RNS Number:5687K
South China Resources PLC
21 December 2007
21st November 2007
South China Resources plc (AIM: SCR)
Final Results for the 12 months ended 30th June 2006
Chairman's Statement
2007 has been a year of challenge and change for South China Resources Plc (the
Company).
On 29 May 2007, the Company decided to terminate its involvement in the Danfeng
Project ("the Project") and the Joint Venture Company established to develop the
Project, the Shang Lou City Zhongbei Minerals and Mining Development Company
Ltd.
Although exploratory drilling conducted in the 18 months prior to July 2007
largely confirmed the presence of copper mineralisation, disappointing check
assaying for Molybdenum mineralisation and verification by SRK Geological
Consultants, convinced the Board that the Project unfortunately did not meet the
development criteria of the Company in terms of potential scale and projected
returns on a fully risked basis.
Further, the Company decided that there was no utility in proceeding with
further negotiations to acquire a 53% interest in the Zhunuo Copper Project
("the Project") in Tibet, China.
This decision was set against a background of increased Chinese regulatory
resistance to foreign mining investment in nationally significant and strategic
metal deposits in China. South China's efforts to progress the acquisition in
line with the Exploration and Mining Right Cooperation and Sale Agreement with
Qinghai Province Geermu Zangge Kalium Fertiliser Company Limited have now been
frustrated.
Accordingly the Company announced to the market on 21 December 2007 that it was
withdrawing from further negotiations on Zhunuo Copper Project in Tibet, China.
David Tyrwhitt, as director primarily responsible for overseeing the Tibet
acquisition, resigned from the Company on 21 December 207.
The Company reviewed many other potential mining acquisitions and relationships
in China during 2007. The Company determined that in all cases the price
expected by vendors and the quality of projects did not warrant further
investment. Accordingly the Company announced on 21 December 2007 that it had
terminated its remaining relationships in China and closed its offices in order
to focus on projects elsewhere.
The strategy of the Company will now be to make investments in the mining and
minerals sector. The geographical focus will be in Southern Africa. The
investments may be either quoted or unquoted and may be in companies,
partnerships, joint ventures or direct interests in energy projects. The Company
intends to be an involved and active investor even though it might not hold a
controlling interest in its investments. Accordingly, where necessary, the
Company may seek participation in the management or board of directors of a
company in which the Company invests. The Directors intend that they will
undertake initial assessments and due diligence on potential investments
themselves and will take appropriate professional advice if merited by the
circumstances.
The new strategy of the Company will be the subject of a shareholder resolution
at the forthcoming Annual General Meeting of the Company.
The Company is currently pursuing potential leads and will make an announcement
to the market when appropriate.
Nathan McMahon
Chairman
21 December 2007
For further information, please contact:
South China Resources plc
Tim Horgan +44 (0) 20 7292 9110
Nabarro Wells & Co. Limited
Hugh Oram +44 (0) 20 7710 7400
Parkgreen Communications
Beth Harris/ Laura Llewelyn +44 (0) 20 7851 7480
Final Accounts
Profit and Loss Account - Group and Company
for the year 30th June 2007
Year ended 30th Year ended 30th
June 2007 June 2006
Note � �
Administrative expenses (2,293,025) (499,369)
Exceptional expenses 3 (5,993,874) -
_______ _______
Operating loss 4 (8,286,899) (499,369)
_______ _______
Interest received on bank deposits 95,832 79,203
_______ _______
Loss on ordinary activities before (8,191,067) (420,166)
taxation
_______ _______
Tax on loss on ordinary activities 6 - -
_______ _______
Loss for the period (8,191,067) (420,166)
_______ _______
Retained loss for the year (8,191,067) (420,166)
====== ======
Loss per share (pence) - basic 7 (5.13)p (0.31)p
Continuing operations
All items relate to the continuing operations of which the company's mandate is
to explore and develop base-metal projects.
Total recognised gains and losses
There were no recognised gains or losses in the year other than those included
within the profit and loss account. The specific costs relating to the Danfeng
project are disclosed as exceptional in Note 3, with segmental analysis provided
in Note 2 to the accounts.
The accompanying notes are an integral part of this group profit and loss
account.
