RNS

RNS Number : 4728O
Ortac Resources Limited
21 August 2017
 

 

 

 

ORTAC RESOURCES LTD

("Ortac" or "Company")

 

FINAL RESULTS and NOTICE OF ANNUAL GENERAL MEETING

 

 

 

ANNUAL GENERAL MEETING

 

 

Ortac Resources Ltd, the AIM listed exploration and mine development company, announces that the Annual General Meeting ("AGM") of the Company will be held at the offices of Hill Dickinson LLP The Broadgate Tower, 8th Floor, 20 Primrose Street, London EC2A2EW at 11:00 BST on 08 September 2017

 

The Company's Annual Report and Accounts for the period ended 31 March 2017, together with the Notice of AGM have been posted.   Electronic copies of these documents will be shortly available on the Company's website below:

 

www.ortacresources.com   

 

 

FINAL RESULTS

 

HIGHLIGHTS

·    Increased stake in Casa Mining to circa 45% (upon conversion of a convertible note) where a revised geological model at their Akyanga deposit defined a 1.05Moz JORC resource @ 2.27 g/t Au within a lower grade envelope of 1.57Moz @ 1.65 g/t Au.

 

·    Entered into a non-binding memorandum of understanding with a potential local partner for the Šturec project in Slovakia, where an 873koz gold equivalent reserve averaging 1.90 g/t Au equivalent has been defined by the company.

 

·    Commenced underground mining activities at Šturec after the underground mining permit was re-issued, thereby satisfying the terms under the Kremnica Mining License Area.

 

·    Andiamo Exploration increased the size of their prospective Haykota exploration license area and recently completed a reverse circulation drill program targeting VMS style mineralisation.

 

·    Partial conversion of loan notes into circa 14% of Zamsort equity.  

·    2017 Loss of £835,000 (2016 Loss: £ 853,000) and a loss per share of 1.2 pence (2016: 2.2 pence). Administration costs reduced 23%

·     Issued 2,481M ordinary shares for consideration of £ 752,000; shares were consolidated 1:100 in March 2017

 

Anthony Balme, Chairman at Ortac, commented: "With the natural resources sector showing notable signs of a recovery, we are excited that your company is strongly positioned to benefit from an uplift in commodities prices. We continue to adopt a low-cost structure and we believe that our diversified portfolio of projects, is well placed to benefit from current and future market trends. Our ambition remains to develop and realise value from our investments, which will hopefully enable us to reward all of Ortac's stakeholders that have supported the Company since its inception."

 

Market Abuse Regulation ("MAR") Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

Contacts

Ortac Resources Ltd

Vassilios Carellas (CEO)

 

+44 (0) 20 3874 8664

SP Angel (Nominated Adviser & Broker)

Ewan Leggat / Lindsay Mair

 

Celicourt Communications (PR)

Mark Antelme / Jimmy Lea

+44 (0) 20 3470 0470

 

 

+44 (0) 20 7520 9261

 

 

CHAIRMAN'S STATEMENT AND OPERATIONS AND FINANCE REVIEW

Ortac's objective in 2017 was to simultaneously advance our projects and take advantage of improved market conditions whilst keeping a tight control over our costs. While some local and geo-political issues interferred with operating and investment activities, significant progress was made with a number of our investments.

 

Our near term goal in Slovakia was to resolve the issues arising in local courts which affected our rights to the mining licence. The challenges were overcome with the co-operation of the Mining Bureau which in March 2017 issued an amended underground mining permit. After due consultation, this was finally confirmed in July 2017 allowing the company to commence small scale mining operations.

 

Although we are aware of the possibility of further challenges, we are now in a substantially better and more stable position with a clear title and are well placed to pursue the development of Šturec, which has a gold equivalent reserve close to 900,000 oz. We are looking at a number of future financing options with potential partners in both Slovakia and overseas. Whilst we monitored the judicial procedures closely we also turned our attention towards advancing discussions regarding alternative processing routes.

 

Ortac also entered into a non-binding Memorandum of Understanding with a potential Joint Venture partner in Slovakia in April 2017. Discussions continue to work towards formalising an arrangement, which will aim to set out how further value can be added to the project. The next stage is to commence an environmental impact assessment while working with the local community to ensure all future development is undertaken in a sustainable and sensitive manner. Following extensive consultation with our stakeholders, the Group agreed to a reduction in the size of the Kremnica Mining Licence Area so that the town of Kremnica was no longer located inside this licence area. During 2017 an impairment charge of £655,000 was recognised in respect of a licence area approximately 2km to the south of the main Šturec project. The impairment arose following a change to Slovakian legislation which ruled that licence areas cannot overlap and accordingly 50% of the capitalised expenditure has been written off which correlates to the 50% reduction to the licence area.

 

In Zambia, the exploration licence at Kalaba, hosting copper, cobalt and other minerals, has potential to be a world class target.  The completion of the demonstration scale processing plant at Kalaba was delayed whilst Zamsort concluded financing to complete the plant. The Group agreed to a partial conversion of the loan notes into a 14 percent equity interest in Zamsort, with the c. 6 percent balance and interest being rolled forward to the end of 2018.

 

Following last year's strategic investment into Casa Mining Ltd ("Casa") Ortac was able to increase its stake in the business to 22.2 percent. Post year end, the Group put a convertible loan note in place that, when converted, will result in Ortac owning approximately 45 percent of Casa. During the year, Casa upgraded its mineral resource estimate at Akyanga to over 1 Moz Au at a 1.5 g/t Au cut off, based on a revised geological model, and, most importantly, it also increased the deposits ore grade to over 2.20 g/t Au. With imminent commencement of drilling activities at Akyanga, we look forward to updating shareholders on the development of this asset and Casa's aspirations of proving up a two to three million ounce gold resource.

 

Turning to Eritrea, the Group's stake in Andiamo Exploration Limited ("Andiamo") was reduced to 18.5 percent as a result of the acquisition for shares of Environminerals East Africa Limited's JV interest in Andiamo's Haykota Licence and subsequent fundraise.

 

Post the conversion and fundraise, Andiamo completed 1,266 metres of Reverse Circulation drilling that tested three further anomalies in the northern part of the licence area as well as additional drill holes at Yacob Dewar and Bergebey. Andiamo increased the size of its Haykota licence area by a further 91km2 to encompass ground formerly held by the now defunct Libya-Eritrea joint venture company. Andiamo remains an interesting prospect for Ortac and we look forward to updating shareholders on developments in due course.

 

Finally, I would like to thank the Ortac team and the Group's stakeholders for their continued support during my tenure as Chairman. Since taking over as Chairman in 2010 we have endured strong headwinds in the form of adverse market conditions, a fall in commodity prices and geo-political difficulties in some of the territories in which we operate. However, as I prepare to stand down I am pleased with the strong position the Group is now in, and I would like to thank the Board and the rest of the employees for their support and assistance. I welcome Nick von Schirnding as your new chairman who I am confident will add significant value for shareholders as we look at enhancing the value of the Group's assets. I would also like to express my appreciation to Paul Heber who is retiring from the Board at the AGM. We thank Paul for his support and the valuable contribution he has made to the Group during his tenure.

 

Outlook

 

It has been pleasing to see a resurgence in commodity prices, with gold prices averaging approximately $1,250 per oz and copper north of $6,000 per tonne. We are optimistic regarding our investments in Africa, as heightened demand for metals (that are vital to the manufacturing process of electric vehicles) such as copper and cobalt continue to push up the price of these commodities. 

