TIDMKRPZ
RNS Number : 4110B
Kropz PLC
30 September 2022
Kropz plc ("Kropz", the "Company") and its subsidiaries (the
"Group")
Unaudited Half Year Results for the Six Months ended 30 June
2022
Kropz plc (AIM: KRPZ), an emerging African phosphate developer
and producer, announces its unaudited results for the six months
ended 30 June 2022.
The financial report is available online at the Company's
website www.kropz.com .
FINANCIAL AND OPERATIONAL HIGHLIGHTS
Key financial indicators
-- Impairment in the value of property, plant, equipment and
mine development assets at Kropz Elandsfontein (Pty) Ltd
("Elandsfontein") of US$44.7 million;
-- Property, plant, equipment and exploration assets, after the
impairment above, of US$ 144 million as at 30 June 2022 (31
December 2021: US$ 180 million);
-- Cash at 30 June 2022 of US$ 1 million (31 December 2021: US$ 2 million); and
-- Trade and other payables at 30 June 2022 of US$ 8 million (31
December 2021: US$ 4 million).
Key corporate and operational developments during the period
Corporate
-- Issued 6,700,000 ordinary shares, at an exercise price of
GBP0.001 an ordinary share, in the Company to key members of the
executive management team, including certain Persons Discharging
Managerial Responsibilities. The issue of ordinary shares was due
to awards vesting that had been issued under the Company's
Long-Term Incentive Plan of 31 July 2020, announced on 4 August
2020;
-- The fifth and final drawdown on the US$ 5 million equity
facility with the ARC Fund, Kropz's major shareholder ("Further
Equity Facility"), as announced on 26 February 2021, occurred on 10
March 2022 for US$ 200,000;
-- The third and fourth, and final drawdowns on the ZAR 200
Million Equity Facility with the ARC Fund ("ZAR 200 Million Equity
Facility"), as announced on 29 September 2021 , occurred on 25
March 2022 for ZAR 40 million and on 26 April 2022 for ZAR 33
million;
-- As announced on 27 April 2022, Kropz Elandsfontein entered
into an agreement with the ARC Fund for a ZAR 25 million
(approximately US$ 1.60 million) bridge loan facility ("Loan 1") to
meet cash requirements in respect of Kropz Elandsfontein and draw
down of Loan 1 took place on 28 April 2022;
-- As announced on 11 May 2022, Kropz entered into a new
conditional convertible equity facility of up to ZAR 177 million
(approximately US$ 11 million) ("ZAR 177 Million Equity Facility")
with ARC Fund to fund Elandsfontein to first revenues from bulk
concentrate sales;
-- The ZAR 177 Million Equity Facility was approved by Kropz
shareholders and became unconditional on 1 June 2022; and
-- The first drawdown on the ZAR 177 Million Equity Facility
occurred on 2 June 2022 for ZAR 103.5 million (approximately US$ 7
million). After set-off of Loan 1, Kropz received an amount of ZAR
78.5 million (approximately US$ 5 million).
Elandsfontein
-- The focus at the Elandsfontein project continued to be
production ramp-up of the mine and beneficiation plant;
-- To 30 June 2022, 5,000 tonnes of concentrate had been
produced and was being stored in the Saldanha Bay storage
facility;
-- BNP released the ZAR 77 million (approximately US$ 5 million)
restricted cash in the bank account of Elandsfontein on 10 January
2022, upon satisfaction of the requirement by BNP for Kropz to
bridge the funding shortfall in respect of Kropz Elandsfontein as
announced on 1 September 2021;
-- As announced on 27 April 2022, a further funding shortfall of
ZAR 177 million was expected due to slower than expected progress
in the ramp up of operations at Elandsfontein;
-- First bulk sales are now expected in Q4 2022 as a result of
early geological challenges in the mining area - higher than
expected volumes of indurated material limited the mining rate that
could be achieved with the mining equipment on site at that
time;
-- The delay was also driven by the need to re-engineer parts of
the fine flotation circuit as proposed by the vendor and had also
been affected by the lack of operator expertise and experience;
and
-- Measures taken by management to address these issues are set out later in this report.
Hinda
-- Since 31 December 2021, management has been interrogating the
Hinda Updated FS and financial model as prepared by Hatch;
-- Various capital cost optimisation initiatives have been
identified for investigation ahead of detailed design; and
-- Development alternatives are being considered and potential funding options investigated.
Key corporate and operational developments post period end
Corporate
-- The second drawdown on the ZAR 177 Million Equity Facility
was made on 7 July 2022 for ZAR 60 million (approximately US$ 4
million);
-- As announced on 20 July 2022, Mark Summers, has resigned as
Chief Executive Officer ("CEO") and Executive Director of the
company effective the end of 2022. The Board has commenced a
process for appointing a new CEO;
-- On 9 August 2022, a final drawdown on the ZAR 177 Million
Equity Facility was made for ZAR 13.5 million (approximately US$
0.9 million);
-- As announced on 14 September 2022, Machiel Reyneke retired as
a non-executive director of the Company and was replaced by Mr
Gerrit Duminy, as non-executive director and representative of the
ARC Fund;
-- Today, Kropz, Kropz Elandsfontein and ARC Fund agreed to a
further ZAR 126 million (approximately US$ 7 million) bridge loan
facility to meet further cash requirements at Elandsfontein in the
ramp-up of operations at Elandsfontein; and
-- Kropz and the ARC Fund are currently working on a
comprehensive funding structure to finance any further funding
requirements in Kropz.
Elandsfontein
-- Subsequent to 30 June 2022, further delays were announced in
the ramp-up of operations at Elandsfontein, largely been driven by
initial ore variability in the current mining area. Mining rates
and associated delivery of ore to the plant were compromised due to
the presence of competent banks of hard material within the
orebody, that were previously unknown. This hard material could not
be mined using free-digging methods leading to new equipment being
brought to site to test mechanical breakage of the material, while
alternative mining methods are being evaluated;
-- To quantify and assess the impact of this hard material on
the future mine plan, further drilling is currently in
progress;
-- A revised mineral resource estimate will be produced later in
the year, once the results of this current drilling programme have
been interpreted;
-- As announced on 9 August 2022, Kropz, Kropz Elandsfontein and
ARC Fund agreed to a further ZAR 121.5 million (approximately US$
7.3 million) bridge loan facility ("Loan 2") to meet immediate cash
requirements at Kropz Elandsfontein. A draw down of ZAR 60 million
(approximately US$ 3.6 million) on Loan 2 was made on 9 August
2022. Loan 2 is unsecured, repayable on demand, with no fixed
repayment terms and is repayable by Kropz Elandsfontein on no less
than two business days' notice. Interest is payable on Loan 2 at
the South African prime overdraft interest rate plus 6%, nominal
per annum and compounded monthly;
-- The second drawdown on Loan 2 was made on 1 September 2022
for ZAR 47 million (approximately US$ 2.8 million). The third and
final draw down of ZAR 14.5 million on Loan 2 was made on 29
September 2022; and
-- At the date of this report, 10,000 tonnes of phosphate rock
concentrate were in stock at the Saldanha Bay storage facility.
