010, the Group reached agreement with LJ International Limited for the sale of consignment stock held by Goldleaves Trading Limited and Miranda Gems (HK) under the Morganite Joint Venture Agreement between the Group, and these parties. The Morganite Joint Venture Agreement has been terminated, with payment due to the Group for the sale of the abovementioned inventory of $1,000,000. In accordance with this agreement, $300,000 was received in February 2010, $200,000 in March 2010, and $100,000 per month thereafter. Subsequent to Quarter 1-2010 and as at the date of this report, the total amount due under the settlement of $1,000,000 has been received.
Gross profit
The Gross profit (Revenue less Cost of sales which includes Direct operating costs of the Marropino Mine irrespective of whether it is producing tantalum concentrate) was $347,000 in Quarter 1-2010. The Gross profit in the period arises from the sale of Morganite which has no attributable cost of sale (Morganite recovery arises as a by-product of the tantalum concentrate production and accordingly no cost of production is attributed to it). The revenue of $1,000,000 has been offset by the ongoing, non administrative costs of maintaining the Marropino Mine in care and maintenance in the period.
Administrative expenses
Underlying administrative expenses in Quarter 1-2010 were $850,000. During the quarter the Group incurred expenditure of a non recurring nature for the following items:
·; $234,000 for sign on bonuses and direct recruitment costs for key management positions, $54,000 of which was paid in Ordinary Shares of the Company;
·; $315,000 of consulting costs directly related to the assessment of geological properties, engineering and metallurgical processing at the Marropino Mine;
·; $155,000 of legal costs incurred with respect to the claim against SRK Consulting (South Africa) Limited and various reviews and revisions to the Group's contracts and agreements.
·; $129,000 exchange loss arising on non US$ denominated bank balances. This loss is offset in full in quarter 1 and 2 by exchange gains and losses on trading items through natural economic hedges (see note 9).
Taxation
The Group has not incurred a tax expense during Quarter 1-2010. The Group has significant tax losses in Mozambique which are expected to offset future taxable profits for the foreseeable future.
Liquidity and Capital Resources
The Group has no external credit lines and is funded solely through shareholder investment. As at 31 March 2010, Group cash balances were $2,710,000. The Group forecasts cash expenditure in the remainder of 2010 and 2011 to exceed the cash balance and future predicted cash inflows from operations due to the expenditure required on property, plant and equipment for the upgrade of the Marropino plant, and the funding of working capital in the phase prior to upgrade and during the ramp up of production at the plant. The Group raised $10,249,000 of additional shareholder funding subsequent to the Quarter end, in June 2010 and September 2010. The Group is currently negotiating the terms of any further investment required.
Cash flows from operating activities
Cash utilised by operations was $1,871,000 in Quarter 1-2010 as a result of operating losses in the period and the deferred receipt of part of the income arising on the termination of the Morganite Joint Venture Agreement in accordance with the agreed payment schedule (refer to the section titled 'Revenue' above). Non cash items in the period relate principally to $214,000 of expenditure paid for in Ordinary Shares of the Company.
Cash flows from investing activities
Cash utilised by investing activities was $319,000 arising from the purchase of capital assets totalling $320,000 offset by $1,000 interest received. The Company continues to minimize capital expenditure in order to conserve cash in advance of the full fundraising required to implement the new processing plant at Marropino. Expenditure has been incurred on critical items, and long lead time items which would delay the restart project if they are not placed in a timely manner.
Contractual obligations
As at 31 March 2010 the Group has capital commitments for the balance payable on a crusher and associated equipment (note 2) amounting to approximately $994,000. This reflects the stage of development of the detailed process flow diagrams for the Marropino Mine upgrade project as at 31 March 2010.
The Group has commitments under operating leases for the rental of premises, with $104,000 due in 2010 and $138,000 due in each of 2011 and 2012.
The Group expects that payment of contractual obligations will come from funds generated by operations subsequent to the commissioning of the new processing plant at Marropino, and from current funds and shareholder investment in the period prior to commissioning.
The Group does not have any off-balance sheet liabilities or transactions that are not recorded or disclosed in the financial statements.
Capital Stock
The Company has one class of Ordinary Shares which carry no right to fixed income. Each share carries the right to one vote at the general meetings of the Company.
The Company has authorised share capital of 1,250,000,000 Ordinary Shares of £0.0004 each, of which 234,428,922 are issued at 31 March 2010. As at the date of this report, the Company has in issue 308,729,803 Ordinary Shares of £0.0004 each, an increase of 74,300,881 Ordinary Shares, principally reflecting the increase in issued Ordinary Shares arising from the June and September 2010 fund raisings (note 13.4) and the issue of shares to certain Directors and employees. The Directors have the authority to issue up to 500,000,000 Ordinary Shares.
There are no specific restrictions on the size of a holding of shares nor on the transfer of shares, which are both governed by the general provisions of the Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.
At 31 March 2010, the Company had instruments that could result in the issue of 44,486,120 Ordinary Shares in the form of warrants, share options and bonus shares. Additionally, as at 31 March 2010, the Company was committed to issuing 296,389 Ordinary Shares to Directors for services provided and 407,644 Ordinary Shares as sign on bonuses to certain employees. This obligation is reflected in the 'Shares to be issued' reserve, a component of the Company and Group equity. Details of employee share schemes, other call options and arrangements relating to the issue of Ordinary Shares in the Company are set out in notes 10 and 11.
No person has any special rights of control over the Company's share capital and all issued shares are fully paid.
On 15 March 2007 Highland African Ventures Limited, Kerias Management Trading Limited and Fleming Partners (Liechtenstein) AG (together the 'Connected Shareholders') entered into the 'Relationship Agreement' with the Company governing the exercise by the Connected Shareholders of their rights in relation to the Company following the admission of the Company to AIM. Subsequent to Quarter 1-2010 and as a result of the September 2010 Placing, Subscription and Additional Subscription this relationship has automatically terminated as the combined shareholding of the Connected Shareholders fell below 30% and thus the Connected Shareholders no longer have certain rights and obligations granted or imposed upon them under the Relationship Agreement which included:
·; the right to appoint two Directors, one of which could be appointed as Chairman;
·; the right to withhold consent from the Company for the issuance of new Ordinary Shares;
·; the right to subscribe to any new Ordinary Shares in proportion to the Connected Shareholders' holdings to prevent dilution of the interests of the Connected Shareholders; and
·; the obligation to offer the Company first refusal of any investment opportunity relating to the tantalum and Morganite business carried on by the Group.
Funds raised
The Group did not raise any additional funds from the issue of new Ordinary Shares in the Quarter.
Subsequent to Quarter 1-2010, in June 2010 and September 2010, the Group raised a further $10,249,000 from the issue of new Ordinary Shares.
Funds raised in June 2010
In June 2010 the Group secured $2,158,000 additional shareholder funding through a placing (the 'June 2010 Placing'), a conditional placing (the 'June 2010 Conditional Placing Shares') and an additional conditional placing (the 'June 2010 Additional Conditional Placing') of Ordinary Shares of £0.0004 each in the Company.
June 2010 Placing
The Group completed the private placing of 6,826,450 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £444,000 ($652,000) before expenses. The funds from the June 2010 Placing were received on 11 June 2010.
June 2010 Conditional Placing
The Group secured commitments for the conditional placing of 14,415,723 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £937,000 ($1,403,000) before expenses. The June 2010 Conditional Placing was conditional on the following conditions precedent:
4. the Directors obtaining shareholder approval at the AGM of the Company on 30 June 2010 for the issuance of the June 2010 Conditional Placing Shares;
5. the June 2010 Conditional Placing Shares issued being accepted to trading on AIM; and
6. there being no material adverse change in national or international financial, market, industrial, economic or political conditions, or any other occurrence of any nature which, in the reasonable opinion of the Company's corporate broker would, or would be reasonably likely to have, a material adverse effect on the business of the Company during the period from 8 June 2010 to the Company's AGM on 30 June 2010.
The conditions precedent for the conditional placing were met in full, and the funds from the June 2010 Conditional Placing were received on 2 July 2010.
June 2010 Additional Conditional Placing
During June 2010, the Group secured additional commitments under the same terms as the June 2010 Conditional Placing for 1,053,741 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £68,000 ($103,000) before expenses. The funds from this additional placing were received on 2 July 2010.
Funds raised in September 2010
In September 2010, the Group secured shareholder investment of £5,247,000 (approximately $8,091,000) before expenses from an unconditional placing (the 'September 2010 Placing), a subscription (the 'September 2010 Subscription') and an additional subscription (the 'September 2010 Additional Subscription) totalling 80,323,432 Ordinary Shares in the Company.
On 3 September 2010, the Group completed a placing of 42,021,415 new Ordinary Shares of £0.0004 each (the 'September Placing Shares') and a subscription of 8,442,506 new Ordinary Shares of £0.0004 each (the 'September Subscription Shares') (together the 'New Shares') at a price of £0.065 per New Share, raising a total of £3,280,000, approximately equivalent to $5,058,000. The funds will be used to fund working capital and the initial phased capital purchases required for the process plant upgrade programme (refer to the section of the MD&A titles 'Process plant upgrade'). The New Shares have been subscribed by a combination of new investors and existing shareholders.
In addition to the monies raised through the issue of the New Shares, the Company received an irrevocable commitment from Compagnie Internationale de Participations Bancaires et Financieres SA , ('CIPAF'), a subsidiary of General Mediterranean Holding SA, to subscribe for 29,859,511 new Ordinary Shares of £0.0004 each (the 'Additional Subscription Shares') at a price of 6.587p per share to raise a further £1,967,000, approximately equivalent to $3,033,000 (the 'Additional Subscription'). The Additional Subscription will take the form of three distinct tranches, as laid out below, with the Company receiving the subscription funds for each of the tranches at the time each tranche is subscribed, and the respective Additional Subscription Shares allotted to CIPAF within five working days of the subscription monies being received:
|
|
Number of Additional Subscription Shares
|
Subscription to be received by |
|
Tranche A |
9,953,170 |
30 September 2010 |
|
Tranche B |
9,953,170 |
31 December 2010 |
|
Tranche C |
9,953,171 |
31 March 2011 |
The subscribers for the New Shares and the Additional Subscription Shares will receive warrants to subscribe for one new Ordinary Share of £0.0004 for every two Ordinary Shares subscribed for (the 'September 2010 Warrants'). The September 2010 Warrants have an exercise price of £0.10 and a term ended 2 September 2012.
Proposed transactions
As at the date of this report, no agreements to merge with or acquire another entity have been entered into.
Significant proposed transactions relate solely to the issue of new Ordinary Shares for cash consideration, or raising of debt finance of up to $15,000,000 to fund the Plan, the terms of which have not yet been finalised.
