Source - RNS
RNS Number : 2673L
Ferrum Crescent Ltd
30 September 2016
 

30 September 2016

Ferrum Crescent Limited

("Ferrum Crescent", the "Company" or the "Group")

(ASX: FCR, AIM: FCR, JSE: FCR)

 

Final Results for the Year Ended 30 June 2016

 

Ferrum Crescent Limited, the ASX, AIM and JSE quoted iron ore developer in Northern South Africa, today announces its final results for the year ended 30 June 2016. These will be posted to Shareholders in due course.

 

A pdf copy of the full Accounts is available as a link to this announcement and on the Company's website (www.ferrumcrescent.com).

 

Commenting on the final results Justin Tooth, Executive Chairman said:

"2016 has been a key period for resetting Ferrum Crescent to be able to build real value for shareholders. The Company has seen a significant restructure in how it is operated, costs have been cut back and new skills made available to the Group. After careful review an option was signed on a suite of lead zinc assets in Spain that bring a significant pre-existing data package on projects in a strong performing commodity, in a politically stable region.  I am also pleased with the work we have done on Moonlight and I look forward to announcing more new to the market from both of our projects, following the Boards decision to exercise the Spanish option and mobilisation to site about to begin."

 

 For further information on the Company, please visit www.ferrumcrescent.com or contact:

 

Ferrum Crescent Limited

Justin Tooth, Executive Chairman

Grant Button, Company Secretary

T: +61 8 9474 2995

UK enquiries:

Laurence Read (UK representative)

T: +44 7557 672 432

 

Strand Hanson Limited (Nominated Adviser)

Rory Murphy/Matthew Chandler

T: +44 (0)20 7409 3494

 

Beaufort Securities Limited (Broker)

Elliot Hance

T: +44 (0)20 7382 8300

 

Bravura Capital (Pty) Ltd (JSE Sponsor)

Doné Hattingh
T (direct): +27 11 459 5037

 

 

The directors accept full responsibility for the information contained in this announcement.  The auditor's unqualified report is available for inspection at the Company's registered office in Australia and at the Company's office at Block B, Regent Hill Office Park, cnr Leslie & Turley Rds, Lonehill, 2062 for 28 business days from release of this announcement.

 

Extracts from the Company's Full, audited Report and Accounts are set out below:

 

Introduction to the Group

 

Ferrum Crescent Limited ("Ferrum", "FCR" or the "Company") is an Australian company listed on the Australian Securities Exchange (ASX: FCR) and on the JSE Limited (JSE: FCR) and quoted on the AIM market of the London Stock Exchange plc (AIM: FCR).

 

Review of operations and activities

 

Ferrum seeks to capitalise on the future demand for high quality iron products worldwide by producing a premium material that can be used in the manufacture of steel in electric arc furnaces.

 

The Moonlight Deposit (upon which the Moonlight Project is based) is a magnetite deposit located on the farms Moonlight, Gouda Fontein and Julietta in Limpopo Province in the north of South Africa (see Figure 2) and is the main operational focus for the Company. Iron and Steel Industrial Corporation (South Africa) ("Iscor"), which explored the Project in the 1980s and '90s, reported mineralisation, capable of producing a concentrate grading at 68.7% iron. At that time, Iscor concluded that the deposit, which was described as comparable to the world's best, was easily mineable due to its low waste-to-ore ratio. The beneficiation attributes of Moonlight ore are extremely impressive, with low-intensity magnetic separation considered suitable for optimum concentration.

 

Metallurgical tests on Moonlight material, undertaken since then by Ferrum, suggest that Iscor's results are conservative, that good metal recoveries can be achieved, and that the resulting concentrates have a high iron content and only negligible impurities. Grind sizes of between 125 to 250 microns produces recoveries of 42-45% and grades of 68-70% Fe. Importantly, the Moonlight material should be amenable to the manufacture of direct reduction ("DR") grade iron pellets, which are in high demand by modern steel manufacturers.

 

Various key components of a BFS have already been concluded on the Project with significant milestones achieved to date including:

 

·     Definition and reporting of an independent JORC Code (2012) compliant Mineral Resource estimate of 307.7Mt at 26.9% Fe of which the  Inferred category is estimated to contain 172.1Mt at 25.3% Fe; the Indicated - 83Mt at 27.4% Fe and Measured - 52.6Mt at 31.3% Fe (May 2012)

 

·     30 year Mining Right granted

 

·     Environmental licence (EIA) in place for the Moonlight Project mining area (approved 4 April 2013)

 

·     Metallurgical test work indicates high quality product in excess of 69% iron and low deleterious elements possible

 

The Company is now seeking to progress the BFS work which will focus on the initial production of high grade magnetite concentrate in order to accelerate the project's production schedule.

 

As a potential producer of a high-grade iron ore product, the final assessment of Moonlight's capability to operate and process ore at an industrial scale is all important.

 

Metallurgists continue to work closely with geologists to identify key areas for representative sample selection for advanced metallurgical testing including a pilot test work programme. Immediate test work will focus on optimising grind size vs iron recovery.

 

Future work will also focus on optimising the pelletising process including an assessment of temperature profiling and treatment times.

 

Work to date on mine planning has been based on a contract mining model for site development, overburden removal and general open pit mining activities.  A low stripping ratio is expected: 1:1.5 during the early years of operations (relatively shallow dips with occurrence of up to 4 magnetite-bearing zones).

 

Feasibility study requirements that still need to be completed include:

·     geotechnical drilling (part complete), mine design, mine reserve estimation based on certain cut-off estimates and economic criteria and a final estimate of mining costs from an adjudicated tender process for contract mining;

·      finalising pipeline route for environmental impact study completion;

·      optimising pipeline design and costing (finalising rheology / density and particle size distribution);

·      finalising negotiations with Eskom (power) for capital costs and tariffs once mining/process demand/schedules are finalised for the anticipated 50-60MW needed for concentrate production; and

·     finalising negotiations with Transnet (rail and port) for planning and costing of loading / unloading facilities, wagon and locomotive requirements and port handling and storage costs. Transnet will need to review the Project's infrastructure requirements as part of the feasibility component and finalisation of commercial arrangements and an appropriate area and connection at the port (Richards Bay) will need to be secured by the Company.

 

 

Moonlight Project Concept

 

Recognising that adding value within the country is a strategic preference for all mining operations within South Africa, Ferrum has consistently planned for beneficiation and other value-adding processes to take place within the country.  Project concepts have previously included the production of pig iron at or near the Moonlight site. However, the Company now believes, that the initial development concept for the Project is likely to involve mining at site and the production of an iron ore concentrate for transportation via a slurry pipeline to a dewatering and loading facility to be located in Thabazimbi. The high grade product would initially be sold to the domestic market. To this end, Ferrum has received a Letter of Intent ("LOI") for production offtake. Future studies will also assess the requirements for the production of pellets and other agglomerated products for use in steel making.

 

Several future pelletiser sites and rail and port combinations have been considered, and the Company has continued to seek confirmation from infrastructure providers (including rail, port and power suppliers) of an allocation of future capacity for the Company. During the 2012 financial year, the South African Government announced that significant capital would be applied in upgrading the rail and port facilities that service the Waterberg Region, which is close to where the Moonlight Deposit is situated.  These planned upgrades are strategically necessary to unlock the value of the Waterberg Region, where the country's most significant remaining coal reserves are situated.  Accordingly, rail, power, water and port facilities are all being upgraded as a matter of national priority.

 

Proposed Rail Upgrades to Waterberg Coal Sources

 

Figure 3 below contains a map showing the planned upgrades to the existing rail infrastructures considered to be the most likely to be used for the Moonlight Project.  The proposed loading facility would be situated near to the Thabazimbi railhead, and export product would be railed to Richards Bay for shipping to customers in the Middle East and elsewhere.

 

During a recent meeting with Transnet, it was agreed to continue to hold regular meetings in order to monitor progress on the rail infrastructure expansion project and for Ferrum to advise status of the proposed commencement of production at Moonlight.

 

 

 

Figure 3: Proposed Rail Upgrades to Waterberg Coal Sources (source: Transnet 2012)

 

Link: http://www.rns-pdf.londonstockexchange.com/rns/2673L_-2016-9-29.pdf

 

In June 2011, the Company entered into an offtake agreement with Swiss based Duferco SA, a leading private company involved in the trading, mining, and end use of iron and steel products and raw materials for the steel industry. Following due diligence on the mineral assets of the Company, Duferco concluded that the Group should be able to produce direct reduction and/or blast furnace pellets equal to or better than current world class product.

 

The offtake agreement with Duferco covers up to 6 Mpta of anticipated future iron ore pellet production from the Project.  Under the agreement, Ferrum will sell Duferco all of its production available for export (in total 4.5 Mpta) and will give Duferco a right of first refusal over an additional 1.5 Mt per annum.

 

In June 2015, South Africa's competition authorities approved, with certain conditions, a merger between China's Hebei Iron and Steel Group Co. and Duferco International Trading Holding, which has certain subsidiaries in South Africa. This transaction is not expected to affect the Company's pre-existing offtake agreement.  

 

Environmental

 

EIAs are currently being prepared for certain aspects of the Project including pipeline route and a product handling facility at Thabazimbi. Environmental approvals are already in place in respect of all mining activities.

 

Geology and Mineral Resources

 

The Mineral Resources are currently located entirely on the farm Moonlight 111LR, with significant potential for future expansion of the existing resource base within the Project area once all current work streams have been financed and completed.

 

In 2014, Mineral Corporation Consultancy Pty Ltd ("The Mineral Corporation") undertook an update of the Project's Mineral Resource estimate to the requirements of JORC (2012), having previously been reported in accordance with JORC (2004). It determined that the Mineral Resource classification criteria imposed in deriving the previous estimate were still valid. Furthermore, the additional reporting requirements contained in JORC (2012) have been fully complied with in its updated independent Mineral Resource estimate report.

 

 

 

Figure 4: Moonlight Deposit Geological Plan

 

Link: http://www.rns-pdf.londonstockexchange.com/rns/2673L_1-2016-9-29.pdf

 

The Project has been explored in the past by Kumba Iron Ore Limited (KIOL) and more recently by the Company. Drilling data from KIOL and three phases of Ferrum exploration inform the estimate. The drilling comprised open-hole percussion, reverse circulation (RC) percussion and diamond core drilling and was all drilled in a vertical orientation.

 

 

A total of 122 RC holes and 89 diamond core holes were employed in the Mineral Resource estimate.

 

 

The Mineral Resource estimate is provided in the table below and the Mineral Resource estimation criteria, as required in JORC (2012) and in Section 5.8.2 of the ASX Listing Rules, are available on the following link: www.jorc/docs/JORC_code_2012.pdf.

 

 

Category

Mineral Resource Gross

Mineral Resource Net (attributable to Ferrum Crescent at 97%)

Mineral Resource Grade

 

Tonne (Mt)*

Contained Fe (Mt)*

Tonne (Mt)*

Contained Fe (Mt)*

Fe (%)

SiO2 (%)

Al2O3 (%)

Inferred

172.1

43.5

166.9

42.2

25.3

51.2

4.8

Indicated

83.0

22.7

80.5

22.1

27.4

50.1

4.0

Measured

52.6

16.5

51.0

16.0

31.3

47.3

2.5

Total

307.7

82.7

298.4

80.3

26.9

50.3

4.2

*Tonnes are rounded

 

 

 

The information above that relates to Exploration Targets, Exploration Results and Mineral Resources has been compiled by Stewart Nupen, a Competent Person who is a Fellow of the Geological Society of South Africa and a registered Professional Natural Scientist with the South African Council for Natural Scientific Professionals. Stewart Nupen is employed by The Mineral Corporation, an independent consulting firm to Ferrum.

