Registered number: 07353748
KERAS RESOURCES PLC
FORMERLY “FERREX PLC”
ANNUAL REPORT 2016
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 2016
Consolidated Statement of Changes in Equity
- 30 September 2015
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
19
23
25
26
27
28
29
30
31
32
33
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
R Lamming
P Hepburn-Brown
Non-Executive Chairman
Managing Director
Non-Executive Director
Non-Executive Director
Company secretary:
Cargil Management Services Limited
Company number:
07353748
Registered office:
Nominated advisor:
Broker:
Solicitor:
Auditor:
27/28 Eastcastle Street
London W1W 8DH
Northland Capital Partners Limited
60 Gresham Street, 4th Floor,
London EC2V 7BB
Beaufort Securities Limited
63 St Mary Axe
London EC3A 8AA
Memery Crystal LLP
44 Southampton Buildings
London WC2A 1AP
Moore Stephens LLP
150 Aldersgate Street
London EC1A 4AB
Page 1
KERAS RESOURCES PLC
HIGHLIGHTS
Established portfolio of gold mining operations in areas with proven resource potential
in Western Australia:
o Low cost acquisition of 100% of Klondyke Gold Project (‘Klondyke’)
o Agreement with Haoma Mining NL (‘Haoma’) for a Right to Mine and Option to
Purchase Agreement on tenements contiguous and near to Klondyke
o Establishment of
joint venture / tribute mining portfolio, following
initial
acquisition of Chaffers Mining in November 2015
Primary focus on Klondyke, located in a prospective gold region with 15km of strike,
which has a scalable JORC compliant resource of 5.6Mt @ 2.08g/t for 374,000 ounces
with significant further upside:
o Resource covers just 2km of the 7.5km main strike identified, and is also open at
depth
o Right to mine adjacent Haoma tenements, which have excellent discovery
potential, highlighted by high-grade drill results, including 3m at 17.58g/t Au
from 20m, 4m at 59.48g/t Au from 64m and 11m at 7.23g/t Au from 30m on
adjacent shear zones
Active growth strategy – Klondyke and Haoma transactions provide Keras with control
over the Warrawoona Greenstone Belt and the Group continues to assess additional
growth opportunities within this prospective area
Additional upside available through established joint venture / tribute mining portfolio
Page 2
KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
During the year under review the Company has changed its area of operation to become
an Australian focussed gold company. Having identified the significant potential of the
Australian gold market, we have made substantial progress within a short space of time. We
established a portfolio of tribute mining operations, which have served as a stepping stone to
the transformational acquisition of the Klondyke Gold Project (‘Klondyke’) in Western
Australia.
With an established resource of 5.6Mt at 2.08g/t gold (‘Au’) for 374,000oz, and further upside
opportunity already identified, we believe Klondyke offers significant value uplift potential.
Furthermore, at the same time as we acquired Klondyke the Company also reached an
agreement with Haoma Mining NL ('Haoma') for a Right to Mine and Option to Purchase
Agreement on tenements contiguous and near to Klondyke covering 650 hectares. We
believe these tenements have excellent potential due to the high grade drill results that have
been returned to date, including 3m @ 17.58g/t Au from 20m, 4m @ 59.48 g/t Au from 64m
and 11m @ 7.23 g/t Au from 30m.
Crucially, as we will be the operator of Klondyke and the Haoma tenements, with a 100%
interest, we believe there are stronger operating margins available for us here compared to
our tribute operations. It is therefore our intention that this will be our primary development
focus. With this in mind, our strategy going forward is centred on advancing Klondyke
towards production whilst concurrently identifying, assessing and developing low risk, high-
margin mining operations, which are intended to provide cash flow to support the
development of Klondyke.
Despite not having been profitable in the year to 30 September 2016, our tribute mining
operations have served to give us a foothold in the gold mining sector in Australia. In order to
ensure that these operations are a profitable investment for the Company, both in terms of
capital investment and management time, Keras has implemented rigorous internal
screening protocols for assessing new projects.
Aside from our operational activity in Australia, we have an 85% interest in the Nayega
Manganese Project in Togo, West Africa, which we believe offers significant upside due to its
low capex, open pit, near-term production 250,000 tonne per annum manganese export
potential. Whilst we continue to await the award of a mining licence, we remain optimistic
about the future development potential of this project, especially given the positive price
performance of manganese in 2016.
Corporate Update
To reflect our increasing operational presence in Australia, we are currently working to
finance the development of Klondyke through a proposed listing on the Australian Stock
Page 3
KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
Exchange (‘ASX’). We will continue to keep shareholders updated with developments
relating to a potential listing of either the Company or its subsidiary on the ASX.
With the change in focus of the Company to Australia, we have commenced restructuring
our Board. Mr. Roy Pitchford resigned from his role as a non-executive director of the
Company in September 2016, when we acquired the Klondyke and Haoma tenements. At
the same time, Mr. James Carter, the Finance Director, also resigned from the Board, but he
will continue to provide services to the Company in the role of Chief Financial Officer. I
would like to take this opportunity to thank both Roy and James for the long-term support
and guidance they have given Keras and I look forward to continuing to work with James.
Financial Review
In order to fund the acquisition of Klondyke, Keras entered into an Acquisition Finance Facility
Agreement ('Finance Agreement') with a consortium of investors arranged by Riverfort
Global Capital Ltd (the 'Investors'). The Finance Agreement has been entered into as a
bridge funding facility to secure the acquisition of a significant long-term asset for the
Company.
The total drawdown available to the Company was US$2m (£1.5m) ('Principal Amount') and
is repayable six months after the initial drawdown at an interest rate of 10% per semi-annum,
with a Commitment Fee and an Implementation Fee of 5% each. Draw down of the total
facility took place on completion of the project acquisition in October 2016 and the
Company granted £389,350 worth of warrants to subscribe for new ordinary shares of 0.01p
each (“Ordinary Shares”). The warrants are exercisable at a strike price of 0.8501GBP and are
valid for two years from the date of issue.
Outlook
This has been a transformational year for Keras, with the change of focus from iron and
manganese in Africa to gold in Australia. I believe we now have the necessary foundations in
place to build an exciting mining business and increase shareholder value. The acquisition of
Klondyke and the Haoma tenements gives us the opportunity to operate our own 100%
owned gold mine, and our focus is now on advancing Klondyke into production. The first step
is to gain a better understanding of the geology and to expand the resource prior to
completing development plans for the project. In line with this, we commenced an initial
600m drill programme in November 2016. We expect the results of this to confirm priority
targets for the resource drill programme planned for early 2017, which we believe should
extend the current JORC compliant mineral resource estimate.
Page 4
KERAS RESOURCES PLC
CHAIRMAN’S STATEMENT
In addition to advancing Klondyke and the Haoma tenements, we will continue to
investigate profitable gold mining operations.
Finally, I would like to take this opportunity, in what could be my final statement as Chairman,
to thank the rest of the Board and our management team for their hard work, and
shareholders for their support through a difficult period of transition. We look forward to
keeping shareholders updated with our progress over the coming year, which is set to be an
extremely active one.
Brian Moritz
Chairman
19 December 2016
Page 5
KERAS RESOURCES PLC
STRATEGIC REPORT
The Directors present their Strategic Report for the year ended 30 September 2016.
Operating Review
Principal Activities
The principal activity of the Group during the reporting period has been the move into gold
mining and exploration via the acquisition of Chaffers Mining Pty Ltd (‘Chaffers Mining’) in
November 2015, which gave Keras the right to mine certain defined gold deposits located
30km north of Kalgoorlie in the heart of the Western Australian. The main areas of activity
during the reporting period were consequently in Australia, with some limited work at the
Company’s manganese project in Togo.
Post year end, the Company announced the completion of the acquisition of the Klondyke
Gold project in Western Australia and entered into the Haoma Option and right to mine
agreement.
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 Chief Financial
Officer and 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
mining and drilling services, metallurgical testwork, engineering design, and environmental
studies. The structure reflects the relatively small scale nature of the Group’s activities, which
necessitates a balance between managing cash expenditure and achieving the Group’s
work programmes in a professional and timely manner.
Strategy and Business Plan
The Group’s strategy is to target projects that increase shareholder value by taking projects
through the life cycle from feasibility to development.
The Group’s business model has established the Company as an efficient and low cost
explorer/developer.
