11th Apr 2012 07:00
11 April 2012
African Minerals Limited
("AML" or "the Company")
Preliminary Results for the year ended 31 December 2011
Highlights:
2011
·; Commenced exports in November 2011, just 14 months from receipt of Mining Lease and the Environmental Impact Assessment Licence.
·; Iron Ore Production for 2012 and 2013 fully committed
·; Increase in scope of Phase I capacity to 20Mtpa with forecast cost at completion of $1,7Bn by end 2012, giving lowest decile capital intensity of $85/tonne.
·; Memorandum of Understanding signed with China Communications Construction Company ("CCCC") for the development of the final engineering study for Phase II of the Tonkolili Project.
2012
·; Closing of Shandong Iron and Steel Group ("SISG") $1.5bn investment in the Tonkolili Project in March 2012.
·; $418m secured loan facility repaid, $65m of interest and fees recouped from SISG injection.
·; Low gearing post SISG, with a debt facility of $100m and $350m of Convertible Bond at the corporate level, and debt of $93m at the project level.
·; CRM confirms intention to subscribe $50m to Convertible Bond
·; 2012 is a commissioning and ramp-up year, with its associated inherent uncertainties, but expect to achieve export of circa 10Mt during 2012.
·; Phase 1 completion progressing on target, the Company remains confident of attaining production run rate of 20Mtpa during Q4 2012.
Commenting on today's announcement, Frank Timis, Executive Chairman of African Minerals said:
"It gives me great pleasure to present these results having successfully re-commenced iron ore shipments from Sierra Leone after a 30 year break, and having also completed our landmark transaction with SISG.
In the coming year we look forward to bringing our Phase I Tonkolili project up to its optimum production level, to end the year delivering ore to market at a rate of 20Mtpa with attractive cash costs."
For further information please contact:
African Minerals Limited Mike Jones
|
+44 203 435 7600
|
Aura Financial Michael Oke / Andy Mills |
+44 207 321 0000 |
Deutsche Bank Rupert Green |
+44 207 545 8000 |
There will be an analyst and investor tele-conference starting at 9:30 am BST on April 11 2012. A slide presentation to accompany the call will be available on the Company's website, www.african-minerals.com
The dial in details are: Tel: +44 203 140 0668 : Passcode: 325672#
Playback will be available at +44 203 140 0698 : Passcode: 384120#
Preliminary Results
Executive Chairman's Statement
At the start of last year, we looked forward to 2011 being a transformational year for African Minerals and I am pleased to report that we have indeed made that significant step. In 2011 AML became a large iron ore producer by developing the mine and associated infrastructure to ship product to international export markets. We made our first shipment in November 2011 and are on the way to becoming the second largest iron ore producer in Africa. Post year end we also completed our landmark $1.5Bn transaction with SISG.
More importantly, for both our shareholders and broader stakeholders, we have demonstrated a strong momentum to grow, and created within the Company a distinctive culture and appetite for further development.
Our team continues to prove its capabilities, despite the specific challenges of working in the region, of simultaneously constructing, commissioning and operating, and handling the complex logistics of a new fully integrated mine, rail and port operation. At the same time we have ensured that we have adequate financial resources to deliver our long-term plans.
In so doing we have also ensured that the people and Government of Sierra Leone prosper from our partnership with them, both at grassroots and Government level. We have created a new source of raw material supply from West Africa, and forged strong links between Sierra Leone and the large business community in China, including SISG, CRM (China Railways Materials Commercial Corporation), CCCC and others.
The achievement of first ore on ship marks a major milestone for the region in the development of its links with the international community. AML's pivotal role in this process demonstrates a commitment to overcoming the physical, cultural and commercial obstacles which have historically constrained such industrial links.
However, what may appear to be pure pioneer spirit or good fortune is of course the result of planning, financial discipline and a commitment to working transparently in partnership with our host communities. Each of these factors is essential in establishing a lasting framework for the coordinated effort which can alone unlock the region's natural resource wealth.
Strategy
Our achievements at Tonkolili underline AML's core strengths and reflect our 5 strategic drivers:
First, we have proven our ability to identify resources and markets as well as to judge the potential for their commercial development.
At Tonkolili we have identified a large ore body, from grass roots exploration, and successfully developed the mine and infrastructure required to exploit the resource. We fast tracked construction to ensure that we were able to begin exports of iron ore within 14 months of receiving the requisite licenses and permits. Our maiden shipment in November 2011 was Sierra Leone's first export of iron ore in more than 30 years.
Second, our entrepreneurial approach and technical expertise enabled us to establish unique partnerships with large steel industry players in China, and strengthened our relationships with the Government and people of Sierra Leone.
At Tonkolili we have solved numerous issues including licensing, infrastructure, logistics and funding to successfully develop an early stage resource project. The recent conclusion of SISG's $1.5bn cash investment in Tonkolili is testament to our abilities in this regard.
Third, AML has nurtured and developed a strong and diverse investor base, which has allowed us to access capital from banks and the debt and equity markets as necessary.
This ability to access finance has allowed the Company to accelerate its development plans and to continue to leverage the growth of both the Tonkolili deposit and the production expectations. The major refinancing we carried out in January 2012 represented a maturation from high cost debt to low cost facilities with commercial banks on standard terms.
Fourth, we have attracted and retained the diverse skills required to develop the project whilst also recruiting and training large numbers of indigenous employees.
Our flat management structure promotes effective two way communication with our employees and enables us to efficiently implement growth plans and address risks across the Company.
Finally, early stage projects need to secure a market for their eventual production in order for the value to ultimately be captured.
In the case of Tonkolili, our partnerships with CRM, SISG and other counterparties, in return for product offtake, clearly demonstrate that we have secured future cashflow to underpin the development of Phases II and III.
Health and Safety
We remain committed to the highest standards of Occupational Health and Safety at our operations and in 2011 we delivered a creditable result, in line with industry leading standards. Our rolling Long Term Injury Frequency Rate ("LTIFR") for 2011 was 1.55, and was a marked reduction in the LTIFR in 2010 of 2.63.
However, the project incurred 5 fatalities in 2011 (2010 : 1). In the first half of the year a sub-contractor lost his life as a result of an earthmoving incident, and another in a motor vehicle accident. Sadly, in August, another motor vehicle accident resulted in the deaths of three people employed by one of our subcontractors. We extend our heartfelt condolences to the families that suffered tragic loss. We strive to achieve zero fatalities and will redouble our efforts in 2012 to meet this important goal.
SISG Transaction Completed
In March 2012, we successfully completed the transaction with SISG under which they acquired a 25 per cent stake in the Tonkolili project in return for $1.5bn and various offtake arrangements. This followed the receipt of requisite approvals from the People's Republic of China and confirmation that our trial ore shipment had been successfully tested in their blast furnaces in February 2012. This investment is a significant vote of confidence in what we have so far achieved at Tonkolili and will enable us to accelerate the development of Phase II whilst also paying down US$418m of secured debt.
Mining and Processing
In December 2010 we commenced formal mining operations at the Simbili part of the Tonkolili orebody and, over the course of the year, the mine and process plant produced 1.2Mt of Direct Shipping Ore ("DSO").
Construction of the Tonkolili 15Mtpa wet process facility is progressing well and it is expected to be commissioned during Q2 2012. On completion of the wet process facility, we will have sufficient production capacity at the mine to achieve our Phase I target production run rate of 20Mtpa during Q4 2012.
Rail & Port
Our maiden shipment of 40,000 tonnes of DSO from Tonkolili in November followed the opening of the integrated mine, rail and port infrastructure, 200km from the mine to the ocean.
The original reconstruction of 74km of existing railway and construction of a new 126km narrow gauge railroad is complete. Our programme to further upgrade the reconstructed narrow gauge rail is underway to allow wagon loads to be increased from 60 tonnes per wagon to 75 tonnes per wagon, with higher rail speeds. The current fleet complement of 20 locos and 456 wagons will be raised to 34 locos and 856 wagons during the remainder of 2012.
Civil and marine engineering works were also completed at the port and associated stockyard during 2011 in order to make the first shipment on schedule.
We have experienced some temporary issues with materials handling which has had some impact on loading rates, and these issues are being resolved. Similarly, rail speeds are increasing, and cycle times reducing, as the rail upgrade programme continues. The issues encountered in the first quarter of 2012 have led us to review our outlook for the year.
The associated expansion at the port, including a second stockyard to meet higher production rates is also progressing well. The expansion will increase port stockpile capacity by 580,000 tonnes, to almost 1Mt, and double port stockpile out-load capacity to support the 20Mtpa production run rate by year end.
Sales Tonnage
Current mine operations are comfortably achieving 8Mtpa, and the current port, rail layout and fleet complement is capable of supporting a production rate of around 6-8Mtpa. Once we have completed the rail upgrade to the higher specification, received the full train fleet complement, commissioned the plant and port expansions, our fully integrated mine / plant / rail / port operations are expected to produce at a run rate of 20Mtpa. This will comprise 15Mtpa of standard lump and fine ore and 5Mtpa of our unscreened All In 32 ("AI32") product.
Sales and Marketing
All expected production for 2012 and 2013 is fully committed under existing contracts.
In total, during 2011 we sold 0.2Mt of product and achieved sales revenues of $9.6m.
As previously announced, our 58 per cent DSO fines sales are priced against the 58 per cent Platts CFR China index with moisture content adjustments in H1 2012 of approximately 8 per cent. Freight rates are benchmarked against the BCI C3 rate for Cape Size vessels on the Tubarao-Qingdao route.
Phase II Expansion
In May 2011 we signed a memorandum of understanding with CCCC for the development of the final engineering study for Phase II of the Tonkolili Project. With the receipt of the SISG investment, this study will now be accelerated. An update will be provided in due course.
2011 Financials
Financial Review
AML raised a total of $653m during 2011.
In January 2011 6,991,450 new common shares were issued to CRM for a consideration of $46m in accordance with their pre-emption rights to retain a 12.5% share of the enlarged capital of AML following the $307m placing in November 2010.
In February 2011 a Secured Loan Facility of $418m was established with the funds fully drawn down at year end.
In August 2011 the Group received approval for the provision of a $93m equipment finance credit facility. $71m was drawn down in 2011 with another $18m drawn down January 2012.
In November 2011 the Group signed a $100m standby facility agreement. This facility was fully drawn down by the end of 2011.
Subsequent to the end of the year, in January 2012 the Group issued Convertible Bonds to the value of $350m, with a maturity of 5 years, a 8.5% coupon, and a conversion price of £7.00 per share.
In accordance with the terms of the Subscription Agreement between CRM and AML, announced 1 April 2010, CRM has the right to maintain its 12.5% shareholding in the event of any equity placings by AML.
CRM has advised the Company of its intention to subscribe for 12.5% of the Company's convertible bond taking total proceeds to approximately $400 m. Settlement of the CRM subscription for the Bonds is conditional upon receipt of Chinese Government approvals.
These financings provided the full financial resources required to take Phase I through the construction and commissioning stages until production ramps up in the second half of 2012 to a run rate of 20Mtpa.
Cash position
As at the end of December, the Group had a cash balance of $16m.
Subsequent to year end, the Group received $350m from the Convertible Bonds issue and a further $18m from the equipment finance credit facility, both as mentioned above. A further $180m has been received from iron ore sales during Q1 2012.
In March 2012, SISG completed its investment, providing $1,017m cash at the project level, after repaying the full amount of $418m under the Secured Loan Facility, and providing an additional $65m at the AML corporate level.
Taxation
Major features of the fiscal regime include:
·; A Mining Lease fee of US$1m pa;
·; A 3.2% royalty of the FOB sales price of iron ore production which includes 0.1% to be contributed to an environmental and social protection and impact mitigation fund, to be managed and controlled by the Company, and 0.1% to a community development fund for the benefit of communities impacted by the Project;
·; A corporate tax rate of 25% for the life of the mine, with a 4yr accelerated depreciation allowance (40%, 20%, 20%, 20%);
·; 5% withholding tax on dividends; and
·; Exemptions for Goods and Services Tax (GST), and import tax for the Company and its contractors.
In February 2012, AML volunteered to prepay $20m (2011 : $10m) in Sierra Leone employee withholding tax which will be offset against future tax liabilities, in order to support infrastructure development in the country.
Financial result FY 2011
The Group generated an operating loss for the period of $41.5m, which principally consisted of employee costs and travel of $28.5m, including share based payments of $16.5m.
