Registered number: 07353748
KERAS RESOURCES PLC
ANNUAL REPORT 2015
KERAS RESOURCES PLC
CONTENTS
Company Information
Highlights
Chairman’s Statement
Strategic Report
Directors’ Report
Independent Auditor’s Report to the Members of Keras
Resources PLC
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
- 30 September 2015
Consolidated Statement of Changes in Equity
- 30 September 2014
Consolidated Statement of Cash Flows
Company Statement of Financial Position
Company Statement of Changes in Equity
Company Statement of Cash Flows
Notes to the Consolidated Financial Statements
Pages
1
2
3
6
15
19
21
22
23
24
25
26
27
28
29
Throughout this document ‘Keras’, ‘Keras Resources’ or ‘the Company’ means Keras Resources
PLC and ‘the Group’ means the Company and its subsidiaries.
KERAS RESOURCES PLC
COMPANY INFORMATION
Directors:
B Moritz
D Reeves
J Carter
R Lamming
R Pitchford
P Hepburn-Brown
Non-Executive Chairman
Managing Director
Finance Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Company secretary:
Cargil Management Services Limited
Company number:
07353748
Registered office:
Nominated advisor:
Broker:
Solicitors:
Auditor:
27/28 Eastcastle Street
London W1W 8DH
Northland Capital Partners Limited
131 Finsbury Pavement
London EC2A 1NT
Beaufort Securities Ltd
131 Finsbury Pavement
London EC2A 1NT
Memery Crystal LLP
44 Southampton Buildings
London WC2A 1AP
Moore Stephens LLP
150 Aldersgate Street
London EC1A 4AB
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KERAS RESOURCES PLC
HIGHLIGHTS
(cid:2)
Focused on gaining near-term cash flow – gold production expected in Q2 2016 following
the acquisition of Chaffers, which holds the Grants Patch Gold tribute agreement in Australia
(cid:2) Name change to Keras Resources PLC to reflect re-focused strategy on Australian gold and
cash flow opportunities
(cid:2) Completed equity fund raising of £835,000 in February 2015 and raised £564,000 in February
2016 by way of the issue of an unsecured loan note to include the limited working capital
required to commence gold production
(cid:2)
Finalised the Definitive Feasibility Study for the Nayega manganese project in Togo which
indicates that the capital and operating costs will be substantially reduced from previous
estimates.
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KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
The year since our last Annual Report has been a time of positive transition which has seen us
implement significant strategic initiatives; a portfolio assessment and diversification; and most
importantly, an acquisition of a near-term gold production company in Australia which has
seen us successfully transform ourselves in more than name alone and enter 2016 a stronger
company.
Over the past year, the continued downward pressure on commodity prices, in particular iron-
ore, has led us to reflect on our African operations and reassess our development strategy to
ensure that we can continue to deliver maximum value for our shareholders. This in turn led to
the decision to refine our core assets and re-focus our portfolio to identify high value
development projects with a direct route to production and cash generation and targeting
opportunities where good margins can be made despite price cycle lows.
With this in mind, we identified an ideal opportunity to deliver cash flow at very low cost within
six months and therefore proceeded to acquire private Australian gold mining company
Chaffers Mining (Pty) Limited (‘Chaffers’). Chaffers has a five year tribute agreement to mine
defined gold deposits at leases owned by Norton Gold Fields (‘Norton’), located 30km north
of Kalgoorlie in the heart of the Western Australian goldfields, product from which will be
treated at Norton’s nearby Paddington processing plant, 25km away. This opportunity was
acquired in an all share deal and represents a very exciting new project in our portfolio. Most
importantly, limited working capital of approximately £300,000 is required to commence
production at the Grants Patch lease and we have secured a loan to fulfil this requirement.
The agreement covers historic resources of more than 350,000 ounces of gold and mining
leases have been granted for deposits which comprise remnant resources below historic pits
and previously unmined near-surface deposits. The shallow laterite and oxide deposits provide
an excellent opportunity to deliver first production in Q2 2016. We are initially targeting
production of 20,000 to 30,000 ounces of gold per annum at AISC C3 costs of c.AUD 900/oz.
Keras will pay mining and processing costs, plus a 22% royalty to Norton.
This acquisition was especially timely in light of the recent upturn in gold prices, especially when
comparing against the lowering Australian dollar which currently prices gold at more than AUD
1,600/oz therefore offering lower operating costs and higher earnings potential for projects
based in Australia.
This acquisition also bolstered our Board and management team. In November 2015, Chaffers’
Peter Hepburn-Brown was appointed as a Non-Executive Director of Keras and Peter George
has taken up the role of Chief Operating Officer. They bring with them valuable knowledge
of the deposits, as well as extensive experience of gold development and production, which
will be very useful as we achieve our strategic goals.
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KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
Although it is fair to say that delivering value through Australian gold production is our primary
strategy, our Nayega Manganese Project in Togo, West Africa is still important to Keras. This is
due to its low capex, open pit, near-term production and low cost 250,000 tonne per annum
manganese export potential. Nayega is an attractive deposit which we believe will deliver
significant value for shareholders once in production. However its timeline for mine
development and production is dependent on the final receipt of the mining licence. We
would like to reassure shareholders that we have been highly active on the ground at Nayega
and have ensured that all the relevant documents, government assurances and local support
are in place so that we are well positioned to deliver first production within circa nine months
from when we decide to commence development, subject to the availability of mining
finance.
In May 2015, we completed the Definitive Feasibility Study (‘DFS’), which marked a significant
milestone at Nayega with a maiden ore reserve of 8.48Mt at 14% Mn and plans for an
accelerated start-up option. The accelerated start-up entails the simplification and
modularisation of the process circuit which we are confident will substantially reduce the
capital and operating costs and should have a positive impact on the project's profitability.
Other elements of the original model remain largely unchanged, with 750,000tpa ore initially
being mined and processed by scrubbing/screening and DMS, albeit using a modified process
flow route. In addition to this we remain in discussions with various third-party financiers for
funding Nayega at project level. Full details are intended to be announced upon receipt of
the mining licence.
We envisage that revenues generated through production from Grants Patch will position the
Group to take on larger projects in the future and with this in mind, we continually assess new
acquisition opportunities. , Considering the current price levels and general appetite for this
commodity our iron-ore portfolio in Gabon and South Africa no longer meets our investment
criteria and has been de-prioritised with no exploration expenditure currently being attributed
to it. We are currently evaluating joint venture and trade sale opportunities to realise the value
of, and where possible, monetise our non-core assets.
Financial review
With regard to funding, we successfully completed fundraising in February 2015 for £835,000
with support from new and existing shareholders and Board participation by way of
subscription, further aligning the Directors with Keras shareholders. Post year end, we have
announced the closing of a £565,000 debt facility that will see us enter positive cash flow at
Grants Patch, thereby minimising dilution to shareholders.
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KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
Our company name change to Keras Resources marks the beginning of our transformation
into a gold production company, with a firm focus on generating cash flow. The
commencement of gold production in Q2 2016 will be transformational and will enable us to
look at adding further gold production in Australia and continue evaluating prospective
opportunities in the natural resource market. We are at an important stage of our
development and with a new strategic vision, a strong team at the helm and our Australian
acquisition, the coming months are set to be particularly exciting for us.
Under these circumstances, the Board decided to fully impair the value of all African iron assets
and the Leinster Manganese Project. Notwithstanding this, we continue to seek ways of
realising value for shareholders from those assets. This decision has reduced net assets to less
than half of the paid up share capital. In accordance with S.656, Companies Act 2006 this will
be considered at the forthcoming Annual General Meeting but it should be stressed that the
decisions already made by the Board are intended to rectify the situation.
I would like to thank investors for their support during the year and look forward to the coming
months.
Brian Moritz
Chairman
4 March 2016
Page 5
KERAS RESOURCES PLC
STRATEGIC REPORT
The Directors present their Strategic Report for the year ended 30 September 2015.
Operating review
Principal activities
The principal activity of the Group has been the identification, acquisition, exploration and
development of iron and manganese projects. The main areas of activity during the reporting
period were Togo, Gabon and South Africa.
Post year end, the Company announced that it would be focusing on near term cash flow
project in the Australian gold industry through the acquisition of Chaffers Mining Pty Ltd.
Organisation Overview
The Group’s business is directed by the Board and is managed by the Managing Director David
Reeves. The Group has a small senior management team comprising a Finance Director, and
an Exploration Manager, now replaced by a Chief Operating Officer. To date, the Group has
mainly engaged the services of external contractors and consultants to provide services to its
various projects such as drilling services, metallurgical testwork, engineering design, and
environmental studies. The structure reflects the early stage nature of the Group’s activities
which necessitates a balance between managing cash expenditure and achieving the
Group’s work programs in a professional and timely manner.
Strategy and Business Plan
The Group’s strategy is to target low capital expenditure projects, near infrastructure, which
offer significant value uplift potential via resource delineation, early production and therefore
near term cash flow. The acquisition of Chaffers Mining in Australia offers the opportunity to
start production in 2016. The Nayega manganese project in Togo is a low cost and low capital
expenditure project.
The Group’s business model has established it as an efficient and low cost explorer. Keras
identifies mineral project opportunities through internal research and to date, its preference
has been to secure project interests through application to local authorities wherever possible.
