Source - RNS
RNS Number : 7712G
Sovereign Mines of Africa PLC
01 June 2017
 

 Sovereign Mines of Africa PLC

("SMA" or "the Company")

 

Sovereign Mines of Africa PLC (AIM:SML), the gold mining exploration Company with properties in the Republic of Guinea in West Africa, today announces its audited results for the year ended 31 December 2016.

 

Enquiries:

 

SOVEREIGN MINES OF AFRICA PLC

Giles Clarke - Chairman                                                                c/o Billy Clegg   +44 20 3757 4983

                                                               

 

SHORE CAPITAL - NOMINATED ADVISER & BROKER

Toby Gibbs/Bidhi Bhoma - Corporate Finance

Jerry Keen - Corporate Broking                                                                 +44 207 408 4090

 

CAMARCO

Billy Clegg / Gordon Poole                                                                          +44 20 3757 4983

 

 

SOVEREIGN MINES OF AFRICA PLC

 

CHAIRMAN'S STATEMENT

 

 

2016 was a year of transition for the Company as the Board implemented a strategic review of the Company's assets and activities. The review included changes to the Board's composition as well as a decision not to continue funding the development of its Guinean assets and resulted, post-period, in the successful sale of its 75% interest in the Mandiana Gold Project ("Mandiana") in Republic of Guinea, WA to Volcanic Metals Corp. ("Volcanic"), a Canadian publicly listed mining company.

In consideration for the farm-out, the Company received 2,502,489 common shares in Volcanic representing 9.9% of the outstanding share capital of Volcanic at the time of transaction. It was an important step for the Company and realised immediate value for shareholders whilst retaining an interest in the future of Mandiana.

Following the successful farm out of its interest in Mandiana, the Company is now deemed a cash shell under AIM Rule 15, pursuant to which it is required to make an acquisition which constitutes a reverse takeover under Rule 14, failing which the Exchange will suspend trading in the Company's shares pursuant to AIM Rule 40. Suspension of trading in the Company's shares is scheduled for 21 July 2017, if the Company's shares remain suspended for six months they will be cancelled from trading on AIM on 21 January 2018 pursuant to AIM Rule 41.

Having previously pursued a wider strategy of targeting assets in a number of sectors, the Company is now pursuing a more targeted strategy, including pursuing acquisitions in the Indian consumer goods sector. The Board is actively assessing acquisition opportunities and is in preliminary discussions to acquire a business operating in this sector. There can, at this time, be no guarantee that any acquisition will complete. Further announcements will be made in due course.

Finally I would like to thank Rupert Street for his service as CEO of the Company. Rupert has today stepped down as CEO and resigned as a Director of the Company. The Company intends to appoint a new CEO in due coursewho will complement the anticipated new direction of the Company and who it is planned will be based in India.

Financial

The loss in the year of £201,547 represents the costs of running the Company during this transitional phase compared with a loss of £1,991,490 in 2015, which included the impairment of its exploration assets of £1,278,059.

The Company had cash resources of £399,446 at 31 December 2016 which will provide sufficient finance to cover the Company's ongoing expenditure for the foreseeable future 

 

 

C G Clarke

(Chairman)

31 May 2017

SOVEREIGN MINES OF AFRICA PLC

 

CONSOLIDATED INCOME STATEMENT AND OTHER COMPREHENSIVE INCOME

 

Year ended 31 December 2016

 

 

 

 

 

 

Restated

 

 

2016

 

2015

 

Note

£

 

£

Administrative costs

 

 

 

 

 

Impairment of intangible assets

 

11

 

-

 

 

(1,278,059)

Other administrative expenses

6

(207,683)

 

(713,988)

 

 

(207,683)

 

(1,992,047)

Finance income

7

6,136

 

557

 
Loss on ordinary activities before taxation

 

 

 

(201,547)

 

 

(1,991,490)

Taxation

8

                   - 

 

               -

Loss for the year

 

(201,547)

 

  (1,991,490)

 

 

 

 

 

Other comprehensive income

 

-

 

             -

Total comprehensive loss for the year

 

(201,547)

 

(1,991,490)

 

 

 

 

 

Loss for the period and total comprehensive loss attributable to:

 

 

 

 

Owners of the parent

 

(201,547)

 

(1,991,490)

 

 

 

 

 

Loss per ordinary share (pence) from continuing operations: basic and diluted

10

 

(0.02)p

 

 

(0.64)p

  

 

 

 

SOVEREIGN MINES OF AFRICA PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

As at 31 December 2016

                                                                                   

 

