NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1.         General information

Premier African Minerals Limited ('Premier' or 'the Company'), together with its subsidiaries (the 'Group'), was incorporated in the Territory of the British Virgin Islands under the BVI Business Companies Act, 2004. The address of the registered office is Craigmuir Chambers, PO Box 71, Road Town, Tortola, British Virgin Islands.

The Group's operations and principal activities are the mining and development of mineral reserves on the African continent.

Premier's shares were admitted to trading on the London Stock Exchange's AIM market on 10 December 2012.

 

2.         Basis of preparation

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) in issue and as endorsed by the European Union. IFRS includes interpretations issued by the IFRS interpretations Committee (formerly IFRIC).

 

The consolidated financial statements have been prepared under the historical cost convention with the exception of available-for-sale financial assets and derivative financial instruments which are included at fair value, and on a going concern basis. The preparation of financial statements in conformity with EU adopted IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies.

 

The accounting policies set out below are consistent across the Group and to all periods presented in these financial statements.

 

3.         Significant accounting policies

Basis of consolidation

Subsidiaries are all entities (including special purpose entities) over which the Group has control. The Group controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de-facto control.

This is evidenced with RHA Tungsten (Private) Limited which the Group owns 49% of but is consolidated into the Group (refer note 4).

 

De-facto control may arise in circumstances where the size of the Group's voting rights relative to the size and dispersion of holdings of other shareholders give the Group the power to govern the financial and operating policies.

 

Subsidiaries are consolidated, using the acquisition method, from the date that control is gained and non-controlling interests are apportioned on a proportional basis.

 

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

Business combinations and goodwill

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed.

Goodwill is tested for impairment as at the reporting date. Goodwill is allocated for the purpose of impairment testing to cash generating units and then the recoverable amount of each cash generating unit at the period end is assessed on the basis of value in use, or if higher the fair value less costs of disposal. If the recoverable amount exceeds the carrying values no impairment loss is recognised.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions - that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Adoption of new and revised standards

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in these financial statements, were in issue, but not effective for the year ended 31 December 2016:

Title	Subject	Effective date
All IFRS and IFRS 12*	Annual Improvements to IFRSs 2014-2016 Cycle	1 January 2017 & 1 January 2018
Amendments to IAS 12*:	Recognition of Deferred Tax Assets for Unrealised Losses	1 January 2017
Amendments to IAS 7*	Disclosure Initiative	1 January 2017
Amendments to IFRS 2*	Classification and Measurement of Share-based Payment Transactions	1 January 2018
IFRIC 22*	Foreign Currency Transactions and Advance Consideration	1 January 2018
IFRS 9	Financial Instruments	1 January 2018
IFRS 15	Revenue from Contracts with Customers (IFRS 15 clarifications not EU-endorsed)	1 January 2018
IFRS 16*	Leases	1 January 2019
*Not yet endorsed in the EU

The Directors anticipate that the adoption of these Standards and Interpretations as appropriate in future periods will have no material impact on the financial statements of the Group

 

Revenue

Revenue from the sale of wolframite concentrate is recognised in profit or loss when the product is sold.  A sale occurs when the significant risks and rewards of ownership have been transferred to the buyer. Ownership is transferred when the concentrate is delivered to the buyer's designated port and a certificate of delivery is obtained.

Foreign currencies

The Group's presentation currency and the functional currency of each of the group's entities is US Dollars.

Foreign currency transactions are recorded at the exchange rate ruling on the date of transaction. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the retranslation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in profit or loss.

 

Taxation

The Group has no taxable profit during the year.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the tax computations, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Exploration and evaluation assets

The Group applies the full cost method of accounting for Exploration and Evaluation ('E&E') costs, having regard to the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, costs of exploring for and evaluating mineral resources are accumulated by reference to appropriate cost centres being the appropriate licence area and/or licence areas held under option agreements. An option agreement grants the option holder the right to explore and evaluate mineral resources, and to acquire the licences at a later date at the discretion of the option holder. Exploration and evaluation assets are tested for impairment as described further below. Where appropriate, licences may be grouped into a cost pool.