Balance Sheet - Group and Company
30th June 2007
Year Year
Ended Ended
30th June 2007 30th June 2006
Note � �
Fixed assets
Intangible assets 8 - 4,365,344
Tangible assets 9 115,701 21,692
Investments 10 - -
_______ _______
115,701 4,387,036
_______ _______
Current assets
Debtors 11 50,168 14,976
Cash at bank and in hand 1,818,602 5,301,792
_______ _______
1,868,770 5,316,768
_______ _______
Creditors: amounts falling due within one year 12 (338,558) (38,312)
_______ _______
Net current assets 1,530,212 5,278,456
_______ _______
Net assets 1,645,913 9,665,492
====== ======
Capital and reserves
Called up share capital 13 1,616,500 1,576,000
Share premium 14 7,179,436 7,103,448
Merger reserve 15 1,440,000 1,440,000
Equity reserve 16 55,000 -
Profit and loss account 18 (8,645,023) (453,956)
_______ _______
Equity shareholders' funds 19 1,645,913 9,665,492
====== ======
The accompanying notes are an integral part of these balance sheets.
These Financial Statements were approved by the Board of Directors on 21
December 2007 and were signed on its behalf by:
Nathan McMahon
Chairman
Group Cash Flow Statement
for the year ending 30th June 2007
Year Year
Ended Ended
30th June 2007 30th June 2006
� �
Reconciliation of operating (loss) to net cash outflow
from operating activities
Operating (loss) (8,286,899) (499,369)
Decrease / (Increase) in debtors (35,192) 21,308
(Decrease) / Increase in creditors 300,246 (88,188)
Depreciation 17,068 4,071
Non-cash exceptional write-off 5,993,874 -
Share based payment 55,000 -
_______ _______
Net cash (outflow) / inflow from operating activities (1,955,903) (562,178)
_______ _______
Returns on investments and service of finance
Interest received 95,832 79,203
_______ _______
Capital expenditure
Purchase of tangible fixed assets (111,077) (25,763)
Purchase of intangible fixed assets (1,628,530) (2,565,344)
_______ _______
Net cash outflow on capital expenditure (1,739,607) (2,591,107)
_______ _______
Financing
Shares issued 116,500 5,547,000
Issue expenses (12) (161,347)
_______ _______
Net cash from financing activities 116,488 5,385,653
_______ _______
(Decrease) / Increase in cash (3,483,190) 2,311,571
====== ======
Reconciliation of net cash flow to movement in net funds
(Decrease)/ increase in cash in the year (3,483,190) 2,311,571
Net funds at 1st July 2006 5,301,792 2,990,221
_______ _______
Net funds at 30th June 2007 1,818,602 5,301,792
====== ======
The accompanying notes are an integral part of this cash flow statement.
Notes to the Accounts
for the year ended 30th June 2007
1. ACCOUNTING POLICIES
The principal accounting policies are summarised below and have been applied
consistently throughout the year.
(a) Accounting convention
The accounts have been prepared under the historical cost convention and in
accordance with applicable U.K. Accounting Standards.
(b) Basis of Consolidation
The group accounts consolidate the accounts of South China Resources PLC and its
wholly-owned subsidiary undertaking, Copper Developments Pty Limited, drawn up
to 30th June 2007. Copper Developments Pty Limited is a dormant company with
cash and share capital of AU$1, therefore there is no disclosed difference
between the company's financial statements and those of the group.
(c) Deferred taxation
Full provision is made for deferred taxation resulting from timing differences
between the recognition of gains and losses in the accounts and their
recognition for tax purposes.
A deferred tax asset is only recognised when it is more likely than not that the
asset will be recoverable in the foreseeable future out of suitable taxable
profits.
(d) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date. All differences are taken to the profit and loss account.
On consolidation of a foreign operation, assets and liabilities are translated
at the balance sheet rates, income and expenses are translated at rates ruling
at the transaction date. Exchange differences on consolidation are taken to the
foreign exchange reserve account where material.
(e) Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.
Depreciation of tangible fixed assets is provided where it is necessary to
reflect a reduction from book value to estimated residual value over the
estimated useful life of the asset to the Company. Depreciation of tangible
fixed assets is calculated by the straight-line method and the annual rates
applicable to the principal categories are:
Information Equipment - Depreciated over 3 years at an annual rate of 33%
Leasehold Improvements - Depreciated over 5 years at an annual rate of 20%
Furniture and Fittings Depreciated over 5 years at an annual rate of 20%
Notes to the Accounts
for the year ended 30th June 2007 cont.../
(f) Exploration and development expenditure
Exploration, evaluation and development expenditure incurred as accumulated in
respect of each identifiable area of interest. These costs are only carried
forward to the extent that they are expected to be recouped through the
successful development of the area or where activities in the area have not yet
reached a stage which permits reasonable assessment of the existence of
economically recoverable reserves.