During the reporting period the Group was focussed on finalising the acquisition of Chaffers
Mining and identifying opportunities for the outright acquisition of an Australian based gold
project; the latter being achieved through the acquisition of the Klondyke gold project and
Haoma option, both located in the Pilbara region of Western Australia. These projects have
existing resources and potential for further exploration upside. Through the acquisition of
Chaffers Mining small scale gold production commenced during the year at the Grants
Page 6
KERAS RESOURCES PLC
STRATEGIC REPORT
Patch projects where the Company has a Tribute Agreement arrangement in place with
Paddington Gold.
Minimal work was undertaken at the Nayega Manganese project in Togo as the company
awaits the award of a mining licence from the Togolese government. A definitive feasibility
study was completed for Nayega in the previous year and the project stills holds significant
value potential for the Company.
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 16% of the issued shares in Keras and we believe this stake
provides further evidence of the Board’s belief in and commitment to its strategy.
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.
Financial and Performance Review
The Group commenced initial production of gold in Australia during the year under review,
having previously had no income other than a small amount of bank interest. Revenue for
the period was £1.9m, generated from gold sales proceeds at the Grants Patch projects in
Australia. Production at these projects was completed in July 2016. Further information was
disclosed in the June quarterly report announced on 28 July 2016. The gross loss from
operations was £0.3m, with lower than expected productivity in the small pits resulting in
higher operating costs. Mining and milling of ore from the Wycheproof project commenced
during the fourth quarter and as at 30 September all production was recorded in inventory.
The results of the Group are set out in detail in the financial statements. The Group reports a
loss of £2.2m for the year (2015: £5.7m) after administration and exploration expenses of
£1.3m (2015: £1.2m) and an impairment charge in 2015 of £4.5m.
The financial statements show that, at 30 September 2016, the Group had total assets of
£3.1m (2015: £1.3m). Total assets include £2.0m (2015: £1.2m) of intangible assets. This
primarily comprises exploration, evaluation and development expenditure on the Group’s
projects. The increase from the previous year is mainly associated with the acquisition of
Chaffers Mining in November 2015.
Page 7
KERAS RESOURCES PLC
STRATEGIC REPORT
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.
The Directors have assessed the carrying value of the Group’s assets, and no impairment has
been made to the carrying value of the Nayega manganese project in Togo, or the carrying
value of gold mining assets in Australia.
Key Performance Indicators (“KPI’s)
During the year the Board monitored the following KPI’s;
Cash flow and working capital
o Short (<3 months) and long term cashflows models are prepared to monitor
and forecast the groups funding needs
o Management accounts prepared on a monthly basis for the group’s key
subsidiaries and quarterly on a consolidated group basis
o Weekly reporting of the Group’s working capital position
Production forecasts and mine plans
o
The company undertook modest scale production at the Grants Patch and
Wycheproof projects during the year. These projects have subsequently been
completed
o Management prepare mine schedules and cash flow budgets for these
projects that were reported against on a daily, weekly and monthly basis.
In the upcoming year there will be greater focus on exploration at the Klondyke and Haoma
gold projects. Should the Company also receive a mining permit for the Nayega Manganese
project then activities at this project could increase substantially from the current reporting
period.
Page 8
KERAS RESOURCES PLC
STRATEGIC REPORT
Australian Owner Operator Gold Projects
Klondyke Gold Project (100% owned)
In October 2016 Keras completed the acquisition of Arcadia Minerals Pty Ltd ('Arcadia'),
which at the time was the 100% owner of the Klondyke Gold Project ('Klondyke') in the
Pilbara region of Western Australia. At the same time, the Company also acquired the
Haoma Mining NL ("Haoma”) Right to Mine and Option to Purchase Agreement, which gives
Keras the right to mine a number of tenements prospective for gold, covering 650 hectares
contiguous and near to Klondyke. These transactions are part of the Company's strategy to
become a significant gold producer in Western Australia.
Klondyke is located in the prospective Warrawoona Goldfield in the East Pilbara District of
the Pilbara Goldfield of Western Australia. The Project comprises four mining licences
covering 490 hectares, which includes numerous historic gold mines with very high gold
grades, such as the Klondyke Block and the Kopcke's Reward, which have historical mined
grades of 574g/t and 90 g/t of gold respectively. Klondyke itself has an established 2012
JORC compliant Inferred Resource of 5.6Mt at 2.08g/t for 374,000oz Au. Crucially, this
resource is confined to two separate 1km portions of a 7.5km of mineralised strike length
identified, meaning there is significant potential for a large increase in resource along the
untested strike length.
Initial optimisation work on the resource suggests, due to its large tonnage, near surface
nature, that the deposit could be best exploited via open pit mining, with favourable
operating metrics projected. Aside from the open-pit resource, there is also the potential for
underground mining on high grade lodes, which would further extend the resource potential
of the deposit.
In addition to the upside potential identified within the Klondyke licence area, Keras also has
the right to mine the Haoma tenements, which comprise seven tenements covering an area
of 650 hectares. These are contiguous and near to the Klondyke deposit, and include historic
deposits such as the previously producing Fieldings Gully mine, and the Coronation and
Copenhagen deposits.
The Fieldings Gully mine is located approximately 15km from the centre of the Klondyke area
and is an old operating mine. Fieldings Gully has a historic non-compliant resource of
315,000t @ 1.8 g/t Au for 18,266oz at a 0.5g/t Au cut-off and the resource remains open at
depth and along strike. Significant intersections returned from the deposit include 14m @
3.09g/t from 53m, 4m @ 5.29 g/t from 12m and 3m @ 17.58g/t from 20m.
Copenhagen is located 10km from Klondyke and is situated on an old mine. No resource has
been calculated, but significant intercepts have been returned from the deposit, including
Page 9
KERAS RESOURCES PLC
STRATEGIC REPORT
4m @ 59.48 g/t Au from 64m, 6m @ 15.47g/t Au from 26m and 10m @ 6.82 g/t Au from 18m.
These intercepts are extremely positive, but I would like to advise shareholders that a small
open pit was developed in the 1980s at Copenhagen and consequently some of these
areas may have been mined. We look forward assessing this deposit in more detail.
Coronation is located 12.5km from Klondyke and is situated on an old mine. Like
Copenhagen, no resource has been calculated but significant intercepts underpin the
prospectivity of this asset, including 8m @ 7.64g/t Au from 64m, 3m @ 16.67g/t Au from 16m
and 2m @ 31.5g/t Au from 30m.
In line with our active growth strategy, work has already commenced at Klondyke and the
wider Haoma tenement area. Detailed mapping of the greater Klondyke area commenced
in early November 2016 and an initial 600m drill programme commenced in mid-November.
The intention of this first phase of drilling is to confirm historical intercepts and finalise assay
techniques for the main 12,000m drill programme which is targeted to upgrade the current
resource in the Klondyke main shear and to in-fill drill the adjacent Haoma tenements
located along strike of the resource.
Following this drill programme, we will look to follow-up significant drill intercepts at
Copenhagen and review data from the Fieldings Gully and Coronation deposits in order to
ascertain the likelihood that further drilling could add to the current resource. We also intend
to complete further metallurgical testwork.
Phase three of our development programme will look to undertake further extensional drilling
in order to define the westerly strike potential of the main Klondyke shear and as part of this
we hope to complete a scoping study. This would then potentially pave the way for a pre-
feasibility study, which covers phase four of our development strategy.
In addition to advancing Klondyke and the Haoma tenements we will continue to assess
additional opportunities in the project area that we believe offer prospective upside
opportunity, complement our current land holding and further consolidate our presence
within the region.
Australian Tribute Gold Projects
The Company continues to identify and assess low-risk, tribute operations to enable
continuing cash flows while the flagship, 100% owned Klondyke Project is being advanced to
a development decision. To support this, Keras has implemented rigorous internal screening
protocols for assessing new projects to determine maximum cash costs and profit per month
to ensure the Company only invests in low-risk projects that provide an adequate reward for
the time spent on the project.
Page 10
KERAS RESOURCES PLC
STRATEGIC REPORT
The Company’s tribute portfolio is focussed on the Western Australian goldfields meaning
that infrastructure can be shared across the projects in order to maximise profitability.
