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Ariana Resources plc RNS Release

Final Results


RNS Number : 9963G
Ariana Resources PLC
02 June 2017
 

 

 

 

 

 

2 June 2017

AIM: AAU

 

FINAL AUDITED RESULTS FOR THE YEAR 31 DECEMBER 2016

 

NOTICE OF ANNUAL GENERAL MEETING ("AGM")

 

Ariana Resources plc ("Ariana" or "the Company"), the exploration and development company operating in Turkey, announces its final audited results for the year ended 31 December 2016.   

 

The Report and Accounts will be posted to shareholders as applicable, and are available on the Company's website www.arianaresources.com, together with the Notice of AGM, and extracts are set out below.

 

The AGM will be held at the East India Club, 16 St James's Square, London SW1Y 4LH on 30 June 2017 at 11.00 am.

Chairman's Statement

 

This has been a landmark year for your Company with the successful completion of construction at the Kiziltepe Mine and our first gold pour in March 2017. This achievement is the result of the unwavering commitment of the Ariana team and our partners Proccea Construction Co. ("Proccea"), together with the support given by the local community and the Turkish Government. I would also like to acknowledge the steadfast commitment of our long-term shareholders, who have supported us as we strived to deliver our vision.

 

Whilst our primary focus has been to ensure that the Kiziltepe Mine was delivered as planned, we have also made significant progress to enhance the long-term economics of the Red Rabbit Gold Project by expanding the resource base at Kiziltepe through recent drilling programmes and its wider hinterland, including an important and timely reappraisal of the Tavşan Sector.

 

We have made significant advances in achieving these goals this year. Leveraging our well-established track record for cost-effective exploration, our discovery cost now having been further reduced to US$15 per ounce, we are confident that we have significantly extended the resource base at the Kiziltepe Sector of the Red Rabbit Gold Project through two successive resource updates in one year.

 

At Kiziltepe, approximately 7,200m of drilling during 2016 confirmed our expectations in the continuity of mineralisation beneath the cap rocks at Arzu Central and tested several other targets successfully. These exciting results indicate an extensive buried vein system connecting Arzu South with Arzu North for over 650m of strike. In addition, drilling on Arzu South has confirmed the continuity of mineralisation along the southern extensions of this vein. At Arzu Far South we have discovered a vein array which is anomalous in gold and particularly silver.

 


We have also added a further 125m to the eastern end of the mineralised vein strike at Banu, which will have the effect of increasing our resource at this location. The grades encountered here demonstrate the potential for extraction from an extended open-pit. At the Karakavak prospect we have confirmed the potential for several shallow open-pittable resources as satellites to the Kiziltepe Mine operations.

 

In November 2016, a scoping study completed on Tavşan demonstrated the opportunity for further resource growth and the development of an attractive low-cost and high-margin mining operation at a second site. Approximately two thirds of the Tavşan resource will be accessible via shallow open-pit mining methods. Additional exploration potential in the area suggests that there are opportunities to increase mine life by a further three years to a total of seven years, producing at a rate of approximately 30,000 oz gold p.a. The study underlined the potential for strong financial returns: NPV (8%) at US$41.9M, with payback secured within 1.1 years over an initial 4 year mine life at a gold price of US$1,250/oz. The scoping study has demonstrated that bringing the Tavşan Sector of the project on stream would enable us to increase production from approximately 20,000 oz to 50,000 oz p.a. gold eq. between the two operations.

 

These positive developments at our operational mine, together with an enhanced resource base, occur against a backdrop of growing strength in global precious metals markets. There appear to be many drivers of this trend, including geo-political uncertainties, central banks stockpiling gold, concerns that the stock markets are over-valued, re-emerging inflation and investors seeking safe havens. Another driver of the market worth noting is the increasingly important role of China. Since 2014 China has been the world's largest importer of gold and since 2007 it has been its largest producer, yet barely any of this production is exported.

 

Another global economic development with a positive impact on our Kiziltepe Mine is the present era of low oil prices, which looks set to continue. Oil prices are at around US$55 per barrel, compared with US$109 in 2012. This is very much the product of the fracking industry, particularly in the Texas Permian Basin. As this technology is rolled out over other oilfields globally, it appears likely that relatively low oil prices will persist for a considerable period of time.

