DUKE ROYALTY LTD
27 June 2014
Praetorian Resources Limited
("Praetorian Resources" or the "Company")
Results for the year ended 31 March 2014
Praetorian Resources (AIM: PRAE) is pleased to announce its audited results for the year to 31 March 2014. The financial information set out below does not constitute the statutory audited accounts for the year ended 31 March 2014 but is derived from those accounts. The full Annual Report and Accounts, including the audit report, will soon be posted to applicable shareholders and available on the Company's website: www.praetorianresources.com
Contacts:
For further information, please contact:
Praetorian Resources Limited | Robert King, Chairman |
+44 (0) 1481 732 153 | |
Grant Thornton UK LLP (Nominated Adviser) | Colin Aaronson/David Hignell/Jamie Barklem |
+44 (0)20 7383 5100 | |
Pareto Securities Limited (Broker) | Guy Wilkes |
+44 (0)20 7786 4370 |
Chairman's' Report
Dear Shareholder
The Company has faced another difficult year. At the period end our net assets attributable to ordinary shareholders was £10,222,354 equating to a Net Asset Value per Share of 21 pence, a decline of 34% from the previous audited period end.
Whilst the general macro-economic climate has seen some signs of improvement, the junior resources sector is still facing challenging times and remains out of favour within the investment community. Access to capital continues to be a substantial problem for the sector.
Although there have been encouraging developments within the portfolio, many positive results which historically would have provided a catalyst for share price increases have been largely ignored by the market. The Board and Advisory and Execution Team have spent a great deal of time working pro-actively with the portfolio constituent companies; assisting with the sourcing of strategic partners and ensuring they remain well funded and strategically positioned to capitalise as and when market conditions improve. Whilst the Net Asset Value of the Company remains suppressed, the Board believes that the portfolio is as robust as it can be given the underlying conditions in our target sector.
Throughout these difficult times, the Company has continued to prudently monitor its operating costs and has endeavoured to reduce its cash commitments wherever possible. During April 2014 a support services agreement was cancelled at a significant discount to the value of the contract, further reducing the Company's cost base. The Board intends to announce additional cash conservation measures in due course and we believe that the Company has made every effort to match its operating cost base to the underlying conditions of the market in which it operates.
During May 2014 the Company also announced a series of share buybacks and subsequent share cancellations. As previously reported the buybacks were targeted to try to reduce any potential overhang in the Company's share register and to close the discount between the Company's share price and Net Asset Value per share.
Further to the announcement in June 2014 that Mark Hohnen and Richard Lockwood have stepped down from the Board, the Chairman would once again like to thank them both for their contribution to the Company since its incorporation. Mr. Lockwood retains his position as an advisor to the Company as part of the Advisory and Execution Team. The Company also welcomes Kaare Foy and Nathan Steinberg to the Board who bring with them extensive sector experience and public markets knowledge.
The Board are cognisant of the fact that the Company remains undercapitalised in its current form and through its advisers are actively searching for opportunities to bring renewed positive momentum and scale to Praetorian. We look forward to being able to update shareholders in due course.
Robert King - Chairman
June 2014
Investment Update
Please see below a summary of the six key positions of the Company that currently equate to approximately 80% of the net asset value.
Maya Gold and Silver is quoted on the TSX Venture Exchange and has a market capitalisation of approximately C$53m. The company is focused on developing its suite of mining assets in Morocco with its most advanced asset, the Zgounder silver mine, currently moving into commercial production. Drilling grades indicate the high potential for Zgounder (excellent grades over mineable widths) and the prospect of near term production means that it stands out from many other pure silver exploration plays. Maya's second asset, Boumadine, is a poly metallic ex mine with significant tailings retreatment possibilities. Maya will be recompiling the significant data from previous drilling at Boumadine during 2014 (40k metres drilled historically).
Savannah Resources is quoted on the AIM market of the London Stock Exchange and has a market capitalisation of approximately GBP 8m. After a full board restructure during 2013 and a refinancing lead by new CEO David Archer, the company's current assets include a strategic stake in AIM listed Alecto Minerals which is exploring for gold principally in Ethiopia and which has a JV with Centamin and a mineral sand asset in Mozambique (Jangamo). Positive initial assays were released during February 2014 from Savannah's Jangamo project and during April 2014 the company announced a GBP 1.5m equity placing to further develop the Jangamo asset as well as a USD 6.3m funding arrangement to purchase a copper / gold asset in Oman. There have also been new hires expanding the technical teams in both Mozambique and Oman with further drilling results expected from Jangamo in the near term.
