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African Potash Ltd.: Audited Annual Results year ended 30 June 2017

African Potash Ltd.: Audited Annual Results year ended 30 June 2017

Fri, 20 Oct 2017 18:18:56
: African Potash Ltd.: Audited Annual Results year ended 30 June 2017

African Potash Ltd. (AFPO)

20-Oct-2017 / 18:18 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.


African Potash Limited / Epic: AFPO / Sector: Mining

20 October 2017

African Potash Limited

("African Potash" or "the Company")

Audited Annual Results for the year ended 30 June 2017

 

African Potash Limited, the NEX listed exploration company focussed on the vertical integration of fertiliser operations in Africa and sub-Saharan potash assets, is pleased to report its audited annual results for the twelve months ended 30 June 2017.

Chairman's Statement

Two years ago, African Potash was a junior exploration company with an early stage project which had just completed a proof of concept drilling program confirming extensive lateral seams of Potash Salts, extending to the edge of the Congolese coastal basin.  Notwithstanding the positive results, the funding environment for early stage resource projects has remained difficult.  Recognising this, the Company has implemented a strategy to develop opportunities for generating revenue in the fast developing and related fertiliser industry, with a long-term view of ultimately providing access to the market for its resource products.

 

Fertiliser Trading

The initial emphasis was on government-focussed trades introduced by COMESA (Common Market for Eastern and Southern Africa).  Several Memoranda of Understanding were entered into, and the Company invested significant time and resources in pursuing these opportunities.  Severe regional drought adversely affected demand, elections postponed decisions and, most importantly, budget restrictions meant that our customers could not, despite assurances to the contrary, secure the necessary payment required either by way of letters of credit or any other satisfactory payment instruments to enable us to conclude the potential trades.

 

Clearly there is a sizeable business opportunity within this area and that we will be well placed to take advantage of it as time progresses as a result of our established relationship with COMESA.  That said, throughout this period, we have learnt that dealing with governments can be slow and unpredictable.  As a result our strategy has developed such that we are now looking towards both wholesale and retail trading, with a view to focussing our operations closer to the end user of fertiliser products.

 

Last year, we commenced trading operations in Zambia with Nutri-Aid Trust ('Nutri-Aid'), which has over 2,500 agro-outlets certified by COMESA.  This pilot scheme commenced with a partially secured credit-based model whereby the agri-dealers within the Nutri-Aid network would pay 50% upon collection and the balance within 45 days.  The pilot revealed not only the inherent risks in a partially secured credit based model but also showed us that many customers were happy to pay cash on collection. 

Following the pilot we have entered into an exclusive agreement with Nutri-Aid to lease their network of small community warehouses which had been established in conjunction with US AID, and to use these to build a warehouse and retail business.  The first three warehouses have been refurbished and are ready to start trading in the season getting underway. 

 

A key driver of demand is the Zambian government's eVoucher program which is replacing their former government subsidy program, whereby registered individual farmers receive a prepaid card which can be used to purchase fertiliser and certain other inputs from registered suppliers. We are a registered eVoucher supplier. 

 

In July 2017 the Government announced that the budget for the current season is $175m.  In addition to the warehouses we have also recently launched the One Farm program, running social media groups where we engage with individual and groups of farmers to identify their input requirements.  We also use these groups to disseminate data and information, weather, agronomical information, timing of planting, market data for sale of outputs amongst others. This enables us to establish close relationships with small scale farming groups and add value over and above the supply of fertiliser.

 

We have also taken the decision to "buy into" an existing business. As announced on 31 March 2017, we have agreed to take a 21% stake in Advanced Agricultural Holdings (Pty) Limited ("Advanced Agri"), an excellent example of a successful fertiliser and speciality input distributor in South Africa.  Advanced Agri will provide us with additional agronomic expertise and speciality products which will enable us to distinguish our product offering to larger commercial farming groups and agri-dealers in the region and give us an advantage when concluding deals with governments and multi-laterals.

Lac Dinga

African Potash retains its interest in the exploration side of the fertiliser industry through its 70% interest in La Société des Potasses et des Mines S.A. ('SPM'), which holds the exclusive right to conduct exploration activities for potash salts over the Lac Dinga Project Area ('Lac Dinga' or the 'Project') in the highly prospective Kouilou region in the Republic of Congo which has been renewed until 25 April 2016, following which, the license is renewable for a further two years.

