Annual Report 2013

Notes to the Financial Statements

for the year ended 31 December 2013

26. CAPITAL AND LIQUIDITY MANAGEMENT

The Group’s capital management objective is to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances.

The principal activity of the Group is the operation of the Mine. The Group therefore manages its capital to ensure existing operations are adequately funded and, based on planned mine production levels, that the Mine will achieve positive cash flows allowing returns to shareholders.

Debt

Project loans as detailed in Note 21 have been made to the Group to develop the Mine and a corporate facility was entered into during the year with Absa Bank. These are all fully drawn and the Group is actively managing the repayment of these loans from cash flows generated from the existing mining operation, or in the case of the Company’s corporate facility, from available cash reserves. The Group has total debt of US$335.2 million (2012: US$324.4 million). This is made up of Project Loans of US$335.8 million and an Absa corporate facility of US$19.4 million.

There were Project Loan interest and principal payments amounting to US$18.0 million (2012: US$32.9 million), interest accrued of US$28.0 million (2012: US$26.4 million), net loan amendment fees of US$6.2 million and foreign exchange movements of US$7.5 million (2012: US$3.8 million) resulting in an overall increase in Project Loans of US$11.4 million (2012: US$2.7 million decrease).

During the year the Absa corporate facility of US$40 million was entered into and drawn down. US$20 million of the facility was repaid in November 2013. There were Absa loan interest payments amounting to US$2.0 million, interest accrued of US$2.1 million and loan arrangement fees and other costs of US$1.7 million of which US$1.0 million was amortised resulting in an overall increase of US$19.4 million for the year.

On 16 December 2013, the Company and Absa entered into an amendment to the corporate facility whereby the facility amount was amended to US$20 million and maturity was extended to 31 March 2015. The amended facility permits for amounts drawn under it to be repaid and redrawn prior to the maturity date which provides the Group with additional working capital flexibility.

On 14 February 2014, the Group entered into a deed of amendment with Project Lenders to restructure the Project Loans, details of which are set out in Note 21. The restructuring removes the requirement to repay all deferred subordinated debt by 1 August 2015, and instead reschedules all deferred subordinated debt that is unpaid as of 31 July 2015. This restructuring has been designed to enable the Project Companies to service the project debt in a sustainable manner, and in due course to pay down the debt on an accelerated basis from available cash while making distributions to the Group.

Equity

On 16 October 2013, 250,300,000 new ordinary shares were issued by way of a placing which raised US$101.9 million net of expenses. The proceeds of the equity raising were used in part to discharge near term payment obligations in respect of the expansion of the Mine and to repay US$20 million of the Company’s Absa loan facility. Participants in the placing were also issued warrants on the basis of one warrant to subscribe for one ordinary share in the Company for every five placing shares. In total 50,060,000 warrants were issued. The warrants, which are not listed or admitted to trading and which have limited transferability rights, have an exercise price of Stg£29.09p and an exercise period of five years commencing thirteen months from the date of issue. 466,666 new ordinary shares were issued during 2013 as a result of share options exercised.

The Board periodically reviews the capital structure of the Group, including the cost of capital and the risks associated with each class of capital. The Group manages and, if necessary, adjusts its capital structure taking account of the underlying economic conditions. Any material adjustments to the Group’s capital structure in terms of the relative proportions of debt and equity are approved by the Board. The Group is not subject to any externally imposed capital requirements.

The definition of capital/capital structure of the Group consists of debt, which includes bank borrowings as disclosed in Note 21 and the finance lease as disclosed in Note 22, and equity attributable to equity holders of the Company, comprising issued capital, reserves, retained losses and other reserves as disclosed in Notes 17 to 20.

The Group’s policy with respect to liquidity and cash flow risk is to ensure continuity of funding through continuously monitoring forecast and actual cash flows and by matching the maturity profiles of financial assets and liabilities.

27. CAPITAL COMMITMENTS

GROUP

 

2013

2012

 

US$’000

US$’000

Contracts for future expenditure authorised by the Board:

 

 

Capital authorised and contracted

19,680

52,450

Capital authorised not contracted

1,104

2,791


Capital authorised and contracted represents the amount authorised and contracted at 31 December of the relevant year to be spent on expansion and operations-related approved capital projects.

Capital authorised not contracted represents the amount not contracted but authorised at 31 December of the relevant year to be spent on expansion and operations-related approved capital projects.

28. CONTINGENT LIABILITIES

On 17 November 2010, a High Court jury delivered a verdict of damages of €10 million in a defamation case taken by a former Company director. The Company has submitted an appeal to the Supreme Court with a view to setting aside both the verdict and the amount, with the intention of securing a retrial. The High Court granted a stay on the award subject to the payment of €0.5 million until the hearing of the Supreme Court appeal. The Company’s legal team strongly advise that the award will be set aside on appeal and therefore no provision has been made in these financial statements for the award as the Company do not consider that there is any future probable loss. The Company has provided US$1.4 million for the costs associated with the defamation case appeal and retrial and further actions taken by the former director as detailed in Note 23 Provisions.

29. PARENT COMPANY, KENMARE RESOURCES PLC STATEMENT OF COMPREHENSIVE INCOME

In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual statement of comprehensive income to the Annual General Meeting and from filing it with the Companies Registration Office. The Company’s loss for the financial year determined in accordance with IFRS is US$13.6 million (2012: US$5.2 million). The loss is due to administration costs of US$2.4 million (2012: US$2.7 million), share-based payments expensed of nil (2012: US$2.5 million), fair value of warrants issued in connection with the equity placing of US$5.9 million (2012: nil), Absa corporate facility loan interest, fees and expenses of US$3.1 million (2012: nil) and other finance costs of US$2.2 million (2012: nil).

30. OPERATING LEASE ARRANGEMENTS

GROUP & COMPANY
The Group as lessee

 

2013

2012

 

US$’000

US$’000

Minimum lease payments under operating leases

 

 

recognised as an expense in the year

102

96

 

 

 

At the statement of financial position date, the Group has outstanding commitments under a non-cancellable operating lease which fall due as follows:

 

2013

2012

 

US$’000

US$’000

Within one year

115

109

In the second to fifth years inclusive

115

218

 

230

327

 

 

 

Operating lease payments represent rentals payable by the Group for its office buildings. The lease has an original term of 25 years and rentals are fixed for an average of 5 years. The unexpired term of the lease is 2 years at year end. The underlying currencies of lease payments are Euro.