Hinda
-- Potential funding solutions for the development of Hinda are
being evaluated and considered.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
For further information visit www.kropz.com or contact:
Kropz Plc Via Tavistock
+44 (0) 20 7920
Mark Summers (CEO) 3150
Grant Thornton UK LLP Nominated Adviser
Samantha Harrison
Harrison Clarke
George Grainger +44 (0) 20 7383
Ciara Donnelly 5100
Hannam & Partners Broker
Andrew Chubb +44 (0) 20 7907
Ernest Bell 8500
Tavistock Financial PR &
IR (UK)
Emily Moss +44 (0) 20 7920
Nick Elwes 3150
Adam Baynes kropz@tavistock.co.uk
R&A Strategic Communications PR (South Africa)
Charmane Russell +27 (0) 11 880
3924
charmane@rasc.co.za
About Kropz plc
Kropz is an emerging African phosphate developer and producer
with phosphate projects in South Africa and the Republic of Congo
("RoC"). The vision of the Group is to become a leading independent
phosphate rock producer and to develop into an integrated,
mine-to-market plant nutrient company focusing on sub-Saharan
Africa.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30
JUNE 2022
30 June 31 December
2022 2021
Unaudited Audited
Notes US$'000 US$'000
Non-current assets
Property, plant, equipment and mine
development 7 102,842 135,099
Exploration assets 8 41,199 44,631
Right-of-use assets 62 7
Other financial assets 1,261 1,357
----------- ------------
145,364 181,094
----------- ------------
Current assets
Inventories 2,059 1,025
Trade and other receivables 1,906 1,511
Restricted cash - 4,858
Cash and cash equivalents 1,007 2,461
----------- ------------
4,972 9,855
----------- ------------
TOTAL ASSETS 150,336 190,949
----------- ------------
Current liabilities
Trade and other payables 7,929 3,543
Lease liabilities 23 7
Other financial liabilities 12 11,768 4,295
19,720 7,845
----------- ------------
Non-current liabilities
Shareholder loans and derivative liability 11 43,783 25,043
Lease liabilities 41 -
Other financial liabilities 12 18,814 26,291
Provisions 4,091 4,033
----------- ------------
66,729 55,367
----------- ------------
TOTAL LIABILITIES 86,449 63,212
----------- ------------
NET ASSETS 63,887 127,737
----------- ------------
Shareholders' equity
Share capital 9 1,212 1,194
Share premium 9 194,757 193,524
Merger reserve 9 (20,523) (20,523)
Foreign exchange translation reserve (11,094) (7,807)
Share-based payment reserve 586 1,197
Accumulated losses (94,419) (45,626)
-----------
Total equity attributable to the owners
of the Company 70,519 121,959
Non-controlling interests (6,632) 5,778
----------- ------------
63,887 127,737
----------- ------------
The accompanying notes form part of the Condensed Consolidated
Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Unaudited Unaudited
Notes US$'000 US$'000
Revenue - -
Other income 500 7
Operating expenses (4,796) (3,436)
----------- -----------
Operating loss (4,296) (3,429)
Finance income 13 85 1,547
Finance expense 14 (4,306) (1,471)
Fair value losses from derivative asset/liability 15 (7,637) (3,728)
Impairment losses 16 (44,700) -
Loss on disposal of subsidiary - (224)
----------- -----------
Loss before taxation (60,854) (7,305)
Taxation 17 - (89)
Loss after taxation (60,854) (7,394)
----------- -----------
Loss attributable to:
Owners of the Company (46,794) (6,602)
Non-controlling interests (14,060) (792)
----------- -----------
(60,854) (7,394)
----------- -----------
Loss for the period (60,854) (7,394)
Other comprehensive income:
Items that may be subsequently reclassified
to profit or loss:
* Exchange differences on translation of parent company
financial statements from functional to presentation
currency (4,137) 628
* Exchange differences on translating foreign
operations 501 (175)
----------- -----------
(3,636) 453
----------- -----------
Total comprehensive loss (64,490) (6,941)
----------- -----------
Attributable to:
Owners of the Company (50,081) (6,611)
Non-controlling interests (14,409) (330)
----------- -----------
(64,490) (6,941)
----------- -----------
Loss per share attributable to owners
of the Company :
Basic and diluted (US cents) 18 (5.09) (1.03)
----------- -----------
The accompanying notes form part of the Condensed Consolidated
Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2022
Foreign
currency Share-based Total
Share Share Merger translation payment Retained attributable Non-controlling Total
capital premium reserve reserve reserve earnings to owners interest equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Unaudited
- six months
ended 30
June 2022
Balance
at 1 January
2022 1,194 193,524 (20,523) (7,807) 1,197 (45,626) 121,959 5,778 127,737
Total
comprehensive
loss for
the period - - - (3,287) - (46,794) (50,081) (14,409) (64,490)
Issue of
shares 18 503 - - - - 521 - 521
Share options
exercised - 730 - - (730) - - - -
Share based payment
charges - - - - 119 - 119 - 119
Investment
in
non-redeemable
preference
shares of
Kropz
Elandsfontein - - - - - (1,999) (1,999) 1,999 -
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
Transactions
with owners 18 1,233 - - (611) (1,999) (1,359) 1,999 640
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
Balance
at 30 June
2022 1,212 194,757 (20,523) (11,094) 586 (94,419) 70,519 (6,632) 63,887
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
Unaudited
- six months
ended 30
June 2021
Balance
at 1 January
2021 706 168,212 (20,523) 2,334 385 (11,005) 140,109 (5,276) 134,833
Total
comprehensive
loss for
the period - - - (9) - (6,602) (6,611) (330) (6,941)
Disposal
of subsidiary - - - - - - - 168 168
Issue of
shares 416 21,584 - - - - 22,000 - 22,000
Remeasurement
of derivative
asset on
issuance
of shares
(Note 15) - - - - - (4,673) (4,673) - (4,673)
Share based
payment
charges - - - - 317 - 317 - 317
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
Transactions
with owners 416 21,584 - - 317 (4,673) 17,644 168 17,812
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
Balance
at 30 June
2021 1,122 189,796 (20,523) 2,325 702 (22,280) 151,142 (5,438) 145,704
---------- -------- --------- ------------ ------------ ------------ -------------- ---------------- ------------
The accompanying notes form part of the Condensed Consolidated
Financial Statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2022
Six months Six months
ended ended
30 June 30 June
2022 2021
Unaudited Unaudited
US$'000 US$'000
Cash flows from operating activities
Loss before taxation (60,854) (7,305)
Adjustments for:
Depreciation of property, plant and
equipment 425 430
Amortisation of right-of-use assets 18 19
Impairment losses 44,700 -
Share-based payment 119 317
Interest income (85) (289)
Interest expense 2,414 1,011
Fair value losses from derivative asset/liability 7,637 3,728
Loss on disposal of subsidiary - 224
Foreign currency exchange differences 1,884 (1,028)
Fair value loss on game animals 21 12
----------- -----------
Operating cash flows before working
capital changes (3,721) (2,881)
Increase in trade and other receivables (478) (1,985)
(Increase) / decrease in inventories (1,117) 11
Increase in payables 4,832 2,445
Accretion in provisions - 177
----------- -----------
(484) (2,233)
Income taxes paid - -
----------- -----------
Net cash flows used in operating activities (484) (2,233)
----------- -----------
Cash flows used in investing activities
Purchase of property, plant and equipment (16,762) (18,659)
Exploration and evaluation expenditure (194) (1,931)
Receipt from other financial asset 70 -
Interest received 85 289
Transfers from restricted cash 4,858 1,946
----------- -----------
Net cash flows used in investing activities (11,943) (18,355)
----------- -----------
Cash flows from financing activities
Finance cost paid (1,072) (1,011)
Shareholder loan received 11,730 -
Repayment of lease liabilities (14) (20)
Other financial liabilities received 25 38
Issue of ordinary share capital 554 22,000
Net cash flows from financing activities 11,223 21,007
----------- -----------
Net (decrease) / increase in cash and
cash equivalents (1,204) 419
Cash and cash equivalents at beginning
of the period 2,461 11,572
Foreign currency exchange (losses) /
gains on cash (250) 499
----------- -----------
Cash and cash equivalents at end of
the period 1,007 12,490
----------- -----------
The accompanying notes form part of the Condensed Consolidated
Financial Statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 JUNE 2022
1. General information
Kropz is an emerging plant nutrient producer with an advanced
stage phosphate mining project in South Africa and a phosphate
project in the RoC. The principal activity of the Company is that
of a holding company for the Group, as well as performing all
administrative, corporate finance, strategic and governance
functions of the Group.