 

During the period the board undertook an impairment review.  In the continued absence of any recovery in potash prices and to reflect that no further progress had been made in securing additional funding or a suitable earn-in partner, the board decided to impair the valuation of the project to $3m.  Based on a re-assessment of the available information as at 30 June 2016 the board have therefore decided that this impairment should be treated as a prior year adjustment, and the comparative financial statements for the year ended 30 June 2016 have been restated accordingly.

 

In order to develop the asset and issue a maiden resource statement, the Group announced on 19 July 2017 that it has entered an agreement with African Agronomix Limited ("AAX"), whereby AAX has the right to acquire up to 100% of the Company's interest in Lac Dinga project structured over four distinct phases (the "Earn-In").  During each phase AAX will have funding and performance obligations, completion of which result in AAX acquiring a greater interest in the Project.  Upon completion of a maiden resource statement, AAX will hold 65% of our interest in the project.  At this point, the Company may elect to participate in co-funding the feasibility studies alongside AAX. 

 

Financial Results

Net income from trading for the year ending 30 June 2017 was $9,000 (2016: $15,000). Operating expenses were reduced to $1.3m (2016: $ 5.1m).  After the impairment charge in respect of exploration assets of $0.7m (2016 as restated: $7.8m) and the reversal of deferred consideration in the prior year of $3.6m, the loss before taxation for the period was $2.3m (2016 as restated: $9.5m).  Cash balances at 30 June 2017 were $11,000 (2016: $298,000).

 

Since the year end the Company has raised, by way of placings, $143,000 before expenses, to fund the further development of its fertiliser trading operations.

 

Outlook

On 21 April 2017, the Company announced that it had signed a Letter of Intent in connection with the proposed acquisition by the Company of Onshore Energy Limited and requested that the Company's shares be suspended.  The Company is no longer pursuing this transaction.

 

Over the past few months, during our suspension from NEX, there have been some key developments that combine to strengthen the African Potash proposition giving us a clearer path to long-term profitability.  Our goals and business strategy align with the Feed Africa initiative - the African Development Bank Group's agricultural transformation strategy for a competitive and inclusive agribusiness sector that creates wealth, improves lives and secures the environment.  Led by the private sector and enabled by the public sector, using innovative financing mechanisms, the strategy aims to end hunger and rural poverty in Africa in the next decade.

 

As part of our strategy to be an African fertiliser trader, we have completed a transaction to acquire a strategic 21% equity stake in Advanced Agri.  We plan to work with Advanced Agri to develop their business regionally outside their South African market.  We have seen an increasing trend in the market over the past year where commercial farmers are opting to purchase a higher quality specialty fertiliser over and above the more common generic NPK and Urea products. Advanced Agri is one of South Africa's leading 'specialty fertiliser' distributors, and this investment positions us well for attracting business and improving margins from the distribution of Advanced Agri's specialty products across Africa.

 

The earn in agreement with African Agronomix Limited to develop our Lac Dinga potash resource is a hugely positive move for all concerned.  We have been looking for the right partner to push this forward for a considerable time.  The transaction endorses our belief in the long-term viability of the Lac Dinga project and, as the earn-in work progresses, will realise value in the project for existing shareholders.  Importantly, shareholders have a free carry to a maiden resource statement.

 

Since restructuring our business model in Zambia we have built a very competent team on the ground. We are now well engaged with three community groups in relation to establishing "Agri-Hubs" from their respective warehouses.   Initially we will focus on the supply of fertiliser and over time expect this will naturally expand into other agriculture related products.  Once these warehouses have bedded down the most efficient business model, we intend is to gradually roll the same model out across the full Nutri-Aid network of 32 community warehouses each of which is situated in the centre of an agricultural region, to give us a significant national distribution platform.  In addition we will continue to develop our One Farm program, which is already generating some significant leads.

 

The Board believe that we now have firm foundations from which to build a growing revenue generating business and look forward to continued progress in the current year.