Polar Star Mining Corporation is a main board TSX listed Chilean copper / gold company with a market capitalisation of approximately C$12m. During the past twelve months Polar has moved from an active exploration and operating company to one which holds material stakes in several potentially large mining assets across Chile. On 14 January 2014 Polar announced the signing of a JV agreement with Newmont Mining Corp for the exploration and development of its flagship Montezuma asset. As part of the deal Newmont invested CAD 2m in Polar at a premium price of CAD 0.18 per share with a three phase earn in arrangement totalling CAD 20m over the next 7 years. In addition to the Newmont deal Polar has concluded the sale of its Chepica mine and Mejillones phosphate asset to AIM quoted Xtract Resources plc.
A Cap Resources is quoted on the Australian Stock Exchange and has a market capitalisation of approximately A$17m. A-Cap continues to move forward with a pre-feasibility study on its large Botswana uranium asset. The company is attempting to become Botswana's leading energy company through the development of its uranium and coal assets. Last year's upgrade shows the potential for a much higher grade core zone and significantly improved economics in terms of production costs per lb. In February A-Cap released a positive report on its Mea coal asset. During May the company closed an AUD 5.8m fundraising by way of a placing and an underwritten rights issue, this new infusion of capital will allow A-Cap to complete all of the feasibility work necessary to allow it to apply for a formal uranium mining licence in Botswana. The company also recently announced the recommencement of a 5,000m drill programme in Botswana.
Equatorial Palm Oil is quoted on the AIM market and has a market capitalisation of approximately £32m. The company is in the process of developing its three Liberian palm oil assets which total 169,000 hectares. During November 2013 EPO received a cash offer of 5p per share for its entire issued share capital from Kuala Lumpur Kepong Berhad ("KLK"), one of the largest plantation companies in Malaysia. Further to the closing of the offer in December 2013 KLK now owns 63.18% of EPO as well as a 50% interest in EPO's Liberian palm oil subsidiary, Liberian Palm Developments Limited ("LPD"). With only c. 15% of EPO's shares in free float, liquidity / availability of stock is very tight, this coupled with a recent announcement that it had signed a JV with a subsidiary of KLK that will provide up to USD 35.5m in non-dilutive cash and funding commitments to LPD as well as an additional USD 20.5m line of finance that is available to LPD at the discretion of KLK has resulted in a re-rating of the stock. Shareholders now await positive news of an acceleration of the Liberian planting programme.
Galileo Resources is quoted on the AIM market of the London Stock Exchange and has a market capitalisation of approximately £9m. Galileo recently acquired the entire issued share capital St Vincent Minerals Inc ('SVM') by way of a share exchange. 26.19m new Galileo shares were issued to SVM shareholders representing 22.88% of the enlarged issued share cap in a deal valued at CAD 4.33m. SVM's principal asset is the Gabbs copper / gold property in Nevada, the NI-43-101 compliant inferred resource is estimated at 1.61 million gold (Au) equivalent ounces in 57 million tonnes deposit grading 0.56g/t Au (1.029 million ounces) and 0.234% Cu. The company continues to develop its Glenover rare earth phosphate asset and is seeking out strategic JV partners to move both assets towards production.