A taxation credit of $27.1m was generated relating to recognition of deferred tax assets on qualifying capital expenditure in Sierra Leone that is in excess of deferred tax liabilities, resulting in $13.1m loss after tax.
As Group's infrastructure and mining assets were still undergoing commissioning at the year end, iron ore sales have been credited to assets under construction and commissioning costs have been capitalised.
The other comprehensive loss of $6.8m resulted from fair value reductions in the Group's listed investments, the main components of which were in respect of Cape Lambert Resources ($4.3m) and Obtala Resources Plc ($3.5m), offset by a $1.3m deferred tax credit.
Total comprehensive loss for the period amounted to $20.1m.
Balance sheet
Exploration and evaluation assets of $190.6m were transferred to assets under construction as the Tonkolili project moved from development phase to commissioning at the end of 2011.
Including the exploration assets transfer, assets under construction and property, plant and equipment increased by $1,237m since December 2010 to $1,506m, resulting from expenditure on the Tonkolili mine, the construction and reconstruction of the new and existing rail and the construction and upgrade of the Pepel port facility.
As production ramps up in 2012, the Group has increased confidence in its ability to generate taxable profit which can be utilised against tax losses. This has resulted in an increase in net deferred tax asset during the year of $28.4m to $36.6m.
Borrowings of $589.2m were generated in the year. The Group closed a secured non-revolving loan facility in February for $417.7m. In the second half of the year the Group had also drawn down a $100m Standby facility and $70.9m of a $92.5 asset-financing facility with the Standard Bank of South Africa. Borrowings are held at fair value on the balance sheet of $560.8m. The $28.4m fair value borrowings movement is principally due to $84.8m capitalised borrowing cost, less $54.5m interest and fee payments.
Equity increased by $109.7m during 2011 to $982.1m. In January 2011 $46.3m was raised through an equity placing as a result of CRM exercising their pre-emption rights in relation to the equity placing undertaken in November 2010. In February 2011, $38.4m warrants and $17.1m shares were issued to lenders as part of secured loan facility. There was a $25.7m increase in equity reserves due to share based payments ($9.2m of this charge related to project activity and was capitalised resulting in the $16.5m income statement charge). These increases were offset by the $13.3m increase in accumulated deficit.
At the end of 2011 cash and cash equivalents amounted to $16.5m (2010: $372.4m).
In February 2012, since the end of the period, AML completed a $868m refinancing package, including the $350m convertible bond referred to above.
This refinancing provided relief from certain restrictive covenants, and brings the average cost of our remaining debt down to circa 8.3 per cent.
Corporate Governance
During the first half of 2011 we strengthened our Board of Directors with the addition of Nina Shapiro as Independent Non-Executive Director ("NED‟), and in early July Bernard Pryor joined the Board also as an Independent NED.
Following the successful completion of the SISG investment, we are pleased to have appointed Mr Cui Jurong onto the Board of AML.
In addition to the Remuneration Committee and Audit Committee, the Board recently established a Risk Committee and a Disclosure Committee to monitor the various company operations and to ensure a high level of integrity in market disclosures.
This strengthening and adjustment of the Board will continue with an aim to having a majority of independent directors on the Board in due course.
Outlook
While AML is confident of achieving the 20Mtpa capacity during Q4 2012, the mine, rail and port are still in the construction and commissioning phase, and there remains uncertainty in the tonnage that will be able to be produced during the ramp up period. This uncertainty includes the timing of commissioning and ramp up of the wet process plant and second stockyard; the completion of the rail upgrade programme; and wet season operations. Given this uncertainty, guidance is currently difficult, but exports of circa 10Mt in 2012 are expected.
We remain confident that by the end of the year the operations will be producing at a rate of 20Mtpa, and that the operating cost base will be controlled below $30/t as per previous guidance.
Frank Timis
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | |||||
For the year ended 31 December 2011 | |||||
2011 | 2010 | ||||
Notes | US$ 000's | US$ 000's | |||
Net operating expenses | 3 | (41,469) | (47,432) | ||
Impairment | 8 | - | (4,453) | ||
Operating loss | (41,469) | (51,885) | |||
Loss on disposal of available for sale investments | 15 | - | (2,277) | ||
Dividend income | 15 | - | 7,347 | ||
Interest income | 1,061 | 318 | |||
Loss for the year from continuing operations | (40,408) | (46,497) | |||
Taxation | 13 | 27,098 | 10,345 | ||
Loss after taxation from continuing operations | (13,310) | (36,152) | |||
Discontinued operations | |||||
Profit for the year | 25 | - | 173 | ||
- | 173 | ||||
Loss for the year | (13,310) | (35,979) | |||
Other comprehensive (loss)/profit | |||||
Fair value movement on available for sale investments | 17 | (8,100) | 13,786 | ||
Deferred taxation on available for sale investments | 17 | 1,261 | (2,113) | ||
Other comprehensive (loss)/income for the year | (6,839) | 11,673 | |||
Total comprehensive loss for the year | (20,149) | (24,306) | |||
Attributable to equity holders of the parent | (20,149) | (24,306) | |||
Basic and diluted loss per share - cents | 6 | (4.06) | (13.98) | ||
Basic and diluted loss per share continuing activities - cents | 6 | (4.06) | (14.05) | ||
Basic and diluted earnings per share discontinuing activities - cents | 6 | - | 0.07 | ||
CONSOLIDATED STATEMENT OF FINANCIAL POSITION | |||||
At 31 December 2011 | |||||
31 December | 31 December | ||||
2011 | 2010 | ||||
Notes | US$ 000's | US$ 000's | |||
Non-current assets | |||||
Exploration and evaluation assets | 8 | 7,475 | 198,115 | ||
Intangible assets | 9 | 2,048 | - | ||
Assets under construction and property, plant & equipment | 10 | 1,506,388 | 269,133 | ||
Available for sale investments | 15 | 67,996 | 76,096 | ||
Deposits | 12 | 3,910 | 3,910 | ||
Deferred tax assets | 13 | 36,591 | 8,232 | ||
Total non-current assets | 1,624,408 | 555,486 | |||
Current assets | |||||
Cash and cash equivalents | 14 | 16,465 | 372,364 | ||
Trade and other receivables | 11 | 16,456 | 422 | ||
Inventories | 7 | 51,035 | 1,277 | ||
Total current assets | 83,956 | 374,063 | |||
Total assets | 1,708,364 | 929,549 | |||
Equity | |||||
Share capital | 17 | 3,290 | 3,176 | ||
Share premium account | 17 | 1,033,065 | 966,931 | ||
Equity reserves | 17 | 83,877 | 20,269 | ||
Fair value reserve | 17 | 14,553 | 21,392 | ||
Accumulated deficit | (152,675) | (139,365) | |||
Total equity | 982,110 | 872,403 | |||
Non-current liabilities | |||||
Interest-bearing loans and borrowings | 16 | 144,208 | - | ||
Other non-current liabilities | 1,898 | 736 | |||
Total non-current liabilities | 146,106 | 736 | |||
Current liabilities | |||||
Interest-bearing loans and borrowings | 16 | 416,609 | - | ||
Trade and other payables | 19 | 157,034 | 52,331 | ||
Tax payable | 20 | 6,505 | 4,079 | ||
Total current liabilities | 580,148 | 56,410 | |||
Total liabilities | 726,254 | 57,146 | |||
Total equity and liabilities | 1,708,364 | 929,549 |
CONSOLIDATED STATEMENT OF CASH FLOW | |||||
For the year ended 31 December 2011 | |||||
2011 | 2010 | ||||
Notes | US$ 000's | US$ 000's | |||
Cash flows from operating activities | |||||
Loss before tax from continuing operations | (40,408) | (46,497) | |||
Profit before tax from discontinued operations | - | 173 | |||
(40,408) | (46,324) | ||||
Adjustments to add/(deduct) non-cash items: | |||||
Depreciation of property, plant & equipment | 10 | 714 | 95 | ||
Amortisation of intangible assets | 9 | 135 | - | ||
Impairment of exploration and evaluation assets | 8 | - | 4,453 | ||
Loss on disposal of property, plant & equipment | 3 | 66 | - | ||
Loss on disposal of available for sale investments | 15 | - | 2,277 | ||
Unrealised foreign exchange loss | 309 | 11,191 | |||
Share based payments | 18 | 25,683 | 11,309 | ||
Dividend income | 15 | - | (7,347) | ||
Interest income | (1,061) | (318) | |||
(14,562) | (24,664) | ||||
Operating loss before working capital changes | |||||
(Increase)/decrease in inventories | (1,071) | 310 | |||
(Increase) in other receivables | (4,505) | (256) | |||
Increase in other non current liabilities | 1,162 | 6 | |||
Increase in trade, taxation and other payables | 3,525 | 46,210 | |||
Net cash flow from operating activities | (15,451) | 21,606 | |||
Cash flows from investing activities | |||||
Dividends received | 15 | - | 7,347 | ||
Interest received | 222 | 318 | |||
Proceeds of sales of property, plant & equipment | - | 62 | |||
Payments to fund assets under construction | |||||
and property, plant and equipment | (916,644) | (264,958) | |||
Payments to acquire exploration and evaluation assets | - | (110,544) | |||
Payments to acquire software | 9 | (2,183) | - | ||
Proceeds of sales of available for sale investments | 15 | - | 1,621 | ||
Payments to acquire available for sale investments | 15 | - | (1,252) | ||
Net cash outflow from investing activities | (918,605) | (367,406) | |||
Cash flows from financing activities | |||||
Proceeds of ordinary share issue | 46,345 | 650,894 | |||
Proceeds of exercise of options and warrants | 17 | 2,348 | 1,815 | ||
Proceeds from borrowings | 589,181 | - | |||
Interest paid and costs of financing | (59,408) | - | |||
Net cash inflow from financing activities | 578,466 | 652,709 | |||
Net (decrease)/increase in cash and cash equivalents | (355,590) | 306,909 | |||
Net foreign exchange difference | (309) | (11,191) | |||
Cash and cash equivalents at beginning of period | 14 | 372,364 | 76,646 | ||
Cash and cash equivalents at end of period | 14 | 16,465 | 372,364 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | ||||||||||
For the year ended 31 December 2011 | ||||||||||
Attributable to equity holders of the parent | ||||||||||
Share | Profit and | |||||||||
Share | premium | Equity | Fair value | loss | ||||||
capital | account | reserves | reserves | account | Total | |||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | |||||
As at 1 January 2010 | 2,136 | 310,002 | 14,221 | 6,960 | (103,386) | 229,933 | ||||
Loss for the year | - | - | - | - | (35,979) | (35,979) | ||||
Fair value movements on available for sale investments | - | - | - | 13,786 | - | 13,786 | ||||
Deferred taxation on available for sale investments | - | - | - | (2,113) | - | (2,113) | ||||
Total comprehensive income | - | - | - | 11,673 | (35,979) | (24,306) | ||||
Reserves transfer for available for sale investments | - | - | - | 2,759 | - | 2,759 | ||||
Allotments during the year | 1,040 | 681,818 | - | - | - | 682,858 | ||||
Transaction cost - equity issues | - | (30,120) | - | - | - | (30,120) | ||||
Share-based payments | - | - | 11,309 | - | - | 11,309 | ||||
Reserves transfer - performance shares | - | 809 | (839) | - | - | (30) | ||||
Reserves transfer - options | - | 4,368 | (4,368) | - | - | - | ||||
Reserves transfer - warrants | - | 54 | (54) | - | - | - | ||||
As at 31 December 2010 | 3,176 | 966,931 | 20,269 | 21,392 | (139,365) | 872,403 | ||||
As at 1 January 2011 | 3,176 | 966,931 | 20,269 | 21,392 | (139,365) | 872,403 | ||||
Loss for the year | - | - | - | - | (13,310) | (13,310) | ||||
Fair value movements on available for sale investments | - | - | - | (8,100) | - | (8,100) | ||||
Deferred taxation on available for sale investments | - | - | - | 1,261 | - | 1,261 | ||||
Total comprehensive income | - | - | - | (6,839) | (13,310) | (20,149) | ||||
Reserves transfer for available for sale investments | - | - | - | - | - | - | ||||
Allotments during the year | 114 | 65,686 | 38,373 | - | - | 104,173 | ||||
Transaction cost - equity issues | - | - | - | - | - | - | ||||
Share-based payments | - | - | 25,683 | - | - | 25,683 | ||||
Reserves transfer - options | - | 378 | (378) | - | - | - | ||||
Reserves transfer - warrants | - | 70 | (70) | - | - | - | ||||
As at 31 December 2011 | 3,290 | 1,033,065 | 83,877 | 14,553 | (152,675) | 982,110 | ||||
AFRICAN MINERALS LIMITED | ||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS | ||||||||||||||||
For the year ended 31 December 2011 | ||||||||||||||||
1. ACCOUNTING POLICIES | ||||||||||||||||
1.1 Corporate Information | ||||||||||||||||
This preliminary announcement for the year ended 31 December 2011 contains extracted financial information from the Group's unaudited non-statutory consolidated financial statements. This announcement does not contain audited information for the year ended 31 December 2011.The unaudited consolidated financial statements of African Minerals Limited for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 10 April 2012.The registered office of African Minerals Limited, the ultimate parent of the Group is Victoria Place, 31 Victoria Street Hamilton, HM10, Bermuda.The principal activities of the Group are the production and sale of Iron Ore and development of mining and infrastructure assets in Sierra Leone. | ||||||||||||||||
1.2 Basis of preparation | ||||||||||||||||
The unaudited consolidated financial statements of African Minerals Limited and all its subsidiaries (the 'Group') have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and adopted by the European Union (EU) as they apply to the financial statements of the Group for the year ended 31 December 2011.The unaudited consolidated financial statements have been prepared on a historical cost basis, except for certain available for sale investments that have been measured at fair value. The consolidated financial statements are presented in US dollars and all values are rounded to the nearest thousand except when otherwise indicated.