 

All costs of E&E are initially capitalised as E&E assets, such as payments to acquire the legal right to explore, including option payments, costs of technical services and studies, seismic acquisition, exploratory drilling and testing. Intangible costs include directly attributable overheads together with the cost of other materials consumed during the exploration and evaluation phases.

Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to profit or loss as they are incurred.

E&E costs are not amortised prior to the conclusion of appraisal activities.

E&E assets related to each exploration licence or pool of licences are carried forward, until the existence (or otherwise) of commercial reserves has been determined. Once the technical feasibility and commercial viability of extracting a mineral resource is demonstrable, the related E&E assets are assessed for impairment on an individual licence or cost pool basis, as appropriate, as set out below and any impairment loss is recognised in profit or loss. The carrying value, after any impairment loss, of the relevant E&E assets is then reclassified as property, plant and equipment.

E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a determination is made as to whether or not commercial reserves exist.

The aggregate carrying value is compared against the expected recoverable amount, generally by reference to the present value of the future net cash flows expected to be derived from production of commercial reserves.

When a licence or pool of licences is abandoned or there is no planned future work, the costs associated with the respective licences are written off in full.

Any impairment loss is recognised in profit or loss and separately disclosed.

 

The Group considers each licence, or where appropriate, a pool of licences, separately, for the purposes of determining whether impairment of E&E assets has occurred.

 

Intangible asset - forestry concession

The forestry concession has been provisionally valued using a discounted future cash flow earning approach. The recognition of the intangible asset fulfils the conditions of being identifiable and separable and is owned by the Mozambican company acquired during the period. 

 

Amortisation will be charged on a straight line basis of 10 years.

 

Inventory

Inventory is valued at the lower of cost and net realisable value. The cost of inventories is based on the cost of consumables and cost of production. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

 

Property, plant and equipment

Property, plant and equipment ('PPE') is stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is provided on all PPE to write off the cost less estimated residual value of each asset over its expected useful economic life on a straight-line basis at the following annual rates:

·    Land & buildings - 10 years

·    Plant & equipment - 4/5 years

·    Mine - depreciated over the life of the mine currently assessed at eight years

·    Assets under construction - not depreciated and will be transferred to the appropriate category of PPE and depreciated when fully ready to use.

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment to determine whether there is any indication that those assets have suffered an impairment loss.

If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or cash-generating unit) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An i mpairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit or loss immediately.

Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise cash and cash equivalents, trade and other receivables, investments in shares, borrowings, other financial liabilities and trade and other payables.

There is no material difference between the book value and fair value of the Group's financial instruments.

Financial assets

The Group classifies all its financial assets as loans and receivables or as available-for-sale investments. Management determines the classification of financial assets at initial recognition.

Loans and receivables are classified as current assets or non-current assets based on their maturity date. Loans and receivables comprise "Trade and other receivables" and "Cash and cash equivalents" in the statement of financial position. Loans and receivables are recognised initially at fair value and subsequently carried at amortised cost less any impairment.

A provision for impairment of receivables is established when there is objective evidence that the Group will not be able to collect all amounts due. Indicators of impairment would include financial difficulties of the debtor, likelihood of the debtor's insolvency, default in payment or a significant deterioration in credit worthiness. Any impairment is recognised in profit or loss.

Subsequent recoveries of amounts previously written off are credited in profit or loss.

Available-for-sale investments are non-derivative financial assets that are either designated in this category or not classified in any other category of financial asset. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Available-for-sale investments are initially recognised at fair value plus transaction costs and subsequently carried at fair value. Changes in fair value are recognised in equity. When available-for-sale investments are sold or impaired, the accumulated fair value adjustments recognised in equity are included in profit or loss as gains or losses from available-for-sale investments.

Available-for-sale investments are assessed for indicators of impairment at the end of each reporting period. They are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been negatively affected.

Financial liabilities

Borrowings and other financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently stated at amortised cost. Any difference between the amounts originally received (net of transaction costs) and the redemption value is recognised in profit or loss over the period to maturity using the effective interest method.