Advisory and Execution Team
June 2014
Consolidated Statement of Comprehensive Income | ||||||
For the year ended 31 March 2014 | ||||||
Year to | * 22/02/2012 | |||||
31/03/2014 | to 31/03/2013 | |||||
£ | £ | |||||
Income | ||||||
Net capital loss on investments at fair value through profit or loss | (4,933,721) | (7,989,575) | ||||
Investment income | 1,179 | 25,735 | ||||
Net investment losses | (4,932,542) | (7,963,840) | ||||
Expenses | ||||||
Directors' fees and expenses | (82,889) | (90,230) | ||||
Administration fees | (67,650) | (50,565) | ||||
Support services administration fees | (162,791) | (141,667) | ||||
Audit fees | (30,250) | (25,000) | ||||
Custodian fees | (9,830) | (12,500) | ||||
Broker fees | (22,712) | (21,963) | ||||
Consultancy fees | (134,000) | (100,500) | ||||
Registrar fees | (9,495) | (5,041) | ||||
Other expenses | (110,624) | (92,423) | ||||
Total expenses | ||||||
Consolidated Statement of Financial Position | |||||||
As at 31 March 2014 | |||||||
31/03/2014 | 31/03/2013 | ||||||
£ | £ | ||||||
ASSETS | |||||||
Non-Current Assets | |||||||
Investments at fair value through profit or loss | 10,813,632 | 15,325,843 | |||||
Total non-current assets | 10,813,632 | 15,325,843 | |||||
Current Assets | |||||||
Trade and other receivables | 60,433 | 5,176 | |||||
Cash and cash equivalents | |||||||
Consolidated Statement of Changes in Equity | ||||||
For the year ended 31 March 2014 | ||||||
Share Capital | Warrants | Treasury Shares | Retained Earnings | Total Equity | ||
£ | £ | £ | £ | £ | ||
At 1 April 2013 | 24,677,901 | - | - | (8,549,735) | 16,128,166 | |
Total comprehensive expense for the year | - | - | - | (5,667,646) | (5,667,646) | |
24,677,901 | - | - | (14,217,381) | 10,460,520 | ||
Transactions with owners | ||||||
Shares issued | 35 | - | - | - | 35 | |
Warrants issued | - | 72,454 | - | - | 72,454 | |
Share buybacks | - | - | (310,000) | - | (310,000) | |
Share buyback costs | - | - | (655) | - | (655) | |
Total transactions with owners | 35 | 72,454 | (310,655) | - | (238,166) | |
At 31 March 2014 | 24,677,936 | 72,454 | (310,655) | (14,217,381) | 10,222,354 | |
As at 22 February 2012 | - | - | - | - | - | |
Total comprehensive expense for the period | - | - | - | (8,549,735) | (8,549,735) | |
Transactions with owners | ||||||
Shares issued | 25,231,101 | - | - | - | 25,231,101 | |
Share issue costs | (553,200) | - | - | - | (553,200) | |
Total transactions with owners | 24,677,901 | - | - | - | 24,677,901 | |
At 31 March 2013 | 24,677,901 | - | - | (8,549,735) | 16,128,166 | |
Consolidated Statement of Cash Flows | |||||||
For the year ended 31 March 2014 | |||||||
Year to | 22/02/2012 | ||||||
31/03/2014 | to 31/03/2013 | ||||||
£ | £ | ||||||
Cash flows from operating activities | |||||||
Purchase of investments | (1,279,845) | (11,160,840) | |||||
Proceeds from sale of investments | 858,335 | 3,873,013 | |||||
Interest received | 1,163 | 8,510 | |||||
Operating expenses paid | (520,271) | (544,941) | |||||
Net cash outflow from operating activities | (940,618) | (7,824,258) | |||||
Cash flows from financing activities | |||||||
Proceeds from issue of shares | 35 | 9,203,510 | |||||
Share buybacks | (310,000) | - | |||||
Share transaction costs - on share issues | - | (553,200) | |||||
Share transaction costs - on share buybacks |
Notes
1. Financial Information
The financial information set out above does not constitute the Company's statutory audited accounts for the year ended 31 March 2014 but is derived from those accounts. The full Annual Report and Accounts, including the audit report, will soon be posted to applicable shareholders and available on the Company's website:www.praetorianresources.com.
2. Significant Accounting Policies
Basis of preparation
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") which comprise standards and interpretations as issued and approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards Interpretations Committee's interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union.
The same accounting policies and methods of computation have been followed and applied as were applied in the preparation of the Group's annual financial statements for the period ended 31 March 2013, which are available on the Company website (www.praetorianresources.com).