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1.3 Basis of consolidation
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The consolidated financial statements comprise the financial statements of the Group as at 31 December 2011.Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases.The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions anddividends are eliminated in full. | ||||||||||||||||
1.4 Significant accounting judgements, estimates and assumptions
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The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management's experience and other factors, including expectations of future events, that are believed to be reasonable under the circumstances. However, actual outcomes would differ from these estimates if different assumptions were used and different conditions existed.In particular, the Group has identified the following areas where significant judgements, estimates and assumptions are required, and where actual results were to differ, may materially affect the financial position or financial results reported in future periods. Further information on each of these and how they impact the various accounting policies is located in the relevant notes to the financial statements.
Going concernManagement have prepared these financial statements on the assumption that the Group is able to continue as a going concern. Refer to note 2. | ||||||||||||||||
Commissioning of Assets and Production Start Date Management assesses the stage of each asset under construction to determine when it moves into the production stage. This being when the asset is substantially complete and ready for its intended use. The criteria used to assess the start date are determined based on the unique nature of each mine construction project, such as the complexity of the project and its location. Management considers various relevant criteria to assess when the production phase is considered to commence. Some of the criteria used to identify the production start date will include, but are not limited to:- Level of capital expenditure incurred compared to the original construction cost estimates- Completion of a reasonable period of testing of the asset- Ability to produce saleable iron ore- Ability to sustain ongoing productionWhen a mine development/construction project moves into the production stage, the capitalisation of certain mine development/construction costs ceases and costs are either regarded as forming part of the cost of inventory or expensed, except for costs that qualify for capitalisation relating to asset additions or improvements, mine development or mineable reserve development. It is also at this point that depreciation/amortisation commences.By the end of 2011, the Group's iron ore infrastructure and mining assets in Sierra Leone were still undergoing commissioning. The mine was processing iron ore, and as a result certain sales occured and samples were shipped in the last quarter. The ore stockpile was held as inventory at the end of the year.Commissioning costs are capitalised into assets under the construction after deducting the net proceeds from selling iron ore and will be depreciated when the infrastructure and mine assets are fully operational. Trade receivables have been recognised for amounts receivable at the end of the year for iron ore sales.
| ||||||||||||||||
Ore resource estimates Ore resource estimates relate to the amount of ore that can be economically and legally extracted from the Group's mining assets. The Group estimates its ore resource based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgments to interpret the data. The estimation of recoverable resource is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgments made in estimating the size and grade of the ore body. Changes in the resource estimates may impact upon the carrying value of exploration and evaluation assets, mining assets, property, plant and equipment, recognition of deferred tax assets, and depreciation and amortisation charges.Exploration and evaluation expenditure The application of the Group's accounting policy for exploration and evaluation expenditure requires judgment in determining whether future economic benefits will arise either from future exploitation or sale or where activities have not reached a stage which permits a reasonable assessment of the existence of reserves. The determination of a Joint Ore Reserves Committee (JORC) resource is itself an estimation process that requires varying degrees of estimation depending on sub-classification and these estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable extraction operation can be established. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the consolidated Statement of Comprehensive Income in the period when the new information becomes available. Exploration and evaluation assets are carried at historical cost less any impairment losses recognised.
| ||||||||||||||||
Recovery of deferred income tax assets Judgement is also required in determining whether deferred income tax assets are recognised in the statement of financial position. Deferred income tax assets, including those arising from un-utilised tax losses, require management to assess the likelihood that the Group will generate sufficient taxable earnings in future periods, in order to utilise recognised deferred income tax assets. Assumptions about the generation of future taxable profits depend on management's estimates of future cash flows. These estimates of future taxable income are based on forecast cash flows from operations (which are impacted by production and sales volumes, commodity prices, reserves, operating costs, closure and rehabilitation costs, capital expenditure, dividends and other capital management transactions) and judgement about the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred income tax assets recorded at the reporting date could be impacted. In addition, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods. | ||||||||||||||||
1.5 New and amended standards and standards issued but not effective
New and amended standards The accounting policies adopted are consistent with those of the previous financial year. The following new and amended IFRS and Interpretations effective as of 1 January 2011 did not have a financial impact on the Group:- IAS 32 Financial Instruments: Presentation (Amendment) - classification of rights issues- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments- IFRIC 13 Customer Loyalty Programmes (determining the fair value of award credits)- IAS 24 Related Party Disclosures (amendment) effective 1 January 2011- IFRIC 14 Prepayments of a Minimum Funding Requirement (amendment) effective 1 January 2011- Improvements to IFRSs (May 2010) o IFRS 3 Business Combinations - measurement options available for non-controlling interest (NCI) effective 1 July 2010 o IFRS 7 Financial Instruments: Disclosures - collateral and qualitative disclosures o IAS 1 Presentation of Financial Statements - analysis of other comprehensive income
| ||||||||||||||||
Standards issued but not yet effectiveStandards issued but not yet effective up to the date of issuance of the Group's financial statements are listed below. The Group intends to adopt these standards when they become effective, however these are not expected to have any significant impact on disclosures, financial position or performance when applied at a future date, except for IFRIC 20 as below. - IAS 1 Financial Statement Presentation - Presentation of Items of Other Comprehensive Income- IAS 12 Income Taxes - Recovery of Underlying Assets- IAS 19 Employee Benefits (Amendment)- IAS 27 Separate Financial Statements (as revised in 2011)- IAS 28 Investments in Associates and Joint Ventures (as revised in 2011)- IFRS 7 Financial Instruments: Disclosures - Enhanced Derecognition Disclosure Requirements- IFRS 9 Financial Instruments: Classification and Measurement- IFRS 10 Consolidated Financial Statements- IFRS 11 Joint Arrangements- IFRS 12 Disclosure of Involvement with Other Entities- IFRS 13 Fair Value Measurement- IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine - is effective for periods on or following 1 January 2013.The Interpretation only applies to stripping costs incurred during the production phase of a surface mine (production stripping costs). Costs incurred in undertaking stripping activities are considered to create two possible benefits - the production of inventory in the current period, and / or improved access to ore to be mined in a future period. Production stripping costs are to be capitalised as part of an asset, if an entity can demonstrate that it is probable future economic benefits will be realised, the costs can be reliably measured and the entity can identify the component of an ore body for which access has been improved. This asset is to be called the "stripping activity asset". Where costs cannot be specifically allocated between the inventory produced during the period and the stripping activity asset, the Interpretation requires an entity to use an allocation basis that is based on a relevant production measure. | ||||||||||||||||
1.6 Summary of significant accounting policies
| ||||||||||||||||
Mineral exploration licences, exploration and evaluation assets and softwareMineral exploration licences Pre-licence costs are expensed in the period in which they are incurred. Licence costs paid in connection with a right to explore in an existing exploration area are capitalised and amortised over the term of the permit.Exploration and evaluation assets Exploration costs are capitalised as exploration and evaluation assets until a decision is made to proceed to development. Related costs are then transferred to assets under construction. Before reclassification, exploration costs are assessed for impairment and any impairment loss recognised in the statement of comprehensive income. Subsequent development costs are capitalised under assets under construction, together with any amounts transferred from exploration and evaluation assets. Mining assets are amortised over the estimated life of the commercial mineral reserves on a unit of production basis.Software Software is shown at historical cost less accumulated amortisation and impairment losses. The initial cost of an asset comprises its purchase price and any consultancy costs directly attributable to bringing the asset into operation together with any incidental cost of purchase. Software amortisation is charged to the Statement of Comprehensive Income on a 20% straight-line basis. | ||||||||||||||||
Assets under construction and property, plant & equipment Plant and equipment are shown at cost less accumulated depreciation and impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, any incidental cost of purchase and borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Directly attributable costs inlcude employee benefits, professional fees and costs of testing whether the asset is functioning properly, after deducting the net proceeds from selling iron ore produced while bringing the asset to the condition intended by management. Capitalised borrowing costs include those that are directly attributable to the construction of mining and infrastructure assets.Property, plant & equipment relate to land, buildings, plant, machinery, fixtures and fittings and are shown at historical cost less accumulated depreciation and impairment losses.Assets under construction relate to mining and infrastructure assets and are not depreciated. After production starts, all assets included in "Assets under construction" are transferred to ""Property, plant and equipment" or "Mine assets": this is signified by the formal commissioning of the mine for production.Mining assets will be amortised over the estimated life of the commercial mineral reserves on a unit of production basis. Infrastructure assets and any other assets are depreciated on a straight-line basis over the expected useful lives of the assets concerned. The depreciation rates are as follows:
| ||||||||||||||||
Subsequent expenditure is capitalised when it is probable that future economic benefits from the use of the asset will be increased. All other subsequent expenditure is recognised as an expense in the period in which it is incurred. Repairs and maintenance which neither materially add to the value of assets nor appreciably prolong their useful lives are charged against income. Gains/(losses) on the disposal of fixed assets are credited/(charged) to income. The gain or loss is the difference between the net disposal proceeds and the carrying amount of the asset.The asset's residual values, useful lives and methods of depreciation are reviewed at each reporting period, and adjusted prospectively if appropriate.
Financial instruments: Initial recognition and measurementa) Financial assetsThe Group's financial assets include available for sale investments, trade and other receivables, and cash and cash equivalents.Available for sale InvestmentsAvailable for sale financial assets include investments in listed equities, that are neither classified as held for trading nor designated at fair value through profit or loss, and are initially measured at fair value.Changes in fair values of investments available for sale are recorded through fair value reserves, whilst dividend income are recorded to the the Statement of Comprehensive Income for the period.Trade and other receivablesTrade and other receivables are stated at amortised cost less provision for doubtful debts. Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.Cash and cash equivalentsCash and cash equivalents are measured at fair value, based on the relevant exchange rates at balance sheet date. Cash and cash equivalents comprise cash, cash at hand and short term deposit amounts with original maturity of less than three months. For the purpose of the Consolidated Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.ImpairmentThe Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. A financial asset is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (a loss event) and that loss event has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.b) Financial liabilitiesThe Group's financial liabilities include trade and other payables, bank overdrafts and borrowings. All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, less directly attributable transaction costs. | ||||||||||||||||
Operating LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.
Finance income Interest income is made up of interest received on cash and cash equivalents.Deferred taxation Deferred income tax is provided using the balance sheet method on temporary differences at the reporting date between the taxbases of assets and liabilities and their carrying amounts for financial reporting purposes.Deferred income tax liabilities are recognised for all taxable temporary differences.
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused taxcredits and unused tax losses, to the extent that it is probable that taxable profit will be available against whichthe deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can beutilised, except:- In respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered.Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
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Foreign currencies The consolidated financial statements are presented in US dollars, which is the parent company's functional currency and the Group's presentation currency. The Group does not have any foreign operations. Transactions in foreign currencies are initially recorded in the functional currency at the respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the spot rate of exchange ruling at the reporting date. All differences are taken to the Statement of Comprehensive Income or other comprehensive income, should specific criteria be met. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Inventories Inventories are valued at the lower of cost of production and net reaslisable value. Work in progress stockpiles represent ore that has been extracted and is available for further processing. Inventories are valued at the lower of cost of production and net realisable value. The cost of producing iron ore is accounted for on a weighted average basis and includes labour costs, materials and contractor expenses which are directly attributable to the extraction and processing of ore, and production overheads. Quantities of ore stockpiles are assessed through surveys and assays.Other inventories are made up of fuel and spare parts for maintenance equipment.