 

I firmly believe that the Group's exposure to a number of different commodities across a wide range of geographies leaves us well placed to benefit from an upturn in market conditions, whilst shielding the business from execution risk in the event one of the Company's investments runs into difficulties. We hope to see further exploration progress made at our promising assets over the coming year and look forward to updating our stakeholders in due course.

 

Annual General Meeting

 

The AGM will be held at the offices of Hill Dickinson LLP at 11:00 am on 8 September 2017. Their offices are located at The Broadgate Tower, 8th Floor, 20 Primrose Street, London EC2A 2EW. The Registration Desk will be located on the Ground Floor. 

 

 

 

 

Anthony Balme

Chairman

 

18 August 2017

 


Consolidated Statement of Comprehensive Income for the year ending 31 March 2017



Year to

Year to



31 March 2017

31 March 2016


Notes

£ 000s

£ 000s

 

Revenue

 


 

-

 

-

Other Operating Income

3

40

45

Administrative expenses

4

(711)

(922)

Share-based payments

Impairment

20

11

(117)

(655)

-

-

Operating loss


(1,443)

(877)





Finance Income

10

67

54

Share of loss of associates accounted for using the equity method

Gain on change of ownership status

 

14

14

 

(34)

575

 

(30)

-

Loss before income tax


(835)

(853)





Income tax expense

6

-

-





Loss for the year from continuing operations


(835)

(853)





Other comprehensive income:




Item that may be subsequently reclassified to profit or loss

 


 

 


Currency translation differences


878

817

Other comprehensive income for the year, net of tax


878

817





Total comprehensive income for the year attributable to owners of the parent


43

(36)









All operations are continuing








Loss per share attributable  to owners of the parent during the year




- Basic & diluted pence per share (restated to reflect 1:100 share consolidation)

9

(1.2)

(2.2)

 

The notes on pages 21 to 48 are an integral part of these consolidated financial statements.

 


Consolidated Statement of Financial Position as at 31 March 2017

 



31 March 2017

31 March 2016


Note

£ 000s

£ 000s





ASSETS




Non-current assets




Intangible assets

11

12,739

12,516

Property, plant and equipment

12

211

214

Investment in associate

14

1,033

874

Available for sale financial assets

15

791

-





Total non-current assets


14,774

13,604





Current assets




Inventories

16

37

34

Trade and other receivables

17

141

150

Available for sale financial assets

15

853

835

Cash and cash equivalents

22

80

428

Total current assets


1,111

1,447

TOTAL ASSETS


15,885

15,051





LIABILITIES




Current liabilities




Trade and Other payables

18

(107)

(149)

TOTAL LIABILITIES


(107)

(149)





NET ASSETS


15,778

14,902





EQUITY ATTRIBUTABLE TO OWNERS OF THE PARENT




Share Capital

19

-

-

Share premium

21

32,774

32,075

Share based payments reserve


1,697

2,320

Foreign exchange reserve


652

(226)

Retained earnings


(19,345)

(19,267)

TOTAL EQUITY


15,778

14,902

 

These financial statements were approved by the Board of Directors on 18 August 2017 and signed on its behalf by:

 

Anthony Balme

Vassilios Carellas

Executive Chairman

Chief Executive Officer

The notes on pages 21 to 48 are an integral part of these consolidated financial statements.


Consolidated Statement of Cash Flows for the year ending 31 March 2017



Year to

Year to



31 March 17

31 March 16


 Notes

£ 000s

£ 000s





Cash flows from operating activities




Loss before income tax


(835)

(853)

Interest Income


(67)

(54)

Share based payment

20

117

_

Share of loss from associates


34

30

Impairment of Intangible assets

Fair value gain on change of ownership status


655

(575)

101

     -

Depreciation and amortisation

11, 12

21

14

Net cash used in operating activities before changes in working capital


(650)

(762)





(Increase)/decrease in inventories

16

(3)

3

Decrease/(increase) in trade and other receivables

17

72

(445)

Decrease in trade and other payables

18

(42)

(38)

Net cash used in operating activities


(623)

(1,242)





Cash flows from investing activities




Purchase of intangible assets

Investment in associate

11

14, 15

(14)

(377)

(134)

-

Purchase of available-for-sale financial assets

14, 15

(50)

(44)

Net cash used in investing activities


(441)

(178)





Cash flows from financing activities




Proceeds from issue of ordinary shares- net of share issue costs

19

716

1,350

Net cash from financing activities


716

1,350





Net decrease in cash and cash equivalents


(348)

(70)

Cash and cash equivalents at beginning of year


428

498

Cash and cash equivalents at end of the year

22

80

428

There were no material non-cash items.

 

The notes on pages 21 to 48 are an integral part of these consolidated financial statements.


Consolidated Statement of Changes in Equity as at 31 March 2017

 


Attributable to the owners of the parent


Share capital

Share premium

Foreign exchange reserve

Share based payment reserve

Retained earnings

Total equity



£ 000s

£ 000s

£ 000s

£ 000s

£ 000s

£ 000s










Balance as at 1 April 2015

-

30,725

(1,043)

2,320

(18,414)

13,588


Loss for the year

-

-

-

-

(853)

(853)


Other comprehensive income for the year- currency translation differences

-

-

817

-

-

817


Total comprehensive income for the year

-

-

817

-

(853)

(36)


Share capital issued

-

1,350

-

-

-

1,350


Total transactions with owners, recognised directly in equity

-

1,350

-

-

-

1,350










Balance as at 31 March 2016

-

32,075

(226)

2,320

(19,267)

14,902










Balance as at 1 April 2016

-

32,075

(226)

2,320

                  

 

(19,267)

14,902


Loss for the year

-

-

-

-

(835)

(835)


Other comprehensive income for the year- Currency translation differences

-

-

878

-

-

878


Total comprehensive income for the year

-

-

878

-

(835)

43


Share capital issued

-

752

-

-

-

752


Share issue expenses

-

(36)

-

-

-

(36)


Share based payments granted

-

(17)

-

134

-

117


Share options expired

-

-

-

(757)

757

-


Total transactions with owners, recognised directly in equity

-

699

-

(623)

757

833










Balance as at 31 March 2017

-

32,774

652

1,697

(19,345)

15,778










Share capital: This represents the nominal value of equity shares in issue and is nil as the shares have a nil par value.

Share premium: This represents the premium paid above the nominal value of shares in issue. 

Foreign exchange reserve:  This reserve represents exchange differences arising from the translation of the financial statements of foreign subsidiaries and the retranslation of monetary items forming part of the net investment in those subsidiaries. 

Share-based payments reserve: This represents the value of share-based payments provided to employees and Directors as part of their remuneration and provided to consultants and advisors hired from time to time as part of the consideration paid.  The reserve represents the fair value of options and performance share rights recognised as an expense.  Upon exercise of options or performance share rights, any proceeds received are credited to share capital and share premium.

Retained earnings: This represents the accumulated profits and losses since inception of the business and adjustments relating to options and warrants. 

 

The notes on pages 21 to 48 are an integral part of these consolidated financial statements.

 


NOTES TO THE FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies

a.      General Information and Authorisation of Financial Statements

The Company is registered in the British Virgin Islands under the BVI Business Companies Act 2004 with registered number 1396532.  The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange.

The principal activity of the Company during the year was that of a holding company for a group engaged in the identification, evaluation, acquisition and development of natural resource projects.  