3. Critical Accounting Judgements and Estimates | ||||||||
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. | ||||||||
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised, if the revision affects only that period, or in the period of revision and future periods, if the revision affects both current and future periods. | ||||||||
In the process of applying the Group's accounting policies, management has made the following judgements, which have had the most significant effects on the amounts recognised in the Consolidated Financial Statements: | ||||||||
Going concern | ||||||||
After making all reasonable enquires the Directors believe that it is appropriate to adopt the going concern basis in preparing the Consolidated Financial Statements since the assets of the Group consist mainly of listed securities which are readily realisable and the short term liabilities of the Group are minimal, accordingly, the Group has adequate financial resources to continue in operational existence for the foreseeable future. | ||||||||
Fair value of unlisted investments | ||||||||
The Group uses valuation techniques that include inputs that are not based on observable market data to estimate the fair value of unlisted financial investments. | ||||||||
The Group receives indicative net assets values ("NAV") of its level 3 unlisted investments from the administrators of those entities. | ||||||||
In determining the fair value of these investments a risk adjusted discount factor of 27% (2013: 50%) has been applied to the indicative net asset value due to the nature of the underlying investment and their potentially illiquid nature. For each additional 5% discount applied to the potentially illiquid investments the fair value of the investments would fall by £21,842 (2013: £40,227). | ||||||||
The Directors believe that the applied valuation techniques and assumptions used are appropriate in determining the fair value of unlisted financial investments. Further details are provided below. | ||||||||
4. Investments at fair value through profit or loss
For the year ended 31 March 2014 | Level 1 | Level 2 | Level 3 | Total | |||||||||
£ | £ | £ | £ | ||||||||||
Opening Cost | 22,132,351 | - | 1,314,499 | 23,446,850 | |||||||||
Additions at cost | 1,171,166 | 108,679 | - | 1,279,845 | |||||||||
Disposals proceeds | (834,395) | - | (23,940) | (858,335) | |||||||||
Net realised loss on disposal of investments | (1,233,232) | - | (951,060) | (2,184,292) | |||||||||
Closing portfolio cost | 21,235,890 | 108,679 | 339,499 | 21,684,068 | |||||||||
Net unrealised (loss) / gain on investments | (11,335,073) | 484,981 | (20,344) | (10,870,436) | |||||||||
Closing valuation | 9,900,817 | 593,660 | 319,155 | 10,813,632 | |||||||||
Net unrealised (loss) / gain on investments | (4,126,293) | 484,981 | 891,883 | (2,749,429) | |||||||||
Net realised loss on disposal of investments | (1,233,232) | - | (951,060) | (2,184,292) | |||||||||
Net capital (loss) / gain on fair value of financial assets designated at fair value through profit or loss | (5,359,525) | 484,981 | (59,177) | (4,933,721) | |||||||||
Investment income | 1,179 | - | - | 1,179 | |||||||||
Total (losses)/gains on Financial Assets at fair value through profit or loss | (5,358,346) | 484,981 | (59,177) | (4,932,542) | |||||||||
For the period ended 31 March 2013 | Level 1 | Level 2 | Level 3 | Total | |||||||||
£ | £ | £ | £ | ||||||||||
Opening Cost | - | - | - | - | |||||||||
Additions at cost - in specie | 14,713,092 | - | 1,314,499 | 16,027,591 | |||||||||
Additions at cost - cash | 11,160,840 | - | - | 11,160,840 | |||||||||
Disposals proceeds | (3,873,013) | - | - | (3,873,013) | |||||||||
Net realised gain on disposal of investments | 131,432 | - | - | 131,432 | |||||||||
Closing portfolio cost | 22,132,351 | - | 1,314,499 | 23,446,850 | |||||||||
Net unrealised loss on investments | (7,208,780) | - | (912,227) | (8,121,007) | |||||||||
Closing valuation | 14,923,571 | - | 402,272 | 15,325,843 | |||||||||
Net unrealised loss on investments | (7,208,780) | - | (912,227) | (8,121,007) | |||||||||
Net realised gain on disposal of investments | 131,432 | - | - | 131,432 | |||||||||
Net capital loss on fair value of financial assets designated at fair value through profit or loss | (7,077,348) | - | (912,227) | (7,989,575) | |||||||||
Investment income | 25,735 | - | - | 25,735 | |||||||||
Total losses on Financial Assets at fair value through profit or loss | (7,051,613) | - | (912,227) | (7,963,840) | |||||||||
The current strategy of the Group, as discussed in the 2013 Annual Report, is to concentrate the portfolio on six key positions where the Group can support and assist in management. As at the year end these key positions constitute 83% (31 March 2013: 68%) of the NAV of the Group. | |||||||||||||
Valuation techniques used in the determination of fair values, including the key inputs used, are as follows: | |||||||||||||
Fair value hierarchy level | Valuation techniques | ||||||||||||
Level 1 | Fair value is the quoted bid price. | ||||||||||||
Level 2 | Stock warrants acquired upon subscription to certain equity holdings in the Group's investment portfolio are recorded at fair value based on a modified Black-Scholes model. Inputs into the warrant valuation include the current market price of the underlying entity, interest rates, stock volatilities and dividends data. As all significant inputs are market-based and observable, warrants are categorized in Level 2 of the fair value hierarchy. | ||||||||||||
