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Sierra Rutile Limited
27 August 2015
Sierra Rutile Limited
Unaudited Interim Results for the Six Months Ended 30 June
2015
London, UK, 27 August 2015: Sierra Rutile Limited (AIM: SRX)
("Sierra Rutile" or the "Group" or the "Company") is pleased to
announce its unaudited interim results for the six months ended 30
June 2015.
Highlights
-- Improved cash generation with cash inflows from operations of
US$10.8 million (H1 2014: US$1.6 million) largely due to effective
management of US$5.3 million working capital release;
-- EBITDA(1) margin of 15.8%, a significant improvement on H1
2014 of 13.6% and full-year 2014 of 12.1%;
-- Excellent cost control with a 24.6% reduction in operating,
administration and marketing costs (H1 2015: US$49.6 million, H1
2014: US$65.8 million);
-- On-target to meet full-year production and unit cost guidance
of 120,000-130,000 tonnes and total operating cash cost(3) of
US$595-615/tonne, despite lower production volumes of 53,275 tonnes
of rutile and 16,920 of ilmenite in H1;
-- Despite a 29.8% decrease in rutile sales volume in H1 2015
compared to H1 2014, loss for the period of US$4.2 million in line
with H1 2014;
-- Planned rutile sales now fully contracted for the remainder of 2015;
-- Realised rutile prices consistent with average realised prices for 2014;
-- Strong balance sheet with US$9.0 million of cash and US$74.0
million of current assets at 30 June 2015 (31 December 2014: US$6.6
million cash and US$76.8 million current assets); and
-- Commencement of Gangama Dry Mine construction with US$7.9
million capital expenditure invested in the project during the
period.
Commenting on the first half performance, CEO John Sisay said:
"We are extremely pleased with the first half financial
performance. Against the backdrop of a flat sales price environment
and a challenging first quarter of production, it was a great
achievement to lower costs, significantly improve EBITDA margin
and, most importantly, to generate substantial cash, which has been
reinvested into Gangama construction.
Due to the actions we have taken in recent years our balance
sheet is very healthy, and with our expectation of meeting
full-year production and unit cost guidance, together with securing
all second half rutile sales, we expect a strong performance for
the second half and full-year as a whole."
(1) Earnings before interest (including foreign exchange), tax,
depreciation and amortisation, excluding exceptional items and
non-cash stock option expense.(2) Direct operating cash cost
(includes direct operating costs but excludes depreciation) less
by-product revenue divided by tonnes of rutile produced.
(3) Total operating cash cost (includes direct operating costs,
general administrative costs and corporate costs but excludes
depreciation) less by-product revenue divided by tonnes of rutile
produced.
(4) All-in cash costs (Total operating cash cost plus
stay-in-business capital cost, but excludes depreciation) less
by-product revenue divided by tonnes of rutile produced.
Financial Review
Revenue
Revenue from sales of rutile, ilmenite, zircon and other
concentrates was US$45.7 million in H1 2015, 28.7% lower than H1
2014 of US$64.1 million. The lower revenue figure was driven by
rutile sales volumes being 29.8% lower than in H1 2014 slightly
offset by an 8.0% increase in ilmenite sales volumes. The lower
rutile volumes are mainly a function of the opening inventory being
lower at the start of 2015 than 2014 and the schedule of shipments
during the course of 2015. Full-year rutile sales are fully
contracted for the remainder of 2015, meaning sales volumes are
heavily weighted towards the second half of 2015.
Realised sale prices of rutile in H1 2015 were an average of
US$809/tonne, 1.1% lower than the average for 2014, illustrative of
the relatively stable pricing conditions experienced through 2014
and the first half of 2015.
Cost of Sales
The Group remains committed to controlling costs and continues
to focus on the implementation of its cost efficiency programmes.
On an absolute basis, this resulted in cost of sales being 24.2%
lower at US$44.1 million (H1 2014: US$58.1 million). This reduction
was largely driven by the lower sales volumes in H1 2015, but there
were also underlying reductions in certain key fixed operating
costs, offset by a 9.3% increase in depreciation.