The Company was incorporated on 10 January 2018 and is a public
limited company, with its ordinary shares admitted to the AIM
Market of the London Stock Exchange on 30 November 2018 trading
under the symbol, "KRPZ". The Company is domiciled in England and
incorporated and registered in England and Wales. The address of
its registered office is 35 Verulam Road, Hitchin, SG5 1QE. The
registered number of the Company is 11143400.
2. Basis of preparation
These interim consolidated financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting and
in accordance with the accounting policies of the consolidated
financial statements for the year ended 31 December 2021. They do
not include all disclosures that would otherwise be required in a
complete set of financial statements and should be read in
conjunction with the 2021 annual report. The statutory financial
statements for the year ended 31 December 2021 were prepared in
accordance with UK adopted international accounting standards and
the Companies Act 2006 applicable to companies reporting under the
International Financial Reporting Standards ("IFRS"). They have
been filed with the Registrar of Companies. The auditors' reported
on those financial statements was unqualified but included a
material uncertainty related to going concern.
The interim consolidated financial statements have been prepared
under the historical cost convention unless otherwise stated in the
accounting policies. They are presented in United States Dollars,
the presentation currency of the Group and figures have been
rounded to the nearest thousand.
The interim financial information is unaudited and does not
constitute statutory accounts as defined in the Companies Act
2006.
The interim financial information was approved and authorised
for issue by the Board of Directors on 30 September 2022.
3. Significant events
The further potential effects of COVID-19, and the possibility
of further waves in South Africa and the RoC remain a risk to
Kropz's projects. Kropz has mitigated this risk as far as
reasonably practicable by compliance with the Kropz COVID-19
policies and procedures. Additionally, the recent Ukraine-Russia
conflict has created increased uncertainty and volatility in debt
and equity markets alongside increased inflationary pressures,
supply chain constraints and increased foreign exchange volatility
which may make the raising of funding more difficult to secure.
4. Going concern
During the six months ended 30 June 2022, the Group incurred a
loss of US$ 60.9 million (six months ended 30 June 2021: US$ 7.4
million) and experienced net cash outflows from operating
activities. Cash and cash equivalents totalled US$ 1.0 million as
at 30 June 2022 (31 December 2021: US$ 2.5 million)
Delays in the ramp-up of operations at Elandsfontein, as set out
above, have delayed first revenues from Elandsfontein to later in
2022.
First revenue from Elandsfontein is now forecast in Q4 of 2022.
The Group has no current source of operating revenue and is
therefore dependent on both existing cash resources and facilities
and future fund raisings to meet overheads and future development
and exploration requirements as they fall due.
In September 2021, Kropz secured the ZAR 200 Million Equity
Facility of up to ZAR 200 million from the ARC Fund, to be used
exclusively for the purposes of bringing the Elandsfontein project
to first revenues. On 26 October 2021, Kropz received a draw down
on the ZAR 200 Million Equity Facility of ZAR 90 million and a
further ZAR 37 million on 10 December 2021. Two further drawdowns
were made in 2022, one on 25 March 2022 for ZAR 40 million and ZAR
33 million on 26 April 2022. The ZAR 200 Million Equity Facility is
fully drawn at the date of this report.
In April 2022, ARC Fund agreed to provide a ZAR 25 million
(approximately US$ 1.6 million) bridge loan facility ("Loan 1") to
Kropz Elandsfontein to meet its immediate cash requirements. Loan 1
was unsecured, repayable on demand, and there were no fixed
repayment terms. It is repayable by Kropz Elandsfontein on no less
than two business days' notice. Interest is payable on the Loan at
14% nominal, compounded monthly. Loan 1 was fully drawn down on 28
April 2022.
In May 2022, Kropz secured the ZAR 177 Million Equity Facility
from the ARC Fund. The ZAR 177 Million Equity Facility could be
drawn down following a written request from Kropz plc and at the
discretion of the ARC Fund. The principal drawn amount may, at the
discretion of ARC Fund, at any time be converted to ordinary
shares, or alternatively be repaid in cash at the end of the term
of the ZAR 177 Million Equity Facility which is 27 October 2026.
The ZAR 177 Million Equity Facility was to be used exclusively for
the purposes of bringing the Elandsfontein project to first
revenues, given a slower ramp-up in operations than originally
envisaged. The delay in ramp-up was largely driven by the need to
re-engineer parts of the fine flotation circuit proposed by the
vendor, but had also been affected by early unpredicted ore
variability and lack of operator experience. Since the
announcement, the vendor provided design changes which were
implemented at the plant, additional operator training was
conducted and is ongoing and a mobile crusher ordered to facilitate
the crushing of the affected ore to an appropriate size fraction
until further test work has been conducted for a permanent
solution.
First drawdown of the ZAR 177 Million Equity Facility of ZAR
103.5 million was made on 2 June 2022. Loan 1 of ZAR 25 million was
set off against the first draw down and the net amount of ZAR 78.5
million received by the Company. The second drawdown on the ZAR 177
Million Equity Facility for ZAR 60 million was made on 7 July 2022
and third and final drawdown of ZAR 13.5 million on 9 August
2022.
As announced on 9 August 2022, Kropz, Kropz Elandsfontein and
ARC Fund agreed to a further ZAR 121.5 million (approximately US$
7.3 million) bridge loan facility ("Loan 2") to meet immediate cash
requirements at Elandsfontein due to further delays in the ramp-up
of operations at Elandsfontein. These delays have largely been
driven by increased ore variability in the current mining area.
Mining rates and associated delivery of ore to the plant were
compromised due to the presence of competent banks of hard material
within the orebody, that were previously unknown. This hard
material could not be mined using free-digging methods and new
equipment needed to be brought to site to test mechanical breakage
of the material. Alternative mining methods have been identified.
In order to assess the impact of this hard material on the future
mine plan, further drilling is currently in progress. A revised
mineral resource estimate will be produced once the results of this
drilling have been interpreted.
A draw down for ZAR 60 million (approximately US$ 3.6 million)
of Loan 2 was made on 9 August 2022. Loan 2 is unsecured, repayable
on demand, and there are no fixed repayment terms. It is repayable
by Kropz Elandsfontein on no less than two business days' notice.
Interest is payable on the Loan at the South African prime
overdraft interest rate plus 6%, nominal per annum and compounded
monthly.
The second drawdown on Loan 2 was made on 1 September 2022 for
ZAR 47 million (approximately US$ 2.8 million). The third and final
draw down of ZAR 14.5 million on Loan 2 was made on 29 September
2022.
On 30 September 2022, Kropz, Kropz Elandsfontein and ARC Fund
agreed to a further ZAR 126 million (approximately US$ 7 million)
bridge loan facility to meet forecast cash requirements at
Elandsfontein up to expected first revenue receipts due to further
delays in the ramp-up of operations at Elandsfontein. Once
contractual agreements have been finalised, drawdowns will be
announced when made on this further bridge loan.