 

Stewart Nupen has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Stewart Nupen consents to the inclusion herein of the matters based on his information in the form and context in which it appears.

 

 

Valuation

 

As at 30 April 2014, The Mineral Corporation prepared an independent valuation for the Project. This independent valuation can be viewed by accessing the following link and going to the disclosures for July 2014: http://www.ferrumcrescent.com/irm/archive/asx-announcements.aspx?RID=8.

 

 

2015 Drilling

 

During the 2015 reporting period, the Company completed a drilling programme that was designed to investigate the extent of Zone D and provide information to inform the location of the proposed future mine. Its purpose was also to identify if, and the areas where, bulk sampling for the requisite levels of metallurgical testwork should take place during the next stage of the Moonlight BFS.

 

The drill programme comprised 10 reverse circulation drill holes (for a cumulative total of 1,396m) and was completed in Q1 2015 ahead of time and below budget. All holes intersected mineralised magnetic zones across various depths.

 

The Zone D drilling confirmed comparable grades to those previously identified within the Inferred Resource, and consequently enabled the Company to finalise its plans for the BFS with respect to the location and design of the proposed open pit mine for the first 10 years of the mine's life, within primary Zones A, B and C, due to shallower intersections, higher grades and better stripping economics. A new zone of mineralisation, Zone E, was also identified representing future exploration potential.

 

Further infill drilling is required to establish a JORC (2012) Ore Reserve and for advanced beneficiation work to be undertaken as part of the direct reduction iron (DRI) plant design process. The success of such infill drilling will also determine whether bulk sampling is necessary to complete the full mine design and plant costings.

 

Following the future completion of all mine plan, plant design and processing assessments, the final stage of the BFS can then be progressed, utilising the stand-alone project economics to establish optimal infrastructure agreements with the relevant local government agencies.

 

Infrastructure

 

Ongoing planning discussions related to future infrastructure requirements which include rail facilities, power and water have continued between the Company and South African infrastructure providers during the reporting period. An LOI has been concluded whereby the final product will be sold in Thabazimbi to a local manufacturer which will greatly reduce the Company's reliance on rail to Richards Bay.

 

Community

 

The Company has signed a Memorandum of Agreement with the Lephalale Local Municipality ("LLM").  The agreement defines the Company's role in assisting the local communities.  The Company will assist in skills development, water scheme planning and developing select students to reach their full potential for future employment at the mine. The Company will also participate in the Mayors Bursary scheme for 2016 school leavers.  LLM in turn is assisting the Company in obtaining historical geological information related to the Moonlight Project. LLM will also assist the Company with any talks with foreign investors and demonstrate their commitment to the project as well as assisting the Company with all key stakeholders and service providers.

 

Meetings are held on a monthly basis with the Company's neighbouring communities, the Ga Seleka and Ga Shonguane communities. 

 

 

Project Schedule

 

The following are significant factors with respect to the advancement of the Moonlight Project:

·      subject to funding, the BFS can be completed within approximately 18-24 months' work-time;

·      30 to 36 month mine construction period currently envisaged;

·      Project's schedule coincides with the South African Government's infrastructure development plans; and

·      Completion of the BFS is currently expected to cost approximately AUD12 - 14M.

 

 

Corporate

 

On 16 July 2015, the Company announced an update in respect of the first funding payment due under the BFS financing agreement with Principle Monarchy Investments (Proprietary) Limited ("PMI") for the development of the Moonlight Iron Ore Project in Limpopo Province, South Africa. PMI advised the Company that it had secured funds for the first R2M payment that was to be paid to the Company under the terms of the Memorandum of Understanding ("MOU") signed on 5 May 2015.

 

On 21 July 2015, PMI advised the Company that PMI had concluded a financing agreement which would enable PMI to fulfil all of its immediate commitments under the BFS financing agreement for the advancement of the project.

 

On 22 July 2015, the Company advised that an investing group had initially allocated funds to PMI in order to enable it to work with the Company over a 12 month period. The Company emphasised to PMI that the scheduled first payment of R2M was still overdue and that the Company awaited access to the funding from PMI in order to advance the work on the BFS. Operationally the Company announced that Hatch Goba had formally agreed to be engaged as the lead study consultant once funding had been received from PMI.

 

On 14 October 2015, the Company announced that the previously announced MOU with PMI to provide financing for the BFS for up to a 39% interest in Ferrum Iron Ore (Pty) Ltd ("FIO") had been formally terminated with no scheduled payments having been received from PMI.

 

On 14 October 2015, the Company also announced that a BFS Farm-In Agreement had been concluded with Business Venture Investments No.1709 (Proprietary) Limited ("BVI") to form a joint venture for the completion of the bankable feasibility study ("BFS") for the Moonlight Iron Ore Project. The comprehensive Farm-In Agreement provides for the completion of all the requisite BFS workstreams to produce a full BFS on the project to a fixed timeline, to be funded by BVI in return for up to a 43% equity interest in FIO the owner of the Moonlight Iron Ore Project. The Farm-In Agreement is to be undertaken in two phases.

 

Phase 1 will cover a study on the best short term business case model based upon technical, financial and committed domestic offtake details. BVI is responsible for completing this study within 12 months. Upon satisfactory completion of Phase 1 BVI will be entitled to 14% equity in FIO. The Company may, however, elect (but is not obligated) to contribute R8.3M to reduce the equity interest of BVI to 10%.  A Shareholders Agreement is intended to be entered into and become effective after the completion of Phase 1.

 

Phase 2 will commence upon satisfactory completion of Phase 1 and BVI will be afforded a total of 24 months in which to complete a full study on the best short term business case defined during Phase 1. Phase 2 will be carried out to a standard, and include, all matters required by international project and equity financiers, including without limitation certain detailed deliverables agreed with the Company. Upon satisfactory completion of Phase 2, BVI will earn a further 29% equity interest in FIO. Should BVI not complete Phase 2, it will have earnt no further equity in FIO apart from that earnt in respect of completing Phase 1.

 

On 14 January 2016, the Company announced that it had agreed with BVI to extend the timeline for completion of Phase 1 of the BFS by 3 months to 12 January 2017. This extension was in order for BVI to finalise the appointment of an internationally reputable engineering firm to manage the BFS.

 

On 16 February 2016, the Company announced that it had entered into an exclusive option and sale agreement for a staged option fee of up to GBP22,500, with TH Crestgate GmbH ("Crestgate"), a private Swiss-based company to potentially acquire 100 per cent. of its indirect wholly-owned subsidiary, GoldQuest Iberica, S.L. ("GoldQuest"), a private company incorporated in Spain, which owns 100 percent of two lead-zinc exploration projects in the provinces of León and Galicia, in historic Spanish mining areas ("the Iberian Projects"), to enable the Company to conduct due diligence on both GoldQuest and the Iberian Projects. The exclusive option, was valid until 31 July 2016, and if exercised the aggregate consideration payable for GoldQuest was approximately GBP465,000 to be satisfied partly in cash (approximately GBP320,000) and partly by the issue of 100,000,000 new ordinary shares in the capital of the Company. The option was exercisable entirely at the Company's discretion (refer to note11 for the investment as at 30 June 2016).

 

On 25 February 2016, the Company announced that it had received applications to subscribe for 149,681,797 new ordinary shares of no par value each at a price of GBP0.0012 per share to raise GBP 179,618 before expenses. Following admission the share capital of the Company comprised 772,985,191 ordinary shares.

 

On 31 March 2016, the Company announced a strategic update and corporate restructuring focused on generating value from the Group's principal iron ore project in northern South Africa and the development of its value-accretive business model, progressing initially with its option over the abovementioned Spanish lead-zinc projects (via the potential acquisition of GoldQuest.

 

The following Board changes were implemented, Mr Justin Tooth assumed the role of Executive Chairman and Managing Director from his previous non-executive role; Dr Evan Kirby joined the Board as a Non-Executive Director; Mr Merlin Marr-Johnson was appointed as an adviser to the Board to assist with the progression of the potential Spanish lead-zinc projects; Mr Tom Revy, who was the Managing Director resigned; Mr Bob Hair who was the Company Secretary resigned and Mr Grant Button, an existing Non-Executive Director assumed the duties of Company Secretary.

 

On 12 April 2016, the Company announced that its comprehensive due diligence investigations on GoldQuest and the Iberian Projects had been completed. The licences in respect of the Iberian Projects had been renewed for a further period of twelve months by the Government of León further to the fulfilment of a basic work programme at the two sites.

 

On 27 April 2016, the Company announced that it had conditionally raised, in aggregate, GBP650,000 before expenses through a placement, via Beaufort Securities Limited ("Beaufort"), its agent, a total of 403,846,154 new ordinary shares of no par value each and a direct subscription of 96,153,846 new ordinary shares, both at a price of 0.13 pence per new ordinary share.

 

As part of the placement and subscription, each investor was offered, options on the basis of one option for every share subscribed pursuant to the placement and subscription. Each option entitles the holder to subscribe for a further new ordinary share at a price of 0.165 pence per share for an exercise period of two years from the date of admission of the abovementioned placing and subscription shares.

 

In addition the Company announced that it was issuing, in aggregate, a further 9,807,692 new ordinary shares in settlement of certain fees, comprising 4,807,692 new ordinary shares to Beaufort at a deemed issue price of 0.13 pence per new ordinary share in settlement of Beaufort's corporate brokering services of GBP6,250 and 5,000,000 new ordinary shares to Crestgate at a deemed issue price of 0.13 pence in connection with the extension of certain escrow arrangements under the terms of the Company's option and sale agreement in respect of GoldQuest. Following admission of all of the aforementioned new ordinary shares, the total issued ordinary share capital of the Company was 1,282,791,883 ordinary shares.

 

On 15 June 2016, the Company announced a corporate and operational update stating, inter alia, that:

 

 

·     the Board was actively evaluating engineering pathways for alternate production routes, based on existing technologies and modelled on current equipment types which are in use at comparable mining operations, including examining lower cost capex development options with potential partners utilising alternative methods for the transportation of concentrate rather than a pipeline;

·      discussions were being held with new potential off-take partners for the supply of concentrate;

·      the Company was seeking to recover certain third party historic geological data and core samples on both the Julietta and Moonlight licence areas;

·      that a Memorandum of Agreement and co-operation framework ("MoA") had been signed with the Mayor of the Lephalale Municipality situated in the Waterberg District of the Limpopo Province which serves to secure the necessary consents from local stakeholders for progression of the project into future development; and

·      that the Company's planned work programme, to determine the extent of the mineralisation on the Iberian Projects was expected to commence shortly after the completion of the acquisition of GoldQuest.

 

Option over Lead-Zinc Exploration Projects, Spain

 

On 16th February 2016 Ferrum Crescent entered into an Option to potentially acquire 100 per cent. of GoldQuest Iberica, S.L. ("GoldQuest"). GoldQuest, a private company incorporated in Spain, owns 100 per cent. of two lead-zinc exploration projects (Toral and Lago) in the provinces of Leόn and Galicia, in historic Spanish mining areas (the "Iberian Projects").