As previously announced, on a unit basis, total operating cash
costs(3) were higher in H1 2015 than in H1 2014 (H1 2015:
US$676/tonne, H1 2014: US$ 609/tonne), driven by lower production
volumes, in particular the production challenges encountered in Q1
2015. Direct operating cash cost(2) and all-in cash costs(4) were
also higher in H1 2015 than H1 2014 at US$573/tonne (H1 2014:
US$481/tonne) and US$721/tonne (H1 2014: US$627/tonne)
respectively. The Company remains on-target to meet full year
production guidance, which is expected to bring direct operating
cash cost, total operating cash costs and all-in cash costs to
within the previously announced targets of
US$520/tonne-US$530/tonne, US$595/tonne-US$615/tonne and
US$650/tonne-US$670/tonne respectively.
Administrative and Marketing Expenses
Administrative expenses decreased by 27.5% (US$2.1 million) from
US$7.7 million in H1 2014 to US$5.6 million in H1 2015 due to the
continued successful focus on cost control.
EBITDA
EBITDA(1) was US$7.2 million compared to US$8.7 million in H1
2014, which was a very successful result on sales volumes that are
28.7% lower for the half year. This resulted in a positive
improvement of EBITDA margin, from 13.6% in H1 2014 to 15.8% for H1
2015, and compares favorably to the full year EBITDA margin from
2014 of 12.1%.
Cash Flow
Net cash inflow from operating activities for the six months
ended 30 June 2015 was US$10.8 million, US$9.2 million above the
comparative period in June 2014, largely due to effective
management of working capital resulting in a US$5.3 million working
capital in-flow, an essential function during the funding of the
Gangama Dry Mine capital expenditures.
Capital expenditures
Capital expenditure was US$10.3 million during the half year (H1
2014: US$6.8 million), of which US$7.9 million was incurred on the
construction of the Gangama Dry Mine.
Financial Position
At 30 June 2015, the Company had cash and cash equivalents of
US$9.0 million (31 December 2014: US$6.6 million) and current
assets of US$74.0 million (31 December 2014: US$76.8 million). A
significant portion of trade and other receivables as at 30 June
2015 have been received subsequent the end of the half year.
(1) Earnings before interest (including foreign exchange), tax,
depreciation and amortisation, excluding exceptional items and
non-cash stock option expense.(2) Direct operating cash cost
(includes direct operating costs but excludes depreciation) less
by-product revenue divided by tonnes of rutile produced.
(3) Total operating cash cost (includes direct operating costs,
general administrative costs and corporate costs but excludes
depreciation) less by-product revenue divided by tonnes of rutile
produced.
(4) All-in cash costs (Total operating cash cost plus
stay-in-business capital cost, but excludes depreciation) less
by-product revenue divided by tonnes of rutile produced.
Borrowings
Following the approval of the construction of the Gangama Dry
Mine, the Group reached financial close on a US$30 million Nedbank
Senior Loan facility on 21 April 2015 with the loan having a tenure
of four years from this date. This was drawn down by US$ 2.7
million at 30 June 2015 to fund, in part, the US$7.9 million
capital expenditures on Gangama construction. This is in addition
to the existing $20 million Nedbank Working Capital Facility
entered into in August 2013 which expires in August 2016.
As previously announced, Sierra Rutile reached an agreement with
the Government of Sierra Leone in December 2014 to defer repayment
of the loan from the Government during the construction of the
Gangama project. Payments will resume in June 2016 and the loan is
expected to be fully repaid by June 2018. The balance outstanding
on the loan at 30 June 2015 was US$21.6 million.
The Company has also secured a standby loan facility of up to
US$15 million from its majority shareholder, Pala Investments, the
"Standby Facility". The Standby Facility is available during the
construction of the Gangama Dry Mine. The Standby Facility has a
tenure of 18 months from initial drawdown, carries an interest rate
of LIBOR plus 5.25%, and has no associated arrangement or
commitment fees. The closure and drawdown of this facility is
subject to satisfaction of a number of conditions customary for a
financing of this type.