On 24 February 2022, Russian troops invaded Ukraine. The war in
Ukraine and related events take place at a time of significant
global economic uncertainty and volatility, and the effects are
likely to interact with and exacerbate the effects of current
market conditions. Phosphate markets are currently in turmoil,
largely due to the sanctions imposed on Russia. Russia is a
significant supplier of fertiliser feed products and associated
sanctions increased the prices of phosphate products significantly
as producers that relied on Russian sources scrambled to secure
alternative sources of amongst others, low cadmium phosphate rock.
Kropz does not have Russian entities in its supply chain nor
customers and will benefit from higher phosphate prices.
Additionally, at the date of these interim financial statements,
the potential future impact of COVID is uncertain, and any delays
or interruptions could cause delays that would require additional
funding through the raising of debt or equity.
Key contracts associated with operational readiness and
commencement of production activities at Kropz Elandsfontein are
finalised, except for Transnet. Negotiations with Transnet were
finalised in December 2021 and final signature of the Transnet
contract is expected prior to the shipment of first concentrate
sales.
Production has steadily been increasing and 10,000 tonnes of
phosphate rock concentrate is now in stock at the Saldanha Bay
storage facility.
Current forecasts are based on first concentrate sales from
Kropz Elandsfontein of approximately ZAR 40 million in October
2022, an average of ZAR 40 million per month for the 3-month period
ended 31 December 2022 and ZAR169 million per month for the
14-month period ended 28 February 2024, thereafter. Should first
concentrate sales not occur in October to December 2022, a funding
shortfall would arise in Kropz Elandsfontein at the end of 31
December 2022 of approximately ZAR 209 million.
Failure to produce adequate quantities of phosphate rock
concentrate to fulfil first sales in the projected time frame,
could negatively impact production ramp-up and cash generation and
create an additional funding requirement. The average operating
costs over the 17-month forecast period for Kropz Elandsfontein is
estimated at approximately ZAR 116 million per month.
Kropz Plc's future cashflows are dependent on concentrate
revenues being achieved by Kropz Elandsfontein.
The Directors have reviewed the Group's overall cash position,
debt repayments and outlook, for a period of seventeen months
following the date of signature of these interim financial
statements and have considered sensitivities around pricing, volume
and timing of production and stress tested various scenarios, in
respect of the matters identified above and are of the opinion that
it is appropriate to adopt the going concern basis of accounting in
preparing these interim financial statements.
Management is working hard with its contractors to overcome
mining and production challenges and increase production to achieve
steady state production. Management has successfully raised money
in the past from its supportive shareholder base, but there is no
guarantee forecast sales will be achieved by the end of the 2022
financial year and that adequate funds will be available in the
future. These circumstances indicate the existence of a material
uncertainty which may cast significant doubt about the Group's
ability to continue as a going concern and therefore it may be
unable to realise its assets and discharge its liabilities in the
normal course of business.
The financial report does not include adjustments relating to
the recoverability and classification of recorded asset amounts or
to the amounts and classification of liabilities that might be
necessary should the Group not continue as a going concern.
5. Significant accounting policies
The Company has applied the same accounting policies,
presentation, methods of computation, significant judgements and
the key sources of estimation uncertainties in its interim
consolidated financial statements as in its audited financial
statements for the year ended 31 December 2021, except for the
adoption of new standards effective as of 1 January 2022. The Group
has not early adopted any standard, interpretation or amendment
that has been issued but is not yet effective.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37)
IAS 37 defines an onerous contract as a contract in which the
unavoidable costs (costs that the Group has committed to pursuant
to the contract) of meeting the obligations under the contract
exceed the economic benefits expected to be received under it.
The amendments to IAS 37.68A clarify, that the costs relating
directly to the contract consist of both:
-- The incremental costs of fulfilling that contract- e.g. direct labour and material; and
-- An allocation of other costs that relate directly to
fulfilling contracts: e.g. allocation of depreciation charge on
property, plant and equipment used in fulfilling the contract.
Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
The amendment to IAS 16 prohibits an entity from deducting from
the cost of an item of property, plant and equipment any proceeds
received from selling items produced while the entity is preparing
the asset for its intended use. The proceeds from selling such
items, together with the costs of producing them, are now
recognised in profit or loss.
Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS 1, IFRS 9, IFRS 16 & IAS 41)
-- IFRS 1: Subsidiary as a First-time Adopter (FTA)
-- IFRS 9: Fees in the '10 per cent' Test for Derecognition of Financial liabilities
-- IFRS 16: Amendment of illustrative example 13 to remove any
confusion about the treatment of lease
-- IAS 41: Taxation in Fair Value Measurements
References to Conceptual Framework (Amendments to IFRS 3)
In May 2020, the IASB issued amendments to IFRS 3, which update
a reference to the Conceptual Framework for Financial Reporting
without changing the accounting requirements for business
combinations.
These amendments had no impact on the interim condensed
consolidated financial statements of the Group.
6. Segment information
Operating segments
The Board of Directors consider that the Group has one operating
segment, being that of phosphate mining and exploration.
Accordingly, all revenues, operating results, assets and
liabilities are allocated to this activity.
Geographical segments
The Group operates in two principal geographical areas - South
Africa and the RoC.
The Group's non-current assets by location of assets are
detailed below.
South
Africa RoC Group
30 June 2022 US$'000 US$'000 US$'000
Total non-current assets 104,140 41,224 145,364
--------- ---------- ---------
South
Africa RoC Group
31 December 2021 US$'000 US$'000 US$'000
Total non-current assets 136,431 44,663 181,094
--------- ---------- ---------
7. Tangible assets - Property, plant, equipment and mine development
30 June 30 June 30 June 31 Dec 31 Dec 31 Dec
2022 2022 2022 2021 2021 2021
Accumulated
depreciation Carrying Accumulated Carrying
Cost and impairment value Cost depreciation value
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 1,481 - 1,481 1,515 - 1,515
Buildings 10,281 (3,161) 7,120 10,514 (56) 10,458
Capitalised road
costs 7,941 (5,570) 2,371 8,121 (2,978) 5,143
Capitalised electrical
sub-station costs 3,445 (2,340) 1,105 3,523 (1,213) 2,310
Machinery, plant
and equipment
Critical spare
parts 2,101 - 2,101 1,713 - 1,713
Plant and machinery 90,610 (27,377) 63,233 86,243 (63) 86,180
Water treatment
plant 2,381 (718) 1,663 2,435 - 2,435
Furniture and fittings 58 (41) 17 49 (40) 9
Geological equipment 83 (47) 36 65 (45) 20
Office equipment 32 (27) 5 32 (21) 11
Other fixed assets 1 (1) - 1 (1) -
Motor vehicles 97 (97) - 100 (100) -
Computer equipment 76 (44) 32 65 (41) 24
Mine development 18,520 (5,583) 12,937 18,938 - 18,938
Stripping activity
costs 15,101 (4,552) 10,549 6,126 - 6,126
Game animals 192 - 192 217 - 217
Total 152,400 (49,558) 102,842 139,657 (4,558) 135,099