 

Another positive development for the Company occurred in December 2016 with the 100% acquisition of the Salinbaş Gold Project in Turkey's Artvin Province from Eldorado Gold Corporation ("Eldorado"). The agreement provides a Net Smelter Return royalty to Eldorado of up to 2% on future production. Salinbaş had been part of a 49:51 Joint Venture with Eldorado since 2012 and previously with European Goldfields Limited from 2008, prior to their acquisition by Eldorado. Salinbaş is a highly significant asset, as it is located within the 'Hot Gold Corridor', a multi-million ounce goldfield containing several major gold- copper projects, notably the adjacent 4 Moz Hot Maden project. Salinbaş contains approximately 10Mt of Indicated and Inferred JORC resources, with an average grade of 2.0 g/t Au and 10.2 g/t Ag (for 650,000 oz gold and 3.2 Moz of silver). A scoping study completed on Salinbaş demonstrated potential for production of approximately 50,000 oz gold and 100,000 oz silver p.a. over 10 years, providing an NPV (8%) in excess of US$100M.

 

In recognition of the widening scope of Ariana's interests, the Ariana Board was strengthened in August 2016 with the addition of Chris Sangster as a Non-Executive Director. Chris is a mining engineer with over 35 years in the industry. His insight will be invaluable in the next stage of Ariana's development, as we continue to prove up our other projects in Turkey and beyond. We look forward to working closely with Chris as we bring Kiziltepe through ramp-up and as we start developing this and other sites further.

 

Over the past two years, Ariana has been diversifying its portfolio into technology-metals, such as lithium, which are associated with many gold provinces worldwide. We witnessed the first benefits of this strategy in late 2015, when Ariana's subsidiary Asgard Metals Pty. Ltd. ("Asgard") vended a package of six tenements in the Pilgangoora area of Western Australia, to Dakota Minerals Limited (ASX: DKO). In July 2016 Asgard completed the sale of our interests in a second package of lithium tenements in Western Australia and the Northern Territory to Kingston Resources Limited (ASX: KSN).

 

In summary, the past year has been a transformational one for your Company. Despite the challenging market conditions and several regulatory changes in Turkey over recent years, we have not wavered from our strategic vision. Our determination has enabled us to make the challenging transition from an explorer to a joint venture producer with the construction of our first                mine at Kiziltepe.  This is a pivotal moment in the evolution of your Company and our achievement is the result of the professionalism and diligence of the Ariana team, our JV team in Zenit Madencilik San. ve Tic. A.S. ("Zenit") and our partners Proccea. I would like to extend my thanks and congratulations for what we have achieved together. We have also been fortunate in the support we have received from the local community in Western Turkey, the Turkish Government and Turkiye Finans Katilim Bankasi A.S. Our JV company, Zenit, has also been careful to ensure that local suppliers are preferentially used for material, equipment and services for construction. This has developed a strong sense of community ownership of the Kiziltepe Project.

 

We are now in the process of realigning Ariana to take advantage of our evolving position as an exploration junior backed by cash-flow from our Joint Venture operation at the Kiziltepe Mine, in addition to our significant investments in three listed junior companies. This provides the Company with a platform on which to expand our strategy both within and outside Turkey. I am immensely proud of the Ariana team: we have a proven track record of successful and cost-effective exploration. Now we also have a track record for delivering our strategic vision, having made the transition from exploration to joint venture production. These achievements give us the confidence and momentum to drive our strategy over the coming years, as we widen our interests to strengthen our portfolio and create shareholder value through further exploration and development of our assets.

Financial Review

 

As outlined in the Chairman's Statement, the past year has been a transformational one for the Group and this is reflected in the Statement of Comprehensive Income, which shows a profit for the year of £13.7M.