This allows Keras to acquire projects at a minimal upfront cost. The Company is now particularly
focussed on projects that offer more immediate cash flow opportunities in the Australian gold
industry.
During the reporting period the Group was focussed on finalising the definitive feasibility study
for the Nayega manganese project and assessing opportunities in Australia that offered short
timeframes to production and cash flow. Given the poor state and outlook in the iron ore
market, the Group carried out minimal work on the iron projects during the reporting period.
The Board has a proven track record in Africa of building value for shareholders through
developing assets into production and successfully completing trade sales. Examples of this
are members of the Board being involved in the development and subsequent trade sales of
Zimplats, Afplats and Chromex for an aggregate consideration of approximately US$1 billion.
Subsequent to the year end, the Company expanded its activities by the acquisition of
Chaffers.
In exploring and developing mineral deposits, the Group accepts that not all its exploration
will be successful but also that the rewards for success can be high. It therefore expects that
its shareholders will be invested for potential capital growth, taking a long term view of
management’s good track record in mineral discovery and development. Board and
management currently hold 25% of the issued shares in Keras and we believe this significant
stake provides further evidence of the Board’s belief in and commitment to its strategy.
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KERAS RESOURCES PLC
STRATEGIC REPORT
To date, the Group has financed its activities through equity and debt raisings. As the Group’s
projects become more advanced, the Board will seek mining finance, as well as investigating
strategic opportunities to obtain funding for projects from future customers via production
sharing, royalty and other marketing arrangements. At the Nayega manganese project, the
Group finalised the Definitive Feasibility Study and this includes discussion with development
banks, offtakers and strategic investors for alternative forms of finance. Manganese prices fell
significantly during the course of 2015 and along with delays in obtaining a licence to mine
from the Togolese government meant that these discussions have been slower to progress
than anticipated in last year’s annual report.
Financial and Performance Review
The Group is not yet in production and so has no income other than a small amount of bank
interest. Consequently the Group is not expected to report profits until it disposes of or is able
to profitably develop projects, which is expected to be in the current year.
The results of the Group are set out in detail in the financial statements. The Group reports a
loss of £5.7m for the year (2014: £2.0m) after administration and exploration expenses of £1.2m
(2014: £1.5m) and an impairment charge of £4.5m (2014:nil).
The financial statements show that, at 30 September 2015, the Group had total assets of £1.3m
(2014: £5.8m). Total assets include £1.2m (2014: £5.5m) of intangible assets. This comprises
exploration, evaluation and development expenditure on the Group’s projects.
Expenditure such as pre-licence and reconnaissance costs is expensed. The loss reported in
any year includes expenditure for specific projects that was carried forward in previous
reporting periods as intangible assets but which the Board determines is impaired in the
reporting period.
In the reporting period, the Directors have assessed the carrying value of the Group’s projects
and given the extremely poor conditions and outlook, the decision was made to fully impair
the carrying values of the Malelane iron and Leinster manganese project, both located in
South Africa and the Mebaga iron project in Gabon. No impairment has been made to the
carrying value of the Nayega manganese project in Togo.
Key Performance Indicators
The financial statements of a mineral exploration company may not provide a reliable guide
to the performance of the Company or its Board.
The usual financial key performance indicators (“KPIs”) cannot be applied to a company with
no turnover and so the Directors consider that the detailed information in this report is the best
guide to the Group’s progress and performance during the year. The Board reviews this
position at least annually in the context of the Group’s activities.
During this reporting period, Keras had a multi-project portfolio of manganese development
assets and iron exploration projects in Africa, the majority of which have now been fully
impaired. Subsequent to the year end the Company announced entry into the Australian gold
sector through the acquisition of Chaffers.
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KERAS RESOURCES PLC
STRATEGIC REPORT
Australia – Grants Patch Gold Tribute Project (100% owned)
With Chaffers, Keras has acquired a five year tribute agreement with Norton Gold Fields which
will see it mine in the near-term certain defined gold deposits located on Norton's leases,
located 30km north of Kalgoorlie in the heart of the Western Australian goldfields.
The deposits have historic resources of 5,741,155t @ 1.97g/t for 363,599 ounces of gold and the
Group plans to commence production in Q2 2016, which will generate near-term cash flow to
be channelled into advancing development at the Nayega manganese project. Keras
anticipates initial production rates of 20,000 to 30,000 oz Au per annum, which will be treated
at Norton’s nearby Paddington processing plant with AISC C3 costs anticipated to total
AUD900/oz. Keras will pay a 22% royalty to Norton.
Initially, Keras will target shallow laterite and oxide gold deposits to generate revenue rapidly.
Deposits comprise previously mined pits with remainder economic material below the pit floor
or unmined new areas. At the first two laterite gold pits, Accord and Anomaly 22, new
estimates totalling 164,000t at an average grade of 1.4g/t, containing 7,200oz Au have been
produced, mine designs finalised and environmental studies completed. 94,350t at 1.39g/t Au
have been assigned to Anomaly 22 and 69,496t at 1.32g/t Au to Accord and this is expected
to provide the first four to five months of mining for the Company. A small programme of
confirmatory reverse circulation drilling will be conducted ahead of production. These initial
pits have been chosen due to the fact that there is no pre-strip required. Modelling of Bent
Tree, a further remnant open pit, is on-going and will be announced when completed. Once
open-pit operations are performing at plan, high-grade underground opportunities will be
investigated, for example, at Prince of Wales, which hosts historic resource of 154,000 @ 8g/t
gold. All equipment required for mining and haulage will be hired from local contractors and
confirmatory drilling and assaying will be conducted prior to the commencement of
production.
The project offers significant cost advantages, with the 100% interest in Chaffers purchased at
£465,000 in shares plus an additional £465,000 in shares on production of 10,000oz Au, at 30
day VWAP to announcement of successfully completing this milestone. Keras is poised to take
advantage of a very profitable gold sector as an AIM listed Australian gold producer.
Togo - Nayega Manganese – 85%
Keras holds an 85% interest in the Nayega manganese project which covers a 92,390 hectares
area in northern Togo, held through Societe Generale des Mines SARL. The project is 30km
from a main road which has direct access to the regionally important deepwater port of Lome
600km away and has >800,000t per annum back loading capabilities.
During the period under review, we made significant progress on the ground proving up the
economic potential and developing the 250,000 tonne low-capex, open-pit manganese mine
towards production of a 38% manganese product with the potential to provide cash flow for
the Group and its shareholders.
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KERAS RESOURCES PLC
STRATEGIC REPORT
The Definitive Feasibility Study (‘DFS’) to develop Nayega as a manganese export operation
completed in 2015 and the results indicate a notable reduction in capital and operating costs.
Additional testwork conducted during the course of 2015 has led to improved understanding
of how the mineralised material responds to beneficiation. As a result, Keras assessed an
'accelerated start-up' option which employs a modified process flow-route for manganese
product. Nayega also offers low cost processing credentials offering an average mining depth
of 4m, no waste stripping and no drill and blast needed. This and the size of the operation will
allow for a small scale mining operation that can be managed by a local contractor which
again should minimise costs.
Further to the DFS work completed, additional pitting at exploration targets T27 and T48 at
Nayega allowed the estimation of resources for these two prospects. Inferred resources of
220,000t @ 15.6% Mn and 2.75Mt @ 9.2% Mn were defined at T48 and T27, respectively. Both
areas are within easy trucking distance (T48 is <1km northwest, T27 is 6.5km east) of the Nayega
deposit and are likely to have a substantial positive impact on its future development.
Nayega's total JORC Code compliant resource in all categories is now 14Mt @ 12.4% Mn. This
includes the 8.48mt @ 14% reserve.
Full details of the DFS, including economics, will be released once the mining licence is
granted. With regard to the mining licence, negotiations with Togolese Government
representatives over the Mining Convention have concluded. The Mining Convention is a
comprehensive document outlining Keras’ and the Government's commitments to each other
on fiscal, environmental and social issues. This is a significant step for Keras and in conjunction
with grant of the Environmental Permit last period, clears the way for the mining licence to be
granted.
Gabon - Mebaga Iron Ore – 78%
Mebaga is a DSO iron ore project located in the north of Gabon within an extensive iron ore
province, which extends from Gabon into the Republic of Congo (“ROC”) and Cameroon.
Major deposits in the region include Belinga in Gabon (1Bt @ 60% Fe); Mbalam in Cameroon
(775Mt @ 57% Fe) and Avima in the ROC (690Mt @ 58% Fe). The project has significant benefits
as the closest DSO project to the Libreville port in the Belinga Super Group area.
The 305 sq km project which spans over a 19km Banded Iron Formation (‘BIF’) strike has an
Exploration Target of 630 - 1,050Mt @ 25 – 65% Fe, including 90 to 150Mt @ 35 – 65% Fe oxide
(weathered), estimated over 11km of 19km BIF strike where mineralisation is open both along
strike and at depth. The DSO potential has been authenticated by the 2013 drilling.
In August 2014, we completed a desktop study for operations and associated costs at Mebaga
which highlighted that significant potential exists for low operating costs. Subsequent to this
study, the iron ore price has dropped to approximately $40/t and the project is considered un-
economic at these prices. As a result of this, the Group has been investigating other initiatives
to realise value from this asset but in the meantime, its carrying value has been fully impaired.