Borrowings and other financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Convertible loan notes and derivative financial instruments

The presentation and measurement of loan notes for accounting purposes is governed by IAS 32 and IAS 39. These standards require the loan notes to be separated into two components:

·     A derivative liability, and

·     A debt host liability.

This is because the loan notes are convertible into an unknown number of shares, therefore failing the 'fixed-for-fixed' criterion under IAS 32. This requires the 'underlying option component' of the loan note to be valued first (as an embedded derivative), with the residual of the face value being allocated to the debt host liability (refer financial liabilities policy above).

Valuation method

The fair value of the derivative liability is determined in accordance with IFRS 13 using an appropriate valuation methodology.

Valuation of the embedded derivative

The embedded derivative represents the additional value of the conversion features on the note. The value depends on the probability of the conversion triggers being triggered and the expected payoff under that scenario.

The valuation of the embedded derivative requires the estimation of the probability of default and the probability of the conversion triggers being triggered at each date where the company is contracted to redeem the notes. The value of the embedded derivative is the discounted probability weighted payoff under the different conversion trigger scenarios.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

An obligation to incur environmental restoration, rehabilitation and decommissioning costs arises when disturbance is caused by the development or on-going production of a mining property. Such costs arising from the decommissioning of plant and other site preparation work, discounted to their net present value, are provided for and capitalised at the start of each project, as soon as the obligation to incur such costs arises. These costs are recognised in the income statement over the life of the operation, through the depreciation of the asset and the unwinding of the discount on the provision. Costs for restoration of subsequent site damage which is created on an ongoing basis during production are provided for at their net present values and recognised in the income statement as extraction progresses.

Changes in the measurement of a liability relating to the decommissioning of plant or other site preparation work (that result from changes in the estimated timing or amount of the cash flow, or a change in the discount rate) are added to or deducted from the cost of the related asset in the current period. If a decrease in the liability exceeds the carrying amount of the asset, the excess is recognised immediately in the income statement. If the asset value is increased and there is an indication that the revised carrying value is not recoverable, an impairment test is performed in accordance with the accounting policy above.

Equity

Equity comprises the following:

·     Issued share capital - ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

·     Merger reserve represents the difference between the nominal value of shares issued by the Company to the shareholders of ZimDiv Holdings Limited and the nominal value of the ZimDiv shares taken in exchange.

·     Foreign exchange reserve represents the differences arising from translation of investments in overseas subsidiaries.

·     Share-based payment reserve represents equity-settled share-based payments until such share options are exercised and the fair value of warrants issued.

·     Retained earnings represent retained profits less retained losses.

·     Non-controlling interests represents the share of retained profits less retained losses of the non-controlling interests. 

Share based payment transactions

The Group operates an equity-settled share option plan and issues warrants from time to time either with direct subscriptions in equity or as finance related packages. The fair value of the service received in exchange for the grant of options or issue of warrants is recognised as an expense or recognised as a deduction from equity or an addition to intangible assets depending on the nature of the services received. The fair value of warrants issued as part of a finance related package is charged as finance costs in the profit or loss.

Share based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant.  The fair value determined at the grant date of equity-settled share based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. 

Fair value is measured by use of the Black Scholes model.  The expected life used in the model has been adjusted, based on management's best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.

The warrants issued as part of the loan note agreements are also subject to certain reset provisions. The terms of the warrant agreements allow for an adjustment to the exercise price or the quantum of warrants issued depending on a number of circumstances. The fair value of the warrants under any re-pricing event is also valued by use of the Black Scholes model at their current and new price. The difference in fair value is charged to profit or loss as and when a re-pricing event occurs. 

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to profit or loss on a straight-line basis over the period of the lease.

Finance leases

Leases where the lessee acquires the economic benefits of the use of the leased asset for the major part of its economic life in return for entering into an obligation to pay for that right are classified as finance leases. At commencement of the lease term, finance leases are recognised as assets and liabilities in the statement of financial position at amounts equal to the fair value of the leased asset or, if lower the present value of the minimum lease payments, determined at the inception of the lease. The discount rate is the interest rate implicit in the lease.  Initial direct costs are added to the amount recognised as an asset. 

Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Operating segments

Segmental information is provided for the Group on the basis of information reported internally to the chief operating decision-maker for decision-making purposes. The Group considers that the role of chief operating decision-maker is performed by the Group's board of directors. 

 

4.         Significant accounting judgements, estimates and assumptions

In applying the Group's accounting policies, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The key estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of certain assets and liabilities recognised in these consolidated financial statements within the next financial year and key judgements are:

Recoverability of exploration and evaluation assets

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources.  If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The carrying amount of exploration and evaluation assets at 31 December 2016 was  $5,436,000  (2015: $3,192,000). No impairment charge was recognised in 2016 because the directors' judgement is that there is no indication of impairment (2015: $844,000 impairment recognised in respect of the Katete and Tinde licenses).

Recoverability of mine assets

Determining whether a mine asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IAS36 Impairment of Assets. If there is any indication of potential impairment, an impairment test is required based on value in use of the asset. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

During 2016 the operating losses at RHA were higher than predicted due to operations in the open pit failing to deliver ore at the anticipated grade, suspension of operations during April and May 2016 and September to December 2016 to permit hoist rehabilitation and reinstallation and upgrade of the underground shaft.  The operating losses were an indicator of potential impairment and management completed an impairment review.

Key assumptions used in generating the discounted cash flow analysis included: 11,500 mtu concentrate production per month; 8 year mine plan; APT price of $220 per metric ton unit ('mtu'); 26% discount rate; and a zero growth rate in operating cash flow after the plant is fully operational, forecast to be for the full year 2018. Other key factors include attainment of forecast grade as set out in our resource statement and plant operating parameters being achieved. The XRT sorter installation is a significant element in increasing confidence in RHA in that 70% of the anticipated run of mine feed target of 40,000 ton per month is passed through the sorter, which is able to recover approximately 95% of the mineralisation in a mass pull of some 5%. This is expected to significantly reduce operating costs per mtu of concentrate and provide a much higher overall mining rate once grade, recoveries and plant throughput meet expectations. There is no certainty that these assumptions will be achieved.   

Sensitivity analysis was conducted on the volume, grade, concentrate production per month and APT price assumptions in the model.

A 10% reduction in the volumes mined from 40,000 tons per month assumed in the model to approximately 36,000 tons per month would not incur an impairment charge if all other assumptions were met.

A 10% decrease in the grade from those assumed in the model (5.5kg per ton for underground and 2.2 kg per ton for open pit) would not incur an impairment charge if all other assumptions were met.

A decrease in concentrate production per month from the 11,500 mtu included in the model to 10,000 mtu would not incur an impairment charge if all other assumptions were met.

A 10% reduction in the APT price from $220/mtu as included in the model $200/mtu would not incur an impairment charge if all other assumptions were met. The model currently uses an APT price of $220/mtu and current prices are $214-223/mtu.

The model assumes annual revenues of $19.5m from 2018.  Revenue generation is dependent on a number of inter-linked assumptions and a combination of changes in those assumptions that reduced annual revenue to less than approximately $14.0m per annum from 2018 would result in an impairment charge. 

The carrying amount of mine assets at 31 December 2016 was  $9,412,000  (2015: $9,918,000). The mine assets relate to the RHA Tungsten Mine in Zimbabwe. The assessment indicates that no impairment charge was needed for 2016.

Estimation of useful life for mine assets

Mine assets are depreciated /amortised on a straight-line basis over the life of the mine concerned.   Judgement is applied in assessing the mine's useful life and in the case of RHA Tungsten, the Group's only operating concern, is based on the initial Preliminary Economic Assessment ('PEA') first published in August 2013 that initially modelled an 8 year life of mine.  

Basis of consolidation

RHA Tungsten (Private) Limited

During 2013, Premier concluded a shareholders' agreement with the National Indigenisation and Economic Empowerment Fund ('NIEEF') whereby NIEEF acquired 51% of the shares of RHA Tungsten (Private) Limited ('RHA').  The principal terms of the agreement are as follows:

·     ZimDiv Holdings Limited ('ZimDiv'), a wholly owned subsidiary, is appointed as the Manager of the project for an initial 5 year term.