 

Further to an initial analysis of the Toral Project's assets, the Company secured the Option to acquire GoldQuest for the following principal reasons:

  • The Board believes that analysis of the results from 42km of historic drilling, together with limited additional exploration work, can readily advance the Toral Project.
  • Establishment of enhanced resource estimate and process recovery is considered to be highly feasible.
  • The Toral Project's asset is open to major reinterpretation. The Board believes that the scale of the asset has been substantially underestimated previously and will seek to re-examine the geological model.

 

The Toral Project area has historically been assessed as containing a single, tabular zone of mineralisation at depths of 300-500m below surface. Such simplistic historical modelling, however, excludes a large amount of normally critical data and, following its due diligence enquiries, the Company believes that the historic NI 43-101 resource estimate significantly under-estimates the mineral potential of the Toral Project. The Company further believes that an initial low cost exploration work programme should be able to test the mineralisation in a series of parallel, sub-vertical structures running from depth up to surface.

 

Utilising the existing data and applying an exploration process that takes into account key structural controls and the characteristics of existing nearby mines will be a key initial work programme priority. Ferrum Crescent's objective, following the recent exercise of its Option on 22 September 2016to seek to establish a JORC compliant resource estimate at both the Toral Project and the Lago Project as well as re-examining the scale and continuity of mineralisation at the Toral Project.

 

Ferrum Crescent's ultimate objective is to potentially establish a credible mineral reserve in a cost effective manner for consideration by potential future acquirers or development finance groups. During the reporting period, the Company carried out extensive geological and legal due diligence on GoldQuest and the Iberian Projects.

 

In carrying out its operations during the reporting period, the Group has incurred a loss after income tax for the period from 1 July 2015 to 30 June 2016 of $1,573,533 (2015: loss of $2,345,860). The Group had net assets of $718,659 (2015: $525,522) as set out in the Statement of Financial Position.

 

 

Significant changes in the Group's state of affairs

 

There have been no significant changes in the state of affairs of the consolidated entity to the date of this report that have not otherwise been disclosed elsewhere in the Annual Report.

 

 

Significant events after the reporting date

 

There are subsequent events to report, as follows:

 

Subsequent to the Company entering into an exclusive option to acquire 100 percent of GoldQuest, two nil-cost extensions were granted to Ferrum Crescent on 22 July 2016 and 31 August 2016 and on 22 September 2016 the option was exercised. Accordingly, Ferrum Crescent has now acquired 100 per cent. of the share capital of GoldQuest. GoldQuest owns 100 per cent. of two lead-zinc exploration projects in the provinces of Leόn and Galicia, in historic Spanish mining areas (the "Iberian Projects"). The consideration comprised GBP326,500 in cash and the issue of 100 million new ordinary shares in the capital of Ferrum Crescent.

Planned work programme, to be overseen by the Company's Senior Project Adviser, Merlin Marr-Johnson, to comprise:

·      re-mapping of the main Toral Project area applying re-interpreted geological understanding of the regional controls on mineralisation;

·      in-fill surveys over the main prospect area where detailed soil geochemistry has not previously been conducted;

·      structural mapping of the existing adits, outcrop and the nearby mineralisation occurrences in order to gauge the balance between local (not fully tested) and regional (well documented) controls on mineralisation;

·      re-logging of historical drill-core and re-assaying of areas where incomplete assays were taken previously in order to seek to identify potential new shallow high grade targets at the Toral Project;

·      creation of a revised geological model incorporating existing and new geological data (geochemistry, structural interpretation, assays, logs, maps); and

·      generation of a highly targeted drill plan, focused on high-grade near-surface ore shoots linking known surface occurrences and known high-grade mineralisation at depth, for testing in 2017.

 

On 25 July 2016, the Company announced that it had conditionally raised in aggregate, GBP 374,453 before expenses through a placement via Beaufort Securities Limited, as agent to the Company, of 187,226,485 new ordinary shares of no par value each in the capital of the Company at a price of 0.20 pence per new ordinary share. As part of the placing, each investor was offered, subject to shareholder approval in accordance with the ASX Listing Rules, options on the basis of one option for every share subscribed pursuant to the placing. Each option entitles the holder to subscribe for a further new ordinary share at a price of 0.30 pence per share for an exercise period of two years following the date of admission of the placing shares to trading on AIM. In addition the Company agreed to grant a further 18,722,649 options to Beaufort Securities Limited on the same terms. Following admission, the total issued ordinary share capital of the Company was 1,470,018,368 ordinary shares.

 

On 28 July 2016, the Company announced that it was issuing 66,874,816 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate, 66,874,816 options exercisable at a price of 0.165 pence per share. Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of these option shares and the abovementioned placing shares, the total issued ordinary share capital of the Company was 1,536,893,184 ordinary shares.

 

On 26 August 2016, the Company announced that it was issuing 44,797,543 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate, a further 44,797,543 options exercisable at a price of 0.165 pence per share. Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of these option shares, the total issued ordinary share capital of the Company was 1,581,690,727 ordinary shares.

 

On 23 September 2016, the Company announced that it was issuing 5,381,907 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate, 5,381,907 options exercisable at a price of 0.165 pence per share Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of the option shares, the total issued ordinary share capital of the Company is 1,587,072,634 ordinary shares.

 

 

Likely developments and expected results

The Group will continue to carry out its business plans, by:

  • Exploring, evaluating and, if technically and economically feasible, developing the Moonlight Project in Limpopo Province, South Africa;
  • Conducting its planned initial zinc exploration work programme on the Iberian Projects in Spain;
  • Seeking further strategic acquisition opportunities within the exploration and mining industry to enter potentially into additional advanced projects that will add value to the Group; and
  • Continuing to meet its statutory commitments relating to its exploration tenements and carrying out exploration of its exploration tenements in accordance with its stated strategy, whilst carefully conserving the Group's cash reserves in order to be able to take advantage of value adding opportunities.

There can be no guarantee either that further exploration of the Group's tenements will result in exploration success or that any potential additional strategic acquisition considered by the Directors to be likely to add value to the Group will become available to the Group. 

 

Environmental regulation and performance

The Group's activities are subject to South African and Spanish legislation relating to the protection of the environment.  The Group is subject to significant environmental legal regulations in respect to its exploration and evaluation activities. The relevant South African Act that we comply with is the ("MPRDA") Mineral and Petroleum Resources Development Act, 2002 (Act No. 28 of 2002)

There have been no known breaches of these regulations and principles.

 

 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the year ended 30 June 2016

 

 

2016

2015

 

Note

$

$

Revenue from continuing operations

 

 

 

Revenue

3(a)

22,517

23,753

Other income

3(b)

490,850

-

 

 

 

 

Administration expenses

3(c)

(1,416,748)

 (1,478,102)

Occupancy expenses

 

(52,382)

(66,218)

Exploration expenditure

 

(188,506)

(456,595)

Fair value adjustment of forward subscription agreement

3(d)

46,868

(208,375)

Foreign exchange loss

 

(395,816)

(176,532)

Share based payments

20

(34,097)

(90,851)

Fair value gain on disposal  of available for sale investments

 

649

137,597

Impairment of minority interest obligation

3(d)

(46,868)

-

Loss before taxation

 

(1,573,333)

(2,315,323)

Income tax benefit / (expense)

5

-

(30,537)

Loss after income tax for the year

 

(1,573,533)

(2,345,860)

 

Other comprehensive income

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

Net exchange gain / (loss) on translation of foreign operation

 

225,175

(180,614)

Net fair value gains on available-for-sale investment

 

-

28,536

Income tax effect

 

-

(7,990)

Reclassification of net changes in fair value relating to the disposal of available for sale investments

 

649

(137,597)

Income tax effect

 

(182)

38,527

Growth on investment unrealised

 

524

-

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

 

226,166

(259,138)

Total comprehensive loss for the year

 

(1,346,376)

(2,604,998)

 

 

 

 

Net loss for the year attributable to:

 

 

 

Equity holders of the Parent

 

(1,573,533)

(2,345,860)

 

 

(1,573,533)

(2,345,860)

Total comprehensive loss for the period attributable to:

 

 

 

Equity holders of the Parent

 

(1,346,376)

(2,604,998)

 

 

(1,346,376)

(2,604,998)

Loss per share

 

Cents per share

Cents per share

 

Basic loss for the year attributable to ordinary equity holders of the Parent

7

(0.22)

(0.50)

 

The above Consolidated Statement of Profit and Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes

 

 

Consolidated Statement of Financial Position

As at 30 June 2016

 

 

 

2016

2015

 

Note

$

$

Assets

 

 

 

Current assets

 

 

 

Cash and short term deposits

8

743,264

1,028,468

Trade and other receivables

9

33,929

21,928

Other current financial assets

12

29,303

34,325

Prepayments

 

50,606

76,983

Total current assets

 

857,102

1,161,704

 

 

 

 

Non-current assets

 

 

 

Plant and equipment

10

13,533

29,645

Investments

11

243,331

-

Non-current financial assets

12

64,715

187,048

Total non-current assets

 

321,579

216,693

 

 

 

 

Total assets

 

1,178,681

1,378,397

 

 

 

 

Liabilities and equity

 

 

 

Current liabilities

 

 

 

Trade and other payables

13

263,827

168,713

Payments received in advance

14

175,722

629,325

 

 

 

 

Provisions

15

20,473

54,837

Total current liabilities

 

460,022

852,875

 

 

 

 

Total liabilities

 

460,022

852,875

 

 

 

 

Equity

 

 

 

Contributed equity

16

33,049,490

31,542,093

Accumulated losses

19

(24,424,297)

(22,850,764)

Reserves

18

(7,906,534)

(8,165,807)

 

Equity attributable to equity holders of the Parent

 

718,659

525,522

Total equity

 

718,659

525,522

 

 

 

 

Total equity and liabilities

 

1,178,681

1,378,397

 

 

This Consolidated Statement of Financial Position is to be read in conjunction with the accompanying notes.