-------- ---------------- --------- -------- -------------- ---------
Reconciliation of property, plant, equipment and mine
development - Period ended 30 June 2022
Foreign
Opening Impairment Fair value Deprecia-tion exchange Closing
Balance Additions provision loss charge gain/loss balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 1,515 - - - (34) 1,481
Buildings 10,458 - (3,099) - (7) (232) 7,120
Capitalised
road costs 5,143 - (2,394) - (280) (98) 2,371
Capitalised
electrical sub-station
costs 2,310 - (1,039) - (121) (45) 1,105
Machinery,
plant and equipment
Critical spare
parts 1,713 450 - - - (62) 2,101
Plant and machinery 86,180 6,634 (27,315) - (1) (2,265) 63,233
Water treatment
plant 2,435 - (718) - - (54) 1,663
Furniture and
fittings 9 10 - (2) - 17
Geological equipment 20 20 - (3) (1) 36
Office equipment 11 - - (6) - 5
Other fixed
assets - - - - - -
Motor vehicles - - - - - -
Computer equipment 24 14 - (5) (1) 32
-
Mine development 18,938 - (5,583) - - (418) 12,937
-
Stripping activity
costs 6,126 9,634 (4,552) - - (659) 10,549
Game animals 217 - - (21) - (4) 192
Total 135,099 16,762 (44,700) (21) (425) (3,873) 102,842
--------- ---------- ----------- ----------- -------------- ----------- ---------
Reconciliation of property, plant, equipment and mine
development - Year ended 31 December 2021
Foreign
Opening Fair value Deprecia-tion exchange Closing
Balance Additions loss charge gain/loss balance
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Buildings and
infrastructure
Land 2,067 - - - (552) 1,515
Buildings 10,991 - - (49) (484) 10,458
Capitalised
road costs 6,177 - - (583) (451) 5,143
Capitalised
electrical sub-station
costs 2,765 - - (253) (202) 2,310
Machinery,
plant and equipment
Critical spare
parts 1,285 571 - - (143) 1,713
Plant and machinery 66,609 29,578 - (4) (10,003) 86,180
Water treatment
plant 1,129 1,503 - - (197) 2,435
Furniture and
fittings 3 10 - (2) (2) 9
Geological equipment - 24 - (2) (2) 20
Office equipment 18 - - (6) (1) 11
Other fixed
assets - - - - - -
Motor vehicles - - - - - -
Computer equipment 5 24 - (5) - 24
Mine development 20,046 528 - - (1,636) 18,938
Stripping activity
costs 3,193 3,433 - - (500) 6,126
Game animals 185 - 51 - (19) 217
Total 114,473 35,671 51 (904) (14,192) 135,099
--------- ---------- ------------- -------------- ----------- ---------
Kropz Elandsfontein has a fully drawn down project financing
facility with BNP Paribas for US$ 30 million (see Note 12). BNP has
an extensive security package over all the assets of Kropz
Elandsfontein and Elandsfontein Land Holdings (Pty) Ltd
("Elandsfontein Land Holdings") as well as the share investments in
those respective companies owned by Kropz SA (Pty) Ltd ("Kropz
SA").
8. Intangible assets - exploration and evaluation costs
30 June 31 December
2022 2021
US$'000 US$'000
Capitalised exploration costs
Cost 41,199 44,631
Amortisation - -
--------- ------------
Carrying value 41,199 44,631
--------- ------------
Reconciliation of exploration assets
Foreign
Opening exchange Closing
Balance Additions Disposals loss balance
US$'000 US$'000 US$'000 US$'000 US$'000
Period ended 30 June 2022
Capitalised exploration
costs 44,631 194 - (3,626) 41,199
------------- ---------- ------------ ---------- ---------
Reconciliation of exploration assets
Foreign
Opening exchange Closing
Balance Additions Disposals loss balance
US$'000 US$'000 US$'000 US$'000 US$'000
Year ended 31 December
2021
Capitalised exploration
costs 44,348 3,931 (62) (3,586) 44,631
------------- ---------- ------------ ---------- ---------
The costs of mineral resources acquired and associated
exploration and evaluation costs are not subject to amortisation
until they are included in the life-of-the-mine plan and production
has commenced.
Where assets are dedicated to a mine, the useful lives are
subject to the lesser of the asset category's useful life and the
life of the mine, unless those assets are readily transferable to
another productive mine. In accordance with the requirements of
IFRS 6, the Board of Directors assessed whether there were any
indicators of impairment. No indicators were identified.
9. Share capital
Shares were issued during the period as set out below:
Share Share Merger
Number capital premium reserve Total
of
shares US$'000 US$'000 US$'000 US$'000
At 1 January 2021 558,627,558 706 168,212 (20,523) 148,395
Convertible loan -
issue of shares 350,944,417 488 25,312 - 25,800
As at 31 December
2021 909,571,975 1,194 193,524 (20,523) 174,195
-------------- --------- --------- --------- --------
Share options exercised 6,700,000 9 731 - 740
Shares issued in settlement
of guarantee fees 3,971,712 4 307 - 311
Convertible loan -
issue of shares 3,474,536 5 195 - 200
-------------- --------- --------- --------- --------
At 30 June 2022 923,718,223 1,212 194,757 (20,523) 175,446
-------------- --------- --------- --------- --------
The changes to the issued share capital of the Company which
occurred between 1 January 2022 and 30 June 2022 were as
follows:
Convertible loan facilities
Kropz secured a convertible loan facility of up to US$ 5 million
(not exceeding a maximum of ZAR 85 million) from ARC Fund ("Further
Equity Facility") in February 2021, to be used exclusively for the
Hinda Updated FS and general corporate purposes for Kropz.
Quarterly drawdowns under the Further Equity Facility are at the
sole discretion of Kropz. Repayment of the Further Equity Facility
and any interest thereon will be in the form of immediate
conversion into ordinary shares in Kropz and issued to ARC Fund, at
a conversion price of 4.202 pence per ordinary share each quarter,
and any US$ amount will be converted to GBP at an agreed rate of
US$ 1 = 0.73 GBP. Ordinary shares to be issued to ARC Fund in terms
of the Further Equity Facility will be a maximum of 86,863,398
ordinary shares.
The fifth and final drawdown on the Further Equity Facility
occurred on 10 March 2022 for US$ 200,000 which was settled by way
of the issue of 3,474,536 new ordinary shares at the issue price of
4.202 pence per ordinary share to the ARC Fund.
As announced on 13 May 2020, and pursuant to the terms of the
original US$ 40 million equity facility, any fees associated with
the bank guarantee provided by ARC Fund, would be settled by the
issue of new ordinary shares to ARC Fund. The final guarantee fees
due to ARC Fund, amounting to US$ 311,733 was settled by the issue
of 3,971,712 new ordinary shares on 10 March 2022.
Share based payment arrangements
Employee Share Option Plan and Long-Term Incentive Plan
The Company operates an ownership-based scheme for executives
and senior employees of the Group. In accordance with the
provisions of the plans, executives and senior employees may be
granted options to purchase parcels of ordinary shares at an
exercise price determined by the Board based on a recommendation by
the Remuneration Committee.
The following plans have been adopted by the Company:
-- an executive share option plan used to grant awards on
Admission of the Company to AIM and following Admission (the "ESOP
Awards") - a performance and service-related plan pursuant to which
nominal-cost options can be granted; and
-- an executive long-term incentive plan (the "LTIP Awards") - a
performance and service-related plan pursuant to which conditional
share awards, nominal-cost options and market value options can be
granted, (together, the "Incentive Plans").
An option-holder has no voting or dividend rights in the Company
before the exercise of a share option.
The charge to profit and loss for the period ended 30 June 2022
was US$ 119,000 (period ended 30 June 2021: US$ 317,000).
As announced on 4 August 2020, 6,700,000 LTIP Awards were
awarded to a Director and senior management. Of this total,
2,350,000 LTIP Awards were granted to each of Mark Summers and
Michelle Lawrence and 1,000,000 to Patrick Stevenaert. The
performance conditions were met and 6,700,000 LTIP Awards vested on
31 December 2021. Consequently, 6,700,000 ordinary shares were
issued on 24 January 2022, at an exercise price of GBP0.001 an
ordinary share, in the Company.