 

The primary driver of this surplus is the fair value assessment of the intangible exploration asset made by the Directors on the acquisition of the remaining 51% of the Salinbaş business in north-eastern Turkey from Eldorado Gold Corporation. The acquisition of these shares allows us to take full control of the continued development of the Salinbaş Project. On acquisition the Directors performed a review to assess whether they had purchased an asset or a business. Having looked at the infrastructure, people and operations in place it was determined they had bought a business and therefore IFRS 3 has been applied. IFRS 3 requires the Directors assess the fair value of the project both just prior to and post the acquisition itself. As our original 49% share of the project was correctly recorded at no value under equity accounting rules in previous years' accounts, our assessment of the value of the intangible exploration asset at Salinbaş, undertaken with the assistance of an independent external valuer, of US$20M, less the recognition of a deferred tax liability of £2.3M and the fair value of the consideration given (in terms of a net smelter royalty), gives rise to a surplus on acquisition of £12.4M in the accounts.

 

Another significant transaction for the Group this year was the conclusion of the sale of our lithium licences in Western Australia for a consideration of A$147,000 and 37.2m shares in an ASX listed company, Dakota Minerals Limited ("Dakota"). Subsequently we sold some of these shares and the overall profit on both the initial sale of licenses and the subsequent sale of Dakota shares, in aggregate of £1.9M is reflected in this year's profit before taxation.

 

In western Turkey, our Joint Venture partner Proccea completed the acquisition of the remaining shares in our Joint Venture company to arrive at their 50% ownership of our Joint Venture vehicle, Zenit Madencilik San. ve Tic. A.S. ("Zenit"), and the gain on the associated dilution amounted to £0.7M this year.

 

As far as the Balance Sheet is concerned, the significant increase in intangible assets arises through our aforementioned valuation of the Salinbaş exploration licenses. Our share of the net assets of Zenit also increased as the mine development progressed towards completion. Included within available for sale investments are the remaining shares arising from last year's Australian licence sales, being primarily the Dakota shares, and these are included at their year-end market value. Trade and other payables have increased this year by £0.7M, largely on account of corporation tax payable in Australia.

 

The Company has funded its ongoing activities this year in part through the disposal of its shares in Dakota, but also through placing of shares to raise approximately £0.5M during 2016 and in January 2017 for £0.9M. In one sense, these are relatively small sums given the scale of achievement in the year under review, but the Directors are very mindful of the impact of further dilution and always strive to balance the need for working capital and the fulfilment of our primary objectives to build a valuable exploration, development and mining concern.

 

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

 

 

Contacts:

 

Ariana Resources plc

Tel: +44 (0) 20 7407 3616

Michael de Villiers, Chairman


Kerim Sener, Managing Director




Beaumont Cornish Limited, Nomad

Tel: +44 (0) 20 7628 3396

Roland Cornish / Felicity Geidt

www.beaumontcornish.com



Beaufort Securities Limited, Joint Broker

Tel: +44 (0) 20 7382 8300

Jon Belliss




Panmure Gordon (UK) Limited, Joint Broker

Tel: +44 (0) 20 7886 2500

Adam James / Tom Salvesen


 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2016

 

                                                                                                         Note

2016

£'000

2015

£'000

Administrative costs

(930)

(797)

General exploration expenditure

(118)

(10)

Exploration costs - written off

-

(521)

Operating loss

5

(1,048)

(1,313)

Other income

4a

1,215

15

Gain on acquisition of remaining interest in Joint Venture

4b

12,435

-

Profit on disposal of available for sale investments


810

-

Finance costs

6

-

(148)

Share of profit on dilution of interest in Joint Venture

7

677

68

Investment income


103

66

Share of profit/(loss) of Joint Venture

7

20

(133)

Profit/(loss) on ordinary activities before tax

14,212

(1,460)

 

Taxation

 

9

 

(486)

 

-

Profit/(loss) for the year

13,726

(1,460)

 

Other comprehensive income


 

 

 

 

(5)

 

 

 

 

(374)

Items that may be reclassified subsequently to profit or loss when specific conditions are met:


Exchange differences on translating foreign operations


Fair value adjustment on available for sale investments

14

23

(87)

Fair value adjustment on other financial asset classified as available for sale


-

160

Other comprehensive income/(loss) for the year net of tax

18

(301)

Total comprehensive income/(loss) for the year

13,744

(1,761)

Profit/(loss) attributable to: Owners of the parent Company

13,726

(1,460)

Total comprehensive income/(loss) attributable to: Owners of the parent Company

13,744

(1,761)

Total comprehensive income/(loss) for the year

13,744

(1,761)

 

Profit/(loss) per share (pence)

 

Basic and diluted

 

 

 

11

 

 

 

1.67

 

 

 

(0.20)

 

Continuing operations

 

None of the Group's activities discontinued during the current or previous year. The accompanying notes form part of the financial statements.