Net finance costs/(income) decreased from costs of US$2.1
million in H1 2014 to an income of US$1.4 million in H1 2015. This
was principally due to the depreciation of the Euro against the US
Dollar and the impact this had on the Euro-denominated loan from
the Government of Sierra Leone, which contributed to the net
foreign exchange gain of US$2.6 million in H1 2015 (H1 2014: US$0.3
million).
Going Concern
At 30 June 2015, the Group had cash and cash equivalents of
US$9.0 million and total borrowings of US$44.5 million.
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The Board has considered the Group's cash flow forecasts for the
period to the end of September 2016, which includes the potential
requirement to repay the US$20 million Nedbank Working Capital
Facility in August 2016 if it has not been extended or refinanced
prior to this date. The Board is satisfied that the Group's
forecasts and projections, taking account of reasonably possible
changes in trading performance show that the Group will be able to
operate with the level of its current facilities for the
foreseeable future. In the event of certain adverse pricing and
production scenarios (including a delay to the commissioning of the
Gangama project), management has within its control the option of
deferring uncommitted capital expenditure to maintain the Group's
funding position and, subject to agreement from Nedbank which
management is confident will be received, extending the tenure of
the Working Capital Facility. Accordingly, the Board continues to
adopt the going concern basis in preparing the financial
statements.
Post-balance sheet events
These are disclosed in note 14.
Related party
Related party transactions are disclosed in note 12 to the
condensed set of financial statements.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on the Group's performance over the
remaining six months of the year and which could cause actual
results to differ materially from expected results. These risks
were set out in detail in the Annual Report for the year ended 31
December 2014 and remain appropriate in 2015. Key risks relate to
the following:
-- Exploration and estimates of mineral reserves and resources
-- Operating risks
-- Insurance
-- Competition
-- Volatility of mineral prices
-- Political risk
-- Protection of assets and personnel
-- Government regulation
-- Title to properties
-- Environmental regulation
-- Rehabilitation
-- Energy cost and supply
-- Currency risk
-- Interest rate risk
-- Financing risk
-- Dependence on key personnel, contractors, experts and other advisers
-- Ebola health risk
Forward looking information
This financial report contains certain forward looking
statements with respect to the financial condition, results,
operations and business of the Group. These statements and
forecasts involve risk and uncertainty because they relate to
events that depend on circumstances in the future. There are a
number of factors that could cause actual results or developments
to differ from those expressed or implied by these forward looking
statements.
Conference call
John Sisay, Chief Executive Officer, will host a conference call
for investors and analysts at 08.00 a.m. (BST) today. Access
details for the call are as follows:
UK Toll Number: +44 (0)203 139 4830
UK Toll-Free Number: 0808 237 0030
Passcode: 28996862#
Sierra Rutile Limited
John Sisay
Chief Executive +44 (0)20 7074
Officer 1800
RBC Capital Markets
Nominated Adviser
and Joint
Corporate Broker +44 (0)20 7653
Jonny Hardy 4000
Investec Bank
Joint Corporate
Broker
Chris Sim/ George +44 (0)20 7597
Price 4000
Numis Securities
Limited
Joint Corporate
Broker
John Prior/ James +44 (0)20 7260
Black/ Paul Gillam 1000
Kreab Gavin Anderson
Marc Cohen / Christina +44 (0)20 7074
Clark /Fiona Cumberland 1800
DIRECTORS' RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with IAS 34 "Interim Financial Reporting"; and
b) the half yearly financial report includes a fair review of
the information:
-- being an indication of important events that have occurred
during the first six months of the financial year, and their impact
on the half yearly financial report and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- being disclosure of related party transactions that have
taken place in the first six months of the financial year and that
have materially affected the financial position or the performance
of the Group during that period and any changes in the related
party transactions described in the last annual report that could
have a material effect on the financial position or performance of
the Group in the first six months of the current financial
year.