Share-based paymentsOptions The Group awards equity-settled share-based payments to certain Directors, officers, employees and suppliers. The grant date fair value of the share plans is recognised as an expense over the expected vesting period with a corresponding entry to retained earnings. The estimate of the number of awards likely to vest is reviewed at each statement of financial position date up to the vesting date, at which point the estimate is adjusted to reflect the actual awards issued. No adjustment is made after the vesting date even if the awards are forfeited or not exercised.Fair value of the options is measured by use of the Black-Scholes pricing model. The estimated life of the instrument used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
Performance shares The Group issues performance shares on the completion of certain conditions being met.The Company has also entered into agreements to award senior executives with shares in the Company based on certain performance conditions being met. Conditions include the completion of certain feasibility studies and the achievement of various iron ore production targets. The grant-date fair value of performance shares is charged to the statement of comprehensive income over the period between the date of grant and the date the performance conditions are expected to be met.Warrants Non-market based vesting conditions are taken into account in estimating the number of awards likely to vest. Fully-paid shares are valued at market value at the date of issue.The grant date fair value of warrants granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees become unconditionally entitled to the warrants. The amount recognised as an expense is adjusted to reflect the actual number of warrants for which the related service and non-market vesting conditions are met. To calculate the fair value of the warrants, the Black & Scholes pricing model has been used.
Segment reporting The Group is managed as a single operating segment which is developing a mine and related infrastructure in order to meet commercial production in 2012. In accordance with IFRS 8 Operating Segments, the Group presents its results in a single segment which are disclosed in the Statement of Comprehensive Income for the Group.The Group does not have any significant non-current assets that are located in the country of domicile of the Group. The vast majority of the non-current assets are located in Sierra Leone. | ||||||||||||||||
2. GOING CONCERN
Following completion of the acquisition by Shandong Iron & Steel Group of a 25% shareholding in the Tonkolili project companies on 30 March 2012 (refer to note 22), the Group has received cash of $1.5bn. The Group paid $417.7m of the $1.5 billion consideration received, to Standard Bank, in settlement of the Secured Loan Facility and a further $65.2m in interest and other charges to AML Bermuda, its parent company. The $1,017.1m remainder of the consideration will be available for use by the project companies for capital expenditure purposes.
Having considered: the estimated cost to complete Phase 1 of the project; detailed cash flow forecasts; assumptions underpinning those forecasts; and the risks and uncertainties associated with the ramp up of production to a forecast level of 20mtpa by the end of this year, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore the Directors continue to adopt the going concern basis of accounting in preparing the financial statements.
3. NET OPERATING EXPENSES |
| |||||
2011 | 2010 | |||||
Notes | US$ 000's | US$ 000's | ||||
From continuing operations | ||||||
Depreciation of property, plant and equipment | 10 | 714 | 95 | |||
Amortisation of intangible assets | 9 | 135 | - | |||
Loss on disposal of property, plant and equipment | 66 | - | ||||
Employee costs | 5 | 23,657 | 23,713 | |||
Foreign exchange differences | (1,793) | 11,191 | ||||
Travel | 4,796 | 7,425 | ||||
Advertising & public relations | 1,022 | 543 | ||||
Consulting and other professional fees | 5,894 | 2,026 | ||||
Insurance | 1,759 | 570 | ||||
IT and communications | 2,478 | 1,161 | ||||
Security | 999 | 501 | ||||
Other operating charges | 1,742 | 207 | ||||
41,469 | 47,432 | |||||
| ||||||
Net operating expenses include: | ||||||
2011 | 2010 | |||||
US$ 000's | US$ 000's | |||||
Auditors' remuneration: | ||||||
Audit of the financial statements | 400 | 140 | ||||
Half year review | 96 | 60 | ||||
Other fees | ||||||
-all other services | - | 25 | ||||
Total other fees | 496 | 225 | ||||
4. KEY MANAGEMENT PERSONNEL | |||||||||
2011 | 2010 | ||||||||
US$ 000's | US$ 000's | ||||||||
Directors' emoluments | 4,932 | 2,996 | |||||||
Amounts receivable under performance share awards | 10,504 | 1,566 | |||||||
Share options | 9,863 | 6,804 | |||||||
Social security | 336 | 210 | |||||||
25,635 | 11,576 | ||||||||
Key management personnel comprise the directors. | |||||||||
The aggregate gain made by directors on the exercise of options is $1,460,000 in 2011 (2010: 3,781,000). | |||||||||
No Director has retirement benefits accruing to them as a result of their services to the Group. | |||||||||
5. EMPLOYEE COSTS | |||||||||
2011 | 2010 | ||||||||
Note | US$ 000's | US$ 000's | |||||||
Wages and salaries | 39,932 | 25,822 | |||||||
Share based payments | 18 | 25,683 | 11,309 | ||||||
Social security costs | 1,682 | 531 | |||||||
67,297 | 37,662 | ||||||||
Less: | |||||||||
Capitalised costs | (43,640) | (13,949) | |||||||
Employee costs included within net operating expenses (note 3) | 23,657 | 23,713 | |||||||
The number of employees at the various mining and exploration operations (excluding the non-executive Directors of the Group) at the end of the year was 1,707 (2010: 950). | |||||||||
$25,196,000 wages and salaries costs and $9,222,000 share based payment costs relating to the project were | |||||||||
capitalised. | |||||||||
| |||||||||
6. LOSS PER SHARE | |||
2011 | 2010 | ||
US$ 000's | US$ 000's | ||
Loss for the year | (13,310) | (35,979) | |
Continuing operations | (13,310) | (36,152) | |
Discontinued operations | - | 173 | |
Basic earnings/loss per share is calculated by dividing the profit/loss attributable to equity holders of the company by the | |||
weighted average number of ordinary shares in issue during the year of all dilutive potential ordinary shares. Although the | |||
company has outstanding share options, warrants and performance share awards that could result in further common | |||
shares being issued, these are not taken into account in computing diluted loss per share as they are antidilutive. | |||
Shares | Shares | ||
Basic and diluted weighted average number of common shares in issue | 327,395,866 | 257,185,914 | |
Basic and diluted loss per share - cents | (4.06) | (13.98) | |
Basic and diluted loss per share continuing activities - cents | (4.06) | (14.05) | |
Basic and diluted earnings per share discontinuing activities - cents | - | 0.07 | |
Convertible bonds were issued after the reporting period and can be convertible into fully paid ordinary shares of the Group. | |||
Refer to subsequent events note 22. In the event of conversion this will significantly increase the number of common shares. | |||
7. INVENTORIES |
| |||||||
2011 | 2010 |
| ||||||
US$ 000's | US$ 000's |
| ||||||
| ||||||||
| ||||||||
Work in progress stockpiles | 20,408 | - |
| |||||
Finished goods stockpiles | 28,279 |
| ||||||
Other inventories | 2,348 | 1,277 |
| |||||
| ||||||||
51,035 | 1,277 |
| ||||||
There were no inventory write downs in the year. Other inventories relate to fuel and spare parts used at the mine | ||||||||
and rail and port. | ||||||||
8. EXPLORATION AND EVALUATION ASSETS | Mineral |
| |||||||||||
Exploration | exploration |
| |||||||||||
expenditure | licences | Total |
| ||||||||||
US$ 000's | US$ 000's | US$ 000's |
| ||||||||||
Cost |
| ||||||||||||
At 1 January 2010 | 123,232 | 920 | 124,152 |
| |||||||||
Additions | 112,102 | - | 112,102 |
| |||||||||
| |||||||||||||
As at 31 December 2010 | 235,334 | 920 | 236,254 |
| |||||||||
| |||||||||||||
At 1 January 2011 | 235,334 | 920 | 236,254 |
| |||||||||
Transfer to assets under construction | (189,720) | (920) | (190,640) |
| |||||||||
| |||||||||||||
As at 31 December 2011 | 45,614 | - | 45,614 |
| |||||||||
| |||||||||||||
Provision for amortisation and impairment |
| ||||||||||||
At 1 January 2010 | 34,281 | - | 34,281 |
| |||||||||
Impairment charge for the year | 3,858 | - | 3,858 |
| |||||||||
| |||||||||||||
As at 31 December 2010 | 38,139 | - | 38,139 |
| |||||||||
| |||||||||||||
At 1 January 2011 | 38,139 | - | 38,139 |
| |||||||||
Amortisation charge for the year | - | - | - |
| |||||||||
| |||||||||||||
As at 31 December 2011 | 38,139 | - | 38,139 |
| |||||||||
| |||||||||||||
Net book value |
| ||||||||||||
At 1 January 2010 | 88,951 | 920 | 89,871 |
| |||||||||
At 31 December 2010 | 197,195 | 920 | 198,115 |
| |||||||||
At 31 December 2011 | 7,475 | - | 7,475 |
| |||||||||
| |||||||||||||
Exploration and evaluation assets comprise the cost of purchasing mineral exploration licences and certain deferred exploration and evaluation expenditure on the Company's mineral licences. |
| ||||||||||||
The transfer to assets under construction relate to the Group's flagship project in Tonkolili, Sierra Leone. The remaining balance relates a gold exploration project in Sierra Leone. |
| ||||||||||||
The Board of Directors regularly assesses the potential of each mineral licence and writes off any deferred exploration expenditure that it believes to be unrecoverable. The Board of Directors undertook an impairment review of the Group's exploration and evaluation assets as at 31 December 2011 and the impairment charge for the year was nil (2010: $3,859,000). The impairment charge in 2010 relates to the write down of our investments in White River Resources, a nickel exploration project in Canada and Pinnacle Coal, a Sierra Leone coal exploration project, neither of which form an on-going part of the Group's core activities. |