 

 

Consolidated Statement of Cash Flows

For the year ended 30 June 2016

 

 

 

2016

2015

 

Note

$

$

Cash flows from  / (used in) operating activities

 

 

 

Interest received

 

3,191

10,635

Income from available for sale investment

 

5,242

13,118

Exploration and evaluation expenditure

 

(183,483)

(458,777)

Receipts from customers

 

14,084

-

Payments to suppliers and employees

 

(1,416,784)

(2,140,761)

Net cash flows (used in) operating activities

24

(1,578,750)

(2,575,785)

 

 

 

 

Cash flows from / (used in) investing activities

 

 

 

Payments for plant and equipment

 

-

456

Other financial assets

 

(243,331)

-

Purchase of available-for-sale financial assets

 

(30,360)

(154,110)

Sale of available-for-sale financial assets

 

-

937,688

Proceeds from disposal of available-for-sale financial assets

 

92,699

99,070

Net cash flows from / (used in) investing activities

 

(180,992)

883,104

 

 

 

 

Cash flows from  / (used in) financing activities

 

 

 

Proceeds from issue of shares

 

1,676,878

2,233,415

Transaction costs on issue of shares

 

(169,481)

(269,780)

Net cash flows from financing activities

 

1,507,397

1,963,635

 

 

 

 

 

Net increase / (decrease)  in cash and cash equivalents held

 

(252,345)

270,954

Net foreign exchange difference

 

(32,859)

19,169

Cash and cash equivalents at 1 July

 

1,028,468

738,345

Cash and cash equivalents at 30 June

8

743,264

1,028,468

           

 

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

 

 

 

Consolidated Statement of Changes in Equity

For the year ended 30 June 2016

                                                                    Attributable to the equity holders of the Parent

 

 

 

Issued capital

$

 

 

Accumulated

losses

$

Employee share incentive reserve

$

 

 

Option reserve

$

 

Foreign exchange reserve

$

 

Available for sale reserve

$

 

 

Equity reserve

$

 

 

 

Total equity

$

At 1 July 2014

29,333,702

(20,504,904)

608,335

1,428,281

134,560

78,524

(10,126,072)

952,426

Loss for the period

-

(2,345,860)

-

-

-

-

-

(2,345,860)

Other Comprehensive Income (net of tax)

-

-

-

-

(180,614)

(78,524)

-

(259,138)

Total comprehensive loss (net of tax)

-

(2,345,860)

-

-

(180,614)

(78,524)

-

(2,604,998)

Transactions with owners in their capacity as owners:

 

 

 

 

 

 

 

 

Shares issued during the year net of transaction costs

   2,037,244

-

-

-

-

-

-

        2,037,244

Shares issued to market previously  on the Employee Share Incentive Plan

-

-

54,389

-

-

-

-

54,389

Directors and KMP salary sacrifice for shares issued

171,147

-

(171,147)

-

-

-

-

-

Options issued to Consultants and Brokers

-

-

-

42,300

-

-

-

42,300

Options issued under Employee Option Plan

-

-

-

44,161

-

-

-

44,161

 

 

 

 

 

 

 

 

 

At 1 July 2015

31,542,093

(22,850,764)

491,577

1,514,742

(46,054)

-

(10,126,072)

525,522

Loss for the period

-

(1,573,533)

-

-

-

-

-

(1,573,533)

Other Comprehensive Income (net of tax)

-

-

-

-

226,166

-

-

226,166

Total comprehensive loss (net of tax)

-

(1,573,533)

-

-

226,166

-

-

(1,347,367)

Transactions with owners in their capacity as owners:

 

 

 

 

 

 

 

 

Shares issued during the year net of transaction costs

1,507,397

-

-

-

-

-

-

1,507,397

Net Growth on Investment Portfolio

-

-

-

-

(991)

-

-

(991)

Options issued under Employee Option Plan

-

-

-

34,098

-

-

-

34,098

At 30 June 2016

33,049,490

(24,424,297)

491,577

1,548,840

179,121

-

(10,126,072)

718,659

                   

 

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

 

Note 1: Corporate information

 

The consolidated financial statements of Ferrum Crescent Limited and its subsidiaries (collectively, the Group) for the year ended 30 June 2016 were authorised for issue in accordance with a resolution of directors on 30 September 2016.

 

Ferrum Crescent Limited, the parent, is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange (ASX), the London Stock Exchange (AIM) and the JSE Limited (JSE).

 

Domicile:

Australia

 

Registered Office:

'G South Mill Centre' Suite 6, 9 Bowman Street, South Perth, WA, 6151

 

Note 2:  Summary of significant accounting policies

 

 

(a)        Basis of preparation

 

The Financial Report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and Interpretations and complies with other requirements of Australian law.

 

The accounting policies detailed below have been consistently applied to all of the years presented unless otherwise stated.  The financial statements are for the consolidated entity consisting of Ferrum Crescent Limited and its subsidiaries.

 

The Financial Report has also been prepared on a historical cost basis, except for the forward subscription agreement and the available-for-sale (AFS) investments which have been measured at fair value. 

 

All amounts are presented in Australian dollars, unless otherwise stated.

 

 

(b)        Statement of compliance

 

The Financial Report complies with Australian Accounting Standards, as issued by the Australian Accounting Standards Board, and complies with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.

 

(c)          Adoption of new and revised standards

Ferrum Crescent Limited and its subsidiaries ('the Group') has adopted all new and amended Australian Standards and Interpretations mandatory for reporting periods beginning on or after 1 July 2015, including:

 

 

·      AASB 2015-3 Amendments to Australian Accounting Standards arising from the withdrawal of AASB1031 Materiality

 

·      AASB 2015-5 Amendments to Australian Accounting Standards Investment Entities. Applying the Consolidation Exception

 

 

The adoption of these standards and interpretations did not have any material effect on the financial position or performance of the Group.

 

(g)        Going concern

 

The Annual Report has been prepared on a going concern basis and this basis is predicated on a number of initiatives being undertaken by the Group with respect to ongoing cost reductions and funding as set out below.

 

The Group incurred an operating loss after income tax of $1,573,533 for the year ended 30 June 2016 (2015: $2,345,860). In addition, the Group has net current assets of $397,080 as at 30 June 2016 (2015: $308,829), which includes the forward subscription agreement, and shareholders' equity of $718,659 (2015: $525,522).

 

The Group's forecast cash flow requirements for the 15 months ending 30 September 2017 reflect cash outflows from operating and investing activities, which take into account a combination of committed and uncommitted but currently planned expenditure. The ability of the Group to continue as a going concern is dependent on raising additional funds to meet the Group's ongoing working capital requirement when required.

 

These conditions indicate a material uncertainty which may cat significant doubt as to whether the Group will be able to meet its debts as and when they fall due and thus continue as a going concern.

 

This Annual report has been compiled on a going concern basis. In arriving at this position the Directors are satisfied that the Group will have access to sufficient cash as and when required to enable it to fund administrative and other committed expenditure. The Directors are satisfied that they will be able to raise additional funds by either selling existing assets, through implementation of strategic joint ventures or via a form of debt and/or equity raising. In addition, the Directors have embarked on a strategy to reduce costs.

 

Should the Group not be able to continue as a going concern, it may be required to realise its assets and discharge its liabilities other than in the ordinary course of business and at amounts that differ from those stated in the financial statements.

 

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, nor to the amounts or classification of liabilities that might be necessary should the Group not be able to continue as a going concern.

 

Note 3: Revenue and expenses

 

Revenue and expenses from continuing operations

 

 

 

2016

2015

 

Note

$

$

(a) Revenue

 

 

 

 

 

 

 

Turnover

 

14,084

-

Interest received

 

8,433

23,753

 

 

22,517

23,753

 

 

 

 

(b) Other Income

 

 

 

Income from third party advance payment

 

490,850

-

 

 

490,850

-

 

 

 

 

(c) Profit or loss 

 

 

 

Other expenses include the following:

 

 

 

Depreciation

 

11,638

18,580

Gain on disposal of plant and equipment

 

(8,609)

-

 

 

 

 

Consulting services

 

243,032

238,053

Employment related

 

 

 

- Directors fees

 

386,994

404,228

- Wages

 

182,207

171,623

- Superannuation

 

39,989

41,595

Corporate

 

276,747

271,287

Travel

 

27,868

62,691

Other

 

256,882

270,045

 

 

1,416,748

1,478,102

(d) Fair value (losses)/gains

 

Fair value (loss)/gain on financial instrument

 

46,868

(208,375)

Impairment of minority interest obligation

 

(46,868)

 

 

 

-

-

 

On 26 October 2010, various agreements were entered into in respect of the minority interest in the Moonlight Iron Project being managed by the company's subsidiary Ferrum Iron Ore (Pty) Ltd ("FIO").

 

Ferrum South Africa Pty Ltd ("FSA"), a wholly owned subsidiary of the Ferrum Crescent Ltd ("FCL"), entered various agreements with Mkhombi Investments (Pty) Ltd ("MI") and its holding company, Mkhombi AmaMato (Pty) Ltd ("MA") for MI to become FIO's BEE partner. MA was to obtain 15.6% of the issued shares in FCL in 2 equal tranches of ZAR 7.5 million. The South African Department of Mineral Resources ("DMR") expressed its support of this transaction. The first tranche was completed on 30 November 2012 and FCL issued 7.8% of its issued shares to MA.

 

Upon completion of the first tranche, the Company legally owned, directly and indirectly through its wholly owned subsidiary, MI, 97% of FIO, with the remaining 3% held by the GaSeleka Community. 

 

Under the subscription agreement, second tranche, FCL will issue shares to MA equal to 7.8% of the issued share capital of the Company for ZAR 7.5 million. The subscription agreement has been extended to 31 July 2019.

 

The above financial asset was fair valued as at 30 June 2016 to nil. The fair value was based on a probability weighted approach with the key assumptions being Ferrum's share price, foreign exchange rates and credit risk.

 

 

Note 4: Segment information

 

Identification of Reportable Segments

 

The Group has based its operating segment on the internal reports that are reviewed and used by the executive management team in assessing performance and in determining the allocation of resources.

 

The Group currently does not have production and is only involved in exploration. As a consequence, activities in the operating segment are identified by management based on the manner in which resources are allocated, the nature of the resources provided and the identity of the manager and country of expenditure. Information is reviewed on a whole of entity basis.

 

Based on these criteria the Group has only one operating segment, being exploration, and the segment operations and results are reported internally based on the accounting policies as described in Note 2 for the computation of the Group's results presented in this set of financial statements.

 

 

Geographic Information:

Note

Australia

South Africa

Consolidation

 

2016

2015

2016

2015

2016

2015

 

 

$

$

$

$

$

$

Revenue from external customers

 

-

15,727

14,084

8,026

14,084

23,753

Non - current assets

10,11 & 12

361

           401

321,218    

     216,292    

321,579      

       216,693      

 

 

Note 5: Income tax expense

 

 

2016

2015

 

$

$

Reconciliation of income tax expense to the pre-tax net loss

 

 

Loss before income tax

1,573,533

2,345,860

 

 

 

Income tax calculated at 30%  (2015:30%) on loss before income tax

(472,060)

(703,758)

 

 

 

Add tax effect of: non-deductible expenses

128,072

104,724

Difference in tax rate of subsidiaries operating in other jurisdictions

8,617

(113,795)

Unused tax losses and temporary differences not brought to account

335,371

743,366

Income tax (profit) / expense

-

30,537

 

 

 

 

 

 

Analysis of deferred tax balances

2016

2015

Deferred tax liabilities

$

$

Assessable temporary differences

 

 

Prepayments

(13,576)

(17,635)

Financial asset

-

-

Deferred tax liabilities offset by deferred tax assets

13,576

17,635

Net deferred tax liabilities

-

-

Deferred tax assets

 

 

Share issue expenses

103,225

86,052

Legal expense amortised

-

4,859

Payables and provisions

41,248

12,355

Other

363,091

-

Unused tax losses

5,213,707

2,830,409

 

5,721,271

2,848,905

Total unrecognised deferred tax assets

(5,707,695)

(2,831,270)

Deferred tax assets

13,576

17,635

Deferred tax assets offset by deferred tax liabilities

(13,576)

(17,635)

Net deferred tax assets

-

-

 

 

Unused tax losses set out above have not been recognised due to the uncertainty of future taxable profit streams.