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2017

 

 

 

 

2017

 

2016

 

 

 

 

 

As restated

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

Revenue

 

 

-

 

59

Cost of sales

 

 

-

 

(44)

Gross profit

 

 

-

 

15

 

 

 

 

 

 

Other trading income

 

 

9

 

-

Operating expenses

6

 

(1,251)

 

(5,078)

Share of loss of associate

 

 

(24)

 

-

Impairment of evaluation and exploration costs

2

 

(719)

 

(7,758)

Reversal of deferred consideration

 

 

-

 

3,600

Other gains / (losses)

14

 

(2)

 

(47)

 

 

 

 

 

 

Operating loss

6

 

(1,987)

 

(9,268)

 

 

 

 

 

 

Finance expense

8

 

(286)

 

(202)

 

 

 

 

 

 

Loss before taxation

 

 

(2,273)

 

(9,470)

 

 

 

 

 

 

Income tax

9

 

-

 

-

 

 

 

 

 

 

Loss for the year

 

 

(2,273)

 

(9,470)

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

Owners of the parent company

 

 

(2,273)

 

(7,940)

Non-controlling interests

 

 

-

 

(1,530)

 

 

 

(2,273)

 

(9,470)

 

 

 

 

 

 

Earnings per share - basic and diluted (cents)

 

 

 

 

 

- attributable to owners of the parent company

10

 

(0.17c)

 

(1.00c)

- attributable to non-controlling interests

10

 

-

 

(0.19c)

 

 

 

(0.17c)

 

(1.19c)

All results relate to continuing activities.

 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2017

 

 

2017

 

2016

 

 

 

 

As restated

 

 

$'000

 

$'000

Loss for the year

 

(2,273)

 

(9,470)

Other comprehensive (loss) / income for the year

 

 

 

 

Items that may be reclassified subsequently to profit or loss

 

 

 

 

- Foreign exchange translation differences

 

46

 

(27)

Total comprehensive loss for the year

 

(2,227)

 

(9,497)

 

 

 

 

 

Attributable to owners of the parent company

 

(2,227)

 

(7,967)

Attributable to non-controlling interests

 

-

 

(1,530)

 

 

(2,227)

 

(9,497)

 

There is no taxation arising on other comprehensive income

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

 

30 June 2017

 

30 June 2016

As restated

 

1 July 2015

 

 

 

 

 

 

 

 

 

Note

 

$'000

 

$'000

 

$'000

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Intangible assets: exploration activities

12

 

3,000

 

3,000

 

10,000

Investment in associate

13

 

101

 

-

 

-

Investment in quoted companies

14

 

-

 

47

 

-

Property, plant and equipment

15

 

99

 

111

 

131

 

 

 

 

 

 

 

 

Total non-current assets

 

 

3,200

 

3,158

 

10,131

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

17

 

25

 

76

 

99

Cash and cash equivalents

17

 

11

 

298

 

571

Total current assets

 

 

36

 

374

 

670

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

3,236

 

3,532

 

10,801

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Trade and other payables

18

 

(1,574)

 

(829)

 

(530)

Loan note

19

 

(1,170)

 

(1,004)

 

-

Deferred consideration

23

 

-

 

-

 

(800)

Total current liabilities

 

 

(2,744)

 

(1,833)

 

(1,330)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET ASSETS

 

 

492

 

1,699

 

9,471

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Share capital

20

 

18,551

 

17,531

 

15,864

Shares to be issued

 

 

-

 

-

 

2,800

Share based payment reserve

 

 

2,633

 

2,637

 

1,141

Foreign exchange translation reserve

 

 

(577)

 

(623)

 

(596)

Retained losses

 

 

(20,115)

 

(17,846)

 

(11,268)

 

 

 

 

 

 

 

 

Total equity attributable to the owners of the parent company

 

 

492

 

 

1,699

 

7,946

Non controlling interests

 

-

 

-

 

1,530

 

 

 

 

 

 

 

TOTAL EQUITY

 

492

 

1,699

 

9,471

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to owners of the parent company

 

Share capital

Shares to be issued

Share-based payment reserve

Foreign exchange translation reserve

Retained losses

Total

Non-controlling interest

 

 

 

Total Equity

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

$'000

Balances at 1 July 2015

15,864

2,800

1,141

(596)

(11,268)

7,941

1,530

9,471

Prior year adjustment (note 11)

-

-

-

-

-

-

-

-

Balances at 1 July 2015 (restated)

15,864

2,800

1,141

(596)

(11,268)

7,941

1,530

9,471

Loss for the year as restated

-

-

-

-

(7,940)

(7,940)

(1,530)

(9,470)

Other comprehensive income

 

 

 

 

 

 

 

 

Exchange translation differences on foreign operations

-

 

-

-

(27)

-

(27)

-

(27)

Total comprehensive income for the year

-

-

-

(27)

(7,940)