| ||||||||||||
2010 |
| ||||||||||||
Impairment |
| ||||||||||||
charge |
| ||||||||||||
US$ 000's |
| ||||||||||||
Project |
| ||||||||||||
Canada - nickel exploration | 2,576 |
| |||||||||||
Sierra Leone - coal exploration | 1,282 |
| |||||||||||
3,858 |
| ||||||||||||
Software (refer to note 9) | 595 |
| |||||||||||
4,453 |
| ||||||||||||
9. INTANGIBLE ASSETS |
| ||||||||
| |||||||||
| |||||||||
Software | |||||||||
US$ 000's | |||||||||
Cost | |||||||||
At 1 January 2010 | - | ||||||||
Additions | 595 | ||||||||
As at 31 December 2010 | 595 | ||||||||
At 1 January 2011 | 595 | ||||||||
Additions | 2,183 | ||||||||
Transfer to assets under construction | - | ||||||||
As at 31 December 2011 | 2,778 | ||||||||
Provision for amortisation and impairment | |||||||||
At 1 January 2010 | - | ||||||||
Impairment charge for the year | 595 | ||||||||
As at 31 December 2010 | 595 | ||||||||
At 1 January 2011 | 595 | ||||||||
Amortisation charge for the year | 135 | ||||||||
As at 31 December 2011 | 730 | ||||||||
Net book value | |||||||||
At 1 January 2010 | - | ||||||||
At 31 December 2010 | - | ||||||||
At 31 December 2011 | 2,048 | ||||||||
| |||||||||
There was no software impairment during the year (2010: $595,000). |
| ||||||||
10. ASSETS UNDER CONSTRUCTION AND PROPERTY, PLANT AND EQUIPMENT | ||||||||||||
Assets under | Plant & | Land & | Fixtures & | |||||||||
construction | machinery | buildings | fittings | Total | ||||||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | ||||||||
Cost | ||||||||||||
At 1 January 2010 | 3,002 | 5,991 | - | 560 | 9,553 | |||||||
Additions | 250,994 | 9,271 | 4,584 | 109 | 264,958 | |||||||
Disposals | - | - | - | (62) | (62) | |||||||
As at 31 December 2010 | 253,996 | 15,262 | 4,584 | 607 | 274,449 | |||||||
At 1 January 2011 | 253,996 | 15,262 | 4,584 | 607 | 274,449 | |||||||
Additions | 1,035,759 | 11,156 | 4,235 | 1,569 | 1,052,719 | |||||||
Disposals | - | (214) | - | (224) | (438) | |||||||
Transfer from exploration and evaluation assets | 190,640 | - | - | - | 190,640 | |||||||
As at 31 December 2011 | 1,480,395 | 26,204 | 8,819 | 1,952 | 1,517,370 | |||||||
Depreciation | ||||||||||||
At 1 January 2010 | - | 2,530 | - | 538 | 3,068 | |||||||
Charge for the year | - | 1,368 | 816 | 90 | 2,274 | |||||||
Disposals | - | - | - | (26) | (26) | |||||||
As at 31 December 2010 | - | 3,898 | 816 | 602 | 5,316 | |||||||
At 1 January 2011 | - | 3,898 | 816 | 602 | 5,316 | |||||||
Charge for the year | - | 5,121 | 776 | 207 | 6,104 | |||||||
Disposals | - | (214) | - | (224) | (438) | |||||||
- | ||||||||||||
As at 31 December 2011 | - | 8,805 | 1,592 | 585 | 10,982 | |||||||
Net book value | ||||||||||||
At 1 January 2010 | 3,002 | 3,461 | - | 22 | 6,485 | |||||||
At 31 December 2010 | 253,996 | 11,364 | 3,768 | 5 | 269,133 | |||||||
At 31 December 2011 | 1,480,395 | 17,399 | 7,227 | 1,367 | 1,506,388 | |||||||
2011 | 2010 | |||||||||||
US$ 000's | US$ 000's | |||||||||||
Depreciation | 6,104 | 2,274 | ||||||||||
Less: | ||||||||||||
Capitalised costs | (5,390) | (2,179) | ||||||||||
Depreciation charge | 714 | 95 | ||||||||||
Capitalised borrowing costs | ||||||||||||
There were borrowing costs capitalised during the year of $86,363,000 (2010: nil). Borrowing costs are comprised of placement fees and interest. The effective interest rates of the specific borrowing are used to determine the amount of borrowing costs eligible for capitalisation. These are detailed in note 16. |
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11. TRADE AND OTHER RECEIVABLES |
| ||||||||||||
2011 | 2010 |
| |||||||||||
Current | US$ 000's | US$ 000's |
| ||||||||||
| |||||||||||||
Trade receivables | 10,690 | - |
| ||||||||||
Other receivables | 5,766 | 422 |
| ||||||||||
| |||||||||||||
16,456 | 422 |
| |||||||||||
| |||||||||||||
Trade receivables relate to amounts receivable as at 31 December 2011 for the sales of iron ore during December 2011. December sales have been credited to assets under construction, as the project was in a phase of commissioning at year end. |
| ||||||||||||
12. DEPOSITS |
| ||||||||||||
2011 | 2010 |
| |||||||||||
Non-current | US$ 000's | US$ 000's |
| ||||||||||
| |||||||||||||
Deposits | 3,910 | 3,910 |
| ||||||||||
| |||||||||||||
$3,000,000 in 2010 and 2011 relates to deposits paid to the Government of Sierra Leone in relation to the rail and port licences. These amounts are recoverable and will be be netted against future Sierra Leone tax payables. | |||||||||||||
13. TAXATION |
| ||||||||
| |||||||||
Analysis of credit for the year: |
| ||||||||
2011 | 2010 |
| |||||||
Notes | US$ 000's | US$ 000's |
| ||||||
Deferred tax |
| ||||||||
| |||||||||
Current year | 15,126 | 10,345 |
| ||||||
Tax adjustments in respect of prior years | 12,896 | - |
| ||||||
Effect of changes in tax rates | (924) | - |
| ||||||
Deferred tax credit | 27,098 | 10,345 |
| ||||||
| |||||||||
The effective corporate income tax for the year is lower than the statutory rate of corporation tax in the UK of 26.5% |
| ||||||||
(2010: 28%). |
| ||||||||
| |||||||||
A reconciliation between the tax credit reflected in the statement of comprehensive income and the expected tax |
| ||||||||
credit based on the statutory rate of corporation tax for the year is shown below: |
| ||||||||
2011 | 2010 |
| |||||||
Notes | US$ 000's | US$ 000's |
| ||||||
| |||||||||
Loss for the year from continuing operations | (40,408) | (46,497) |
| ||||||
Discontinued operations |
| ||||||||
Profit/(loss) for the year | 25 | - | 173 |
| |||||
(40,408) | 173 |
| |||||||
| |||||||||
Loss on ordinary activities before tax | (40,408) | (46,324) |
| ||||||
| |||||||||
| |||||||||
Group's domestic tax rate is as follows: |
| ||||||||
| |||||||||
Loss before tax multiplied by the standard rate of UK Corporation tax |
| ||||||||
26.5% (2010: 28%) | 10,708 | 12,971 |
| ||||||
| |||||||||
Effects of: |
| ||||||||
Expenses deductible/(not deductible) for tax purposes | 10,150 | (4,705) |
| ||||||
Effect of changes in tax rates | (924) | - |
| ||||||
Recognition of previously unrecognised deferred tax assets | 14,689 | 3,708 |
| ||||||
Losses not recognised | (7,610) | - |
| ||||||
Effect of overseas tax rates | 85 | (1,629) |
| ||||||
Total taxation credit | 27,098 | 10,345 |
| ||||||
| |||||||||
Deferred income tax asset |
| ||||||||
With the Tonkolili mine in a commissioning phase and with production starting in Q1 2012, the Group has increased confidence of their ability to generate taxable profits against brought forward tax losses. This has resulted in an increase to the recognised net deferred tax asset during 2011. |
| ||||||||
| |||||||||
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: |
| ||||||||
Property plant & equipment | Tax losses | Other temporary differences | Total | ||||||
Deferred income tax assets | US$ 000's | US$ 000's | US$ 000's | US$ 000's | |||||
At 1 January 2010 | |||||||||
Credited/(charged) to the Statement of Comprehensive Income | - | 63,283 | 817 | 64,100 | |||||
Amounts previously unrecognised | 5,123 | 12,915 | (604) | 17,434 | |||||
Effects of changes in tax rates | - | (75) | - | (75) | |||||
As at 31 December 2010 | 5,123 | 76,123 | 213 | 81,459 | |||||
At 1 January 2011 | 5,123 | 76,123 | 213 | 81,459 | |||||
Credited/(charged) to the Statement of Comprehensive Income | (5,037) | 135,009 | 9,416 | 139,388 | |||||
Amounts previously unrecognised | - | - | - | - | |||||
Effects of changes in tax rates | - | - | - | - | |||||
As at 31 December 2011 | 86 | 211,132 | 9,629 | 220,847 | |||||
Property plant & equipment | Investment | Other | Total | ||||||
Deferred income tax liabilities | US$ 000's | US$ 000's | US$ 000's | US$ 000's | |||||
At 1 January 2010 | |||||||||
Charged/(credited) to the Statement of Comprehensive Income | 56,117 | 2,622 | 58,739 | ||||||
(Credited) to Other Comprehensive Income | 2,113 | 2,113 | |||||||
Amounts previously unrecognised | 11,389 | (6) | 1,067 | 12,450 | |||||
Effects of changes in tax rates | (75) | (75) | |||||||
As at 31 December 2010 | 67,506 | 2,032 | 3,689 | 73,227 | |||||
At 1 January 2011 | 67,506 | 2,032 | 3,689 | 73,227 | |||||
Charged/(credited) to the Statement of Comprehensive Income | 115,979 | - | (3,689) | 112,290 | |||||
(Credited) to Other Comprehensive Income | - | (1,261) | - | (1,261) | |||||
As at 31 December 2011 | 183,485 | 771 | - | 184,256 | |||||
Net deferred tax asset | |||||||||
As at 1 January 2011 | 8,232 | ||||||||
Tax credit recognised in Statement of Comprehensive Income | 27,098 | ||||||||
Tax credit recognised in Other Comprehensive Income | 1,261 | ||||||||
Total taxation credit | 28,359 | ||||||||
As at 31 December 2011 | 36,591 | ||||||||
Unrecognised tax losses | |||||||||
Where the realisation of deferred tax assets is dependent on future profits, losses carried forward are recognised only to the extent that business forecasts predict that such profits will be available to the companies in which the losses arose. The Group has unrecognised deferred tax assets of approximately $7,072,000 (2010: $2,120,000) in respect of tax losses that are available indefinitely for offset against future taxable profits. Furthermore, the Group has an unrecognised deferred tax asset of $9,800,000 in relation to future deductions which may be available in relation to employee share schemes. | |||||||||
Change in corporation tax rateUnited KingdomFinance Act 2011, which was substantively enacted in July 2011, included provisions to reduce the rate of corporation tax to 26% with effect from 1 April 2011 and 25% with effect from 1 April 2012.The government has announced that it intends to further reduce the rate of corporation tax to 23% with effect from 1 April 2013 and 22% from 1 April 2014. As this legislation was not substantively enacted by 31 December 2011, the impact of the anticipated rate change is not reflected in the tax provisions reported in these accounts.Sierra LeoneThe rate of corporation tax has is 25% and has not changed in the year.