 

 

Note 6: Auditors' remuneration

 

 

2016

2015

 

 

$

$

Remuneration of the auditor of the Company for:

 

 

 

-auditing or reviewing the financial statements

 

 

 

Ernst & Young Australia

 

-

28,000

Ernst & Young South Africa

 

-

22,000

BDO Audit (WA) Pty Ltd

 

22,686

-

BDO South Africa Incorporated

 

11,501

-

Lancaster Mauritius

 

5,174

4,523

 

 

39,361

54,523

-other assurance related services

 

 

 

Ernst & Young Australia

 

1,803

-

 

 

41,164

54,523

 

 

Note 7: Earnings per share

 

 

2016

2015

 

 

$

$

Basic loss per share (cents per share)

 

(0.22)

(0.50)

Diluted loss per share (cents per share)

 

(0.22)

(0.50)

 

Loss used in calculating basic loss per share

 

(1,573,533)

(2,345,860)

 

 

 

 

Adjustments to basic loss used to calculate dilutive loss per share

 

-

-

 

Loss used in calculating dilutive loss per share

 

(1,573,533)

(2,345,860)

 

 

 

 

 

 

Number

Number

Weighted average number of ordinary shares used in the calculation of basic loss per share

 

714,611,971

468,894,041

 

 

 

 

Weighted average number of ordinary shares used in the calculation of diluted loss per share

 

714,611,971

468,894,041

         

 

There have been no transactions involving ordinary shares or potential shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

 

 

Note 1 - 13,000,000 employee share options outstanding at 30 June 2016 (30 June 2015: 13,000,000) have not been included in the calculation of dilutive earnings per share as these are anti-dilutive.

 

Note 2 - 29,954,525 potential shares to be issued under the BBBEE subscription agreement have not been included in the calculation of dilutive earnings per share as these are anti-dilutive.

 

 

 

Note 8: Cash and cash equivalents

 

Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:

 

 

2016

2015

 

 

$

$

Cash at bank

 

743,264

1,028,468

 

 

 

Note 9: Trade and other receivables

 

 

 

2016

2015

 

 

$

$

Current

 

 

 

Sundry debtors

 

18,475

2,513

GST / VAT

 

15,454

19,415

 

 

33,929

21,928

 

 

 

 

Non-trade debtors are non-interest bearing and are generally on 30-90 days credit terms. The carrying amounts of these receivables represent fair value and are not considered to be impaired.

 

 

 

Note 10: Plant and equipment

 

Furniture, fittings and equipment

 

Motor vehicles

Leasehold improvements

 

Total

 

$

$

$

$

 

 

 

 

 

Year ended 30 June 2016

 

 

 

 

Opening net carrying value

7,474

8,302

13,869

29,645

Disposals

(274)

457

-

183

Depreciation charge for the year

(3,724)

(7,166)

(748)

(11,638)

Exchange differences

(1,028)

(1,592)

(2,036)

(4,657)

Closing net carrying amount

2,448

1

11,085

13,533

 

 

 

 

 

At 30 June 2016

 

 

 

 

Cost

39,447

24,575

14,780

78,801

Accumulated depreciation

(36,999)

(24,574)

(3,695)

(65,268)

Net carrying value

2,448

1

11,085

13,533

 

 

 

 

 

 

Furniture, fittings and equipment

 

Motor vehicles

Leasehold improvements

 

Total

 

Year ended 30 June 2015

$

$

$

$

Opening net carrying value

11,957

21,195

13,829

46,981

Additions

450

-

-

450

Depreciation charge for the year

(5,620)

(14,088)

(855)

(20,563)

Exchange differences

687

1,195

895

2,777

Closing net carrying amount

7,474

8,302

13,869

29,645

 

 

At 30 June 2015

 

 

 

 

Cost

49,428

71,396

17,336

138,160

Accumulated depreciation

(41,954)

(63,094)

(3,467)

(108,515)

Net carrying value

7,474

8,302

13,869

29,645

 

 

 

Note 11: Investments

 

 

2016

2015

 

 

$

$

 

 

 

 

Option to acquire GoldQuest Iberica, S.L.

 

243,331

-

 

 

 

 

 

 

243,331

-

 

 

On 15 February 2016, the Company entered into an exclusive option and sale agreement for a staged option fee of up to GBP22,500, with TH Crestgate GmbH ("Crestgate"), a private Swiss-based company to potentially acquire 100 per cent. of its indirectly wholly-owned subsidiary, GoldQuest Iberica, S.L. ("GoldQuest"), a private company incorporated in Spain, which owns 100 per cent. of two lead-zinc exploration projects in the provinces of León and Galicia, in historic Spanish mining areas ("the Iberian Projects"), to enable the Company to conduct due diligence on GoldQuest and the Iberian Projects.

 

Subsequent to the Company entering into an exclusive option to acquire 100 percent of GoldQuest, two nil-cost extensions were granted to the Company on 22 July 2016 and 31 August 2016. Subsequently,on 22 September 2016 the option was exercised. Accordingly, the Company has now acquired 100 per cent. of the share capital of GoldQuest. The consideration comprised GBP326,500 in cash and the issue of 100 million new ordinary shares in the capital of the Company.

 

The carrying amount of the financial asset is carried at cost as its fair value cannot be reliably measured at year end as the Company does not have a quoted market price.

 

 

Note 12: Other financial assets           

 

 

 

2016

2015

 

 

$

$

Current assets

 

 

 

Rental and Other Deposits

 

5,121

5,960

Rehabilitation Trust

 

24,182

28,365

 

 

 

 

 

 

29,303

34,325

 

 

 

 

 

Non- current assets

 

 

 

 

 

 

 

Available for sale investments (at fair value) (refer to note (a) below)

 

64,715

187,048

 

 

64,715

187,048

 

Note (a): Available for sale investments

 

On 30 October 2014, Guardrisk issued a financial guarantee for the rehabilitation of land to be disturbed by mining to the DMR for the sum of R7,517,000.

 

On 1 November 2014, Ferrum Iron Ore (Pty) Ltd, a subsidiary of the Company, signed a policy of insurance where-by an initial lump sum of R1,500,000 (approx. AUD 149,250 at the then prevailing AUD:ZAR exchange rate of 10.0503) and a monthly contribution of R100,000 (approx. AUD9,950 at the same exchange rate) would be paid for a fixed period from 1 November 2014 to 31 October 2017 to cover the environmental guarantee.

 

On 18 November 2015 the policy was renegotiated and a lump sum of R1,104,878 (approx. AUD 92,699 at the then prevailing AUD:ZAR exchange rate of 11.9190) was paid out to the Company as working capital and the monthly contributions were amended to be paid up, on condition that the Company advise Guardrisk of any intention to do further explorative work. The policy is due to be renegotiated in October 2017 when the environment guarantee expires.

 

 

 

Note 12: Other financial assets            (continued)

 

Note (a): Available for sale investments(continued)

 

There is a provision in the policy to the effect that, at the end of the policy period or cancellation (and where applicable), should there be a positive balance sitting in the policy after taking into account all expenditure (including claims), Guardrisk will declare a performance bonus back to the Company. There is no prior entitlement to this performance bonus.

 

 

Note 13: Trade and other payables

 

 

2016

2015

 

 

$

$

Current

 

 

 

Trade payables and other payables

 

263,827

168,713

 

 

263,827

168,713

 

Trade and other payables are non-interest bearing and are normally settled on 30-day terms.

 

 

 

Note 14: Provision for payments received in advance

 

 

 

2016

2015

 

 

$

$

Current

 

 

 

Provision for Anvwar Asian Investments

 

175,722

629,325

 

 

629,325

 

During the 2014 reporting period, the Company entered into a legally binding heads of agreement with Anvwar Asian Investment ("AAI"), an entity based in Oman, whereby AAI was to purchase a 35% interest in Ferrum Iron Ore (Pty) Ltd ("FIO"), the Group Company that holds the Moonlight Project.  Following a number of term variations of this letter of intent, the Company entered into a new agreement with AAI in March 2014, whereby AAI agreed to pay US$1 million, by way of two tranches of US$500,000, one payable by the end of March 2014 and the second payable by the end of April 2014, thereby earning the right, subject to the requisite approvals of the South African Reserve Bank, to be issued with FIO shares equalling 35% of that company, being partly paid, subject to the right to pay an additional US$9 million to become fully paid or be converted into 3.5% of FIO fully paid.  The additional US$9 million had to be paid by the earlier of 31 December 2015 and completion of the Moonlight BFS.

 

However the second tranche of US$500,000 was not received by the Company within the time frame stipulated under the agreement. The Company therefore informed AAI of its default; and AAI remains in default as at the date of this report. Accordingly, the first tranche of US$500,000 was initially recorded as a current liability.

 

On 14 March 2015, the Company terminated the investment agreement between itself and AAI as a result of AAI's breach of a material term of the agreement.

 

On 22 July 2015, AAI's lawyers, Trowers & Hamlins, issued a letter to the Company, requesting that the first tranche be returned to AAI within 14 days from the date of issue. They advised that AAI will commence legal proceedings for the recovery of the first tranche plus any interest and costs incurred by AAI.

On 30 June 2016 after no further correspondence between AAI, its lawyers and the Company, the Company derecognised an amount of US$364,448, leaving a provision of US$135,552 for payments received in advance. Refer to note 22 for the contingent liability with respect to this matter.

 

 

Note 15: Provisions

 

 

2016

2015

 

 

$

$

 

Employee benefits

 

20,473

54,837

 

Note 16: Contributed Equity

 

 

 

 

 

 

 

2016

2015

2016

2015

 

No. of shares

No. of shares

$

$

(a)        Share Capital

 

 

 

 

            Ordinary Shares

 

 

 

 

 

            Ordinary shares fully paid

1,282,791,883

618,787,353

33,314,792

31,807,395

             Employee share   incentive plan shares

(2,300,000)

(2,300,000)

(265,302)

(265,302)

 

1,280,491,883

616,487,353

33,049,490

31,542,093

 

Capital management

When managing capital (which is defined as the Company's total equity), management's objective is to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the lowest cost of capital available to the entity. As the equity market is constantly changing management may issue new shares to provide for future exploration and development activity.  The Company is not subject to any externally imposed capital requirements.

 

During the year ended 30 June 2016, nil (2015: 4,295,000) shares were issued back to the market from the Employee Incentive Share Plan.

 

 

(b)        Movements in ordinary share capital

Date

Details

Number of shares

$

30 June 2014

Closing Balance

380,602,777

29,843,607

10 November 2014  

Allotment  issue

49,065,642

392,525

13 November 2014    

Underwritten issue

58,434,358

467,475

12 December 2014    

Private placement

21,525,819

173,077

12 December 2014    

Salary sacrifice share scheme issue

9,158,757

171,147

22 May 2015              

Private placement

48,000,000

465,600

29 May 2015              

Private placement

52,000,000

504,400

29 May 2015              

Share plan shares sold on market (c)

 

59,344

 

Costs associated with share issues

 

(269,780)

30 June 2015

Closing Balance

618,787,353

31,807,395

17 February 2016      

Subscription Shares

4,515,041

13,046

29 February 2016      

Subscription Shares

149,681,797

359,236

27 April 2016             

Placing and Subscription Shares

500,000,000

1,279,499

27 April 2016             

Fee Shares

4,807,692

12,303

27 April 2016             

Shares - TH Crestgate GmbH

5,000,000

12,795

 

Costs associated with share issues

 

(169,476)

30 June 2016          

Closing Balance

1,282,791,883

33,314,792

Employee share plan shares on issue

(2,300,000)

(265,302)

 

 

1,280,491,883

33,049,490

 

 

 

If, at any time during the exercise period, an employee ceases to be an employee, all share options held by that employee will lapse one month after their employment end date. Therefore, employee shares above are only recognised in issued capital when issued to the employees concerned.