By order of the Board
John Sisay Alex Kamara
26 August 2015 26 August 2015
INDEPENDENT REVIEW REPORT TO SIERRA RUTILE LIMITED
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2015 which comprises the unaudited
condensed consolidated income statement, the unaudited condensed
consolidated statement of comprehensive income, the unaudited
condensed consolidated statement of financial position, the
unaudited condensed consolidated statement of cash flows, the
unaudited condensed consolidated statement of changes in equity and
related Notes 1 to 14. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to them in an
independent review 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, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM rules of the London Stock Exchange.
As disclosed in Note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the AIM rules of the London Stock Exchange.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
26 August 2015
Sierra Rutile Ltd and its subsidiaries
Unaudited condensed consolidated income statement
Interim period ended 30 June 2015
6 months 6 months
to to
30 June 30 June
2015 2014
Notes US$'000 US$'000
Revenue 3 45,665 64,052
Cost of sales (44,051) (58,116)
Gross profit 1,614 5,936
Administrative and marketing
expenses (5,597) (7,722)
Other income 33 131
(3,950) (1,655)
Finance income /(costs) 4 1,369 (2,150)
Loss before taxation (2,581) (3,805)
Income tax expense 5 (1,603) (320)
Loss for the period (4,184) (4,125)
Unaudited condensed consolidated statement of comprehensive
income
Loss for the period (4,184) (4,125)
Total comprehensive loss
for the year (4,184) (4,125)
Loss per share (US$)
* basic and diluted 6(0.008) (0.008)
Sierra Rutile Ltd and its subsidiaries
Unaudited condensed consolidated statement of financial
position
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Interim period ended 30 June 2015
Audited
30 June 31 December
2015 2014
ASSETS Notes US$'000 US$'000
Non-current assets
Intangible assets 11,582 11,624
Property, plant and equipment 7 160,232 159,276
Biological assets 8 - 4,927
Investment in joint venture 8 5,271 -
177,085 175,827
Current assets
Biological assets 8 415 184
Inventories 54,320 49,909
Trade and other receivables 9,347 19,914
Current tax assets - 228
Cash and cash equivalents 9,020 6,564
Derivative financial instruments 14 902 -
74,004 76,799
Total assets 251,089 252,626
LIABILITIES
Current liabilities
Trade and other payables (16,104) (16,432)
Current tax liabilities (891) (6)
Short-term borrowings 9 (24,962) (20,046)
Provision for liabilities
and charges (192) (288)
(42,149) (36,772)
Non-current liabilities
Medium-and-long-term borrowings 9 (19,506) (22,954)
Retirement benefit obligations (3,296) (2,931)
Provision for liabilities
and charges (1,862) (1,928)
(24,664) (27,813)
Total liabilities (66,813) (64,585)
Net assets 184,276 188,041
EQUITY AND LIABILITIES
Share capital 10 275,102 275,102
Share capital option reserve 2,819 2,637
Retained loss (93,645) (89,698)
Total equity attributable
to equity holders of the
parent 184,276 188,041
Sierra Rutile Ltd and its subsidiaries
Unaudited condensed consolidated statement of cash flows
Interim period ended 30 June 2015
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Operating activities
Loss before taxation (2,581) (3,805)
Adjustments for:
Depreciation on property,
plant and equipment 10,662 9,757
Amortisation of intangible
assets 85 86
Write off of property,
plant and equipment - 473
Total borrowing costs 1,234 2,473
Exchange gain (2,596) (313)
Share option expense 419 544
Provision for doubtful
debts - 336
Changes in working capital
* (Increase)/decrease in inventories (4,411) 10,039
* Decrease/(increase) in trade and other receivables 10,008 (17,732)
* (Decrease)/increase in trade and other payables (328) 1,764
* Movement in provisions (6) (78)
Interest paid (1,173) (1,532)
Tax paid (490) (398)
Net cash inflow from operating
activities 10,823 1,614
Investing activities
Purchase of property,
plant and equipment (10,280) (6,806)
Purchase of biological
assets (231) (1,576)
Purchase of intangible
assets (43) (151)
Net cash used in investing
activities (10,554) (8,533)
Financing activities
Net proceeds from borrowings 2,735 20,000
Repayment of borrowings - (24,939)
Cash flow from derivative
financial instruments (583) -
Net cash from/(used in)
financing activities 2,152 (4,939)
Net increase/(decrease)
in cash and cash equivalents 2,421 (11,858)
Cash and cash equivalents
at beginning of the period 6,564 22,628