The Financial Statements of Ortac Resources Limited for the year ended 31 March 2017 were authorised for issue by the Board on 18 August 2017.

b.   i) New and amended standard adopted by the Group

The following IFRSs or IFRIC interpretations were effective for the first time for the financial year beginning 1 April 2016.  Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

Standards

Application

IFRS 11 amendment

Accounting for acquisitions of interest in Joint Operations

IAS 16 & IAS 18

Clarification of acceptable methods of depreciation and amortization

IAS 27 amendment

Equity method in separate financial statements

Annual Improvement Cycle 2012-2014

Amendments to: IFRS 5 Non-current assets held for sale and Discontinued Operations, IFRS 7 Financial instruments: Disclosures, IAS19 Employee benefits and IAS34 Interim Financial Reporting.

IAS1

Disclosure initiative

     ii) New and amended standards not yet adopted by the Group

Standard                                                                                                                                       Effective Date

IAS 7 (Amendments)        Results of the Disclosure Initiative                                         *1 January 2017

IAS 12 (Amendments)      Recognition of Deferred tax assets for Unrealised Losses *1 January 2017

IFRS 2 (Amendments)      Clarification of Measurement of Share Based                       *1 January 2018

                                              Payment Transactions

IFRS 9 (Amendments)      Financial Instruments                                                                 *1 January 2018

IFRS 15                               Revenue from Contracts with Customers                                 *1 January 2018

IFRS 16                               Leases                                                                                              1 January 2019

Annual Improvements    2014 - 2016 Cycle                                                                           *1 January 2017

 

*Subject to EU endorsement

 

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group or the Company.

 

Whilst the Directors do not anticipate the adoption of these standards and interpretation in future reporting periods will have a material impact on the Group's or Company's financial statements, they have yet to complete their full assessment in relation to the impact of IFRS 9 and IFRS 15. 

c.   Basis of Preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRIC) as adopted by the European Union. 

The consolidated financial statements have been prepared on the historical convention, as modified by the measurement to fair value of available-for-sale financial assets as described in the accounting policies below. 

The financial information is presented in Pounds Sterling (£) and all values are rounded to the nearest thousand Pounds Sterling (£000's) unless otherwise stated. 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.  These policies have been consistently applied unless otherwise stated.  The Company has elected not to present individual financial statements as it is not required to do so.

d.   Basis of Consolidation

The consolidated financial statements consolidate the financial statements of Ortac Resources Limited and the audited financial statements of its subsidiary undertakings made up to 31 March 2017. 

Subsidiaries are entities over which the Group has control.  The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.  They are de-consolidated from the date that control ceases. 

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.  All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. 

e.    Associates

Associates are entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.  Investments in associates are accounted for using the equity method of accounting.  Under the equity method, the investment is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss of the investee after the date of acquisition.  The Group's investment in associates includes any goodwill identified on acquisition.

Where the ownership interest in an existing investment is increased whereby significant influence is obtained, the Group re-measures the existing investment immediately prior to obtaining significant influence with resulting gains/losses recognised immediately in profit or loss.  The fair value of the existing investment added to the fair value of the consideration of the additional investment is treated as the deemed cost and is continued to be accounted for under the equity method.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassified to profit or loss where appropriate.

The Group's share of post-acquisition profit or loss is recognised in the statement of comprehensive income, and its share of post-acquisition movements is recognised in the other comprehensive income section of the statement of comprehensive income with a corresponding adjustment to the carrying amount of the investment.  When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate. 

The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired.  If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amounts of the associate and its carrying value and recognises the amount adjacent to 'share of profit/loss of associate' in the group statement of comprehensive income.

When the Group loses significant influence over an associate, it derecognises that associate and recognises a profit or loss being the difference between the sum of the proceeds received and any retained interest, and the carrying amount of the investment in the associate at the date significant influence is lost.

Gains and losses resulting from upstream and downstream transactions between the Group and its associates are recognised in the Group's financial statements only to the extent of unrelated investor's interests in the associates.  Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred.  Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. 

Impairment gains and losses arising in investments in associates are recognised in the statement of comprehensive income. 

f.   Going Concern

The financial statements have been prepared on a going concern basis.  The Group's assets are not generating revenues, an operating loss has been reported and an operating loss is expected in the 12 months subsequent to the date of these financial statements and as a result the Company will need to raise funding to provide additional working capital to finance their ongoing activities and non-discretionary expenditures.  The Board has successfully raised £2,000,000 subsequent to the year end as discussed in Note 27 to the financial statements and the proceeds used in part to fund the acquisition of a US$2,000,000 convertible loan note issued by Casa Mining Limited.

Based on the Board's assessment that the cash flow budgets can be achieved and that the necessary funds will be raised, the Directors have a reasonable expectation that the Group and the Company has access to adequate resources to continue in operational existence for the foreseeable future.  Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements for the year ended 31 March 2017.

Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current. 

Going concern is referred to in the auditor's report as an emphasis of matter without any modification of their opinion. 

g.   Business combinations

The acquisition of subsidiaries in a business combination is accounted for using the acquisition method.  The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. The acquiree's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 "Non Current Assets Held for Sale and Discontinued Operations", which are recognised and measured at fair value less costs to sell. 

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the identifiable net assets acquired and liabilities assumed.  If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss in the Income Statement.

Any interest of non-controlling interests in the acquiree is initially measured at the minority's proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.  There are no non- controlling shareholders of subsidiaries.

h.   Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Board, being the Group's chief operating decision-maker ("CODM").

i.    Contingent consideration

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.  Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity. 

j.    Foreign currencies

The Group and Company's functional and presentational currency is Pounds Sterling.  Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.  At present the functional currency of all of the Slovakian subsidiaries is the Euro. 

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

·     monetary assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

·     income and expenses for each statement of comprehensive income presented are translated at average exchange rates during the accounting year; and

·     all resulting exchange differences are recognised in other comprehensive income where material.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken to other comprehensive income.  When a foreign operation is sold, such cumulative exchange differences are subsequently reclassified in the income statement as part of the gain or loss on sale.

k.    Taxation

Tax is recognised in the consolidated Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.  In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. 

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.  However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. 

In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled.  Deferred tax assets and liabilities are not discounted. 

There has been no tax credit or expense for the year relating to current or deferred tax.



 

l.    Intangible assets

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group's share of the net identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition.  Goodwill arising on the acquisition of subsidiaries is included in 'intangible assets'.  Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.  Impairment losses on goodwill are not reversed.  Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. 

Exploration and evaluation assets

Exploration and development costs are carried forward in respect of areas of interest where the consolidated entity's rights to tenure are current and where these costs are expected to be recouped through successful development and exploration, or by sale.  Alternatively, these costs are carried forward while active and significant operations are continuing in relation to the areas of interest and it is too early to make reasonable assessment of the existence or otherwise of economically recoverable reserves.  When the area of interest is abandoned, exploration and evaluation costs previously capitalised are impaired. 

In accordance with the full cost method, costs incurred by the Company on behalf of its subsidiaries and associated with mining development and investment are capitalised on a project-by-project basis pending determination of the feasibility of the project.  Costs incurred include appropriate technical and administrative expenses but not general overheads.  If a mining development project is successful, the related expenditures will be written-off over the estimated life (useful economic life) of the commercial ore reserves on a unit of production basis.  Impairment reviews are carried out regularly by the Directors of the Company.  Where a project is abandoned, or is considered to be of no further commercial value, the related costs will be written off to the Statement of Comprehensive Income. 