 

 

 

(c)        Movements in employee share plan shares issued with limited recourse employee loans

 

Date

Details

Number of shares

$

 

 

 

 

01 July 2014

Opening balance

6,595,000

(509,905)

 

Cancelled during 2015

(4,295,000)

244,603

 

Issued during 2015

-

-

30 June 2015

Closing balance

2,300,000

(265,302)

 

 

Cancelled during 2016

-

-

 

Issued during 2016

-

-

30 June 2016

Closing balance

2,300,000

(265,302)

 

 

The table below summarises the model inputs (post consolidation) for employee share plan shares granted during periods prior to 30 June 2016:

 

 

Shares granted for consideration

 

2,150,000

Exercise price

0.198

Interest rate

0%

Issue date

7 December 2010

Expiry date

30 November 2014

Underlying security spot price at grant date (GBP)

0.198

Expected life

4

 

Shares granted for consideration

 

150,000

Exercise price

0.100

Interest rate

0%

Issue date

24 February 2012

Expiry date

24 February 2016

Underlying security spot price at grant date (GBP)

0.100

Expected life

4

 

No employee share plan shares were issued in 2016 (2015: Nil).

 

This account is used to record the value of shares issued under the Executive Share Incentive Plan (ESIP). The ESIP is accounted for as an "in-substance" option plan due to the limited recourse nature of the loan between employees and the Company to finance the purchase of ordinary shares. The total fair value of the "in substance" options issued under the plan is recognised as a share-based payment expense over the vesting period, with a corresponding increase in equity.

 

 

Note 17: Listed Options

 

 

 

2016

2015

 

 

No. of Options

No. of Options

Options

 

 

 

At year end the following options were on issue:

 

 

 

 

 

 

-  21 November 2016 Options exercisable at 3 cents per share

 

500,000

500,000

- 19 February 2017 Options exercisable at 8 cents per share

 

2,500,000

2,500,000

- 2 February 2018 Options exercisable at GBP0.0075 per share

 

2,000,000

2,000,000

- 2 February 2018 Options exercisable at GBP0.02 per share

 

3,000,000

3,000,000

- 1 March 2018 Options exercisable at GBP0.0075 per share

 

2,000,000

2,000,000

- 1 March 2018 Options exercisable at GBP0.02 per share

 

3,000,000

3,000,000

- 12 May 2016 Unlisted options issued to investors

 

500,000,000

-

 

 

513,000,000

13,000,000

 

 

 

 

 

 

2016

2015

Movements in 21 November 2016 Options

 

No. of Options

No. of Options

Beginning of the financial year

 

500,000

500,000

Options issued during the year   

 

-

-

Options cancelled during the year           

 

-

-

End of the financial year

 

500,000

500,000

 

 

 

 

Movements in 19 February 2017 Options

 

 

 

Beginning of the financial year

 

2,500,000

2,500,000

Options issued during the year   

 

-

-

Options cancelled during the year           

 

-

-

End of the financial year

 

2,500,000

2,500,000

 

 

 

 

 

 

 

 

Movements in 2 February 2018 Options

 

 

 

Beginning of the financial year

 

5,000,000

-

Options issued during the year   

 

-

5,000,000

Options cancelled during the year           

 

-

-

End of the financial year

 

5,000,000

5,000,000

 

 

 

 

Movements in 1 March 2018 Options

 

 

 

Beginning of the financial year

 

5,000,000

-

Options issued during the year   

 

-

5,000,000

Options cancelled during the year           

 

-

-

End of the financial year

 

5,000,000

5,000,000

 

 

 

 

Movement in 12 May 2018 unlisted options issued to investors         

 

 

 

Beginning of the financial year

 

-

-

Options issued during the year   

 

500,000,000

-

Options cancelled during the year           

 

-

-

End of the financial year

 

500,000,000

-

 

 

 

 

 

The table below summarises the model inputs (post consolidation) for investor options granted during the year ended 30 June 2016:

 

 

 

Options granted for consideration

 

500,000,000

Exercise price (GBP)

0.00165

Issue date

12 May 2016

Expiry date

12 May 2018

Underlying security spot price at grant date (GBP)

0.00165

Expected life

2

 

Movements after 30 June 2016

 

 

On 29 July 2016, 66,874,816 of the options issued on 12 May 2016 were exercised at a price of GBP 0.0165 pence per share. In addition on 29 July 2016, 187,226,485 ordinary shares were issued at a price of GBP 0.020 pence per share along with an option of 187,226,485 options of GBP0.030 pence per share that are exercisable over a period of 2 years subject to the receipt of shareholder approval.

 

On 26 August 2016, 44,797,543 of the options issued on 12 May 2016 were exercised at a price of GBP 0.0165 pence per share.

 

On 28 September 2016, 5,381,907 of the options issued on 12 May 2016 were exercised at a price of GBP 0.0165 pence per share.

 

 

 

Note 18: Reserves

 

 

Employee share incentive reserve

 

 

Options reserve

 

Foreign exchange reserve

 

 

Equity reserve

Available for sale reserve

 

 

 

Total

 

$

$

$

$

$

$

At 1 July 2014

608,335

1,428,281

134,560

(10,126,072)

78,524

(7,876,372)

Currency translation differences

-

-

(180,614)

-

-

(180,614)

Options issued

-

86,461

-

-

-

86,461

Shares issued to KMPs on the Salary Sacrifice Scheme

54,389

-

-

-

-

54,389

Directors and KMP salary sacrifice for shares issued

(171,147)

-

-

-

-

(171,147)

Growth in investment portfolio

-

-

-

-

20,546

20,546

Reclassification adjustment for gains included in the income statement (net of tax effect)

-

-

-

-

(99,070)

(99,070)

At 30 June 2015

491,577

1,514,742

(46,054)

(10,126,072)

-

(8,165,807)

Options issued under Employee Option plan

-

34,098

-

-

-

34,098

Net growth on Investment Portfolio

-

-

(991)

-

-

(991)

Currency translation differences

-

-

226,166

-

-

226,166

At 30 June 2016

491,577

1,548,840

179,121

(10,126,072)

-

(7,906,534)

 

 

^This amount includes remuneration to KMPs and Directors that was accrued and will ultimately be settled in shares under the Company's salary sacrifice scheme.

 

 

Nature and purpose of reserves

 

      Employee share incentive reserve

      This reserve is used to record the value of equity benefits provided to employees, consultants and directors as part of their remuneration under the Executive Share Incentive Plan.   

 

Options reserve

This reserve is used to record the value of options issued, other than share-based payments to directors, employees and consultants as part of their remuneration.

 

Foreign currency translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.

 

Equity reserve

The Equity reserve is used to record the acquisition of the non-controlling interest by the Group and to record differences between the carrying value of non-controlling interests and the consideration paid / received, where there has been a transaction involving non-controlling interests that do not result in a loss of control.

The reserve is attributable to the equity of the parent.

 

Available-for-sale reserve

Used to record changes in the fair value of the Group's available-for-sale financial assets.

 

 

Note 19: Accumulated losses

 

 

 

2016

2015

 

 

$

$

Accumulated losses at the beginning of the financial year

 

(22,850,764)

(20,504,904)

Net loss for the year

 

(1,573,533)

(2,345,860)

Accumulated losses at the end of the financial year

 

(24,424,297)

(22,850,764)

 

 

Note 20: Share based payments

Expenses arising from share-based payment transactions

 

Total expenses arising from share-based payment transactions recognised during the year were as follows:

 

 

2016

$

2015

$

Options issued in consideration for services

34,097

90,851

 

 

 

 

 

 

 

34,097

90,851

 

Options issued in consideration for services

 

Fair value of options granted

 

The fair value at the grant date of options issued is determined using a binomial option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the non-tradable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

 

1.    The tables below summarise the model inputs (post consolidation) for options granted prior to the year ended 30 June 2015:

 

Options granted for no consideration

500,000

Exercise price (AUD cents)

0.03

Issue date

21 November 2013

Expiry date

21 November 2016

Underlying security spot price at grant date (AUD cents)

0.03

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

3.08%

Binomial model valuation per option (AUD cents per share)

1.65

 

 

Options granted for no consideration

2,500,000

Exercise price (AUD cents)

0.08

Issue date

19 February 2014

Expiry date

19 February 2017

Underlying security spot price at grant date (AUD cents)

0.06

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

2.97%

Binomial model valuation per option (AUD cents per share)

4.12

 

Options granted for no consideration

2,000,000

Exercise price (GBP)

0.0075

Issue date

2 February 2015

Expiry date

2 February 2018

Underlying security spot price at grant date (GBP)

0.0075

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

0.64%

Binomial model valuation per option (AUD cents per share)

0.50

 

 

Options granted for no consideration

3,000,000

Exercise price (GBP)

0.02

Issue date

2 February 2015

Expiry date

2 February 2018

Underlying security spot price at grant date (GBP)

0.02

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

0.64%

Binomial model valuation per option (AUD cents per share)

0.34

 

 

 

Options granted for no consideration

2,000,000

Exercise price (GBP)

0.0075

Issue date

1 March 2015

Expiry date

1 March 2018

Underlying security spot price at grant date (GBP)

0.0075

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

0.90%

Binomial model valuation per option (AUD cents per share)

0.55

 

Options granted for no consideration

 

3,000,000

Exercise price (GBP)

0.02

Issue date

1 March 2015

Expiry date

1 March 2018

Underlying security spot price at grant date (GBP)

0.02

Expected price volatility of the Company's shares

100%

Expected dividend yield

0%

Expected life

3

Risk-free interest rate

0.90%

Binomial model valuation per option (AUD cents per share)

 

0.37

Movements

 

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year:

 

 

2016

Number

2016

WAEP

2015

Number

2015

WAEP

Outstanding at 1 July

13,000,000

1.32

3,400,000

3.46

Issued during the year

-

-

10,000,000

0.94

Cancelled during the year

-

 

  (400,000)

10.00

Outstanding at 30 June

13,000,000

0.92

13,000,000

1.32

Exercisable at 30 June

11,500,000

1.04

10,000,000

0.94

 

 

 

Note 21: Commitments

 

(i)  At this stage the Company has no minimum obligations with respect to tenement expenditure requirements.

(ii)  Operating lease commitments are as follows:

 

 

2016

2015

 

$

$

Within 1 year

25,107

28,039

2 to 3 years

-

-

Total

25,107

28,039

 

 

The Company disposed of its Australian tenements during 2011 and whilst the Company still holds tenements in South Africa, expenditure commitments in relation to such tenements have been met. The Company has converted its South African prospecting rights into mining rights and applied for new prospecting rights over adjacent land.

 

A subsidiary of the Group entered into a 36 month commercial office lease on 1 April 2012, with an 8% annual escalation to the fixed portion of the lease, for their head office in Johannesburg, South Africa. The value of the lease was annualised over the life of the Lease agreement. This lease reached the end of its term on 31 March 2015, and had a renewal period for a further 3 years commencing 1 April 2015 but was only renewed for a period of 1 year until 31 March 2016. During February 2016 the lease was renewed for a further period of 12 months until 31 March 2017.