Transactions with related parties
During Quarter 1-2010, consulting services were provided by certain Directors, and / or companies in which they have a beneficial ownership, amounting to $231,000 (year ended 31 December 2009 - $1,035,000; Quarter 1-2009 - $nil). These fees are included in the Condensed Consolidated Statement of Comprehensive Loss as Administrative expenses. Full details are provided in note 12. These transactions were conducted in the normal course of business and were accounted for at the fair value of the transactions, which is the exchange amount in all instances other than those involving share based payments, where the fair value is determined by means of a valuation model (note 11).
Critical accounting estimates
In the application of the Group's accounting policies which are described in note 3 to the Group financial statements for the year ended 31 December 2009, including consideration of the Going concern status of the Company and Group, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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 to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The effect on the financial statements of changes in estimates in future periods could be material.
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in financial statements.
Carrying value of tangible fixed assets
As described more fully in the Group financial statements for the year ended 31 December 2009, the Group impaired all of its tangible operating fixed assets held at 31 December 2009. During Quarter 1-2010, the Group concluded the preliminary design of the new processing plant at the Marropino Mine, with a sufficiently reliable estimate of the capital investment required to modify the plant design, including the construction of a hard rock circuit, in order for the Marropino Mine to be net cash positive after future capital investment. In March 2010, in order to meet the Marropino Mine restart programme, the Group commissioned the construction of a key long lead time item for the hard rock circuit at Marropino. This item, which is reported under assets in the course of construction, is the principal component of the $351,000 property, plant and equipment balance reported at 31 March 2010.
The recoverability of the carrying value of the Property, plant and equipment asset is dependent on the Group's ability to secure shareholder investment to fund the remaining capital investment required at the Marropino Mine, and the ability of the Group to realise forecast budgeted results of operations.
Recoverability of input Value Added Tax
Mozambique Value Added Tax ("IVA"), operates in a similar manner to UK Value Added Tax ("VAT"). The Group is exempt from IVA on its exports from Mozambique under the terms of its Mining License Agreement and Mozambique tax law. The Group is able to recover input sales tax on all purchases within Mozambique. The Group is always therefore in a net recovery position of IVA. Since 2004 and until August 2010, the Group had not succeeded in recovering IVA from the Mozambique Government. The Group has two ongoing IVA recovery claims submitted, and further recoverable IVA due, but not yet claimed back. Due to the significant uncertainty over the recoverability of these IVA balances, the Group provided in full against the assets as at 31 December 2009.
As at 31 March 2010, the Group did not have all of the documentation required by Mozambique Law to recover the IVA. Subsequent to Quarter 1-2010 in Quarter 2-2010 the Group was able to obtain copies of all of the documentation required by Mozambique Law to support the ongoing IVA claims. $502,000 of the ongoing IVA recoverable claims was approved for payment by the Mozambique Tax Authority in August 2010. The remaining $73,000 of the ongoing claims has been withheld, pending the Group providing additional information to support the amounts claimed. As at the date of this report, approximately $198,000 has been received by the Group in August 2010, with the approved balance of the two ongoing claims anticipated during Quarter 3-2010. The Group anticipates that a further $423,000 of the IVA recoverable, once claimed in Quarter 4-2010, will be received by the Group during Quarter 4-2010 and Quarter 1-2011.
In accordance with IAS 10, 'Events after the Reporting Period', the Group has not released the provision against the IVA recoverable assets as at 31 March 2010 as the Group did not have all of the requisite documentation to support the ongoing IVA recoverable claims as at that date. The Group has subsequently released $925,000 of the provision against IVA recoverable assets that are now deemed collectable in full in Quarter 2-2010.
|
|
|
|
|||||
|
|
|
|
3 months ended 31 March 2010 Unaudited
|
|
3 months ended 31 March 2009 Unaudited
|
|
12 months ended 31 December 2009 Audited |
|
|
Note |
|
US$000 |
|
US$000 |
|
US$000 |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Tantalum concentrate |
|
|
- |
|
2,677 |
|
5,394 |
|
Morganite |
|
|
1,000 |
|
- |
|
315 |
|
|
4 |
|
1,000 |
|
2,677 |
|
5,709 |
|
Cost of sales |
|
|
(653) |
|
(3,902) |
|
(8,899) |
|
Gross profit/(loss) |
|
|
347 |
|
(1,225) |
|
(3,190) |
|
|
|
|
|
|
|
|
|
|
Administrative expenses |
|
|
(1,683) |
|
(924) |
|
(7,000) |
|
Impairment of fixed assets |
|
|
- |
|
(195) |
|
(469) |
|
Exploration and evaluation expenses |
|
|
- |
|
- |
|
(3) |
|
Operating loss |
|
|
(1,336) |
|
(2,344) |
|
(10,662) |
|
|
|
|
|
|
|
|
|
|
Net finance expense |
5 |
|
(2) |
|
(73) |
|
(111) |
|
Finance income |
|
|
1 |
|
1 |
|
3 |
|
Finance expense |
|
|
(3) |
|
(74) |
|
(114) |
|
|
|
|
|
|
|
|
|
|
Loss before taxation |
|
|
(1,338) |
|
(2,417) |
|
(10,773) |
|
|
|
|
|
|
|
|
|
|
Taxation |
|
|
- |
|
- |
|
(102) |
|
Loss for the period |
|
|
(1,338) |
|
(2,417) |
|
(10,875) |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
Foreign currency translation loss on foreign operations |
|
|
- |
|
2 |
|
(192) |
|
Total comprehensive loss for the period |
|
|
(1,338) |
|
(2,415) |
|
(11,067) |
|
|
|
|
US cents |
|
US cents |
|
US cents |
|
Basic and diluted loss per share |
|
|
(0.6) |
|
(6.1) |
|
(7.7) |
|
Weighted average number of shares outstanding |
|
|
234,058,060 |
|
39,447,104 |
|
142,151,358 |
All for the year ended 31 December 2009
All results derive from continuing operations. The loss and total comprehensive loss for all periods presented are wholly attributable to equity holders of Noventa Limited.
|
|
|
|
|
31 March 2010 Unaudited |
|
31 March 2009 Unaudited |
|
31 December 2009 Audited |
|
|||||||
|
|
|
Note |
|
US$000 |
|
US$000 |
|
US$000 |
|
|||||||
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|||||||
|
Intangible assets |
|
6 |
|
- |
|
- |
|
- |
|
|||||||
|
Property, plant and equipment |
|
7 |
|
351 |
|
- |
|
40 |
|
|||||||
|
Deferred tax asset |
|
|
|
- |
|
- |
|
- |
|
|||||||
|
|
|
|
|
351 |
|
- |
|
40 |
|
|||||||
|
Current assets |
|
|
|
|
|
|
|
|
|
|||||||
|
Inventories |
|
8 |
|
565 |
|
1,871 |
|
488 |
|
|||||||
|
Trade and other receivables |
|
|
|
776 |
|
1,957 |
|
100 |
|
|||||||
|
Cash and cash equivalents |
|
9 |
|
2,710 |
|
2,398 |
|
5,029 |
|
|||||||
|
|
|
|
|
4,051 |
|
6,226 |
|
5,617 |
|
|||||||
|
Total assets |
|
|
|
4,402 |
|
6,226 |
|
5,657 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Current Liabilities |
|
|
|
|
|
|
|
|
|
|||||||
|
Trade and other payables |
|
|
|
2,083 |
|
2,821 |
|
2,156 |
|
|||||||
|
Current tax liabilities |
|
|
|
219 |
|
- |
|
280 |
|
|||||||
|
Borrowings |
|
|
|
- |
|
28 |
|
- |
|
|||||||
|
Derivative financial liabilities |
|
|
|
- |
|
- |
|
- |
|
|||||||
|
|
|
|
|
2,302 |
|
2,849 |
|
2,436 |
|
|||||||
|
Net current assets |
|
|
|
1,749 |
|
3,377 |
|
3,181 |
|
|||||||
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|||||||
|
Long-term provisions |
|
|
|
260 |
|
249 |
|
258 |
|
|||||||
|
|
|
|
|
260 |
|
249 |
|
258 |
|
|||||||
|
Total liabilities |
|
|
|
2,562 |
|
3,098 |
|
2,694 |
||||||||
|
Net assets |
|
|
|
1,840 |
|
3,128 |
|
2,963 |
||||||||
|
Equity |
|
|
|
|
|
|
|
|
||||||||
|
Share capital |
|
10 |
|
157 |
|
32 |
|
156 |
|
|||||||
|
Share premium |
|
|
|
54,458 |
|
43,066 |
|
54,335 |
|
|||||||
|
Shares to be issued reserve |
|
10 |
|
75 |
|
- |
|
76 |
|
|||||||
|
Convertible loan note reserve |
|
|
|
- |
|
4,976 |
|
- |
|
|||||||
|
Merger reserve |
|
|
|
8,858 |
|
8,858 |
|
8,858 |
|
|||||||
|
Translation reserve |
|
|
|
22 |
|
216 |
|
22 |
|
|||||||
|
Accumulated losses |
|
|
|
(61,730) |
|
(54,020) |
|
(60,484) |
|
|||||||
|
Equity attributable to equity holders of the parent |
|
|
|
1,840 |
|
3,128 |
|
2,963 |
|
|||||||
Approved by the Board of Directors on 12 September 2010 and signed on behalf of the Board of Directors:
|
P Lawless Chief Executive Officer |
|
T J Griffiths Chairman of the Audit Committee |
|
CONSOLIDATED CASH FLOW STATEMENT FOR THE 3 MONTHS ENDED 31 MARCH 2010
|
|
|
|
3 months ended 31 March 2010 Unaudited
|
|
3 months ended 31 March 2009 Unaudited
|
|
12 months ended 31 December 2009 Audited |
|
|
|
Note |
|
US$000 |
|
US$000 |
|
US$000 |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Loss for the period |
|
|
|
(1,338) |
|
(2,417) |
|
(10,875) |
|
Adjustments for: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
8 |
|
- |
|
- |
|
Impairment of property, plant and equipment |
|
7 |
|
- |
|
195 |
|
469 |
|
Share based payment expense |
|
11 |
|
214 |
|
53 |
|
2,236 |
|
Foreign exchange (profit) / loss |
|
|
|
(52) |
|
- |
|
(115) |
|
Finance expense |
|
5 |
|
3 |
|
74 |
|
114 |
|
Finance income |
|
5 |
|
(1) |
|
(1) |
|
(3) |
|
Taxation |
|
|
|
- |
|
- |
|
102 |
|
Operating cash out flow before changes in working capital and provisions |
|
|
|
(1,166) |
|
(2,096) |
|
(8,072) |
|
|
|
|
|
|
|
|
|
|
|
(Increase) / decrease in trade and other receivables |
|
|
|
(676) |
|
(1,093) |
|
767 |
|
(Increase) / decrease in inventories |
|
|
|
(13) |
|
1,436 |
|
2,822 |
|
Decrease in trade and other payables |
|
|
|
(16) |
|
(1,080) |
|
(1,653) |
|
Net cash used in operating activities |
|
|
|
(1,871) |
|
(2,833) |
|
(6,136) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
Interest received |
|
|
|
1 |
|
1 |
|
3 |
|
Acquisition of property, plant and equipment |
|
|
|
(320) |
|
(195) |
|
(509) |
|
Net cash used in investing activities |
|
|
|
(319) |
|
(194) |
|
(506) |
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
|
|
Proceeds from issue of new shares |
|
|
|
- |
|
- |
|
6,470 |
|
Share issue expenses |
|
|
|
- |
|
- |
|
(809) |
|
Proceeds from issue of convertible loan notes |
|
|
|
- |
|
3,000 |
|
3,632 |
|
Convertible loan note issue expenses |
|
|
|
- |
|
(11) |
|
(41) |
|
Repayment of borrowings |
|
|
|
- |
|
(30) |
|
(59) |
|
Interest paid |
|
|
|
- |
|
(70) |
|
(71) |
|
Net cash inflow from financing activities |
|
|
|
- |
|
2,889 |
|
9,122 |
|
Net (decrease) / increase in cash and cash equivalents |
|
|
|
(2,190) |
|
(138) |
|
2,480 |
|
Effect of exchange rates on cash and cash equivalents |
|
|
|
(129) |
|
(4) |
|
9 |
|
Cash and cash equivalents at beginning of period |
|
9 |
|
5,029 |
|
2,540 |
|
2,540 |
|
Cash and cash equivalents at end of period |
|
9 |
|
2,710 |
|
2,398 |
|
5,029 |
1. Basis of preparation
The condensed consolidated financial statements of the Group for the three months ended 31 March 2010, which are unaudited and have not been reviewed by the Company's auditor, have been prepared in accordance with the International Financial Reporting Standards ('IFRS') accounting policies adopted by the Group and set out in the annual report for the year ended 31 December 2009. The Group does not anticipate any change in these accounting policies for the year ended 31 December 2010. This Quarter 1-2010 report has been voluntarily prepared in anticipation of the Company's proposed listing on The Toronto Stock Exchange - these condensed consolidated financial statements have been prepared to comply with applicable Canadian legal requirements. In preparing this report, the Group has adopted the guidance in the AIM rules of the London Stock Exchange (the 'AIM Rules') for interim accounts which do not require that the interim condensed financial statements are prepared in accordance with IAS 34, 'Interim financial reporting'. While the financial figures included in this report have been computed in accordance with IFRSs applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as that term is defined in IFRSs.