The recoverability of these costs is dependent upon the discovery of economically recoverable reserves, the ability of the Group to obtain necessary financing to complete the development of reserves and future profitable production or proceeds from the disposal of recoverable reserves. 

m. Significant accounting judgements, estimates and assumptions

Critical Accounting Estimates and Judgements

The preparation of financial statements using accounting policies consistent with IFRS requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of income and expenses.  The preparation of financial statements also requires the Directors to exercise judgement in the process of applying the accounting policies.  Changes in estimates, assumptions and judgements can have a significant impact on the financial statements.



Critical accounting estimates and judgements

Estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognized prospectively from the period in which the estimates are revised.  The following are the key estimate and assumption uncertainties that have a significant risk of resulting in a material adjustment within the next financial year:

i) Impairment of Intangible assets

Exploration and evaluation costs have a carrying value at 31 March 2017 of £12,739,000 (2016: £12,347,000).  Management tests annually whether exploration projects have future economic value in accordance with the accounting policy stated in note u. below.  Each exploration project is subject to an annual review, which includes assumptions by management that the exploration at the various sites will lead to commercial mining operations.  When there are indications that an asset may be impaired, the Group is required to estimate the asset's recoverable amount and an impairment would lead to a write-off of the amount in the Statement of Comprehensive Income.   

ii) Contingent Liability

As referred to in note 24, the contingent consideration arrangement requires Ortac Resources (UK) Limited to pay a vendor royalty to Tournigan Energy Limited of up to US$3,750,000 in either shares or cash, being $15 per ounce on the first 250,000 ounces of gold equivalent resource defined as proven and probable reserve in the bankable feasibility study.  This will become payable within 60 days of all required permits being obtained to allow commercial production at the Kremnica property.

The fair value of the royalty has been determined using year-end exchange rates on the basis that the resource threshold referred to above will be exceeded.

iii) Deemed cost of Casa Mining Ltd as an associate

The Board has estimated the fair value of its existing investment in Casa Mining Ltd ("Casa") at the point immediately prior to obtaining significant influence.  The method used to estimate the fair value is based on the amount a reasonable and informed third party would invest into Casa.  Two days prior to obtaining significant influence, a third party entity acquired a 4.5% investment in Casa Mining Ltd.  Management estimates that is an appropriate basis to form a valuation of Casa.  The basis valued the Group's investment in Casa on that date at £968,000, which represented a gain of £628,000 on the carrying value of the investment.  The gain of £628,000 has been recognised in profit or loss.  Another valuation methodology may give rise to a different valuation of the investment.

iv) Carrying value of investments

The Board have conducted an assessment of the Group's investments in associates and available for sale financial assets and in their judgement the net realisable values of the investments exceed the carrying values. This exercise requires the board to make numerous estimates and judgements in relation to asset carrying values, using the information they have to hand at a certain moment in time. The provision of other information and use of other inputs may affect the carrying value of these investments.

n.   Finance income

Finance income consists of bank interest on cash and cash equivalents which is recognised as accruing on a straight line basis, over the period of the deposit. 

o.   Cash and cash equivalents

Cash and Cash Equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. 

p.   Inventories

Inventories largely consist of operational and maintenance consumables held and are stated at the lower of cost and net realisable value ("NRV").  Cost is determined using the first-in, first-out ("FIFO") method.  NRV is the estimated selling price in the ordinary course of business, less applicable selling expenses. 

q.   Trade and other receivables

Receivables are recognised initially at cost, being their initial fair value.  These are classified as loans and receivables, and so are subsequently carried at cost using the effective interest method.  The Directors are of the view that such items are collectible and no provisions are required. 

r.   Investments

Investments in subsidiary undertakings are stated at cost less any provision for impairment in value, prior to their elimination on consolidation. 

s.   Financial instruments

The Group's financial instruments are classified as loans and receivables and available for sale financial assets.  The classification depends on the purpose for which the financial instruments were acquired.  Management determines the classification of its financial instruments at initial recognition.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, and comprise trade and other receivables and cash and cash equivalents (see separate accounting policies for these items). 

Available-for-sale financial assets are non-derivatives that are not included in any other category, and comprise current asset investments.  They are initially recognised at fair value plus transaction costs, and are subsequently carried at fair value with changes in fair value being recognised in other comprehensive income.

Trade and other payables are classified as financial liabilities, and are initially recognised a cost, being their fair value, and subsequently measured at amortised cost using the effective interest method.  Any interest is recognised as a finance cost within the statement of comprehensive income.

There is no material difference between the carrying values and fair value of the Group's financial instruments. 

t.   Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. 

Depreciation is provided on all property, plant and equipment to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

·    Office equipment 20% or straight line over the period of the lease- whichever is the lesser;

·    Field equipment - between 5% and 25%.

All assets are subject to annual impairment reviews.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.  The carrying amount of the replacement part is derecognised.  All other repairs and maintenance are charged to the Statement of Comprehensive Income during the financial period in which they are incurred.

The asset's residual value and useful economic lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying value is written down to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within the Statement of Comprehensive Income.

u.   Impairment of assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired.  If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. 

An asset's recoverable amount is the higher of its fair value less costs to sell and its value in use.  This is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, and the asset's value in use cannot be estimated to be close to its fair value.  In such cases, the asset is tested for impairment as part of the cash-generating unit to which it belongs.  When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, it is considered impaired and is written down to its recoverable amount. 

In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.  Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset, unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease). 

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised.  If that is the case, the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in the Statement of Comprehensive Income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase.  After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. 

v.   Trade and other payables

Trade and other payables are carried at amortised cost under the effective interest method and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. 

w.  Share-based payments

The Group provides benefits to senior personnel, consultants and advisors of the Group in the form of share-based payments, whereby such parties render services in exchange for shares or rights over shares (equity-settled transactions). 

The cost of these equity-settled transactions with such parties is measured by reference to the fair value of the equity instruments at the date at which they are granted.  The fair value is determined by using a Black-Scholes model. 

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Ortac Resources Limited (market conditions) if applicable. 

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant party become fully entitled to the award (the vesting period). 

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects:

(i)     the extent to which the vesting period has expired and;

(ii)    the Group's best estimate of the number of equity instruments that will    ultimately vest. 

No adjustment is made for the likelihood of market performance conditions being met, as the effect of these conditions is included in the determination of fair value at grant date.  The charge to the Income Statement for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. 

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a market condition. 

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings/ (loss) per share. 

x.   Earnings per share

Basic Earnings per share is calculated as profit attributable to equity holders of the parent for the period, adjusted to exclude any costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element. 

2.  Segmental analysis

Segment information has been determined based on the information reviewed by the Board, being the Group's chief operating decision-maker, for the purposes of allocating resources and assessing performance.  No revenue is currently being generated.

Head office activities are mainly administrative in nature and are located in the UK/BVI whilst the activities in Slovakia relate to development work. All other segments have been determined as the countries in which those assets are held being Eritrea, Zambia and the Democratic Republic of the Congo ("DRC").

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. 