 

 

Note 22: Contingent liabilities

 

 

 

 

The Company received USD500,000 from  AAI during March 2014 as part of AAI's advanced payment for a percentage ownership of the Company's subsidiary FIO. The transaction was never formaly finalised and on 30 June 2016, the Company transferred the amount of USD364,448 from provision for payments received in advance to sundry income to cover expenses incurred by the Company subsequent to AAI's default, leaving a value of US$135,552 in provision for payments received in advance.

 

The matter is contingent liability as the likelihood of probable outflow is not considered remote at this point in time and the Company may be exposed to repay the investment amount of USD 500,000 or part thereof, subject to the Company's ability to prove its loss and damages suffered as a result of AAI's breach of contract.

 

 

Note 23: Related party transactions

 

Compensation of Key Management Personnel

 

 

 

2016

2015

 

 

$

$

Short-term employee benefits

 

716,803

828,463

Post-employment benefits

 

26,849

37,539

Share based payments

 

34,097

85,675

Termination benefits

 

-

-

 

 

777,749

951,678

 

 

Transactions between related parties are on normal commercial terms and conditions and no more favourable than those available to other parties unless otherwise stated.

 

 

Subsidiaries

 

The consolidated financial statements include the financial statements of Ferrum Crescent Limited and the subsidiaries listed in the following table.

 

 

 

 

% Beneficial Equity Interest

Name

 

Country of Incorporation

2016

2015

 

 

 

 

 

Ferrum Metals Pty Ltd

 

Australia

100

100

Batavia Ltd

 

Mauritius

100

100

Ferrum South Africa (Pty) Ltd ("FIO")

 

South Africa

100

100

Ferrum Iron Ore (Pty) Ltd

 

South Africa

97.14

97.14

Mkhombi Investments (Pty) Ltd ("MI")

 

South Africa

88.46

88.46

 

 

 

Ferrum Crescent Limited is the ultimate Australian parent entity and the ultimate parent of the Group. Transactions between Ferrum Crescent Limited and its controlled entities during the year consisted of loan advances by Ferrum Crescent Limited. All intergroup transactions and balances are eliminated on consolidation.

 

The Baphuting Bo Seleka Community Trust ("Trust") has a 3% indirect interest in FIO, the project Company, via its investment in MI. Until such time as FIO commences mining no expenses or investments have been carried over to the Trust.

 

 

Trade receivable

 

 

2016

2015

 

 

$

$

Trade receivable

 

15,454

-

 Less provision for bad debts

 

(15,454)

 

 

 

-

-

 

On 14 October 2015, the Company announced that a BFS Farm-In Agreement had been concluded with Business Venture Investments No.1709 (Proprietary) Limited ("BVI") to form a joint venture for the completion of the bankable feasibility study ("BFS"). The comprehensive Farm-In Agreement provides for the completion of all the requisite BFS workstreams to produce a full BFS on the project to a fixed timeline, to be funded by BVI in return for up to a 43% equity interest in Ferrum Iron Ore (Pty) Ltd ("FIO") the owner of the Moonlight Iron Ore Project. As at 30 June 2016 BVI had not paid the Company for any of the expenses that the Company had incurred on behalf of BVI and a bad debt provision has been created.

 

 

Trade payable

 

 

 

 

 

 

Income from Related Parties

Expenditure to Related Parties

Amounts Owed by Related Parties at year end

Amounts Owed to Related Parties at year end

 

 

$

$

$

$

Magnum Mining and Exploration Ltd (i)

2016

-

87,582

-

29,382

 

2015

-

106,138

-

12,296

 

(i) Mr G Button, a non-executive director and company secretary for the Company, is also a director of Magnum Mining and Exploration Ltd. During the year, Magnum Mining and Exploration Ltd received the above fees for office rental, office running costs and staffing expenses. These fees are based on normal commercial terms and conditions.

 

 

Loans to / (from) related parties

 

The following transactions were undertaken between the Company, executive officers and director-related entities during 2016 and 2015.

 

 

2016

2015

 

 

$

$

Consulting fees were paid or accrued to Camcove Pty Ltd, a company of which Robert Hair is a director and shareholder

60,000

60,000

Consulting fees were paid or accrued to Tavistock Communications Limited, a company of which Merlin Mar-Johnson is an Employee

15,672

-

Directors fees were paid or accrued to Metallurgical Management Services Pty Ltd, a company of which Dr Evan Kirby is a director

7,500

-

 

83,172

60,000

 

 

Note 24: Cash flow information

 

 

2016

2015

 

$

$

Reconciliation of cash flow from operations with loss from ordinary activities after income tax

 

 

Loss from ordinary activities after income tax

(1,573,533)

(2,345,860)

Depreciation

11,638

18,580

Loss / (profit) on sale of plant and equipment

(8,609)

-

Profit on sale of available for sale financial assets

(649)

(137,597)

Fair value adjustment of forward subscription agreement

-

208,375

Share based payment compensation

34,097

90,851

Net foreign exchange differences

368,404

(54,155)

Movement of Bad debts

16,056

-

Proceeds from third party funding

(490,850)

-

 

Changes in assets and liabilities

 

 

(Increase) / decrease in receivables

(12,001)

(174,766)

(Increase) / decrease in other operating assets

31,399

(24,758)

Increase / (decrease) in payables and provisions

45,298

(194,914)

Cash flows used in operations

(1,578,750)

(2,575,785)

 

 

Note 25: Financial risk management objectives and policies

 

 

The Group's principal financial instruments comprise cash, short term deposits, held-for-trading and derivative instruments.

The main purpose of the financial instruments is to finance the Group's operations. The Company also has other financial instruments such as trade debtors and creditors which arise directly from its operations.

The main risks arising from the Group's financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The board reviews and agrees policies for managing each of these risks and they are summarised below:

 

 

(a)        Interest Rate Risk

 

The Group's exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates, and the effective weighted average interest rate for each class of financial assets and financial liabilities, is set out in the following table. Also included is the effect on profit and equity after tax if interest rates at that date had been 10% higher or lower with all other variables held constant as a sensitivity analysis.

 

The Group has not entered into any hedging activities to manage interest rate risk. In regard to its interest rate risk, the Group continuously analyses its exposure. Within this analysis, consideration is given to potential renewals of existing positions, alternative investments and the mix of fixed and variable interest rates.

 

 

 

Weighted

Floating

Fixed

Non

 

Interest Rate

Risk Sensitivity

 

Average Effective

Interest

Interest

Interest

 

 

 

 

 

 

 

 

 

 

-10%

+10%

 

Interest Rate

Rate

Rate

Bearing

Total

 

Profit

 

Equity

 

Profit

 

Equity

 

%

$

$

$

$

 

$

 

$

 

$

 

$

2016

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

Cash

0.05%

730,546

-

12,718

(319)

-

319

-

Trust deposits

0.00%

75

-

29,229

-

-

-

-

Receivables

0.00%

-

-

33,929

-

-

-

-

Investments

1.12%

64,715

-

-

(524)

-

524

-

Financial asset

0.00%

-

-

-

-

-

-

-

-

Total Financial Assets

 

795,336

-

75,876

871,211

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

-

-

439,549

-

-

-

-

Total Financial Liabilities

 

-

-

439,549

439,549

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

Cash

0.35%

868,354

136,490

23,624

(1,064)

-

1,064

-

Trust deposits

0.00%

163

-

34,162

-

-

-

-

Receivables

0.00%

-

-

21,928

-

-

-

-

Investments

1.12%

187,048

-

-

(1,312)

-

1,312

-

Financial asset

0.00%

-

-

-

-

-

-

-

-

Total Financial Assets

 

1,055,565

136,490

79,714

1,271,769

 

 

 

 

Financial Liabilities

 

 

 

 

 

 

 

 

 

Trade and other payables

 

-

-

803,892

-

-

-

-

Total Financial Liabilities

 

-

-

803,892

803,892

 

 

 

 

                     

 

 

A sensitivity of 10% has been selected as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. A -10% sensitivity would move short term interest rates at 30 June 2016 from around 2% to 1.8% representing a 20 basis point downwards shift (14.00 basis points net of tax).

 

Based on the sensitivity analysis, mainly interest revenue from variable rate deposits, cash balances and investment is impacted resulting in a decrease or increase in overall income.

 

 

(b)        Liquidity Risk

 

The Group manages liquidity risk by maintaining sufficient cash reserves and marketable securities required to meet the current exploration and administration commitments, through the continuous monitoring of actual cash flows.

 

Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk management framework for the management of the Group's short, medium and long term funding and liquidity management requirements.

 

 

 

 

Less than 1 month

1 - 3 months

3 months - 1 year

1 - 5 years

5+ years

Total

 

%

$

$

$

$

$

2016

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

 

Cash

743,264

-

-

-

-

743,264

Trust deposits

-

-

-

29,303

-

29,303

Receivables

-

33,929

-

-

-

33,929

Investments

-

-

-

64,715

-

64,715

 

743,264

33,929

-

94,018

-

871,211

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

Non-interest bearing

-

(439,549)

-

-

-

(439,549)

 

-

(439,549)

-

-

-

(439,549)

 

 

 

 

 

 

 

Net cash inflow / (outflow)

743,264

(405,620)

-

94,018

-

431,662

 

 

2015

 

 

 

 

 

 

Financial assets:

 

 

 

 

 

 

Cash

1,028,468

-

-

-

-

1,028,468

Trust deposits

-

-

-

34,325

-

34,325

Receivables

-

21,928

-

-

-

21,928

Investments

-

-

-

187,048

-

187,048

 

1,028,468

21,928

-

221,373

-

1,271,769

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

Non-interest bearing

-

(803,892)

-

-

-

(803,892)

 

-

(803,892)

-

-

-

(803,892)

 

Net cash inflow / (outflow)

1,028,468

(781,965)

-

221,373

-

467,876

 

 

(c)        Credit Risk

 

Credit risk arises in the event that counterparty will not meet its obligations under a financial instrument leading to financial losses.  The Company is exposed to credit risk from its operating activities and, financing activities including deposits with banks and investments with insurance companies.  The credit risk control procedures adopted by the Company is to assess the credit quality of the institution with whom funds are deposited or invested, taking into account its financial position and past experiences.

 

The maximum exposure to credit risk on financial assets of the Company which have been recognised on the statement of financial position is generally limited to the carrying amount.

 

Cash is maintained with National Australia Bank and the Standard Bank of South Africa.

 

The investment in mining rehabilitation insurance policy is invested by Guardrisk in the following investments,

 

 

Type of Investment

Type of interest

Unit trust - monthly contributing

Floating  interest rate

Unit trust - fixed investment (paid out during FY2016)

Floating  interest rate

Money market

Floating interest rate

Current account

Non-interest bearing

 

 

(d)        Foreign Exchange Risk

 

The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. The carrying amount of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date is as follows,

 

Liabilities

Assets

 

2016

$

2015

$

2016

$

2015

$

 

 

 

 

 

Great British Pounds (GBP)

(631,013)

(653,422)

621,213

670,765

South African Rand (ZAR)

(179)

(16,208)

179

16,208

United States Dollars (USD)

15,094

64,679

-

-

 

 

 

Foreign currency sensitivity analysis

 

The Group is exposed to Great British Pound (GBP), United States Dollar (USD) and South African Rand (ZAR) currency fluctuations.