 

 

 

 

Consolidated Statement of Financial Position

For the year ended 31 December 2016

 


Note

2016

£'000

2015

£'000

Assets




Non-current assets




Trade and other receivables

16

120

42

Available for sale investments

14

-

22

Intangible exploration assets

12

17,965

1,654

Land, property, plant and equipment

13

319

324

Investment in Joint Venture

7

3,527

2,830

Total non-current assets


21,931

4,872

 

Current assets




Trade and other receivables

17

1,689

989

Other financial asset


-

14

Available for sale investments

14

866

-

Cash and cash equivalents


440

319

Total current assets


2,995

1,322

Total assets


24,926

6,194

 

Equity




Called up share capital

19

5,836

5,797

Share premium

19

9,241

8,764

Other reserves


720

720

Share based payments


571

578

Translation reserve


(540)

(535)

Retained earnings


4,367

(9,274)

Total equity attributable to equity holders of the parent


20,195

6,050

Non-controlling interest


-

3

Total equity


20,195

6,053

 

Liabilities




Non-current liabilities




Deferred tax liabilities

21

2,273

-

Other financial liabilities

22

1,651

-

Total non-current liabilities


3,924

-

 

Current liabilities




Trade and other payables

18

807

141

Total current liabilities


807

141

Total equity and liabilities


24,926

6,194

 

 

-The financial statements were approved by the Board of Directors and authorised for issue on 2 June 2017. They were signed on its behalf by:

 

Registered number: 05403426

The accompanying notes form part of the financial statements



 

Company Statement of Financial Position

For the year ended 31 December 2016

 

 

                                           Note

2016

2015

£'000

£'000

Assets

 

 

14

 

 

-

 

 

22

Non-current assets

Available for sale investments

Investments in group undertakings

15

274

274

Total non-current assets

274

296

 

Current assets


 

 

 

8,527

 

 

 

8,604

Trade and other receivables

17

Other financial asset


-

14

Available for sale investments

14

46

-

Cash and cash equivalents


-

-

Total current assets

8,573

8,618

Total assets

8,847

8,914

 

 

Equity


 

 

 

 

5,836

 

 

 

 

5,797

Called up share capital

19

Share premium

19

9,241

8,764

Share based payments reserve


571

578

Retained earnings


(6,815)

(6,232)

Total equity

8,833

8,907

 

 

Liabilities

Current liabilities

Trade and other payables

 

 

 

 

18

 

 

 

 

14

 

 

 

 

7

Total current liabilities

14

7

Total equity and liabilities

8,847

8,914

 

-The financial statements were approved by the Board of Directors and authorised for issue on 2 June 2017. They were signed on its behalf by:

 

Registered number: 05403426

 

The accompanying notes form part of the financial statements

 

 

 

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 31 December 2016

 


 

 

 

Share capital

£'000

 

 

 

Share premium

£'000

 

 

 

Other reserves

£'000

 

Share based payments reserve

£'000

 

 

 

Translation

reserve

£'000

 

 

 

Retained earnings

£'000

Total attributable to equity holders of

parent

£'000

 

 

Non- controlling Interest

£'000

 

 

 

 

Total

£'000

Changes in equity to 31 December 2015










Balance at 1 January 2015

5,640

7,583

720

578

(161)

(7,887)

6,473

3

6,476

Loss for the year

-

-

-

-

-

(1,460)

(1,460)

-

(1,460)

Other comprehensive income

-

-

-

-

(374)

73

(301)

-

(301)

Total comprehensive income

-

-

-

-

(374)

(1,387)

(1,761)