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KERAS RESOURCES PLC
STRATEGIC REPORT
South Africa - Malelane Iron Ore – 74%
Malelane is located in the mineral rich Mpumalanga region of South Africa. Keras holds a 74%
interest in the project, which incorporates prospecting rights over a 4,192 Hectare area.
Malelane hosts a JORC Code compliant Inferred Resource of 139Mt at 37% Fe, which is only
defined over 1.5km of the 14km BIF strike identified within the project area. A Scoping Study
completed by Keras utilising this maiden resource in 2012 illustrated a potential method of
developing Malelane as an initial 1.8Mtpa open-pit, low strip ratio operation with a 57% Fe
product over a 16.6 year Life of Mine (‘LOM’).
With the reduction in iron ore pricing, this asset is not considered economic and its carrying
value has been fully impaired.
South Africa – Leinster Manganese – 74%
The 47,004 hectare Leinster project is our second manganese project, located in the Northern
Cape and North West Provinces of South Africa. The project covers the entire Leinster Basin,
an erosional outlier of the Kalahari Manganese Field, which is the largest manganese
metallogenic province in the world.
The Leinster deposit lies at an average depth of 80m below surface and is envisaged as an
underground operation with ore trucked or railed to port for the export market. Anglo
American, who drilled 51 holes on the Leinster property between 1977 and 1988, previously
held the property. Using this information, Coffey Mining calculated an exploration target of 5.5
to 8.7Mt at 28.6 to 31% Mn for Leinster on behalf of Keras Resources. The target is open in all
directions.
With the reduction in manganese pricing, this asset is not considered economic and its carrying
value has been fully impaired.
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KERAS RESOURCES PLC
STRATEGIC REPORT
Risk management
The Board regularly reviews the risks to which the Group is exposed and ensures through its
meetings and regular reporting that these risks are minimised as far as possible.
The principal risks and uncertainties facing the Group at this stage in its development are:
Exploration risk
The Group’s business has been mineral exploration and evaluation which are speculative
activities and whilst the Directors are satisfied that good progress is being made, there is no
certainty that the Group will be successful in the definition of economic mineral deposits, or
that it will proceed to the development of any of its projects or otherwise realise their value.
The Group aims to mitigate this risk when evaluating new business opportunities by targeting
areas of potential where there is at least some historical drilling or geological data available.
Resource risk
All mineral projects have risk associated with defined grade and continuity. Mineral reserves
and resources are calculated by the Group in accordance with accepted industry standards
and codes but are always subject to uncertainties in the underlying assumptions which include
geological projection and commodity price assumptions.
The Group reports mineral resources and reserves in accordance with the Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves (‘the JORC Code’).
The JORC Code is a professional code of practice that sets minimum standards for public
reporting of mineral exploration results, mineral resources and ore reserves. Further information
on the JORC Code can be found at www.jorc.org.
Development risk
Delays in permitting, financing and commissioning a project may result in delays to the Group
meeting production targets. Changes in commodity prices can affect the economic viability
of mining projects and affect decisions on continuing exploration activity.
Mining and processing technical risk
Notwithstanding the completion of metallurgical testwork, test mining and pilot studies
indicating the technical viability of a mining operation, variations in mineralogy, mineral
continuity, ground stability, ground water conditions and other geological conditions may still
render a mining and processing operation economically or technically non-viable.
The Group has a small team of mining professionals experienced in geological evaluation,
exploration, financing and development of mining projects. To mitigate development risk the
Group supplements this from time to time with engagement of external expert consultants and
contractors.
Environmental risk
Exploration and development of a project can be adversely affected by environmental
legislation and the unforeseen results of environmental studies carried out during evaluation of
a project. Once a project is in production unforeseen events can give rise to environmental
liabilities.
The Group is currently in the exploration stage. Any disturbance to the environment during this
phase is minimal and is rehabilitated in accordance with the prevailing regulations of the
countries in which we operate. As part of our ongoing feasibility studies being conducted at
the Malelane and Nayega projects, environmental baseline studies are being undertaken or
planned to be undertaken as part of this process.
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KERAS RESOURCES PLC
STRATEGIC REPORT
Financing & liquidity risk
The Group has an ongoing requirement to fund its activities through the equity markets and in
future to obtain finance for project development. There is no certainty such funds will be
available when needed. To date, Keras has managed to raise funds primarily through equity
and debt placements despite the very difficult markets that currently exist for raising funding
in the junior mining industry.
Political risk
All countries carry political risk that can lead to interruption of activity. Politically stable
countries can have enhanced environmental and social permitting risks, risks of strikes and
changes to taxation whereas less developed countries can have in addition, risks associated
with changes to the legal framework, civil unrest and government expropriation of assets.
Partner risk
Whilst there has been no past evidence of this, the Group can be adversely affected if joint
venture partners are unable or unwilling to perform their obligations or fund their share of future
developments.
The Group aims to mitigate this risk by 1) holding significant majority shareholdings in our
projects that we can commit to funding our minority partners until production and positive
cash flow and 2) endeavouring to enter into joint venture funding arrangements with large
and credible counterparties.
Financial instruments
Details of risks associated with the Group’s financial instruments are given in Note 24 to the
financial statements. Given the early stage nature of the Group’s activities, Keras does not
utilise any complex financial instruments.
Insurance coverage
The Group maintains a suite of insurance coverage that is appropriate for an exploration stage
company. This is arranged via an insurance broker and coverage includes public and products
liability, travel, property and medical coverage and assistance while Group employees and
consultants are travelling on Group business. This is reviewed at least annually and adapted as
the Group’s scale and nature of activities changes.
Internal controls and risk management
The Directors are responsible for the Group’s system of internal financial control. Although no
system of internal financial control can provide absolute assurance against material
misstatement or loss, the Group’s system is designed to provide reasonable assurance that
problems are identified on a timely basis and dealt with appropriately.
In carrying out their responsibilities, the Directors have put in place a framework of controls to
ensure as far as possible that ongoing financial performance is monitored in a timely manner,
that corrective action is taken and that risk is identified as early as practically possible. The
Directors review the effectiveness of internal financial control at least annually.
The Board, subject to delegated authority, reviews capital investment, property sales and
purchases, additional borrowing facilities, guarantees and insurance arrangements.
The Board takes account of the significance of social, environmental and ethical matters
affecting the business of the Group. At this stage in the Group’s development the Board has
not adopted a specific policy on Corporate Social Responsibility as it has a limited pool of
stakeholders other than its shareholders. Rather, the Board seeks to protect the interests of
Keras’ stakeholders through individual policies and through ethical and transparent actions.
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KERAS RESOURCES PLC
STRATEGIC REPORT
The Group has adopted an anti-corruption and bribery policy and a whistle blowing policy.
Shareholders
The Directors are always prepared, where practicable, to enter into dialogue with shareholders
to promote a mutual understanding of objectives. The Annual General Meeting provides the
Board with an opportunity to informally meet and communicate directly with investors.
Environment
The Board recognises that its principal activities, mineral exploration and mining, have
potential to impact on the local environment. To date, activities at the various projects have
been limited to drilling activities and the Group does comply with local regulatory requirements
with regard to environmental compliance and rehabilitation. The impact on the environment
of the Group’s activates has the potential to increase should our projects move into a
development or production phase. This is currently assessed through baseline environmental
studies that are being undertaken and
resources needed to manage
environmental compliance in the future.
identifying
Given the Group’s size and scale it is not considered practical or cost effective to collect and
report data on carbon emissions.
Employees
The Group engages its employees to understand all aspects of the Group’s business and seeks
to remunerate its employees fairly, being flexible where practicable. The Group gives full and
fair consideration to applications for employment received regardless of age, gender, colour,
ethnicity, disability, nationality, religious beliefs, transgender status or sexual orientation. The
Group takes account of employees’ interests when making decisions and welcomes
suggestions from employees aimed at improving the Group’s performance.
The Group has operated projects in South Africa, Gabon and Togo, and is commencing
operations in Australia. We recruit locally as many of our employees and contractors as
practicable.
Suppliers and contractors
The Group recognises that the goodwill of its contractors, consultants and suppliers is important
to its business success and seeks to build and maintain this goodwill through fair dealings. The
Group has a prompt payment policy and seeks to settle all agreed liabilities within the terms
agreed with suppliers. There have been occasions during the reporting period where this has
been extended beyond normal terms as the Group has managed cash flow during the year
during current difficult market conditions.
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KERAS RESOURCES PLC
STRATEGIC REPORT
Health and safety
The Board recognises that it has a responsibility to provide strategic leadership and direction
in the development of the Group’s health and safety strategy in order to protect all of its
stakeholders. Except for the Australian subsidiaries, the Group does not have a formal health
and safety policy at this time. This is re-evaluated as and when the Group’s nature and scale
of activities change.
This Strategic Report was approved by the Board of Directors on 4 March 2016.
David Reeves
Managing Director
4 March 2016
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KERAS RESOURCES PLC
DIRECTORS’ REPORT
The Directors present their report together with the audited financial statements of the Group
for the year ended 30 September 2015.