Net increase/(decrease)
to cash and cash equivalents 2,421 (11,858)
Effect of foreign exchange
rate changes 35 48
Cash and cash equivalents
at end of period 9,020 10,818
Sierra Rutile Ltd and its subsidiaries
Unaudited condensed consolidated statements of changes in
equity
Interim period ended 30 June 2015
Share
Share option Retained Total
capital reserve loss equity
US$'000 US$'000 US$'000 US$'000
Balance at 31 January
2014 275,102 6,439 (84,329) 197,212
Total comprehensive
income for the period - - (9,948) (9,948)
Exercise of share
options - (3,842) 3,842 -
Forefeiture of share
options - (737) 737 -
Recognition of share-based
payments - 777 - 777
Balance at 31 December
2014 275,102 2,637 (89,698) 188,041
Balance at 31 January
2015 275,102 2,637 (89,698) 188,041
Total comprehensive
income for the period. - - (4,184) (4,184)
Forefeiture of share
options - (237) 237 -
Recognition of share-based
payments - 419 - 419
Balance at 30 June
2015 275,102 2,819 (93,645) 184,276
Sierra Rutile Ltd and its subsidiaries
Notes to unaudited interim condensed consolidated financial
statements
Interim period ended 30 June 2015
1. General information
Sierra Rutile Limited ("Sierra Rutile") is a public limited
company incorporated and domiciled in the British Virgin Islands.
The address of its registered office is at P.O. Box 4301, Trinity
Chambers, Road Town, Tortola, British Virgin Islands.
2. Accounting policies
Basis of preparation
The condensed consolidated financial statements for the six
month period ended 30 June 2015 have been prepared in accordance
with International Accounting Standard (IAS) 34 "Interim Financial
Reporting".
These financial statements are condensed financial statements
and accordingly do not include all of the information required for
a full annual financial report and are to be read in conjunction
with the Group's financial statements for the year ended 31
December 2014, which were prepared in accordance with International
Financial Reporting Standards (IFRS) adopted for use by the
European Union. The financial information for the year ended 31
December 2014 does not therefore constitute statutory accounts.
This information was derived from the statutory accounts for the
year ended 31 December 2014. The auditor's report on these accounts
was unqualified and did not include a reference to any matters to
which the auditor drew attention by way of an emphasis of
matter.
The condensed consolidated financial statements have been
prepared under the historical cost convention.
The accounting policies used by the Group in these condensed
financial statements are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2014, as
amended to reflect the adoption of new standards, amendments and
interpretations which became effective in the period as shown
below:
-- Amendments to IAS19 - Employee Benefits: Defined Benefit Plans - Employee Contributions
-- Annual Improvements to IFRSs 2010 - 2012 cycle
-- Annual Improvements to IFRSs 2011 - 2013 cycle
The adoption of these new accounting pronouncements has not had
a significant impact on the accounting policies, methods of
computations or presentation applied by the Group. The Group has
not early adopted any amendment, standard or interpretation that
has been issued but is not yet effective. It is expected that where
applicable, these standards and amendments will be adopted on each
respective effective date.
Going concern
At 30 June 2015, the Group had cash and cash equivalents of
US$9.0 million and total borrowings of US$44.5 million.
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The Board has considered the Group's cash flow forecasts for the
period to the end of September 2016, which includes the potential
requirement to repay the US$20 million Nedbank Working Capital
Facility in August 2016, if it has not been extended or refinanced
prior to this time. The Board is satisfied that the Group's
forecasts and projections, taking account of reasonably possible
changes in trading performance show that the Group will be able to
operate with the level of its current facilities for the
foreseeable future. In the event of certain adverse pricing and
production scenarios (including a delay to the commissioning of the
Gangama project), management has within its control the option of
deferring uncommitted capital expenditure to maintain the Group's
funding position and subject to agreement from Nedbank extending
the tenure of the Working Capital Facility, which management is
confident will be received.