 

 

 

Restated

 

 

2016

 

2015

 

Note

£

 

£

 

 

 

 

 

NON CURRENT ASSETS

Intangible assets

 

11

 

            -

 

 

             -

CURRENT ASSETS

 

 

 

 

Other receivables

15

2,438

 

-

Cash at bank

 

399,446

 

501,170

Assets classified as held for sale

13

-

 

-

 

 

401,884

 

501,170

TOTAL ASSETS

 

401,884

 

501,170

 

 

 

 

 

LIABILITIES

 

 

 

 

CURRENT LIABILITIES

Trade and other payables

 

14

 

49,883

 

 

37,443

TOTAL LIABILITIES

 

49,883

 

37,443

 

 

 

 

 

NET ASSETS

 

352,001

 

463,727

 

 

 

 

 

EQUITY

 

 

 

 

Share capital

16

3,163,589

 

3,163,589

Share premium account

16

5,563,520

 

5,563,520

Reconstruction reserve

 

(586,100)

 

(586,100)

Share-based payment reserve

17

690,126

 

600,305

Profit and loss account

 

(8,479,134)

 

(8,277,587)

EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT

 

 

352,001

 

 

463,727

 

 

 

 

SOVEREIGN MINES OF AFRICA PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 2015 (restated)

Share

capital

Share

premium

Reconstruction

reserve

Share based payment reserve

Profit & loss account

Total

 

£

£

£

£

£

£

Balance at 1 January 2015

 

3,108,589

 

5,099,544

 

(586,100)

 

14,454

 

(6,286,097)

 

1,350,390

Loss and total comprehensive income for the year

 

              -

 

                -

 

             -

 

-

 

(1,991,490)

 

 

(1,991,490)

 

Share-based payment expense

 

-

 

-

 

 

-

585,851

-

585,851

 

Issue of shares, net of share issue costs

 

55,000

 

   463,976

 

             -

 

             -        

 

              -

 

518,976

Balance at 31 December 2015

 

3,163,589

 

5,563,520

 

(586,100)

 

600,305

 

(8,277,587)

 

463,727

 

 

2016

Share

capital

Share

premium

Reconstruction

reserve

Share based payment reserve

Profit & loss account

Total

 

£

£

£

£

£

£

Balance at 1 January 2016

 

3,163,589

 

5,563,520

 

(586,100)

 

600,305

 

(8,277,587)

 

463,727

Loss and total comprehensive income for the year

 

              -

 

                -

 

             -

 

-

 

(201,547)

 

(201,547)

 

Share-based payment expense

 

-

 

-

 

 

-

 

89,821

 

 

-

 

89,821

Balance at 31 December 2016

 

3,163,589

 

5,563,520

 

(586,100)

 

690,126

 

 

(8,479,134)

 

352,001

 

 

 

The Reconstruction reserve represents the difference between the investment in the subsidiary and the share capital in the subsidiary on acquisition.

 

 

 

 

SOVEREIGN MINES OF AFRICA PLC

 

 CONSOLIDATED STATEMENT OF CASH FLOWS

 

Year ended 31 December 2016

 

 

 

 

 

 

 

2016

 

Restated

2015

 

£

 

£

Cash flows from operating activities

 

 

 

Loss before taxation

(201,547)

 

(1,991,490)

Impairment losses on intangible assets

-

 

1,278,059

Share-based payment expense

89,821

 

585,851

Increase in other receivables

(2,438)

 

-

Increase/(decrease) in trade and other payables

12,440

 

(21,016)

Net cash from operating activities

(101,724)

 

(148,596)

 

 

 

 

Cash flows from investing activities

 

 

 

Purchase of intangible assets

-

 

(119,161)

Net cash used in investing activities

-

 

(119,161)

 

 

 

 

Cash flows from financing activities

 

 

 

Issue of shares, net of share issue costs

              -

 

518,976

Net cash flows from financing activities

               -

 

518,976

 

 

(Decrease)/increase in cash and cash equivalents

(101,724)

 

251,219

Cash and cash equivalents at beginning of year

501,170

 

249,951

Cash and cash equivalents at end of year

399,446

 

501,170

 

 

 

1.    BASIS OF ACCOUNTING

The financial information set out in this announcement does not constitute the Group's statutory financial statements for the years ended 31 December 2016 or 2015 but is derived from those financial statements. Statutory financial statements for 2015 have been delivered to the Registrar of Companies, and those for 2016 will be delivered in due course.

