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2020 ReportREGISTERED NUMBER: 05101822 (ENGLAND AND WALES) REPORT OF THE DIRECTORS AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED JULY 31, 2014 RAMBLER METALS AND MINING PLC CONTENTS OF THE FINANCIAL STATEMENTS Company Information Chairman’s Statement Strategic report Management’s Discussion and Analysis Report of the Directors Directors’ Responsibilities Corporate Governance Independent Auditor’s Report Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Company Statement of Comprehensive Income Company Statement of Financial Position Company Statement of Changes in Equity Company Statement of Cash Flows Notes to the Company Financial Statements Page 1 2 4 6 35 36 37 38 40 41 42 43 44 45 75 76 77 78 79 RAMBLER METALS AND MINING PLC COMPANY INFORMATION FOR THE YEAR ENDED JULY 31, 2014 Directors: T S Chan E C Chen D H W Dobson L D Goodman G Ogilvie J S Thomson N P Williams (appointed February 19, 2014) Secretary: P Mercer Registered office: Salatin House 19 Cedar Road Sutton Surrey SM2 5DA Registered number: 5101822 (England and Wales) Auditor: BDO LLP 55 Baker Street London W1U 7EU Page 1 RAMBLER METALS AND MINING PLC CHAIRMAN’S STATEMENT FOR THE YEAR ENDED JULY 31, 2014 We are very pleased to report the results for the year ended July 31, 2014 While the volatility of our markets has added new challenges to operating a successful mining business, the Board of Directors feels that the Company has developed a strong base from its assets and is well positioned for its continued growth and the generation of shareholder value. This has been a year of significant change and progress for Rambler Metals and Mining. We have seen changes to our management and our operations, all of which, in my opinion have been very positive. At the financial level, and following the declaration of commercial production in 2012, this was our first full fiscal year of commercial production. As a result, we generated cash of nearly $25 million, earned a profit of $13.5 million and reduced our debt to zero. Operationally, we achieved many of our goals in addition to creating new opportunities to further grow the business in the years to come and to hopefully extend the mine life of our assets. We also made a significant change to the management structure of the business with the promotion of the CFO, Norman Williams, to the CEO position on January 15, 2014. Mr. Williams, with his management team, has been an integral part of making Rambler into a profit making mining company and will be a key component of its continued success as we move into optimizing the business. As a result of our financial position, we are now able to examine the various strategic opportunities available to us and decide which offer the best ways to create value for our shareholders. Your Board has decided that the focus for 2015 will be towards optimizing the existing infrastructure at the Nugget Pond milling facility and moving the Ming Mine’s Lower Footwall Zone towards production. The Board is also seeking approval at this year’s Annual General Meeting for the authorization for a Share Buy-Back program. The presentational currency of the Group’s financial statements is Canadian dollars ($). OPERATIONAL HIGHLIGHTS The Group reached considerable milestones and other key achievements during the fiscal year. Highlights include: Earned a profit before tax of $13.5 million (2013: $3 million) after completing the first full year of commercial production. Generated cash of $24.8 million (2013 $11.5 million) from operations during the year. Repaid its credit facility and became debt free in February 2014. Continued its exploration activity at the Ming Mine and acquired exploration and development rights to other local copper/gold properties. Continued to advance its review of pre-concentrating the Lower Footwall Zone material with the goal of converting the known resources into mineable reserves. FINANCIAL HIGHLIGHTS The consolidated profit after taxation of the Group in respect of the year ended July 31, 2014 amounted to $9,015,000 (earnings per share of $0.063) versus a profit of $9,053,000 for the year ended July 31, 2013 (earnings per share of $0.063). Earnings before interest, taxes, depreciation, amortisation (“EBITDA”) for the year were $27,270,000 (2013 : $9,419,000). The Group generated revenue of $62.1 million from the sale of copper concentrate containing gold and silver by- products. Page 2 The gross assets of the Group amounted to $119.4 million as at the end of the year. This included Mineral properties of $51.6 million and Intangible assets of $18.5 million which mainly consisted of accumulated deferred exploration and evaluation expenditures on the Lower Footwall Zone at the Ming Mine. Following declaration of commercial production in the previous year the Group has had a successful year generating sufficient cash flow to become debt free. My thanks go to our employees, officers and directors for the progress made during the year and to our shareholders for their continuing support. I look forward to continued success in fiscal 2015. G Ogilvie Chairman October 25, 2014 Page 3 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED JULY 31, 2014 REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS A review of the Group’s business and future developments is set out in the Management’s Discussion and Analysis. PRINCIPAL RISKS AND UNCERTAINTIES An investment in Rambler should be considered speculative due to the nature of its operations and certain other factors. The risk factors which should be taken into account in assessing Rambler’s activities and an investment in securities of Rambler include, but are not limited to, those set out below. Should any one or more of these risks occur, it could have a material adverse effect on the value of securities of Rambler and the business, prospects, assets, financial position or operating results of Rambler, any one of which may have a significant adverse effect on the price or value of any securities of Rambler. The risks noted below do not necessarily comprise all those faced by Rambler and are not intended to be presented in any assumed order of likelihood or magnitude of consequences. Mining risks Mining operations are inherently risky. These operations are subject to all hazards and risks encountered in the exploration, development and production of mineralization in an underground setting. These include but are not limited to formation pressures, seismic activity, rock bursts, fires, power outages, cave-ins, flooding, explosions and other conditions involved in the drilling and removal of material. Any of these events could result in serious damage to the mine and other infrastructure, damage to life or property, environmental damage and possible legal liability. The Company’s profitability will depend, in part, on the economic returns and actual costs of developing its mining projects, which may differ from the estimates made by the Company. Copper and Gold Price Volatility The Group’s revenues will continue to be derived from the extraction and sale of copper concentrate containing gold and silver by-products. The prices of copper, gold and silver have fluctuated widely, particularly in recent years, and are affected by numerous factors beyond the Group’s control including international, economic and political trends, expectations of inflation, currency exchange fluctuations, interest rates, global or regional to new extraction consumption patterns, speculative activities and developments and improved extraction and production methods. In recent years the price of copper has been affected by changes in the worldwide balance of copper supply and demand, largely resulting from economic growth and political conditions in China and other major developing economies. While this demand has resulted in higher prices for copper in recent years, if Chinese economic growth slows, it could result in lower demand for copper. The effect of these factors on the price of copper and gold cannot be accurately predicted. Any material decrease in the prevailing price of copper in particular for any significant period of time would have an adverse and material impact on the Group’s economic evaluations and on the Group’s results of operations and financial condition. increased global production due Page 4 RAMBLER METALS AND MINING PLC STRATEGIC REPORT FOR THE YEAR ENDED JULY 31, 2014 PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED) Additional Requirement for Capital The Group may need to raise additional capital in due course to fund anticipated future development and on- going operations. Future development of the Ming Mine, future acquisitions, base metal prices, environmental rehabilitation or restitution, revenues, taxes, capital expenditures and operating expenses and geological and processing successes are all factors which will have an impact on the amount of additional capital required. Any additional equity financing may be dilutive to shareholders and debt financing, if available, may involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Group. If the Group is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion, forfeit its interests in some or all of its properties, incur financial penalties and reduce or terminate its operations. Uncertainty in the estimation of mineral resources and mineral reserves The calculation of mineral reserves and mineral resources and related grades mined has a degree of uncertainty. Until such a time as the mineral reserves and mineral resources are actually mined and processed, the quantity of grades must be considered as estimates only. The mineral reserve estimates of the Company have been determined based on assumed metal prices, cut-off grades and costs that may prove to be inaccurate. Any material change in these variables, along with differences in actual metal recoveries when compared to laboratory test results, may affect the economic outcome of current and future projects. ON BEHALF OF THE BOARD: N P Williams Director October 25, 2014 Page 5 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 This MD&A, including appendices, is intended to help the reader understand Rambler Metals and Mining plc (‘the parent company’) and its subsidiaries (the ‘Group’ or ‘Rambler’), our operations and our present business environment. It has been prepared as of October 25, 2014 and covers the results of operations for the quarter and year ended July 31, 2014. This discussion should be read in conjunction with the audited Financial Statements for the year ended July 31, 2014 and notes thereto. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations adopted by the International Accounting Standards Board (“IASB”), as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. The presentation currency is Canadian dollars. These statements together with the following MD&A are intended to provide investors with a reasonable basis for assessing the potential future performance. See Forward Looking Statement disclosure in Appendix 5. GROUP OVERVIEW The strategic vision of the Group is to become Atlantic Canada’s leading mine operator and resource developer. Its principal activity is the development, mining and exploration of the Ming Copper-Gold Mine (‘Ming Mine’) in Newfoundland and Labrador (see map referenced in Appendix 1) and the exploration and development of other properties located in Atlantic Canada. Since the declaration of commercial production in November 2012 the Group has generated sufficient free cash flows to repay its credit facility and is now a debt free and profitable operation. The Group is looking forward to: 1. Continuing as a profitable copper and gold producer with a focus on further optimization of the existing infrastructure at the Nugget Pond milling facility. 2. Improving revenue through the integration of the existing gold hydromet plant into the production stream and focusing on the Group’s operations with the goal of reducing its overall operating costs. Increasing available resources and reserves through further exploration both within the Ming mine and current land holdings. 3. 4. Creating organic growth through the integration of the Ming mine’s Lower Footwall Zone, extending the life of mine and increasing the annual concentrate production . 5. Selectively pursuing strategic growth opportunities including joint ventures, acquisitions, strategic alliances and equity positions. The Group’s directors and management believe that these priorities have created a solid foundation for Rambler and its shareholders, and will continue to provide the best opportunity to build a successful and long term mining company. The parent Company’s Ordinary Shares trade on the London AIM market under the symbol “RMM” and the TMX Venture Exchange under the symbol “RAB”. Page 6 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 HIGHLIGHTS OF THE YEAR ENDED JULY 31, 2014 Highlights of the 2014 fiscal year included: Production Produced a total of 25,647 dmt (2013 – 13,802 dmt – nine months of commercial production) of copper concentrate during the year. Concentrate produced averaged 29.13% copper with 8.39 g/t gold and 66.97 g/t silver (2013: 29.02% copper with 7.07 g/t gold and 49.11 g/t silver) with milling recoveries for copper and gold averaging 96.4% and 67.1% respectively (2013: 91% and 62% respectively). The Group met or exceeded all production guidance for the fiscal year. Of particular significance are the increases in copper metal, gold ounce and silver ounce production at 9, 26 and 35 per cent respectively over the high end range of the fiscal guidance. During the fourth quarter daily tonnage through the copper concentrator averaged 647 dmt a 16% increase over the average of 555 dmt in Q3/14. Tonnage milled: Q4/14 – 59,526 dmt versus Q3/14 – 49,355 dmt an increase of 10,171 dmt. Concentrate produced decreased as a result of lower copper head grades however still remained within the fiscal production guidance. Shipped copper concentrate, totalling approximately 28,837 wmt via the Group’s port storage facility at Goodyear’s Cove, Newfoundland and Labrador. In addition, at year end 3,258 dmt of invoiced copper concentrate remained in storage together with non-invoiced concentrate of 260 dmt. At year end approximately 30,000 – 35,000 dmt of ore was either developed, drilled, blasted or in stockpiled inventory. Underground resources were also made available to begin preparing and developing other massive sulphide zones, specifically the Ming up and down plunge areas. The fiscal 2015 production scheduled will include the mining and blending of these zones with the 1807 Zone. Average production costs (before depreciation and amortisation) for the year were $138 (2013 $145) per tonne of ore milled and $1.51 (2013: $2.03) per equivalent pound of copper. The reduction in costs per tonne and equivalent pound of copper are mainly attributable to more tonnes milled compared with the previous year. Revenue A total of 25,806 dmt (2013 – 14,746 dmt) of concentrate was provisionally invoiced during the year containing 6,968 (2013 5,124) tonnes of accountable copper metal, 6,043 (2013 3,439) and 28,887 (2013 12,850) ounces of accountable gold and silver respectively at an average price of $3.42 (2013 - $3.38) per pound copper, $1,395 (2013 - $1,530) per ounce gold and $22.06 (2013 - $27) per ounce silver, generating revenue of $62.0 million (2013 - $34.7 million). During the year the Group agreed to final weights and assays on three concentrate shipments with its off-take partner resulting in a $0.3 million decrease in revenue. Additional revenue of $0.4 million was realized on the final settlement of 293 ounces of gold produced from 1806 zone ore through the Group’s gold processing facility bringing net revenue for the year to $62.1 million. Page 7 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 HIGHLIGHTS OF THE YEAR ENDED JULY 31, 2014 (continued) The Group realized a gain of $250,000 being the difference in the commodity prices at time of provisional invoicing and commodity prices realised on final settlement of the three shipments during the year. In addition a gain of $197,000 arose on the movement in the differences between anticipated commodity prices upon final settlement of concentrate in the Group’s warehouse at period end and shipments delivered pending final settlements. Revenue associated with the sale of copper concentrate is recognised when significant risks and rewards of ownership of the asset sold are transferred to the Group's off-taker, which is when the group receives provisional payment for each lot of concentrate invoiced. Where a provisional invoice is not raised, risks and rewards of ownership transfer when the concentrate passes over the rail of the shipping vessel. Adjustments arising due to differences in assays, from the time of provisional invoicing to the time of final settlement, are adjusted to revenue. Adjustments arising due to differences in commodity prices, from the time of provisional invoicing to the time of final settlement, are adjusted to gain or loss on Derivative Financial Instruments. Profit The net profit before tax for the year was $13,503,000 compared with $2,985,000 for the year ended July 31, 2013. The net profit for the quarter ended July 31, 2014 was $1,974,000 ($3,407,000 before tax) or $0.014 per share which compares to $2,306,000 for Q3/14 and a profit of $7,620,000 ($1,579,000 before tax) for Q4/13. Earnings before interest, taxes, depreciation, amortisation (“EBITDA”) for the year were $27,270,000 (2013 : $9,419,000). Cash flow and cash resources Cash flows generated from operating activities were $24,755,000 compared with $11,468,000 in the