Accordingly, the Board continues to adopt the going concern
basis in preparing the financial statements (see page 3 of this
report).
3. Segment information
IFRS 8 requires operating segments to be identified on the basis
of internal reports about components of the Group that are
regularly reviewed by the Chief Operating Decision Maker of the
Group to allocate resources to the segments to assess their
performance.
The strategy of the Group is to produce, refine and sell rutile.
Information reported to the Board is on an integrated basis, which
is how decisions over resource allocation are made. The Group
itself has only one mining product being rutile, with ilmenite,
zircon and other concentrates and other revenue streams being
considered by-products of the integrated rutile production
process.
As such, the Group considers there to be one segment being the
production, refining and sale of rutile. Since the beginning of
2013, the Group has begun to grow certain agricultural products
(see note 8), but at 30 June 2015 this is not considered material
enough to be a reportable segment.
Segment revenue
Revenue represents the invoiced amount in respect of sales of
rutile, ilmenite and zircon and other concentrates extracted during
the period excluding sales discount and consists of the
following:
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Rutile 40,648 58,477
Ilmenite 4,042 4,208
Zircon and other concentrates 975 1,367
45,665 64,052
Geographical information
Revenue is derived from sales to external customers domiciled in
various geographical regions. Details of segment revenue by
location of customers are as follows:
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Asia 4,022 7,044
Europe 28,295 11,031
North America 12,604 18,370
South America 286 884
MENA (Middle East and North
Africa) 458 26,723
45,665 64,052
No customers are currently located in Sierra Leone.
For the period ended 30 June 2015 revenues of US$14,364,000,
US$8,417,000 and US$7,901,000 were generated from three customers
(30 June 2014 revenues of US$26,316,000, US$18,321,000 and
US$10,347,000 were generated from three customers), each of whom
accounted for more than 10% of our total sales in each period.
Seasonality information
Whilst certain of the activities of the Group's operations are
subject to the effects of seasonality, the effect on the results of
the Group are minimal.
3. Segment information (continued)
Segment assets
All of the Group's assets are in Sierra Leone except certain
inventory balances valued at US$1.8 million (31 December 2014:
US$4.0 million) held in a warehouse in Europe.
4. Finance income/(costs)
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Net finance income/(costs)
Interest expense and arrangement
fees:
* Government of Sierra Leone loan (647) (1,168)
* Nedbank loan (700) (1,112)
* Other (292) -
Unwinding of discount on
rehabilitation provision (43) (46)
Unrealised gain on derivative
financial instruments 610 -
Interest expense on retirement
benefit (162) (147)
Total borrowing costs (1,234) (2,473)
Net foreign exchange transaction
gains 2,603 323
Total finance income/(costs) 1,369 (2,150)
5. Income taxes
(a) Income tax expense
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Current tax 5 -
Deferred tax - -
Minimum turnover tax at
3.5% (2014: 0.5%) 1,598 320
Income tax expense 1,603 320
From 1 January 2015, the taxation of the Group's operations in
Sierra Leone reverted to the provisions of the Sierra Rutile
Agreement (Ratification) Act 2002, under which tax is charged at an
amount not less than 3.5% of turnover and not more than the
standard Sierra Leone corporate income tax rate (up to a maximum
rate of 37.5%) on taxable profits. The standard corporate income
tax rate in Sierra Leone enacted at the balance sheet date was
30%.