On 20 March 2014 a debenture was purchased. Given the proximity of the purchase to the year end the debentures fair value is deemed to be the price of the transaction and accordingly has been included within Level 2. | |||||||||||||
Level 3 | The fair value of investments in unlisted entities is derived by applying a discount rate, as deemed appropriate by the Board, to the NAV of the entity as supplied by that entity's management. | ||||||||||||
The significant unobservable input used in arriving at the fair value is the discount rate applied by the Board. The discount rate used is the best estimate of the measure of the impact of the illiquid nature of the investments. The Group might only be able to liquidate these positions at disadvantageous prices, should the Board determine, or it become necessary, to do so. | |||||||||||||
If the discount rates used in the valuation of financial assets classified as Level 3 under the fair value hierarchy were to increase or decrease by 5%, with all other variables held constant, the NAV would have decreased or increased by £21,842 (31 March 2013 : £40,227), being 0.21% (31 March 2013 : 0.25%) of NAV. | |||||||||||||
For financial instruments that are recognised at fair value on a recurring basis, the Board determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. | |||||||||||||
There were no transfers of financial assets between fair value hierarchy levels during the year. | |||||||||||||
5. Basic and diluted deficit per Ordinary Share
2014 | 2013 | ||||||||
£ | £ | ||||||||
Loss for the year / period | (5,667,646) | (8,549,735) | |||||||
Weighted average number of Ordinary Shares in issue | 49,137,769 | 48,625,982 | |||||||
Deficit Per Share (pence) | (11.53) | (17.58) | |||||||
The deficit per share is based on the Group loss for the year and on the weighted average number of Ordinary Shares in issue for the year. | |||||||||
The Group's subscription shares and the warrants could potentially dilute the earnings per share in the future. | |||||||||
Subsequent to the year end there have been share issues and buybacks as detailed below. | |||||||||
6. Net Asset Value per Ordinary Share
31/03/2014 | 31/03/2013 | ||||||||
£ | £ | ||||||||
Net asset value attributable to Ordinary Shares per consolidated financial statements | 10,222,354 | 16,128,166 | |||||||
Shares in issue at year /period end | 49,093,951 | 50,093,901 |
Net asset value per Ordinary Share (excluding shares held in Treasury) | 0.21 | 0.32 |
7. Events after the reporting date
The Directors believe that it is prudent and beneficial to all shareholders to reduce the Company's cash commitments and to reduce the level of cash outflows wherever possible. As such it was agreed by the Board on 24 April 2014 that AGAM's service agreement be cancelled with immediate effect. | ||||||||
The contract had a fixed five year term from the date of the AIM admission and therefore had an expiry date of 9 July 2017. It was agreed that the monetary value of the remaining life of the contract, £483,945, be settled in full by a non-cash consideration of 2,400,000 newly issued Ordinary Shares in the Company and a termination fee of £40,000 paid in cash. These new shares became listed on AIM with effect from 1 May 2014. Upon cancellation of this contract the functions previously undertaken by AGAM will now be performed by the Advisory and Execution team in conjunction with the Board. | ||||||||
Both Richard Lockwood and Charles Cannon-Brookes own more than 20% of AGAM. As a consequence AGAM's interest in the Company is aggregated with each of their holdings under the AIM definition of directors' family. Their resulting holdings as a percentage of voting rights in the Company are as follows. | ||||||||
% of voting rights | ||||||||
Richard Lockwood | 11.40 | |||||||
Charles Cannon-Brookes | 6.44 | |||||||
On 6 May 2014 the Company announced that it has completed the on-market buy-back of an aggregate of 7,858,015 Ordinary Shares at a price of 8 pence per Ordinary Share. These shares, along with the 1,000,000 Ordinary Shares held by the Company in treasury at year end, will be cancelled. The Company's issued Ordinary share capital post the cancellation is 43,635,936 Ordinary Shares. | ||||||||
On 9 June 2014 the Company announced that Mark Hohnen and Richard Lockwood had stepped down from the Board, and that Kaare Foy and Nathan Steinberg had been appointed to the Board, with immediate effect. | ||||||||
Richard Lockwood will retain his position as an advisor to the Company as part of the Advisory and Execution Team. | ||||||||
Also on 9 June 2014 the Company announced the appointment of Grant Thornton UK LLP ("Grant Thornton") as the Company's nominated adviser with immediate effect. | ||||||||
8. Annual General Meeting
The Company's Annual General Meeting will be held at Legis House, 11 New Street, St Peter Port, Guernsey on 20 August 2014 at 11 a.m. The notice of AGM together with proxy forms will be posted to shareholders shortly. Additional copies are available on the Company's website and on request directly from the Company.
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