previous fiscal year. Cash flows generated from operating activities were $5,889,000 in Q4/14 compared to $5,966,000 in Q3/14 and cash utilized of $5,892,000 in Q4/13. The increase in the cash generated relates to the operating profit and changes in working capital. Cash resources as at July 31, 2014 were $9.5 million and as of October 25, 2014 were$8.9 million. Page 8 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 HIGHLIGHTS OF THE YEAR ENDED JULY 31, 2014 (Continued) Financing and Investment During the year a repayment of US$2.2 million (project to date US$11.6 million) was made on the Group’s Gold Loan from the delivery of 1,722 payable ounces of gold (project to date 7,446 ounces have been delivered). Cleared the outstanding balance of $5.7 million on its secured credit facility by February 28, 2014. On September 17, 2013 the Group announced that a conditional offer had been accepted by Cornerstone Capital Resources Inc. for the Group to acquire their 50% interest in the Little Deer Copper Deposit and Whalesback Mine in Newfoundland for $550,000 consisting of $200,000 in cash and $350,000 in shares. The 50% interest is subject to a Joint Venture agreement with Thundermin Resources Inc. (‘Thundermin’). The purchase price consists of a 0.75 per cent net smelter return (‘NSR’) on Rambler’s proportionate share of all products derived from the Little Deer Project subject to a buyback of 0.5 per cent of the NSR for $500,000 at any time; and the remaining 0.25 per cent of the NSR for fair market value as determined by the economics of the Little Deer Project’s feasibility study at any time following the completion of the feasibility study. On October 11, 2013 the Group satisfied the conditions of the offer and 887,614 ordinary shares were subsequently issued on December 2, 2013. Consistent with the strategic goals outlined above, in December 2013 the Group entered into a subscription agreement with Marathon Gold Corporation (TSX: MOZ) (‘Marathon’) for common shares of Marathon by way of a non-brokered private placement of a guaranteed subscription of $0.5 million with an option by Rambler to invest an additional $1.5 million. Marathon’s principal asset is the Valentine Lake property, located in central Newfoundland, which hosts two well defined gold deposits with NI 43-101 compliant resources: the Leprechaun Gold Deposit and the Victory Gold Deposit. The first tranche of $250,000 closed on December 4, 2014 with the acquisition of 1,176,470 of MOZ shares at a subscription price of $0.2125. The second tranche of $250,000 closed on April 2, 2014 with the acquisition of 797,448 common shares of MOZ at a subscription price of $0.3135. Subscribed $129,000 for shares in Maritime Resources Corp. (TSX: MAE). Of the $129,000, $79,000 will be used to allow for the conversion of a $75,000 loan, plus interest, into shares of Maritime, totaling 316,000 shares. The remaining $50,000 was invested for 200,000 non-flow though (‘NFT’) units consisting of one common share and one non-transferable share purchase warrant. Each share purchase warrant attached to NFT units entitles the holder to purchase one non flow- through common share at a price of $0.35 until May 21, 2015. Following the placement Rambler holds 6,267,460 shares of Maritime representing 17.7% of the issued outstanding shares of the Company. Funds from the placement will be used to further advance the Green Bay Property and the former producing Hammerdown Gold Mine in particular. Staffing At the end of the year a total of 157 full time employees were employed at the Ming Mine compared to 139 full time employees at July 31, 2013. The Group continues to evaluate current employment levels and look for opportunities to streamline its operations with the goal of improving overall efficiency. Page 9 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 HIGHLIGHTS OF THE YEAR ENDED JULY 31, 2014 (Continued) Exploration and evaluation Ming Mine diamond drilling has been mainly focused on extending the 1807 Copper Zone to replenish the reserves that have been mined since declaring Commercial Production. The deepest drill hole completed to date has extended the resource model 210 meters (plunge length) below the deepest reserve level, 516L, while drilling up plunge has extended the zone an additional 161 meters (plunge length) above the shallowest reserve level, 329L. Additional drilling is also being planned to test the mineralized contact to the west and east of the mine which remains largely unexplored. On January 27, 2014 the Group updated its NI 43-101 Reserve and Resource estimates at the Ming Copper-Gold Mine. The reserve itself shows the replacement of all tonnes mined from the 1807 zone to date, extending the mine life by one year. All zones remain open to further exploration. Consistent with the Company’s strategic goal of growing and extending the life of the Ming Mine in June 2013 the Group received funding from the Research Development Corporation, Newfoundland and Labrador (‘RDC’) to complete in depth research on two separate projects associated with the advancement of the Ming Copper-Gold Mine. The first is a gold liberation of historic tailings study for which RDC will contribute $178,439, total project investment $239,169. The second project involves an examination of various pre-concentration methods with the goal of further improving the economic viability of the Lower Footwall Zone (‘LFZ’). RDC is supporting this research by contributing $250,000 through its R&D Proof of Concept program to a total project cost of $372,668. During Q4/14 work continued on both projects with the Group’s third party consultant. The Lower Footwall Zone pre-concentration project has identified Dense Media Separation (DMS) technology as a potentially viable method of upgrading the in situ grade of the large (18.2M tonnes at 1.43% Cu) Lower Footwall Zone at the Ming Mine. Through the completion of bench scale testing and a mini-pilot plant program, DMS technology was successful by removing thirty to forty per cent of the lighter host rock with copper recoveries up to ninety five per cent. In terms of copper grade improvement, the mini-pilot using run of mine ore from the LFZ grading 1.39% returned a pre-concentrate grade of 2.27% (an upgrade ratio of 1.63). The Company is planning the next stage in testing of this technology through the rental and operation of an on-site demonstration plant. This plant would be fed from a bulk sample of Lower Footwall Zone material (~ 20,000 to 30,000 metric tonnes) sourced from readily available access points already established in the Ming Mine. This demonstration plant would serve to scale up the results seen in the laboratory with the resultant pre-concentrate being delivered to the copper concentrator as additional feed. Results of this demonstration would be used in subsequent optimization studies aimed at commercialization of the Lower Footwall Zone with the expectation of lowering initial capital requirements compared to the Company’s Preliminary Economic Assessment published in April 2012. Page 10 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 OPERATIONAL SUMMARY For the quarter ended July 31, 2014 the Group produced 6,000 tonnes of copper concentrate containing 1,708 tonnes of copper metal, 2,107 ounces of gold and 16,708 ounces of silver. The average feed grade during the period was 3.24% Cu, 1.65 g/t Au and 12.60 g/t Ag followed by a mill recovery of 96.7 per cent, 71.0 per cent and 75.9 per cent for copper, gold and silver respectively. During the year the Company milled 215,496 dry metric tonnes of ore and produced 25,647 tonnes of copper concentrate containing 7,472 tonnes of copper metal, 6,921 ounces of gold and 52,539 ounces of silver. The average feed grade during the year was 3.68 per cent copper, 1.59 grammes per tonne gold and 10.65 grammes per tonne silver followed by a mill recovery of 96.4 per cent, 67.1 per cent and 78.1 per cent for copper, gold and silver respectively. The Company first declared commercial production in November 2012 and has since milled 352,893 dry metric tonnes and produced 39,449 tonnes of copper concentrate containing 11,425 tonnes of copper metal, 10,058 ounces of gold and 76,497 ounces of silver. Feed grades can be subject to fluctuations throughout the year due to a combination of factors including the inconsistent nature of the ore bodies being mined, production sequencing, unplanned mining dilution and blending strategies. Fluctuations in recoveries can be attributed to variations in feed grade, variations in production rate, grindability of the mill feed and planned processing plant shutdowns. The ranged values in the fiscal guidance is intended to cover these variations seen throughout the fiscal year. Ore and Concentrate Production Summary for Fiscal 2014 PRODUCTION Dry Tonnes Milled 215,496 59,526 49,355 50,957 55,659 200,000 – 220,000 YTD Q4/14 Q3/14 Q2/14 Q1/14 F2014 Guidance Copper Recovery Gold Recovery Silver Recovery Copper Head Grade (%) Gold Head Grade (g/t) 96.4% 67.1% 78.1% 3.68 1.59 96.7% 71.0% 75.9% 3.24 1.65 96.4% 66.2% 79.2% 3.84 1.62 Silver Head Grade (g/t) 10.65 12.60 11.70 95.9% 61.7% 76.1% 3.71 1.64 9.22 96.8% 69.1% 81.9% 4.01 1.43 8.91 Page 11 92 – 94 % 63 – 67 % 55 – 65 % 3.0 – 4.0 1.0 – 2.0 6.0 – 8.0 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 OPERATIONAL SUMMARY (continued) CONCENTRATE (Produced and Stored in Warehouse) Copper (%) Gold (g/t) Silver (g/t) Dry Tonnes produced Copper Metal (tonnes) Gold (ounces) Silver (ounces) Total Q4/14 Q3/14 Q2/14 Q1/14 F2014 Guidance 29.13 8.39 66.97 25,647 7,472 6,921 52,539 28.47 10.93 86.62 6,000 1,708 2,107 29.32 8.02 79.15 6,238 1,829 1,608 29.02 7.07 49.11 6,818 1,978 1,551 29.68 7.81 56.01 6,591 1,956 1,655 27 – 30 6 – 8 45 – 55 20,000 – 24,000 5,700 – 6,840 4,500 – 5,500 16,708 13,196 10,764 11,870 32,000 – 39,000 Ore and Concentrate Production Quarterly results comparison PRODUCTION Q4/14 Q3/14 Q4/14 Q4/13 Dry Tonnes Milled 59,526 49,355 21% 59,526 47,027 27% Copper Recovery Gold Recovery Silver Recovery Copper Head Grade (%) Gold Head Grade (g/t) 96.7% 71.0% 75.9% 3.24 1.65 96.4% 66.2% 79.2% 3.84 1.62 Silver Head Grade (g/t) 12.60 11.70 0% 7% -4% -16% 2% 8% 96.7% 71.0% 75.9% 3.24 1.65 94.0% 65.0% 73.0% 4.05 1.52 12.60 10.95 3% 9% 4% -20% 9% 15% Page 12 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 OPERATIONAL SUMMARY (continued) CONCENTRATE (Produced and Stored in Warehouse) Q4/14 Q3/14 Q4/14 Q4/13 Copper (%) Gold (g/t) Silver (g/t) Dry Tonnes produced Copper Metal (tonnes) Gold (ounces) Silver (ounces) 28.47 10.93 86.62 6,000 1,708 2,107 29.32 8.02 79.15 6,238 1,829 1,608 16,708 13,196 -3% 36% 9% -4% -7% 31% 27% 28.47 10.93 86.62 6,000 1,708 2,107 16,708 30.00 7.70 58.60 5,244 1,574 1,297 9,873 -5% 42% 48% 14% 9% 62% 69% Production of 6,000 tonnes of copper concentrate representing a 14 per cent increase over Q4 2013 and a 4 per cent decrease from Q3 2014 Dry tonnes milled of 59,526 tonnes representing a 27 per cent increase over Q4 2013 and a 21 per cent increase from Q3 2014. This resulted in the production of: 1,708 tonnes of Copper (7,472 tonnes for the year) 2,107 ounces of Gold (6,921 ounces for the year) 16,708 ounces of Silver (52,539 ounces for the year) Head grades of Copper 3.24 per cent, Gold 1.65 grammes per tonne and Silver 12.60 grammes per tonne with recoveries to concentrate for Copper 96.7 per cent, Gold 71.0 per cent and Silver 75.9 per cent. Copper head grade decreased by 20 per cent over Q4 2013 and 16 per cent in Q3 2014 while copper recoveries remained in line with full year results. Concentrate grade for Copper 28.47 per cent, Gold 10.93 grammes per tonne and Silver 86.62 grammes per tonne representing a 5 and 3 per cent decrease in copper concentrate grade over Q4/2013 and Q3/2014 respectively. Gold and Silver in concentrate both showed increases over Q4 2013 and Q3 2014. Page 13 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 HEALTH AND SAFETY The Group completed the year with no lost time accidents and 3 medical aid injuries. The lost time accident frequency rate and medical aid frequency rate for the period and fiscal year to date was 0 and 1.9 respectively. The Health and Safety of the Group’s employees continues to be a high priority with prevention and early hazard recognition being key components of the Group’s strategy. OUTLOOK Management continues to pursue the following objectives: Continue mining and milling the exposed 1807 workplaces for the generation of copper concentrate revenue from the Ming Mine. Place additional development focus into preparing this high grade zone for further exploration both up-dip and down-dip for inclusion in future resource and reserve estimates. Continue to open up other mining horizons in the Ming North and South ore bodies, both up and down plunge. Increase production from the Ming Mine to allow the optimization of the Nugget Pond copper concentrator to its design capacity of 1,000 mtpd and potentially allow the gold hydromet to be operated independently and/or simultaneously with the copper concentrator. Continuing to evaluate opportunities for the possible integration of the Lower Footwall Zone into the mine’s reserve. As a part of this work, completing the onsite demonstration program to determine if pre-concentrating the Lower Footwall Zone material using dense media separation (‘DMS’) is a viable option to help improve the run of mine head grade from this zone. Become a strategic long term low-cost producer, by selectively pursuing growth opportunities through joint ventures and acquisitions, as demonstrated by the Group’s investment in the former producing Hammerdown gold mine, Little Deer and Whales Back copper mines and the advanced Valentine Lake Gold Project. Increase exposure and liquidity both on London’s AIM and on Toronto’s Venture Exchange through marketing and investor relations campaigns. Page 14 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 FISCAL 2015 GUIDANCE Similar to 2014, copper production for the 2015 fiscal year is forecast between 5,400 and 6,700 tonnes of metal with increases forecasted for gold and silver; 5,600 to 6,600 ounces of gold and 39,000 to 46,000 ounces of silver. PRODUCTION Fiscal 2015 CONCENTRATE Fiscal 2015 Dry Tonnes Milled 215,000 – 230,000 Copper Recovery Gold Recovery Silver Recovery 94 - 96% 65 - 70% 60 - 75% Copper Head Grade (%) 2.5 – 3.5 Gold Head Grade (g/t) Silver Head Grade (g/t) 1 - 2 6 - 8 (Produced) Copper % Gold (g/t) Silver (g/t) 27 – 30 6 – 8 45 -55 Dry tonnes produced 20,000 – 24,000 Copper Metal (tonnes) 5,400 -6,700 Gold (ounces) 5,600 – 6,600 Silver (ounces) 39,000 – 46,000 See ‘Forward Looking Information’ in Appendix 5 for a description of the factors that may cause actual results to differ from forecast. Page 15 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 CAPITAL PROJECTS REVIEW During the year the Group incurred expenditures of $6,683,000 on Mineral Property; $2,925,000 on property, plant and equipment; and $1,064,000 on exploration and evaluation at the Ming Mine net of $264,000 in RDC claims. Mineral Property Property, plant and equipment Exploration and evaluation costs TOTAL CAPITAL Total $,000 6,683 2,925 1,064 10,672 Q4/14 $,000 1,550 420 137 2,107 Q3/14 $,000 1,778 533 (19) 2,292 Q2/14 $,000 2,074 1,563 314 3,951 Q1/14 $,000 1,281 409 632 2,322 Mineral Property expenditures in the year remained consistent quarter on quarter and are in line with the continued capital development within the Group’s producing 1807 ore zone and the Ming up and down plunge areas. Property, plant and equipment includes $1.5 million on underground mobile equipment and $0.6 million on storage and office buildings during the year. Exploration and evaluation costs at the Ming Mine relate to exploration drilling on the 1807 and undefined ore zones and the on-going Lower Footwall zone projects and include $550,000 on the acquisition of the Little Deer Project as outlined above. Page 16 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 FINANCIAL REVIEW Fiscal 2014 ($000’s) 62,110 Commentary Revenue of $62.1 million was generated through the sale of 25,806 dmt of copper concentrate containing 6.968 tonnes of accountable copper metal and 6,043 ounces of accountable gold. This compared with revenue of $34.7 million in the prior year generated through the sale of 14,634 dmt of copper concentrate containing 3,947 tonnes of accountable copper metal and 2,664 ounces of accountable gold. Comparatives Fiscal 2013 ($000’s) B/ (W)* 34,669 79% 39,732 Production costs relate to the processing and mining costs associated with Group’s Ming Mine and include processing costs of $7.2 million, mining costs $22.5 million and depreciation and amortisation of $10.0 million. Operating costs associated with mining and processing of Ming Mine ores were capitalized to Mineral Property prior to commercial production being achieved for the first quarter of 2013. 27,644 (44)% 4,432 447 General and administrative expenses were higher than the previous year by $875,000. Employment costs increased $442,000 as a result of , compensation changes and addition of administrative/management staff, Legal and professional costs increased $281,000 which includes the costs of merger and acquisition activity carried out during the year , travel and investor relation costs increased $6,000 and security and general expenses increased $153,000 mainly due to increased municipal taxes of $101,000 and increased security costs of $41,000 . Gain/(loss) on derivative financial instruments. Throughout the year the Group fixed a portion of its copper, gold and silver production with its off-take partner to mitigate the risk of any significant commodity price movements resulting in a net realized gain on derivative financial assets of $250,000 being the difference in the commodity prices at time of provisional invoicing, and actual commodity prices realized on the fixed portion of the shipment. A further unrealized loss of $197,000 resulted at year end being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement following the future shipment of concentrates in the Group’s warehouse at year end. 3,557 (25)% (323) 238% (1,173) Foreign exchange losses arising on the Gold Loan increased in the year as a result of the weakening of the Canadian dollar against the US dollar during the year. (513) (129%) (4,488) Income tax(charge)/credit. The income tax charge is the deferred tax charge arising from the utilisation of losses brought forward compared to a recognition of a deferred tax asset in 2013. 