 

The following table details the Group's sensitivity to a 10% increase and decrease in the Australian Dollar (AUD) against the relevant currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates.

 

The sensitivity analysis includes cash balances held in GBP, ZAR and USD which give rise to a foreign currency gain or loss on revaluation. A positive number indicates an increase in profit and other equity where the AUD strengthens against the ZAR. In relation to cash balances held in GBP a positive number indicates an increase in profit and other equity where the Australian Dollar strengthens against the respective currency. For a weakening Australian Dollar against the respective currency there would be an equal and opposite impact on the profit and other equity and the balances below would be negative.

 

 

 

 

2016

2015

 

 

 

Profit / (loss)

$

Equity increase / (decrease)

$

 

Profit / (loss)

$

Equity increase / (decrease)

$

 

-  

 

 

 

 

AUD strengthens 10%

-   ZAR

-   GBP

-   USD

(18)

(63,101)

2,890

18

63,101

(2,890)

(1,621)

(65,342)

12,268

1,621

65,342

(12,268)

AUD weakens 10%

-   ZAR

-   GBP

-   USD

18

63,101

(2,890)

(18)

(63,101)

2,890

1,621

65,342

(12,268)

(1,621)

(65,342)

12,268

 

 

 

(e)        Fair value

 

The fair values of cash, trade and other receivables and trade and other payables approximate their carrying values, as a result of their short maturity or because they carry floating rates.

 

(i)         Fair value of financial instruments measured at fair value

 

For financial instruments carried at fair value the Group adopts various methods in estimating fair value.  The methods comprise:

 

Level 1 - the fair value is calculated using quoted prices in an active market

Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 - the fair value is estimated using inputs for the asset or liability that are not based on observable market data.

 

 

 

Jun 2016

Jun 2015

 

AUD

AUD

Level 2

 

 

Available for sale financial assets

64,715

187,048

 

 

 

 

For financial instruments not quoted in active markets, the Group uses valuation techniques such as other relevant models used by market participants which may include inputs derived from quoted prices in an active market (Level 2). These valuation techniques use both observable and unobservable market inputs.

 

 

Note 26: Parent Entity Information

 

 

2016

2015

 

 

$

$

Current assets

 

742,467

934,073

Total assets

 

986,159

934,474

Current liabilities

 

216,061

129,863

Total liabilities

 

216,061

129,863

Issued capital

 

37,362,411

35,855,014

Accumulated Losses

 

(32,278,633)

(30,702,626)

Reserves

 

4,313,679

4,347,776

Total shareholders' equity

 

770,099

804,612

Profit / (loss) of the parent entity

 

(1,576,006)

(2,466,304)

Total comprehensive (loss) / income

 

(1,347,367)

(2,725,442)

 

 

On 30 November 2009, Ferrum Crescent Limited (formerly Washington Resources Ltd) ("FCR") completed the legal acquisition of Ferrum Metals Limited (formerly Ferrum Crescent Limited) ("FML"). Under the terms of AASB 3 Business Combinations (Revised), FML was deemed to be the accounting acquirer in the business combination. The transaction was therefore accounted for as a reverse acquisition. The Parent entity therefore had issued capital of $25,620,916 as opposed to the Group's consolidated issued capital of $28,366,383. For further details please refer to the disclosures contained within the 30 June 2010 Annual Report.

 

There have been no guarantees entered into by the parent entity in relation to any debts of its subsidiaries.

 

The parent entity has no contingent liabilities as at 30 June 2016 (2015: Nil).

 

 

Note 27: Subsequent events

 

Subsequent to the Company entering into an exclusive option to acquire 100 percent of GoldQuest, two nil-cost extensions were granted to Ferrum Crescent and on 22 September 2016 the option was exercised. Accordingly, the Company has acquired 100 per cent. of the share capital of GoldQuest Iberica, S.L. ("GoldQuest"). GoldQuest owns 100 per cent. of two lead-zinc exploration projects in the provinces of Leόn and Galicia, in historic Spanish mining areas (the "Iberian Projects"). Consideration comprised GBP326,500 in cash and the issue of 100 million new ordinary shares in the capital of Ferrum Crescent.

On 25 July 2016, the Company announced that it had conditionally raised in aggregate, GBP 374,453 (AU$655,034) before expenses through a placement via Beaufort Securities Limited, as agent to the Company, of 187,226,485 new ordinary shares of no par value each in the capital of the Company at a price of 0.20 pence per new ordinary share. As part of the placing, each investor was offered, subject to shareholder approval in accordance with the ASX Listing Rules, options on the basis of one option for every share subscribed pursuant to the placing. Each option will entitle the holder to subscribe for a further new ordinary share at a price of 0.30 pence per share for an exercise period of two years following the date of admission of the placing shares trading on AIM. In addition the Company has agreed to grant further 18,722,649 options to Beaufort Securities Limited on the same terms. Following admission, the total issued ordinary share capital of the Company was 1,470,018,368 ordinary shares.

 

On 28 July 2016, the Company announced that it was issuing 66,874,816 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate 66,874,816 options exercisable at a price of 0.165 pence per share, raising AUD 193,025 before expenses. Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of the option shares and the abovementioned placing shares, the total issued ordinary share capital of the Company was 1,536,893,184 ordinary shares.

 

On 26 August 2016, the Company announced that it was issuing 44,797,543 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate, a further 44,797,543 options exercisable at a price of 0.165 pence per share, raising AUD 128,184 before expenses. Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of these option shares, the total issued ordinary share capital of the Company was 1,581,690,727 ordinary shares.

 

On 23 September 2016, the Company announced that was issuing 5,381,907 new ordinary shares of no par value each in the capital of the Company as a result of the exercise of, in aggregate, 5,381,907 options exercisable at a price of 0.165 pence per share Such options were granted in connection with the Company's placing and subscription announced on 27 April 2016. Following the issue of these further option shares, the total issued ordinary share capital of the Company is 1,587,072,634 ordinary shares.

 

On 29 September 2016, the Company announced the following proxy results of the General Meeting of Shareholders held on said date in respect of the resolutions set out in the Notice of General Meeting dated 23 August 2016.  Resolution 1,2 and 3 were passed on a show of hands.

 

Resolution 1: Ratification of prior issue of Shares

Resolution 2: Approval of grant of Placement Options

Resolution 3: Approval of grant of Broker Options

 

Also on 29 September 2016, the Company also announced that it was issuing 100,000,000 new ordinary shares of no par value each in the capital of the Company to GoldQuest Mining (Spain) Corp on 30th September 2016. These shares will be issued in settlement of the share element of the consideration for the acquisition of 100 per cent. of the issued share capital of GoldQuest Iberica, S.L. The shares will be fully paid and rank pari passu in all respects with the Company's existing ordinary shares. Following the issue of the shares, the total issued ordinary share capital of the Company is 1,687,072,634 ordinary shares.

 

 

 

ASX Requirements

 

Distribution schedules of shareholders and statements of voting rights are set out in Table 1, whilst the Company's top twenty shareholders are shown in Table 2.  Substantial shareholder notices that have been received by the Company are set out in Table 3 and the tenement schedule as at 30 June 2016 is set out in Table 4.

 

Table 1

Shareholder spread

 

Ordinary shares, with right to attend meetings and vote personally or by proxy, through show of hands and, if required, by ballot (one vote for each share held)

1-1,000

73

 

1,001-5,000

107

 

5,001-10,000

91

 

10,001-100,000

248

 

100,001 - and over

225

 

 

 

 

 

Total holders of ordinary shares

Total number of ordinary shares                      

744

1,282,791,883

 

 

 

Options, with no right to attend meetings or vote personally or by proxy

1-1,000

              -        

 

1,001-5,000

              -

 

5,001-10,000

              -

 

10,001-100,000

              -

 

100,001 - and over

              26

 

 

 

 

Total holders of options

Total number of options                                             

              26 

513,000,000

 

 

 

Table 2

Top twenty shareholders

 

Shareholder

Number of shares

Percentage

 

Hargreaves Lansdown (Nominees) Limited

      135,556,381

10.57%

 

Barclayshare Nominees Limited

      131,190,328

10.23%

 

TD Direct  Investing Nominees (Europe) Limited

      110,415,308

8.61%

 

HSDL Nominees Limited

        89,981,899

7.02%

 

Redmayne (Nominees) Limited

        87,434,315

6.82%

 

The Bank of New York (Nominees) Limited

        42,764,600

3.34%

 

Investor Nominees Limited

        41,961,925

3.27%

 

Rathbone Nominees Limited

        34,638,909

2.70%

 

Mr E F G Nealon

26,484,421

2.02%

 

Mkhombi Amamato (Pty) Ltd

        25,281,620

1.97%

 

W B Nominees Limited

        24,624,206

1.92%

 

Citicorp Nominees Pty Ltd

        23,269,017

1.81%

 

HSBC Client Holdings Nominee (UK) Limited

        22,498,050

1.75%

 

IG Markets Limited

        22,407,431

1.75%

 

Lawshare Nominees Limited

        22,170,630

1.73%

 

JIM Nominees Limited

        20,714,889

1.62%

 

Wealth Nominees Limited

        20,265,279

1.58%

 

Vidacos Nominees Limited

        17,596,041

1.37%

 

Pershing Nominees Limited

        16,313,425

1.27%

 

Share Nominees Ltd

        15,232,852

1.19%

 

 

 

 

               

 

Table 3

Substantial shareholders

 

Shareholder

Number of shares

Percentage

Hargreaves Lansdown (Nominees) Limited

      135,556,381

10.57%

Barclayshare Nominees Limited

      131,190,328

10.23%

TD Direct  Investing Nominees (Europe) Limited

      110,415,308

8.61%

 

Voting Rights

 

The voting rights attached to each class of equity securities are set out below:

 

(a) Ordinary shares

 

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

 

 

Table 4

 

Tenement schedule as at 30 June 2016:

 

Project

Tenement Number

Tenement Status

Holder

Percentage Interest

 

 

 

 

 

Moonlight

30/5/1/2/2/201 MR

Mining Right Granted

Ferrum Iron Ore (Pty) Ltd

97%

 

 

 

 

 

Moonlight

 

LP30/6/1/1/2/11868PR

Prospecting Application

Ferrum Iron Ore (Pty) Ltd

97%

 

 

JSE Limited Requirements

 

Headline earnings reconciliation

2016

2015

 

 

 

$

$

 

 

 

 

 

Loss attributable to ordinary equity holders of the parent entity

(1,573,533)

(2,345,860)

 

 

 

 

 

 

 

 

 

 

Add back IAS 16 loss on the disposal of plant and equipment

(8,609)

-

 

 

 

 

 

Less profit on sale of available for sale investments

649

(137,597)

 

Total tax effects of adjustments

(182)

38,527

 

 

 

 

 

 

Headline loss

(1,581,675)

(2,444,930)

 

 

 

 

 

 

 

Basic loss per share

(1,573,533)

(2,345,860)

 

Weighted average shares in issue

714,611,971

468,894,041

 

Basic loss per share (cents)

(0.22)

(0.50)

 

 

 

 

 

 

 

Headline loss

(1,581,675)

(2,444,930)

 

Weighted average shares in issue

714,611,971

468,894,041

 

Headline loss per share (cents)

(0.22)

(0.52)

                 

 


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