10. Key management personnel remuneration
The remuneration for each Director and Key Management Personnel
("KMP") of the Group during the period was as follows:
Short-Term Benefits
Period ended 30 June Remuneration Options
2022 (i) Bonus (ii) Total
US$ US$ US$ US$
Executive directors
Mark Summers 161,879 - 52,638 214,517
------------- --------- ----------- --------
161,879 - 52,638 214,517
------------- --------- ----------- --------
Non-executive directors
Lord Robin Renwick 25,946 - - 25,946
Linda Beal 24,269 - - 24,269
Mike Daigle 31,135 - - 31,135
Machiel Reyneke (iii) - - - -
Mike Nunn (iii) - - - -
------------- --------- ----------- --------
81,350 - - 81,350
------------- --------- ----------- --------
Total directors' remuneration 243,229 - 52,638 295,867
------------- --------- ----------- --------
Executives
Michelle Lawrence 116,474 - 36,510 152,984
Patrick Stevenaert 81,328 - 9,021 90,349
------------- --------- ----------- --------
197,802 - 45,531 243,333
------------- --------- ----------- --------
Short-Term Benefits
Period ended 30 June Options
2021 Remuneration(i) Bonus (ii) Total
US$ US$ US$ US$
Executive directors
Mark Summers 154,491 - 127,317 281,808
---------------- ---------- ------------- --------
154,491 - 127,317 281,808
---------------- ---------- ------------- --------
Non-executive directors
Lord Robin Renwick 27,759 - - 27,759
Linda Beal 25,965 - - 25,965
Mike Daigle 33,311 - - 33,311
Machiel Reyneke (iii) - - - -
Mike Nunn (iii) - - - -
---------------- ---------- ------------- --------
87,035 - - 87,035
---------------- ---------- ------------- --------
Total directors' remuneration 241,526 - 127,317 368,843
---------------- ---------- ------------- --------
Executives
Michelle Lawrence 109,585 - 110,062 219,647
Patrick Stevenaert 89,692 - 41,165 130,857
---------------- ---------- ------------- --------
199,277 - 151,227 350,504
---------------- ---------- ------------- --------
(i) Includes UK NIC, UK payroll tax and pension.
(ii) Options as share-based payment arrangements under the ESOP,
LTIP and other schemes are expensed over the vesting period, which
includes the years to which they relate and their subsequent
vesting periods.
(iii) Machiel Reyneke and Mike Nunn receive no Director fees.
The following ESOP options, which were issued at the time of
admission to AIM as share-based payment arrangements, were
outstanding to KMP at the period ended 30 June 2022:
Name Expiry Date Exercise Price Number of Options
(pence)
------------------- ------------- --------------- ------------------
28 November
Mark Summers 2028 0.1 3,362,609
28 November
Michelle Lawrence 2028 0.1 1,465,137
------------------
4,827,746
------------------
The following LTIP options, which were issued on 2 July 2021 as
share-based payment arrangements, were outstanding to KMP at the
period ended 30 June 2022:
Name Vesting dates Exercise Price Number of Options
(pence)
-------------------- --------------- --------------- ------------------
Mark Summers Various 0.1 2,400,000
Michelle Lawrence Various 0.1 2,400,000
Patrick Stevenaert Various 0.1 900,000
------------------
5,700,000
------------------
11. Shareholder loans and derivative liability
30 June 31 December
2022 2021
US$'000 US$'000
ARC Fund 16,489 16,196
Convertible debt - ARC Fund 15,583 6,191
Derivative liability 11,711 2,656
--------- ------------
43,783 25,043
--------- ------------
ARC Fund
The loans are: (i) US$ denominated, but any repayments will be
made in ZAR at the then prevailing ZAR/US$ exchange rate; (ii)
carry interest at monthly US LIBOR plus 3%; and (iii) are repayable
by no later than 1 January 2035 (or such earlier date as agreed
between the parties to the shareholder agreements).
Convertible debt - ARC Fund
On 20 October 2021, the Company entered into a new convertible
equity facility of up to ZAR 200 million ("ZAR 200 Million Equity
Facility") with ARC Fund. The Company made a drawdown of ZAR 90
million of the ZAR 200 Million Equity Facility on 26 October 2021,
ZAR 37 million on 9 December 2021, ZAR40 million on 25 March 2022
and a further ZAR 33 million on 26 April 2022. The ZAR 200 Million
Equity Facility is fully drawn down at the date of this report.
Interest is payable at 14% nominal, compounded monthly. At any time
during the term of the ZAR 200 Million Equity Facility, repayment
of the ZAR 200 Million Equity Facility capital amount will, at the
election of ARC Fund, either be in the form of the conversion into
ordinary shares of 0.1 pence each ("Ordinary Shares") in the
Company and issued to ARC Fund, at a conversion price of 4.5058
pence per Ordinary Share each, representing the 30-day Volume
Weighted Average Price ("VWAP") on 21 September 2021, and at fixed
exchange rate of GBP 1 = ZAR 20.24, or payable in cash by the
Company at the end of the term of the ZAR 200 Million Equity
Facility which is 27 October 2026.
On 11 May 2022, the Company entered into a new convertible
equity facility of up to ZAR 177 million ("ZAR 177 Million Equity
Facility") with ARC Fund. The Company made a drawdown of ZAR 103.5
million of the ZAR 177 Million Equity Facility on 2 June 2022.
Interest is payable at 14% nominal, compounded monthly. At any time
during the term of the ZAR 177 Million Equity Facility, repayment
of the ZAR 177 Million Equity Facility capital amount will, at the
election of ARC Fund, either be in the form of the conversion into
Ordinary Shares in the Company and issued to ARC Fund, at a
conversion price of 9.256 pence per Ordinary Share each,
representing the 30-day VWAP on 4 May 2022, and at fixed exchange
rate of ZAR 1 = GBP 0.0504, or payable in cash by the Company at
the end of the term of the ZAR 177 Million Equity Facility which is
2 June 2027. Two further draw downs were made in 2022, one on 7
July 2022 for ZAR 60 million and ZAR 13.5 million on 9 August 2022.
The ZAR 177 Million Equity Facility is fully drawn down at the date
of this report.
Convertible liability
It was determined that the conversion option embedded in the
convertible debt equity facility be accounted for separately as a
derivative liability. Although the amount to be settled is fixed in
ZAR, when converted back to Kropz's functional currency, will
result in a variable amount of cash based on the exchange rate at
the date of conversion. The value of the liability component and
the derivative conversion component were determined at the date of
first draw down using a Monte Carlo simulation. The debt host
liability was bifurcated based on the determined value of the
option. Subsequently, the embedded derivative liability is adjusted
to reflect fair value at each period end with changes in fair value
recorded in profit and loss (refer to Note 21).
12. Other financial liabilities
30 June 31 December
2022 2021
US$'000 US$'000
BNP Paribas 30,064 30,041
Greenheart Foundation 518 545
--------- ------------
Total 30,582 30,586
--------- ------------
Non-current financial liabilities 18,814 26,291
Current financial liabilities 11,768 4,295
------- -------
Total 30,582 30,586
------- -------
BNP
A US$ 30,000,000 facility was made available by BNP Paribas to
Kropz Elandsfontein in September 2016. Interest was charged at
three months US LIBOR plus 4.5% and was initially repayable
quarterly over 2 years. The rst capital repayment was due on 31
March 2018.