 








31 March 2017

UK/BVI

Slovakia

Eritrea

Zambia

DRC

Total


£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

Result







Operating loss

Fair value gain/(loss)

(659)

-

(129)

-

-

(53)

-

-

-

628

(788)

575

Share of loss of  associate

Impairment

-

(655)

(18)

-

-

(16)

-

(34)

(655)

Finance income

-

-

-

67

-

67

Loss before & after taxation

(659)

(784)

(71)

67

612

(835)








Other information







Depreciation and impairment

6

15

-

-

-

21

Investment into available for sale financial assets

-

-

853

791

-

1,644

Investment in associate

-

-

-

-

1,033

1,033

Capital additions

-

14

-

-

-

14








Assets







Non-current Assets

-

12,950

-

-

1,033

13,983

Current assets  excluding cash and cash equivalents

-

57

853

912

-

1,822

Cash and equivalents

71

9

-

-

-

80

Consolidated total assets

71

13,016

853

912

1,033

15,885








Liabilities







Non-current liabilities

-

-

-

-

-

-

Current liabilities

(62)

(45)

-

-

-

(107)

Consolidated total liabilities

(62)

(45)

-

-

-

(107)

 

31 March 2016

UK/BVI

Slovakia

Eritrea

Zambia

DRC

Total


£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

£ 000's

Result







Operating loss

(847)

(35)

-

-

-

(882)

Share of loss of  associate

-

-

(30)

-

-

(30)

Finance income

5

-

-

54

-

59

Loss before & after taxation

 (842)

(35)

(30)

54

-

(853)








Other information







Depreciation and impairment

-

19

-

-

-

19

Investment into available for sale financial assets

-

-

-

-

(44)

 (44)

Investment in associate

-

-

-

-

-

-

Capital additions

-

(134)

-

-

(44)

(178)






Assets







Non-current Assets

        -

12,730

874

-

-

13,604

Current assets  excluding cash and cash equivalents

52

78

-

                       845

44

1,019

Cash and equivalents

425

3

-

-

-

428

Consolidated total assets

477

         12,811

874

845

44

          15,051








 

Liabilities





Non-current liabilities

-

-

-

-

-

-

Current liabilities

(91)

(58)

-

-

-

(149)

Consolidated total liabilities

(91)

(58)

-

-

-

(149)

 

3.  Other operating income


2017

2016


£ 000's

£ 000's

Rental income

20

32

Other sundry income

20

13


40

45

4.  Administrative expenses





2017

2016


£ 000's

£ 000's

Directors' fees

115

167

Wages and salaries

109

171

Establishment expenses

32

116

Travel and subsistence expenses

34

44

Professional fees - legal, consulting, exploration

154

9

AIM related costs including Public Relations

131

228

Auditor's remuneration - audit

25

38

Other Slovakian costs

78

34

Depreciation and amortisation

21

14

Other expenses and impairment

12

101

Total operating expenses

711

922

5.  Employee information



2016

2017

Group Staff Costs comprised:


£ 000's

£ 000's

Wages, salaries and benefits


115

242

Less: capitalised exploration expenditure


(6)

(71)

Charge to the profit or loss


109

171

The average number of persons employed in the Group, including Executive Directors, was:



2017

2016

Average number of persons employed:


Number

Number

Operations


4

9

Administration


2

3



6

12

 



 

6. Taxation




2017

£'000

2016

£'000






Current income tax charge



-

-

Deferred tax charge/ (credit)



-

-

Total taxation charge/ (credit)



-

-






Taxation reconciliation

The charge for the year can be reconciled to the loss per the consolidated statement of comprehensive income:


2017

2016


£'000

£'000

Loss before income tax

(835)

  (853)




Tax on loss at the weighted average Corporate tax rate of 14.38% (2016: 11.90 %)

Effects of:

Permanent differences

Tax losses carried forward

Non-taxable income/Non-deductible expenses for tax purposes

(120)

 

-

-

120

(101)

 

-

-

101

Total income tax expense

-

-

The deferred tax asset has not been provided for in accordance with IAS 12.   The Group does not have a material deferred tax liability at the year end.

The weighted average applicable tax rate used is a combination of the rates used in the BVI, UK and Slovakia, and has increased as a result of the impairment in the Slovakia entity.

7.  Dividends

No dividends were paid (2016: nil). 

8.  Directors' remuneration


2017

2016


£ 000's

£ 000's

Directors' remuneration

268

167

 

2017

Short term employee benefits

 

Share based
payments

Total



£ 000's

£ 000's

£ 000's

Executive Directors





Anthony Balme


38

29

67

Vassilios Carellas


108

33

141






Non-Executive Directors





Paul Heber


18

5

23

Nicholas Von Schirnding


3

34

37



167

101

268

 



 

 

2016

Short term employee benefits

 

Share based
payments

Total



£ 000's

£ 000's

£ 000's

Executive Directors





Anthony Balme


36

-

36

Vassilios Carellas


104

-

104






Non-Executive Directors





Paul Heber


18

-

18

David Paxton


10

-

10



168

-

168

No pension benefits are provided for any Directors (2016: nil). 

9.  Earnings per share

The calculation of Earnings per share is based on the loss attributable to equity holders divided by the weighted average number of shares in issue during the year. 


2017

2016


£ 000's

£ 000's

Loss

(835)

(853)




Weighted average number of ordinary shares per share (000s)

69,166*

38,148*




Basic earnings per share (expressed in pence)

(1.2)*

(2.2)*

·    Restated to reflect 1:100 share consolidation

As the inclusion of potential Ordinary shares would result in a increase in the earnings per share, they are considered to be anti-dilutive.  As such, diluted and basic earnings per share are the same. 

10.  Interest income


2017

2016


£ 000's

£ 000's

Interest on Zamsort Loan

67

54

 



 

11.  Intangible assets


Goodwill

Exploration and

Total



evaluation assets



£ 000's

£ 000's

£ 000's

Cost




At 1 April 2015

270

11,418

11,688

Additions

-

134

134

Currency  translation adjustments

Impairment

-

(101)

795

-

795

(101)





Net book value as at 31 March 2016

169

12,347

12,516





At 1 April 2016

169

12,347

12,516

Additions

-

14

14

Currency  translation adjustments

Impairment

-

-

864

(655)

864

(655)





Net book value as at 31 March 2017

169

12,570

12,739

 

Exploration projects carried out by the subsidiaries are at an early stage of development and can be split into two categories:

1.   Those based upon JORC or JORC compliant resource estimates which enable value in use calculations to be prepared:  A reclassification of resource estimates undertaken in 2012 by a leading group of mining consultants led to the announcement of maiden JORC Ore Reserves for the Šturec Deposit with 13.97Mt of ore at a grade of 1.70g/t Au and 14.22g/t Ag (1.90g/t Au Equivalent) classified in the Proven and Probable categories, giving an open pit Ore Reserve of 873,000oz of gold equivalent (28 tonnes).  Subsequently, a Pre-Feasibility Study, carried out by a leading practice of mining consultants, of the Šturec Project announced on 8 April 2013 further confirmed the economic feasibility of the Šturec project: which based upon a metals price of (at US$1,343/oz Au Eq net price) and a discount rate of 8% gave an NPV of US$195m (post tax US$145m) and Internal Rate of Return ('IRR') of 30%. 

As regards the status of the mining licence, as previously reported in 2014 and following an application which was approved by the Slovak Authorities, a program of trial underground mining was started, which plans to extract 4,000 tonnes of ore over the three year period till 2017, and this in the context of its Mining Licence Area, which remain valid until 2018 and confirmation from the relevant authorities that Ortac holds both underground and surface mining rights to the Kremnica Mining Licence Area. 

To date some 500 tonnes of ore has been successfully mined and from this, bulk samples have been extracted and tested using non cyanide processing technologies, with encouraging results.  At the same time Ortac has paid royalties to the Slovak State on the ore extracted. 

With the Slovak Republic having now banned the use of cyanide leaching technology in the processing of minerals, Ortac's work on alternative processing is opportune and indeed as previously announced, 20 tonnes of material mined from the Šturec Deposit was sent for pilot scale tests utilising a potential alternative gold recovery process, with encouraging results, that the Board believes will be economic.  Ortac is therefore optimistic that a more eco-friendly, cost-effective process will be developed. 