The financial information contained in this report also does not constitute statutory accounts under the Companies (Jersey) Law 1991, as amended. The financial information for the year ended 31 December 2009 is based on the statutory accounts for the year ended 31 December 2009. The auditors reported on those accounts: their report, while unqualified, included an emphasis of matter regarding the Group's and Company's ability to continue as a going concern. Readers are referred to the auditors report to the Group financial statements as at 31 December 2009 (which is available at www.noventa.net), and the section titled Going Concern in the Management Discussion and Analysis section of this report.
These condensed consolidated financial statements for Quarter 1-2010 have been prepared in accordance with the IFRS principles applicable to a going concern, which contemplate the realisation of assets and liquidation of liabilities during the normal course of operations. The conditions and risks noted in the section titled Going Concern in the Management Discussion and Analysis section of this report cast significant doubt on the validity of that assumption. Having carried out a going concern review in preparing these condensed consolidated financial statements for Quarter 1-2010, the Directors have concluded that there is a reasonable basis to adopt the going concern principle, but acknowledge that there is a material uncertainty over the ability of the Group and Company to remain a going concern, and therefore to discharge its liabilities in the normal course of business.
2. Critical accounting judgments and key sources of estimation uncertainty
In the application of the Group's accounting policies which are described in note 3 to the Group financial statements for the year ended 31 December 2009, including consideration of the Going Concern status of the Company and Group, the Directors are required to make judgements, estimates and assumptions about the carrying amounts 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 to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision, and future periods if the revision affects both current and future periods. The effect on the financial statements of changes in estimates in future periods could be material.
2.1 Critical judgements in applying the Group's accounting policies
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements.
2.1.1 Carrying value of tangible fixed assets
As described more fully in the Group financial statements for the year ended 31 December 2009, the Group impaired all of its tangible operating fixed assets held at 31 December 2009. During Quarter 1-2010, the Group concluded the preliminary design of the new processing plant at the Marropino Mine, with a sufficiently reliable estimate of the capital investment required to modify the plant design, including the construction of a hard rock circuit, in order for the Marropino Mine to be net cash positive after future capital investment. In March 2010, in order to meet the Marropino Mine restart programme, the Group commissioned the construction of a key long lead time item for the hard rock circuit at Marropino. This item, which is reported under Assets in the course of construction, is the principal component of the $351,000 Property, plant and equipment balance reported at 31 March 2010.
The recoverability of the carrying value of the Property, plant and equipment asset is dependent on the Group's ability to secure additional shareholder investment to fund the remaining capital investment required at the Marropino Mine, and the ability of the Group to realise forecast budgeted results of operations.
2.1.2 Recoverability of input Value Added Tax
Mozambique Value Added Tax ("IVA"), operates in a similar manner to UK Value Added Tax ("VAT"). The Group is exempt from IVA on its exports from Mozambique under the terms of its Mining License Agreement and Mozambique tax law. The Group is able to recover input sales tax on all purchases within Mozambique. The Group is always therefore in a net recovery position of IVA. Since 2004 and until August 2010, the Group had not succeeded in recovering IVA from the Mozambique Government. The Group has two ongoing IVA recovery claims submitted, and further recoverable IVA due, but not yet claimed back. Due to the significant uncertainty over the recoverability of these IVA balances, the Group provided in full against the assets as at 31 December 2009.
As at 31 March 2010, the Group did not have all of the documentation required by Mozambique Law to recover the IVA. Subsequent to Quarter 1-2010 during Quarter 2-2010 the Group was able to obtain copies of all of the documentation required by Mozambique Law to support the ongoing IVA claims. $502,000 of the ongoing IVA recoverable claims was approved for payment by the Mozambique Tax Authority in August 2010. The remaining $73,000 of the ongoing claims has been withheld, pending the Group providing additional information to support the amounts claimed. As at the date of this report, approximately $198,000 has been received by the Group in August 2010, with the approved balance of the two ongoing claims anticipated during Quarter 3-2010. The Group anticipates that a further $423,000 of the IVA recoverable, once claimed in Quarter 4-2010, will be received by the Group during Quarter 4-2010 and Quarter 1-2011.
In accordance with IAS 10, 'Events after the Reporting Period', the Group has not released the provision against the IVA recoverable assets as at 31 March 2010 as the Group did not have all of the requisite documentation to support the ongoing IVA recoverable claims as at that date. The Group has subsequently released $925,000 of the provision against IVA recoverable assets that are now deemed collectable in full in Quarter 2-2010.
3. Segment Information
The Directors consider that the primary reporting format is by business segment. The Directors consider there to only be one business segment, being the mining, extraction and production of tantalum concentrate, currently undertaken solely from the Marropino Mine in Mozambique. Morganite production is incidental to this principal activity and arises as a by-product of the tantalum concentrate production. All administrative expenditure is allocated to this sole segment.
The Group is currently in the process of restarting the Marropino Mine, and developing an appropriate internal reporting structure, including a revision of the key performance indicators "KPIs". Currently, the Chief Executive Officer monitors the performance of the business on the basis of current and forecast cash balances and cash utilisation and operational performance indicators (including recovery rates, plant and mobile fleet availability). Segment information provided on the basis of the information previously presented to the Chief Executive Officer is not considered meaningful and is not presented.
No geographical analysis of the results by region is reported due to the dominance of the Group's operations in Southern Africa (The Republic of South Africa and The Republic of Mozambique) relative to those in Jersey (Channel Islands) other than for 'Cash and cash equivalents'. 'Cash and cash equivalents' balances are predominantly maintained in Jersey (note 9).
4. Revenue
An analysis of the Group's revenue is as follows:
|
|
|
3 months ended 31 March 2010 Unaudited US$000 |
|
3 months ended 31 March 2009 Unaudited US$000 |
|
12 months ended 31 December 2009 Audited US$000 |
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
Sales of goods: |
|
|
|
|
|
|
|
Tantalum concentrate |
|
- |
|
2,677 |
|
5,394 |
|
Morganite |
|
1,000 |
|
- |
|
315 |
|
|
|
|
|
|
|
|
|
|
|
1,000 |
|
2,677 |
|
5,709 |
|
Finance income |
|
1 |
|
1 |
|
3 |
|
|
|
|
|
|
|
|
|
|
|
1,001 |
|
2,678 |
|
5,712 |
On 9 February 2010, the Group reached agreement with LJ International Limited for the sale of consignment stock held by Goldleaves Trading Limited and Miranda Gems (HK) under the Morganite Joint Venture Agreement between the Group, and these parties. The Morganite Joint Venture Agreement has been terminated, with payment due to the Group of $1,000,000. In accordance with this agreement, $300,000 was received in February 2010, $200,000 in March 2010, and $100,000 per month thereafter. As at the date of this report, the total amount due under the settlement of $1,000,000 has been received.
5. Net finance expense
|
|
|
3 months ended 31 March 2010 Unaudited US$000 |
|
3 months ended 31 March 2009 Unaudited US$000 |
|
12 months ended 31 December 2009 Audited US$000 |
|
|
|
|
|
|
|
|
|
Interest income on bank deposits |
|
1 |
|
1 |
|
3 |
|
Finance income |
|
1 |
|
1 |
|
3 |
|
|
|
|
|
|
|
|
|
Interest expense on trade finance loans |
|
- |
|
(71) |
|
(71) |
|
Issue expenses of convertible loan notes |
|
- |
|
- |
|
(30) |
|
Discount unwind on environmental provision |
|
(3) |
|
(3) |
|
(13) |
|
Finance expense |
|
(3) |
|
(74) |
|
(114) |
|
Net finance expense |
|
(2) |
|
(73) |
|
(111) |
6. Intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited 31 March 2010, 31 March 2009, Audited 31 December 2009 |
||||
|
|
|
Cost |
|
Accumulated amortisation and impairment |
|
Net book value |
|
|
|
|
|
|
|
|
|
|
Mining rights |
2,798 |
|
(2,798) |
|
- |
|
|
Marropino |
150 |
|
(150) |
|
- |
|
|
|
|
|
|
|
|
|
|
|
2,948 |
|
(2,948) |
|
- |
The Group's intangible assets relate principally to an acquired mining concession in the Zambezia Province of Mozambique. While the Group has full title to the mining concession, as at all reporting dates, the development of the mining concession is uncertain. Once further geological, metallurgical and engineering studies have been completed, and if a viable resource is determined, development will need to be funded through either external funding (shareholder investment or loan arrangements) or through positive cash flows from operations. The timing of any development in this mining concession is therefore uncertain. Due to these factors, there is a significant level of estimation uncertainty regarding the carrying value of the intangible assets and the intangible assets have therefore been impaired in full. The remaining life of the estimated reserves in the principal concession amounts to 10 years.
