Annual Report 2013

Notes to the Financial Statements

for the year ended 31 December 2013

31. RETIREMENT BENEFIT PLANS

The Company contributes to individual pension schemes on behalf of certain employees. Contributions to the schemes are charged in the period in which they are payable to the scheme.

GROUP & COMPANY

 

2013

2012

 

US$’000

US$’000

Contributions

338

333

 

 

 

32. SHARE-BASED PAYMENTS

The Company has a share option scheme for certain Directors, employees and consultants. Options are exercisable at a price equal to the quoted market price of the Company’s shares on the date of grant. The options generally vest over a three year period in equal annual amounts or if performance related in the year the performance criteria are met. If options remain unexercised after a period of 7 years from the date of grant, the options expire. Option expiry periods may be extended at the discretion of the Board of Directors.

Details of the share options outstanding during the year are as follows:

 

2013

2012

 

Number of

Weighted average

Number of

Weighted average

 

share options

exercise price

share options

exercise price

 

US$

US$

Outstanding at the beginning of the year

78,717,965

50c

61,434,629

42c

Granted during the year

11,800,000

45c

20,800,000

67c

Exercised during the year

(466,667)

26c

(1,408,330)

33c

Expired/(lapsed) during the year

(11,003,336)

64c

(2,108,334)

56c

Outstanding at the end of the year

79,047,962

48c

78,717,965

50c

Exercisable at the end of the year

44,262,553

 

53,567,071

 

 

 

 

 

 

The weighted average share price at the date of exercise for share options exercised during the year was US$0.50. The options outstanding at the end of the year have exercise prices which range from US$0.23 to US$0.61 and a weighted average remaining contractual life of 3.3 years (2012: 3.3 years).

In 2013, options were granted on 23 January, 28 May, 4 September, and 10 December. The aggregate of the estimated fair values of the options granted on those dates is US$2.7 million.

In 2012, options were granted on 30 May, 20 June, and 29 August. The aggregate of the estimated fair values of the options granted on those dates is US$8.7 million.

The fair values were calculated using a Black-Scholes option pricing model. The inputs into the calculation were as follows:

 

2013

2012

Weighted average share price

US$0.45

US$0.67

Weighted average exercise price

US$0.45

US$0.67

Expected volatility

48%

63%

Expected life (years)

7

7

Risk free rate

2%

1%

 

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous year as this is deemed the most reliable indicator of the volatility of the Company’s share price. Extending the historical volatility over periods greater than one year results in high volatility factors which are not appropriate as an estimation of expected volatility.

During the year the Group recognised a share-based payment expense of US$0.8 million (2012: US$3.5 million) and capitalised share-based payments of US$0.2 million (2012: US$0.4 million).

33. RELATED PARTY TRANSACTIONS

GROUP
Transactions between the Company and its subsidiary undertakings, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

2013

2012

 

US$’000

US$’000

Short-term employee benefits

2,943

3,393

Long-term employee benefits

-

558

Post-employment benefits

167

160

Compensation on retirement

-

-

Share-based payments

277

2,100

Total benefits

3,387

6,211

 

 

 

Other related party transactions

Vico Properties plc is a related party of the Company as Mr M. Carvill is a Director of both the Company and Vico Properties plc. The Company used to perform certain administrative services for Vico Properties plc. The charge for 2013 was nil (2012: nil). At the year-end the balance outstanding was US$0.07 million (2012: US$0.07 million).

COMPANY
Kenmare Moma Mining (Mauritius) Limited and Kenmare Moma Processing (Mauritius) Limited, the Project Companies, are wholly owned subsidiary undertakings of Congolone Heavy Minerals Limited, which in turn is a subsidiary undertaking of Kenmare Resources plc. During the year, funding for the Moma Titanium Minerals Mine was provided to the Project Companies by Congolone Heavy Minerals Limited. At the year end the amount due to Congolone Heavy Minerals Limited from the Project Companies was US$639.7 million (2012: US$559.6 million).

Under the terms of a management services agreement with the Company, management services costing US$6.6 million (2012: US$6.5 million) were provided during the year to the Project Companies.

As detailed in Note 17, on 16 October 2013, 250,300,000 new ordinary shares were issued at a price of Stg£26.5p by the Company by way of a placing. Participants in the placing were also issued with warrants on the basis of one warrant to subscribe for one share in the Company for every five new ordinary shares subscribed for under the placing. 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 after the date of issue. M&G Group Limited (a wholly-owned subsidiary of Prudential plc), together with M&G Limited, M&G Investment Management Limited and M&G Securities Limited (each a wholly owned subsidiary of M&G Limited), together “M&G”, is the Company’s largest shareholder which before the placing held approximately 20% of the issued ordinary share capital of the Company. M&G participated in the placing of new ordinary shares on a pro rata basis, maintaining its percentage interest in the enlarged issued share capital. M&G also received warrants under the placing on the same basis as all of the participants. The total consideration paid by M&G in respect of its participation in the placing (excluding any further consideration arising on the future exercise of warrants) was Stg£13.3 million. Having regard to its status as a substantial shareholder, M&G was and is considered to be a related party of the Company under paragraph 11.1.4A of the UKLA Listing Rules. Accordingly, the participation by M&G in the placing represented a related party transaction. However this transaction was classified under the relevant class tests required under the UKLA Listing Rules as a smaller related party transaction (less than 5%). Accordingly, no independent shareholder approval was required and the requirements under the UKLA Listing Rules were to inform the UKLA in writing of the proposed transaction, to provide the UKLA with written confirmation from the Company’s sponsor that the terms of the transaction or arrangement with the related party are fair and reasonable as far as the shareholders of the Company are concerned and to include details of the transaction in the Company’s next published accounts, including the identity of the related party, the value of the consideration for the transaction and all other relevant circumstances. This disclosure is intended to address this obligation.

34. EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

On 14 February 2014, the Company, Congolone Heavy Minerals Limited, and the Project Companies entered into a deed of amendment with Project Lenders. The key terms of the amendment are detailed in Note 21.

35. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved by the Board on 11 April 2014.