With effect from 11 December 2015, the name of the Company was changed from Ferrex PLC
to Keras Resources PLC.
The Group’s projects are set out in the strategic report.
Review of business and financial performance
Further details on the financial position and development of the Group are set out in the
Chairman’s Statement, the Strategic Report and the annexed financial statements.
Results
The Group reports an after-tax loss of £5,697,000 (2014: £2,005,000).
Major events after the balance sheet date
On 17 November 2015, the Company announced that it had entered an agreement to
acquire 100% of Australian private company, Chaffers Mining Pty Ltd (“Chaffers”). Chaffers
has negotiated a five year tribute agreement with Paddington Goldfields, a subsidiary of
Norton Goldfields ('Norton') to mine certain defined gold deposits located on the Norton
leases, located 30km north of Kalgoorlie in the heart of the Western Australian goldfields, for
treatment at Norton’s nearby Paddington processing plant. This was part of the Company’s
focus on targeting near term cash flow potential projects in stable jurisdictions.
On 1 February 2016, Keras announced that it had secured £563,889 loan note to commence
gold production in Australia during 2016. These funds will, inter alia, provide the working
capital need to commence production at the Grants Patch tribute project.
Further details on both of these subsequent events can be found in the respective
announcements which are available from the Company’s website www.kerasplc.com.
Dividends
The Directors do not recommend payment of a dividend for the year ended 30 September
2015 (2014: £nil).
Political donations
There were no political donations during the year (2014: £nil).
Going concern
The Directors continue to adopt the going concern basis in preparing the financial statements.
With the commencement of gold production expected in Q2 of 2016, the Group’s forecasts
indicate that it will be cash flow positive from that time. External funding arrangements for the
development of the Nayega project will be obtained prior to any commitment for such
development.
Directors’ indemnities
The Group maintains Directors and Officers liability insurance providing appropriate cover for
any legal action brought against its Directors and/or officers.
Page 15
KERAS RESOURCES PLC
DIRECTORS’ REPORT
Corporate governance statement
The Directors recognise the importance of sound corporate governance commensurate with
the size and nature of the Group and the interests of its shareholders. Keras complies insofar
as the Directors consider appropriate for a company at Keras’ stage of development, with the
Corporate Governance Code for Small and Mid-size Quoted Companies 2013, published by
the Quoted Companies Alliance. The Company has established Audit and Remuneration
Committees, with formally delegated duties and responsibilities.
Audit Committee
The Audit Committee, which comprises R Lamming, B Moritz and R Pitchford, and is chaired by
B Moritz, is responsible for ensuring the financial performance, position and prospects of the
Group are properly monitored and reported on and for meeting the auditors and reviewing
their reports relating to accounts and internal controls. Meetings of the Audit Committee are
held at least twice a year, at appropriate times in the reporting and audit cycle. The Audit
Committee is required to report formally to the Board on its proceedings after each meeting
on all matters for which it has responsibility. The members of the Audit Committee are re-
elected annually by the Board.
Remuneration Committee
The Remuneration Committee, which now comprises R Lamming and R Pitchford and which is
chaired by R Lamming, reviews the performance of the executive directors and sets their
remuneration, determines the payment of bonuses to executive directors and considers the
future allocation of share options and other equity incentives pursuant to any share option
scheme or equity incentive scheme in operation from time to time to Directors and employees.
Meetings of the Remuneration Committee are required to be held at least twice a year. The
Remuneration Committee is required to report formally to the Board on its proceedings after
each meeting on all matters for which it has responsibility. The members of the Remuneration
Committee are re-elected annually by the Board.
Directors
The following Directors held office during the period:
B Moritz
D Reeves
J Carter
R Lamming
R Pitchford
(Non-Executive Chairman)
(Managing Director)
(Finance Director)
(Non-Executive Director)
(Non-Executive Director)
P Hepburn-Brown was appointed as a Director on 17 November 2015.
Directors’ interests
The beneficial interests of the Directors holding office on 30 September 2015 in the issued share
capital of the Company were as follows:
Page 16
KERAS RESOURCES PLC
DIRECTORS’ REPORT
B Moritz
J Carter1
D Reeves3
R Lamming2
R Pitchford4
30 September 2015
30 September 2014
Number of
ordinary
shares of
0.01p each
25,833,333
2,777,778
128,577,867
42,881,944
78,993,055
Percentage
of issued
ordinary
share
capital
2.30%
0.25%
11.68%
3.90%
7.18%
Number of
ordinary
shares of
0.05p each
14,583,333
2,777,778
117,327,876
42,881,944
78,993,055
Percentage
of issued
ordinary
share
capital
1.56%
0.30%
12.56%
4.59%
8.46%
1These ordinary shares are held by the Carter Super Fund whose beneficiaries are J Carter and
his spouse.
2These ordinary shares are held by Clearwater Investments Group Limited, a company owned
by the Clearwater Trust whose beneficiaries are members of R Lamming’s family.
3These ordinary shares are held by the Elwani Trust whose beneficiaries are the spouse and
children of D Reeves.
4These ordinary shares are held by Blue Sky Mining Limited, a company owned by the Sarnia
Trust whose beneficiaries are members of R Pitchford’s family.
There have been no changes to these holdings since 30 September 2015.
On his appointment as a director, Mr Hepburn-Brown held an aggregate 25,833,400 ordinary
shares in Keras, representing 2.4 per cent. of the issued ordinary share capital, and resulting
from the acquisition of Chaffers. There has been no change in that holding. Mr Hepburn-Brown
is entitled to be allotted further ordinary shares up to a value of £77,500, through earn out
arrangements relating to the acquisition of Chaffers.
Directors’ remuneration and service contracts
Details of remuneration payable to Directors including share based payments are disclosed in
note 10 to these financial statements:
B Moritz
D Reeves
J Carter
R Lamming
R Pitchford
Remuneration
£’000
30
125
90
33
20
298
Share-
based
payments
£’000
2
6
2
2
1
13
2015
Total
£’000
32
131
92
35
21
311
2014
Total
£ ‘000
36
141
81
56
23
337
The share-based payments represent the charge to the profit and loss account in respect of
options granted to the Directors, these options were cancelled on 25 February 2015 as detailed
in note 21 to these financial statements.
Fees payable to non-executive directors and part of the remuneration of the executive
directors have not been paid and are included with Trade and Other Payables.
Page 17
KERAS RESOURCES PLC
DIRECTORS’ REPORT
Statement of Directors’ responsibilities
The Directors are responsible for preparing the strategic report, the directors’ report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have elected to prepare the financial statements in accordance
with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union.
The financial statements are required by law to give a true and fair view of the state of affairs
of the Company and the Group of the Group’s profit or loss for that year.
In preparing these financial statements, the Directors are required to:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
select suitable accounting policies and then apply them consistently,
make judgements and estimates that are reasonable and prudent;
state whether the financial statements comply with IFRS as adopted by the European
Union; and
prepare the financial statements on the going concern basis unless it is inappropriate
to presume that the Group and Company will continue in business
The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Group’s and Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company and the Group and enable them
to ensure that the financial statements comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Company and the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to auditor
Each Director at the date of approval of this report confirms that;
So far as that are aware,
(cid:2)
(cid:2)
there is no relevant audit information of which the Group’s auditor is unaware; and
they have taken all steps that they ought to have taken to make themselves aware of
any relevant audit information and to establish that the auditor is aware of that
information.
Auditor
Chantrey Vellacott DFK LLP merged its practice with Moore Stephens LLP with effect from 1
May 2015 and now practises under the name of Moore Stephens LLP. A resolution to re-appoint
Moore Stephens LLP as auditor will be proposed at the Annual General Meeting.
By order of the Board
Brian Moritz
Director
4 March 2016
Page 18
KERAS RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KERAS RESOURCES PLC
We have audited the financial statements of Keras Resources PLC for the year ended 30
September 2015 which comprise the consolidated statement of comprehensive income, the
consolidated statement of financial position, the consolidated statement of changes in equity,
the consolidated statement of cash flows, the Company statement of financial position, the
Company statement of changes in equity, the Company statement of cash flows and the
related notes. The financial reporting framework that has been applied in the preparation of
the financial statements is applicable law and International Financial Reporting Standards
(IFRS) as adopted by the European Union and, as regards the Company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the company’s members as a
body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' responsibilities statement, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and
fair view. Our responsibility is to audit and express an opinion on the financial statements in
accordance with applicable law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices Board's Ethical Standards for
Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial
Reporting Council’s web-site at www.frc.org.uk/auditscopeukprivate.
Page 19
KERAS RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KERAS RESOURCES PLC (CONTINUED)
Opinion on financial statements
In our opinion:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
the financial statements give a true and fair view of the state of the Group's and of the Company's
affairs as at 30 September 2015 and of the Group's loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRS as adopted
by the European Union;
the Company financial statements have been properly prepared in accordance with IFRS as adopted
by the European Union and as applied in accordance with the Provisions of the Companies Act 2006;
and
the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report and the Strategic Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
(cid:2) adequate accounting records have not been kept by the Company, or returns adequate for our
audit have not been received from branches not visited by us; or
the Company financial statements are not in agreement with the accounting records and returns; or
(cid:2)
(cid:2) certain disclosures of Directors' remuneration specified by law are not made; or
(cid:2) we have not received all the information and explanations we require for our audit.