-

(1,761)

Issue of share capital

157

1,257

-

-

-

-

1,414

-

1,414

Share issue costs

-

(76)

-

-

-

-

(76)

-

(76)

Non-controlling Interest -

share of net assets in subsidiary

-

-

-

-

-

-

-

-

-

Transactions with owners

157

1,181

-

-

-

-

1,338

-

1,338

Balance at 31 December 2015

5,797

8,764

720

578

(535)

(9,274)

6,050

3

6,053

 

 

Changes in equity to 31 December 2016










Profit for the year

-

-

-

-

13,726

13,726

-

13,726

Other comprehensive income

-

-

-

-

(5)

23

18

-

18

Total comprehensive income

-

-

-

-

(5)

13,749

13,744

-

13,744

Issue of share capital

39

524

-

-

-

-

563

-

563

Share issue costs

-

(47)

-

-

-

-

(47)

-

(47)

Cancellation of share options

-

-

-

(7)

-

7

-

-

-

Non-controlling Interest -

share of net assets in subsidiary

-

-

-

-

-

(115)

(115)

(3)

(118)

Transactions with owners

39

477

-

(7)

-

(108)

401

(3)

398

Balance at 31 December 2016

5,836

9,241

720

571

(540)

4,367

20,195

-

20,195

 

The accompanying notes form part of the financial statements.



 

 

Company Statement of Changes in Equity

For the year ended 31 December 2016

 


Share capital

£'000

 

 

Share premium

£'000

Share based payments reserve

£'000

 

 

Retained earnings

£'000

 

 

 

Total

£'000

Changes in equity to 31 December 2015

 

Balance at 1 January 2015

 

 

5,640

 

 

7,583

 

 

578

 

 

(5,556)

 

 

8,245

Loss for the year

-

-

-

(749)

(749)

Other comprehensive income

-

-

-

73

73

Total comprehensive income

-

-

-

(676)

(676)

Issue of share capital

157

157

-

-

1,414

Share issue costs

-

(76)

-

-

(76)

Transactions with owners

157

1,181

-

-

-

Balance at 31 December 2015

5,797

8,764

578

(6,232)

8,907

 

Changes in equity to 31 December 2016

 

Loss for the year

-

-

-

(614)

(614)

Other comprehensive income

-

-

-

24

24

Total comprehensive income

-

-

-

(590)

(590)

Issue of share capital

39

524

-

-

563

Share issue costs

-

(47)

-

-

(47)

Cancellation of share options

-

-

(7)

7

-

Transactions with owners

39

477

(7)

7

516

Balance at 31 December 2016

5,836

9,241

571

(6,815)

8,833

 

The accompanying notes form part of the financial statements.

 

 

 

Consolidated Statement of Cash Flows

For the year ended 31 December 2016

 


2016

£'000

2015

£'000

Cash flows from operating activities

Profit/(loss) before tax

Adjustments for:

Profit on disposal of available for sale investments

Other income - non cash consideration received in shares

Depreciation of non-current assets

Write down of intangible exploration assets

Disposal of intangible exploration assets - Australian tenements and licences

Gain on acquisition of remaining interest in Joint Venture (excluding cash acquired)

Fair value adjustments

Other financial asset charges

 

(Increase)/decrease investment in Joint Venture asset

 Investment income

 

14,212

 

(810)

(1,148)

1

-

51

(12,386)

(23)

-

 

(697)

(103)

 

(1,460)

 

-

-

 1

521

-

-

87

148

 

65

(66)

 

Movement in working capital

 

(903)

 

(704)

Increase/(decrease) in non-current assets due to exchange movements

51

(132)

(Increase)/decrease in trade and other receivables

(660)

(3)

Increase/(decrease) in trade and other payables

237

108

Foreign exchange differences on retranslation of assets and liabilities

(5)

(374)

Cash outflow from operating activities

(1,280)

(1,105)

Taxation paid

(77)

-

Net cash used in operating activities

(1,357)

(1,105)

Cash flows from investing activities

 

(19)

 

(13)

Purchase of land, property, plant and equipment

Payments for intangible assets

(149)