(7,967)

(1,530)

(9,497)

Transactions with owners

 

 

 

 

 

 

 

 

Issue of shares

1,667

-

-

-

-

1,667

-

1,667

Reversal of deferred consideration

-

(2,800)

-

-

-

(2,800)

-

(2,800)

Lapse /exercise of share options as restated

-

-

(1,362)

-

1,362

-

-

-

Share based payment charge

-

-

2,858

-

-

2,858

-

2,858

Total transactions with owners

1,667

(2,800)

1,496

-

1,362

1,725

-

1,725

 

 

 

 

 

 

 

 

 

Balance at 30 June 2016 (restated)

17,531

-

2,637

(623)

(17,846)

1,699

-

1,699

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

-

(2,273)

(2,273)

-

(2,273)

Other comprehensive income

 

 

 

 

 

 

 

 

Exchange translation differences on foreign operations

-

 

-

-

46

-

46

-

46

Total comprehensive income for the year

-

-

-

46

(2,273)

(2,227)

-

(2,227)

Transactions with owners

 

 

 

 

 

 

 

 

Issue of shares

1,020

-

-

-

-

1,020

-

1,020

Lapse of share based payments

-

-

(4)

-

4

-

-

-

Total transactions with owners

1,020

-

(4)

-

4

1,020

-

1,020

 

 

 

 

 

 

 

 

 

Balance at 30 June 2017

18,551

-

2,633

(577)

(20,115)

492

-

492

 

The notes on pages 21 to 45 form part of the financial statements.

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2017

 

 

 

2017

 

2016

 

 

 

 

 

As restated

 

Note

 

$'000

 

$'000

 

 

 

 

 

 

Operating activities

 

 

 

 

 

Loss before tax

 

 

(2,273)

 

(9,470)

Adjustments for:

 

 

 

 

 

- Profit on disposal of investments

 

 

(37)

 

-

- Impairment of evaluation and exploration assets

12

 

719

 

7,758

- Reversal of deferred consideration

 

 

-

 

(3,600)

- Impairment of investments

 

 

-

 

47

- Share of loss of associate

 

 

24

 

-

- Foreign exchange

 

 

(4)

 

(113)

- Share based payment

 

 

98

 

3,010

- Finance expense

 

 

286

 

202

Operating cash flow before movements in working capital

(1,188)

 

(2,166)

Working capital adjustments:

 

 

 

 

 

- Decrease in receivables 

 

 

51

 

23

- Increase in payables 

 

 

659

 

302

 

 

 

 

 

 

Cash used in operations

 

 

(478)

 

(1,841)

Finance expense

 

 

(152)

 

(202)

 

 

 

 

 

 

Net cash used in operating activities

 

 

(630)

 

(2,043)

 

 

 

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

Purchase of evaluation and exploration assets

12

 

(626)

 

(756)

Sale / (purchase) of investments

14

 

80

 

(106)

Purchase of property, plant and equipment

16

 

(14)

 

(11)

 

 

 

 

 

 

Net cash used in investing activities

 

 

(560)

 

(873)

 

 

 

 

 

 

Financing activities

 

 

 

 

 

Proceeds from issue of share capital

 

 

713

 

1,515

Drawdown of loan note

19

 

190

 

1,127

 

 

 

 

 

 

Net cash from financing activities

 

 

903

 

2,642

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(287)

 

(274)

 

 

 

 

 

 

Cash and cash equivalents at start of the year

 

 

298

 

571

Effect of exchange rates on cash and cash equivalents

 

 

-

 

1

 

 

 

 

 

 

Cash and cash equivalents at end of the year

 

 

11

 

298

                 

 

Non cash transactions

The principal non cash transactions relate to:

 

 

 

2017

 

2016

Shares issued in settlement of:

 

 

$'000

 

$'000

-          Advisory and consultancy and directors fees

 

 

182

 

152

-          Acquisition of associate

 

 

125

 

-

Share based payments

 

 

-

 

3,010

 

 

 

307

 

3,162

 

 

 

The Directors of the Company accept responsibility for the content of this announcement.

For further information visit www.africanpotash.com or contact the following:

Chris Cleverly

African Potash Limited

+44 (0) 20 7408 9200

David Scott

James Dewhurst

Alexander David Securities Limited

 

+44 (0)20 7448 9820

 

Market Abuse Regulations (EU) No. 596/2014

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

 

 

 

 




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