14. FINANCIAL INSTRUMENTS | |||||||||
Set out below is a comparison by class of the fair value of the Group's financial instruments that are carried in the financial statements. | |||||||||
Carrying Value | Carrying Value | Fair Value | Fair Value | ||||||
2011 | 2010 | 2011 | 2010 | ||||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | ||||||
Financial assets | |||||||||
Trade and other receivables | 11 | 10,690 | - | 10,690 | - | ||||
Deposit | 12 | 3,910 | 3,910 | 3,910 | 3,910 | ||||
Available for sale investments | 15 | 67,996 | 76,096 | 67,996 | 76,096 | ||||
Cash and cash equivalents | 16,465 | 372,364 | 16,465 | 372,364 | |||||
99,061 | 452,370 | 99,061 | 452,370 | ||||||
Financial liabilities | |||||||||
Trade and other payables | 157,034 | 52,331 | 157,034 | 52,331 | |||||
Interest-bearing borrowings | 16 | 560,817 | - | 560,817 | - | ||||
717,851 | 52,331 | 717,851 | 52,331 | ||||||
The Group's principal financial liabilities comprise interest-bearing borrowings and trade and other payables. The main purpose of the interest-bearing borrowings is to raise finance for the Group's capital expenditure program. Trade and other payables are used to manage short term cash flow and working capital requirements. The Group has various financial assets such as available for sale investments, as well as other receivables and cash and cash equivalents, which arise directly from its operations. | |||||||||
In respect of monetary assets and liabilities held in currencies other than US Dollars, the Group ensures that net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short term imbalances. Foreign exchange differences on retranslation of such assets and liabilities are taken to the statement of comprehensive income. | |||||||||
Cash and cash equivalents consist of short-term deposits in US Dollars and Sterling which earn market interest rates. | |||||||||
The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The fair value of loans and other current financial liabilities is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities; as at 31 December 2011, the carrying amounts of such liabilities are not materially different from their calculated fair values. | |||||||||
15. AVAILABLE FOR SALE INVESTMENTS | |||||||
2010 | Share | Share | Share price | Exchange | Fair value | 2011 | |
US$ 000's | Disposals | Acquisitions | movement | Movement | movement | US$ 000's | |
Listed securities: | |||||||
Equity securities - Australia | 62,668 | - | - | (4,382) | 63 | (4,319) | 58,349 |
Equity securities - UK | 13,428 | - | - | (3,770) | (11) | (3,781) | 9,647 |
76,096 | - | - | (8,152) | 52 | (8,100) | 67,996 | |
2009 | Share | Share | Share price | Exchange | Fair value | 2010 | |
US$ 000's | Disposals | Acquisitions | movement | Movement | movement | US$ 000's | |
Listed securities: | |||||||
Equity securities - Australia | 40,504 | - | 16,338 | 6,486 | (660) | 5,826 | 62,668 |
Equity securities - UK | 1,703 | (3,100) | 6,865 | 504 | 7,456 | 7,960 | 13,428 |
42,207 | (3,100) | 23,203 | 6,990 | 6,796 | 13,786 | 76,096 | |
Australia | |||||||
Australian equity securities include Cape Lambert Resources Limited. | |||||||
15,086,615 Cape Lambert Resources shares at consideration of $1 per share were acquired during 2010 in respect of the | |||||||
disposal of Marampa Iron Ore Limited. A further 3,860,277 additional Cape Lambert Resources shares were purchased in 2010 | |||||||
for $1,252,385. There were no additional shares acquired in 2011. | |||||||
As at 31 December 2011 the percentage holding of Cape Lambert Resources Limited was 17.73% (2010: 19.64%). | |||||||
There were no dividends received from Cape Lambert Resource Limited in 2011 (2010: $7,347,134). | |||||||
United Kingdom | |||||||
As at 31 December 2011 the percentage holding of Stellar Diamonds plc (formerly West African Diamonds plc) was 0.80% (2010: 1.25%) and the percentage holding of Obtala Resources plc was 8.97% (2010: 9.45%). | |||||||
There were no shares acquired in UK entities during 2011. 21,170,422 shares in Obtala Resources were received during 2010 in | |||||||
respect of the disposal of Sierra Leone Hard Rock (SL). | |||||||
11,425,000 shares in Baobab Resources plc with cost of $3,898,781 were disposed of in 2010 for proceeds of $1,621,371 | |||||||
and loss on disposal of $2,277,410. No shares were disposed in 2011. | |||||||
16. INTEREST-BEARING LOANS AND BORROWINGS
2011 | |||||||||||
Effective Interest Rate % | Maturity | US$ 000's | |||||||||
Non-current interest-bearing loans and borrowings | |||||||||||
$417.7m Secured Loan facility | 28.18% | 31 January 2013 | 32,171 | ||||||||
$100m Standby facility | LIBOR + 8.5% | 30 September 2013 | 53,795 | ||||||||
$92.5m Asset financing facility | LIBOR + 5.59% | 31 March 2017 | 57,927 | ||||||||
Other Asset financing | 21.38% | 31 October 2015 | 315 | ||||||||
144,208 | |||||||||||
Current interest-bearing loans and borrowings | |||||||||||
$417.7m Secured Loan facility | 28.18% | 31 January 2013 | 360,343 | ||||||||
$100m Standby facility | LIBOR + 8.5% | 30 September 2013 | 44,583 | ||||||||
$92.5m Asset financing facility | LIBOR + 5.59% | 31 March 2017 | 11,491 | ||||||||
Other Asset financing | 21.38% | 31 October 2015 | 192 | ||||||||
416,609 | |||||||||||
Total interest-bearing loans and borrowings | 560,817 | ||||||||||
Secured Loan Facility |
| ||||||||||
The debt facility was established on 4 February 2011 for an amount of $417.7m denominated in US Dollars. As at 31 December 2011, full funds had been drawn down. |
| ||||||||||
| |||||||||||
The principal terms of the facility are as follows: |
| ||||||||||
| |||||||||||
- Two year term (capital repayments commencing from 30 April 2012); |
| ||||||||||
- An interest rate of 11.5% per annum, and a commitment fee (details of the commitment fee below); |
| ||||||||||
- Repayment by the Company at any time (repayments during the first year incur a prepayment fee being 6% of the amount repaid). If the facility remains outstanding on the first anniversary of drawing, the Company shall pay a bonus equal to 3% of the outstanding balance of the facility either in cash or common shares at the Company's election; and |
| ||||||||||
- Secured over the principal assets of the Group. |
| ||||||||||
The commitment fee paid to lenders comprised 2,356,832 new common shares and 10,442,500 warrants which were issued on 4 February 2011. The warrants are convertible into new common shares in the Company at 425 pence per share at the discretion of the warrant holder over a life of five years. |
| ||||||||||
The fair value of the common shares was based on the agreed price of 450 pence and the warrants were valued at 227 pence using a Black-Scholes pricing model. |
| ||||||||||
| Key assumptions and variables used in the valuation included: |
| |||||||||||||||||
| - The spot share price used was £5.13 being the last available closing price prior to the valuation date (4 February 2011); |
| |||||||||||||||||
| - The strike share price used was £4.24; |
| |||||||||||||||||
| - The risk free rate used was a yield of a 5 year UK Government Bond as at the valuation date over the life of the warrants; |
| |||||||||||||||||
| - A nil% dividend yield; |
| |||||||||||||||||
| - Volatility of 40% (sensitivity analysis performed on volatilities of 40%, 45% and 50%, independent valuers' conclusion deemed volatility of 40% appropriate); |
| |||||||||||||||||
| - American type Option; options can be exercised at any point up until expiry; and |
| |||||||||||||||||
| - Warrants are freely transferable (with the exception of to "Restricted Purchasers") prior to the exercise of the subscription rights. |
| |||||||||||||||||
|
| ||||||||||||||||||
| The fair value of the warrants issued in relation to the secured loan facility were valued at $38,373,000. |
| |||||||||||||||||
|
| ||||||||||||||||||
| Borrowing costs of $84,814,000 have been capitalised and transferred to assets under construction based on an effective interest rate of 28.18%. |
| |||||||||||||||||
| After the reporting period, the Group closed a $518m refinancing package with the Standard Bank of South Africa which redeemed |
| |||||||||||||||||
| the $417.7m Secured Loan Facility on more improved and less restrictive terms and continued the $100m standby facility. |
| |||||||||||||||||
| Refer to subsequent events note 22 for further detail. |
| |||||||||||||||||
| |||||||||||||||||||
Standby facility |
| ||||||||||||||||||
On 3 November 2011, the Group signed a $100m Subordinated Facility Agreement with Standard Bank.The principal terms of the facility are:- Repayable in 5 equal quarterly instalments beginning 30 September 2012. There are no penalties for early repayment.- The effective interest rate of this facility, including all commitment and arrangement fees, is under 11% and the interest rate reduces by a further 1% post completion.As at 31 December 2011, the facility is fully drawn down.Borrowing costs of $765,000 have been capitalised and transferred to assets under construction based on an effective interest rate of 10.7% (incorporating transaction fees) . |
| ||||||||||||||||||
| |||||||||||||||||||
Asset financing facility |
| ||||||||||||||||||
On 29 September 2011, the Group signed a $92.5m Asset Financing Facility Agreement with Standard Bank Ltd.The principal terms of the facility are:- Term of 5 years from drawdown, with quarterly repayment- Secured on $99.1m mine and infrastructure assets, specifically carved out of the existing Secured Loan Facility for the purpose of equipment financing- Fully amortising asset-secured loan for mining equipment and rolling stock- Political Risk Insurance to cover general political risk in Sierra Leone- First repayment is after a six month deferment period$89m of the facility has been drawn down. As at 31 December 2011 $70.9m was drawn down, the remaining $18.1m was received in January 2012. |
| ||||||||||||||||||
Borrowing costs of $784,000 have been capitalised and transferred to assets under construction based on an effective interest rate of 7% (incorporating transaction fees) . |
| ||||||||||||||||||
17. SHARE CAPITAL AND RESERVES | |||||||||||
2011 | 2010 | ||||||||||
Number of | 2011 | Number of | 2010 | ||||||||
shares | US$ 000's | shares | US$ 000's | ||||||||
Authorised | |||||||||||
Common shares of US$ 0.01 each | 500,000,000 | 5,000 | 500,000,000 | 5,000 | |||||||
Preference shares of US$ 0.001 each | 100,000,000 | 100 | 100,000,000 | 100 | |||||||
Issued and fully paid - common shares of US$ 0.01 each | |||||||||||
At 1 January | 317,575,943 | 3,176 | 213,639,654 | 2,136 | |||||||
Allotments during the period | 11,369,613 | 114 | 103,936,289 | 1,039 | |||||||
At 31 December | 328,945,556 | 3,290 | 317,575,943 | 3,176 | |||||||
Preference shares are authorised but not issued. | |||||||||||
SHARE PREMIUM | |||||||||||
Note | US$ 000's | ||||||||||
At 1 January 2010 | 310,002 | ||||||||||
Share allotments during the year | 681,818 | ||||||||||
Transaction cost - equity issues | (30,120) | ||||||||||
Reserves transfer - performance shares | 809 | ||||||||||
Reserves transfer - options | 18 | 4,368 | |||||||||
Reserves transfer - warrants | 54 | ||||||||||
At 31 December 2010 | 966,931 | ||||||||||
Share allotments during the year | 65,686 | ||||||||||
Reserves transfer - options | 378 | ||||||||||
Reserves transfer - warrants | 70 | ||||||||||
At 31 December 2011 | 1,033,065 | ||||||||||
Allotments during the period were as follows: |
| ||||||||||
| |||||||||||
New shares |
| ||||||||||
9,348,282 (2010: 98,579,474) new common shares were issued for consideration of $63,452,000 (2010: $677,948,832) with no related expenses paid (2010: $26,418,702). |
| ||||||||||
| |||||||||||
6,991,450 new common shares were issued to China Railway Materials Commercial Corporation for consideration of |
| ||||||||||
$46,345,000. |
| ||||||||||
| |||||||||||
2,356,832 new common shares valued at $17,107,000 were issued as part of the commitment fee paid to lenders for the |
| ||||||||||
secured non-revolving credit facility (refer to Note 16). |
| ||||||||||
| |||||||||||
No shares were repurchased during the period. |
| ||||||||||
| |||||||||||
Share options |
| ||||||||||
1,887,997 (2010: 2,223,482) new common shares were issued for consideration of $2,184,336 (2010: $1,679,050) on the |
| ||||||||||
exercise of share options. |
| ||||||||||
| |||||||||||
Warrants |
| ||||||||||
133,334 (2010: 133,333) new common shares were issued for consideration of $163,693 (2010: $53,880) on the exercise of |
| ||||||||||
share warrants. |
| ||||||||||
Share scheme
No new common shares were issued in 2011 on the achievement of corporate objectives under the Employee Share Scheme. In 2010 there were 3,000,000 shares issued, with a value at grant date of $839,973 under this Scheme. | ||||||||
Total | ||||||||
11,369,613 (2010: 103,936,289) shares were issued for consideration of $65,800,000 (2010: 652,738,000). Total proceeds of options and warrants in the year totalled $2,348,000 (2010: $1,815,000). | ||||||||
Consideration for the shares issued as commitment fee of $17,107,000 (as above) are included within the proceeds from | ||||||||
borrowings of $417,700,000 as per the Statement of Cash Flows, resulting in net consideration of ordinary shares | ||||||||
issued of $48,693,000. | ||||||||
FAIR VALUE RESERVES | ||||||||
Balances held in fair value reserves relate to fair value movements in the year on available for sale investments. | ||||||||
Note | US$ 000's | |||||||
As at 1 January 2010 | 6,960 | |||||||
Reserves transfer for available for sale investments | 2,759 | |||||||
Fair value movement on available for sale investments | 13,786 | |||||||
Deferred taxation on available for sale investments | (2,113) | |||||||
2010 fair value movement | 11,673 | |||||||
As at 31 December 2010 | 21,392 | |||||||
Fair value movement on available for sale investments | 15 | (8,100) | ||||||
Deferred taxation on available for sale investments | 13 | 1,261 | ||||||
2011 fair value movement | (6,839) | |||||||
As at 31 December 2011 | 14,553 | |||||||
EQUITY RESERVES | ||||||||
The balance held in equity reserves relates to share based payments, options and warrants. | ||||||||
Note | US$ 000's | |||||||
As at 1 January 2010 | 14,221 | |||||||
Share-based payments | 18 | 11,309 | ||||||
Reserves transfer - performance shares | (839) | |||||||
Reserves transfer - options | 18 | (4,368) | ||||||
Reserves transfer - warrants | (54) | |||||||
As at 31 December 2010 | 20,269 | |||||||
Issue of warrants | 16 | 38,373 | ||||||
Share-based payments | 18 | 25,683 | ||||||
Reserves transfer - options | (378) | |||||||
Reserves transfer - warrants | (70) | |||||||
As at 31 December 2011 | 83,877 | |||||||
18. SHARE BASED PAYMENTS |
| ||||||||||||||||||||
| |||||||||||||||||||||
Equity-settled transactions |
| ||||||||||||||||||||
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity reserves, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The income statement expense or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense (see note 5). |