Accumulated costs in relation to an abandoned area are written off in full
against the profit in the year in which the decision to abandon the area is
made.
A regular review is undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in relation to that area of
interest.
Restoration, rehabilitation and environmental costs necessitated by exploration
and evaluation activities are expensed as incurred and treated as exploration
and evaluation expenditure.
(g) Revenue recognition
The company recognises revenue from operations in its profit and loss account,
on an invoiced basis.
(h) Options and share based payments
The ompany has applied the requirements of FRS 20.
Where equity instruments are to persons other than employees, the income
statement is charged with the fair value of goods and services received, except
where it is in respect to costs associated with the issue of securities, in
which case it is charged to the share premium account.
Equity-settled share based payments are measured at fair value at the date of
the grant.
2. TURNOVER AND SEGMENTAL ANALYSIS
As the group remains focussed on exploration activities, the group had no
turnover for the year ended 30th June 2007, nor for the prior period 30th June
2006.
Year ended 30th June 2007 Year ended 30th June 2006
Loss before Net assets/ Loss before Net assets/
taxation (liabilities) Taxation (liabilities)
By geographical area
United Kingdom (2,197,193) 1,645,913 (420,166) 5,300,148
Peoples Republic of China (5,993,874) - - 4,365,344
_______ _______ _______ _______
(8,191,067) 1,645,913 (420,166) 9,665,492
====== ====== ====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
3. EXCEPTIONAL ITEM
On the 29th May 2007 the company announced the decision to terminate its
involvement in the Danfeng Project ("the Project") and the Joint Venture Company
established to develop the Project, the Shang Lou City Zhongbei Minerals and
Mining Development Company Ltd.
Although exploratory drilling conducted since inception confirmed the presence
of copper mineralisation the Board believed the Project did not meet the
development criteria of the Company in terms of potential scale and projected
returns on a fully risked basis. All costs associated with the project,
including provision for all closure costs, have been written-off to the profit
and loss account as follows:
2007 2006
� �
Project Exploration - Danfeng 4,193,874 -
Goodwill on acquisition 1,800,000 -
________ ________
As at 30 June 2007 5,993,874 -
====== ======
4. OPERATING LOSS
2007 2006
� �
This is stated after charging:
Exceptional write-off 5,993,874 -
Depreciation 17,068 4,071
Auditors' Remuneration - Audit 7,500 7,500
- Other - 7,000
Services
Directors' Emoluments 407,000 210,500
Directors' Shared based payment 55,000 -
====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
5. DIRECTORS AND EMPLOYEES
A summary of the total remuneration of the Directors is comprised as follows:
2007 2006
Director � �
Steve Leithead 141,000 116,000
Alastair Clayton 63,000 47,500
Nathan McMahon (Chairman) 24,000 45,000
Bruce Stewart (i) 35,000 2,000
Mario Vazquez (ii) 120,000 -
David Tyrwhitt (iii) 79,000 -
_______ _______
Directors' fees / remuneration 462,000 210,500
====== ======
(i) Remuneration disclosed for Bruce Stewart includes the Executive share
based payment valuation on options granted as incentivisation
for performance (Note 17).
(ii) Remuneration disclosed for Mario Vazquez includes the Executive share
based payment valuation on options granted as incentivisation
for performance (Note 17).
(iii) David Tyrwitt performed consultancy services for the company in addition
to being appointed as director on 12th March 2007. The remuneration
disclosed includes of consultancy fees of �76,785 (Note 23).
The average number of employees, including Directors during the year was 21,
allocated as follows:
2007 2006
Number Number
Management and administration 7 7
Operation resources 14 8
====== ======
6. TAXATION
2007 2006
� �
Analysis of charge in year
Tax on loss on ordinary activities - -
====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
6. TAXATION cont.../
Factors affecting tax charge for year
The differences between the tax assessed for the period and the standard rate of
corporation tax are explained as follows:
2007 2006
� �
Loss on ordinary activities before tax (8,191,067) (420,166)
Loss on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 30% (2,457,320) (126,050)
Effects of:
Future tax benefit not brought to account - revenue 1,915,507 123,686
Future tax benefit not brought to account - capital 540,000 -
Expenses not deductible for tax purposes 1,813 2,364
_______ _______
Current tax charge for period - -
====== ======
The Group has a potential deferred tax asset arising from revenue losses of
�2,049,330 incurred since inception.