Grants Patch Gold Project
Status: Anomaly 22 and Accord – Complete | Prince of Wales Mine – Ongoing
On 17 November 2015 Keras secured its first tribute contract via the acquisition of a 100%
interest of Australian private company Chaffers Mining ('Chaffers'). This gave Keras
ownership of a five year tribute mining agreement with Paddington Goldfields, a subsidiary of
Norton Goldfields ('Norton'), to mine certain defined gold deposits located on the Norton
Grants Patch lease area, situated 30km north of Kalgoorlie in the heart of the Western
Australian goldfields (‘Grants Patch’). The agreement covers historic resources of 5,741,155t
at 2 g/t of gold for 363,599 ounces, with multiple deposits comprised of remnant resources
below historic pits and previously unmined near-surface deposits. Ore recovered is treated
at Norton's Paddington processing plant located 25km away (‘Paddington Mill’). Keras is
contracted to pay mining and processing costs, plus 22% royalty on gold recovered to
Norton.
Following an initial investigation of the licence area, Keras identified two shallow laterite and
oxide gold deposits, Anomaly 22 and Accord, which were recognised as providing potential
for rapid targeting in order to generate revenue in the short term. The Company also
identified an opportunity for high grade underground mining from the Price of Wales mine,
which has a historic resource of 154,000t @ 8g/t gold and an exploration target of 500Kt at
10g/t for 160Koz.
Ore mining commenced at Anomaly 22 in March 2016 and the first batch of ore, totalling
7,548t at a grade of 1.53 g/t containing around 372 ounces of gold, was hauled in early April
2016 to be processed at the Paddington Mill. Following delivery, ore mining commenced at
Accord and operations continued to move between the Anomaly 22 and Accord deposits,
with a second batch of ore, estimated to total 17,000t of ore at a grade of 1.93 g/t Au
containing an estimated 1,055 ounces of gold, delivered to the Paddington Mill in late April
2016.
In total, 63,346 tonnes of ore were mined from Anomaly 22 and Accord, which was toll
processed at a provisional grade of 1.36 g/t Au for a total of 2,763 ounces Au. However,
lower than expected productivity in the small pits resulted in higher operating costs, with a
total operating cost per ounce excluding joint venture costs of A$1,407/oz and total
operating cost including payments to due joint ventures partners of A$1,736/oz achieved, set
against the then average gold price of A$1,687/oz. This accordingly led us to re-evaluate
our joint venture mining protocols for the mining of future deposits, including increasing
Page 11
KERAS RESOURCES PLC
STRATEGIC REPORT
excavator and trucking capacity, optimising grade control drilling and re-negotiating
contracts in order to significantly reduce costs and increase operating margins.
The underground Prince of Wales mine remains a prospective target for Keras, where higher
operating margins are modelled. Keras has completed extensive design and costing work in
order to help finalise development plans for the mine and a Bulk Sample permit to mine an
initial 10,000t was received in July 2016, which will allow the Company to target the shallow,
higher-grade ore that can be easily accessed from the existing decline. Further updates
relating to this will be provided in due course.
Wycheproof Gold Deposit
Status: Complete
Keras secured a 50:50 profit share agreement with Kalgoorlie Mining Associates on 23
February 2016 to mine the Wycheproof deposit, which is located 50km north-east of the city
of Kalgoorlie in the Western Australian goldfields. With an established resource of 75,600t at
2.87 g/t Au for 6,974 ounces, Wycheproof is a high-grade, shallow deposit, which Keras
targeted due to its ability to be brought into production in a short space of time.
To support the exploitation of this asset, Keras concluded a toll milling agreement with
Golden Mile Milling (Pty) Ltd ('Golden Mile') on 31 August 2016 to treat ore from Wycheproof
at Golden Mile’s Lakewood mill, which is located on the outskirts of Kalgoorlie. Following this,
in September 2016, the Company commenced milling of the first 10,000t batch of gold ore
from Wycheproof and during the quarter ended 30 September 2016 mined 19,522 tonnes of
ore at an estimated average grade of 1.80g/t Au. The final batch is currently being
processed with total recovered gold estimated to be approximately 1,000 ounces Au.
Lindsay's Gold Project
Status: Ongoing
On 14 March 2016 Keras signed a binding profit share agreement with KalNorth Gold Mines
Limited ('KalNorth') over the Lindsay's Project in the Western Australian goldfields. Under the
terms of the Agreement, Keras has been granted an exclusive and irrevocable option to
mine the Lindsay's Project in consideration for a share of the net revenues derived from the
Lindsay's Project.
The Lindsay's Project is located 65km NNE of Kalgoorlie and about 60km NE of the Grants
Patch Gold Tribute Project. It incorporates total open pit and underground resources of
215,100 ounces Au at a grade of 1.7g/t Au of which 77% falls in the Indicated Resource
category. It also includes the high-grade Parrot Feathers deposit, which comprises a resource
of 401,000t at a grade of 4.2g/t Au containing 54,000 ounces Au with further upside potential.
Page 12
KERAS RESOURCES PLC
STRATEGIC REPORT
This deposit is likely to be targeted via an underground operation. Keras is currently assessing
development plans for this project with a decision to proceed or not to be made in the near
future.
On 14 December 2016, the Group entered into a Dead of Release with KalNorth Gold Mines
Limited in relation to the binding profit share agreement (see Note 29 to the financial
statements).
African Portfolio
Togo – Nayega Manganese Project (85% owned)
Keras holds an 85% interest in the Nayega manganese project, which covers 92,390 hectares
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 deep-water port of Lome
600km away that has >800,000t per annum back loading capabilities.
Having defined a JORC Code compliant Indicated and Measured Resource of 11.0Mt @
13.1% manganese, the Company has completed the majority of the Phase 1 Definitive
Feasibility Study to develop an initial open-pit, 250,000tpa manganese operation. To support
this proposed development, we have applied for a Mining Permit. The Company continues
to await the award of this, and consequently we have not undertaken any significant
activities during the year. However, we would like to assure shareholders that we have all the
relevant documents, government assurances and local support in place so that we are well
positioned to deliver first production within approximately nine months from a development
decision, subject to the availability of mining finance.
With the manganese price performing well this year we remain unchanged in our view that
Nayega offers significant value for Keras and we are currently assessing the best ways in
which to realise this.
Gabon – Mebaga Iron Ore (78% owned)
The Mebaga licence has had an application for renewal lodged, the Company is
considering the best course of action for this project.
South Africa – Leinster Manganese (74% owned)
The Company is considering disposal options with regards to this project.
Page 13
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 primarily 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.
Page 14
KERAS RESOURCES PLC
STRATEGIC REPORT
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 and also undertook gold mining activities at
the Grants patch and Wycheproof projects during the reporting period. 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. The company engaged a
specialist environment consultant to assess and prepare the Company’s environment
obligations and permitting requirements at our gold projects during the reporting period.
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.
Page 15
KERAS RESOURCES PLC
STRATEGIC REPORT
Financial Instruments
Details of risks associated with the Group’s financial instruments are given in Note 27 to the
financial statements. Given the 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 the Company. This
is arranged via a specialist mining 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.
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.
Page 16
KERAS RESOURCES PLC
STRATEGIC REPORT
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 mining and 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 identifying resources needed
to manage environmental compliance in the future. During the year the Group engaged an
experienced environment consultant to assist with assist with fulfilling our environmental
regulatory obligations at the Australian gold projects.
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 commenced
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.
Page 17
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 19 December 2016.
David Reeves
Managing Director
19 December 2016.
Page 18
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 2016.
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 £2,239,000 (2015: £5,716,000).
Major events after the balance sheet date
On 5 October 2016, the Company announced that it had completed the acquisition of the
Klondyke Gold Project and the Haoma Mining NL Right to Mine and Option to Purchase
Agreement in the Pilbara region of Western Australia. These transactions are part of the
Company's strategy to become a significant gold producer in Western Australia.
In order to fund the above acquisitions, the Company has entered into an Acquisition
Finance Facility Agreement with a consortium of investors arranged by Riverfort Global
Capital Ltd. The Finance Agreement has been entered into as a bridge funding facility to
secure the acquisition of a significant long-term asset for the Company.
The total drawdown available before fees to the Company is £1.5m with a maturity date six
months after the initial drawdown at an interest rate of 10% per semi-annum, with a
Commitment Fee and an Implementation Fee of 5% each. During the period before the
maturity the Investors may elect to convert such principal amount of the loan outstanding at
a 20% premium to the Keras closing share price on the date of drawdown.
On 14 December 2016, the Group entered into a Dead of Release with KalNorth Gold Mines
Limited in relation to the binding profit share agreement over the Lindsay’s Project. The
Group will receive approximately £0.07m relating to the recovery of third party costs
incurred.
Further details on 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
2016 (2015: £nil).
Political donations
There were no political donations during the year (2015: £nil).