6,068 (174)% Page 17 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 FINANCIAL REVIEW (continued) Fiscal 2014 Results ($000’s) Commentary Mineral properties The group incurred costs of $6.7 million in the year which included labour costs of $3.4 million and underground development costs of $3.3 million. In 2013 the group incurred costs of $15.1 million in the year offset by revenue on gold production of $9.5 million (see further below). The costs for 2013 include labour of $4.6 million, contractor and material costs of $0.3 million, underground development costs of $4.5 million, depreciation of $1 million and finance costs of $1.1 million. Finance costs include $0.6 million in effective interest charges arising on the gold loan due to higher than estimated gold prices and actual gold ounces delivered during the year as well as changes to future gold pricing and volume estimates. Finance costs include actual cash cost of $0.6 million relating to interest on the Group’s Credit Facility and equipment capital leases. 6,683 Ming Mine Revenue of $9.5 million was realized in Q1/13 on the sale of 14,918 ounces of gold and 1,271 tonnes of copper concentrate. Processing and ore transportation costs of $5.5 million and concentrated transportation & other allowances of $241,000 were incurred to generate this revenue. Revenue realized during testing and commissioning was credited against Mineral properties prior the declaration of commercial production. Comparatives Fiscal 2013 ($000’s) B/ (W)* 5,664 (18)% 2,925 Capital spending on property, plant and equipment slightly increased during the year including $1.9 million spent on underground equipment and $0.4 million on updates at the mill. 2,620 (11)% 1,064 Capital spending on exploration and evaluation relate to exploration drilling on the 1807 and undefined ore zones and the on-going Optimization Studies on the Group’s Lower Footwall Zone ore body. It also includes $550,000 for the purchase of the Little Deer Coper Deposit. 190 (454)% *B / (W) = Better / (Worse) Page 18 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 SUMMARY OF QUARTERLY RESULTS The quarterly results for the Group for the last eight fiscal quarters are set out in the following table. Quarterly Results (All amounts in 000s of Canadian Dollars, except Loss per share figures) 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Fiscal 2014 Revenue Profit before tax Net Income Earnings per Share (Basic & Diluted) Fiscal 2013 Revenue Profit/(loss) before tax Net Income/ (loss) Earnings/(loss) per Share (Basic & Diluted) 15,050 15,078 15,237 16,745 3,407 1,974 0.014 3,312 2,306 0.016 1,520 1,027 0.007 13,175 10,087 11,407 1,580 7,620 0.053 193 193 0.001 1,930 1,958 0.014 5,264 3,708 0.026 -* (718) (718) (0.005) * gold and copper sales resulting from the testing and commissioning of the Ming Mine were credited to Mineral properties until commercial production was achieved The profit in the second quarter of 2013 reflects the successful move into commercial production on November 1, 2012. The reduced profit in the third quarter of 2013 was due to a decline in copper and gold prices and invoicing of less copper concentrate when compared to the second quarter of 2013 and the subsequent increase in profits in fourth quarter of 2013 was due to an increase in production and the recognition of a deferred tax credit of $6,040,000. Profits before tax in the first quarter of 2014 increased by $3,684,000 due to increased sales and production efficiencies and fell by $2,681,000 in the second quarter as a result of lower revenue, increased production costs and exchange losses on the Gold Loan. In the third quarter of 2014 profit before tax increased by $1,792,000 mainly as a result of a reversal of foreign exchange losses on the Gold Loan and a reduction in administrative expenses with a further increase of $95,000 in the fourth quarter of 2014 mainly due to reduced production costs. Page 19 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION Since announcing commercial production, the Group has generated cash flows to finance its operational and development requirements and repay loans. Prior to Q2/13 the Group relied on private placement financings of equity securities, a Gold Loan facility, capital leases and a credit facility (see ’Commitments and Loans’ section) to finance its development requirements. The Group generated operating cash flows of $39 million since declaring commercial production on November 1, 2012 with $7 million generated in Q4/14 and positive cash flows are expected to continue. However, there is no guarantee that expenses will not exceed income again during this mining phase. If this is the case, the liquidity risk could be material, even with current cash resources. The Group’s holding of cash balances is kept under constant review. Given the current climate, the Group takes a very risk averse approach to management of cash resources and Management and Directors monitor events and associated risks on a continuous basis. Cash and short-term investment resources (cash, cash equivalents and short-term investments) were as follows: Resource Cash $CDN Cash US$ Cash GBP Total July 31, 2014 $’000 July 31, 2013 $’000 7,398 1,992 145 9.535 2,212 3,293 61 5,566 Sales of copper concentrate are in US dollars and the majority of the Group’s expenses are incurred in Canadian dollars. The Group’s principal exchange rate risk relates to movements between the Canadian and US dollar. The Gold Loan is repayable from future sales of gold mitigating the exchange risk. Management will closely monitor exchange fluctuation and consider the use of forward exchange contracts as required. Interest rates on the capital leases and short term borrowings are fixed, eliminating interest rate risk. Cash flows utilised in investing activities amounted to $9.9 million for the year. Cash of $6.7 million was spent on the Group’s Mineral Property $2.0 million on property, plant and equipment, $0.7 million on evaluation and exploration costs, $0.1 million on equity interest in Marathon Gold Corp. and $0.5 million on equity interest in Maritime Resources Corp. Cash flows utilized in financing activities during the year amounted to $10.9 million and included repayment of $5.9 million of the Group’s credit facility and repayments of the gold loan of $2.4 million and finance lease repayments of $2.6 million. Page 20 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION (continued) The Group is required to hold Letters of Credit in favour of the Government of Newfoundland and Labrador in respect of the reclamation and closure liability at the existing Nugget Pond Mill and Ming Mine. At period end the Group holds bearer deposit notes totalling $3.25 million. Since the commencement of commercial production the Group has generated operating cash flows of $39 million and reduced the working capital deficit from $2.7 million at July 31, 2013 to positive working capital of $9.8 million at July 31, 2014. The current economic conditions do, however, create uncertainty particularly over: (a) the price of copper, gold and silver; (b) the exchange rate between Canadian and US dollars and thus the consequence for the cash generated from US dollar revenues; (c) the production targets being met. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should continue to be cash flow positive. Based on the above management concludes the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. At October 25, 2014 the Group has $8.9 million in cash and cash equivalents. Financial Instruments The Group’s principal financial assets comprise: cash and cash equivalents, restricted cash, available for sale investments, derivative financial instruments and trade and other receivables. The Group’s financial liabilities comprise trade payables; other payables; and interest bearing loans and borrowings. All of the Group’s financial liabilities are measured at amortised cost. The Board of Directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign currency risk, liquidity risk, credit risk, interest rate risk and commodity price risk each of which is discussed in note 23 of the financial statements for the year ended July 31, 2014. Page 21 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 COMMITMENTS AND LOANS At July 31, 2014, the Group has a commitment of approximately $250,000 in connection with the Little Deer Project. Gold Loan In March 2010, the Group entered into an agreement (“Gold Loan”) with Sandstorm to sell a portion of the life-of-mine gold production from its Ming Mine. Under the terms of the agreement Sandstorm made staged upfront cash payments for the gold to the Group totalling US$20 million. For this, in each production year following the first year of production, until 175,000oz of payable gold has been produced, the Group has agreed to sell a percentage equal to 25% x (85% divided by the actual percentage of metallurgical recovery of gold realized in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 25% of the payable gold. In each production year following the first year of production, after 175,000oz of payable gold has been produced, the Group has agreed to sell a percentage equal to 12% x (85% divided by the actual percentage of metallurgical recovery of gold realized in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 12% of the payable gold for the remainder of the period ending 40 years after the date of the agreement. After the expiry of the 40 year term, the agreement is renewable in 10 year terms at the option of Sandstorm. The Gold Loan is accounted for as a financial liability carried at amortised cost. In determining the effective interest rate implicit in the cash flows arising from the loan the cash flows are forecast based on management’s best estimates of the time of delivery of payable gold, the total amount of gold expected to be produced over the mine life and the timing of that production. The Gold Loan is secured by a fixed and floating charge over the assets of the Group. Page 22 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 Credit Facility On September 29, 2011 the Group agreed a Credit Facility of up to $10 million with Sprott Resource Lending Partnership (‘Sprott’) for use as additional funding for the development of the Ming Mine. On March 26, 2013 this agreement was amended such that the principal is repayable by March 31, 2014 and secured by a fixed and floating charge over the assets of the Group. During the first nine months of fiscal 2014 the Group made total repayments of $5.9 million repaying the facility in full. Loan and lease balances At July 31, 2014, interest bearing loans and borrowings comprised of finance lease commitments of $5,434,000. The Group entered into finance lease commitments of $953,000 to finance the acquisition of a mine truck in the year. SUBSEQUENT EVENTS The Company subscribed to purchase 760,340 common shares in Marathon Gold Corporation for $375,000 bringing its total holding to 2,734,258 representing 3.98% of the issued and outstanding shares. As a continuation of previously successful dense media (‘DMS’) or pre-concentration test work the Group is planning to implement an on-site demonstration DMS plant to scale-up the process and prove the technology for its application. Once the technology demonstration is complete and operating parameters are optimized, this project will serve as the basis of a pre-feasibility study with the goal of moving the LFZ resources into the mine reserve. The Research & Development Corporation of Newfoundland and Labrador (‘RDC’) initial contribution of $250,000 in 2013 helped provide the groundwork for the on-site demonstration plant program. On September 9, 2014 the Group announced that RDC has again provided support with an additional $750,000 investment. Page 23 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 1 – LOCATION MAP Page 24 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 2 ‐ SELECTED FINANCIAL INFORMATION & REVIEW OF OVERALL PERFORMANCE Financial Highlights (All amounts in 000s of Canadian Dollars, unless otherwise stated) Gold sales – gold doré (Ounces) Average price (per ounce) Concentrate sales pre commercial production (dmt) Concentrate sales post commercial production (dmt) Average provisional price ($ per tonne Cu, Ag & Au concentrate) Revenue Production Expenses Exploration Expenditure Administrative expenses Net Income (loss) Cash Flow generated from (used in) operating activities Cash Flow used in investing activities Cash Flow (used in) from financing activities Net increase (decrease) in cash Cash and cash equivalents at end of period Total Assets Total Liabilities Working Capital Weighted average number of shares outstanding (000s) Earnings (loss) per share ($) Year ended July 31, 2014 2013 2012 293 1,447 N/A 25,806 2,423 62,110 (39,732) (93) (4,432) 9,015 24,755 (9,926) (10,877) 3,952 9,535 119,387 (31,979) 9,814 143,863 0.063 3241 1,4911 14,6341 4,3312 2,3821 34,669 (27,644) (26) (3,557) 9,053 11,468 (8,595) (5,154) (2,281) 5,566 116,859 (39,167) (2,753) 142,690 0.063 15,6132 1,6542 1,2712 - - 1,219 (674) (24) (3,022) (3,367) (1,209) (7,075) 5,903 (2,381) 7,826 110,718 (43,317) (7,625) 128,477 (0.026) 1 represents post commercial production, November 1, 2012 to July 31, 2013. 2 gold and copper concentrate sales relating to the testing and commissioning of the Ming Mine are credited to Mineral properties until commercial production is achieved. Page 25 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 3 ‐ FINANCIAL REVIEW FOR THE QUARTER ENDED JULY 31, 2014 Q4/14 Results ($000’s) Commentary Comparatives Q3/14 B/ (W)* Q4/13 B/ (W) 15,050 Revenue of $15.0 million in Q4/14 was generated through the sale of 5,909 dmt of copper concentrate containing 1,572 tonnes of accountable copper metal, 1,927 ounces of accountable gold and 11,445 ounces of accountable silver compared with $15.1 million from the sale of 6,320 dmt of copper concentrate in Q3/14. The small reduction in revenue reflects lower average copper prices during the quarter on lower accountable copper metal sold offset by increased accountable gold and silver. Revenue in Q4/13 was generated through the sale of 5,573 dmt of copper concentrate containing 1,610 tonnes of accountable copper metal and 1,130 ounces of accountable gold. 6,357 Production costs relate to the processing and mining costs associated with Group’s Ming Mine production and include processing and mining costs of $1.7 million (Q3/14: $1.8 million) and $4.7million (Q3/14: $6.2 million) respectively. Processing and mining costs in Q4/13 were of $1.8 million and $5.4 million respectively. 1,104 General and administrative expenses were higher than the previous quarter by $16,000. Promotional and travel costs reduced by $79,000 and legal and professional costs by $59,000. In comparison to Q4/13 administrative expenses increased by $261,000. Staff costs increased by $34,000 , legal and professional costs by $207,000 mainly as a result of costs of merger and acquisition activity expensed in Q4/14, promotional and travel costs by $30,000 offset by a reduction of $10,000 in general expenses. Gain/(loss) on derivative financial instruments. During the quarter the net unrealized fair value gain adjustment recognized was $314,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement offset by a realized loss of $198,000 on the final settlement of the Group’s sixth concentrate shipment. During Q3/14 the fair value loss adjustment was $64,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement of concentrates in the Group’s warehouse at period end and shipment delivered pending final settlement. 116 During Q4/13 the net unrealized fair value gain adjustment recognized was $145,000 being the difference in the commodity prices at time of provisional invoicing and anticipated commodity prices upon final settlement offset by a realized loss of $192,000 on the final settlement of the Group’s third concentrate shipment. 15,078 0% 13,175 14% 7,964 20% 7,173 11% 1,088 (1)% 843 (7)% (64) 281% (47) 347% 36 Foreign exchange differences arising on the Gold Loan resulted in a gain in Q4/14 as a result of the weakening of the Canadian dollar against the US dollar during the quarter. 296 (88)% 112 34% 1,550 Mineral properties The group incurred costs of $1.5 million in the quarter. The cost includes labour costs of $0.8 million and underground development costs of $0.7 million. Mineral properties expenditure reduced in Q4/13 in line with the completion of the 1807 independent ramp breakthrough in Q3/13. 1,778 13& 1,266 (22)% 420 Capital spending on property, plant and equipment reduced slightly during the quarter compared to Q3/14. Q4/13 includes the purchase of two additional scooptrams. 