6. Property, plant and equipment
|
|
At 31 March 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited at 31 March 2010 |
||||
|
|
|
Cost $'000 |
|
Accumulated depreciation and impairment $'000 |
|
Net book value $'000 |
|
|
|
|
|
|
|
|
|
|
Assets under construction |
666 |
|
(484) |
|
182 |
|
|
Mining assets |
14,310 |
|
(14,219) |
|
91 |
|
|
Office furniture, equipment and computers |
467 |
|
(389) |
|
78 |
|
|
Buildings |
1,628 |
|
(1,628) |
|
- |
|
|
|
17,071 |
|
(16,720) |
|
351 |
|
|
At 31 March 2009 |
Unaudited at 31 March 2009 |
||||
|
|
|
Cost $'000 |
|
Accumulated depreciation and impairment $'000 |
|
Net book value $'000 |
|
|
|
|
|
|
|
|
|
|
Assets under construction |
503 |
|
(503) |
|
- |
|
|
Mining assets |
14,197 |
|
(14,197) |
|
- |
|
|
Office furniture, equipment and computers |
419 |
|
(419) |
|
- |
|
|
Buildings |
1,625 |
|
(1,625) |
|
- |
|
|
|
16,744 |
|
(16,744) |
|
- |
|
|
At 31 December 2009 |
Audited at 31 December 2009 |
||||
|
|
|
Cost $'000 |
|
Accumulated depreciation and impairment $'000 |
|
Net book value $'000 |
|
|
|
|
|
|
|
|
|
|
Assets under construction |
484 |
|
(484) |
|
- |
|
|
Mining assets |
14,217 |
|
(14,217) |
|
- |
|
|
Office furniture, equipment and computers |
423 |
|
(383) |
|
40 |
|
|
Buildings |
1,628 |
|
(1,628) |
|
- |
|
|
|
16,752 |
|
(16,712) |
|
40 |
The Group impaired all of its operating tangible fixed assets as at 1 January 2009 and 31 December 2009, reflecting the uncertainty over the future profitability of the Marropino Mine due to the lack of available funding for the Group to successfully install a comminution circuit at Marropino. The net book value at 31 March 2010 principally reflects the initial equipment for the Marropino comminution circuit (note 2.1).
If the Group is successful in implementing its plans and making the Marropino Mine a profitable operation, the Directors anticipate that a portion of the impairment will be written back in future periods.
|
|
8. Inventories
|
|
|
|
31 March 2010 Unaudited US$000
|
|
31 March 2009 Unaudited US$000 |
|
31 December 2009 Audited US$000 |
|
|
Consumables |
|
153 |
|
90 |
|
55 |
|
|
Spare parts |
|
408 |
|
- |
|
429 |
|
|
Work-in-progress |
|
4 |
|
4 |
|
4 |
|
|
Finished goods |
|
- |
|
1,777 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
565 |
|
1,871 |
|
488 |
9. Financial instruments
Details of the capital risk management policy of the Group are provided in note 10.
This note provides further information on the financial instruments of the Group including the risks associated to these instruments and the Group financial risk management policies to address these risks.
9.1 Significant accounting policies and classification of financial instruments
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3 to the Group financial statements for the year ended 31 December 2009.
9.2 Financial risk management objectives
The Group actively manages the risks arising from its operations, and financial instruments at Board level. The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework and to ensure that the Group has adequate policies, procedures and controls to manage successfully the financial risks that the Group faces.
While the Group does not have a written policy relating to risk management of the risks arising from any financial instruments held, the close involvement of the Board of Directors in the day to day operations of the Group ensures that risks are monitored and controlled in an appropriate manner for the size and complexity of the Group. Financial instruments are not traded, nor are speculative positions taken. The principal risks that the Group faces with an impact on financial instruments are summarised below. Further details by class of financial instrument are described later in this note.
The Group's key financial market risks arise from changes in foreign exchange rates ('currency risk'). The Group is also exposed to credit risk.
Currency risk
The Group is exposed to foreign currency exchange risk mainly in relation to the US Dollar, to South African Rand, Mozambique Metical and Great British Pound. The potential currency exposures are:
·; Transactional exposure in respect of:
§ operating costs, capital expenditures and, to a lesser extent, sales incurred in currencies other than the functional currency of operations;
§ certain exchange control restrictions which require funds to be maintained in currencies other than the functional currency of operations; and
§ financial assets and liabilities denominated in currencies other than the functional currency of Group companies, such as bank balances held in currencies other than US$, and trade payables denominated in national currency in Mozambique and South Africa.
·; Translational exposures in respect of investments in overseas operations which have functional currencies other than US Dollars.
The Group's policy is to minimise transactional exposure through maintaining detailed forecast cash flows by principal currency in which cash inflows and outflows are made, allowing the Group to retain funds in the relevant currencies to create natural hedges against exchange fluctuations.
Credit risk
The Group principally has exposure to credit risk on its bank balances and trade receivables. This risk is managed through the selection of bank counterparties based on the financial security of the counterparty, credit assessment of customers and contractual terms and conditions and monitoring.
Interest rate risk
The Group is, to a limited extent, exposed to interest rate risk which arises principally from the Group's bank and cash balances.
Liquidity risk
The Group has limited liquidity risk as at 31 March 2010 due to the bank and cash balances held exceeding the amounts due to third parties of the Group, and the ability of the Group to defer payments to certain creditors pending delivery of items of equipment. Details of the liquidity position of the Group as at the date of these financial statements is provided in the section titled 'Going concern' of the Management Discussions and Analysis section of this report.
9.3 Classes of financial assets and liabilities
The Group analyses its financial instruments into the following classes based on the differing risks to which the instruments expose the Group:
|
|
Book Value 31 March 2010
|
Book Value 31 March 2009
|
Book Value 31 December 2009
|
Fair Value 31 March 2010
|
Fair Value 31 March 2009
|
Fair Value 31 December 2009
|
|
|
Unaudited US$000 |
Unaudited US$000 |
Audited US$000 |
Unaudited US$000 |
Unaudited US$000 |
Audited US$000 |
|
|
|
|
|
|
|
|
|
Short term operating assets |
572 |
1,596 |
12 |
572 |
1,596 |
12 |
|
Bank balances and cash in hand |
2,710 |
2,398 |
5,029 |
2,710 |
2,398 |
5,029 |
|
|
|
|
|
|
|
|
|
Total financial assets |
3,282 |
3,994 |
5,041 |
3,282 |
3,994 |
5,041 |
|
|
|
|
|
|
|
|
|
Short term operating liabilities |
2,075 |
2,832 |
2,156 |
2,075 |
2,832 |
2,156 |
|
Warrants |
- |
- |
- |
- |
- |
- |
|
|
|
|
|
|
|
|
|
Total financial liabilities |
2,075 |
2,832 |
2,156 |
2,075 |
2,832 |
2,156 |
Fair value
The assumptions used by the Group to estimate the fair values of financial instruments are summarised below:
(iv) For 'Short term operating assets' and 'Short term operating liabilities' the fair value approximates to book value because of the short maturities of these assets and liabilities.
(v) For 'Bank balances and cash in hand', the fair value has been determined to approximate book value. The Group has no fixed rate deposits.
(vi) For warrants the fair value has been calculated using a Black Scholes valuation model due to the short term of the derivative instruments (18 months). The warrants are carried at fair value and accordingly the book value and the fair value of the warrants is the same.
Short term operating assets
These assets are principally subject to credit risk. The balance at 31 March 2010 principally comprises trade receivables from the sale of Morganite in the period (see note 4) (the balance at 31 December 2010 principally comprises recoverable input VAT in South Africa; the balance at 31 March 2009 principally comprises amounts due from the sale of tantalum concentrate). Credit risk arises due to changes in the credit rating of the counterparty. The Group's credit risk is reduced as it only transacts with a small number of counterparties who have a sound credit rating. The Group's exposure to credit risk is further controlled by reviewing its credit exposure to counterparties at regular intervals.
The maximum exposure at 31 March 2010 was $572,000 (31 December 2009 - $12,000; 31 March 2009 - $1,596,000).
No amounts included in 'Short term operating assets' are past due and not impaired at 31 March 2010, 31 December 2009 or 31 March 2009. The Group does not hold any security against the receivables in 'Short term operating assets'.
Included in the 'Short term operating assets' are receivables which have been fully provided against. Movements in the allowance account against 'Short term operating assets', which principally relates to the input IVA recoverable in Mozambique (see note 3 and 13) is as follows:
|
|
US$000 |
|
At 1 January 2009 (audited) |
1,001 |
|
Increase in allowance |
66 |
|
At 31 March 2009 (unaudited) |
1,067 |
|
Increase in allowance |
597 |
|
At 31 December 2009 (audited) |
1,664 |
|
Decrease in allowance |
(164) |
|
At 31 March 2010 (unaudited) |
1,500 |
The increase in the allowance account during 2009 reflects the increase in the underlying input IVA balance recorded by the Group. The decrease in the allowance account in Quarter 1-2010 reflects the effect of the devaluation of the Mozambique Metical on the IVA recoverable balance, offset by an increase in input IVA. The allowance has been partially released in Quarter 2-2010 - refer to note 2 and 13.
Bank balances and cash in hand
All amounts are carried at amortised cost, and, other than cash in hand, are interest bearing assets, with interest rates arranged with counterparty financial institutions based on commercial negotiations, reflecting the term, currency and amount of each deposit. Due to the short term cash requirements of the Group in the turnaround phase, as at 31 March 2010 interest rates are mainly nominal rates on current account bank balances.