IAN STAUNTON FCA (Senior Statutory Auditor)
for and on behalf of MOORE STEPHENS LLP
Chartered Accountants and Statutory Auditor
London
4 March 2016
Page 20
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Revenue
Cost of sales
Gross profit
Administrative and exploration
expenses
Loss from operating activities
Finance income
Finance costs
Net finance costs
Results from operating activities after finance costs
Impairment of assets
Loss before tax
Tax
Loss for the year
Other comprehensive income
Exchange translation on foreign operations
Total comprehensive loss for the year
Loss attributable to:
Owners of the Company
Non-controlling interests
Loss for the year
Total comprehensive loss attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive loss for the year
Loss per share
Basic and diluted loss per share (pence)
All activities are classed as continuing
Notes
11
11
14
12
2015
£’000
2014
£’000
-
-
-
-
-
-
(1,180)
(1,488)
(1,180)
(1,488)
-
(78)
(78)
-
(426)
(426)
(1,258)
(1,914)
(4,458)
(5,716)
-
(5,716)
19
(5,697)
(5,450)
(266)
(5,716)
(5,373)
(324)
(5,697)
-
(1,914)
126
(1,788)
(217)
(2,005)
(1,692)
(96)
(1,788)
(1,909)
(96)
(2,005)
20
(0.528)
(0.192)
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 21
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
Assets
Property, plant and equipment
Intangible assets
Non-current assets
Loans
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Other reserves
Retained deficit
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Liabilities
Loans and borrowings
Trade and other payables
Current liabilities
Total liabilities
Total equity and liabilities
Notes
13
14
16
17
18
19
22
23
2015
£’000
35
1,171
1,206
-
52
64
116
1,322
5,504
6,371
523
(11,275)
1,123
(661)
462
375
485
860
860
1,322
2014
£’000
65
5,526
5,591
-
73
107
180
5,771
4,669
6,439
425
(5,825)
5,708
(337)
5,371
-
400
400
400
5,771
The financial statements were approved by the Board of Directors and authorised for issue on 4 March 2016.
They were signed on its behalf by:
Brian Moritz, Director
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 22
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P
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Depreciation
Profit on disposal of property, plant and equipment
Foreign exchange differences
Equity-settled share-based payments
Changes in:
- trade and other receivables
- trade and other payables
Cash used in operating activities
Finance costs
Taxes paid
Net cash used in operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Exploration expenditure
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of share capital
Proceeds from short term borrowings
Net cash flows from financing activities
Net decrease in cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at 30 September
2015
£’000
2014
£’000
(1,180)
(1,488)
15
(1)
139
21
(1,006)
12
177
(817)
(15)
-
(832)
13
-
(224)
(211)
655
345
1,000
(43)
107
64
25
-
(81)
54
(1,490)
19
129
(1,342)
(8)
126
(1,224)
-
(7)
(631)
(638)
1,743
-
1,743
(119)
226
107
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 25
KERAS RESOURCES PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2015
Assets
Property, plant and equipment
Investments
Non-current assets
Loans
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Reserves
Retained deficit
Total equity attributable to owners of the Company
Liabilities
Loans and borrowings
Trade and other payables
Current liabilities
Total liabilities
Total equity and liabilities
Notes
13
15
16
17
18
19
22
23
2015
£’000
1
-
1
1,770
29
57
1,856
1,857
5,504
6,371
250
(11,055)
1,070
375
412
787
787
2014
£’000
1
1,778
1,779
6,322
52
72
6,446
8,225
4,669
6,439
229
(3,465)
7,872
-
353
353
353
1,857
8,225
The financial statements of Keras Resources PLC, company number 07353748, were approved by the Board
of Directors and authorised for issue on 3 March 2016 They were signed on its behalf by:
Brian Moritz, Director
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 26
KERAS RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Share
capital
£‘000
Share
premium
£‘000
Share option
reserve
£‘000
Balance at 1 October 2013
4,026
4,912
175
Loss for the year
Total comprehensive loss
for the period
Issue of ordinary shares
Costs of share issue
Share-based payments
-
-
643
-
-
643
Balance at 30 September 2014
4,669
-
-
1,726
(199)
-
1,527
6,439
Retained
deficit
£‘000
(2,303)
Total
equity
£ ‘000
6,810
(1,162)
(1,162)
(1,162)
(1,162)
-
-
-
-
2,369
(199)
54
2,224
7,872
-
-
-
-
54
54
229
(3,465)
Balance at 1 October 2014
4,669
6,439
229
(3,465)
7,872
Loss for the year
Total comprehensive loss
for the year
Issue of ordinary shares
Costs of share issue
Share-based payments
-
-
835
-
-
835
-
-
-
(68)
-
(68)
-
-
-
-
21
21
(7,590)
(7,590)
(7,590)
(7,590)
-
-
-
-
835
(68)
21
788
Balance at 30 September 2015
5,504
6,371
250
(11,055)
1,070
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 27
KERAS RESOURCES PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Fair value adjustment on financial instrument
Depreciation
Equity-settled share-based payments
Changes in:
- trade and other receivables
- trade and other payables
Cash used in operating activities
Finance costs
Net cash used in operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Net proceeds from issue of share
capital
Proceeds from short term borrowing
Loans to subsidiaries
Net cash flows from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of
period
Cash and cash equivalents at 30 September
2015
£’000
(723)
-
-
21
(702)
14
159
(529)
(23)
(552)
-
-
655
345
(463)
537
(15)
72
57
2014
£’000
(1,162)
404
-
54
(704)
(30)
155
(579)
23
(556)
(1)
(1)
1,743
-
(1,287)
456
(101)
173
72
The notes on pages 29 to 55 are an integral part of these consolidated financial statements.
Page 28
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
1.
2.
3.
(a)
(b)
(c)
(d)
Reporting entity
Keras Resources PLC is a company domiciled in England and Wales. The address of the Company’s
registered office is 27/28 Eastcastle Street, London, W1W 8DH. The Group currently operates as an
explorer and developer and aims to commence production at its Australian gold projects in 2016.
Going concern
After making enquiries and as more fully explained in the Directors Report on page 15, the Directors
have formed a judgement that, as at the date of approving the financial statements, there is a
reasonable expectation that the Group and the Company have adequate resources to continue in
operational existence for the foreseeable future. For this reason, the Directors have adopted the
going concern basis in preparing the accounts.
Basis of preparation
Statement of compliance
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board and
as adopted by the European Union.
The Company’s individual statement of comprehensive income has been omitted from the Group’s
annual financial statements having taken advantage of the exemption not to disclose under Section
408(3) of the Companies Act 2006. The Company’s comprehensive loss for the period ended 30
September 2015 was £7,590,000 (2014: £1,162,000).
Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis unless
otherwise stated.
Functional and presentation currency
These consolidated financial statements are presented in Pounds Sterling (‘GBP’ or ‘£’), which is the
Group’s functional currency and is considered by the Directors to be the most appropriate
presentation currency to assist the users of the financial statements. All financial information presented
in GBP has been rounded to the nearest thousand, except when otherwise indicated.
Use of estimates and judgements
The preparation of the consolidated financial statements in conformity with IFRS, as adopted by the
EU, requires management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form
the basis of making judgements about carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimates are revised if the revision affects only
that period, or in the period of revision and future periods of the revision if it affects both current and
future periods.
Critical estimates and assumptions that have the most significant effect on the amounts recognised
in the consolidated financial statements and/or have a significant risk of resulting in a material
adjustment within the next financial year are as follows:
(cid:2)
(cid:2)
Carrying value of intangible assets
Share-based payments
– Notes 4(e)(i) and 14
- Notes 4(g) and 21
Page 29
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(a)
(i)
(ii)
(iii)
(iv)
(v)
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these
consolidated financial statements, and have been applied consistently by Group entities.
Basis of consolidation
Business combinations
The Group accounts for business combinations using the acquisition method when control is
transferred to the Group. The consideration transferred in the acquisition is generally measured at fair
value, as are identifiable net assets acquired. Any goodwill that arises is tested annually for
impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction
costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing
relationships. Such amounts generally are recognised in profit or loss.
Any contingent consideration payable is measured at fair value at the acquisition date. If an
obligation to pay contingent consideration that meets the definition of a financial instrument is
classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise,
contingent consideration is remeasured at fair value at each reporting date and subsequent changes
in the fair value of the contingent consideration are recognised in profit or loss.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that control
ceases.
Non-controlling interests
Non-controlling interests are measured at their proportionate share of the acquiree’s identifiable net
assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for
as equity transactions.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related non-controlling interests and other components of equity. Any resulting
gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at
fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-
group transactions, are eliminated in preparing the consolidated financial statements.
Page 30
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(b)
(i)
(c)
(i)
Significant accounting policies (continued)
Foreign currency
Transactions in foreign currencies are translated into the respective functional currencies of Group
entities at exchange rates at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated into the functional currency at the reporting date.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value
in a foreign currency are translated to the functional currency at the exchange rate when the fair
value was determined. Non-monetary items that are measured based on historical cost in a foreign
currency are translated at the exchange rate at the date of the transaction. Foreign currency
differences are generally recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations, including goodwill and the fair value adjustments arising
on acquisition, are translated to GBP at exchange rates at the reporting date. The income and
expenses of foreign operations are translated to GBP at exchange rates at the dates of the
transactions.