5. Income taxes (continued)
(a) Income tax expense (continued)
Based on the above, the income tax expense can be reconciled to
the Company's loss before tax as follows:
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Loss before tax (2,581) (3,805)
Current tax 5 -
Minimum turnover tax at
3.5% (H1 2014: 0.5%) 1,598 320
Deferred tax - -
Income tax expense 1,603 320
(b) Current tax liabilities/(assets)
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
Opening balance (222) (241)
Charged to the income
statement 1,603 320
Paid during the period (490) (398)
At end of period 891 (319)
6. Loss per share
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
(a) Basic loss per share
Loss attributable to owners
of the parent (4,184) (4,125)
Weighted average number
of ordinary shares in issue 522,231,508 516,920,956
Basic loss per share (0.008) (0.008)
6 months 6 months
to to
30 June 30 June
2015 2014
US$'000 US$'000
(b) Diluted loss per share
Loss attributable to owners
of the parent (4,184) (4,125)
Weighted average number
of ordinary shares in issue 522,231,508 516,920,956
Effect of dilutive ordinary -
shares-share options -
Weighted average number
of ordinary shares for diluted
loss per share 522,231,508 516,920,956
Diluted loss per share (0.008) (0.008)
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The outstanding share options at 30 June 2015and at 30 June 2014
represent anti-dilutive potential ordinary shares, therefore basic
and diluted earnings per share are the same for the respective
periods. Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue on the
assumption of conversion of all potentially dilutive ordinary
shares. Potential ordinary shares shall be treated as dilutive
when, only when, their conversion to ordinary shares would decrease
earnings per share or increase loss per share.
7. Property, plant and equipment
During the period the Group spend US$10.3 million on acquisition
of property, plant and equipment, of which US$7.9 million related
to expenditures on Gangama Dry Mine.
The amount of borrowing costs related to this project and
capitalised during the six months ended 30 June 2015 was
approximately US$1.5 million.
The Group also scrapped certain fully depreciated machinery
which no longer had economic value to the Group worth US$2.7
million.
8. Investment in joint venture
In June 2015, Sierra Rutile sold 51% of its agricultural
business Agricultural Resources Group ("ARG") to Carmanor for $1
and an agreement by Carmanor to fund all work commitments for the
years ending 31 December 2015 and 2016. Subject to successful
completion of these work commitments in each of the years,
Carmanor's interest will increase to 65% and 75% respectively.
Under the terms of the shareholder agreement, Sierra Rutile has
retained joint control over ARG and consequently will equity
account for its 49% holding.
30 June
2015
US$'000
Assets disposed
Property, plant and equipment 195
Biological assets 5,076
5,271
Satisfied by:
Investment in joint venture 5,271
5,271
The fair value of the joint venture of $5.3 million equals the
net assets disposed and as result there is no gain or loss recorded
in the consolidated income statement.
Certain biological assets with a value of $415,000 included
within ARG were not subject to the agreement with Carmanor and they
continue to be controlled by Sierra Rutile.
9. Borrowings
30 June 31 December
2015 2014
US$'000 US$'000
Unsecured borrowings:
Government of Sierra Leone
Loan (a) 21,571 22,954
21,571 22,954
Secured borrowings:
Nedbank Loan (b)(i) 20,035 20,046
Nedbank Loan (b)(ii) 2,862 -
22,897 20,046
Total borrowings:
Current 24,962 20,046
Non-current 19,506 22,954
44,468 43,000
The group has three principal loans:
(a) Government of Sierra Leone Loan "GOSL" Loan-unsecured
The GOSL borrowing is subject to interest of 8% per annum and
became repayable semi-annually from June 2013. There are no
covenants attached to the loan and the Group does not have any
undertaking, nor is it contractually bound to create, any lien on
or with respect to any of its rights or revenues. In December 2014,
the Group obtained approval for the deferral of repayments for the
loan from the GOSL. Repayments will resume in June 2016 and the
loan is expected to be fully repaid by June 2018. The balance at 30
June 2015 is Euro 19,475,016 (US$ 21,570,600).
(b) US$50 million Nedbank Facility-secured
(i) US$20 million Nedbank Working Capital Facility -secured
Initially this revolving facility had a tenor of one year from
19 August 2013 and this was renewed for a further two years on 22
July 2014 and is committed until August 2016. The facility carries
an interest rate of LIBOR plus 5%, and is secured against the
assets of the Group. If a portion of the loan is drawn down, any
future cash receipts from sales are restricted until they cover the
portion of the loan drawn down. At the 30 June 2015 test date the
Group was fully compliant with the interest cover ratio covenant
for the facility and the facility was fully drawn down. The
liability at 30 June 2015 and 31 December 2014 includes certain
interest balances paid after the period end date.