(260)

Investment income

103

66

Net cash used in investing activities

(65)

(207)

Cash flows from financing activities

 

1,103

 

-

Proceeds from disposal of available to sale investments

Proceeds from issue of share capital and swap repayments

440

1,587

Net cash proceeds from financing activities

1,543

1,587

 

Net increase in cash and cash equivalents

 

121

 

275

Cash and cash equivalents at beginning of period

319

44

Cash and cash equivalents at end of year

440

319

 

 

Company statement of cash flows

All bank transactions are undertaken by Ariana Exploration & Development Limited on behalf of Ariana Resources PLC and recharged accordingly. As such the Company had no cash transactions directly.

The accompanying notes form part of the financial statements.

Selected notes extracted from the Consolidated Financial Statements set out below, with the references as they appear in the Report and Accounts for the year ended 31 December 2016:

 

1. General information

Ariana Resources PLC (the "Company") is a public limited company incorporated and domiciled in Great Britain. The Company's shares are listed on the Alternative Investment Market of the London Stock Exchange. The principal activities of the Company and its subsidiaries (together the "Group") are related to the exploration for and development of gold and other minerals primarily in Turkey.

 

The Company's registered office address is Bridge House, London Bridge, London, SE1 9QR, United Kingdom.

 

The consolidated financial statements are presented in Pounds Sterling (£), which is the parent company's functional and presentation currency, and all values are rounded to the nearest thousand except where otherwise indicated.

 

Basis of preparation

The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, effective for the Group's reporting for the year ended 31 December 2016.

 

The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with IFRS. These financial statements have been prepared under the historical cost convention (except for available for sale financial assets) and the accounting policies have been applied consistently throughout the Group.

 

Going concern

These financial statements have been prepared on the going concern basis.

 

The Directors are mindful that there is an ongoing need to monitor overheads and costs associated with delivering the exploration programme, and raise additional working capital on an ad hoc basis to support the Group's activities. The Group has no bank facilities and has been meeting its working capital requirements from cash resources. At the year end the Group had cash and cash equivalents amounting to £440,000 (2015: £319,000), together with available for sale investments with a market value of £866,000 (2015: £22,000).

 

The Directors have prepared cash flow forecasts for the Group for the period to 30 June 2018 based on their assessment of the prospects of the Group's operations. These cash flow forecasts include the normal operating costs for the Group over the period together with the expenditure necessary to meet the minimum licence expenditure requirements, as well as discretionary exploration and development expenditure. The forecasts indicate that to continue to develop the Group's various projects as currently planned the Group will need to raise additional financing. Based on previous experience the Directors believe this to be achievable, particularly as the Group raised £0.9M in January 2017 from the issue of new shares. In the event that additional funding is not obtained as needed, the Group has flexibility to reduce its operating expenditure and discretionary exploration expenditure, along with the ability to liquidate the available for sale investments in order to meet its financial obligations as they fall due.

 

In assessing the going concern assumption for the Group, the Directors have excluded the Red Rabbit Joint Venture as the Joint Venture is currently funding all the costs of the development through a mixture of its own resources and bank facilities secured to fund the construction and operation the mine.  At present, although mine construction was completed after the year end and the mine is operating successfully, positive cashflow from Joint Venture to the Group is not expected in the next 12 months as Joint Ventures construction bank loans need to be repaid in priority to the Group or the joint venture partner. The Group however expects to generate further cashflow from the sale of land to the Joint Venture following the repayment of the aforementioned construction bank loans and this is anticipated to be during 2018.

 

The Directors are considering a variety of options as regards to the financing of the Group going forward, and this may include an equity raise if thought appropriate. Despite challenging capital markets for junior exploration and mining companies, the Company and Group have been successful historically in raising equity finance and in light of this, the directors have a reasonable expectation of securing sufficient funding to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the consolidated financial statements.

 

In preparing these financial statements the Directors have given consideration to the above matters and on that basis they believe that it remains appropriate to prepare the financial statements on a going concern basis. 

 

4a. Other income

 

 

4b. Other gains

 

The gain on acquisition relates to the estimated gain arising on the acquisition of the remaining shares in Greater Pontides Exploration B.V., further details of which are set out in note 20.