| ||||||||||||||||||||
No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied. |
| ||||||||||||||||||||
| |||||||||||||||||||||
Where the terms of an equity-settled transaction award are modified, the minimum expense recognised is the expense as if the terms had not been modified, if the original terms of the award are met. An additional expense is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee as measured at the date of modification. |
| ||||||||||||||||||||
Where an equity-settled award is cancelled, no further expense is recognised for that award. This includes any award where non-vesting conditions within the control of either the entity or the employee are not met. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph. |
| ||||||||||||||||||||
| |||||||||||||||||||||
The stock-based compensation recognised as an expense in the year to 31 December 2011 was $25,683,000 (2010:$11,309,000). This charge is comprised of $14,663,000 (2010: $9,271,000) share options charge and $11,020,000 (2010: $2,037,000) performance share charge. |
| ||||||||||||||||||||
A transfer of $378,000 (2010: $4,368,000 ) was made from the share premium account to the equity reserve during the year. |
| ||||||||||||||||||||
a) OPTIONS | |||||||||||||||||||||
The Group has issued equity settled share options under a share option scheme adopted by the Group on 5 November 2004. Movements in share options over US$ 0.01 common shares in the Company were as follows: | |||||||||||||||||||||
2011 | 2010 | ||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||
Number of Options | Average Price | Number of Options | Average Price | ||||||||||||||||||
As at 1 January | 20,274,973 | 203.4p | 16,648,455 | 99.5p | |||||||||||||||||
Options granted in the year | 6,875,000 | 478.5p | 6,550,000 | 410.3p | |||||||||||||||||
Options exercised in the year | (1,887,997) | 51.7p | (2,223,482) | 136.4p | |||||||||||||||||
Options lapsed in the year | (1,238,327) | 468.5p | (50,000) | 16.8p | |||||||||||||||||
Options forfeited in the year | (5,383,336) | 422.4p | (650,000) | 458.5p | |||||||||||||||||
As at 31 December | 18,640,313 | 20,274,973 | |||||||||||||||||||
10,628,343 (2010: 7,294,795) options were exercisable at year end. | |||||||||||||||||||||
Volatility was determined using the historic fluctuations in the Company's share price. | |||||||||||||||||||||
The fair value of options granted during the year was estimated using the Black-Scholes pricing model with the following significant assumptions: | |||||||||||||||||||||
2011 | 2010 | ||||||||||||||||||||
Expected life (years) | 0.25 - 4.50 | 5.00 | |||||||||||||||||||
Risk-free interest rate | 0.57 - 1.96% | 1.8 - 3.0 % | |||||||||||||||||||
Volatility | 40 - 77.35% | 77 - 91% | |||||||||||||||||||
Weighted average fair value per option | $2.48 | $4.10 | |||||||||||||||||||
Weighted average exercise price | $4.16 | $1.23 | |||||||||||||||||||
Key statistics regarding the options for the year were as follows: |
| ||||||||||||||||||||
| |||||||||||||||||||||
Weighted average fair value per option | $2.48 | $4.10 |
| ||||||||||||||||||
Weighted average exercise price | $4.16 | $1.23 |
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Weighted average share price at exercise date during the year | $7.41 | $5.73 |
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Weighted average remaining life (days) at end of period | 978 | 1,240 |
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Range of exercise price at end of period | $0.80 - $8.67 | $0.80 - $7.62 |
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Subject to the rules of the Share Option Plan and the requirements noted below, each of the outstanding options is exercisable based on various targets in relation to performance of the Group or is exercisable based on the following: |
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- one-third of the shares under option following the first anniversary of the date of grant; |
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- a further one-third of the shares under option following the second anniversary of the date of grant; |
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- the final one-third of the shares under option following the third anniversary of the date of grant; |
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provided that the option holder remains a director or employee of the Group, or if the option holder's employment is terminated, within ninety days of the termination. |
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Subject to the rules of the Share Option Plan each of the outstanding options is exercisable when the Company's share price has traded at or above the Exercise Price for 14 consecutive trading days. |
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b) WARRANTS |
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Movements in equity settled warrants over US$ 0.01 common shares in the Company in the year were as follows: |
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Number of options | 2011 | 2010 |
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As at 1 January | 133,334 | 266,667 |
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Warrants granted in the year | 10,442,500 | - |
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Warrants lapsed in the year | - | - |
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Warrants exercised in the year | (133,334) | (133,333) |
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As at 31 December | 10,442,500 | 133,334 |
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All warrants outstanding at year end relate to those granted in relation to the Secured Loan Facility. Refer to note 16 for details and key statistics regarding these warrants. No stock-based compensation in relation to warrants was recognised as an expense in the year to 31 December 2011 (2010: nil). |
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Warrants are valued using the Black-Scholes pricing model. The value is then capitalised as a borrowing cost into assets under construction. These warrants were issued as part of the consideration paid to advisors who have acted for the Company in the raising of equity through private placements. |
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During the year there were no lapses of warrants (2010: nil) and therefore no transfer out of equity reserves for warrants. |
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c) PERFORMANCE SHARES |
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Movements in performance equity settled shares in the Company in the year were as follows: |
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Weighted | Weighted |
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Number of options | 2011 | Average Price | 2010 | Average Price |
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As at 1 January | 3,250,000 | 226.2p | 4,500,000 | 21.1p |
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Options granted in the year | 1,650,000 | 523.6p | 1,750,000 | 397.8p |
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Shares issued in the year | - | (3,000,000) | 21.1p |
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Options forfeited in the year | (1,000,000) | 285.5p | - |
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Options lapsed in the year | (150,000) | 521.0p | - |
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Options cancelled in the year | (500,000) | 26.0p | - |
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As at 31 December | 3,250,000 | 3,250,000 |
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There were no issues in 2011. For the shares issued in 2010, the following performance conditions were met: |
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- the award of the mining lease for the Tonkolili iron ore project; |
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- the completion of the China Railway Materials Commercial Corporation's ('CRM') equity subscription completed in June 2010. |
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In 2011 the Group entered into agreements to award senior executives with shares in the Company based on certain performance conditions being met. These conditions include the following: |
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- the completion of Phase Two construction targets; and |
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- the achievement of various iron ore production targets. |
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19. TRADE AND OTHER PAYABLES | ||||||
2011 | 2010 | |||||
US$ 000's | US$ 000's | |||||
Trade payables | 79,161 | 41,229 | ||||
Accruals | 77,873 | 11,102 | ||||
157,034 | 52,331 | |||||
Trade payables are non-interest bearing. Trade payables and accruals increased principally due to an increase in | ||||||
capital spend in 2011. | ||||||
20. TAX PAYABLE | ||||
2011 | 2010 | |||
US$ 000's | US$ 000's | |||
Penalties | 2,790 | - | ||
Other taxes and social security | 3,715 | 4,079 | ||
6,505 | 4,079 | |||
Penalties have been capitalised and incurred for under-provision of withholding tax on payments made prior | ||||
to the Mining Lease Agreement being approved. Other taxes include employee tax and withholding tax payable. | ||||
21. COMMITMENTS AND CONTINGENCIES | ||||||||
Operating Leases | ||||||||
The Group has entered into two mining licences with the Sierra Leone Government and a lease for the port and rail operations.The lives of the mining licences is 25 years and the port and rail licence is 99 years. There are no restrictions placed upon the Group by entering into these leases.The Group also has a 5 year operating lease contract for a locomotive fleet for the port and rail operations. A call option exists for the lessee to transfer ownership of the assets to the lessor at fair value of the assets at the end of the lease term. | ||||||||
Future minimum payments under the operating leases as at 31 December are as follows: | ||||||||
2011 | 2010 | |||||||
US$ 000's | US$ 000's | |||||||
Within one year | 10,332 | 1,250 | ||||||
After one year but not more than five years | 38,708 | 5,000 | ||||||
More than five years | 40,750 | 43,250 | ||||||
89,790 | 49,500 | |||||||
Capital Commitments | ||||||||
At 31 December 2011, the Group had commitments of $48,700,000 (2010: $329,300,000) including $25,650,000 (2010: $202,600,000) infrastructure and $23,050,000 (2010: $126,700,000) in relation to the mine. | ||||||||
22. SUBSEQUENT EVENTS | ||||||||
1. Convertible BondOn 31 January 2012 the Group announced the pricing of US$350 million of Convertible Bonds (due 2017).The Bonds were issued at par and were priced with a coupon of 8.5% payable semi-annually in arrears and will be convertible into fully paid ordinary shares of the Group. The conversion price was set at a price of US$10.98 equivalent to GBP 7.00 converted into US$ at the GBP:USD exchange rate as of 30 January 2012. Based on the issue size of US$350 million, the ordinary shares to be issued upon conversion of the Bonds would represent 31,876,138 ordinary shares and at the time of pricing this corresponded to 9.7% of the current total number of issued and outstanding ordinary shares of the Group. In addition, the Group has offered CRM the right to subscribe to ordinary shares in accordance with their right to preserve their 12.5% shareholding. The Board of CRM have confirmed acceptance of this offer and completion is subject to PRC approvals and the relevant documentation.The Bonds were settled and closed on 9 February 2012. If not converted or previously redeemed the Bonds will be redeemed at par at maturity 5 years from the closing date (9 February 2017). The Group will have the option to call the Bonds at 110% of par at 3 years after the Closing Date (9 February 2015). In addition, the Group has the right to redeem the Bonds if at any time the aggregate principal amount of the Bonds outstanding is equal to or less than 15% of the aggregate principal amount of the Bonds initially issued. | ||||||||
2. RefinancingOn 31 January 2012 the Group announced that The Standard Bank of South Africa Limited (Standard Bank) approved a refinancing package for $518m in order to redeem the existing $417.7m Secured Loan Facility prior to its anniversary date and continue the existing $100m Standard Bank Standby Facility. The refinancing has been concluded on improved and less restrictive terms than the facilities that it has replaced.On 9 February 2012 the Group announced that it has closed the $417.7m financing package provided by Standard Bank. The $417.7m available under the new facility agreement has been completely drawn down to redeem the previous secured loan facility in full, at par.Principal terms of the agreement are as follows:- 9 month term (full repayment at end of term)- An interest rate of Libor plus 7.5% per annum and a commitment fee- Secured over the principal assets of the GroupUnder the agreement, commitment fees are payable in warrants convertible into new common shares in the Company at 515 pence per share. 1,985,000 warrants were issued to Standard Bank with a 3 year tenure.On 2 April 2012 this facility was repaid following the investment of $1.5 billion from Shandong Iron and Steel Group, refer to point 3 below. | ||||||||
3. Shandong Iron and Steel Group
On 30 March 2012, following receipt of all PRC approvals, Shandong Iron and Steel Group (SISG) completed its $1.5bn acquisition of a 25% shareholding in the mine, rail and port and power subsidiaries comprising the Tonkolili iron ore project, for a cash consideration of $1.5bn. The funds were received on 2 April 2012.
The principal terms are:
- SISG will purchase iron ore under an off-take arrangement, with an additional equity ore option and dividend ore option. The discounted off-take arrangements include 2Mtpa of Phase I production, increasing to 10Mtpa, with discounts ranging from 0% to 15%, depending on the benchmark iron ore price. Furthermore, SISG will have the right to elect, on an annual basis, to receive 25% of standard production at benchmark prices, and to also receive iron ore in settlement of any declared dividends from the project.
- The Group will use the funds received to accelerate development of Tonkolili's Phase II expansion.
- The existing $417.7m secured loan facility was repaid from the proceeds on 2 April 2012 (refer to point 2 above).
- Mr Cui Jurong, Vice President of SISG, has been nominated to the Board of Directors of the Group.
- A put option exists whereby SISG can sell back their interest at fair value, in the event Frank Timis (Executive Chairman) is no longer a director of the Group.
On 2 April 2012 the Group paid $417.7m of the $1.5 billion consideration received, to Standard Bank, in settlement of the Secured Loan Facility and a further $65.2m in interest and other charges to AML Bermuda, its parent company. The $1,017.1m remainder of the consideration will be available for use by the project companies for capital expenditure purposes.