Foreign currency differences are recognised in other comprehensive income and accumulated in the
translation reserve except to the extent that the translation difference is allocated to non-controlling
interests. When a foreign operation is disposed of in its entirety or partially such that control, significant
influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign
operation is reclassified to profit or loss as part of the gain or loss on disposal. If the Group disposes of
part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative
amount is reattributed to non-controlling interests. When the Group disposes of only part of an
associate or joint venture while retaining significant influence or joint control, the relevant proportion
of the cumulative amount is reclassified to profit or loss.
Financial instruments
Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are originated. All other
financial assets are recognised initially on the trade date, which is the date that the Group becomes
a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset
expire, or it transfers the rights to receive the contractual cash flows in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest
in such transferred financial assets that is created or retained by the Group is recognised as a separate
asset or liability. Financial assets and liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Group currently has a legally enforceable
right to offset the amounts and intends either to settle them on a net basis or to realise the asset and
settle the liability simultaneously.
The Group’s non-derivative financial assets comprise loans and receivables.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments that are not quoted
in an active market. Such assets are recognised initially at fair value plus any directly attributable
transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised
cost using the effective interest method, less any impairment losses (see note 4(f)(i)).
Page 31
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(c)
Significant accounting policies (continued)
Financial instruments (continued)
(i)
Non-derivative financial assets (continued)
Loans and receivables (continued)
Loans and receivables comprise trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with maturities of three months
or less from the acquisition date that are subject to an insignificant risk of changes in their fair value,
and are used by the Group in the management of its short-term commitments.
(ii)
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they
are originated. All other financial liabilities are recognised initially on the trade date, which is the date
that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations are discharged,
cancelled or expire.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognised initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the
effective interest method.
Other financial liabilities comprise trade and other payables.
(iii)
Share capital
(d)
(i)
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary
shares are recognised as a deduction from equity, net of any tax effects.
Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and
any accumulated impairment losses. Cost includes expenditure that is directly attributable to the
acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.
Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference
between the net proceeds from disposal and the carrying amount of the item) is recognised in profit
or loss.
(ii)
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits
associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is
expensed as incurred.
Page 32
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(d)
(iii)
(e)
(i)
(ii)
(iii)
Significant accounting policies (continued)
Property, plant and equipment (continued)
Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in the statement of
comprehensive income over the estimated useful lives of each component.
Items of property, plant and equipment are depreciated from the date that they are installed and
are ready for use, or in respect of internally constructed assets, from the date that the asset is
completed and ready for use.
The estimated useful lives of significant items of property, plant and equipment are as follows:
(cid:2)
(cid:2)
(cid:2)
(cid:2)
plant and equipment
office equipment
computer equipment
motor vehicles
10 years
2 years
2 years
5 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Intangible assets
Prospecting and exploration rights
Rights acquired with subsidiaries are recognised at fair value at the date of acquisition. Other rights
acquired and evaluation expenditure are recognised at cost.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are measured at
cost less accumulated amortisation and any accumulated impairment losses.
Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied
in the specific asset to which it relates. All other expenditure, including expenditure on internally
generated goodwill and brands, is recognised in profit or loss as incurred.
Page 33
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(e)
(iv)
Significant accounting policies (continued)
Intangible assets (continued)
Amortisation
Intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful lives,
from the date that they are available for use.
The estimated useful lives are as follows:
(cid:2)
Prospecting and exploration rights
Life of mine based on units of production
Amortisation methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Amortisation is included within administrative expenses in the statement of comprehensive income.
(f)
Impairment
(i)
Non-derivative financial assets
A financial asset not classified as at fair value through profit or loss is assessed at each reporting date
to determine whether there is objective evidence that it is impaired. A financial assets is impaired if
there is objective evidence of impairment as a result of one or more events that occurred after the
initial recognition of the asset, and had an impact on the estimated future cash flows from that asset
that can be estimated reliably.
Objective evidence that financial assets are impaired includes default or delinquency by a debtor,
restructuring of an amount due to the Group on terms that the Group would not consider otherwise,
indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of
borrowers or issuers, economic conditions that correlate with defaults or the disappearance of an
active market for a security. In addition, for an investment in an equity security, a significant or
prolonged decline in its fair value below its cost is objective evidence of impairment.
Financial assets measured at amortised cost
The Group considers evidence of impairment for financial assets measured at amortised cost (loans
and receivables) at both a specific asset and collective level. All individually significant assets are
assessed for specific impairment. Those found not to be specifically impaired are then collectively
assessed for any impairment that has been incurred but not yet identified. Assets that are not
individually significant are collectively assessed for impairment by grouping together assets with similar
risk characteristics.
In assessing collective impairment, the Group uses historical trends of the probability of default, the
timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to
whether current economic and credit conditions are such that the actual losses are likely to be greater
or less than suggested by historical trends.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the
difference between its carrying amount and the present value of the estimated future cash flows
discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and
reflected in an allowance against loans and receivables. Interest on the impaired asset continues to
be recognised. When an event occurring after the impairment was recognised causes the amount
of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
Page 34
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(f)
(ii)
Significant accounting policies (continued)
Impairment (continued).
Non-financial assets
The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated. Goodwill and indefinite-lived intangible assets are tested annually
for impairment or when there is an indication of impairment. An impairment loss is recognised if the
carrying amount of an asset or Cash Generating Unit (‘CGU’) exceeds its recoverable amount.
The recoverable amount of an asset of CGU is the greater of its value in use and its fair value less costs
to sell. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped
together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment
ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which
impairment testing is performed reflects the lowest level at which goodwill is monitored for internal
reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that
are expected to benefit from the synergies of the combination.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs
are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of
CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on
a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is
reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount
that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised.
(g)
Employee benefits
Share-based payments
The grant-date fair value of share-based payment awards 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 awards. The amount recognised as an expense is adjusted to
reflect the number of awards for which the related service and non-market performance conditions
are expected to be met, such that the amount ultimately recognised as an expense is based on the
number of awards that meet the related service and non-market performance conditions at the
vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value
of the share-based payment is measured to reflect such conditions and there is no adjustment for
differences between expected and actual outcomes.
(h)
Revenue
Revenue from the sale of precious metals is recognised in the statement of comprehensive income
when the significant risks and rewards of ownership have been transferred to the buyer excluding sales
taxes.
Page 35
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
4.
(i)
(j)
Significant accounting policies (continued)
Finance income and finance costs
Finance income comprises interest income on bank funds. Interest income is recognised as it accrues
in profit or loss, using the effective interest method.
Finance costs comprise interest expense on borrowings.
Taxation
Tax expense comprises current and deferred tax. Current and deferred tax is recognised in profit or
loss except to the extent that it relates to a business combination, or items recognised directly in equity
or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using
tax rates enacted or substantially enacted at the reporting date, and any adjustment to tax payable
in respect of previous years. Current tax payable also includes any tax liability arising from the
declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred
tax is not recognised for:
(cid:2)
(cid:2)
(cid:2)
temporary differences on the initial recognition of assets or liabilities in a transaction that is not
a business combination and that affects neither accounting nor taxable profit or loss;
temporary differences related to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future; and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences
when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax
liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis
or their tax assets and liabilities will be realised simultaneously.
Deferred tax assets are recognised for unused tax losses, unused tax credits and deductible temporary
differences to the extent that it is probable that future taxable profits will be available against which
they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised; such reductions are
reversed when the probability of future taxable profits improves.
(k)
Segment reporting
Segment results that are reported to management include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Page 36
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
5.
New standards and interpretations not yet adopted
Certain standards, amendments to published standards and interpretations have been issued that
are mandatory for accounting periods beginning on or after 1 October 2014 or later periods, but which
the Group has not early adopted.
At the reporting date of these financial statements, the following were in issue but not yet effective:
Amendments to IAS 1 Presentation of financial statements
Amendments to IAS 16 Property Plant and Equipment
Amendments to IAS 24 Related Party Disclosures
Amendments to IFRS 7 Financial Instruments : Disclosures
Amendments to IFRS 8 Operating Segments
Amendments to IAS 27 Separate Financial Statements
Amendments to IAS 38 Intangible Assets
Investment Entities (Amendments to IFRS 10 and IFRS 12 )
6.
(i)
(ii)
(iii)
(iv)
Where relevant, the Group is evaluating the effect of these Standards, amendments to published
Standards and Interpretations issued but not yet effective, on the presentation of its financial
statements.
Determination of fair values
A number of the Group’s accounting policies and disclosures require the determination of fair value,
for both financial and non-financial assets and liabilities. Fair values have been determined for
measurement and/or disclosure purposes based on the following methods. When applicable further
information about the assumptions made in determining fair values is disclosed in the notes specific to
that asset or liability.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is
the estimated amount for which a property could be exchanged on the date of acquisition between
a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the
parties had each acted knowledgeably. The fair value of items of plant and equipment is based on
the market approach and cost approaches using quoted market prices for similar items when
available and depreciated replacement cost when appropriate. Depreciated replacement cost
reflects adjustments for physical deterioration as well as functional and economic obsolescence.