The principal risk arising for 'Bank balances and cash in hand' is credit risk in terms of counterparty default. In the current economic climate, the Group actively manages this risk through the monitoring of the credit status of the counterparty financial institutions. As at the balance sheet date the Group's assets in 'Bank balances and cash in hand' are principally held with the following banks, which are all high quality financial institutions:
|
|
Location of funds |
31 March 2010 Unaudited US$000 |
31 March 2009 Unaudited US$000 |
31 December 2009 Audited US$000 |
|
|
|
|
|
|
|
Deutsche Bank |
Jersey |
2,349 |
1,658 |
4,782 |
|
Standard Bank |
Mozambique |
210 |
480 |
150 |
|
First National Bank |
South Africa |
139 |
250 |
88 |
|
Other |
|
12 |
10 |
9 |
|
|
|
|
|
|
|
|
|
2,710 |
2,398 |
5,029 |
The maximum amount subject to credit risk is the total book value.
'Bank balances and cash in hand' is also subject to the risk of changes in foreign currency exchange rates. As at 31 March 2010, the assets in 'Bank balances and cash in hand' were carried in the following currencies:
|
|
|
|
||||
|
|
31 March 2010 Unaudited US$000 |
31 March 2009 Unaudited US$000 |
31 December 2009 Audited US$000 |
|
||
|
|
|
|
|
|
||
|
US Dollar |
1,673 |
1,963 |
690 |
|
||
|
£ Sterling |
676 |
156 |
4,190 |
|
||
|
Rand South Africa |
211 |
251 |
89 |
|
||
|
Mozambique Metical |
150 |
27 |
59 |
|
||
|
Other |
- |
1 |
1 |
|
||
|
|
|
|
|
|
||
|
|
2,710 |
2,398 |
5,029 |
|
||
The impact of changes in foreign currency exchange rates on the carrying value of 'Bank balances and cash in hand' is shown along with all other financial instruments, in the foreign currency sensitivity analysis below.
Short term operating liabilities
'Short term operating liabilities' represents trade, and other payables arising in the normal course of business. No interest is chargeable on any of the items included in 'Short term operating liabilities', as long as the Group adheres to the agreed payment terms with each supplier.
The principal risks associated with 'Short term operating liabilities' are liquidity risk and the risk of changes in foreign currency exchange rates. The impact of these risks is shown below in the sections respectively on liquidity risk and foreign currency sensitivity analysis along with all other financial instruments of the Group.
Warrants
'Warrants' contains warrants issued by the Company which are classified as derivative financial liabilities as the warrants are issued in a currency other than the functional currency of the Company. The warrants have nil value as at 31 March 2010 and 31 December 2009. The warrants do not create any obligation on the Company other than to deliver shares in the Company for a fixed price (18p per share), at the option of the holder, for 18 months from the date of issuance in September 2009. 'Warrants' does not therefore expose the Company or Group to any risks as at the balance sheet date.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group raises funds as and when required on the basis of forecast expenditure and inflows. When funding is required, the Group balances the costs and benefits of equity and debt financing. When funds are received they are deposited with banks of high standing in order to obtain competitive market interest rates.
Due to the operations of the Group being in turnaround, and the specific requirement to bring the Marropino Mine back into operation, the liquidity as at 31 March 2010 is not representative of the planned ongoing liquidity of the Group. The Going Concern section of the Management Discussion & Analysis section of this report provides further information on the planned future liquidity and the Going Concern basis of the Group.
Foreign currency sensitivity analysis
The Group's foreign currency assets and liabilities are exposed to foreign currency transaction risk.
The following are the exchange rates with United States Dollars of the significant foreign currency assets and liabilities as at each period end:
|
|
31 March 2010 |
31 March 2009 |
31 December 2009 |
|
|
|
|
Unaudited 1 US$ = |
Unaudited 1 US$ = |
Audited 1 US$ = |
|
|
|
|
|
|
|
|
|
|
£ Sterling |
0.66 |
0.70 |
0.63 |
|
|
|
South African Rand |
7.39 |
9.72 |
7.42 |
|
|
|
Mozambique Metical |
31.8 |
26.8 |
27.5 |
|
|
The table below illustrates the hypothetical sensitivity of the Group's reported profit and equity to a 10% increase and decrease in the United States Dollar exchange rate to £ Sterling, South African Rand and Mozambique Metical at the period-end assuming that all other variables remain unchanged. 10% represents the Directors assessment of a reasonably possible change in the relevant exchange rates. A positive number below indicates an increase in profit and equity.
|
|
Income statement
|
Equity
|
|
|||
|
|
31 March
2010
|
31 March 2009
|
31 December 2009
|
31 March
2010
|
31
March 2009
|
31 December 2009
|
|
|
Unaudited
US$000
|
Unaudited
US$000
|
Audited
US$000
|
Unaudited
US$000
|
Unaudited
US$000
|
Audited
US$000
|
|
|
|
|
|
|
|
|
|
US$ strengthens by 10%
|
75
|
(179)
|
(225)
|
75
|
(179)
|
(225)
|
|
|
|
|
|
|
|
|
|
US$ weakens by 10%
|
(75)
|
179
|
225
|
(75)
|
179
|
225
|
The Group publishes its consolidated financial statements in United States Dollars and, as a result, is also subject to foreign currency exchange translation risk in respect of the translation of the results and underlying net assets of its non United States Dollars functional currency entities into United States Dollars. The impact of translation risk is not quantified in the table above.
10. Share capital, Call options over equity and Capital risk management
10.1 Share capital
|
|
31 March 2010 Unaudited |
|
31 March 2009 Unaudited |
|
31 December 2009 Audited |
|
|||||
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|||||
|
Share capital |
|
£ |
|
£ |
|
£ |
|
||||
|
Authorised |
|
|
|
|
|
|
|
||||
|
1,250,000,000 (31 December 2009 - 125,000,000; 31 March 2009 - 125,000,000) Ordinary Shares of £0.0004 each |
|
500,000 |
|
50,000 |
|
500,000 |
|
||||
|
|
|
US$000 |
|
US$000 |
|
US$000 |
|
||||
|
Allotted, called up and fully paid |
|
|
|
|
|
|
|
||||
|
234,428,922 (31 December 2009 - 232,734,868; 31 March 2009 - 39,447,104) Ordinary Shares of £0.0004 each |
|
157 |
|
32 |
|
156 |
|
||||
|
|
|
|
|
|
|
||||||
The Company has one class of Ordinary Shares. The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Shares issued
During Quarter 1-2010, 1,694,054 Ordinary Shares were issued at an average issue price of £0.046 each as joining bonuses for staff, or contractual fees due for Directors' Services for Quarter 4 2009. The amounts due for Directors Services in Quarter 4-2009 were reported within the Shares to be issued reserve as at 31 December 2009.
Details of Ordinary Shares issued subsequent to 31 March 2010 are provided in note 13.
During the year ended 31 December 2009, 102,272,832 Ordinary Shares were issued at £0.04 for cash consideration at a premium of £0.0396 per share. A further 76,499,388 Ordinary Shares were issued at £0.04 upon conversion of the $5,000,000 Existing Loan Notes (refer to note 24 of the 31 December 2009 financial statements) and 10,000,000 were issued at £0.04 upon conversion of the £400,000 Loan Notes (refer to note 24 of the 31 December 2009 financial statements). In addition, the Company issued 4,515,544 Ordinary Shares in lieu of services rendered, of which 1,000,000 were issued at £0.04, 3,000,000 as a bonus issue and 531,311 at the average of the previous 30 days mid-market price prior to allotment, ranging between £0.0411 and £0.0595.
S (continued)
The Company issued 3,456,836 call options over Ordinary Shares in the Company during Quarter 1-2010 (year ended 31 December 2009 - 40,695,974; Quarter 1-2009 - 3,345,008). See note 11.
Shares to be issued reserve
At the period end, the Group had obligations to deliver shares to Directors in consideration for services received of $35,000 (31 December 2010 - $76,000; 31 March 2010 - $nil), and obligations to deliver shares to employees as sign on bonuses of $40,000 (31 December 2010; 31 March 2010 - $nil). These shares were issued in July 2010. The compensation expense for the services received has been included in the consolidated statement of comprehensive loss for the relevant period, with the related liability at the period end recognised in the 'Shares to be issued' reserve.
10.2 Call options over equity
The following table summarises the principal terms of options, bonus shares and warrants outstanding at 31 March 2010 which could result in the issuance of Ordinary Shares in the Company:
|
|
Outstanding at 31 March 2010 |
Exercisable at period end |
Weighted average exercise price |
Expiry date |
Comments |
|
Options issued by employee share options plans in 2007 |
1,042,057 |
1,027,438 |
£0.0004 |
2017 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share options plans in 2008 |
297,000 |
123,600 |
£1.15 |
2018 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share option plans in 2009 - 1 |
2,339,261 |
1,639,256 |
£0.16 |
2019 |
Includes performance conditions that are not expected to be met over the option vesting period for non vested options.
|
|
Options issued by employee share option plans in 2009 - 2
|
6,890,000 |
890,000 |
£0.04 |
2019 |
None |
|
Options issued outside of the share option plans - 2009
|
2,000,000 |
2,000,000 |
£0.04 |
2016 |
None |
|
Warrants 2009 -1 |
11,585,966 |
- |
£0.04 |
2016 |
Share price to reach 25p on a 30 day moving average for the warrants to be exercised.
|
|
Warrants 2009 -2
|
1,500,000 |
1,500,000 |
£0.04 |
2016 |
None |
|
Warrants 2009 - 3
|
9,375,000 |
9,375,000 |
£0.18 |
2011 |
None |
|
Bonus shares 2009 - 1 |
3,000,000 |
- |
£0.04 |
No expiry |
Share price to reach 10p on a 30 day moving average for the bonus shares to vest.
|
|
Bonus shares 2009 - 2 |
3,000,000 |
- |
£0.04 |
No expiry |
Share price to reach 15p on a 30 day moving average for the bonus shares to vest.
|
|
Options issued by employee share option plans in 2010
|
2,000,000 |
- |
£0.04 |
2019 |
None |
|
Options issued outside of the share option plans - 2010
|
1,456,836 |
1,456,836 |
£0.05 |
2017 |
None |
|
|
44,486,120 |
18,012,130 |
|
|
|
10.3 Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the return to stakeholders. The Directors consider that the capital structure of the Group consists of equity attributable to equity holders of the parent, comprising issued capital and reserves net of retained losses, as disclosed in the equity section of the Consolidated statement of financial position.
The Group's Board of Directors reviews the capital structure regularly as part of the annual review of the Group structure and more regularly when funding is required. As part of the review, the Board of Directors considers the cost of capital and the risks associated with each class of capital.
11. Share based payments
A summary of all options, warrants and other call options over Ordinary Shares in the Company is provided in note 10.