The Group was unable to fund the instalment payments on the loan
as they fell due in early 2018 and consequently, under the terms of
the facility agreement, was in default from 1 April 2018. On 20
September 2018 the Group and BNP Paribas conditionally agreed a
waiver of the breach and restructure of the facility under which
the rst capital repayment was deferred to 30 September 2020. In
addition, BNP Paribas provided the necessary consents required to
facilitate all the contemplated transactions leading up to the
admission of Kropz plc to AIM. The waiver and restructured facility
were only contingent on the admission of Kropz plc's shares to
trading on AIM by 30 November 2018, which did occur on that date.
The facility has been fully drawn down.
During January 2020, given the delays in the recommissioning of
Elandsfontein, Kropz Elandsfontein was once again placed into
default by BNP Paribas. In May 2020, Kropz Elandsfontein and BNP
Paribas agreed to amend and restate the term loan facility
agreement entered into on or about 13 September 2016 (as amended
from time to time). The BNP Paribas facility amendment agreement
extends inter alia the final capital repayment date to Q3 2024,
with eight equal capital repayments to commence in Q4 2022 and an
interest rate of 6.5% plus US LIBOR, up to project completion and
4.5% plus US LIBOR thereafter. Financial closure occurred on 25
June 2020.
BNP Paribas has an extensive security package over all the
assets of Kropz Elandsfontein and Elandsfontein Land Holdings as
well as the share investments in those respective companies owned
by Kropz SA.
13. Finance income
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Interest income 85 289
Foreign exchange gains - 1,258
----------- -----------
Total 85 1,547
----------- -----------
14. Finance expense
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Shareholder loans 1,215 243
Foreign exchange losses 1,892 44
Bank debt 1,057 1,010
BNP Paribas - Debt modification present
value adjustment amortisation (123) (130)
BNP Paribas amendment fee amortisation 108 114
Finance leases 3 -
Other 154 190
----------- -----------
Total 4,306 1,471
----------- -----------
15. Fair value losses from derivative asset/liability
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Fair value loss from convertible loan facilities 7,637 3,728
Total 7,637 3,728
----------- -----------
The Group secured a US$ 40 million convertible loan facility
from ARC Fund, Kropz's major shareholder, in June 2020 for the
development of Elandsfontein. Under the terms of the convertible
equity facility, ARC Fund committed to provide up to a ZAR
equivalent of US$ 40 million (up to a maximum of ZAR 680 million)
to the Company which will be converted into new ordinary shares.
The cap of ZAR 680 million was put in place as ARC Fund secured
this facility from Rand Merchant Bank in South Africa in order to
fulfil its commitments to the Company. The Company, via Kropz
Elandsfontein, received the ZAR equivalent of the draw down based
on the actual exchange rate prevailing at the time of the drawdown,
subject to a maximum exchange rate of ZAR 17 to the US$.
Immediately upon draw down, new ordinary shares in the Company
were issued to ARC Fund at a fixed share price (6.75 pence per
share) and fixed GBP / US$ exchange rate (0.86). Drawdowns are at
the sole discretion of the Company and no interest is payable on
the drawdown unless equity shares are not issued to ARC Fund in
terms of a drawdown.
Kropz secured a further convertible loan facility of up to US$ 5
million (not exceeding a maximum of ZAR 85 million) from ARC Fund
("Further Equity Facility") in February 2021, to be used
exclusively for the Hinda Updated FS and general corporate purposes
for Kropz. Repayment of the Further Equity Facility and any
interest thereon will be in the form of immediate conversion into
ordinary shares in Kropz and issued to ARC Fund, at a conversion
price of 4.202 pence per ordinary share each quarter, and any US$
amount will be converted to GBP at an agreed rate of US$ 1 = 0.73
GBP.
At 30 June 2021, US$ 4 million remained undrawn of the Original
and Further Equity Facility which equated to 55,594,902 new
ordinary shares to be issued in the Company pursuant to the terms
of the Original Equity Facility and Further Equity Facility. A
Monte-Carlo simulation was applied to simulate the expected share
price at a 60% volatility and the expected share price was deemed
to be 5.70 pence per share. Accordingly, the derivative asset was
revalued for changes in the share price prior to draw down with the
resulting loss for revaluation for the six months ended 30 June
2021 booked to profit and loss of US$ 3,728,000 and US$ 4,673,000
receivable extinguished through equity based on the relative draw
down percentage of the undrawn facilities at period end.
On 20 October 2021, the Company entered into a new convertible
equity facility of up to ZAR 200 million ("ZAR 200 Million Equity
Facility") and on 11 May 2022 of up to ZAR 177 million ("ZAR 177
Million Equity Facility") with ARC Fund (refer to Note 11). It was
determined that the conversion option embedded in the convertible
debt equity facilities be accounted for separately as a derivative
liability. The embedded derivative liability is adjusted to reflect
fair value at each period end with changes in fair value recorded
in profit and loss (refer to Note 21).
16. Impairment losses
The Elandsfontein mine is currently in the ramp-up phase. The
Directors have therefore carried out a review of impairment
indicators. As part of the impairment indicator assessment, the net
present value of the life of mine plan is considered. The net
present value is most sensitive to the following key estimates and
assumptions:
-- Phosphate rock prices;
-- Phosphate recoveries;
-- Foreign exchange rates; and
-- Operating costs.
Economical recoverable resources represent management's
expectations at the time of completing the assessment of the
carrying value of property, plant, equipment and mine development.
These assessments are based on the resource statements and
exploration and evaluation work undertaken by appropriately
qualified persons. Forecast phosphate prices have been obtained
from independent external experts and forecast South African Rand
exchange rates from commercial banks. Based on the assumptions the
recoverable amount of assets (US$ 100.5 million) is significantly
less than its carrying amount (US$ 145.2 million) and an impairment
of US$ 44.7 million is required.
The impairment loss was allocated as follows:
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Property, plant, equipment and mine development
assets 44,700 -
Total 44,700 -
----------- -----------
Sensitivity Analysis
The following table summarises the potential impact of changes
in the key estimates and assumptions on the quantum of impairment
(assessed independently of each other):
Reversal of /
(increase in)
impairment
US$ million
Increased by
Impact if discount rate 2% (12.3)
increased by
Impact if selling prices 10% 44.7
reduced by 10% (63.8)
increased by
Impact if production tonnes 10% 44.7
reduced by 10% (57.8)
increased by
Impact if foreign exchange rates 10% 44.7
reduced by 10% (59.8)
increased by
Impact if operating costs: 10% (54.3)
reduced by 10% 44.7
17. Taxation
Major components of tax charge Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Deferred
Originating and reversing temporary differences - -
Current tax
UK tax in respect of current period - 89
------------ -----------
Total - 89
------------ -----------
The Group had losses for tax purposes of approximately US$ 78.2
million (31 December 2021: US$ 52.1 million) which, subject to
agreement with taxation authorities, are available to carry forward
against future profits. A net deferred tax asset arising from these
losses has not been recognised as steady state production has not
been reached.
18. Earnings per share
The calculations of basic and diluted earnings per share have
been based on the following loss attributable to ordinary
shareholders and the weighted average number of ordinary shares
outstanding:
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
Loss attributable to ordinary shareholders (46,794) (6,602)
Weighted average number of ordinary shares
in Kropz plc 920,069,356 643,728,660
Basic and diluted loss per share (US cents) (5.09) (1.03)
------------ ------------
The diluted loss per share and the basic loss per share are
recorded as the same amount, as the conversion of share options
decreases the basic loss per share, thus being anti-dilutive.