Page 19
KERAS RESOURCES PLC
DIRECTORS’ REPORT
Going concern
The Directors continue to adopt the going concern basis in preparing the financial
statements. The Board is confident that external funding can be raised to finance the
Group’s planned activities. Should a decision to mine be made, any 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.
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 and B Moritz, 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 B Moritz 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.
Page 20
KERAS RESOURCES PLC
DIRECTORS’ REPORT
Directors
The following Directors held office during the period:
B Moritz
D Reeves
J Carter
R Lamming
R Pitchford
P Hepburn-Brown
(Non-Executive Chairman)
(Managing Director)
(Finance Director) resigned 12 September 2016
(Non-Executive Director)
(Non-Executive Director) resigned 12 September 2016
(Non-Executive Director) appointed on 17 November 2015
Directors’ interests
The beneficial interests of the Directors holding office on 30 September 2016 in the issued
share capital of the Company were as follows:
30 September 2016
30 September 2015
Number of
ordinary
shares of
0.01p each
25,833,333
128,577,867
41,944,444
25,883,400
Percentage
of issued
ordinary
share
capital
1.92%
9.54%
3.11%
1.92%
Number of
ordinary
shares of
0.05p each
25,833,333
128,577,867
42,881,944
-
Percentage
of issued
ordinary
share
capital
2.35%
11.68%
3.81%
-
B Moritz
D Reeves1
R Lamming2
P Hepburn-Brown
1These ordinary shares are held by the Elwani Trust whose beneficiaries are the spouse and
children of D Reeves.
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.
There have been no material changes to these holdings since 30 September 2016.
Directors’ remuneration and service contracts
Details of remuneration payable to Directors are disclosed in note 11 to these financial
statements:
B Moritz
D Reeves
J Carter
R Lamming
R Pitchford
P Hepburn-Brown
Remuneration
£’000
30
125
100
55
19
35
364
Share-
based
payments
£’000
8
23
17
11
4
11
74
2016
Total
£’000
38
148
117
66
23
46
438
2015
Total
£ ‘000
32
131
92
35
21
-
311
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.
During the year the Company established a share appreciation rights scheme to incentivise
Directors and senior management, further details of this scheme can be found in note 24.
Page 21
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:
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 they are aware,
there is no relevant audit information of which the Company’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
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
19 December 2016
Page 22
KERAS RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KERAS RESOURCES PLC (CONTINUED)
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 2016 which are
set out on pages 25 to 61. The financial reporting framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
parent 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 auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 22, 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 (APB’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.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and the Company’s affairs as at
30 September 2016 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Company financial statements have been properly prepared in accordance with IFRSs 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.
Page 23
KERAS RESOURCES PLC
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF KERAS RESOURCES PLC (CONTINUED)
Emphasis of matter – Going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the
disclosures made in note 2 to the financial statements concerning the Group’s and the Company’s ability to continue
as a going concern. The Group incurred a net loss of £2,239,000 during the year ended 30 September 2016 and, at
that date, had net current liabilities of £1,788,000. The continuation of operations is largely dependent on seeking
finance through external sources. These conditions indicate the existence of a material uncertainty which may cast
significant doubt about the Group’s and Company’s ability to continue as a going concern. The financial statements
do not include adjustments that would result if the Group and Company were unable to continue as a going
concern.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ 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:
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
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Michael Simms, Senior Statutory Auditor
For and on behalf of Moore Stephens LLP, Statutory Auditor
150 Aldersgate Street
London
EC1A 4AB
19 December 2016
Page 24
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2016
Revenue
Cost of sales
Gross loss
Administrative and exploration
expenses
Loss from operating activities
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
8
12
15
13
2016
£’000
1,936
(2,242)
(306)
2015
£’000
-
-
-
(1,320)
(1,180)
(1,626)
(1,180)
(486)
(486)
(78)
(78)
(2,112)
(1,258)
(10)
(2,122)
(117)
(2,239)
95
(2,144)
(2,211)
(28)
(2,239)
(2,075)
(69)
(2,144)
(4,458)
(5,716)
-
(5,716)
19
(5,697)
(5,450)
(266)
(5,716)
(5,373)
(324)
(5,697)
23
(0.176)
(0.528)
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 25
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2016
Assets
Property, plant and equipment
Intangible assets
Trade and other receivables
Non-current assets
Inventory
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
14
15
20
19
20
21
22
25
26
2016
£’000
51
2,041
29
2,121
604
200
134
938
3,059
6,123
7,666
(339)
(12,387)
1,063
(730)
333
1,136
1,590
2,726
2,726
3,059
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
The financial statements were approved by the Board of Directors and authorised for issue on 19 December
2016. They were signed on its behalf by:
Brian Moritz, Director
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 26
l
t
a
o
T
y
t
i
u
q
e
2
6
4
0
0
0
‘
£
5
9
)
9
3
2
,
2
(
)
4
4
1
,
2
(
-
)
1
1
(
5
2
9
,
1
-
1
0
1
5
1
0
,
2
3
3
3
-
n
o
N
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
l
t
a
o
T
0
0
0
‘
£
)
1
6
6
(
)
8
2
(
)
1
4
(
)
9
6
(
-
-
-
-
-
-
)
0
3
7
(
0
0
0
‘
£
3
2
1
,
1
6
3
1
)
1
1
2
,
2
(
)
5
7
0
,
2
(
-
)
1
1
(
5
2
9
,
1
-
1
0
1
5
1
0
,
2
3
6
0
,
1
t
i
c
i
f
e
d
0
0
0
‘
£
)
5
7
2
,
1
1
(
)
5
2
(
)
2
7
3
,
1
(
)
7
9
3
,
1
(
-
-
0
5
2
-
5
3
5
8
2
i
d
e
n
a
e
R
t
3
7
2
0
0
0
‘
£
1
6
1
)
9
3
8
(
)
8
7
6
(
-
-
-
-
-
-
e
v
r
e
s
e
r
e
g
n
a
h
c
x
E
r
e
a
h
S
n
o
i
t
p
o
e
v
r
e
s
e
r
t
n
a
r
r
a
w
/
0
5
2
0
0
0
‘
£
-
-
-
-
-
)
0
5
2
(
1
0
1
)
5
3
(
)
4
8
1
(
)
7
8
3
,
2
1
(
)
5
0
4
(
6
6
r
e
a
h
S
i
m
u
m
e
p
r
r
e
a
h
S
l
a
t
i
p
a
c
0
0
0
‘
£
1
7
3
6
,
0
0
0
‘
£
4
0
5
5
,
5
1
0
2
r
e
b
o
t
c
O
1
t
a
e
c
n
a
a
B
l
-
-
-
-
-
-
)
1
1
(
6
0
3
1
,
5
9
2
1
,
6
6
6
7
,
-
-
-
-
-
-
-
9
1
6
9
1
6
3
2
1
6
,
r
a
e
y
e
h
t
r
o
f
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
l
t
a
o
T
e
m
o
c
n
i
e
v
i
s
n
e
h
e
p
m
o
c
r
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
s
s
o
L
r
d
e
s
i
c
e
x
e
s
t
n
a
r
r
a
w
f
o
t
c
e
p
s
e
r
n
i
r
e
f
s
n
a
r
T
s
t
s
o
c
e
c
n
a
n
i
f
f
o
u
e
i
l
n
i
d
e
u
s
s
i
s
t
n
a
r
r
a
W
6
1
0
2
r
e
b
m
e
p
e
S
t
0
3
t
a
e
c
n
a
a
B
l
f
o
n
o
i
t
a
l
l
e
c
n
a
c
n
o
e
v
r
e
s
e
r
r
e
f
s
n
a
r
T
e
u
s
s
i
r
e
a
h
s
f
o
s
t
s
o
C
s
n
o
i
t
p
o
r
s
e
a
h
s
y
r
a
n
d
o
r
i
f
o
e
u
s
s
I
y
n
a
p
m
o
C
e
h
t
f
o
s
r
e
n
w
o
o
t
l
e
b
a
u
b
t
i
r
t
t
A
Y
T
I
U
Q
E
N
I
S
E
G
N
A
H
C
F
O
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
6
1
0
2
R
E
B
M
E
T
P
E
S
0
3
D
E
D
N
E
R
A
E
Y
E
H
T
R
O
F
C
L
P
S
E
C
R
U
O
S
E
R
S
A
R
E
K
.