533 21% 828 49% Page 26 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 3 ‐ FINANCIAL REVIEW FOR THE QUARTER ENDED JULY 31, 2014 (continued) Q4/14 Results ($000’s) Commentary 137 Capital spending on exploration and evaluation costs in Q3/14 was $191,000 and this was offset by RDC claims of $54,000 and relates to exploration drilling on the Group’s 1807 and undefined ore bodies. Expenditure in Q3/14 was $190,000 offset by RDC claims of $209,000. Expenditure in Q4/13 relates to exploration drilling on the Group’s 1807 and 1806 ore bodies as well as on-going Optimization Studies on the Group’s Lower Footwall Zone ore body. *B / (W) = Better / (Worse) Comparatives Q3/14 B/ (W)* Q4/13 B/ (W) (19) (821)% 131 (5)% Page 27 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 4 ‐ CRITICAL ACCOUNTING POLICIES AND ESTIMATES The details of the Group’s accounting policies are presented in accordance with International Financial Reporting Standards as set out in Note 2 to the financial statements. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The following estimates are considered by management to be the most critical for investors to understand some of the processes and reasoning that go into the preparation of the Group’s financial statements, providing some insight also to uncertainties that could impact the Group’s financial results. Going Concern Since the commencement of commercial production the Group has generated operating cash flows of $39 million and reduced the working capital deficit from $2.7 million at July 31, 2013 to positive working capital of $9.8 million at July 31, 2014. The current economic conditions do, however, create uncertainty particularly over: (a) the price of copper, gold and silver; (b) the exchange rate between Canadian and US dollars and thus the consequence for the cash generated from US dollar revenues; (c) the production targets being met. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should continue to be cash flow positive. Based on the above management concludes the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Share-based payments The Group calculates the cost of share based payments using the Black-Scholes model. Inputs into the model in respect of the expected option life and the volatility are subject to management estimate and any changes to these estimates may have a significant effect on the cost. The assumptions used in calculating the cost of share based payments are explained in note 5 of the financial statements for the year ended July 31, 2014. Page 28 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 4 ‐ CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) Gold Loan The Group calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold (see note 21 of the financial statements for the year ended July 31, 2014). The cash flows will be dependent on the production of gold and its selling price at the time of delivery which have been estimated in line with the mine plan, future prices of gold and resource and reserve estimates. Management’s estimates of these factors are subject to risk and uncertainties affecting the amount of the interest charge. Any changes to these estimates may result in a significantly different interest charge which would affect the income statement and the corresponding Gold Loan liability. Mineral Property and Exploration and Evaluation Costs The directors have assessed whether there are any indicators of impairment in respect of mineral property and exploration and evaluation costs. In making this assessment they have considered the Group’s business plan which includes resource estimates, future processing capacity, the forward market and longer term price outlook for copper and gold. Resource estimates have been based on the most recently filed NI43-101 report and its opportunities economic model which includes resource estimates and conversion of its inferred resources. Management’s estimates of these factors are subject to risk and uncertainties affecting the recoverability of the Group’s mineral property and exploration and evaluation costs. Any changes to these estimates may result in the recognition of an impairment charge with a corresponding reduction in the carrying value of such assets. After consideration of the above factors, the directors do not consider that there are any indicators that mineral property and exploration and evaluation costs are impaired at the year end. Amortisation of Mineral Property Amortisation of the Mineral Property is calculated on a unit of production method expected to amortise the cost including future forecast capital expenditure over the expected life of the mine based on the tonnes of ore expected to be extracted. Any changes to these estimates may result in an increase in the amortisation charge with a corresponding reduction in the carrying value of the Mineral Property. Closure Costs The Group has an obligation to reclaim its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. These estimates are recorded as a liability at their fair values in the periods in which they occur. If the estimate of reclamation costs proves to be inaccurate, the Group could be required to increase the provision for site closure and reclamation costs, which would increase the amount of future reclamation expense, resulting in a reduction in the Group’s earnings and net assets. Revenue Revenues are subject to variation after the date of sale due to assay, price and foreign exchange fluctuations. Management monitors these changes closely and at the end of the period the directors will consider whether the effect of these variations are material on the whole and determine whether an adjustment is therefore appropriate. Page 29 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 4 ‐ CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) Available for sale investments Management considers that they do not have significant influence over the financial and policy decisions of the entities in which investment has been made and therefore have included the investments as available for sale investments. Deferred tax The Group has incurred losses which will be available for offset against future taxable profits and one of the subsidiaries has tax credits available to offset against future tax liabilities. Following the declaration of commercial production in the previous year it has been concluded that the Group has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset. If future taxable profits prove to be insufficient the Group could be required to reduce the deferred tax asset which would result in a reduction in the Group’s earnings and net assets. Page 30 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 4 ‐ CRITICAL ACCOUNTING POLICIES AND ESTIMATES (continued) The Group has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning on or after 1 January 2013. The adoption of these new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Group. In order to comply with International Financial Reporting Standards as issued by the International Accounting Standards Board, the Group has chosen early adoption of IFRS 10, 11, and 12 for EU purposes, however these do not have a material impact on the financial statements. No standards issued but not yet effective have been adopted early. International Financial Reporting Standards that have recently been issued or amended but are not yet effective have not been adopted for the annual reporting period ended July 31, 2014: IFRS /Amendment Various IFRS 9 IFRS 14 IFRS 15 IFRIC 21 Title Nature of change to accounting policy Annual Improvements to IFRSs No change to accounting policy, Application date of standard Various Application date for Group August 1, 2014 Financial instruments: Classification and Measurement Regulatory Deferral Accounts Revenue from contracts with customers Levies therefore, no impact No change to accounting policy, therefore, no impact No change to accounting policy, therefore, no impact No change to accounting policy, therefore, no impact No change to accounting policy, therefore, no impact January 1, 2015 August 1, 2015 January 1, 2014 August 1, 2014 January 1, 2017 August 1, 2017 January 1, 2014 August 1, 2014 Management have reviewed the impact of the above standards and interpretations and have concluded that they will not result in any material changes to reported results. Details of the main accounting policies of the Group are included in note 2 of the financial statements for the year ended July 31, 2014. Page 31 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 5 – OTHER MATTERS Outstanding Share & Option Data As at the date of this MD&A the following securities are outstanding: Security Shares issued or Issuable Common Shares 144,168,228 Options 5,506,000* *if all options have fully vested Weighted Average Exercise Price -- $0.47 For further assistance Mr. Peter Mercer, Corporate Secretary can be reached directly at +1-709-800-1929 ext.500 or pmercer@ramblermines.com. Forward Looking Information This MD&A contains "forward-looking information" ("FLI") which may include, but is not limited to, statements with respect to the Group's objectives and strategy, future financial or operating performance of the Group and its projects, exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining exploration and development, environmental risks, title disputes or claims and limitations of insurance coverage. All statements, other than statements of historical fact, are forward-looking statements. Often, but not always, statements containing FLI can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur be achieved or continue to be achieved. Forward-looking statements are based on opinions, estimates and assumptions of management considered reasonably at the date the statements are made. Key assumptions include without limitation, the price of and anticipated costs of recovery of, copper concentrate, gold and silver, the presence of and continuity of such minerals at modeled grades and values, the capacities of various machinery and equipment, the availability of personnel, machinery and equipment at estimated prices, mineral recovery rates, and others. Investors are cautioned however that forward-looking statements necessarily involve both known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Group to be materially different from any future results, performance or achievements expressed or implied by the FLI. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; conclusions of economic evaluations; availability and cost of credit; fluctuations in Canadian dollar interest rates; fluctuations in the relative value of United States dollars, Canadian dollars and British Pounds; changes in planned parameters as plans continue to be refined; fluctuations in the market and forward prices of copper, gold, silver or certain other commodities; possible variations of ore grade or recovery rates; failure of equipment; accidents and other risks of the mining exploration industry; political instability, insurrection or war; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in the section entitled "Risks and Uncertainties" in the Report of Directors for the year ended July 31, 2014. Although the Group has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the FLI contained in this MD&A, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Unless stated otherwise, statements containing FLI herein are made as of the date of this MD&A and the Group disclaims any intention or obligation and assumes no responsibility to update or revise any FLI contained herein, whether as a result of new information, future events or otherwise, except as required by applicable law. Page 32 RAMBLER METALS AND MINING PLC MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JULY 31, 2014 APPENDIX 5 – OTHER MATTERS (continued) Forward Looking Information(continued) Other than as required by applicable securities law, the Company disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All of the forward-looking statements made in this MD&A are qualified by these cautionary statements. Accordingly, readers should not place undue reliance on forward-looking statements. The following table outlines certain significant forward-looking statements contained in this MD&A and provides the material assumptions used to develop such forward-looking statements and material risk factors that could cause actual results to differ materially from the forward looking statements. FLI statements Continued positive cash flow Assumptions Risk Factors Actual expenditures exceed revenues. from operations will not Expenditures exceeding revenues resulting from fluctuations in the market and forward prices of copper, gold, silver or certain other commodities, or increased costs of production, or production stoppages or shortfalls. Continued mining and milling the exposed 1807 workplaces and further up-dip and down-dip exploration of 1807 zone Increase production from the Ming Mine to allow the optimization of the Nugget Pond copper concentrator at 1,000 mtpd and potentially allow the gold hydromet to be operated independently and/or simultaneously with the copper concentrator. Achieving the planned capital and operating development and production targets; and, timely completion of drill bays to allow commencement of exploration drilling Successful completion of a detailed engineering review of existing infrastructure and availability of finance from cash flow from operations or external Development delays reducing access to production ore Economic viability Open up mining horizons in the Ming South up and down plunge ore bodies. Achieving development and production targets the planned capital and operating Development delays reducing access to production ore Become a strategic low cost producer by selective pursuit of growth opportunities term long Identification and acquisition of suitable Mineral properties, investment opportunities and suitable partners for joint ventures. Availability of suitable Mineral properties at an appropriate price and adequate available finance. Availability of suitable acquisition and joint venture opportunities on acceptable terms Increasing stock market exposure and liquidity Market reacts positively to Group’s results and promotional activity Failure to reach market expectations. Deterioration in market conditions generally or in the mining sector Further information Additional information relating to the Group is on SEDAR at www.sedar.com and on the Group’s web site at www.ramblermines.com. Page 33 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED JULY 31, 2014 The Directors present their report with the audited financial statements of the Group for the year ended July 31, 2014. PRINCIPAL ACTIVITY The principal activity of the Group is the development, mining and exploration of the Ming Copper-Gold Mine located in Newfoundland and Labrador and the exploration and development of other strategic properties within the immediate area. The principal activity of the parent company is that of a holding company. DIRECTORS The Directors during the period under review were: T S Chan E C Chen D H W Dobson L D Goodman B Hinchcliffe (resigned January 2, 2014) S Neamonitis (resigned December 5, 2013) G Ogilvie J S Thomson N P Williams (appointed February 19, 2014) DIVIDENDS No dividends will be distributed for the year ended July 31, 2014. SUBSTANTIAL SHARE INTERESTS At October 25, 2014 the parent Company was aware of the following substantial share interests: Number of Ordinary Shares % of Share Capital Henderson Global Investors Tinma International Ltd. BlackRock Investment Management Majedie Asset Management Legal and General Investment Management Whitmill Trust (Zila Corporation) Hargreaves Lansdown FINANCIAL INSTRUMENTS 28,878,626 22,736,992 13,053,180 10,988,197 9,691,887 8,838,000 5,274,339 20.03 15.77 9.05 7.62 6.72 6.13 3.66 The Board of Directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign exchange risk, liquidity risk, credit risk, interest rate risk and commodity price risk, each of which is discussed in note 23 to the financial statements. Page 34 RAMBLER METALS AND MINING PLC REPORT OF THE DIRECTORS FOR THE YEAR ENDED JULY 31, 2014 (CONTINUED) SUBSEQUENT EVENTS Details of subsequent events are set out in the Management’s Discussion and Analysis. STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR All of the current Directors have taken all the steps that they ought to have taken to make themselves aware of any information needed by the Group’s Auditor for the purposes of their audit and to establish that the Auditor is aware of that information. The Directors are not aware of any relevant audit information of which the Auditor is unaware. AUDITOR The auditor, BDO LLP, will be proposed for re-appointment in accordance with Section 489 of the Companies Act 2006. ON BEHALF OF THE BOARD: P Mercer Company Secretary October 25, 2014 Page 35 RAMBLER METALS AND MINING PLC DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the report of the directors 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 group and company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company's website is the responsibility of the directors. The directors' responsibility also extends to the on-going integrity of the financial statements contained therein. Page 36 RAMBLER METALS AND MINING PLC CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED JULY 31, 2014 In formulating the Group's corporate governance procedures the Board of Directors takes due regard of the principles of good governance set out in the UK Corporate Governance Code issued by the Financial Reporting Council in September 2012 and the size and development of the Group. The Group also has regard to the Quoted Companies Alliance (QCA) Guidelines on Corporate Governance for AIM Companies. The Board of Rambler Metals and Mining PLC is made up of one executive Director and seven non-executive Directors. G Ogilvie is the senior non-executive director and N Williams is the Group's President and Chief Executive. It is the Board's policy to maintain independence by having at least half of the Board comprising non- executive directors. The structure of the Board ensures that no one individual or group dominates the decision making process. The Board ordinarily meets no less than quarterly providing effective leadership and overall control of the Group's affairs through the schedule of matters reserved for its decision. This includes the approval of budgets and business plans, items of major capital expenditure, risk management policies and the approval of the financial statements. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to Board meetings. The Board delegates certain of its responsibilities to Board committees which have clearly defined terms of reference. Between the Board meetings, the executive Director, the Chief Financial Officer and some of the non-executive directors meet on a regular basis to review and discuss progress. All Directors have access to the advice and services of the company secretary, who is responsible for ensuring that all Board procedures are followed. Any Director may take independent professional advice at the Group's expense in the furtherance of his duties. The Audit Committee, which meets not less than quarterly and considers the Group's financial reporting (including accounting policies) and internal financial controls, is chaired by J S Thomson, the other members being L Goodman and E C Chen. The committee receives reports from management and from the Group's auditor. The Group has in place a series of procedures and controls designed to identify and prevent the risk of loss. These procedures are formally documented and are reported on regularly. The Audit Committee has reviewed the systems in place and considers these to be appropriate. The Remuneration Committee, which meets at least once a year and is responsible for making decisions on directors' remuneration packages, is chaired by L Goodman. T S Chan and J S Thomson are the other committee members. Remuneration of executive Directors is established by reference to the remuneration of executives of equivalent status both in terms of time commitment, level of responsibility of the position and by reference to their job qualifications and skills. The Remuneration Committee will also have regard to the terms which may be required to attract an executive of equivalent experience to join the Board from another company. Such packages may include performance related bonuses and the grant of share options. The Board attaches importance to maintaining good relationships with all its shareholders and ensures that all price sensitive information is released to all shareholders at the same time in accordance with AIM and Toronto Stock Exchange-Venture market rules. The Group's principal communication is through the Annual General Meeting and through the annual report and accounts, quarterly and interim statements. Page 37 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF RAMBLER METALS AND MINING PLC We have audited the financial statements of Rambler Metals and Mining PLC for the year ended 31 July 2014 which comprise the consolidated income statement, the consolidated and parent company statements of comprehensive income, the consolidated and parent company statements of financial position, the consolidated and parent company statements of changes in equity, the consolidated and parent company statements of cash flows and the related notes. 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 auditors As explained more fully in the statement of directors’ responsibilities, 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 Financial Reporting Council’s (FRC’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 FRC’s website 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 parent company’s affairs as at 31 July 2014 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent 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. Separate opinion in relation to IFRSs as issued by the IASB As explained in Note 2 to the group financial statements the group, in addition to applying IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). Page 38 Note 2014 $’000 2013 $’000 3 4 6 7 8 62,110 (29,684) (10,048) 22,378 (4,432) (93) 17,853 (1,173) 99 447 (3,723) (4,350) 34,669 (20,936) (6,708) 7,025 (3,557) (26) 3,442 (513) 84 (323) 295 (457) 13,503 2,985 (4,488) 6,068 9,015 9,053 Note 2014 $ 2013 $ 19 19 0.063 0.063 0.062 0.063 RAMBLER METALS AND MINING PLC CONSOLIDATED INCOME STATEMENT For the Year Ended July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Revenue Production costs Depreciation and amortisation Gross profit Administrative expenses Exploration expenses Operating profit Exchange loss Bank interest receivable Gain/(loss) on derivative financial instruments Finance costs Net financing expense Profit before tax Income tax (charge)/credit Profit for the year attributable to owners of the parent Earnings/(loss) per share Basic earnings per share Diluted earnings per share Page 40 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the Year Ended July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Profit for the year Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation of foreign operations (net of tax) Gain/(loss) on available for sale investment (net of tax) Other comprehensive income for the year Total comprehensive income for the year and attributable to the owners of the parent 2014 $’000 2013 $’000 9,015 9,053 176 (93) 83 (3) 721 718 9,098 9,771 Page 41 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Note 2014 $’000 2013 $’000 9 10 11 12 8 13 14 15 16 17 18 21 22 21 20 18,514 51,644 25,676 2,151 1,754 99,739 3,950 2,120 788 9,535 3,255 17,450 49,395 28,460 1,703 5,916 102,924 3,373 1,096 639 5,566 3,261 19,648 119,387 13,935 116,859 2,628 75,505 214 316 206 8,539 87,408 20,242 1,903 22,145 5,300 4,534 9,834 31,979 2,613 75,164 214 140 299 (738) 77,692 20,576 1,903 22,479 10,898 5,790 16,688 39,167 119,387 116,859 Assets Intangible assets Mineral properties Property, plant and equipment Available for sale investments Deferred tax Total non-current assets Inventory Trade and other receivables Derivative financial asset Cash and cash equivalents Restricted cash Total current assets Total assets Equity Issued capital Share premium Merger reserve Translation reserve Fair value reserve Retained profits/(accumulated losses) Total equity Liabilities Interest-bearing loans and borrowings Provision Total non-current liabilities Interest-bearing loans and borrowings Trade and other payables Total current liabilities Total liabilities Total equity and liabilities ON BEHALF OF THE BOARD: N P Williams Director Approved and authorised for issue by the Board on October 25, 2014 Page 42 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EXPRESSED IN CANADIAN DOLLARS) Group Balance at August 1, 2012 Comprehensive income Profit for the year Foreign exchange translation differences Gain on available for sale investments (net of tax) Total other comprehensive income Total comprehensive income for the year Transactions with owners Issue of share capital Share-based payments Transactions with owners Balance at July 31, 2013 Balance at August 1, 2013 Comprehensive income Profit for the year Foreign exchange translation differences Gain on available for sale investments (net of tax) Total other comprehensive income Total comprehensive income for the year Transactions with owners Issue of share capital Share-based payments Transactions with owners Balance at July 31, 2014 Share capital $’000 Share Premium $’000 Merger Reserve $’000 Translation reserve $’000 Fair value reserve $’000 Accumulated Losses $’000 Total $’000 2,599 74,756 214 143 (422) (9,888) 67,402 - - - - - - - - 214 214 - - - - - - - - - (3) - (3) (3) - - - 140 140 - 176 - 176 176 - - - - - 721 721 721 - - - 299 299 - - (93) (93) (93) - - - 9,053 - - - 9,053 - 97 97 (738) 9,053 (3) 721 718 9,771 422 97 519 77,692 (738) 77,692 9,015 - - - 9,015 - 262 262 9,015 176 (93) 83 9,098 356 262 618 214 316 206 8,539 87,408 - - - - - 14 - 14 2,613 - - - - - 408 - 408 75,164 2,613 75,164 - - - - - 15 - 15 2,628 - - - - - 341 - 341 75,505 Page 43 RAMBLER METALS AND MINING PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Cash flows from operating activities Operating profit Depreciation Share based payments Foreign exchange difference Increase in inventory Increase in debtors Decrease/(increase) in derivative financial instruments (Decrease)/increase in creditors Cash generated from operations Interest paid Tax received Net cash generated from operating activities Cash flows from investing activities Interest received Redemption of bearer deposit note Acquisition of listed investment Acquisition of evaluation and exploration assets Acquisition of Mineral properties - net Acquisition of property, plant and equipment Net cash utilised in investing activities Cash flows from financing activities Proceeds from exercise of share options Repayment of Gold Loan (note 21) Repayment of Credit Facility Capital element of finance lease payments Net cash utilised in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of period Page 44 2014 $’000 2013 $’000 17,853 10,143 262 (172) (577) (1,024) 298 (1,206) 25,577 (822) - 24,755 98 6 (629) (746) (6,683) (1,972) (9,926) 7 (2,402) (5,900) (2,582) (10,877) 3,952 5,566 17 9,535 3,442 6,813 97 - (145) (379) (962) 3,431 12,297 (857) 28 11,468 84 2 (148) (160) (6,735) (1,638) (8,595) 22 (1,466) (1,625) (2,085) (5,154) (2,281) 7,826 21 5,566 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 Nature of operation and going concern The principal activity of the Group is the development and exploration of the Ming Copper-Gold Mine (“Ming Mine”) located in Baie Verte, Newfoundland and Labrador, Canada. The Group’s business activities, together with the factors likely to affect its future development, performance and position, its financial position, cash flows, liquidity position and borrowing facilities are set out in the Management Discussion and Analysis on pages 3 to 28. In addition, note 23 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. Since the commencement of commercial production the Group has generated operating cash flows of $39 million and reduced the working capital deficit from $2.7 million at July 31, 2013 to positive working capital of $9.8 million at July 31, 2014. The current economic conditions do, however, create uncertainty particularly over (a) the price of copper, gold and silver; (b) the exchange rate between Canadian and US dollars and thus the consequence for the cash generated from US dollar revenues ; (c) the production targets being met. The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should continue to be cash flow positive. Based on the above management concludes the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. 2 Significant accounting policies Rambler Metals and Mining Plc (the “Company”) is a company registered in England and Wales. The consolidated financial statements of the Company for the year ended July 31, 2014 comprise the Company and its subsidiaries (together referred to as the “Group”). These financial statements are presented in Canadian dollars. Although the parent company has a functional currency of GB pounds the majority of the Group’s operations are carried out by its operating subsidiary which has a functional currency of Canadian dollars. Foreign operations are included in accordance with the policies set out in note 2(d). At July 31, 2014 the closing rate of exchange of Canadian dollars to 1 GB pound was 1.84 (July 31, 2013: 1.57) and the average rate of exchange of Canadian dollars to 1 GB pound for the year was 1.71 (2013: 1.58). Statement of compliance (a) The consolidated financial statements of Rambler Metals and Mining plc have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and their interpretations issued by the International Accounting Standards Board (“IASB”), as adopted by the European Union and with IFRS and their interpretations adopted by the IASB. There are no material differences on application to the Group. The consolidated financial statements have also been prepared in accordance with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Page 45 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) The Group has adopted all of the new and revised Standards and Interpretations that are relevant to its operations and effective for accounting periods beginning 1 January 2013. The adoption of these new and revised Standards and Interpretations had no material effect on the profit or loss or financial position of the Group. In order to comply with International Financial Reporting Standards as issued by the International Accounting Standards Board, the Group has chosen early adoption of IFRS 10, 11, and 12 for EU purposes, however these do not have a material impact on the financial statements. The Group has not adopted any standards or interpretations in advance of the required implementation dates. It is not expected that adoption of standards or interpretations which have been issued by the International Accounting Standards Board but have not been adopted will have a material impact on the financial statements. (b) Basis of preparation The financial statements are presented in Canadian dollars, rounded to the nearest thousand dollars. The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and 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 the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgements made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in note 26. The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements. The accounting policies have been applied consistently by Group entities. (c) Basis of consolidation (i) Subsidiaries An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control is obtained. (ii) Transactions eliminated on consolidation Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Page 46 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (d) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated to the functional currency at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at foreign exchange rates ruling at the dates the fair value was determined. (ii) Translation into presentation currency The assets and liabilities of the UK parent are translated to Canadian dollars at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of the parent company are translated to Canadian dollars at rates approximating to the foreign exchange rates ruling at the dates of the transactions. (iii) Net investment in foreign operations Exchange differences arising from the translation of the net investment in foreign operations are taken to translation reserve. They are released into the income statement upon disposal. (e) Property, plant and equipment (i) Owned assets Items of property, plant and equipment are stated at cost. The cost of self-constructed assets includes the cost of materials, direct labour and the initial estimate of the costs of dismantling and removing the items and restoring the site on which they are located, where an obligation to incur such costs exists. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. (ii) Leased assets Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases. (iii) Subsequent costs The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred. (iv) Depreciation Depreciation is charged to the income statement or capitalised as part of the exploration and evaluation costs or Mineral properties where appropriate, on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows: Page 47 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (e) Property, plant and equipment (continued) Mineral properties (cid:31) buildings (cid:31) plant and equipment (cid:31) motor vehicles (cid:31) computer equipment (cid:31) fixtures, fittings and equipment 5 to 10 years 2 to 10 years 3 years 3 years 3 years The estimated useful lives and residual values of the assets are considered annually and restated as required. (f) Mineral properties Upon transfer of ‘Exploration and evaluation costs’ into ‘Mineral properties’, all subsequent expenditure on the construction, installation or completion of infrastructure facilities is capitalised within ‘Mineral properties’. Development expenditure is net of proceeds from all sale of gold and copper concentrate extracted during the development phase and until commercial production is declared. Mineral properties are amortised on a unit of production basis. Future forecast capital expenditure is included in the unit of production amortisation calculation. (g) Intangible assets (i) Exploration and evaluation costs These comprise costs directly incurred in exploration and evaluation. They are capitalised as intangible assets pending determination of the feasibility of the project. When the existence of economically recoverable reserves and the availability of finance is established, the related intangible assets are transferred to Mineral properties. Where a project is abandoned or is determined not to be economically viable, the related costs are written off. The recoverability of deferred exploration and evaluation costs is dependent upon a number of factors common to the natural resource sector. These include the extent to which the Group can establish economically recoverable reserves on its properties, the ability of the Group to obtain necessary financing to complete the development of such reserves and future profitable production or proceeds from the disposition thereof. (ii) Impairment of exploration and evaluation costs Impairment reviews for exploration and evaluation costs are carried out on a project by project basis, with each project representing a potential single cash generating unit. An impairment review is undertaken when indicators of impairment arise but typically when one of the following circumstances apply: unexpected geological occurrences that render the resource uneconomic; title to the asset is compromised; variations in metal prices that render the project uneconomic; and variations in the exchange rate for the currency of operation. Page 48 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Available for sale investments (h) Available for sale investments are recognised at fair value with changes in value recorded in other comprehensive income. Subsequent to initial recognition available-for-sale financial assets are stated at fair value. Movements in fair values are recognised in other comprehensive income, with the exception of impairment losses which are recognised in profit or loss. Fair values are based on prices quoted in an active market if such a market is available. If an active market is not available, the group establishes the fair value of financial instruments by using a valuation technique, usually discounted cash flow analysis. When an investment is disposed, any cumulative gains and losses previously recognised in equity are recognised in profit or loss. Inventory (i) Stockpiled ore is recorded at the lower of production cost and net realisable value. Production costs include all direct costs plus an allocation of fixed costs associated with the mine site. Operating supplies are valued at the lower of cost and net realisable value. Cost is determined on an average cost basis. Trade and other receivables (j) Trade and other receivables are generally stated at their cost less impairment losses. Receivables in respect of the sale of copper concentrate which contain an embedded derivative linking them to future commodity prices are measured at fair value through profit and loss and are treated as derivative financial assets or liabilities. Receivables with a short duration are not discounted. Financial instruments measured at fair value through profit and loss (k) Financial instruments measured at fair value through profit and loss, which includes all derivative financial instruments and receivables containing embedded derivatives arising from sales of concentrate, are measured at fair value at each balance sheet date with changes in value reflected directly within the income statement. Cash and cash equivalents (l) Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Impairment (m) The carrying amounts of the Group’s assets (except deferred exploration and evaluation costs (see accounting policy (g)(ii)) and deferred tax assets (see accounting policy 2(s)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see accounting policy 2(m)(i)). An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Page 49 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Impairment (continued) (m) Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. (i) Calculation of recoverable amount The recoverable amount of other assets is the greater of their net selling price and value in use. 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. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (ii) Reversals of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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. (n) Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities include finance leases and hire purchase contracts which are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of comprehensive income over the period of the borrowings on an effective interest basis except where the difference between cost and redemption value qualify to be capitalised as part of the cost of a qualifying asset. Trade and other payables (o) Trade and other payables are stated at amortised cost. Revenue recognition (p) Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group’s activities. Revenue is shown net of sales tax. The group recognises revenue when the amount of the revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met as described below. Any revenues generated during commissioning are treated as a contribution towards previously incurred costs and are therefore credited against mining and development assets accordingly. Page 50 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) (p) Revenue recognition (continued) Sale of gold Revenue associated with the sale of gold doré bars is recognised in accordance with contract terms negotiated with the refiner and when significant risks and rewards of ownership of the asset sold are transferred to the refiner, which is when the minimum determinable or agreed amount of gold has been determined and title has passed to the refiner. Sale of concentrate Revenue associated with the sale of copper concentrate is recognised when significant risks and rewards of ownership of the asset sold are transferred to the Group's off-taker, which is when the group receives provisional payment for each lot of concentrate invoiced. Where a provisional invoice is not raised, risks and rewards of ownership transfer when the concentrate passes over the rail of the shipping vessel. Adjustments arising due to differences in assays and weights, from the time of provisional invoicing to the time of final settlement, are adjusted to revenue. (q) Expenses (i) Operating lease payments Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense. (ii) Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. (iii) Borrowing costs Borrowing costs are recognised in the income statement where they do not meet the criteria for capitalisation. Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised. Equity settled share based payments (r) All share based payments are recognised in the financial statements. All goods and services received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of employee services are determined indirectly by reference to the fair value of the share options awarded. Their value is appraised at the grant dates and excludes the impact of non- market vesting conditions. All share-based remuneration is ultimately recognised as an expense in the income statement with a corresponding credit to the accumulated losses in the balance sheet. Page 51 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 2 Significant accounting policies (continued) Equity settled share based payments (continued) (r) If vesting periods apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if the number of share options ultimately exercised is different to that estimated on vesting. Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital. Income tax (s) Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Page 52 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. Operating segments The Group’s operations relate to the exploration for and development of mineral deposits with support provided from the UK and as such the Group has only one operating segment. Information about geographical areas 2014 2013 UK $’000 Canada Consolidated UK Canada Consolidated $’000 $’000 $’000 $’000 $’000 Segment revenue - 62,110 62,110 - 34,669 34,669 Segment non-current assets 1,663 98,076 99,739 1,357 101,567 102,924 Information about major customers Revenues from transactions with a single customer exceeding 10% of total revenues were as follows: Customer A Others 4. Operating profit The operating profit is after charging: Depreciation – owned assets Amortisation Directors’ emoluments (see note 24) Auditor’s remuneration: Audit of these financial statements Fees payable to the auditor for other services: Other assurance services 2014 $’000 61,687 423 62,110 2013 $’000 34,190 479 34,669 2014 $’000 2013 $’000 5,709 4,434 482 91 4 4,609 2,204 413 66 10 The Audit Committee reviews the nature and extent of non-audit services to ensure that independence is maintained. In addition to the depreciation charge shown above, depreciation of $nil (2013: $1,045,000) was capitalised within Mineral properties. Page 53 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. Personnel expenses Salary costs Wages and salaries Other short term benefits Compulsory social security contributions Share based payments Group 2014 $’000 11,848 433 1,836 262 14,379 Group 2013 $,000 11,343 325 1,644 97 13,409 Salary costs of $3,386,000 (2013: $4,638,000) were capitalised as Mineral properties and $21,000 (2013: $10,000) as assets under construction costs during the year. Number of employees The average number of employees during the year was as follows: Directors Administration Production and development Group 2014 Group 2013 7 14 136 157 8 13 139 160 During the year the Group granted share options to key personnel to purchase shares in the entity. The options are exercisable at the market price of the shares at the date of grant. Share-based payments The number and weighted average exercise prices of share options are as follows: Outstanding at the beginning of the year Granted during the year Exercised during the year Cancelled during the year Outstanding at the end of the year Exercisable at end of year Weighted average Weighted average exercise Number exercise Number price 2014 $ of options 2014 ‘000 0.45 0.49 - 0.42 0.47 0.47 4,113 1,526 - (133) 5,506 4,202 price 2013 $ 0.46 0.47 0.24 0.63 0.45 0.45 of options 2013 ‘000 3,937 622 (117) (329) 4,113 3,339 The options outstanding at July 31, 2014 have an exercise price in the range of $0.17 to $1.10 and a weighted average remaining contractual life of 6.5 years (2013: 7 years). The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on the Black-Scholes model. Page 54 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 5. Personnel expenses (continued) Fair value of share options and assumptions issued during the year 2014 2013 Fair value at measurement date Share price (weighted average) Exercise price (weighted average) Expected volatility (expressed as weighted average volatility used in the modelling under Black-Scholes model) Expected option life (years) Expected dividends Risk-free interest rate (based on national government bonds) $0.225 $0.214 $0.492 $0.492 $0.473 $0.473 50.7% 5 0 1.63% 50.8% 5 0 1.55% The expected volatility is based on the historical volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information. There is no performance or market conditions associated with the share option grants. The share-based payment expense relates to the following grants: Share options granted in 2011 Share options granted in 2012 Share options granted in 2013 Share options granted in 2014 Total expense recognised as employee costs 6. Loss on derivative financial instruments Gain/(loss) on concentrate receivables from off-taker 7. Finance costs Finance lease interest Gold loan interest Credit facility interest and charges Off-take provisional payment interest Mortgage interest Unwinding of discount on reclamation provision 2014 $’000 2013 $’000 7 23 44 188 262 17 26 54 - 97 2014 $’000 2013 $’000 447 (323) 2014 $’000 2013 $’000 349 2,639 477 256 2 - 3,723 319 (1,750) 975 88 5 68 (295) Finance costs incurred prior to the declaration of commercial production were generally capitalised in Mineral properties. Page 55 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income tax 8. Recognised in the income statement Current tax expense Current year Deferred tax charge/(credit) Origination and reversal of temporary timing differences In respect of previously unrecognised tax losses Tax losses surrendered for tax credit Total income tax charge/(credit) in income statement Reconciliation of effective tax rate Profit before tax Income tax using the UK corporation tax rate of 22.33% (2013: 23.67%) Effect of tax rates in foreign jurisdictions (rates increased) Non-deductible expenses Foreign exchange differences Effect of reduction in tax rates Effect of tax losses and credits Under provision in previous year Recognised in other comprehensive income Current tax expense Current year Deferred tax (credit)/expense Fair value re-measurement of available for sale investments Exchange difference on retranslation of UK deferred tax asset Over provision in previous period Total income tax (credit)/expense in statement of other comprehensive income 2014 $,000 2013 $,000 - - 4,488 - - 4,488 - - - (6,040) (28) (6,068) 2014 $’000 2013 $’000 13,502 2,985 3,015 1,017 65 - 231 93 67 4,488 706 228 30 (2) - (7,030) - (6,068) 2014 $,000 2013 $,000 - - (26) (238) (61) (325) - - 122 - - 122 Page 56 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 8. Income tax credit (continued) Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: Property, plant and equipment Mineral property Intangible assets Available for sale investment Gold loan Tax value of loss carry-forwards and credits recognised Net tax assets / (liabilities) Assets Liabilities Net Balance Balance Balance Balance Balance Balance July 31, 2014 July 31, 2013 July 31, 2014 July 31, 2013 July 31, 2014 July 31, 2013 $’000 $’000 $’000 $’000 $’000 $’000 - - - - - 10,503 10,503 (1,832) (2,166) (1,658) (35) (151) - (5,842) (1,413) (1,228) (1,352) (61) (533) - (4,587) (1,832) (2,166) (1,658) (35) (151) 7,596 1,754 (1,413) (1,228) (1,352) (61) (533) 10,503 5,916 - 7,596 7,596 Movement in recognised deferred tax assets and liabilities Property, plant and equipment Mineral properties Intangible assets Available for sale investment Gold loan Tax value of loss carry-forwards and credits Recognised in Recognised in Balance income other Balance Aug 1, 2012 comprehensive July 31, 2013 $’000 $’000 income $’000 21 3,104 1,327 (61) - (4,391) - 1,392 (1,876) 25 - 533 (6,114) (6,040) - - - 122 - 2 124 $’000 1,413 1,228 1,352 61 533 (10,503) (5,916) Page 57 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Movement in recognised deferred tax assets and liabilities (continued) Property, plant and equipment Mineral properties Intangible assets Available for sale investment Gold loan Other timing differences Tax value of loss carry-forwards and credits Recognised in Balance Recognised in other Balance Aug 1, 2013 income comprehensive Jul 31, 2014 $’000 $’000 income $’000 $’000 1,413 1,228 1,352 61 533 - (10,503) (5,916) 419 938 306 - (382) (29) 3,235 4,487 - - - (26) - - (299) (325) 1,832 2,166 1,658 35 151 (29) (7,567) (1,754) The Group has incurred losses which will be available for offset against future taxable profits and one of the subsidiaries has tax credits available to offset against future tax liabilities. The Group considers that it has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset of $1.8 million (2013: $5.9 million). 9. Intangible assets Cost Balance at 1 August 2012 Additions Balance at 31 July 2013 Balance at 1 August 2013 Additions Balance at July 31, 2014 Carrying amounts At 1 August 2012 At 31 July 2013 At 1 August 2013 At July 31, 2014 Exploration and evaluation costs Ming Mine Little Deer Project Total $’000 $’000 $’000 17,260 190 17,450 17,450 514 17,964 17,260 17,450 17,450 17,964 - - - - 550 550 - - - 550 17,260 190 17,450 17,450 1,064 18,514 17,260 17,450 17,450 18,514 Consideration of impairment for exploration and evaluation costs The directors have assessed whether there are any indicators of impairment in respect of exploration and evaluation costs. In making this assessment they have considered the Group’s preliminary economic assessment which includes resource estimates, future processing capacity, the forward market and longer term price outlook for copper and gold. The directors do not consider that there are any indicators that exploration and evaluation costs are impaired at the year end. Page 58 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 10. Mineral properties Cost Balance at August 1, 2012 Additions Transfer to inventory on commercial production Balance at July 31, 2013 Balance at August 1, 2013 Additions Balance at July 31, 2014 Amortisation Balance at August 1, 2012 Amortisation charge Balance at July 31, 2013 Balance at August 1, 2013 Amortisation charge Balance at July 31, 2014 Carrying amounts At August 1, 2012 At July 31, 2013 At August 1, 2013 At July 31, 2014 Mineral property $’000 48,064 5,664 (2,129) 51,599 51,599 6,683 58,282 - 2,204 2,204 2,204 4,434 6,638 48,064 49,395 49,395 51,644 The Group generated revenue from saleable material produced during commissioning of $nil million (2013: $9.5 million) and offset this revenue against the mineral property asset prior to commercial production being declared. The Group capitalised borrowing costs of $nil million (2013: $1.1 million). Page 59 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 11. Property, plant and equipment Land and Assets under Motor vehicles Plant and fittings and Computer buildings construction equipment equipment equipment $’000 $’000 $’000 $’000 $’000 $’000 Total $’000 Fixtures, Cost Balance at August 1, 2012 Additions Reclassification Balance at July 31, 2013 Balance at August 1, 2013 Additions Balance at July 31, 2014 Depreciation and impairment losses Balance at August 1, 2012 Depreciation charge for the year Balance at July 31, 2013 Balance at August 1, 2013 Depreciation charge for the year Balance at July 31, 2014 Carrying amounts At August 1, 2012 At July 31, 2013 At August 1, 2013 At July 31, 2014 Leased plant and machinery 3,674 30 613 4,317 4,317 126 4,443 1,259 399 1,658 1,658 407 2,065 2,415 2,659 2,659 2,378 21,499 131 (21,604) 26 26 20 46 - - - - - - 21,499 26 26 46 212 47 - 259 259 - 259 129 54 183 183 46 229 83 76 76 30 17,354 2,349 20,991 40,694 40,694 2,610 43,304 10,018 5,087 15,105 15,105 5,155 20,260 7,336 25,589 25,589 23,044 93 17 - 110 110 - 110 72 16 88 88 14 102 21 22 22 8 753 46 - 799 799 169 968 613 98 711 711 87 798 140 88 88 170 43,585 2,620 - 46,205 46,205 2,925 49,130 12,091 5,654 17,745 17,745 5,709 23,454 31,494 28,460 28,460 25,676 The Group leases surface and underground equipment under a number of finance lease agreements. At the end of each lease the Group has the option to purchase the equipment at a beneficial price. At July 31, 2014, the net carrying amount of leased plant and machinery was $2,426,000 (2013: $4,090,000). The leased plant and machinery secures lease obligations (see note 21). During the year plant and equipment additions of $953,000 (2013: $1,432,000) were acquired through finance lease arrangements. Page 60 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 12. Available for sale investments Cost or valuation Balance at August 1, 2012 Acquisitions Revaluation Balance at July 31, 2013 Balance at August 1, 2013 Acquisitions Revaluation Balance at July 31, 2014 Carrying amounts At July 31, 2013 At July 31, 2014 Available for sale investments $’000 712 148 843 1,703 1,703 629 (181) 2,151 1,703 2,151 Rambler holds an 17.7% equity stake in Maritime Resources Corp and a representative on the Board of Directors. The market price at July 31, 2014 was $0.17 (2013: $0.30 per share). Rambler also acquired a 3.7% equity stake in Marathon Gold Corporation for $500,000 during the year. The market price at July 31, 2014 was $0.55 The carrying amount of the available for sale investments is the level 1 fair value determined using the closing market price of the shares on the TSX exchange. The cost of the available for sale investments is $1,911,000 (2013: $1,282,000). 