No deferred tax asset has been recognised because there is insufficient evidence
of the timing of suitable future profits against which the losses can be
recovered.
7. LOSS PER SHARE
The basic loss per share is derived by dividing the loss for the year
attributable to ordinary shareholders by the weighted average number of shares
in issue.
2007 2006
� �
Loss for the year (8,191,067) (420,166)
Weighted average number of Ordinary shares of 1p on issue 159,535,414 132,731,507
Loss per share - basic (stated in pence) (5.13) p (0.31) p
Weighted average number of Ordinary shares of 1p on issue 172,845,896 136,573,505
inclusive of outstanding options
There are no dilutive share options as at 30 June 2007.
Notes to the Accounts
for the year ended 30th June 2007 cont.../
8. INTANGIBLE FIXED ASSETS
Project Goodwill Total
Exploration
� � �
Net book value
At 30th June 2006 2,565,344 1,800,000 4,365,344
Additions 1,628,530 - 1,628,530
_______ _______ _______
At 30th June 2007 4,193,874 1,800,000 5,993,874
_______ _______ _______
Amortisation
At 30th June 2006 - - -
at 30th June 2007 4,193,874 1,800,000 5,993,974
_______ _______ _______
Net book value
At 30th June 2007 - - -
====== ====== ======
At 30th June 2006 2,565,344 1,800,000 4,365,344
====== ====== ======
On the 29th May 2007 the company announced the decision to terminate its
involvement in the Danfeng Project ("the Project") and the Joint Venture Company
established to develop the Project, the Shang Lou City Zhongbei Minerals and
Mining Development Company Ltd.
9. TANGIBLE FIXED ASSETS
IT Equipment Leasehold Furniture & Total
Improvement Fittings
� � � �
Cost
At 1st July 2006 25,763 - - 25,763
Additions 13,914 83,760 13,403 111,077
_______ _______ _______ _______
At 30th June 2007 39,677 83,760 13,403 136,840
_______ _______ _______ _______
Depreciation
At 1st July 2006 4,071 - - 4,071
Charge for year 11,721 4,230 1,117 17,068
_______ _______ _______ _______
At 30th June 2007 15,792 4,230 1,117 21,139
_______ _______ _______ _______
Net book value
At 30th June 2007 23,885 79,530 12,286 115,701
====== ====== ====== ======
At 30th June 2006 21,692 - - 21,692
====== ====== ====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
10. INVESTMENTS
The Company holds 20% or more of the share capital of the following
Company:
Country of Shares held
registration or
Company incorporation Class Percentage
Copper Developments Pty Limited Australia Ordinary 100%
2007 2006
� �
Carrying value of investment in subsidiary - -
====== ======
Copper Developments Pty Limited is a wholly owned dormant company with cash and
share capital of AU$1.
11. DEBTORS
2007 2006
� �
VAT Receivable 30,519 6,200
Prepayments 5,967 8,776
Accounts Receivable 13,682 -
_______ _______
50,168 14,976
====== ======
12. CREDITORS: amounts falling due within one year
2007 2006
� �
Trade Creditors 90,599 23,812
Accruals 247,959 14,500
_______ _______
338,558 38,312
====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
13. SHARE CAPITAL
2007 2006
� �
Authorised
5,000,000,000 ordinary shares at 1p each 50,000,000 50,000,000
====== ======
2007 2006
� �
Allotted, called up and fully paid
161,650,003 Ordinary shares at 1p each 1,616,500 1,576,000
(30 June 2006: 157,600,003 Ordinary shares of 1p each) ====== ======
On 7 July 2006, 100,000 ordinary shares were issued at a price of 1 pence for
cash.
On 2 October 2006, 1,050,000 ordinary shares were issued at a price of 5 pence
for cash.
On 16 October 2006, 525,000 ordinary shares were issued at a price of 5 pence
for cash.
On 4 December 2006, 225,000 ordinary shares were issued at a price of 5 pence
for cash.
On 1 March 2007, 250,000 ordinary shares were issued at a price of 1 pence for
cash.
On 29 March 2007, 1,800,000 ordinary shares were issued at a price of 1 pence
for cash.
On 24 April 2007, 100,000 ordinary shares were issued at a price of 5 pence for
cash.
Share Options
The following options were granted by the Company and have not been exercised at
30th June 2007:
Number of Exercise Expiry
ordinary shares price date
249,997 5.0p 23rd February 2010
840,000 5.0p 8th November 2007
442,500 5.0p 8th March 2008
2,500,000 40.0p 30th August 2008
10,333,334 40.0p 30th June 2009
On 30th August 2006, 2,500,000 options were granted at an exercise price of 40
pence.