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
i
f
d
e
t
a
d
i
l
o
s
n
o
c
e
s
e
h
t
f
o
t
r
a
p
l
r
a
g
e
t
n
i
r
n
a
e
a
1
6
o
t
3
3
s
e
g
a
p
n
o
s
e
t
o
n
e
h
T
7
2
e
g
a
P
l
t
a
o
T
y
t
i
u
q
e
0
0
0
‘
£
1
7
3
,
5
9
1
)
6
1
7
,
5
(
)
7
9
6
,
5
(
5
3
8
)
8
6
(
1
2
8
8
7
2
6
4
0
0
0
‘
£
)
7
3
3
(
)
8
5
(
)
6
6
2
(
)
4
2
3
(
-
-
-
-
-
n
o
N
s
t
s
e
r
e
t
n
i
g
n
i
l
l
o
r
t
n
o
c
l
t
a
o
T
0
0
0
‘
£
8
0
7
,
5
7
7
)
0
5
4
,
5
(
)
3
7
3
,
5
(
5
3
8
)
8
6
(
1
2
8
8
7
t
i
c
i
f
e
d
0
0
0
‘
£
)
5
2
8
,
5
(
)
3
8
1
(
)
7
6
2
,
5
(
)
0
5
4
,
5
(
-
-
-
-
i
d
e
n
a
e
R
t
6
9
1
0
0
0
‘
£
7
7
0
6
2
)
3
8
1
(
-
-
-
-
e
v
r
e
s
e
r
e
g
n
a
h
c
x
E
)
1
6
6
(
3
2
1
,
1
)
5
7
2
,
1
1
(
3
7
2
r
e
a
h
S
n
o
i
t
p
o
e
v
r
e
s
e
r
9
2
2
0
0
0
‘
£
-
-
-
-
-
1
2
1
2
0
5
2
0
0
0
‘
£
9
3
4
6
,
-
-
-
-
-
)
8
6
(
)
8
6
(
r
e
a
h
S
i
m
u
m
e
p
r
r
e
a
h
S
l
a
t
i
p
a
c
0
0
0
‘
£
9
6
6
4
,
-
-
-
-
-
5
3
8
5
3
8
r
a
e
y
e
h
t
r
o
f
s
s
o
l
e
v
i
s
n
e
h
e
r
p
m
o
c
l
t
a
o
T
e
m
o
c
n
i
e
v
i
s
n
e
h
e
p
m
o
c
r
r
e
h
t
O
r
a
e
y
e
h
t
r
o
f
s
s
o
L
r
s
e
a
h
s
y
r
a
n
d
o
r
i
f
o
e
u
s
s
I
s
t
n
e
m
y
a
p
d
e
s
a
b
-
e
a
h
S
r
e
u
s
s
i
r
e
a
h
s
f
o
s
t
s
o
C
4
1
0
2
r
e
b
o
t
c
O
1
t
a
e
c
n
a
a
B
l
1
7
3
6
,
4
0
5
5
,
5
1
0
2
r
e
b
m
e
p
e
S
t
0
3
t
a
e
c
n
a
a
B
l
y
n
a
p
m
o
C
e
h
t
f
o
s
r
e
n
w
o
o
t
l
e
b
a
u
b
t
i
r
t
t
A
Y
T
I
U
Q
E
N
I
S
E
G
N
A
H
C
F
O
T
N
E
M
E
T
A
T
S
D
E
T
A
D
I
L
O
S
N
O
C
5
1
0
2
R
E
B
M
E
T
P
E
S
0
3
D
E
D
N
E
R
A
E
Y
E
H
T
R
O
F
C
L
P
S
E
C
R
U
O
S
E
R
S
A
R
E
K
.
s
t
n
e
m
e
t
a
t
s
l
i
a
c
n
a
n
i
f
d
e
t
a
d
i
l
o
s
n
o
c
e
s
e
h
t
f
o
t
r
a
p
l
r
a
g
e
t
n
i
r
n
a
e
a
1
6
o
t
3
3
s
e
g
a
p
n
o
s
e
t
o
n
e
h
T
8
2
e
g
a
P
KERAS RESOURCES PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Depreciation and amortisation
Profit on disposal of property, plant and equipment
Foreign exchange differences
Equity-settled share-based payments
Changes in:
- inventories
- 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
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Exploration and licence 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 increase/(decrease) in cash and
cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at 30 September
2016
£’000
2015
£’000
(1,626)
(1,180)
107
-
(90)
-
(1,609)
(604)
(177)
942
(1,448)
(344)
(1,792)
-
(21)
(286)
(307)
1,434
735
2,169
70
64
134
15
(1)
139
21
(1,006)
-
12
177
(817)
(15)
(832)
13
-
(224)
(211)
655
345
1,000
(43)
107
64
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 29
KERAS RESOURCES PLC
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2016
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
14
17
18
20
21
22
25
26
2016
£’000
-
465
465
2,434
231
82
2,747
3,212
6,123
7,666
66
(12,473)
1,382
1,136
694
1,830
1,830
3,212
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
1,857
The financial statements of Keras Resources PLC, company number 07353748, were approved by the Board
of Directors and authorised for issue on 19 December 2016. They were signed on its behalf by:
Brian Moritz, Director
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 30
KERAS RESOURCES PLC
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2016
Balance at 1 October 2014
Loss for the year
Total comprehensive loss
for the period
Issue of ordinary shares
Costs of share issue
Share-based payments
Share
capital
Share
premium
£‘000
4,669
£‘000
6,439
Share option
/warrant
reserve
£‘000
229
Retained
deficit
£‘000
(3,465)
Total
equity
£‘000
7,872
-
-
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
Balance at 1 October 2015
5,504
6,371
250
(11,055)
1,070
Loss for the year
Total comprehensive loss
for the year
Issue of ordinary shares
Costs of share issue
Transfer reserve on cancellation of
options
Warrants issued in lieu of finance
costs
Transfer in respect of warrants
exercised
Balance at 30 September 2016
-
-
619
-
-
-
-
619
6,123
-
-
1,306
(11)
-
-
-
1,295
7,666
-
-
-
-
(250)
101
(35)
(184)
(1,703)
(1,703)
(1,703)
(1,703)
-
-
250
-
35
285
1,925
(11)
-
101
-
2,015
1,382
66
(12,473)
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 31
KERAS RESOURCES PLC
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
Cash flows from operating activities
Loss from operating activities
Adjustments for:
Intercompany debt written off
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 financing activities
Net proceeds from issue of share
capital
Proceeds from short term borrowing
Loans to subsidiaries
Net cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at 30 September
2016
£’000
(1,228)
607
1
-
(620)
(202)
282
(540)
(334)
(874)
1,434
735
(1,270)
899
25
57
82
2015
£’000
(723)
-
-
21
(702)
14
159
(529)
(23)
(552)
655
345
(463)
537
(15)
72
57
The notes on pages 33 to 61 are an integral part of these consolidated financial statements.
Page 32
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
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 commenced production at its Australian gold projects in 2016.
Going concern
After making enquiries and as more fully explained in the Directors Report on page 20, 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. This assumption relies on external funding being
raised, either via a potential listing on the ASX or through other sources, to finance the Group’s
planned activities. For this reason, the Directors have adopted the going concern basis in preparing
the accounts. At this stage, however, there can be no certainty as regards the raising of the
external funding necessary.
Basis of preparation
Statement of compliance
The consolidated financial statements have been prepared in accordance with International
Financial Reporting Standards (“IFRSs”) as issued by the International Accounting Standards Board
(“IASB”) and as adopted by the European Union, and the Companies Act 2006 as applicable to
entities reporting in accordance with IFRS.
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 year ended 30
September 2016 was £1,703,000 (2015: £7,590,000).
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.
Page 33
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
(d)
Use of estimates and judgements (continued)
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:
Carrying value of intangible assets
Intercompany receivables (Company only)
- Notes 4(e)(i) and 15
- Note 18
4.
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.
(a)
Basis of consolidation
(i)
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.
(ii)
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.
(iii)
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.
(iv)
(v)
Page 34
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
Significant accounting policies (continued)
(b)
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.
(i)
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.
(c)
Financial instruments
(i)
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(g)(i)).
Page 35
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
Significant accounting policies (continued)
(c)
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
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.
(d)
Property, plant and equipment
(i)
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 36
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
Significant accounting policies (continued)
(d)
Property, plant and equipment (continued)
(iii)
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:
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.
(e)
Intangible assets
(i)
(ii)
(iii)
(iv)
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.
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:
Prospecting and exploration rights
The “Chaffer” tribute agreement
Life of mine based on units of production
Amortised over a period of 5 years
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.