(ii) US$30 million Nedbank Senior Loan Facility -secured
This facility has a tenor of four years from financial close on
21 April 2015, carries an interest rate of LIBOR plus 5.25%, and is
secured against the assets of Sierra Rutile. This facility is
restricted for use on the Gangama Dry Mine project and US$
2,735,000 is drawn down at 30 June 2015. The first covenant
measurement period on this facility is December 2016.
9. Borrowings (continued)
(c) US$15 million Pala Standby Facility-unsecured
The facility will have a tenor of 18 months from initial
drawdown, and carries an interest rate of LIBOR plus 5.25%. It is
available during the construction of Gangama Dry Mine. Closing and
drawdown of this facility is subject to satisfaction of a number of
conditions customary for a financing of this type. This facility is
currently undrawn at 30 June 2015.
The carrying values of all the Groups borrowing approximate fair
value.
10. Share capital
Share
Number capital
Issued shares and options of shares US$'000
At 1 January 2014 514,900,417 275,102
Options exercised 6,189,441 -
At 30 June 2014 521,089,858 275,102
Options exercised 1,141,650 -
At 31 December 2014 522,231,508 275,102
Options exercised (a) - -
At 30 June 2015 522,231,508 275,102
(a) During the period no share options held by management and
directors were exercised.
The total authorised number of ordinary shares is unlimited with
no par value. All issued shares are fully paid and are admitted on
the AIM market of the London Stock Exchange.
11. Capital commitments
30 June, 31 December,
2015 2014
US$'000 US$'000
Property, plant and equipment
acquisition contracted for
at the end of the reporting
period but not yet incurred: 22,328 741
At 30 June 2015, the Group had capital commitments of
US$22,328,000 (31 December 2014: US$741,000) principally relating
to construction of Phase 1 of the Gangama Dry Mine project.
12. Related party transactions
The following table provides the total amount of transactions
that have been entered into with related parties during the six
months ended 30 June 2015 and 2014, as well as balances with
related parties as at 30 June 2015 and 31 December 2014:
Amount Purchases/project Amounts
payable fees receivable
(a) Transactions and balances US$'000 US$'000 US$'000
At 30 June 2015
Director:
Enterprise in which Mr.
Alex Kamara is also a director
- Cemmats Group * (57) (299) -
At 30 June 2014
Director:
Advances to a director** - - 50
Director:
Enterprise in which Mr.
Alex Kamara is also a director
- Cemmats Group * (8) (59) -
At 30 December 2014
Director:
Advances to a director** - - 8
Director:
Enterprise in which Mr.
Alex Kamara is also a director
- Cemmats Group * - (289) -
* Mr. Alex B. Kamara is a Director of the Group. Mr. Kamara is
also a non-executive director of Cemmats Group, a Sierra Leonean
company which has a number of contracts with Sierra Rutile to
supply mining services and equipment.
** Included in trade and other receivables in 2014 was an amount
owed to the company by one of the directors. The advance was made
to Mr. A Kamara to cover medical and travel expenses. This amount
does not carry interest and was fully settled in January 2015.
(b) Agreements with senior officers, directors and advisers
During the period the company granted 10,550,000 share options
(30 June 2014: 4,375,000) to Directors, senior officers of the
company with exercise price of GBP0.30 (30 June 2014:GBP0.51).
(c) Transactions with significant shareholder
As disclosed in note 9, the Group secured a US$15 million
Standby Facility from Pala Investments, the Group's majority
shareholder. The Standby Facility is available during the
construction of the Gangama Dry Mine. The Standby Facility has a
tenor of 18 months from initial drawdown, carries an interest rate
of LIBOR plus 5.25%, and has no associated arrangement or
commitment fees. Closing and drawdown of this facility is subject
to satisfaction of a number of conditions customary for a financing
of this type and the facility was undrawn as at 30 June 2015.
13. Financial instruments
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