On 8th March 2007, 1,282,500 options were granted at an exercise
price of 5 pence.
Notes to the Accounts
for the year ended 30th June 2007 cont.../
14. SHARE PREMIUM
2007 2006
� �
At 1st July 7,103,448 2,133,795
Arising on shares issued 76,000 5,131,000
Share issue expenses (12) (161,347)
_______ _______
At 30th June 7,179,436 7,103,448
====== ======
15. MERGER RESERVE
2007 2006
� �
At 1st July 1,440,000 -
On acquisition of subsidiary - 1,440,000
_______ _______
At 30th June 1,440,000 1,440,000
====== ======
Upon the acquisition of the Company's wholly-owned subsidiary, a merger reserve
was created to deal with the excess of the fair value of shares acquired over
the nominal value of shares allotted, in accordance with the merger relief
provisions in the Companies Act 1985.
16. EQUITY RESERVE
2007 2006
� �
At 1st July - -
Share based payment (Note 17) 55,000 -
_______ _______
At 30th June 55,000 -
====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
17. SHARE BASED PAYMENT
During the financial year the company granted options to senior executives as
incentivisation for performance. The expense in respect to these options was
charged to the share premium account.
Share Price Fair Value
Name Date Granted Number Exercise Expiry Date Grant Date Grant Date
Price per Option Total �
Mario Vasquez 30/08/06 2,000,000 40p 30/08/08 19.25p 44,000
Bruce Stewart 30/08/06 500,000 40p 30/08/08 19.25p 11,000
The fair value of the options granted to senior executives during the period was
�55,000. The assessed fair value at the grant date was determined using the
Black-Scholes Model that takes into account the exercise price, the term of the
option, the share price at grant date, the expected volatility of the underlying
share of 56%, the expected dividend yield and the risk free interest rate of
5.5% for the term of the option.
In assessing the fair value of the options, a discount of 10% has been applied
to the theoretical value calculated by the Black-Scholes Model to take into
account the lack of marketability of the options and the inherent limitations of
the Black-Scholes Model.
18. PROFIT AND LOSS ACCOUNT
2007 2006
� �
At 1st July (453,956) (33,790)
Retained loss (8,191,067) (420,166)
_______ _______
At 30th June (8,645,023) (453,956)
====== ======
19. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
2007 2006
� �
At 1st July 9,665,492 2,900,005
Loss for the financial period (8,191,067) (420,166)
Shares issued 116,500 7,347,000
Share based payment 55,000 -
Issue expenses (12) (161,347)
_______ _______
At 30th June 1,645,913 9,665,492
====== ======
Notes to the Accounts
for the year ended 30th June 2007 cont.../
20. CONTINGENT LIABILITIES AND COMMITMENTS
On 20th March 2007 the company entered into a 5 year rental lease expiring on
19th March 2012. The annual rental charge totals �85,150. As at the 30 June
2007, the remaining rental commitment amounted to �383,175.
21. FINANCIAL INSTRUMENTS
The Group uses financial instruments comprising cash, liquid resources and
debtors/creditors that arise from its operations.
The Group's exposure to currency and liquidity risk is not considered
significant. The majority of the Group's cash balances are held in Sterling.
The net fair value of financial assets and liabilities approximates the carrying
values disclosed in the financial statements.
The currency and interest rate profile of the financial assets is as follows:
Cash and short Cash and short
Term deposits term deposits
At 30th June 2007 At 30th June 2006
� �
Sterling 1,818,602 4,916,754
People's Republic of China - 385,038
_______ _______
1,818,602 5,301,792
====== ======
The financial assets comprise interest earning bank deposits.
22. EVENTS AFTER THE BALANCE SHEET DATE
On the 30th September 2007, Mario Vazquez resigned from his position of
Executive Director to the company. Mario's resignation effectively voided the
2,000,000 performance based options (Note 13) granted on the 30th August 2006.
On the 21st December 2007, David Tyrwhitt resigned from his position of
Executive Director to the company.
23. RELATED PARTIES
The following director related party transaction occurring the year:
The company paid consultancy fees at agreed commercial rates to an Australian
company titled David Tyrwhitt & Associate Pty Ltd, of which David Tyrwhitt is an
Executive. The amount of consultancy fees for the financial year amounted to
�76,785.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKDKNABDDOBB
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