Annual Report 2013

Notes to the Financial Statements

for the year ended 31 December 2013

6. FINANCE INCOME

 

2013

2012

 

US$’000

US$’000

Interest on bank deposits

299

1,706

 

 

 

7. FINANCE COSTS

 

2013

2012

 

US$’000

US$’000

Interest on bank borrowings

30,021

26,429

Fair value of warrants

5,851

-

Other financing fees

3,879

1,557

Finance lease interest

274

323

Mine closure provision unwinding of the discount

510

405

Total

40,535

28,714

 

 

 

The interest on all Group borrowings has been expensed in the year.

8. INCOME TAX EXPENSE

 

2013

2012

 

US$’000

US$’000

Corporation tax

-

-

Deferred tax

(2,033)

(3,301)

Total

(2,033)

(3,301)

 

 

 

Reconciliation of effective tax rate

 

 

(Loss)/profit before tax

(42,087)

52,787

 

 

 

(Loss)/profit before tax multiplied by the applicable tax rate (12.5%)

(5,261)

6,598

Differences in effective tax rates on overseas earnings

5,261

(6,598)

Applied losses

(2,176)

(3,301)

Recognition of deferred tax asset

143

-

Total

(2,033)

(3,301)

 

 

 

GROUP

No charge to corporation tax arises in the year ended 31 December 2013 as there were no taxable profits in the year. No charge to corporation tax arose in the year ended 31 December 2012 as the taxable profits were offset by losses brought forward in prior years.

At the statement of financial position date Kenmare Moma Mining (Mauritius) Limited had unused tax losses of nil (2012: US$12.2 million) available for offset against future profits. A deferred tax asset of US$0.1 million has been recognised for losses available for offset against future profits. For the year ended 31 December 2012 a deferred tax asset of US$2.2 million has been recognised in respect of US$12.2 million of prior year losses.

The fiscal regime applicable to the mining activities of Kenmare Moma Mining (Mauritius) Limited allows for a 50% reduction in the corporate tax in the initial ten year period of production following start-up (2007) and charges a royalty of 3% based on heavy mineral concentrate sold to Kenmare Moma Processing (Mauritius) Limited. The royalty charge payable to the Government of Mozambique for the year end 31 December 2013 was US$3.3 million (2012: US$3.2 million). Under the fiscal regime applicable to mining activities, Kenmare Moma Mining (Mauritius) Limited is exempted from import and export taxes and VAT, and accelerated depreciation is permitted. Whilst withholding tax is levied on certain payments to non-residents, mining companies are exempt from withholding tax on dividends for the first ten years or until their investment is recovered whichever is earlier. The withholding tax charge payable to the Government of Mozambique for the year end 31 December 2013 was US$0.5 million (2012: US$0.8 million).

Deferred tax is the tax expected to be payable or recoverable on 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, and is accounted for using the statement of financial position liability method. The fiscal regime applicable to mining allows for the option to use accumulation of exploration and development expense and optional depreciation at 25% per annum with tax losses allowed to be carried forward for three years.

Kenmare Moma Processing (Mauritius) Limited has Industrial Free Zone (IFZ) status. As an IFZ company, it is exempted from import and export taxes, VAT and other corporation taxes. A revenue tax of 1% is charged after six years of operation. The revenue tax commenced in December 2013 and the amount payable to the Government of Mozambique was US$0.1 million. There is no dividend withholding tax under the IFZ regime.

COMPANY

No charge to taxation arises in the years ended 31 December 2013 or 31 December 2012 as there were no taxable profits in either year.

At the statement of financial position date, the Parent Company has unused tax losses. Due to the uncertainty over the existence of future taxable profits, a deferred tax asset of US$2.1 million at 31 December 2013 (2012: US$1.3 million) calculated at a rate of 12.5% for tax losses has not been recognised in the statement of financial position.

9. LOSS/EARNINGS PER SHARE

The calculation of the basic and diluted loss/earnings per share attributable to the ordinary equity holders of the parent is based on the following data:

 

2013

2012

 

US$’000

US$’000

(Loss)/profit for the year attributable to equity holders of the parent

(44,120)

49,486

 

 

 

 

2013

2012

 

Number of

Number of

 

shares

shares

Weighted average number of issued ordinary shares for
the purpose of basic (loss)/earnings per share

2,583,605,457

2,462,602,902

 

 

 

Effect of dilutive potential ordinary shares:

 

 

Share options and warrants

-

9,977,123

Weighted average number of ordinary shares for the purposes
of diluted (loss)/earnings per share

2,583,605,457

2,472,580,025

 

 

 

 

Cent per share

Cent per share

(Loss)/earnings per share: basic

(1.71)

2.01

(Loss)/earnings per share: diluted

(1.71)

2.00

 

In 2013 the basic loss per share and the diluted loss per share are the same as the effect of the outstanding share options and warrants are anti-dilutive.

10. EMPLOYEE NUMBERS AND BENEFITS

The average number of persons employed by the Group (including Executive Directors) was 1,554 (2012: 1,017) and is analysed below:

 

2013

2012

Management and administration

460

404

Operations

1,094

613

 

1,554

1,017

 

 

 

The aggregate payroll costs incurred in respect of these employees comprised:

 

 

 

2013

2012

 

US$’000

US$’000

Wages and salaries

49,288

39,177

Share-based payments

780

3,547

Social welfare

2,534

1,111

Pension costs

338

333

 

52,940

44,168

 

 

 

US$1.4 million (2012: US$1.7 million) of payroll costs and US$0.2 million (2012 US$0.4 million) of the share-based payments relating to share options granted to employees working on the expansion project have been capitalised in property, plant and equipment during the year.

Included in wages and salaries are payroll taxes of US$7.5 million (2012: US$4.6 million) payable to the Government of Mozambique, US$1.5 million (2012: US$1.4 million) payable to Irish Revenue and US$0.1 million (2012: nil) payable to Her Majesty’s Revenue & Customs of the UK.

Included in the social welfare cost is social welfare of US$2.0 million (2012: US$0.6 million) payable to the Government of Mozambique, US$0.5 million (2012: US$0.5 million) payable to Irish Revenue and US$0.1 million (2012: nil) payable to Her Majesty’s Revenue & Customs of the UK.

Included in the payroll cost above are Executive and Non-Executive emoluments (inclusive of share-based payments) of US$3.3 million (2012: US$5.7 million).