 

7.  Share of profit/(loss) of interest in Joint Venture

In July 2010 the Group entered into an agreement with Proccea Construction Co. ("Proccea") such that Galata Madencilik San. ve Tic. Ltd. ("Galata") would transfer its principal assets at Kiziltepe and Tavşan, collectively known as the "Red Rabbit Gold Project" into a new wholly owned subsidiary, Zenit Madencilik San. ve Tic. A.S. ("Zenit"). Proccea earn their 50% share in Zenit by investing US$8M in the capital of Zenit, US$1.4M of such funds to be spent on a Feasibility Study and an Environmental Impact Assessment ("EIA"), with the balance on initial mine construction, once the Feasibility Study and EIA were completed satisfactorily. Proccea's stake in Zenit increased during the year to 50% (2015: 30.4%) as further shares were issued to them in accordance with the Joint Venture agreement. Ultimately profits from Zenit will be shared in the ratio of 51% the Group and 49% to Proccea, but key decisions require approval from both the Group and Proccea.

 

The Group accounts for its Joint Venture with Proccea in Zenit using the equity method in accordance with IAS 28 (revised).  At 31 December 2016 the Group has a 50% (2015: 69.6%) interest in Zenit.

 

Summarised financial information of the Joint Venture, based on its translated financial statements, and reconciliations with the carrying amount of the investment in the consolidated financial statements are set out below:

 

Summarised statement of financial position

2016

£'000

2015

£'000

Non-current assets

23,505

6,764

Current assets

15,081

10,097

Current and Non-current liabilities

(31,532)

(12,793)

Equity

7,054

4,068

Proportion of the Group's ownership

50%

69.6%

Carrying amount of Investment in Joint Venture

3,527

2,830

 

Summarised statement of Profit and Loss

2016

£'000

2015

£'000

Other income

483

104

Administrative expenses - including exchange losses

(443)

(295)

Profit/(loss) for the year

40

(191)

Proportion of the Group's ownership

50%

69.6%

Group's share of profit/(loss) for the year

20

(133)

Increase in share of net assets following issue of shares in Zenit

677

68

Movement in interest in Joint Venture for the year

697

(65)

 

 

12.  Intangible exploration assets

 

Group

Deferred exploration expenditure

£'000

Cost


At 1 January 2015

2,146

Additions

260

Exchange movements

(96)

Reallocation of project costs to Joint Venture Company

(135)

Costs written off

(521)

At 31 December 2015

1,654

Additions through acquisition of remaining interest in Joint Venture (see note 20)

16,210

Additions

149

Exchange movements

3

Disposal of Australian tenements and licences

(51)

At 31 December 2016

17,965



Net book value


At 1 January 2015

2,146

At 31 December 2015

1,654

At 31 December 2016

17,965

 

None of the Group's intangible assets are owned by the Company.

 

The technical feasibility and commercial viability of extracting a mineral resource are not yet demonstrable in the above intangible exploration assets. These assets are not amortised, until technical feasibility and commercial viability is established. Intangible exploration costs written off represent costs relating to certain projects that are no longer considered economically viable or where exploration licences have been relinquished.

 

14.  Available for sale investments

 

Group and Company

Non-current

£'000

Current

£'000

Total

£'000

Group     Company

£'000       £'000

At 1 January 2016

22

-

22

-               22

Additions

-

1,114

1,114

1,114       -

Disposals

-

(293)

(293)

(293)       -

Adjustment to fair value

24

(1)

23

(1)           24

Transfer to current assets

(46)

46

-

-               -

At 31 December 2016

-

866

866

820          46

Net book value

 

At 31 December 2016

 

 

-

 

 

866

 

 

866

 

 

820          46

At 31 December 2015

22

-

22

-               22

 

 

Available for sale investments represent the Group's investment in Dakota Minerals Limited and Kingston Resources Limited, both listed on the Australian Securities Exchange, and the Company`s  investment in Royal Road Minerals Limited, a company listed on the Toronto Venture Exchange and all are stated at their market value at the year end.