13. Inventory Metals in process Operating supplies 14. Trade and other receivables Trade receivables Other receivables Sales taxes recoverable Prepayments and accrued income 2014 2013 $’000 $’000 2,351 1,599 3,950 1,977 1,396 3,373 2014 2013 $’000 $’000 1,295 113 311 401 2,120 - 372 288 436 1,096 Page 61 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 15. Derivative financial asset Concentrate receivables from off-taker 2014 2013 $’000 $’000 788 639 The carrying amount of the derivative financial asset is the level 2 fair value determined using forward prices of copper, gold and silver. The cost of the concentrate receivables is $713,000 (2013: $865,000). 16. Cash and cash equivalents Bank balances Cash and cash equivalents in the statement of cash flows 17. Restricted cash Bearer deposit notes 2014 2013 $’000 $’000 9,535 9,535 5,566 5,566 2014 2013 $’000 $’000 3,255 3,261 The Group is required to hold Letters of Credit in favour of the Government of Newfoundland and Labrador in respect of the reclamation and closure liability associated with the Ming Mine The bearer deposit notes mature on differing dates throughout fiscal 2014 and have a nominal value of $3,300,000 (2013 - $3,300,000) giving an effective yield of 1.2% (2013 – 1.2%). 18. Capital and reserves Share capital and share premium – group and company In issue at 1 August 2012 Issued in consideration for finance fees Issued on exercise of options In issue at 31 July 2013 In issue at 1 August 2013 Issued in consideration for acquisition of Little Deer project Issued on exercise of options In issue at July 31, 2014 Number ‘000 142,360 804 72 143,236 143,236 887 45 144,168 At July 31, 2014, the authorised share capital comprised 1,000,000,000 ordinary shares of 1p each. 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. Details of shares issued during the year ended July 31, 2014 are as follows: On August 31, 2013 the company received monies to subscribe for 45,000 shares for $0.16 each raising a total of $7,345 following the exercise of options. Page 62 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 18. Capital and reserves (continued) On December 2, 2013 the company issued 887,614 shares for $0.39 each raising a total of $350,000 as part consideration for the acquisition of the Little Deer Project. Merger reserve The merger reserve arose from the acquisition of Rambler Mines Limited by Rambler Metals and Mining PLC. This acquisition was accounted for in accordance with the merger accounting principles set out in UK Financial Reporting Standard 6 and the Companies Act 1985, which continue under the Companies Act 2006, whereby the consolidated financial statements were presented as if the business previously carried out through Rambler Mines Limited had always been owned and controlled by the Company. The transition provisions of IFRS 1 allow all business combinations prior to transition to IFRS to continue to be accounted for under the requirements of UK GAAP at that time. Accordingly this acquisition has not been re-stated in accordance with that standard. Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the parent company which has a different functional currency from the presentation currency. Exchange differences arising are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in the income statement in the period of disposal of the operation. Fair value reserve The fair value reserve comprises cumulative adjustments made to the fair value of available for sale investments. Capital management The Group’s objectives when managing capital are to safeguard the entity’s ability to continue as a going concern so that it can continue to increase the value of the entity for the benefit of the shareholders. Given the nature of the Group’s current activities the entity will remain dependent on a mixture of debt and equity funding until such a time as the Group becomes self-financing from the commercial production of mineral resources. The Group’s capital was as follows: Cash and cash equivalents Finance leases Bank loan Gold loan Credit facility Net debt Equity Total capital Details of employee share options outstanding are set out in note 5. 2014 $’000 9,535 (5,434) - (20,108) - (16,007) (87,408) (103,415) 2013 $’000 5,566 (7,040) (22) (18,791) (5,621) (25,908) (77,692) (103,600) Page 63 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 19. Earnings per share Basic earnings per share The calculation of basic earnings per share at July 31, 2014 was based on the profit attributable to ordinary shareholders of $9,015,000 and a weighted average number of ordinary shares outstanding during the period ended July 31, 2014 of 143,863,000 calculated as follows: Profit/(loss) attributable to ordinary shareholders Profit for the period Profit attributable to ordinary shareholders Weighted average number of ordinary shares At August 1, 2012 Effect of shares issued during the year At July 31, 2013 In issue at August 1, 2013 Effect of shares issued during year Weighted average number of ordinary shares at July 31, 2014 2014 $’000 2013 $’000 9,015 9,015 9,053 9,053 Number ‘000 142,360 330 142,690 143,236 627 143,863 There is no material difference between the basic and diluted loss per share. At July 31, 2014 there were 5,506,000 (2013: 4,113,000) share options in issue of which 978,265 (2013: 1,079,397) were considered to be dilutive and may have a dilutive effect on the basic earnings or loss per share in the future. 20. Trade and other payables Trade payables Non trade payables Accrued expenses 2014 2013 $’000 2,811 304 1,419 4,534 $’000 4,177 287 1,326 5,790 21. Interest-bearing loans and borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate and foreign currency risk, see note 23. Page 64 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Interest-bearing loans and borrowings (continued) Non-current liabilities Bank loan Finance lease liabilities Gold Loan Current liabilities Current portion of bank loan Current portion of finance lease liabilities Current portion of Gold Loan Credit Facility Finance lease liabilities Finance lease liabilities are payable as follows: Less than one year Between one and five years 2014 $’000 2013 $’000 - 2,750 17,492 20,242 19 4,613 15,944 20,576 - 2,684 2,616 - 5,300 3 2,427 2,847 5,621 10,898 Minimum lease Payments 2014 Interest Principal 2014 2014 Minimum lease Payments 2013 Interest Principal 2013 2013 $’000 $’000 $’000 $’000 $’000 $’000 2,894 2,863 5,757 210 113 323 2,684 2,750 5,434 2,759 4,867 7,626 332 254 586 2,427 4,613 7,040 Under the terms of the lease agreements, no contingent rents are payable. The finance lease liabilities are secured on the underlying assets. Total interest of $nil (2013: $101,000) was charged to Mineral properties during the year. Gold Loan In March 2010, the Group entered into an agreement (“Gold Loan”) with Sandstorm to sell a portion of the life-of- mine gold production from its Ming Mine. Under the terms of the agreement Sandstorm made staged upfront cash payments for the gold to the Group totalling US$20 million. For this, in each production year following the first year of production, until 175,000oz of payable gold has been produced, the Group has agreed to sell a percentage equal to 25% x (85% divided by the actual percentage of metallurgical recovery of gold realized in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 25% of the payable gold. In each production year following the first year of production, after 175,000oz of payable gold has been produced, the Group has agreed to sell a percentage equal to 12% x (85% divided by the actual percentage of metallurgical recovery of gold realized in the immediately preceding production year) provided that, if the payable gold production in any production year after the third production year is less than 15,000 ounces, then in each such production year, Sandstorm payable gold shall not be less than 12% of the payable gold for the remainder of the period ending 40 years after the date of the agreement. After the expiry of the 40 year term, the agreement is Page 65 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 21. Interest-bearing loans and borrowings (continued) renewable in 10 year terms at the option of Sandstorm. The Gold Loan is accounted for as a financial liability carried at amortised cost. In determining the effective interest rate implicit in the cash flows arising from the loan the cash flows are forecast based on management’s best estimates of the time of delivery of payable gold, the total amount of gold expected to be produced over the mine life and the timing of that production. Total interest of $546,000 (2013: $1,169,000) was accrued during the period of which $nil (2013: $581,000) was charged to Mineral properties. The Gold Loan is secured by a fixed and floating charge over the assets of the Group. Credit Facility On September 29, 2011 the Group agreed a Credit Facility of up to $10 million with Sprott Resource Lending Partnership (‘Sprott’) for use as additional funding for the development of the Ming Mine. On March 26, 2013 this agreement was amended such that the principal is repayable by March 31, 2014 and secured by a fixed and floating charge over the assets of the Group. During the first nine months of fiscal 2014 the Group made total repayments of $5.9 million repaying the facility in full. Total financing and interest charges of $nil (2013: $392,000) were charged to Mineral properties during the year. 22. Provision Reclamation and closure provision Opening balance Unwinding of discount Ending balance 2014 $’000 2013 $’000 1,903 - 1,903 1,812 91 1,903 The reclamation and closure provision has been made in respect of costs of land restoration and rehabilitation expected to be incurred at the end of the Ming Mine’s useful life. The provision has been calculated based on the present value of the expected future cash flows associated with reclamation and closure activities as required by the Government of Newfoundland and Labrador. The provision relates to restoration of all three sites associated with the Ming Mine project: mill, mine and port sites. The Ming Mine’s useful life was extended by one year resulting in no unwinding of the discount in 2014. The liability is secured by Letters of Credit for $3,255,155. 23. Financial instruments The Group’s principal financial assets comprise: cash and cash equivalents, restricted cash, available for sale investments, derivative financial instruments and other receivables. In addition the Company’s financial assets include amounts due from subsidiaries. The Group and Company’s financial liabilities comprise: trade payables; other payables; and accrued expenses. The Group’s financial liabilities also include interest bearing loans and borrowings. All of the Group’s and Company’s financial liabilities are measured at amortised cost and their financial assets are classified as loans and receivables and measured at amortised cost with the exception of available for sale investments and derivative financial instruments as described in notes 12 and 15 respectively. Page 66 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 23. Financial instruments (continued) The Group held the following categories of financial instruments at July 31, 2014: Financial assets Assets at fair value through profit and loss: Derivative financial instruments – level 2 fair value Available for sale investments: Investment in quoted equity securities – level 1 fair value Loans and receivables: Trade receivables Other receivables Sales taxes recoverable Cash at bank Restricted cash Total financial assets Liabilities at amortised cost or equivalent: Trade payables Non trade payables Accrued expenses Loans and borrowings Total financial liabilities 2014 $’000 2013 $’000 788 639 2,151 1,703 1,295 113 311 9,535 3,255 - 372 288 5,566 3,261 14,509 17,448 9,487 11,829 2014 2013 $’000 (2,811) (304) (1,419) (25,542) $’000 (4,177) (287) (1,326) (31,474) (30,076) (37,264) The board of directors determines, as required, the degree to which it is appropriate to use financial instruments and hedging techniques to mitigate risks. The main risks for which such instruments may be appropriate are foreign exchange risk, liquidity risk, credit risk, interest rate risk and commodity price risk each of which is discussed below. Foreign exchange risk The Group's cash resources are held in Canadian dollars, GB pounds and US Dollars and certain receivables and the Gold Loan are denominated in US dollars. The Group has a downside exposure to any strengthening of the GB pound as this would increase expenses in Canadian dollar terms. This risk is mitigated by reviewing the holding of cash balances in GB pounds. Any weakening of the GB pound would however result in the reduction of the expenses in Canadian dollar terms and preserve the Group's cash resources. In addition, any such movements would affect the Consolidated Balance Sheet when the net assets of the Parent Company are translated into Canadian dollars. The Group has a downside exposure to any strengthening of the US dollar as this would increase the amount repayable on the Gold Loan in Canadian dollar terms. This risk, however, is relevant only should the Gold Loan be repaid in cash under terms set out in note 21. Repayment is envisaged in payable gold which is denominated in US dollars. Exposure to this foreign currency risk has been mitigated since the commencement of production. Any weakening of the US dollar would however result in a reduction in revenue and receivables in Canadian dollar terms. The Group has not hedged its exposure to currency fluctuations. Page 67 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 23. Financial instruments (continued) The policy in relation to the translation of foreign currency assets and liabilities is set out in note 2(d), 'Accounting Policies Foreign Currencies' to the consolidated financial statements. The Group does not hedge its exposure of foreign investments held in foreign currencies. There is no significant impact on profit or loss from foreign currency movements associated with the Parent company’s assets and liabilities as the foreign currency gains or losses are recorded in the translation reserve. Exchange rate fluctuations may adversely affect the Group’s financial position and results. The following table details the Group’s sensitivity to a 10% strengthening and weakening in the GB pound against the Canadian/US Dollar. 10% represents management’s assessment of the reasonable possible exposure. 