Intangible assets
The fair value of other intangible assets is based on the discounted cash flows expected to be derived
from the use and eventual sale of the assets.
Trade and other receivables
The fair value of trade and other receivables is estimated at the present value of future cash flows,
discounted at the market rate of interest at the reporting date. This fair value is determined for
disclosure purposes or when such assets are acquired in a business combination.
Share-based payments
The fair value of the employee share options is measured using the Black-Scholes formula.
Measurement inputs include the share price on the measurement date, the exercise price of the
instrument, expected volatility (based on an evaluation of the Company’s historic volatility,
particularly over the historic period commensurate with the expected term), expected term of the
instruments (based on historical experience and general option holder behaviour), expected
dividends, and the risk-free interest rate (based on government bonds). Service and non-market
performance conditions attached to the transactions are not taken into account in determining fair
value.
Page 37
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
7.
Operating segments
The Group considers that it operates in two distinct business areas, being that of iron ore exploration,
and that of manganese exploration. These business areas form the basis of the Group’s operating
segments. For each segment, the Group’s Managing Director (the chief operating decision maker)
reviews internal management reports on at least a quarterly basis.
Other operations relate to the Group’s administrative functions conducted at its head office and by
its intermediate holding company together with consolidation adjustments.
Information regarding the results of each reportable segment is included below. Performance is
measured based on segment profit before tax, as included in the internal management reports that
are reviewed by the Group’s Managing Director. Segment results are used to measure performance
as management believes that such information is the most relevant in evaluating the performance of
certain segments relative to other entities that operate within the exploration industry.
Page 38
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I
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
8.
Expenses
Expenses include:
Depreciation and amortisation expense
Auditor’s remuneration
- Audit fee
- Other services
-Tax services
Foreign exchange differences
2015
£‘000
2014
£‘000
15
28
3
-
4
25
25
3
4
59
2014
£‘000
285
175
54
514
Auditor’s remuneration in respect of the Company amounted to £10,000 (2014: £10,000).
9.
Personnel expenses
Wages and salaries
Fees
Equity-settled share-based payments
2015
£‘000
284
228
21
533
Fees in respect of the services of D Reeves are payable to a third party, Wilgus Investments (Pty)
Limited.
Fees in respect of the services of R Lamming are payable to a third party, Parallell Resources Limited.
The average number of employees (including directors) during the period was:
Directors
Key management personnel
Other
2015
5
2
5
12
2014
5
2
5
12
Page 41
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
10.
Directors’ emoluments
2015
Wages and salaries (incl. fees)
Compulsory social security contributions
Equity-settled share-based payments
2014
Wages and salaries (incl. fees)
Compulsory social security contributions
Equity-settled share-based payments
Executive
directors
£’000
228
-
8
236
Executive
directors
£’000
230
-
26
256
Non-
executive
directors
£‘000
70
-
5
75
Non-
executive
directors
£‘000
70
-
11
81
Total
£‘000
298
-
13
311
Total
£‘000
300
-
37
337
Emoluments disclosed above include the following amounts payable to the highest paid director:
Emoluments for qualifying services
2015
£‘000
131
2014
£’000
141
As detailed in note 21, on 25 February 2015 all share options and warrants issued were cancelled.
Key management personnel
Included in note 9 are emoluments paid to key management personnel in the year which amounted
to £90,000 (2014: £100,000).
Page 42
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
11.
Finance income and finance costs
Recognised in loss for period
Interest income on cash balances held
Finance income
Fair value adjustment to financial instruments
Other
Finance costs
12.
Taxation
Current tax expense
Tax recognised in profit or loss
Current tax expense
Current period
Deferred tax expense
Origination and reversal of temporary differences
Total tax expense
Reconciliation of effective tax rate
2015
£‘000
-
-
-
78
78
2015
£‘000
-
-
-
2015
£’000
2014
£‘000
-
-
403
23
426
2014
£‘000
(126)
-
(126)
2014
£’000
Loss before tax
(5,716)
(1,788)
Tax using the Company’s domestic tax rate of 20.5% (2014: 22.0%)
(1,172)
(393)
Effects of:
Expenses not deductible for tax purposes
Overseas losses
Equity-settled share-based payments
Tax reclaimed on research and development expenditure
Tax losses carried forward not recognised as a deferred tax asset
974
95
4
-
99
-
116
138
12
126
127
126
None of the components of other comprehensive income have a tax impact.
Factors that may affect future tax charges
At the year end, the Group had unused tax losses available for offset against suitable future profits of
approximately £2,992,000 (2014: £2,507,000). A deferred tax asset has not been recognised in respect
of such losses due to uncertainty of future profit streams.
Page 43
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
13.
Property, plant and equipment
Group
Cost
Balance at 1 October 2013
Additions
Effect of movements in exchange rates
Balance at 30 September 2014
Balance at 1 October 2014
Additions
Disposals
Effect of movements in exchange rates
Balance at 30 September 2015
Depreciation and impairment provisions
Balance at 1 October 2013
Depreciation for the year
Balance at 30 September 2014
Balance at 1 October 2014
Depreciation for the year
Depreciation eliminated on disposals
Effect of movements in exchange rates
Balance at 30 September 2015
Carrying amounts
At 30 September 2013
At 30 September 2014
At 30 September 2015
Plant and
equipment
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
Total
£’000
27
3
(2)
28
28
-
-
(1)
27
3
5
8
8
4
-
-
12
24
20
15
47
4
(2)
49
49
-
(1)
-
48
24
5
29
29
5
(1)
-
33
23
20
15
68
-
(5)
63
63
-
(39)
(3)
21
23
15
38
38
6
(27)
(1)
16
45
25
5
142
7
(9)
140
140
-
(40)
(4)
96
50
25
75
75
15
(28)
(1)
61
92
65
35
Page 44
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
13.
Property, plant and equipment (continued)
Company
Cost
Balance at 1 October 2013
Additions
Balance at 30 September 2014
Balance at 1 October 2014
Additions
Balance at 30 September 2015
Depreciation and impairment provisions
Balance at 1 October 2013
Depreciation for the year
Balance at 30 September 2014
Balance at 1 October 2014
Depreciation for the year
Balance at 30 September 2015
Carrying amounts
At 30 September 2013
At 30 September 2014
At 30 September 2015
Computer
equipment
£’000
Total
£’000
4
1
5
5
-
5
4
-
4
4
-
4
-
1
1
4
1
5
5
-
5
4
-
4
4
-
4
-
1
1
Page 45
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
14.
Intangible assets
Cost
Balance at 1 October 2013
Additions
Effect of movement in exchange rates
Balance at 30 September 2014
Balance at 1 October 2014
Additions
Effect of movements in exchange rates
Balance at 30 September 2015
Amortisation and impairment losses
Balance at 1 October 2013
Balance at 30 September 2014
Balance at 1 October 2014
Impairment
Effect of movements in exchange rates
Balance at 30 September 2015
Carrying amounts
Balance at 30 September 2013
Balance at 30 September 2014
Balance at 30 September 2015
Prospecting
and
exploration
rights
£000
5,022
631
(127)
5,526
5,526
224
(160)
5,590
-
-
-
4,458
(39)
4,419
5,022
5,526
1,171
The carrying value of the prospecting and exploration rights is supported by the estimated resource
and current market values.
Page 46
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
15.
Investment in subsidiaries
Company
Equity investments
Balance at beginning of period
Impairment
Balance at 30 September
Directly
Ferrex Iron Limited
Ferrex Manganese Limited
Southern Iron Limited
Ferrex Australia (Pty)Limited
Indirectly
Moongate 218 (Pty) Limited
Southern MN (Pty) Limited
2015
£’000
1,778
(1,778)
-
2014
£’000
1,778
-
1,778
Ownership interest
2015
100%
100%
100%
100%
74%
74%
74%
85%
2014
100%
100%
100%
100%
74%
74%
74%
85%
Activity
Country of
incorporation
Investment
Investment
Investment
United
Kingdom
United
Kingdom
Guernsey
Research and
development
Australia
Exploration
Exploration
South
Africa
South
Africa
South
Africa
Togo
Umbono Mineral Holdings (Pty) Ltd
Exploration
Société Générale de Mine
Exploration
Ressources Equatoriales SARL
Exploration
Gabon
78.3%
78.3%
16.
Loans
Group
Balance at beginning of period
Provisions against loans at beginning of period
Balance at 30 September
Company
Balance at beginning of period
Funds advanced to and ordinary shares issued on behalf of
subsidiary undertakings
Provisions against loans
Balance at 30 September
2015
£‘000
119
(119)
-
2015
£‘000
6,322
463
(5,015)
1,770
2014
£‘000
119
(119)
-
2014
£‘000
5,035
1,287
-
6,322
Group loans are to third parties in respect of costs relating to exploration rights. Due to the uncertainty
of obtaining the necessary licences a provision has been made against these loans. All loans are
currently unsecured and interest free.
Page 47
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
17.
Trade and other receivables
Group
Other receivables
Prepayments
Company
Other receivables
Prepayments
2015
£‘000
37
15
52
2015
£‘000
15
14
29
Other receivables are stated at their nominal value less allowances for non-recoverability.