2.   Those other projects, for which no JORC or non-JORC compliant resource estimates, are available to enable value in use calculations to be prepared.  Given that these projects are at an early stage, and are unlikely to be pursued and with preliminary results indicating modest returns, the Directors have continued with the policy of expensing the exploration costs incurred on these projects during the year. 

During 2017 an impairment charge of £655,000 was recognised in respect of a licence area approximately 2km to the south of the main Sturec project. The impairment arose following a change to Slovakian legislation which ruled that licence areas cannot overlap. This led to a reduction in the size of the licence area to approximately 50% of the original area. The Directors have estimated that the total spend on that licence has been evenly spread across the licence area and therefore have recognised an impairment equal to 50% of the capitalised costs on that licence.

12. Property, plant and equipment


Office Equipment

Field Equipment

Total

Property, Plant and Equipment

£ 000's

£ 000's

£ 000's

Cost




As at 1 April 2015

102

217

319

Additions

-

-

-

Disposals

-

-

-

Currency translation adjustment

-

36

36

As at 31 March 2016

102

253

355





As at 1 April 2016

102

253

355

Additions

-

-

-

Disposals

-

(20)

(20)

Currency translation adjustment

-

34

34

As at 31 March 2017

102

 267

369





Depreciation








As at 1 April 2015

(93)

(11)

(104)

Charge for the year

(3)

    (11)

(14)

Currency translation adjustment

-

(21)

(21)

As at 31 March 2016

(96)

(43)

 (139)

 

 




As at 1 April 2016

(96)

(43)

(139)

Disposals                                                                                             

Charge for the year

-

(6)

20

(15)

20

(21)

Currency translation adjustment

-

(18)

(18)

As at 31 March 2017

(102)

(56)

(158)

 

Net book value




At 31 March 2016

6

208

214

At 31 March 2017

-

211

211

Depreciation charges for the year ended 31 March 2017 of £21,000 (2016: £14,000) have been charged to "administrative expenses".

 

13.  Investment in subsidiaries

At 31 March 2017 the Company held 100% of the share capital of the following wholly owned subsidiary companies:

Company

Place of Business

% Ownership held

Nature of business

Ortac Resources (UK) Limited

England and Wales

100%

Holding Company

St. Stephans Gold s.r.o.*

Slovak Republic

100%

Mineral Exploration

Ortac s.r.o *

Carpathian Minerals s.r.o. *

Slovak Republic

Slovak Republic

100%

100%

Mineral Exploration

Minerals Exploration

 

* Wholly owned subsidiary of Ortac Resources (UK) Limited. 

14.  Investment in associates

Set our below are the associates of the Group during the year ended 31 March 2017.


Andiamo

Casa

Total


£ 000's

£ 000's

£ 000's

1 April 2015

-

-

-

Transfer of available for sale financial assets

904

-

904

Share of loss

(30)

-

(30)

At 31 March 2016

874

-

874





1 April 2016

874

-

874

Transfer of available for sale financial assets (note 15)

-

340

340

Additions

50

81

131

Share of loss

(18)

(16)

(34)

Fair value adjustment

(53)

628

575

Transfer to available for sale financial assets (note 15)

(853)

-

(853)

31 March 2017

-

1,033

1,033

 

Nature of investment in associates during 2017 and 2016:

 

Name of entity

Address of Registered Office

% ownership
interest

Nature of relationship

Measurement
method

Andiamo Exploration Ltd

6 Gresham Street, London UK

18

See note i

Equity

Casa Mining Ltd

24 CyberCity Ebene Mauritius

23

See note ii

Equity

 

(i)         Andiamo Exploration Limited

Andiamo is involved in the exploration of gold and other minerals in Eritrea. In accordance with IAS 28 the figures used in respect of Andiamo relate to the 31 December 2016 as the year end is not co-terminous with that of Ortac.  During the year ended 31 March 2017 Andiamo issued shares with the result that Ortac's shareholding was diluted to 18.48% and the investment was reclassified as an Available for sale financial asset (Note 15). The investment was re-measured to fair value immediately prior to the reclassification resulting in a loss of £53,000 which has been recognised in profit or loss.

 

(ii)        Casa Mining Limited

Casa Mining Limited ("Casa") is involved in the exploration of gold and other minerals in the Democratic Republic of Congo. During the year, Ortac has continued to invest in Casa and has increased its shareholding to 22.2% during the year. The Board consider that the Group has obtained significant influence over Casa and from the point at which that was obtained in October 2016 the Available for Sale financial asset was reclassified to Investment in Associate and equity accounted. The initial cost of the investment was measured at fair value and as a result a gain of £628,000 was recognised directly in profit or loss.

 

Summarised statement of comprehensive income for Casa Mining Limited:

2016


£ 000's

Loss before tax

(461)

Income tax expense

-

Post-tax loss from operations

(461)

Other comprehensive loss

-

Total comprehensive loss

(461)

 

Summarised statement of financial position for Casa Mining Limited:

 


2016


£ 000's

Assets

Intangible assets

 

6,236

Total non-current assets

6,236



Cash and cash equivalents

71

Other current assets

20

Total current assets

 

91

 

Financial liabilities

(52)

Total current liabilities

(52)



Non-current liabilities

(1,622)

Net assets

4,653



Interest in associate (22.8%)

1,033

Goodwill

-

Carrying value

1,033

 

The information above reflects the amounts presented in the audited financial statements of Casa Mining Limited as at 31 December 2016 adjusted to align the accounting policies between the Group and the associate.  The key adjustment was in respect of the capitalisation and evaluations assets.

The amounts have been converted from USD into GBP at a rate of 0.8109 being the rate prevailing at 31 December 2016.

15.  Available for sale financial assets


2017

2016


£ 000's

£ 000's

Opening Balance

835

-

Additions - Casa Mining Limited

296

44

Conversion of Secured loan into available-for-sale financial asset

-

791

Transfer of Casa Mining Limited to Investment in associate (Note 14)

Transfer of Andiamo Exploration Limited from Investment in associate (Note14)

(340)

853

-

-

As at 31 March

1,644

835




Current

853

835

Non-current

791

-

As at 31 March

1,644

835

 

The Available for sale financial assets include the Company's shareholding in Andiamo Exploration Limited and its holding of Secured Loan Notes of Zamsort Limited. See note (ii) below for an explanation regarding the re-classification of the Zamsort amounts.

 

(i)         Equity Investment

Movements in the Company's 18.48% shareholding in Andiamo Exploration Limited and its 22.8% shareholding in Casa Mining Limited are Itemised in Note 14. During the year the Group's investment in Casa Mining Limited was reclassified as an Investment in associate and its investment in Andiamo Exploration Limited was reclassified as an Available for sale financial investment.

At year end, the Group believes that there has been no impairment of the Andiamo carrying value of £853,000.  Andiamo is a private company and there is no quoted market price available for its shares.

 

(ii)        Secured Loan Notes of Zamsort Limited


2017

2016


£ 000's

£ 000's

Convertible loan note - current

-

791

Convertible loan note - non-current

791

-


791

791

On 30 March 2015, Ortac Resources Limited announced that it had entered into a US$600,000 (£405,405) 8% Secured Convertible Loan Note (the "Convertible Loan") and a one note for one share Call Option Agreement (the "Option") with Zamsort, a private company registered in Zambia that holds a prospective Cu-Co mining and exploration licence in the Zambian Copper Belt. 