The auditors have reported on the financial statements for the year ended 31 December 2015; their report was unqualified and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

While the financial information included in this announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as endorsed for use in the European Union, this announcement does not itself contain sufficient information to comply with IFRSs.

The principal accounting policies adopted in the preparation of the financial information in this announcement are set out in the Company's full financial statements for the year ended 31 December 2016 and are consistent with those adopted in the financial statements for the year ended 31 December 2015.

The Directors do not recommend the payment of a dividend (2015: nil).

The Board approved this announcement on 31 May 2017.

2.    OPERATING SEGMENTS

 

Operating segments are based on internal reports about components of the Group, which are regularly reviewed by the Chairman being the Chief Operating Decision Makers ("CODM") for strategic decision making and resource allocation in order to allocate resources to the segment and to assess its performance.

 

The Group undertakes only one business activity as described in the Director's report. All transactions between each reportable segment are accounted for using the same accounting policies as the Group uses, as set out in Note 3. Accordingly, the Group's operating segments have been determined based on geographical areas.

 

The Group has not generated revenue during the either of the years ended 31 December 2016 or 31 December 2015. The Group's results by reportable segment are as follows:

 

 

UK

Guinea

Group

As at 31 December 2016

 

£

£

£

RESULTS

 

 

 

 

Operating loss

 

(207,526)

(157)

(207,683)

Interest income

 

6,136

-

6,136

 

 

 

UK

Guinea

Group

As at 31 December 2015 (restated)

 

£

£

£

RESULTS

 

 

 

 

Operating loss

 

(713,988)

(1,278,059)

(1,992,047)

Interest income

 

557

-

557

 

 

 

 

 

All transactions between each reportable segment are accounted for using the same accounting policies as the Group uses, as set out in Note 3. The Group's assets and liabilities by reportable segment are as follows: -

 

 

UK

Guinea

Group

As at 31 December 2016

 

£

£

£

ASSETS

 

 

 

 

Cash

 

399,446

-

399,446

Intangible assets

 

-

-

-

Total assets

 

401,884

-

401,884

 

 

 

 

 

LIABILITIES

 

 

 

 

Trade and other payables

 

49,883

-

49,883

 

 

UK

Guinea

Group

As at 31 December 2015

£

£

£

ASSETS

 

 

 

Cash

501,013

157

501,170

Intangible assets

-

-

-

Total assets

249,795

-

249,795

 

 

 

 

LIABILITIES

 

 

 

Trade and other payables

37,443

-

37,443

 

 

 

 

3.    STAFF COSTS

 

 

 

Restated

As at 31 December

2016

2015

 

£

£

Wages and salaries

-

10,912

Social security costs

-

2,811

Share based payment expense

89,821

585,851

 

89,821

599,574

 

The average monthly number of Group employees during the year was as follows:

 

2016

2015

As at 31 December

Number

Number

Directors

3

3

Employees

-

5

 

3

8

All employees relating to the prior year were engaged in exploration activities in Guinea. Accordingly, the employment costs form part of the exploration costs included in the financial statements as intangible assets.

 

No Directors' emoluments were paid during the year. Details of transactions with Directors are set out in Note 18 to the financial statements.

Jeremy Sparrow is not taking any fees in relation to his role as Non-executive Director and has in lieu of such been granted 22,000,000 share warrants. Each warrant entitles him to subscribe for one Ordinary Share at the price of 0.23 pence per share. 11,000,000 warrants may be exercised from 28 July 2016 until 29 July 2021. The remaining 11,000,000 warrants are exercisable on the execution of a reverse takeover by the Company. See Note 17 for further details.

4.    TAXATION
 

 

2016

2015

As at 31 December

£

£

Analysis of the tax charge:

 

 

Current tax:

Tax

 

 

Total tax charge in the income statement

-

-

 

-

-

 

 

 

   Restated

 

2016

            2015

As at 31 December

£

                   £

Reconciliation of the tax charge:

 

 

Current tax:

Tax

 

 

Loss before tax

(201,547)

(1,991,490)

Loss before tax multiplied by standard rate of corporation tax (20%)

in the UK of 20% (2015: 21%)

(40,309)

   (398,298)

 

 

 

Effects of:

 

 

Non-deductible costs

18,169

     372,906

Deferred tax not provided

22,140

       25,392

Total tax charge in the income statement

-

                  -

 

A deferred tax asset has not been recognised in respect of deductible temporary differences relating to losses carried forward at the year-end, as there is insufficient evidence that taxable profits will be available in the foreseeable future against which the deductible temporary difference can be utilised. The amount of the asset not recognised is £569,446 (2015: £547,306).