11.1 Equity-settled share options and warrants
The Company has a share option scheme for all employees of the Group - the Noventa Unapproved Share Option Scheme (the 'Share Plan'). Options are granted annually to employees and certain Directors and are exercisable at a price equal to the average quoted market price of the Company's shares on the 30 days preceding the date of grant. Generally the options are granted annually with vesting over one, two, three and four years, subject to certain production related performance criteria being met, and the employee remaining in continued employment with the Group. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the employee leaves the Group before the options vest, unless certain conditions apply. On the retrenchment of staff, options vest in full immediately. This was applicable in the year ended 31 December 2009 when the Marropino Mine was placed in care and maintenance.
The Group also issues options under the terms of the Share Plan which do not have performance conditions, and have either no service period or a one or two year service period. These options are granted to Directors and key management.
Further options and warrants over Ordinary Shares in the Company are issued to Directors and certain service providers. These options are not granted under the terms of the Share Plan.
11.2 Three month period ended 31 March 2010
Charge in the period
The total charge recorded in the income statement for share based payments in Quarter 1-2010 was $214,000. Of this amount, $123,000 arises on shares issued to Directors as contractual Directors' fees, or employee sign on bonuses. The number of Ordinary Shares issued in payment of Directors' fees and sign on bonuses is determined based on the contractual amounts due, and relevant market prices for the Company's Ordinary Shares. The compensation expense recorded is therefore the contractual amount due.
$91,000 of the charge arises from the issuance of share options to certain employees and Directors of the Group, under the Noventa Unapproved Share Option Scheme, or through options outside of the Noventa Unapproved Share Option Scheme.
Employee share option plans
The number of options in the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust are as follows:
|
|
|
Number of options |
|
Weighted average exercise price |
|
At 1 January 2010 |
|
10,731,548 |
|
£0.20 |
|
Granted during the period |
|
2,000,000 |
|
£0.04 |
|
Terminated during the period |
|
(163,230) |
|
£0.36 |
|
At 31 March 2010 |
|
12,568,318 |
|
£0.17 |
|
|
The following options have been issued by the Share Plan in Quarter 1-2010:
|
|
|
Number |
Grant date |
Expiry date |
Exercise price |
Fair value at grant date |
|
1.3 |
|
|
|
|
|
|
|
|
Share Plan - issue 6 |
2,000,000 |
1 January 2010 |
31 December 2019 |
£0.040 |
$0.045 |
During Quarter 1-2010, no options became exercisable and no share options were exercised under the Share Plan or the EBT.
The weighted average fair value of options granted during Quarter 1-2010 by the Share Plan was $0.045. No options were granted by the Noventa EBT during the period. The fair value of the options granted has been recognised in accordance with the respective vesting periods applicable to the options. The options were priced using the Black-Scholes model. Where relevant, the expected life used in the model has been adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Expected volatility has been based on the historical volatility of the Company's shares price. The charge to the income statement for Quarter 1-2010 for the unapproved share option plan and the EBT was $37,000
The aggregate estimated fair value of all options granted under the Share Plan in the period is $91,000.
The fair value of options granted by the Share Plan has been determined using a Black Scholes valuation model with the following inputs:
|
|
2010 (issue 6) |
|
|
|
|
Weighted average share price |
5.3p |
|
Weighted average exercise price |
4.0p |
|
Expected volatility |
84% |
|
Risk-free rate |
1.44% |
|
Expected dividend yield |
0% |
The volatility assumption has been determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance.
Options issued outside of the Share Plan
The following options were issued during Quarter 1-2010 outside of the Share Plan:
|
Beneficiary |
Number |
|
Grant date |
|
Expiry date |
Exercise price |
|
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
|
Mr T Griffiths |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
Mr G Coltman |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
Mr G Moseley |
485,612 |
|
20 January 2010 |
|
19 January 2017 |
£0.05148 |
|
$18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,456,836 |
|
|
|
|
|
|
|
These options have no future service, or performance conditions attached. The fair value of $54,000, determined using a Black Scholes valuation model with the following inputs has been expensed in full in Quarter 1-2010:
|
|
|
|
|
|
|
Weighted average share price |
5.1p |
|
Weighted average exercise price |
5.1p |
|
Expected volatility |
95% |
|
Risk-free rate |
1.04% |
|
Expected dividend yield |
0% |
The volatility assumption has been determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance.
11.3 Year ended 31 December 2009
Details of all share options and warrants outstanding during the year ended 31 December 2009 which are accounted for as share based payments are as follows:
|
|
|
Number of options and warrants |
|
At 1 January 2009 |
|
1,787,880 |
|
Granted during the year |
|
34,320,974 |
|
Lapsed during the year |
|
(1,291,340) |
|
Exercised in the year |
|
(3,000,000) |
|
|
|
|
|
At 31 December 2009 |
|
31,817,514 |
The total charge recorded in the consolidated statement of comprehensive loss for share based payments (including $91,000 for shares issued to Directors under service contracts) in the year ended 31 December 2009 was $2,236,000.
Employee share option plans
The number of options in the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust during the year was as follows:
|
|
|
Number of options |
|
Weighted average exercise price |
|
At 1 January 2009 |
|
1,787,880 |
|
£1.12 |
|
Granted during the year |
|
10,235,008 |
|
£0.08 |
|
Lapsed during the year (1) |
|
(1,291,340) |
|
£0.46 |
|
|
|
|
|
|
|
At 31 December 2009 |
|
10,731,548 |
|
£0.20 |
|
(1) Options lapsed due to performance criteria not being achieved and / or option holders leaving the employment of the Group. |
|
|
The following options were issued by the Share Plan in the year ended 31 December 2009:
|
|
|
Number |
Grant date |
Expiry date |
Exercise price |
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
Share Plan - issue 5 |
6,000,000 |
20 October 2009 |
2019 |
£0.040 |
$0.02 |
|
|
Share Plan - issue 4 |
890,000 |
17 July 2009 |
2019 |
£0.040 |
$0.02 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.06 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.07 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.09 |
|
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.10 |
|
|
|
|
|
|
|
|
|
|
|
10,235,008 |
|
|
|
|
|
|
|
|
|
|
|
|
During the year 2,430,294 options became exercisable. No share options were exercised during the year under the Share Plan or the EBT.
The weighted average fair value of options granted during the year by the Share Plan was $0.03 (2008: $0.85). No options were granted by the Noventa EBT during the year (2008: Nil). The fair value of the options granted was recognised in accordance with the respective vesting periods applicable to the options. The options were priced using the Black-Scholes model. Where relevant, the expected life used in the model was adjusted based on management's best estimate for the effects of non-transferability, exercise restrictions and behavioural considerations. Expected volatility was based on the historical volatility of the Company's share price. The charge to the income statement for the year for the unapproved share option plan and the EBT was $845,000.
The aggregate estimated fair value of all options granted under the Share Plan in 2009 was $240,000.
The fair value of options granted by the Share Plan was determined using a Black Scholes valuation model with the following inputs:
|
|
2009 (issue 4 and 5) |
2009 (issue 3) |
|
|
|
|
|
Weighted average share price |
4.0p |
15.5p |
|
Weighted average exercise price |
4.0p |
15.5p |
|
Expected volatility |
60% |
59% to 70% |
|
Expected life
|
1.5 years |
1.5 years to 4.5 years |
|
Risk-free rate |
2.01% |
2.21% |
|
Expected dividend yield |
0% |
0% |
The volatility assumption was determined based on the volatility of the Company's share price over comparable terms to the expected option life.
Options, warrants and bonus shares issued outside of the Share Plan
The following options, warrants and bonus shares that are required to be accounted for under IFRS 2, Share based payments, were issued during the year ended 31 December 2009 outside of the Share Plan:
|
Beneficiary |
Number |
|
Grant date |
|
Expiry date |
Exercise price |
|
Fair value at grant date |
|
|
|
|
|
|
|
|
|
|
|
Religare Capital Markets (UK) Ltd |
1,000,000 |
|
14 October 2009 |
|
14 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
11,585,966 |
|
14 October 2009 |
|
14 October 2016 |
£0.04 |
|
$733,000 |
|
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
6,000,000 |
|
17 July 2009 |
|
No expiry |
£0.00 |
|
$254,000 |
|
|
|
|
|
|
|
|
|
|
|
Ekasure Limted |
3,000,000 |
|
27 August 2009 |
|
No expiry |
£0.00 |
|
$127,000 |
|
|
|
|
|
|
|
|
|
|
|
Pope & Co |
500,000 |
|
14 October 2009 |
|
No expiry |
£0.04 |
|
$12,000 |
|
|
|
|
|
|
|
|
|
|
|
P Cox |
1,000,000 |
|
20 October 2009 |
|
20 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
Dr EJ Martin |
1,000,000 |
|
20 October 2009 |
|
20 October 2016 |
£0.04 |
|
$25,000 |
|
|
|
|
|
|
|
|
|
|
|
|
24,085,966 |
|
|
|
|
|
|
|
The options and warrants awarded to Religare Capital Markets (UK) Limited, Pope & Co, Mr. P Cox and Dr. ES Martin were valued using the Black Scholes valuation model, with the same inputs as those used for Issue 4 and Issue 5 of the Share Plan. The options and warrants were awarded in consideration for services rendered in the period. There were no future service, or performance conditions attached to these options and warrants. The fair value was expensed in full in the year ended 31 December 2009.
The bonus shares and warrants granted to Barons Financial Services Limited (a company in which Mr. E Kohn TD has a beneficial interest), and Ekasure Limited (a company in which Mr. J Allan has a beneficial interest) were awarded as turnaround incentives with the following vesting conditions and fair values:
|
Beneficiary |
|
Type |
Share price target |
Strike price |
Number of shares |
|
Fair value at grant date of the award |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
6p on 30 day moving average |
- |
1,000,000 |
|
$46,000 |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
10p on 30 day moving average |
- |
1,000,000 |
|
$42,000 |
|
|
|
|
|
|
|
|
|
|
Ekasure Limited |
|
Bonus shares |
15p on 30 day moving average |
- |
1,000,000 |
|
$39,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
|
Bonus shares |
6p on 30 day moving average |
- |
2,000,000 |
|
$92,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited |
|
Bonus shares |
10p on 30 day moving average |
- |
2,000,000 |
|
$84,000 |
|
|
|
|
|
|
|
|
|
|
Barons Financial Services Limited
|
|
Bonus shares |
15p on 30 day moving average |
- |
2,000,000 |
|
$78,000 |
|
Barons Financial Services Limited |
|
Warrants |
25p on 30 day moving average |
- |
5% of the equity of Noventa -11,585,966 |
|
$733,000 |
These awards had no future service conditions. The fair value of the awards of $1,114,000 was expensed in the year ended 31 December 2009, to reflect the benefit of the services provided by Barons Financial Services Limited and Ekasure Limited in the turnaround of the Group operations. The awards were valued using a Monte Carlo Simulation model to account for the market condition in the determination of the fair value of the awards with the following inputs:
|
|
Bonus shares |
Warrants |
|
|
|
|
|
Weighted average share price |
3.0p |
6.13p |
|
Weighted average exercise price |
- |
4.0p |
|
Expected volatility |
65% |
69% |
|
Expected life |
6, 8 or 9 years |
6 years |
|
Risk-free rate |
3.1%, 3.4% or 3.6% |
2.7% |
|
Expected dividend yields |
0% |
0% |
The volatility assumption was determined based on the volatility of the Company's share price, adjusted for a period of abnormal volatility between 24 April 2009 and 24 September 2009 reflecting the uncertainty over the future of the Group following the Marropino Mine entering care and maintenance. The expected life of the options was determined as an output of the Monte Carlo Simulation model and determined the expected vesting date applicable for the risk free interest rate assumption.