Page 37
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
(f)
Significant accounting policies (continued)
Inventories
Inventories are initially recognised at cost, and subsequently at lower of cost and net realisable
value. Cost comprises all costs of purchase, costs of conversion and other costs incurred in bringing
the inventories to their present location and condition. Weighted average cost is used to determine
the cost of ordinarily inter-changeable items.
Mining inventory includes run of mine stockpiles, minerals in circuit, finished goods and consumables.
Stockpiles, minerals in circuit and finished goods are valued at their cost of production to their point
in process using a weighted average cost of production, or net realisable value, whichever is the
lower. Low grade stockpiles are only recognised as an asset when there is evidence to support the
fact that some economic benefit will flow to the Company on the sale of such inventory.
Consumables are valued at their cost of acquisition, or net realisable value, whichever is the lower.
(g)
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 asset 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 38
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
Significant accounting policies (continued)
(g)
Impairment (continued)
(ii)
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.
(h)
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.
The fair value of the amount payable to employees in respect of Share Appreciation Rights (SARs),
which are settled in cash, is recognised as an expense with a corresponding increase in liabilities,
over the period during which the employees become unconditionally entitled to payment. The
liability is remeasured at each reporting date and at settlement date based on the fair value of the
SARs. Any changes in the liability are recognised in profit or loss.
Page 39
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
(i)
(j)
(k)
(l)
Significant accounting policies (continued)
Compound financial instruments
Compound financial instruments comprise both liability and equity components. At issue date the
fair value of the liability component is estimated by discounting its future cashflows at an interest
rate that would have been payable on a similar debt instrument without any equity conversion
option. The liability component is accounted for as a financial liability. The difference between the
net issue proceeds and the liability component, at the time of issue, is the residual, or equity
component, which is accounted for as an equity reserve.
The interest expense on the liability component is calculated by applying the effective interest rate
for the liability component of the instrument. The difference between any repayments and the
interest expense is deducted from the carrying amount of the liability.
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.
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:
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.
Page 40
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
4.
(l)
Significant accounting policies (continued)
Taxation (continued)
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.
(m)
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.
5.
New standards and interpretations not yet adopted
Amendments to the following International Financial Reporting Standards (IFRS) and International
Accounting Standards (IAS) have been implemented by the Group in the period ended 30
September 2016:
IAS 24 Related Party Disclosures
IFRS 8 Operating Segments
Standards, Amendments to published Standards and Interpretations issued but not yet effective
Certain standards, amendments to published standards and interpretations have been issued that
are mandatory for accounting periods beginning after 1 October 2015 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 IFRS 7 Financial Instruments : Disclosures
Amendments to IAS 27 Separate Financial Statements
Amendments to IAS 7 Statement of Cash Flows
Amendments to IFRS 2 Share-Based Payments
IFRS 9 Financial Instruments
IFRS 11 Joint Arrangements
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
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.
Page 41
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
6.
(i)
(ii)
(iii)
(iv)
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
functional and economic
for physical deterioration as well as
cost
obsolescence.
reflects adjustments
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.
7.
Operating segments
The Group considers that it operates in three distinct business areas, being that of iron ore
exploration, that of manganese exploration and that of gold exploration and extraction. 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 42
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
7.
Operating segments (continued)
Information about reportable segments
2016
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital
expenditure
Liabilities
Gold
£’000
1,936
(23)
(93)
(830)
1,941
794
1,111
Iron Ore
£’000
Manganese
£’000
Other
operations
£’000
-
-
(8)
(108)
575
8
-
(463)
(1)
(1,087)
521
5
Total
£’000
1,936
(486)
(117)
(2,122)
3,059
817
13
1,598
2,726
-
-
(15)
(97)
22
10
4
2015
Gold
£’000
Iron Ore
£’000
Manganese
£’000
Other
operations
£’000
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital
expenditure
Liabilities
-
-
-
-
-
-
-
-
-
(3,947)
(4,100)
36
38
7
-
-
(525)
(782)
806
186
31
-
(78)
(1)
(834)
480
-
822
Total
£’000
-
(78)
(4,473)
(5,716)
1,322
224
860
Page 43
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
7.
Operating segments (continued)
Information about geographical segments
2016
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital
expenditure
Liabilities
2015
External revenue
Interest expense
Depreciation, amortisation
and impairment
Loss before tax
Assets
Exploration and capital
expenditure
Liabilities
Australia
£’000
1,936
(23)
(93)
(830)
1,940
794
1,111
Australia
£’000
-
-
-
-
-
-
-
-
-
-
(12)
8
-
-
South
Africa
£’000
-
-
(2,682)
(2,674)
7
16
8.
Revenue
Sales of precious metals – Mining and exploration
Page 44
South
Africa
£’000
West
Africa
£’000
Other
operations
£’000
Total
£’000
1,936
(486)
(117)
(2,122)
3,059
817
-
-
(13)
(184)
589
8
-
(463)
(11)
(1,096)
522
15
17
1,598
2,726
West
Africa
£’000
-
-
(1,790)
(2,202)
1,226
208
-
38
Other
operations
£’000
-
(78)
(1)
(840)
89
-
822
Total
£’000
-
(78)
(4,473)
(5,716)
1,322
224
860
2016
2015
£ ‘000
£‘000
1,936
1,936
-
-
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
9.
Expenses
Expenses include:
Depreciation and amortisation expense
Auditor’s remuneration
- Audit fee
- Other services
-Tax services
Foreign exchange differences
2016
£‘000
107
35
3
-
27
Auditor’s remuneration in respect of the Company amounted to £10,000 (2015: £10,000).
10.
Personnel expenses
Wages and salaries
Fees
Equity-settled share-based payments
2016
£‘000
318
277
74
669
2015
£‘000
15
28
3
-
4
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, Parallel Resources Limited.
The average number of employees (including directors) during the period was:
Directors
Key management personnel
Other
2016
6
2
5
13
2015
5
2
5
12
Page 45
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
11.
Directors’ emoluments
2016
Wages and salaries (incl. fees)
Compulsory social security contributions
Equity-settled share-based payments
2015
Wages and salaries (incl. fees)
Compulsory social security contributions
Equity-settled share-based payments
Executive
directors
£’000
225
-
40
265
Executive
directors
£’000
228
-
8
236
Non-
executive
directors
£‘000
139
-
34
173
Non-
executive
directors
£‘000
70
-
5
75
Total
£‘000
364
-
74
438
Total
£‘000
298
-
13
311
These amounts are disclosed by director in the Directors’ report on page 21.
Emoluments disclosed above include the following amounts payable to the highest paid director:
Emoluments for qualifying services
2016
£‘000
148
2015
£’000
131
Key management personnel
Included in note 10 are emoluments paid to key management personnel in the year which
amounted to £102,000 (2015: £90,000).
Page 46
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
12.
Finance costs
Recognised in loss for period
Interest on loans
Other
Finance costs
13.
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
Loss before tax
2016
£‘000
453
33
486
2015
£‘000
-
78
78
2016
£‘000
2015
£‘000
117
-
117
-
-
-
2016
£’000
2015
£’000
(2,122)
(5,716)
Tax using the Company’s domestic tax rate of 20.0% (2015: 20.5%)
(424)
(1,172)
Effects of:
Expenses not deductible for tax purposes
Overseas losses
Equity-settled share-based payments
Tax claimed, repaid on research and development expenditure
Tax losses carried forward not recognised as a deferred tax asset
136
189
15
117
84
117
974
95
4
-
99
-
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 £3,413,000 (2015: £2,992,000). A deferred tax asset has not been recognised in
respect of such losses due to uncertainty of future profit streams.
Page 47
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
14.
Property, plant and equipment
Group
Cost
Balance at 1 October 2014
Disposals
Effect of movements in exchange rates
Balance at 30 September 2015
Balance at 1 October 2015
Additions
Effect of movements in exchange rates
Balance at 30 September 2016
Depreciation and impairment provisions
Balance at 1 October 2014
Depreciation for the year
Depreciation eliminated on disposals
Effect of movements in exchange rates
Balance at 30 September 2015
Balance at 1 October 2015
Depreciation for the year
Effect of movements in exchange rates
Balance at 30 September 2016
Carrying amounts
At 30 September 2014
At 30 September 2015
At 30 September 2016
Plant and
equipment
£’000
Office and
computer
equipment
£’000
Motor
vehicles
£’000
Total
£’000
28
-
(1)
27
27
19
6
52
8
4
-
-
12
12
4
2
18
20
15
34
49
(1)
-
48
48
8
6
62
29
5
(1)
-
33
33
9
3
45
20
15
17
63
(39)
(3)
21
21
-
4
25
38
6
(27)
(1)
16
16
6
3
25
25
5
-
140
(40)
(4)
96
96
27
16
139
75
15
(28)
(1)
61
61
19
8
88
65
35
51
Page 48
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
14.