 

A deferred tax asset has also not been recognised in respect of deductible temporary differences relating to the cost of the equity settled share based payments awards detailed in Note 16, as there is insufficient evidence that taxable profits will be available in the foreseeable future against which the deductible temporary difference can be utilised. The amount of the asset not recognised in 2016 is £162,526.

 

The assets would be recovered if the Group made taxable profits in future years.

 

5.    LOSS PER SHARE

 

Basic earnings per share is calculated by dividing the loss attributable to ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period.

 

 

Restated

As at 31 December

2016

2015

Weighted average number of ordinary shares in issue

312,363,590

Loss after taxation (£)

(201,547)

(1,991,490)

Loss per share (pence)

(0.02)

(0.64)

 

Due to there being a loss during the period there are no dilutive transactions and therefore no diluted loss per share has been presented.

 

6.    INTANGIBLE ASSETS

 

 

 

 

 

Exploration costs

£

Cost

 

 

 

At 31 December 2015

 

 

4,972,103

Additions

 

 

119,161

At 31 December 2015

 

 

5,091,264

At 31 December 2016

 

 

5,091,264

 

 

 

 

Impairment

 

 

 

1 January 2015

 

 

3,813,205

Impairment charge

 

 

 1,278,059

At 31 December 2015

 

 

5,091,264

At 31 December 2016

 

 

5,091,264

 

 

 

 

Net book value as at 31 December 2015 and 2016

 

 

-

           

 

Exploration activities are deferred until a reasonable assessment can be made of the existence or otherwise of economically recoverable reserves. The Directors have reviewed the carrying value of the exploration assets and an impairment provision has been made to reflect their expected recoverable value, in the light of discussions with potential strategic partners. 

 

The 2015 Impairment charges are included under "Administrative expenses" in the Consolidated Statement of Comprehensive Income.

 

7.    ASSETS HELD FOR SALE

 

2016

2015

As at 31 December

£

£

Group

 

 

Intangible assets

-

-

 

As explained in the Directors Report, on 20 January 2017 the Group sold its 75% interest in the Mandiana Gold Project to Volcanic Gold Mines Inc ('Volcanic'), formerly Volcanic Metals Corp, in exchange for 100% of the Company's shares in Sovereign Mines of Africa Limited, the Company received 2,502,489 shares in Volcanic, a company listed on TSX Venture Exchange, a stock exchange in Canada. At the date of the transaction Volcanic's shares had a share price of CAD$0.45 (approximately £0.28 per share). This transaction meets the IFRS 5 'Non-current assets held for sale and Discontinued operations' definition of held for sale because the asset was available for immediate sale in its present condition and the sale was highly probable at the balance sheet date. There are no additional measurement differences on reclassified to held for sale as the assets were fully impaired in the prior year (see Notes 11 and 12).  

 

8.   TRADE AND OTHER PAYABLES

 

2016

2015

As at 31 December

£

£

Group

 

 

Accruals

49,883

37,443

 

9.      SHARE CAPITAL

 

a)            Share capital

 

The Company has one class of Ordinary share which carry no right to fixed income nor have any preferences or restrictions attached.

 

 

 

 

2016

2015

As at 31 December

£

£

Issued and fully paid

 

 

860,859,050 Ordinary shares of 0.01p each (2015: 860,858,850)

3,163,589

86,086

310,858,850 Deferred shares of 0.99p

-

3,077,503

 

3,163,589

3,163,589

 

b)            Share issues during the year

 

Number of shares

Share capital

Share premium

Total

 

 

£

£

£

At 1 January 2015 (1.0p Ordinary shares)

310,858,850

 

3,108,589

5,099,544

8,208,133

Issue of shares during year:

 

 

 

 

Ordinary shares (0.01p)

550,000,000

 

55,000

463,976

518,976

Subdivision of 1p Ordinary shares into 0.99p Deferred shares

310,858,850

 

-

-

-

At 31 December 2015

1,171,717,700

 

3,163,589

5,563,520

8,727,109

Redemption of 0.99p Deferred shares

(310,858,850)

-

-

-

Issue of Ordinary shares (0.01p)

200

-

-

-

At 31 December 2016

860,859,050

 

3,163,589

5,563,520

8,727,109

 

On 30 June 2015, the Company's share capital was subdivided from 310,858,850 Ordinary shares of 1 pence each into 310,850,858 Ordinary shares of 0.1 pence each and 310,858,850 Deferred shares of 0.99 pence each. On 30 December 2015, the Company raised additional working capital of £550,000 through a placing of 550,000,000 new Ordinary shares with new and existing investors at a price of 0.1p each.