19. Related party transactions
Details of share issues, KMP remuneration and shareholder loans
are explained in Notes 9, 10 and 11. In addition, the following
transactions were carried out with related parties:
Related party balances
Loan accounts - Owed to related parties
30 June 31 December
2022 2021
US$'000 US$'000
ARC Fund 16,489 16,196
Convertible debt - ARC Fund 15,583 6,191
Derivative liability 11,711 2,656
Greenheart Foundation 518 545
--------- ------------
Total 44,301 25,588
--------- ------------
Related party balances
Interest paid to related parties
Six months Six months
ended ended
30 June 30 June
2022 2021
US$'000 US$'000
ARC Fund 1,215 243
----------- -----------
Total 1,215 243
----------- -----------
20. Seasonality of the Group's business
There are no seasonal factors which materially affect the
operations of any company in the Group.
21. Fair value
The following table compares the carrying amounts and fair
values of the Group's financial assets and financial liabilities as
at 30 June 2022.
The Group considers that the carrying amount of the following
financial assets and financial liabilities are a reasonable
approximation of their fair value:
-- Trade receivables;
-- Trade payables;
-- Restricted cash; and
-- Cash and cash equivalents.
As at 30 June As at 31 December
2022 2021
Carrying Fair Carrying Fair
amount value amount value
US$'000 US$'000 US$'000 US$'000
Financial Assets
Other financial assets 1,261 1,261 1,357 1,357
Derivative asset - - - -
--------- --------- --------- ---------
Total 1,261 1,261 1,357 1,357
--------- --------- --------- ---------
Financial Liabilities
Shareholder loans 32,072 32,072 22,387 22,387
Derivative liability 11,711 11,711 2,656 2,656
Other financial liabilities 30,582 30,582 30,586 30,586
--------- --------- --------- ---------
Total 74,365 74,365 55,629 55,629
--------- --------- --------- ---------
This note provides an update on the judgements and estimates
made by the Group in determining the fair values of the financial
instruments.
(i) Financial instruments Measured at Fair Value
The financial instruments recognised at fair value in the
Statement of Financial Position have been analysed and classified
using a fair value hierarchy reflecting the significance of the
inputs used in making the measurements.
(ii) Fair value hierarchy
The fair value hierarchy consists of the following levels
-- Quoted prices in active markets for identical assets and liabilities (Level 1);
-- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices) (Level 2); and
-- Inputs for the asset and liability that are not based on
observable market date (unobservable inputs) (Level 3).
Level Level Level
1 2 3 Total
US$'000 US$'000 US$'000 US$'000
30 June 2022
Derivative asset - - - -
--------- --------- --------- ---------
31 December 2021
Derivative asset - - - -
--------- --------- --------- ---------
Level Level Level
1 2 3 Total
US$'000 US$'000 US$'000 US$'000
30 June 2022
Derivative liability - - 11,711 11,711
---------- ---------- --------- ---------
31 December 2021
Derivative liability - - 2,656 2,656
---------- ---------- --------- ---------
There were no transfers between levels for recurring fair value
measurements during the year.
(iii) Reconciliation: Level 3 fair value measurement
Six months Year
ended ended
30 June 31 December
2022 2021
US$'000 US$'000
Derivative asset
Opening balance - 8,586
Fair value loss recognised in profit
and loss - (4,139)
Extinguished on issuance of equity - (4,447)
------------ -------------
Closing balance - -
------------ -------------
Derivative liability
Opening balance (2,656) -
Fair value at initial recognition (2,320) (2,015)
Fair value loss recognised in profit
and loss (7,637) (653)
Foreign exchange 902 12
--------- --------
Closing balance (11,711) (2,656)
--------- --------
(iv) Valuation technique used to determine fair value
Derivative asset:
A Monte-Carlo simulation was applied to simulate the expected
share price at a 60% volatility multiplied by the number of shares
to be issued pursuant to the Original and Further Equity Facility
compared to the quoted market share price.
Derivative liability:
A Monte-Carlo simulation was applied to value the option
component of the convertible debt at a 30% volatility in share
price, 14% volatility in the GBP:ZAR exchange rate and risk free
rate of 0.76% multiplied by the number of shares to be issued
pursuant to the drawn amounts under the ZAR 200 Million Equity
Facility and ZAR 177 Million Equity Facility.
22. Events after the reporting period
The second drawdown on the ZAR 177 Million Equity Facility of
ZAR 60 million was made on 7 July 2022 and third and final drawdown
of ZAR 13.5 million on 9 August 2022.
Further delays in the ramp-up of operations at Elandsfontein has
largely been driven by ore variability in the current mining area,
as discussed above.
As announced on 9 August 2022, Kropz, Kropz Elandsfontein and
ARC Fund agreed to a further ZAR 121.5 million (approximately US$
7.3 million) bridge loan facility ("Loan 2") to meet immediate cash
requirements at Elandsfontein. A draw down ZAR 60 million
(approximately US$ 3.6 million) of Loan 2 was made on 9 August 2022
and the third and final draw down of ZAR 14.5 million
(approximately US$ 800,000) was made on 29 September 2022.
Loan 2 is unsecured, repayable on demand, and there are no fixed
repayment terms. It is repayable by Elandsfontein on no less than
two business days' notice. Interest is payable on Loan 2 at the
South African prime overdraft interest rate plus 6%, nominal per
annum and compounded monthly.
At the date of this report, 10,000 tonnes of phosphate rock
concentrate were in stock at the Saldanha Bay storage facility.
As announced on 30 September 2022, Kropz, Kropz Elandsfontein
and ARC Fund agreed to a further ZAR 126 million (approximately US$
7 million) bridge loan facility to meet further cash requirements
at Elandsfontein due to further delays in the ramp-up of operations
at Elandsfontein. A further announcement will be made once
contractual agreements have been finalised and drawdowns made on
this further bridge loan.
Company information
Directors
Lord Robin William Renwick of Clifton, Non-executive
Chairman
Mark Robert Summers, Chief Executive Officer
Michael (Mike) John Nunn, Non-executive Director
Gerrit Jacobus Duminy, Non-executive Director (appointed 14
September 2022)
Michael (Mike) Albert Daigle, Independent Non-executive
Director
Linda Janice Beal, Independent Non-executive Director
Company secretary
Mark Robert Summers
Company number
11143400
Registered address
35 Verulam Road
Hitchin SG5 1QE
Independent auditors
BDO LLP
55 Baker Street
London W1U 7EU
Nominated adviser
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
Broker
H&P Advisory Limited
2 Park Street
Mayfair
London W1K 2HX
Legal advisers as to English Law
Memery Crystal Limited
165 Fleet Street
London EC4A 2DY
Legal advisers as to South African Law
Werksmans Attorneys
The Central, 96 Rivonia Road
Sandton 2196
Johannesburg
South Africa
Bowmans
22 Bree Street
Cape Town 8000
South Africa
Legal advisers as to the laws of Republic of Congo
PricewaterhouseCoopers Tax & Legal
88 Avenue du General de Gaulle
B.P. 1306
Pointe-Noire
Congo
Legal advisers as to the laws of the British Virgin Islands
Harney Westwood & Riegels LP
Craigmuir Chambers
PO Box 71,
Road Town
Tortola VG1110
British Virgin Islands
Registrars
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Principal bankers
Barclays
One Churchill Place
London E14 5HP
BNP Paribas
11 Crescent Place
Melrose Arch
Johannesburg 2196
South Africa
Financial PR
Tavistock Communications Limited
1 Cornhill
London EC3V 3ND
Market consultant
CRU Consulting
Chancery House
53-64 Chancery Lane
London WC2A 1QS
Company's website: www.kropz.com
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END
IR WPUBWBUPPGCU
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