11.4 Quarter 1-2009
Details of all share options and warrants outstanding during Quarter 1-2009, which were all issued under the Noventa Unapproved Share Option Scheme and the Employee Benefit Trust are as follows:
|
|
|
Number of options |
|
Weighted average exercise price |
|
At 1 January 2009 |
|
1,787,880 |
|
£1.12 |
|
Granted during the period |
|
3,345,008 |
|
£0.155 |
|
|
|
|
|
|
|
At 31 March 2009 |
|
5,132,888 |
|
£0.49 |
The total charge recorded in the income statement for share based payments in Quarter 1-2009 was $53,000.
|
|
The following options were issued by the Share Plan in Quarter 1-2009:
|
|
|
|
|
|
|
|
|
|||
|
1.4 |
|
|
|
|
|
|
|
|||
|
|
Number |
Grant date |
Expiry Date
|
Exercise price |
Fair value at grant date
|
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.06 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.07 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.09 |
|||||
|
Share Plan - issue 3 |
836,252 |
10 March 2009 |
2019 |
£0.155 |
$0.10 |
|||||
|
|
|
|
|
|
|
|||||
|
|
3,345,008 |
|
|
|
|
|||||
|
|
|
|
|
|
|
|||||
During Quarter 1-2009 no options became exercisable and no share options were exercised under the Share Plan or the EBT.
The options were valued using the Black-Scholes model as disclosed above for the full year ended 31 December 2009. The charge to the consolidated statement of comprehensive loss for Quarter 1-2009 for the unapproved share option plan and the EBT was $53,000.
The aggregate estimated fair value of all options granted under the Share Plan in the period was $268,000.
12. Related party transactions
|
|
Transactions between the company and its subsidiaries have been eliminated upon consolidation and are therefore not disclosed in this note. Details of transactions and balances between the Group and other related parties are detailed below. The amounts reported are the fair value of the transaction in US$. Directors' fees and expenses are excluded unless they are invoiced to the Group by means of a separate Company.
|
|||||||
|
|
|
3 month period ended 31 March 2010 |
|
3 month period ended 31 March 2009 |
|
12 month period ended 31 December 2009 |
|
|
|
|
|
Unaudited US$000 |
|
Unaudited US$000 |
|
Audited US$000 |
|
|
|
|
Highland African Ventures Limited |
|
|
|
|
|
|
|
|
|
Convertible loan notes issued for cash |
- |
|
3,000 |
|
3,000 |
|
|
|
|
Convertible loan notes converted to Ordinary Shares |
- |
|
- |
|
4,200 |
|
|
|
Fleming Family & Partners (Suisse) AG Subscription of Ordinary Shares on behalf of clients |
- |
|
- |
|
170 |
|
||
|
Bridgewater Pension Trustees Ltd A/C Pathfinder Private Pension No. 0450 Subscription of Ordinary Shares |
- |
|
- |
|
140 |
|
||
|
Barons Financial Services SA |
|
|
|
|
|
|
||
|
Consulting fees |
83 |
|
- |
|
282 |
|
||
|
Fees due for the services of Mr. E Kohn TD as Chairman paid in cash |
21 |
|
- |
|
37 |
|
||
|
Commission arising on fund raising on the same terms as those provided by the Company's broker |
- |
|
- |
|
221 |
|
||
|
Funds advanced to the Company (representing expenditure incurred on the Company's behalf and recharged to the Company) |
104 |
|
- |
|
247 |
|
||
|
Balance due to Barons Financial Services SA at period end |
- |
|
- |
|
24 |
|
||
|
Funds due to the Company from Barons Financial Services SA for advances against expenses |
38 |
|
- |
|
14 |
|
||
|
Barons Financial Services Limited |
|
|
|
|
|
|
||
|
Fees due for the services of Mr. E Kohn TD as Chairman paid in shares |
20 |
|
- |
|
37 |
|
||
|
Fair value of 6,000,000 conditional bonus shares issued to Barons Financial Services Limited |
- |
|
- |
|
254 |
|
||
|
Fair value of 11,585,956 warrants issued to Barons Financial Service Limited |
- |
|
- |
|
733 |
|
||
|
Balance due to Barons Financial Services Limited in shares at period end |
20 |
|
- |
|
22 |
|
||
|
Carey Olsen |
|
|
|
|
|
|
||
|
Legal fees and expenses |
11 |
|
- |
|
167 |
|
||
|
Balance due to Carey Olsen at period end |
11 |
|
- |
|
124 |
|
||
|
Ekasure Limited |
|
|
|
|
|
|
||
|
Fees due for the services of Mr. J Allan |
90 |
|
- |
|
260 |
|
||
|
Balance due to Ekasure Limited in shares at period end |
- |
|
- |
|
10 |
|
||
|
Re-imbursement of expenses incurred on behalf of Noventa |
17 |
|
- |
|
54 |
|
||
|
Fair value of 3,000,000 conditional bonus shares issued to Ekasure Limited |
- |
|
- |
|
127 |
|
||
|
Balance due to Ekasure Limited at period end |
30 |
|
- |
|
30 |
|
||
|
Goldline Global Consulting |
|
|
|
|
|
|
||
|
Fees due for the services of Mr P. Cox as Director |
6 |
|
- |
|
31 |
|
||
|
Balance due to Goldline Global Consulting in shares at period end |
3 |
|
- |
|
17 |
|
||
|
Balance due to Goldline Global Consulting at period end |
3 |
|
- |
|
2 |
|
||
Highland African Ventures Limited is a related party of the Company by virtue of its significant shareholding in the Company. Fleming Family & Partners (Suisse) AG and Bridgewater Pension Trustees Ltd A/C Pathfinder Private Pension No. 0450 are related parties of the Company by virtue of their relationship with Mr. R J Fleming, who has a significant shareholding in the Company. Highland African Ventures Limited is owned by a trust whose trustee is Fleming Family & Partners Liechtenstein and Mr. R J Fleming is one of the potential beneficiaries. As at the date of this report Fleming Family & Partners Liechtenstein has a total interest, including through Highland African Ventures Limited, in a total of 89,203,154 shares (28.89% of the issued shares). As at the date of this report Mr. R J Fleming has an interest, including through Highland African Ventures Limited, in a total of 85,208,892 shares (27.6% of the issued shares).
Barons Financial Services SA, Barons Financial Services Limited, Ekasure Limited, Carey Olsen and Goldline Global Consulting are related parties to the Group by virtue of common directorship as follows:
|
Related party |
Common Director |
|
Barons Financial Services SA and Barons Financial Services Limited |
Mr. E Kohn TD |
|
Ekasure Limited |
Mr. J Allan |
|
Carey Olsen |
Mr. G Coltman |
|
Goldline Global Consulting |
Mr. P Cox |
TES (continued)
All related party transactions are transacted on an arm's length basis, in accordance with standard commercial terms applicable to the type of transaction.
13. Events subsequent to the balance sheet date
13.1 Marropino Mine Production Restart
The Group recommenced production at the Marropino Mine in Mozambique on 23 April 2010, on a deliberately limited scale to assess the economics, efficacy and efficiency of the operation in a controlled and measured way. Full scale production from run of mine material is anticipated to recommence in Q4 2010 when the Group finalises the construction and commissioning of the redesigned processing plant, including a front end comminution circuit.
Production to the date of this report has surpassed the Group's initial expectations, with the Group consistently achieving recovery rates of tantalum of 51% from June 2010. This compares to the period prior to May 2009 when the Marropino Mine was placed in care and maintenance of 30% to 35%.
13.2 Tantalum off-take agreement - 1
The Group has a confidential long-term off-take agreement for the sale of a substantial proportion of its projected production of tantalum concentrate. This contract was initially negotiated in 2007 with all sales of tantalum concentrate subsequent to the signing of the contract having been sold to this customer.
In June 2010, the Group successfully renegotiated and signed an amendment to this off-take agreement which will allow the Group to reduce annual quantities of tantalum that it sells to this customer under the agreement. This will permit the Group to sell the remaining annual production to other parties, this allowing the Group to benefit from increased market prices and a more diversified customer base.
13.3 Tantalum off-take agreement - 2
In July 2010 the Group signed a confidential three year off-take agreement for the sale of a substantial proportion of its projected production of tantalum concentrate with a new customer which is a major processor and refiner of specialist metals and advanced ceramics. The agreement is for similar quantities as for the Group's existing renegotiated off-take agreement with pricing that reflects market prices at the date the agreement was signed. The agreement is subject only to a sample shipment of material being chemically acceptable. This shipment left Mozambique on 24 August 2010.
13.4 Fundraising
On 7 June 2010 the Group secured $2,055,000 additional shareholder funding through a placing (the 'June 2010 Placing') and a conditional placing (the 'June 2010 Conditional Placing Shares') of Ordinary Shares in the Company as described below. A further $103,000 was raised in June 2010 (the 'June 2010 Additional Conditional Placinnng').
In September 2010, the Group secured shareholder investment of £5,247,000 (approximately $8,091,000) before expenses from an unconditional placing (the 'September 2010 Placing) a subscription (the 'September 2010 Subscription') and an additional subscription (the 'September 2010 Additional Subscription) totalling 80,323,432 Ordinary Shares in the Company.
13.4.1 June 2010 Placing
The Group secured irrevocable commitments for the private placing of 6,826,450 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £444,000 ($652,000) before expenses. The funds from the June 2010 Placing were received on 11 June 2010.