23. RELATED PARTY TRANSACTIONS
1. | Sales | Accounts receivable | Purchases | Accounts payable | Borrowings | ||||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | |||||||
African Petroleum Corporation Limited | |||||||||||
2011 | 475 | 475 | 326 | 233 | - | ||||||
2010 | - | - | - | - | - | ||||||
International Petroleum Limited | |||||||||||
2011 | 130 | 130 | - | - | - | ||||||
2010 | - | - | - | - | - | ||||||
CRM Commercial Corporation | |||||||||||
2011 | 66,688 | 5,065 | |||||||||
2010 | - | - | 17,428 | 13,341 | - | ||||||
Dundee Resources Limited | |||||||||||
2011 | - | - | 8 | - | - | ||||||
2010 | - | - | - | 1 | - | ||||||
Dundee Corporation | |||||||||||
2011 | - | - | - | - | 26,000 | ||||||
2010 | - | - | - | - | - | ||||||
Corona Gold Corporation | |||||||||||
2011 | - | - | - | - | 5,000 | ||||||
2010 | - | - | - | - | - | ||||||
Pan African Limited | |||||||||||
2011 | 668 | 668 | - | - | - | ||||||
2010 | - | - | - | - | - | ||||||
Clyde & Co | |||||||||||
2011 | - | - | - | - | - | ||||||
2010 | - | - | 397 | 50 | - | ||||||
Global Iron Ore Corporation | |||||||||||
2011 | 2,254 | - | 168 | - | - | ||||||
2010 | - | - | - | - | - | ||||||
1. African Petroleum Corporation Limited (formally Eastern Petroleum Corporation) is a company of which Frank Timis is a Director and has an ownership interest. Transactions relate to jet rental expenses from African Petroleum and office rental expenses charged to African Petroleum. Frank Timis is the Executive Chairman of African Minerals Limited.International Petroleum Limited is a company of which Frank Timis is a Director and in which he has an ownership interest. Transactions relate to recharge of office rental.China Railway Materials Commercial Corporation is a Group shareholder. Transactions relate to materials purchased for railways and ore cars.Dundee Resources Limited is a firm of which Murray John is a Director. Transactions relate to fees incurred under the $417.7m secured non-revolving credit facility, which was provided by Dundee Resources Limited and Sprott Secured Lending Limited (refer to Note 16). Murray John is a Director of African Minerals Limited.Dundee Corporation and Corona Gold Corporation are firms of which Murray John is a Director. Transactions relate to debt raised as part of the $417.7m credit facility (refer to Note 16). Interest shall accrue on the principal amount of the Term Facility from the date of advance of the principal amount of the Term Facility into the Escrow Account at the rate of 11.50% per annum, compounded monthly (effective annual rate of 12.13%).Pan African is a company of which Frank Timis is a Majority shareholder. Transactions relate to employee services provided.Clyde & Co LLP is a firm of which Christopher Duffy is a partner. Transactions relate to legal fees. Christopher Duffy was a Director of African Minerals Limited during 2010.Global Iron Ore Corporation is a Company in which Dermot Coughlan's son holds a senior management position. Transactions relate to agency commission costs associated with iron ore sales and arrangement of 2012 iron ore offtake contracts.All the above transactions have been approved by the Board and have been carried out on an arm's length basis.
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2. Miguel Perry provided $500,000 as part of the 2011 $417.7m Secured Loan Facility and received 12,500 warrants and 2,811 shares. Miguel Perry is the Chief Financial Officer and Director of African Minerals Limited.
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24. REPORTING JURISDICTIONS |
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The Company is a reporting issuer in certain Canadian jurisdictions. However, the Company is a "designated foreign issuer" as defined in Canadian National Instrument 71-102 and is subject to foreign regulatory requirements, including those of the AIM market of the London Stock Exchange. As such, the Company is exempt from certain requirements otherwise imposed on reporting issuers in Canada. In particular, financial statements of the Company may be prepared under International Financial Reporting Standards or accounting principles that meet the non-Canadian disclosure requirements to which the Company is subject. |
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25. ASSETS OF DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE AND DISCONTINUED OPERATIONS | ||||
Analysis of the result of discontinued operations, all of which were 2010; and the result recognised on the re-measurement of assets of disposal group, is as follows: | ||||
2010 | ||||
US$ 000's | ||||
Revenue | 626 | |||
Expenses | (453) | |||
Profit for the year | 173 | |||
Revenue of discontinued operations in 2010 comprises gold sales. | ||||
GAIN ON DISPOSAL OF SUBSIDIARY | ||||
2010 | ||||
US$ 000's | ||||
Proceeds | ||||
Shares in Obtala Resources received during the year | 6,867 | |||
Total proceeds | 6,867 | |||
Net assets disposed | 6,867 | |||
Gain on disposal of subsidiary | - | |||
2010 | ||||
On 12 January 2010 the Group disposed of its diamond operation, which comprised of Sierra Leone Hard Rock Limited and its subsidiary Sierra Leone Hard Rock (SL) Limited. The assets and liabilities were transferred to Obtala Resources plc in a share transaction valued at US$6,866,724 and amounted to nil profit on disposal. | ||||
26. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES | ||||||||||
The Group's activities expose it to a variety of financial risks. The Group's Board provides certain specific guidance in managing such risks, particularly as relates to credit and liquidity risk. Any form of borrowings requires approval from the Board and the Group does not currently use any derivative financial instruments to manage its financial risks. The key financial risks and the Group's major exposures are as follows: | ||||||||||
Credit risk | ||||||||||
The maximum exposure to credit risk is represented by the carrying amount of the financial assets. In relation to cash and cash equivalents, the Group limits its credit risk with regards to bank deposits by only dealing with reputable banks. In relation to sales receivables, the Group's credit risk is managed by credit checks for credit customers and approval of letter of credit by the Group's advising bank for offtake customers. | ||||||||||
Foreign currency risk | ||||||||||
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The table below indicate the currencies to which the Group had significant exposure at 31 December 2011 on its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the currency rate against the USD, with all other variables held constant on the Consolidated Statement of Comprehensive Income (due to the fair value of currency sensitive non-trading monetary assets and liabilities). A positive amount in the table reflects a potential net increase in the consolidated statement of comprehensive income. | ||||||||||
Non-trading currency cash & cash equivalents:
Effect on | Effect on | |||||||||||||||||||||||||||||
Change in | Statement of | Change in | Statement of | |||||||||||||||||||||||||||
Currency | Comprehensive | Currency | Comprehensive | |||||||||||||||||||||||||||
2011 | rate in % | Income | 2010 | rate in % | Income | |||||||||||||||||||||||||
British Pounds | 3,934 | +10 | 393 | 22,888 | +10 | 2,289 | ||||||||||||||||||||||||
Canadian Dollars | 131 | +10 | 13 | 390 | +10 | 39 | ||||||||||||||||||||||||
Chinese Yen | 98 | +10 | 10 | 48 | +10 | 5 | ||||||||||||||||||||||||
Euros | 0 | +10 | 0 | 0 | +10 | 0 | ||||||||||||||||||||||||
South African Rand | 0 | +10 | 0 | 0 | +10 | 0 | ||||||||||||||||||||||||
Sierra Leone Leones | 709 | +10 | 71 | (104) | +10 | (10) | ||||||||||||||||||||||||
4,872 | 487 | 23,223 | 2,322 | |||||||||||||||||||||||||||
Available for sale investments: | ||||||||||||||||||||||||||||||
Change in | Change in | |||||||||||||||||||||||||||||
2011 | Currency | Equity | 2010 | Currency | Equity | |||||||||||||||||||||||||
US$ 000's | rate in % | Movement | US$ 000's | rate in % | Movement | |||||||||||||||||||||||||
Listed securities: | ||||||||||||||||||||||||||||||
Equity securities - Australia | 58,349 | +10 | 5,835 | 62,668 | +10 | 6,267 | ||||||||||||||||||||||||
Equity securities - UK | 9,647 | +10 | 965 | 13,428 | +10 | 1,343 | ||||||||||||||||||||||||
Total | 67,996 | 6,800 | 76,096 | 7,610 | ||||||||||||||||||||||||||
Equity price risk | ||||||||||||||||||||||||||||||
Equity price risk is the risk that the fair values of equities decrease as the result of changes in the levels of equity indices and the value of individual stocks. Management of the Group monitors equity securities in its investment portfolio based on market indices. | ||||||||||||||||||||||||||||||
The effect on equity (as a result of a change in the fair value of quoted equity shares held at 31 December 2011) due to a reasonably possible change in equity indices, with all other variables held constant, is as follows: | ||||||||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||||||||
Change in | Effect on | Change in | Effect on | |||||||||||||||||||||||||||
equity price | equity | equity price | equity | |||||||||||||||||||||||||||
% | US$ 000's | % | US$ 000's | |||||||||||||||||||||||||||
Quoted investments | +15 | 10,199 | +10 | 7,610 | ||||||||||||||||||||||||||
Liquidity risk | ||||||||||||||||||||||||||||||
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Numbers in the table below represent the gross, contractual, undiscounted amount payable in relation to the financial liabilities. | ||||||||||||||||||||||||||||||
The Group monitors its risk to a shortage of funds using a combination of cash flow forecasts, budgeting and monitoring of | ||||||||||||||||||||||||||||||
operational performance. | ||||||||||||||||||||||||||||||
The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of various interest-bearing | ||||||||||||||||||||||||||||||
loans and borrowings (refer to note 16), operating leases (refer to note 21) and share issues.
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After the reporting period, the Group issued a convertible bond (refer to note 22) and a refinancing package for key | ||||||||||||||||||||||||||||||
borrowings was agreed (refer to note 22). | ||||||||||||||||||||||||||||||
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Less than | Three to | One to | Total | |||||||||||||||||||||||||||
On demand | three months | twelve months | five years | months | ||||||||||||||||||||||||||
US$ 000's | US$ 000's | US$ 000's | US$ 000's | US$ 000's | ||||||||||||||||||||||||||
As at 31 December 2011: | ||||||||||||||||||||||||||||||
Accruals | 68,446 | 9,427 | - | - | 77,873 | |||||||||||||||||||||||||
Trade payables | 71,154 | 8,007 | - | - | 79,161 | |||||||||||||||||||||||||
Interest-bearing loans and borrowings (note 16) | 4,311 | 25,085 | 452,322 | 198,572 | 680,290 | |||||||||||||||||||||||||
Trade payables and accruals | 143,911 | 42,519 | 452,322 | 198,572 | 837,324 | |||||||||||||||||||||||||
As at 31 December 2010: | ||||||||||||||||||||||||||||||
Accruals | 1,813 | 9,289 | - | - | 11,102 | |||||||||||||||||||||||||
Trade payables | 24,876 | 16,353 | - | - | 41,229 | |||||||||||||||||||||||||
Trade payables and accruals | 26,689 | 25,642 | - | - | 52,331 | |||||||||||||||||||||||||
In 2010, accruals and trade payables of $26,689,000 were repayable on demand. | ||||||||||||||||||||||||||||||
Capital Management |
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Capital includes equity attributable to the equity holders of the parent. Refer to the statement of changes in equity for quantitative information regarding equity. | ||||||||||||||||||||||||||||||
The Group's primary objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders. | ||||||||||||||||||||||||||||||
Capital managed by the Group as at 31 December 2011 consisted of: | ||||||||||||||||||||||||||||||
2011 | 2010 | |||||||||||||||||||||||||||||
US$ 000's | US$ 000's | |||||||||||||||||||||||||||||
Cash and cash equivalents | 16,465 | 372,364 | ||||||||||||||||||||||||||||
Interest-bearing loans and borrowings (note 16) | 560,817 | - | ||||||||||||||||||||||||||||
Equity attributable to equity holders of the parent | 982,110 | 872,403 | ||||||||||||||||||||||||||||
The capital structure is reviewed by management through regular forecasting and monthly reporting. The Group is not subject to any externally imposed capital requirements. | ||||||||||||||||||||||||||||||
Interest Rate Risk |
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Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. | ||||||||||||||||||||||||||||||
A sensitivity analysis is not presented, as all borrowing costs have been capitalised as at 31 December 2011: therefore profit or loss and equity would have not been affected by changes in the interest rate. | ||||||||||||||||||||||||||||||
Notes to Editors
African Minerals is developing its Tonkolili iron ore project in Sierra Leone, with a JORC compliant resource of 12.8Bnt. The project, which currently has a 60+ year mine-life, is being developed in 3 phases. Phase I is expected to produce 20 million tonnes of iron ore per annum at full capacity.
Phase II now contemplates a 30Mtpa expansion, taking production to 50Mtpa, and the establishment of an expanded port facility at Tagrin Point, a new standard gauge, heavy haul railway from Tonkolili to Tagrin Point, and an expanded production facility at the mine to produce a 64% high grade hematite concentrate.
African Minerals and its contractors currently employ approximately 9,700 people in Sierra Leone, 82% of whom are Sierra Leonean nationals.
The Company has also developed significant port and rail infrastructure to support the operation of the project, via its subsidiary African Rail and Port Services (SL) Limited ("ARPS"), in which the Government of Sierra Leone ("GoSL") has a 10% free carried interest.
The Tonkolili project companies are currently owned 75% by AML, and 25% by SISG, except for ARPS, which is owned 65% by AML, 25% by SISG and 10% by GoSL.
www.african-minerals.com
African Minerals is listed on the AIM market of the London Stock Exchange.
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