The Group and Company’s exposure to credit and currency risk is disclosed in note 24.
18.
Cash and cash equivalents
Group
Bank balances
Cash and cash equivalents
Company
Bank balances
Cash and cash equivalents
2015
£‘000
64
64
2015
£‘000
57
57
2014
£‘000
58
15
73
2014
£‘000
38
14
52
2014
£‘000
107
107
2014
£‘000
72
72
There is no material difference between the fair value of cash and cash equivalents and their book
value.
Page 48
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
19.
Capital and reserves
Share capital
In issue at beginning of year
Issued for cash
Issued in connection with acquisition of subsidiary
In issue at 30 September – fully paid
Balance at beginning of year
Share issues
Balance at 30 September
Number of ordinary shares
of £0.005 each
2015
933,794,390
167,000,000
-
1,100,794,390
2014
805,179,963
128,614,427
-
933,794,390
Ordinary share capital
2015
£‘000
4,669
835
5,504
2014
£‘000
4,026
643
4,669
Ordinary shares
All shares rank equally with regard to the Company’s residual assets.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are
entitled to one vote per share at meetings of the Company.
Issue of ordinary shares
On 25 February 2015, 167 million ordinary shares were issued, of these, 144.5 million were issued for
cash at a price of £0.005 per ordinary share and 22.5 million were issued at £0.005 per ordinary share
to settle loans from D Reeves and B Moritz.
Share option reserve
The share option reserve comprises the cumulative entries made to the consolidated statement of
comprehensive income in respect of the equity-settled share-based payments.
Exchange reserve
The exchange reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
Page 49
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
20.
Loss per share
Basic and diluted loss per share
The calculation of basic loss per share at 30 September 2015 is based on the loss attributable to
ordinary shareholders of £5,450,000 (2014: £1,692,000), and a weighted average number of ordinary
shares in issue of 1,033,079,321 (2014: 880,614,829), calculated as follows:
Weighted average number of ordinary shares
Issued ordinary shares at beginning of year
Effect of shares issued
Weighted average number of ordinary shares
2015
933,794,390
99,284,931
1,033,079,321
2014
805,179,963
75,434,866
880,614,829
The share options in issue are considered to be antidilutive and as a result, basic and diluted loss per
share are the same.
21.
Share-based payments
The Company operated a share option programme that entitled key management personnel to
purchase shares in the Company. The terms and conditions of the share option programme were
disclosed in the consolidated financial statements as at and for the year ended 30 September 2014.
On 25 February 2015 all share options and warrants issued were cancelled.
22.
Loans and borrowings
Group and Company
Unsecured loan notes
2015
£‘000
375
375
2014
£‘000
-
-
The loan notes carry interest at 10% per annum and are repayable on demand.
Page 50
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
23.
Trade and other payables
Group
Trade payables
Accrued expenses
Other payables
Company
Accrued expenses
Other payables
2015
£‘000
98
347
40
485
2015
£‘000
339
73
412
2014
£‘000
99
166
135
400
2014
£‘000
158
195
353
There is no material difference between the fair value of trade and other payables and accruals and
their book value. The Group’s and Company’s exposure to currency and liquidity risk related to trade
and other payables is disclosed in note 24.
24.
Financial instruments
Financial risk management
The Group’s operations expose it to a variety of financial risks that include liquidity risk. The Group has
in place a risk management programme that seeks to limit the adverse effect of such risks on its
financial performance.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument
fails to meet its contractual obligations.
Management has a credit policy in place of and the exposure to credit risk is monitored on an ongoing
basis.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at the reporting date was as follows.
Group
Trade and other receivables
Cash and cash equivalents
Company
Loans
Trade and other receivables
Cash and cash equivalents
Note
17
18
Note
16
17
18
Carrying amount
2015
£‘000
52
64
116
Carrying amount
2015
£‘000
1,770
29
57
1,856
2014
£‘000
73
107
180
2014
£‘000
6,322
52
72
6,446
Page 51
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
24.
Financial instruments (continued)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated
with its financial liabilities that are settled by delivering cash or another financial asset.
The Group reviews its facilities regularly to ensure it has adequate funds for operations and expansion
plans.
The following are the contractual maturities of financial liabilities, including estimated interest
payments and excluding the impact of netting agreements.
Group
2015
Non-derivative financial liabilities
Loans and borrowings
Trade and other payables
2014
Non-derivative financial liabilities
Trade payables
Company
2015
Non-derivative financial liabilities
Loans and borrowings
Trade payables
2014
Non-derivative financial liabilities
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£‘000
2 months or
less
£‘000
375
485
860
(375)
(485)
(860)
(375)
(485)
(860)
Carrying
amount
£’000
Contractual
cash flows
£‘000
2 months or
less
£‘000
400
400
(400)
(400)
(400)
(400)
Carrying
amount
£’000
Contractual
cash flows
£‘000
2 months or
less
£‘000
375
412
787
(375)
(412)
(787)
(375)
(412)
(787)
Carrying
amount
£’000
Contractual
cash flows
£‘000
2 months or
less
£‘000
353
353
(353)
(353)
(353)
(353)
Page 52
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
24.
Financial instruments (continued)
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and
equity prices will affect the Group’s income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return. At present, the Directors do not consider these
risks to be significant to the Group.
Currency risk
The Group is exposed to foreign currency risk on purchases that are denominated in currencies other
than GBP. The currencies giving rise to this risk are primarily South African Rand and the Australian
Dollar. The Group places deposits in these currencies to manage the exposure to changes in future
cash outflows in these currencies.
Fair values
The fair values of financial instruments such as trade and other receivables/payables are substantially
equivalent to carrying amounts reflected in the balance sheet.
Capital management
The Group’s objective when managing capital is to safeguard its accumulated capital in order to
provide an adequate return to shareholders by maintaining a sufficient level of funds, in order to
support continued operations.
The Group considers its capital to be total shareholders’ equity which at 30 September 2015 for the
Group totalled £1,123,000 (2014: £5,708,000) and for the Company totalled £1,070,000 (2014:
£7,872,000).
25.
Related parties
The Group’s related parties include its key management personnel and others as described below.
Except for interest on inter-company loans, transactions with related parties take place on terms no
more favourable than transactions with unrelated parties. No guarantees have been given or
received and all outstanding balances are usually settled in cash.
D Reeves advanced £375,000 to the Group in the period via loan notes, subject to an arrangement
fee of £30,000. As detailed in note 22 these loan notes carry interest at 10% per annum and are
repayable on demand.
D Reeves and B Moritz each advanced £50,000 to the Group in the previous period. As detailed in
note 19, these loans plus a premium of £12,500 in total were settled by the issue of ordinary shares.
Page 53
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
25.
Related parties (continued)
Other related party transactions
Transactions with Group companies
The Company had the following related party balances from financing activities:
Southern Iron Limited
- Loans and receivables (interest free)
Ferrex Iron Limited
- Loans and receivables (interest free)
Ferrex Manganese Limited
- Loans and receivables (interest free)
Ferrex Australia Pty Limited
- Loans and receivables (interest free)
2015
£’000
1,000
2014
£’000
3,770
-
2,387
503
2,522
2,387
-
267
267
Southern Iron Limited had the following related party balances from financing activities:
Moongate 218 (Pty) Limited
- Loans and receivables (interest free)
Umbono Mineral Holdings (Pty) Limited
- Loans and receivables (interest free)
Société Générale de Mine SARL
- Loans and receivables (interest free)
2015
£’000
1,194
2014
£’000
1,176
3
50
1,357
1,217
Ferrex Iron Limited had the following related party balances from financing activities:
Ressources Equatoriales SARL
- Loans and receivables (interest free)
967
860
Ferrex Manganese Limited had the following related party balances from financing
activities:
Umbono Mineral Holdings (Pty) Limited
- Loans and receivables (interest free)
26.
Contingencies
55
860
-
On 28 March 2014, the company issued shares of which a proportion formed part of an equity swap
agreement. The fair value of this instrument at the period end has been assessed based on a share
price as at 30 September 2015 and should the agreement have been settled at 30 September then
the Company would have had a liability of £269,000, however, given volatility of Keras share price and
resource equity markets generally, the Directors are of the opinion that recognition of the amount as
a contingent liability is the most appropriate classification as at the reporting date.
Page 54
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2015
27.
Subsequent events
On 17 November 2015, the Company announced that it had entered an agreement to acquire 100%
of Australian private company Chaffers Mining Pty Ltd. Chaffers has negotiated a five year tribute
agreement with Paddington Goldfields, a subsidiary of Norton Goldfields ('Norton') to mine certain
defined gold deposits located on the Norton leases, located 30km north of Kalgoorlie in the heart of
the Western Australian goldfields, for treatment at Norton’s nearby Paddington processing plant. This
was part of the Company’s focus on targeting near term cash flow potential projects in stable
jurisdictions.
On 1 February 2016, Keras announced that it had secured £563,889 loan note to commence gold
production in Australia during 2016. These funds will, inter alia, provide the working capital needed to
commence production at the Grants Patch Tribute project, located 30km north of Kalgoorlie in
Western Australia.
Further details on both of these subsequent events can be found in the respective announcement
which are available from the Company’s website www.kerasplc.com.
Page 55