Property, plant and equipment (continued)
Company
Cost
Balance at 1 October 2014
Additions
Balance at 30 September 2015
Balance at 1 October 2015
Additions
Balance at 30 September 2016
Depreciation and impairment provisions
Balance at 1 October 2014
Depreciation for the year
Balance at 30 September 2015
Balance at 1 October 2015
Depreciation for the year
Balance at 30 September 2016
Carrying amounts
At 30 September 2014
At 30 September 2015
At 30 September 2016
Computer
equipment
£’000
Total
£’000
5
-
5
5
-
5
4
-
4
4
1
5
1
1
-
5
-
5
5
-
5
4
-
4
4
1
5
1
1
-
Page 49
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
15.
Intangible assets
Cost
Balance at 1 October 2014
Additions
Effect of movement in exchange rates
Balance at 30 September 2015
Balance at 1 October 2015
Additions
Effect of movements in exchange rates
Balance at 30 September 2016
Amortisation and impairment losses
Balance at 1 October 2014
Impairment
Effect of movements in exchange rates
Balance at 30 September 2015
Balance at 1 October 2015
Impairment
Amortisation
Effect of movements in exchange rates
Balance at 30 September 2016
Carrying amounts
Balance at 30 September 2014
Balance at 30 September 2015
Balance at 30 September 2016
Prospecting
and
exploration
rights
£000
5,526
224
(160)
5,590
5,590
790
306
6,686
-
4,458
(39)
4,419
4,419
10
88
128
4,645
5,526
1,171
2,041
The carrying value of the prospecting and exploration rights is supported by the estimated resource
and current market values.
Page 50
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
16.
Business combinations
On 16 November 2015, the Group acquired 100 per cent of the ordinary share capital of Chaffers
Mining Pty Limited (now renamed Keras (Gold) Australia Pty Limited), an Australian registered private
company. The acquisition was settled by way of a share issue and a further share issue to be made
once 10,000 oz of gold have been extracted. At the interim financial date the further share issue to
the value of £465,000 was treated as a deferred liability against mineral rights. At the year end
however the directors have reconsidered the measurement of the acquisition and have determined
that the further share issue should be treated as a contingent liability with the mineral rights
recognised being reassessed accordingly but the valuation of these rights will be revisited upon
determination of any liability. The transaction has been accounted for using the acquisition method
of accounting.
This acquisition contributed to entire revenue generated by the group during the year.
The details of the business combination are as follows:
Book value
£’000
Fair value
adjustments
£’000
Fair value
£’000
Mineral rights
Fixed assets
Bank balances and cash
Trade and other payables
-
6
19
(64)
(39)
504
-
-
-
504
Satisfied by:
Share consideration (actual and deferred)
Reassessment of consideration at
30 September 2016 (see below)
504
6
19
(64)
465
£’000
930
(465)
465
Included in the share consideration is £465,000 which relates to deferred consideration payable
based on the expectation that there will be 10,000 oz of gold production over the life of the tribute
agreement.
At the year end the directors consider that the balance of the consideration for the Chaffers
acquisition, the further share issue to the value of £465,000, will no longer be payable as they
consider it unlikely that 10,000 oz of gold will be extracted from this resource. This matter will be
reassessed on an annual basis.
Page 51
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
17.
Investment in subsidiaries
Company
Equity investments
Balance at beginning of period
Additions
Impairment
Balance at 30 September
Directly
Ferrex Iron Limited
Ferrex Manganese Limited
Southern Iron Limited
Keras Australia Pty Limited
Keras (Gold) Australia Pty Limited
Indirectly
Moongate 218 (Pty) Limited
Southern MN (Pty) Limited
Société Générale de Mine
Activity
Country of
incorporation
Investment
Investment
Investment
United
Kingdom
United
Kingdom
Guernsey
Research and
development
Mining minerals
Australia
Australia
Exploration
Exploration
Exploration
South
Africa
South
Africa
Togo
2016
£’000
-
465
-
465
2015
£’000
1,778
-
(1,778)
-
Ownership interest
2016
100%
100%
100%
100%
100%
74%
74%
85%
2015
100%
100%
100%
100%
-
74%
74%
85%
Ressources Equatoriales SARL
Exploration
Gabon
78.3%
78.3%
18.
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 subsidiaries
Provisions against loans
Balance at 30 September
2016
£‘000
-
-
-
2016
£‘000
1,770
1,270
(606)
2,434
2015
£‘000
119
(119)
-
2015
£‘000
6,322
463
(5,015)
1,770
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 was made against these loans in the
current and previous year. All loans are currently unsecured and interest free and repayable on
demand apart from that between the parent and Keras Australia (Gold)Pty Limited on which
interest is charged at LIBOR plus 2%.
Page 52
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
19.
Inventories
Minerals held for sale
Production stockpiles
Amount of inventory charged as an expense was £2,242,000 (2015: £nil).
20.
Trade and other receivables
Group
Other receivables
Prepayments
Non current
Current
Company
Other receivables
Prepayments
2016
£’000
426
178
604
2016
£‘000
149
80
229
29
200
229
2016
£‘000
194
37
231
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 27.
21.
Cash and cash equivalents
Group
Bank balances
Cash and cash equivalents
Company
Bank balances
Cash and cash equivalents
2016
£‘000
134
134
2016
£‘000
82
82
2015
£’000
-
-
-
2015
£‘000
37
15
52
-
52
52
2015
£‘000
15
14
29
2015
£‘000
64
64
2015
£‘000
57
57
There is no material difference between the fair value of cash and cash equivalents and their book
value.
Page 53
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
22.
Capital and reserves
Share capital
Number of ordinary shares
In issue at beginning of year
Issued for cash
Issued in settlement of debt
Issued in connection with acquisition of subsidiary
In issue at 30 September – fully paid
of £0.001 each of £0.005 each
2015
933,794,390
167,000,000
-
-
1,100,794,390
2016
1,100,794,390
152,811,597
1,363,636
93,000,000
1,347,969,623
In issue at beginning of year
Issued on subdivision
Balance at beginning of year
Share issues
Balance at 30 September
Number of deferred shares
of £0.004 each
2016
-
1,193,794,390
1,193,794,390
2015
-
-
-
Ordinary share capital
2016
£‘000
5,504
619
6,123
2015
£‘000
4,669
835
5,504
All ordinary 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.
At a general meeting of the Company on 10 December 2015, the Company’s shareholders
approved resolutions to, inter alia, subdivide each ordinary share of £0.005 each into 1 new ordinary
share of £0.001 each and 1 deferred share of £0.004 each.
The ordinary shares of £0.001 each carry the same rights as those previously attached to the ordinary
shares of £0.005 each (save for the reduction in nominal value).
The deferred shares do not entitle the holders thereof to receive notice of or attend and vote at any
general meeting of the Company or to receive dividends or other distributions. As regards any
return on capital on a winding up or other return of capital (otherwise than on conversion or
redemption or purchase by the Company of any of its shares) the holders of the deferred shares
shall be entitled to receive the amount paid up on their shares after holders of the ordinary shares
the amount of £1,000 in respect of each ordinary share held by them respectively.
Page 54
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
22.
Capital and reserves (continued)
Issue of ordinary shares
On 16 November 2015, 93 million ordinary shares were issued as part of the consideration of the
acquisition of Chaffers Mining Pty Ltd at a price of £0.005 per ordinary share, details of the
transaction can be found in note 16.
Further to the exercise of warrants detailed below, 14,000,000 shares were issued on 15 March 2016
at a price of £0.005 per ordinary share.
On 7 April 2016, further to the exercise of warrants detailed below, 17,752,933 ordinary shares were
issued for cash at £0.005 per ordinary share.
On 13 April 2016, further to the exercise of warrants detailed below, 3,000,000 ordinary shares were
issued for cash at £0.005 per ordinary share.
On 14 April 2016, 113,636,364 ordinary shares were issued for cash at £0.011 per ordinary share.
On 14 April 2016, 1,363,636 ordinary shares were issued at £0.011 per ordinary share in consideration
of fees relating to the placement of shares.
On 27 April 2016, further to the exercise of warrants detailed below, 1,422,300 ordinary shares were
issued for cash at £0.005 per ordinary share.