As at 31 March 2015, Ortac Resources Limited had advanced US$ 450,000 (£304,000) to Zamsort as a first instalment of this loan, with the balance of US$ 150,000 following due diligence, paid on 9 April 2015.  On 25 August 2015 the Company exercised its Option to purchase a further US$ 600,000 of the Convertible Loan and now has a total investment of US$ 1,200,000 convertible into 19.35% of Zamsort. Available for sale financial assets are carried at their original cost of £791,000. 

The loan notes are convertible at any time prior to the redemption date.  The net proceeds received from the issue of the loan notes have been split between a receivable/liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity.

As per Note 27 in May 2017 the Company agreed with Zamsort Limited to convert US$828,472 of US$1,200,000 Secured Loan Notes issued by Zamsort to the Company and to release its secured debenture in exchange for a 14% shareholding in Zamsort and a loan note with a principal amount of US$371,528 which has a repayment date of 31 December 2018. Interest of 8% continues to accrue and at 31 March 2017 the Company has reported approximately US$122,000 of interest.  The Directors believe that the Zamsort financial asset will be fully recovered and therefore no impairment charge has been recognised.

The Directors have re-assessed the classification of the Zamsort loan during the year and decided that the asset should be classified as a non-current asset because the intention is to convert the loan into equity and to hold the investment for a period of more than 12 months. As a result, the Zamsort loan has been re-classified to a non-current asset at 31 March 2017.

 

 

16.  Inventories 





2017

2016


£ 000's

£ 000's

Stocks and consumables

37

34

Total

37

34

 

17.  Trade and other receivables


Group

Group


2017

2016

Current trade and other receivables

£ 000's

£ 000's

Receivables, including Zamsort Loan interest

131

104

Prepayments

10

46

Total

141

150

Current trade and other receivables are all due within one year. 

Loans advanced to subsidiaries are unsecured, interest free and have no fixed repayment date. 

The fair value of trade and other receivables is the same as their carrying values as stated above.

Trade and other receivables do not contain any impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.  The Group does not hold any collateral as security.



 

The carrying amounts of the Group's current and non-current trade and other receivables are denominated in the following currencies:


Group

Group


2017

2016

Current trade and other receivables

£ 000's

£ 000's

UK Pounds

-

52

US Dollars

122

54

Euros

19

44

Total

141

150

18.  Trade and other payables


Group

Group


2017

2016

Current trade and other payables

£ 000's

£ 000's

Trade payables, other payables and accruals

107

149


107

149

The carrying values of trade and other payables are considered to be a reasonable approximation of the fair value and are considered by the Directors as payable within one year.

19.  Share capital

Authorised

£ 000's

Unlimited Ordinary  shares of no par value

 

Called up, allotted, issued and fully paid

 

Number of shares

Nominal value

As at 31 March 2015

2,826,329,020

-

    Additions:


-

1 July 2015

705,882,353

-

21 October 2015

800,000,000

-

8  March 2016

1,400,000,000

-

Total additions

2,905,882,353

-

As at 31 March 2016

5,732,211,373

-

26-27 September 2016

24 October 2016

26 October 2016

Consolidation

1,480,000,000

251,296,486

750,000,000

(8,131,372,872)

-

-

-

-

 

As at 31 March 2017

82,134,987

-

 

 

On 26 and 27 September 2016 1,480,000,000 ordinary shares of no par value were issued at a price of 0.025 pence per share for a cash consideration of £320,000. Additional consideration consisted of 640,000 shares of Andiamo Exploration Limited valued at £ 50,000

On 24 October 2016 251,296,486 ordinary shares of no par value were issued at a price of 0.0325 pence per share to acquire 124,722 shares of Casa Mining Limited. 

On 26 October 2016  750,000,000 ordinary shares of no par value were issued at a price of 0.04 pence per share for a cash consideration of £300,000. 

On 24 March 2017 8,213,507,859 ordinary shares were consolidated 1:100 to 82,134,987 ordinary shares. 

20.  Share based payments and Warrants

 

Share Options

During the year the following share options were issued and the cost of £117,086 was calculated using the Black Scholes method:

 

 

Weighted

Avg Price

(pence)

Number

Exercise

Price

(pence)

Share price at grant

(pence)

Weighted Avg

Term

(years)

Value

(000s)

**








1 April 16

   0.94

279,300,000

-

-

1.97

2,320

Granted 12 May 16

-

135,000,000

0.05

0.03

5

33

Expired

-

(79,500,000)

-

-

-

 (757)

Consolidation1:100

-    

    (331,452,000)

  -

 -

-

-    

Granted 24 March 17

-

3,500,000

   4.00

 2.92

5

 84

31 March 17

30.46*

6,848,000



  4.10 *

1,680








 

post consolidation

** In the Black Scholes model the inputs were Volatility as 100%, the Risk Free Interest Rate as 0.55% and the dividend yield as 0%.

Under IFRS 2 "Share-based Payments", the Company determines the fair value of options issued to Directors, Employees and other parties as remuneration and recognises the amount as an expense in the Statement of Comprehensive Income with a corresponding increase in equity. 

Warrants

At April 1, 2016 there were no Warrants in issue.

During the year the following warrants in respect of fees and share issue costs were issued and the cost of £17,151 was calculated using the Black Scholes method:

 

Grant

date

Number granted

Pre Consolidation

Number

Post Consolidation

Exercise

Price*

(pence)

Term

(years)

Share Price at grant*

pence

Value **

26 Oct 16

33,750,000

   337,500

4.00

5

4.28

£10,817

09 Dec 16

48,750,000

   487,500

2.90

2

2.61

£ 6,334


4,575,000




£17,151

·    Post consolidation price

**   In the Black Scholes model the inputs were Volatility as 100%, the Risk Free Interest Rate as  0.55% and the dividend yield as 0%.

 

 

 

21.  Share premium

2017

2016


£ 000s

£ 000s

Opening Balance

32,075

30,725

Total Additions (see note 19 for details)

Share issue costs

752

(53)

1,350

-

As at 31 March

32,774

32,075




See note 19 for a breakdown of share issues during the year.

22.  Financial instruments and capital risk management

Financial Risk Management

Financial Risk Factors

The Group's activities expose it to a variety of financial risks: market risk (including foreign currency risk and price risk), credit risk and liquidity risk.  The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

Risk management is carried out by the Board of Directors under policies approved at Board meetings. The Board frequently discusses principles for overall risk management including policies for specific areas such as foreign exchange. 

a) Market Risk

                i) Foreign Exchange Risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the UK pound sterling and Euro.  Foreign exchange risk arises from recognised monetary assets and liabilities, where they may be denominated in a currency that is not the Group's functional currency.  The exposure to this risk is not considered material to the Group's operations and thus the Directors consider that, for the time being, no hedging or other arrangements are necessary to mitigate this risk.

On the assumption that all other variables were held constant, and in respect of the Group and the Company's expenses the potential impact of a 20% increase/decrease in the UK Sterling: Euro Foreign exchange rate on the Group's loss for the year and on equity is as follows:

Potential impact on euro expenses: 2017

Effect on loss before tax for the year ended


Group

Company

Increase/(decrease) in foreign exchange rate

£ 000's

£ 000's

20%

22

256

-20%

(22)

(256)

 

b) Credit Risk

Credit risk arises from cash and cash equivalents.

The Group considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk.  The Group will only keep its holdings of cash and cash equivalents with institutions which have a minimum credit rating of 'A'.

The Group considers that it is not exposed to major concentrations of credit risk.