13.4.2 June 2010 Conditional Placing
The Group secured commitments for the conditional placing of 14,415,723 Ordinary Shares of £0.0004 each for £0.065 per Ordinary Share, raising £937,000 ($1,403,000) before expenses. The June 2010 Conditional Placing was conditional on the following conditions precedent:
7. the Directors obtaining shareholder approval at the AGM of the Company on 30 June 2010 for the issuance of the June 2010 Conditional Placing Shares;
8. the June 2010 Conditional Placing Shares issued being accepted to trading on AIM; and
9. there being no material adverse change in national or international financial, market, industrial, economic or political conditions, or any other occurrence of any nature which, in the reasonable opinion of the Company's corporate broker would, or would be reasonably likely to have, a material adverse effect on the business of the Company during the period from 8 June 2010 to the Company's AGM on 30 June 2010.
The conditions precedents for the conditional placing were met in full, and the funds from the June 2010 Conditional Placing were received on 2 July 2010.
13.4.3 June 2010 Additional Conditional Placing
During June 2010, the Group secured additional commitments under the same terms as the June 2010 Conditional Placing for 1,053,741 Ordinary Shares of £0.0004 pence each for £0.065 per Ordinary Share, raising £68,000 ($103,000) before expenses The funds from this additional placing were received on 2 July 2010.
13.4.4 September 2010 Placing, Subscription and Additional Subscription
On 3 September 2010, the Group completed a placing of 42,021,415 new Ordinary £0.0004 shares (the 'September Placing Shares') and a subscription of 8,442,506 new Ordinary Shares of £0.0004 each (the 'September Subscription Shares') (together the 'New Shares') at a price of £0.065 per New Share, raising a total of £3,280,000, approximately equivalent to $5,058,000. The funds will be used to fund working capital and provide the initial phased capital inflows required for the process plant upgrade programme (refer to the section of the MD&A titles 'Process plant upgrade'). The New Shares have been subscribed by a combination of new investors and existing shareholders.
In addition to the monies raised through the issue of the New Shares, the Company received an irrevocable commitment from Compagnie Internationale de Participations Bancaires et Financieres SA , ('CIPAF'), a subsidiary of General Mediterranean Holding SA, to subscribe for 29,859,511 new Ordinary Shares of £0.0004 each (the 'Additional Subscription Shares') at a price of 6.587p per share to raise a further £1,967,000, approximately equivalent to $3,033,000 (the 'Additional Subscription'). The Additional Subscription will take the form of three distinct tranches, as laid out below, with the Company receiving the subscription funds for each of the tranches at the time each tranche is subscribed, and the respective Additional Subscription Shares allotted to CIPAF within five working days of the subscription monies being received:
|
|
Number of Additional Subscription Shares
|
Subscription to be received by |
|
Tranche A |
9,953,170 |
30 September 2010 |
|
Tranche B |
9,953,170 |
31 December 2010 |
|
Tranche C |
9,953,171 |
31 March 2011 |
The subscribers for the New Shares and the Additional Subscription Shares will receive warrants to subscribe for one new Ordinary Share of £0.0004 for every two Ordinary Shares subscribed for (the 'September 2010 Warrants'). The Warrants have an exercise price of £0.10 and a term ended 2 September 2012.
13.5 IVA recovery
Mozambique Value Added Tax ("IVA"), operates in a similar manner to UK Value Added Tax ("VAT"). The Group is exempt from IVA on its exports from Mozambique under the terms of its Mining License Agreement and Mozambique tax law. The Group is able to recover input sales tax on all purchases within Mozambique. The Group is always therefore in a net recovery position of IVA. Since 2004 and until August 2010, the Group had not succeeded in recovering IVA from the Mozambique Government. The Group has two ongoing IVA recovery claims submitted, and further recoverable IVA due, but not yet claimed back. Due to the significant uncertainty over the recoverability of these IVA balances, the Group provided in full against the assets as at 31 December 2009.
As at 31 March 2010, the Group did not have all of the documentation required by Mozambique Law to recover the IVA. During Quarter 2-2010 the Group was able to obtain copies of all of the documentation required by Mozambique Law to support the ongoing IVA claims. $502,000 of the ongoing IVA recoverable claims was approved for payment by the Mozambique Tax Authority in August 2010. The remaining $73,000 of the ongoing claims has been withheld, pending the Group providing additional information to support the amounts claimed. As at the date of this report, approximately $198,000 has been received by the Group in August 2010, with the approved balance of the two ongoing claims anticipated during Quarter 3-2010. The Group anticipates that a further $423,000 of the IVA recoverable, once claimed in Quarter 4-2010 will be received by the Group during Quarter 4-2010 and Quarter 1-2011.
In accordance with IAS 10, 'Events after the Reporting Period', the Group has not released the provision against the IVA recoverable assets as at 31 March 2010 as the Group did not have all of the requisite documentation to support the ongoing IVA recoverable claims as at that date. The Group has subsequently released $925,000 of the provision against IVA recoverable assets that are now deemed collectable in full in Quarter 2-2010.
13.6 First shipment since the Marropino Mine returned to production
The Group completed its first commercial export of 8,000 Kg (17,632 Lb) of tantalum concentrate from the Marropino Mine in August 2010 to one of the Group's two major customers. The shipment was loaded on 22 August 2010 at the port of Quelimane, Mozambique and sailed from port on the 24 August 2010. A further shipment to the Group's other major customer is scheduled for September 2010.
These shipments are to confirm the logistics pathway for future shipments to the Group's customers, and to revise and adjust shipping routes and procedures in advance of the full production at the Marropino Mine in 2011.
13.7 New tantalum discovery at Marropino
In August 2010, the Group discovered a new tantalum deposit at the Marropino Mine. Independent assays from three pits show that average tantalum grades for the individual pits are 2,697 ppm, 3,836 ppm and 7,577 ppm. These compare to the average 220 ppm for the primary hard rock deposit at Marropino. The new area is entirely soft ore, measuring approximately one square kilometre and lying two kilometres to the south east of the Marropino Mine processing plant. The discovery, known as Marropino South, is being geologically studied to determine the estimated tantalum in the deposit. If it is proven that Marropino South is viable, the enhanced economics may reduce, or eliminate further need for external financing for the execution of the Group's plans. Until the evaluation of the Marropino South is completed, there is no guarantee that it is viable or of consistently high grade.
Country of incorporation Jersey, Channel Islands
Registration number 95036
Legal form Public listed company
Shares Listed Alternative Investment Market of the London Stock Exchange ('AIM')
RIC Code- NVTA
Registered address Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Telephone: +44 (0)1534 869 403
Fax: +44 (0)1534 866 859
Email: [email protected]
Website: noventa.net
Directors Mr EF Kohn TD (Chairman)
Mr P Lawless (Chief Operating Officer until 30 June 2010, thereafter Chief Executive Officer)
Mr JN Allan (Chief Executive Officer until 30 June 2010, thereafter Non-executive director)
Mr TJ Griffiths (Non-executive director)
Dr EJ Martin (Non-executive director)
Mr G Coltman (Non-executive director)
Mr K Chung (Non-executive director)
Management Noventa Limited:
Mr EF Kohn TD (Chairman)
Mr JN Allan (Chief Executive Officer until 30 June 2010, thereafter Non-executive director)
Mr P Lawless (Chief Operating Officer until 30 June 2010, thereafter Chief Executive Officer)
Mr DL Cassiano-Silva (Chief Financial Officer)
Highland African Mining Company Limitada:
Mr DM Whitehouse (Executive Director & Chief Projects Officer Highland African Mining Company Limitada)
Mr DD Darsamo (Executive Director & Engineering Manager Highland African Mining Company Limitada)
Mr N Norris (Metallurgical Manager Highland African Mining Company Limitada)
Mr M José (Pit Manager, Highland African Mining Company Limitada)
Mr LN Juliasse (Human Resources Manager, Highland African Mining Company Limitada)
Company secretary Grange Corporate Services Limited
Third Floor, Mielles House
La Rue des Mielles
St Helier
Jersey, JE2 3QD
Channel Islands
Auditors Deloitte LLP
London Gatwick Office
Global House
High Street, Crawley
West Sussex, RH10 1DL
England
Legal advisors In the United Kingdom:
Skadden, Arps, Slate, Meagher & From (UK)
LLP
40 Bank Street
Canary Wharf,
London, E14 5DS
England
In Jersey:
Carey Olsen
47 Esplanade
St. Helier
In Mozambique:
Sal & Caldeira
Avenida Julius Nyerere, 3412
Maputo, 2830
Mozambique
Jersey, JE1 0BD
Channel Islands
In South Africa:
Webber Wentzel
10 Fricker Road
Illovo Boulevard
Johannesburg, 2107
South Africa
In Canada:
Blake, Cassels & Graydon LLP Canadian Barristers & Solicitors 23 College Hill 5th Floor London EC4R 2RP England
Nominated advisor Religâre Capital Markets (UK) Limited
100 Cannon Street
London, EC4N 6EU
England
Corporate broker Religâre Capital Markets plc
100 Cannon Street
London, EC4N 6EU
England
AIM AIM market of the London Stock Exchange
Ta2O5 Tantalum pent-oxide
kg kilogramme
klb thousand pounds
km kilometre
lb pound
m metre
mlbs million pounds
Mt million tonnes
pa per annum
ppm parts per million
$ or US$ US Dollar, legal currency of the United States of America
£ Pound Sterling, legal currency of the United Kingdom
Mining concession land where the Group has a granted right to extract economic minerals including, but not limited to tantalum concentrate
Mining licence land where the Group has a granted right to explore for economic minerals including, but not limited to tantalum concentrate
Quarter 1 The three month period ended 31 March of the Company's financial year ended 31 December
Mineral resource - a concentration, or occurrence, of material of economic interest in or on the Earth's crust in such form, quality and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a mineral resource is known, estimated from specific geological evidence and knowledge, or interpreted from a well constrained and portrayed geological model. Mineral resources are sub-divided in order of increasing confidence, in respect of geo-scientific evidence, into inferred, indicated and measured categories.
Inferred resource - that part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, working and drill holes which may be limited or of uncertain quality and reliability. This category of resource should not be used in any economic valuation exercise.
Indicated resource - that part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, working and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed.
Measured resource - is that part of a mineral resource for which quantity, grade or quality, densities, shape, and physical characteristics are so well established that they can be estimated with confidence sufficient to allow the appropriate application of technical and economic parameters, to support production planning and evaluation of the economic viability of the deposit. The estimate is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely enough to confirm both geological and grade continuity.
Note - Definitions of mineral resource, inferred resource, indicated resource and measured resource are based on the South African Code for the Reporting of Mineral Resources and Mineral Reserves (the "SAMREC" code).
Related Shares:
PAR.L