On 23 September 2016, further to the exercise of warrants detailed below, 3,000,000 ordinary shares
were issued for cash at £0.005 per ordinary share.
Warrants
On 1 February 2016, 112,777,800 warrants were issued. These warrants are exercisable at £0.005 and
are valid for two years from the date of issue.
In issue at beginning of year
Cancelled in year
Issued in year
Exercised in year
In issue at 30 September
Number of warrants
of £0.005 each of £0.005 each
2016
-
-
112,777,800
(39,175,233)
73,602,567
2015
38,501,656
(38,501,656)
-
-
-
Share option/warrant reserve
The share option/warrant reserve comprises the cumulative entries made to the consolidated
statement of comprehensive income in respect of the equity-settled share-based payments and
cumulative entries made to the liability for loan notes with an 8% redemption in respect of warrants
issued with the notes as adjusted for share options cancelled and warrants exercised.
Exchange reserve
The exchange reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations.
Page 55
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
23.
Loss per share
Basic and diluted loss per share
The calculation of basic loss per share at 30 September 2016 is based on the loss attributable to
ordinary shareholders of £2,211,000 (2015: £5,450,000), and a weighted average number of ordinary
shares in issue of 1,253,614,650 (2015: 1,033,079,321), 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
2016
1,100,794,390
152,820,260
1,253,614,650
2015
933,794,390
99,284,931
1,033,079,321
The warrants in issue are considered to be antidilutive and as a result, basic and diluted loss per
share are the same.
24.
Share-based payments
On 28 April 2016, the Company established a Share Appreciation Right Scheme to incentivise
Directors and senior executives. Shares granted under the scheme at that date total 97,500,000 at
1.0674p per share with 64,500,000 vesting on 31 December 2016 and the balance, 33,000,000, vesting
on 31 December 2017. Share Appreciation Rights have a vesting period of 3 years and the
aggregate number of shares which may be allocated under the Scheme will not exceed 15% of the
Company’s issued share capital from time to time. No vesting had taken place at 30 September
2016.
The Black Scholes pricing model was used to calculate the share based payment charge
incorporating an annual volatility rate of 60%. A charge for the year ended 30 September 2016
amounted to £74,000.
25.
Loans and borrowings
Group and Company
Unsecured loan notes – 10%
Unsecured loan notes – 8% redemption
Y A Global loan
2016
£‘000
314
556
266
1,136
2015
£‘000
375
-
-
375
The loan notes carry interest at 10% per annum and are repayable on demand. This loan was
provided by the Managing Director David Reeves.
The unsecured loan notes which carry an 8% redemption premium are repayable on demand. These
loan notes also carried a 10% coupon payable upfront and received 1GBP worth of warrants to
subscribe for new ordinary shares of £0.001 for every £1 nominal of the note. As detailed in note 22,
the warrants are exercisable at £0.005 and are valid for two years from the date of issue.
The YA Global Loan relates to the closure of the equity swap agreement. It is unsecured and is
scheduled for repayment on 17 February 2017.
Page 56
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
26.
Trade and other payables
Group
Trade payables
Accrued expenses
Other payables
Company
Accrued expenses
Other payables
2016
£‘000
496
579
515
1,590
2016
£‘000
347
347
694
2015
£‘000
98
347
40
485
2015
£‘000
339
73
412
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 27.
27.
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. The Group’s only customer during the reporting
period was Paddington Gold Pty Ltd (“Paddington”), who the Group entered a Tribute arrangement
to mine and process gold through Paddington processing mill. As at 30 September 2016 all net sales
proceeds had been received from Paddington.
In July, the Group commenced mining operations at Wycheproof. Ore from Wycheproof would be
processed through a 3rd party processing plant with proceeds from previous metals sold to the Perth
Mint. The risk of default of payment from the Perth Mint is considered virtually to be nil.
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
Carrying amount
2016
£‘000
229
134
363
2015
£‘000
52
64
116
Page 57
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
27.
Financial instruments (continued)
Company
Loans
Trade and other receivables
Cash and cash equivalents
Carrying amount
2016
£‘000
2,434
231
82
2,747
2015
£‘000
1,770
29
57
1,856
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
2016
Non-derivative financial
liabilities
Loans and borrowings
Trade and other payables
2015
Non-derivative financial liabilities
Loans and borrowings
Trade and other payables
Company
2016
Non-derivative financial liabilities
Loans and borrowings
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£’000
2 months
or less
£‘000
2-12
months
£‘000
1,136
1,590
2,726
(1,136)
(1,590)
(2,726)
(145)
(265)
(410)
(991)
(1,325)
(2,316)
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
1,136
694
1,830
(1,136)
(694)
(1,830)
(145)
(116)
(261)
2-12
months
£‘000
(991)
(578)
(1,569)
Page 58
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
27.
Financial instruments (continued)
Company
2015
Non-derivative financial liabilities
Loans and borrowings
Trade and other payables
Carrying
amount
£’000
Contractual
cash flows
£‘000
2 months or
less
£‘000
375
412
787
(375)
(412)
(787)
(375)
(412)
(787)
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 2016 for the
Group totalled £1,063,000 (2015: £1,123,000) and for the Company totalled £1,382,000 (2015:
£1,070,000).
28.
Related parties
The Group’s related parties include its key management personnel and others as described below.
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 previous period via loan notes, subject to an
arrangement fee of £30,000 and he advanced a further £100,000 in this period, subject to an
arrangement fee of £14,000. As detailed in note 25 these loan notes carry interest at 10% per annum
and are repayable on demand. During the year, £175,000 of this loan was converted into unsecured
loan notes which carry an 8% redemption premium are repayable on demand, as detailed in note
25. These loan notes also carried a 10% coupon payable upfront and received 1GBP worth of
warrants to subscribe for new ordinary shares of £0.001 for every £1 nominal of the note. The total
amount due to D Reeves at the year end was £508,000 (2015 : £375,000). D Reeves also let a
property to the company in Australia and received £21,000 in this respect.
Page 59
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
28.
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 Manganese Limited
- Loans and receivables (interest free)
Keras Australia Pty Limited
- Loans and receivables (interest free)
Keras (Gold) Australia Pty Limited
- Loans and receivables
2016
£’000
1,155
2015
£’000
1,000
2,522
-
503
2,387
292
267
1,179
-
Southern Iron Limited had the following related party balances from financing activities:
Moongate 218 (Pty) Limited
- Loans and receivables (interest free)
Southern MN (Pty) Limited
- Loans and receivables (interest free)
Société Générale de Mine SARL
- Loans and receivables (interest free)
1,196
1,194
3
3
1,458
1,357
Ferrex Iron Limited had the following related party balances from financing activities:
Ressources Equatoriales SARL
- Loans and receivables (interest free)
Ferrex Manganese Limited had the following related party balances from financing
activities:
Southern MN (Pty) Limited
- Loans and receivables (interest free)
-
967
-3
55
3
Page 60
KERAS RESOURCES PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 2016
29.
Subsequent events
On 5 October 2016, the Company announced that it had completed the acquisition of the
Klondyke Gold Project and the Haoma Mining NL Right to Mine and Option to Purchase Agreement
in the Pilbara region of Western Australia. Consideration for the acquisitions is a payment of A$
1.42m (£0.8m) in cash and the balance via the issue of 100,000,000 ordinary shares of 0.1p each in
the Company at a price of 0.62p. These transactions are part of the Company's strategy to
become a significant gold producer in Western Australia.
In order to fund the above acquisitions, the Company has entered into an Acquisition Finance
Facility Agreement with a consortium of investors arranged by Riverfort Global Capital Ltd. The
Finance Agreement has been entered into as a bridge funding facility to secure the acquisition of a
significant long-term asset for the Company. The accounting for this transaction is yet to be
finalised and therefore detailed analysis on the company financials cannot be determined.
The total drawdown available before fees to the Company is £1.5m with a maturity date six months
after the initial drawdown at an interest rate of 10% per semi-annum, with a Commitment Fee and
an Implementation Fee of 5% each. During the period before the maturity the Investors may elect to
convert such principal amount of the loan outstanding at a 20% premium to the Keras closing share
price on the date of drawdown.
On 14 December 2016, the Group entered into a Dead of Release with KalNorth Gold Mines Limited
in relation to the binding profit share agreement over the Lindsay’s Project. The Group will receive
approximately £0.07m relating to the recovery of third party costs incurred.
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 61
Perivan Financial Print 243542