The Group holds cash as a liquid resource to fund its obligations.  The Group's cash balances are held in Sterling and Euros.  The Group's strategy for managing cash is to maximise interest income whilst ensuring its availability to match the profile of the Group's expenditure.  This is achieved by regular monitoring of interest rates and monthly review of expenditure forecasts. 

The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk; however, it does review its currency exposures on an ad hoc basis.  Currency exposures relating to monetary assets held by foreign operations are included within the foreign exchange reserve in the Group Balance Sheet. 

The currency profile of the Group's cash and cash equivalent is as follows:


2017

2016

Cash and cash equivalents

£ 000's

£ 000's

Sterling

73

425

Euros

7

3

At end of year

80

428

On the assumption that all other variables were held constant, and in respect of the Group's cash position, the potential impact of a 20% increase in the UK Sterling:Euro foreign exchange rate would have increased the Group's loss for the year and reduced equity as at 31 March 2017 as follows:

Potential impact on:

Loss for the year

Other components of equity


2017

2016

2017

2016


£ 000's

£ 000's

£ 000's

£ 000's

Cash and cash equivalents

1

2

1

2

c) Liquidity Risk

To date the Group has relied upon equity funding to finance operations.  The Directors are confident that adequate funding will be forthcoming with which to finance operations.  Controls over expenditure are carefully managed.

The Group ensures that its liquidity is maintained by a management process which includes projecting cash flows and considering the level of liquid assets in relation thereto, monitoring Balance Sheet liquidity and maintaining funding sources and back-up facilities. 

Fair Value Estimation

The following table presents the Group's financial assets and financial liabilities that are measured at fair value at 31 March 2017.

Items at fair value as at 31 March 2017

Level 1

Level 2

Level 3

Total

Assets

£ 000's

£ 000's

£ 000's

£ 000's

Investment in associate - shares (note 14)

Available for sale assets  - shares (Note 15)

-

-

-

-

1,033

1,644

1,033

1,644

Total Assets 

-

-

2,677

2,677

 

The following table presents the Group's financial assets and financial liabilities that are measured at fair value at 31 March 2016.

Items at fair value as at 31 March 2016

Level 1

Level 2

Level 3

Total

Assets

£ 000's

£ 000's

£ 000's

£ 000's

Investment in associate - shares (note 14)

-

-

874

874

Available for sale assets  - shares (Note 15)

-

-

835

835

Total Assets

-

-

1,709

1,709

Fair value hierarchy

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market

The movement in the levels during the year to 31 March 2017 are attributable to the changes in ownership status during the period and any additional equity purchases or fair value adjustments required as a result.

Capital Risk Management

The Group's objectives when managing capital are to safeguard the Group's ability to position as a going concern and to continue its exploration and evaluation activities.  The Group has no debt at 31 March 2017 and has capital, defined as the total equity and reserves of the Group, of £15,778,000 (2016: £14,902,000). 

The Group monitors its level of cash resources available against future planned exploration and evaluation activities and may issue new shares in order to raise further funds from time to time.

23.  Commitments

Operating leases




Future aggregate minimum lease payments

2017

2016

£ 000's

£ 000's

Not later than one year

-

13

Later than one year but not later than five years

-

-

Total lease commitment

-

13

There are no operating leases.

On 16 August 2011, Ortac Resources (UK) Limited, at that time Ortac Resources plc entered into a 5-year lease agreement to rent space.  The lease expired in August 2016.

 

Exploration commitments

Ongoing exploration expenditure is required to maintain title to the Group's mineral exploration permits.  No provision has been made in the Group financial statements for these amounts as the expenditure is expected to be fulfilled in the normal course of the operations of the Group. 

24. Contingent liability

As part of its acquisition of Kremnica Gold s.r.o. and Kremnica Gold Mining s.r.o. on 15 September 2010 (since 1 April 2014 both merged together and renamed Ortac s.r.o), the Company agreed to pay:

a)   Vendor royalties of up to US$3,750,000 in either shares or cash - being $15 per ounce on the first 250,000 ounces of gold equivalent (gold plus silver) resource defined as proven and probable reserve in the bankable feasibility study.  Said royalty will become payable within 60 days of all required permits being obtained to allow commercial production at the Kremnica property; and

b)   A 2 per cent Net Smelter Royalty ("NSR") on gold and silver production from the Kremnica Gold Project to a limit of the first 1,000,000 ounces produced, reduced to a 1 per cent NSR on the next 1,000,000 ounces and zero per cent thereafter.  At any time prior to the reduction of the NSR percentage to 1 per cent, Ortac may acquire half of the 2 per cent NSR for US$1,000,000.  After the reduction of the NSR to 1 per cent, the Purchaser may acquire all of the Vendor NSR for US$1,000,000. 

On the basis of the updated third party resource study, the Company is confident that proven and probable reserves will significantly exceed 250,000 ounces of gold equivalent resource.  Notwithstanding this, until such time as it is clear that all the required permits to achieve commercial production will be secured, no provision for such amounts is included in the Group financial statements.

The contingent liability at 31 March 2017 is £3,040,000 (2016: £2,611,000) calculated using the foreign exchange rate at the year-end date.  

25.  Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. There were no other transactions with related parties.

Remuneration of Key Management Personnel

The remuneration of the Directors is set out in note 8.  A portion of the Directors remuneration is paid to service companies, wholly controlled by them:  Carter Capital Limited (A Balme); VC Resources Limited (V Carellas) and Pumba Consulting Limited. (P Heber) 

26.  Ultimate controlling party

There is no ultimate controlling party in the opinion of the Board.

27.  Events after the reporting period

(i)   In May 2017 the Company agreed with Zamsort Limited to convert US$ 828,472 of US$1,200,000 Secured Loan Notes issued by Zamsort to the Company and to release its secured debenture in exchange for a 14% shareholding in Zamsort and a loan note with a principal amount of US$371,528 which has a repayment date of 31 December 2018 . Interest of 8% continues to accrue and at 31 March 2017 the Company has reported approximately US$121,000 of interest.

 

(ii)  In May 2017, the Company placed 66,666,667 shares for gross proceeds of £2,000,000.

 

(iii) On May 2, 2017 the Company reached agreement with Casa Mining Ltd to purchase a US$2,000,000 Convertible Loan Note (CLN) convertible into ordinary shares of Casa at a conversion price of US$ 0.65 per ordinary share. On conversion at this price the Company would own 44.8% based on the current issued shares of Casa. The CLN contains a pre-emptive right in respect of future Casa financings for a period of 12 months ending May 2018. The conversion price increases to US $1.20 on 1 March 2018 and increases a further 10% on 1 June 2018 and every three-month period thereafter. The CLN is unsecured and repayable on 30 April 2020.

 

(iv) On the 18th July 2017, the Company re-commenced underground mining activities at Sturec, fulfilling the condition required by Slovak regulations to preserve its right to exploit the ore deposit in the Kremnica Mining Licence Area for a minimum period of at least three years. Ortac also entered into a non-binding Memorandum of Understanding with a potential Joint Venture partner in Slovakia in April 2017. Discussions continue to work towards formalising an arrangement, which will aim to set out how further value can be added to the project.

 

(v)  Brian McMaster joined the Board of Directors as of 01 August. Anthony Balme to step down as Chairman of Ortac at the Company's Annual General Meeting. Nick von Schirnding, currently a Non-Executive Director, will assume the role of Chairman after the AGM. Mr Paul Heber is to retire as a Non-Executive Director at the Company's Annual General Meeting.

 


 


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