 

As at 31 December 2016 due to changes in the market value of these investments, a fair value adjustment totalling £23,000 (2015 : loss £87,000) has been reflected in these accounts.

 

During the year the Group, through its Australian subsidiary, Asgard Metals Pty. Ltd., completed the sale of various tenements in the Pilbara region of Western Australia to Dakota Minerals Limited ("Dakota"), a company listed on the Australian Securities Exchange.  The initial transaction included cash payments totalling A$147,000 37.2m fully paid ordinary shares and this consideration is reflected in other income at a valuation of A$1.9M (£1.07M).  Additionally, during the year , the Group generated profit on the disposal of some of its shares in Dakota amounting to A$1.4M (£0.8M).

 

In addition to the Dakota transactions mentioned above, the Group also through its Australian subsidiary, Asgard Metals Pty. Ltd. completed the sale of its interests in a package of tenements in the Northern Territory and Western Australia to Kingston Resources Limited ("Kingston"). The initial consideration included a cash payment to Asgard of A$20,000 and 6,600,000 fully paid ordinary shares in Kingston.

 

20.  Business combination

During December 2016 the Group announced that in addition to its 49% shareholding already held in the Greater Pontides Exploration B.V., ("GPE") it acquired all of the remaining shares in issue held by its Joint Venture partner, Eldorado Gold Corporation, following their strategic decision to withdraw from the project for a consideration of US$100 and a net smelter royalty of up to 2%.  The principal asset of GPE are the licences held within an area known as Salinbaş in north-eastern Turkey.

 

Following the acquisition of the remaining 51% of GPE the Directors performed a review to assess whether they had purchased an asset or a business. Having looked at the infrastructure, people and operations in place at GPE it was determined they had bought a business and therefore the assets and liabilities have been measured at fair value per IFRS 3.

 

The Directors consider a bargain purchase arose on the acquisition of the remaining shares in GPE on the basis that their assessment of the Group's ability to realise value from the Salinbaş project differed from that of Eldorado, particularly in the light of their withdrawal from this type of exploration project in Turkey. The gain arose on the acquisition of full control due to the fair value of the identifiable net assets attributable to the owners of the Group being considered to be greater than the consideration payable, based on an external mine scoping study valuation commissioned by the Directors for the purposes of the accounts, as set out below. The valuation technique used for measuring the fair value of the intangible asset was a discounted cashflow method.

 

Assets acquired and liabilities recognised at the date of acquisition:

 


Book Value

£'000

Fair value adjustment

£'000

2016

£'000

Non-current assets




Property, plant and equipment

3

-

3

Intangible asset - adjusted to fair value

2,839

13,371

16,210

Current assets




Other receivables

118

-

118

Cash and cash at bank

49

-

49

Current liabilities




Trade and non current liabilities

(21) 

-

(21) 

Deferred tax liability

-

(2,273) 

(2,273) 

Net assets acquired

2,988

     11,098

14,086 





Net assets acquired



14,806

Contingent consideration payable



(1,651)

Gain on acquisition



12,435

Gain on acquisition made up of :




Gain on interest previously held in associate



4,008

Gain on bargain purchase



8,427




12,435

 

 

In addition to the cash consideration for the shares acquired amounting to US$100, a 2% Net Smelter Royalty will become payable on commencement of production at Salinbaş.  The fair value of potential liability of the royalty has been valued at £1.651M and is disclosed under other financial liabilities as set out in note 22.

 

Deferred tax has been provided on the fair value uplift on recognition of intangibles at 17% and is disclosed under non current liabilities as set out in note 21.

 

No expenditure has been incurred by GPE in the period from the date of acquisition to the year end.

 

22.  Other financial liabilities


Group

Company


2016

£'000

2015

£'000

2016

£'000

2015

£'000

Contingent consideration payable

1,651

-

-

-

 

The contingent consideration will be remeasured each reporting date and any gain or loss will go through the income statement.

 

 

Note to the announcement:

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015.  The financial information for the year ended 31 December 2015 is derived from the statutory accounts for that year.  The audit of statutory accounts for the year ended 31 December 2016 is complete. 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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