On 22 June 2016, the Company redeemed all of the 310,858,850 deferred shares of 0.99 pence each (created as a result of the subdivision in June 2015 of each of the Company's former ordinary shares of 1.0 pence each into one ordinary share of 0.01 pence and one deferred share of 0.99 pence) for 100 pence in aggregate, in accordance with the rights attaching to such classes of shares. The redemption was funded out of the proceeds of the subscription by Lea Yeat Limited for 200 new Ordinary shares of 0.01 pence in the Company for 0.5 pence each in cash, made for the purpose of such redemption.

The Ordinary shares carry no right to fixed income nor have any preferences or restrictions attached.

10.        SHARE-BASED PAYMENTS

The Company has an unapproved share option scheme under which options to subscribe for the Company's shares have been granted to two directors. The vesting condition is the number of years' service. The share options and warrants currently in existence were granted and are exercisable as follows:

 

Share options

Date granted

Exercise

price

(pence)

Number of shares

Vesting conditions

Contractual life remaining

(Years)

28 June 2013

3

3,000,000

Between 28 June 2013 and 2018 June 2018

1.5

18 November 2013

3

3,000,000

Between 18 November 2013 and 18 November 2018

1.9

 

Share warrants

 

 

 

 

Date granted

Exercise

price

(pence)

Number of shares

Vesting conditions

Contractual life

remaining

(Years)

30 December 2015

0.1

125,000,000

Upon execution of a reverse takeover by the Company

 

4

30 December 2015

0.1

125,000,000

Between 30 December 2015 and  30 December 2020

4

18 July 2016

0.23

11,000,000

Between 28 July 2016 and 29 July 2021

4.6

18 July 2016

0.23

11,000,000

Upon execution of a reverse takeover by the Company

 

4

The Directors did not exercise any share options or warrants during 2016 (2015: none).

22,000,000 share warrants over Ordinary Shares were granted to Jeremy Sparrow following his appointment as a Non-Executive director on 18 July 2016. Jeremy Sparrow is not taking any fees in relation to his appointment to the Board of the Company and has in lieu of such been granted the 22,000,000 warrants. Each warrant entitles him to subscribe for one Ordinary share at the price of 0.23 pence per share.

At the year-end, the market value of the Company's shares was 0.425p per share.  The highest price during the year was 0.860p and the lowest price was 0.225p. The share-based payment charge relating to the share options and warrants granted to directors amounted to £89,821 (2015 restated: £585,851).

 

The number and weighted average exercise prices of share options and warrants are as follows:

 

Weighted average

Exercise

price (pence)

 

 

Number of shares

Granted in the year

-

-

Outstanding at year end

0.17

256,000,000

Exercisable at the year end

1.21

17,000,000

         

The estimated fair values of options and warrants which fall under IFRS 2, and the inputs used in the Black-Scholes model to calculate those fair values, are as follows:

 

 

 

 

 

 

 

At date of grant

 

 

 

 

 

 

Date of grant

Estimated fair value pence

Share price pence

Exercise price

pence

Expected volatility (%)

Expected Life (yrs)

Vesting period (yrs)

Risk free rate (%)

Expected dividend (%)

28.6.13

0.936

1.375

3.0

22

5

5

0.5

0

18.11.13

35

51

3.0

22

6

6

0.5

0

30.12.15

0.23

0.24

0.1

56

5

5

0.5

0

30.12.15

0.23

0.24

0.1

56

5

5

0.5

0

18.07.16

0.42

0.42

0.23

113

5

5

0.6

0

18.07.16

0.42

0.42

0.23

113

5

5

0.6

0

 

Expected volatility was determined by calculating the standard deviation of daily continuously compounded returns of the Company's share price calculated back from the date of grant.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioral considerations.

 

11.       TRANSACTIONS WITH RELATED PARTIES

 

N A Steinberg, a former director and part-time Finance Director who resigned during 2016, is a partner in Munslows LLP, a firm of Chartered Certified Accountants.  That firm charged fees of £13,800 (2015: £20,000) excluding VAT to the Group in respect of professional services in the period. Of the fees charged, £nil (2015: £10,000 included in trade and other payables) was outstanding at year end.

        

 

12.       POSTING OF ACCOUNTS AND NOTICE OF AGM

The Report and Accounts for the period ended 31 December 2016 will shortly be available on the Company's website and will be sent to registered shareholders by post shortly together with notice of the Company's AGM.

 

 

 

 

 

 


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