10% strengthening of GB pound 10% weakening of GB pound 10% strengthening of US dollar 10% weakening of US dollar Equity 2014 $’000 2013 $’000 (19) 17 (2,010) 1,828 (12) 11 (1,879) 1,708 Liquidity risk With finite cash resources the liquidity risk is significant. This risk is managed by controls over expenditure and concentrating on achieving the payment milestones under the financing arrangement. Success will depend largely upon the outcome of on-going and future exploration and development programmes. Given the nature of the Group’s current activities the entity will remain dependent on a mixture of debt and equity funding in the short to medium term until such time as the Group becomes self-financing from the commercial production of mineral resources. The liabilities of the parent company are due within one year. The parent company has adequate financial resources to meet the obligations existing at July 31, 2014. The Group’s and Company’s trade payables, other payables and accrued expenses are generally due between one and three months and the Group’s other financial liabilities are due as follows: Due within one year Due within one to two years Due within two to three years Due within three to four years Due within four to five years Due after five years 2014 $’000 2013 $’000 5,683 5,898 4,471 3,643 3,219 17,807 40,721 11,621 5,865 4,732 3,764 3,404 16,576 45,962 Page 68 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 23. Financial instruments (continued) Fixed rate financial liabilities At the year end the analysis of finance leases and hire purchase contracts which were all due in Canadian Dollars and are at fixed interest rates was as follows: Fixed rate liabilities Due within one year Due within one to two years Due within two to three years Due within three to four years Due within four to five years 2014 $’000 2013 $’000 2,894 2,170 562 131 - 5,757 8,663 2,640 1,916 306 23 13,548 The average fixed interest rate for the finance leases and hire purchase contracts outstanding at July 31, 2014 was 5.81%. Credit risk The Group generally holds the majority of its cash resources in Canadian dollars given that the majority of the Group’s outgoings are denominated in this currency. Given the current climate, the Group has taken a very risk averse approach to management of cash resources and management and Directors monitor events and associated risks on a continuous basis. There is little perceived credit risk in respect of trade and other receivables (see note 14). The Group maximum exposure to credit risk at July 31, 2014 was represented by receivables and cash resources. Interest rate risk The Group's policy is to retain its surplus funds on the most advantageous term of deposit available up to twelve month's maximum duration. Details of the Group’s borrowings are described in note 21. If the interest rate on deposits were to fluctuate by 1% there would be no material effect on the Group’s and Company’s reported results. Commodity price risk Commodity price risk is the risk that the Group’s future earnings will be adversely impacted by changes in the market prices of commodities. The Group is exposed to commodity price risk as its future revenues will be derived based on contracts with customers at prices that will be determined by reference to market prices of copper and gold at the delivery date. As explained in note 26 the Group calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold. In estimating the cash flows the following table details the Group’s sensitivity to a 10% increase and a 25% decrease in the price of gold. These percentages represent management’s assessment of the reasonable possible exposure. 10% increase in the price of gold 25% decrease in the price of gold Page 69 Gross assets 2013 2014 $’000 $’000 (2,011) 5,027 (1,843) 4,609 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 23. Financial instruments (continued) Receivables in respect of the sale of copper concentrate which contain an embedded derivative linking them to future commodity prices are measured at fair value through profit and loss and are treated as derivative financial assets or liabilities. In estimating the value of the derivative the following table details the Group’s sensitivity to a 5% increase and a 5% decrease in the price of copper, gold and silver. These percentages represent management’s assessment of the reasonable possible exposure. 5% increase in the price of copper, gold and silver 5% decrease in the price of copper, gold and silver Gross assets 2013 2014 $’000 $’000 1,006 (1,006) 441 (441) Financial assets The floating rate financial assets comprise interest earning bank deposits at rates set by reference to the prevailing LIBOR or equivalent to the relevant country. Fixed rate financial assets are cash held on fixed term deposit. At the year end the cash and short term deposits were as follows: At July 31, 2014 Sterling US $ Canadian $ At July 31, 2013 Sterling US $ Canadian $ Floating rate Assets Total $’000 $’000 145 1,992 7,398 9,535 145 1,992 7,398 9,535 $’000 $’000 61 3,293 2,212 5,566 61 3,293 2,212 5,566 Fair values In the directors’ opinion there is no material difference between the book value and fair value of any of the group’s financial instruments. Page 70 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Related parties Identity of related parties The Group has a related party relationship with its subsidiaries and with its directors and executive officers. Transactions with key management personnel The directors’ compensations were as follows: Salary – executive G Ogilvie N Williams Fees – non-executive G Ogilvie D H W Dobson S Neamonitis J M Roberts L D Goodman B D Hinchcliffe T S Chan J Thomson E C Chen 2014 $’000 2013 $’000 192 138 87 - 6 - 13 7 13 13 13 482 330 - - 13 7 13 13 13 13 11 413 D H W Dobson waived his entitlement to director’s fees for the current and preceding periods. At July 31, 2014 fees of $29,448 (2013: $18,874) remained outstanding. Page 71 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 24. Related parties (continued) Share options held by directors were as follows: G Ogilvie1 N Williams2 J Thomson3 D H W Dobson4 S Neamonitis L D Goodman4 B D Hinchcliffe At 31.07.14 At 31.07.13 No. No. ‘000 1,100 1,175 400 45 N/A 45 N/A 2,765 ‘000 1,100 N/A 400 45 100 45 45 1,735 1 200,000 options at an exercise price of $0.71 expiring on 7 December 2016, 150,000 options at an exercise price of $1.10 expiring on 12 November 2017 and 750,000 options at an exercise price of $0.19 expiring on 10 November 2018. 2 100,000 options at an exercise price of $0.96 expiring on 7 July 2018, 75,000 options at an exercise price of $0.18 expiring on 10 November 2018, 250,000 options at an exercise price of $0.50 expiring on 7 May 2020 and 750,000 options at an exercise price of $0.50 expiring on 19 February 2024. 3 100,000 options at an exercise price of $0.71 expiring on 7 December 2016 and 300,000 options at an exercise price of $0.17 expiring on 10 November 2018. 4 options at an exercise price of $0.17 expiring on 10 November 2018. Total key management personnel compensations were as follows: Short term employee benefits Social security costs Share based payments 25. Subsequent events 2014 2013 $’000 $’000 863 62 191 1,116 784 39 - 823 The Company subscribed to purchase 760,340 common shares in Marathon Gold Corporation for $375,000 bringing its total holding to 2,734,258 representing 3.98% of the issued and outstanding shares. As a continuation of previously successful dense media (‘DMS’) or pre-concentration test work the Group is planning to implement an on-site demonstration DMS plant to scale-up the process and prove the technology for its application. Once the technology demonstration is complete and operating parameters are optimized, this project will serve as the basis of a pre-feasibility study with the goal of moving the LFZ resources into the mine reserve. The Research & Development Corporation of Newfoundland and Labrador (‘RDC’) initial contribution of $250,000 in 2013 helped provide the groundwork for the on-site demonstration plant program. On September 9, 2014 the Group announced that RDC has again provided support with an additional $750,000 investment. 26. Critical accounting estimates and judgements The details of the Group’s accounting policies are presented in accordance with International Financial Reporting Standards as set out in Note 2 to the financial statements. The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Page 72 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Critical accounting estimates and judgements (continued) The following estimates are considered by management to be the most critical for investors to understand some of the processes and reasoning that go into the preparation of the Company’s financial statements, providing some insight also to uncertainties that could impact the Company’s financial results. Going Concern The risks associated with going concern are explained in note 1. Mineral Property and Exploration and Evaluation Costs The directors have assessed whether there are any indicators of impairment in respect of mineral property and exploration and evaluation costs. In making this assessment they have considered the Group’s business plan which includes resource estimates, future processing capacity, the forward market and longer term price outlook for copper and gold. Resource estimates have been based on the most recently filed NI43-101 report. Management’s estimates of these factors are subject to risk and uncertainties affecting the recoverability of the Group’s mineral property and exploration and evaluation costs. Any changes to these estimates may result in the recognition of an impairment charge with a corresponding reduction in the carrying value of such assets. After consideration of the above factors, the directors do not consider that there are any indicators that mineral property and exploration and evaluation costs are impaired at the year end. Amortisation of Mineral Property Amortisation of the Mineral Property is calculated on a unit of production method expected to amortise the cost including future forecast capital expenditure over the expected life of the mine based on the tonnes of ore expected to be extracted. Any changes to these estimates may result in an increase in the amortisation charge with a corresponding reduction in the carrying value of the Mineral Property. Closure costs The Group has an obligation to restore its properties after the minerals have been mined from the site, and has estimated the costs necessary to comply with existing reclamation standards. These estimates are recorded as a liability at their fair values in the periods in which they occur. If the estimate of reclamation costs proves to be inaccurate, the Group could be required to increase the provision for site closure and reclamation costs, which would increase the amount of future reclamation expense, resulting in a reduction in the Group’s earnings and net assets. Share-based payments The Group calculates the cost of share based payments using the Black-Scholes model. Inputs into the model in respect of the expected option life and the volatility are subject to management estimate and any changes to these estimates may have a significant effect on the cost. The assumptions used in calculating the cost of share based payments are explained in note 5. Gold Loan The Group calculates the effective interest rate on the Gold Loan based on estimates of future cash flows arising from the sale of payable gold (see note 21).The cash flows will be dependent on the production of gold and its selling price at the time of delivery which have been estimated in line with the mine plan, future prices of gold and reserve estimates. Management’s estimates of these factors are subject to risk and uncertainties affecting the amount of the interest charge. Any changes to these estimates may result in a significantly different interest charge which would affect the carrying value of the exploration and evaluation costs and the corresponding Gold Loan liability. Page 73 RAMBLER METALS AND MINING PLC NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 26. Critical accounting estimates and judgements (continued) Revenue Revenues are subject to variation after the date of sale due to assay, price and foreign exchange fluctuations. Management monitors these changes closely and at the end of the period the directors will consider whether the effect of these variations are material on the whole and determine whether an adjustment is therefore appropriate. Available for sale investment Management consider that they do not have significant influence over the financial and policy decisions of Maritime and therefore have included the investment as an available for sale investment. Deferred tax assets The Group has incurred losses which will be available for offset against future taxable profits and one of the subsidiaries has tax credits available to offset against future tax liabilities. Following the declaration of commercial production during the previous year it has been concluded that the Group has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset. If future taxable profits prove to be insufficient the Group could be required to reduce the deferred tax asset which would result in a reduction in the Group’s earnings and net assets. Page 74 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF COMPREHENSIVE INCOME For the Year Ended July 31, 2014 (Loss)/profit for the year Other comprehensive income Items that may be reclassified into profit or loss Exchange differences on translation into presentation currency Other comprehensive income/(loss) for the year Total comprehensive (loss)/income for the year 2014 $’000 2013 $’000 (11,291) 211 11,014 11,014 (154) (154) (277) 57 Page 75 REGISTERED NUMBER: 05101822 (ENGLAND AND WALES) RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF FINANCIAL POSITION As at July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Assets Investments Deferred tax Total non-current assets Trade and other receivables Cash and cash equivalents Total current assets Total assets Equity Issued capital Share premium Translation reserve Retained profit Total equity Liabilities Trade and other payables Total current liabilities Total liabilities Total equity and liabilities ON BEHALF OF THE BOARD: Note C3 C4 C5 C6 18 C7 2014 $’000 2013 $’000 68,245 1,663 69,908 94 145 239 70,147 2,628 75,505 793 (9,011) 69,915 232 232 232 70,147 68,323 1,375 69,698 53 66 119 69,817 2,613 75,164 (10,221) 2,104 69,660 157 157 157 69,817 N P Williams Director Approved and authorised for issue by the Board on October 25, 2014 Page 76 RAMBLER METALS AND MINING PLC COMPANY STATEMENT OF CHANGES IN EQUITY (EXPRESSED IN CANADIAN DOLLARS) Balance at August 1, 2012 Comprehensive income Profit for the year Foreign exchange translation differences Total other comprehensive income Total comprehensive income for the year Issue of share capital Balance at July 31, 20123 Balance at August 1, 2013 Comprehensive income Loss for the year Foreign exchange translation differences Total other comprehensive income Total comprehensive loss for the year Issue of share capital Share based payments Transactions with owners Balance at July 31, 2014 Share capital $’000 Share premium $’000 Translation reserve $’000 Accumulated losses $’000 Total $’000 2,599 74,756 (10,067) 1,893 69,181 - - - - - - - - - (154) (154) (154) 14 2,613 408 75,164 - (10,221) 211 - - 211 - 2,104 211 (154) (154) 57 422 69,660 2,613 75,164 (10,221) 2,104 69,660 - - - - 15 - 15 2,628 - - - - 341 - 341 75,505 - (11,291) (11,291) 11,014 11,014 11,014 - - - 793 - - (11,291) - 176 176 (9,011) 11,014 11,014 (277) 356 176 532 69,915 Page 77 RAMBLER METALS AND MINING PLC STATEMENT OF CASH FLOWS For the Year Ended July 31, 2014 (EXPRESSED IN CANADIAN DOLLARS) Cash flows from operating activities Operating loss Share based payments Foreign exchange losses Increase in debtors Increase in creditors Net cash utilised in operating activities Cash flows from investing activities Interest received Loans repaid by/(advanced to) subsidiaries Net cash generated from/( utilised in) investing activities Cash flows from financing activities Proceeds from the issue of share capital Proceeds from exercise of share options Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at end of period 2014 $’000 (11,341) 176 9,526 (41) 75 (1,605) - 1,661 1,661 7 7 7 63 66 16 145 2013 $’000 (1,166) - (135) (3) 4 (1,300) - 907 907 - 22 22 (371) 437 - 66 Page 78 RAMBLER METALS AND MINING PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS C1. Accounting policies The accounting policies of the company are consistent with those adopted by the Group with the addition of the following: Investments Investments are stated at their cost less impairment losses. C2. (Loss)/profit of parent company As permitted by section 408 of the Companies Act 2006, the income statement of the parent company is not presented as part of these financial statements. The parent company’s loss for the financial year was $11,291,000 (2013: profit $211,000). C3. Investments Cost Balance at August 1, 2012 Repayments (net) Effect of movements in foreign exchange Balance at July 31, 2013 Balance at August 1, 2013 Repayments (net) Effect of movements in foreign exchange Balance at July 31, 2014 Investment in subsidiary $’000 Loans $’000 Total $’000 378 - - 378 378 - 64 442 68,470 (508) (17) 67,945 67,945 (1,311) 1,169 67,803 68,848 (508) (17) 68,323 68,323 (1,311) 1,233 68,245 The company has interests in the following material subsidiary undertakings, which are included in the consolidated financial statements. Name Class Holding Activity Country of Incorporation Rambler Mines Limited Rambler Metals and Mining Canada Limited Ordinary 100% Holding company England Common 100% (indirectly) Exploration, Canada development and mining The aggregate value of shares in subsidiary undertakings is stated at cost. The loans to the subsidiary undertakings are interest free. Page 79 RAMBLER METALS AND MINING PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS C4. Deferred tax The Company has incurred losses which will be available for offset against future taxable profits. Given the continuing profitability of one of the Company’s subsidiaries it has been concluded that the Company has sufficient evidence of future taxable profits to justify the recognition of a deferred tax asset of $1.7 million. C5. Trade and other receivables Other receivables Sales taxes recoverable Prepayments and accrued income C6. Cash and cash equivalents Bank balances Cash and cash equivalents in the statement of cash flows C7. Trade and other payables Trade payables Non trade payables Accrued expenses C8. Related party transactions 2014 2013 $’000 $’000 - 22 72 94 1 13 39 53 2014 2013 $’000 $’000 145 145 66 66 2014 $’000 47 1 184 232 2013 $’000 17 9 131 157 The Company has a related party relationship with its subsidiaries (see note C3) and with its directors and executive officers (see note 24). Transactions with subsidiary undertakings Details of loans advanced to subsidiary undertakings are included in note C3. Other related parties Transactions with other related parties are detailed in note 24. Page 80
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