·     ZimDiv has marketing rights to the product.

·     Each shareholder can appoint up to two directors each, with a 5^th director who is rotated between each shareholder. The 5^th director will not have a vote.

·     Although the local Zimbabwean company is responsible for financing and repayment of such, Premier has secured the funding to advance RHA to production.

·     There has been no operational change since the agreements were signed and Premier continues to fund RHA until it becomes cash generative.   

At the financial year-end, two directors of RHA were from the Premier Group and two from NIEEF. A fifth board appointee has not yet been made. There is no majority vote at board level and Premier still retains operational and management control through its shareholders' agreement.  Following the assessment, the Directors concluded that Premier, through its wholly owned subsidiary ZimDiv, retained control and should continue to consolidate 100% of RHA and recognise non-controlling interests in the consolidated financial statements.

TCT Industrias Florestais Limitada

During 2016, Premier concluded the public deeds for the assignment of quotas to acquire a 26% interest in TCT IF from Transport Commodity Trading Mozambique Limitada ("TCTM") and a further 26% interest from GAPI Sociedade de Investimentos S.A. ("GAPI"), in aggregate amounting to 52% for a total consideration of US$2.1 million.  Despite not holding legal title to the quotas, the directors have concluded that Premier has control of TCT by virtue of irrevocable power of attorney to permit Premier to participate and vote in all General Assembly meetings on behalf of both parties.

At the financial year-end, one director of TCT was from the Premier Group and two directors from TCT. There is no majority vote at board level and Premier still retains operational and management control.  Premier has further been appointed as the manager of TCT.

Following the assessment, the Directors concluded that Premier should consolidate 100% of TCT and recognise non-controlling interests in the consolidated financial statements.

Valuations

·   Valuation of inventory - judgement was applied in calculating the initial carrying value of inventory and judgement continues to be applied in assessing the net realisable value. See accounting policy regarding inventories.

·   Available-for-sale investment - Premier's investment in Circum Minerals Limited ('Circum') is classified as an available-for-sale investment and as such is required to be measured at fair value at the reporting date. As Circum is unlisted there are no quoted market prices. In previous years the fair value of the Circum shares was derived using the most recent placing price.  In the absence of placings during 2016, the directors have sought to update the latest placing price of $2 per share in August 2015 with reference to share price movements of comparable listed companies and have concluded that there is no change in fair value as at 31 December 2016. 

·   Valuation of warrants, share options and ordinary shares issued as consideration - judgement is applied in determining appropriate assumptions to be used in calculating the fair value of the warrants, shares and share options issued. Refer accounting policy note and note 29.

·   Valuation of the embedded derivative in the convertible loan notes - judgement is applied in determining appropriate assumptions to be used in calculating the fair value of derivatives associated with the convertible loan notes. Refer accounting policy note and note 31.  

 

Identification and valuation of intangible assets acquired in a business combination

Judgement has been applied in the identification and valuation of the forestry, lodge and limestone assets acquired in the acquisition of TCT - refer to note 13 for details of the assumptions and estimates made.  Fair values have been determined on a provisional basis because management have not yet completed the fair value exercise.  Any subsequent change in identification and valuation of these assets during the measurement period will impact the fair value of intangible assets and also goodwill, deferred tax and non-controlling interests arising in respect of the business combination.

Going concern

Judgement is applied in assessing the likelihood and timing of future cash flows associated with the Group's activities. Judgement is also applied in assessing the likelihood of receiving future funding.

 

5.         Going concern

These consolidated financial statements are prepared on the going concern basis. The going concern basis assumes that the Group will continue in operation for the foreseeable future and will be able to realise its assets and discharge its liabilities and commitments in the normal course of business. The Group has incurred significant operating losses and negative cash flows from operations as the Group continued to move from a development and exploration company into operations during the year under review.

 

During the year, the Group raised $5.528 million in net funding through share and warrant subscriptions to fund further investment in the RHA Tungsten Mine to improve production, exploration at Zulu, to acquire a minor stake in the unlisted Casa Mining and to fund working capital.

 

Immediately subsequent to the year-end, the Group raised a further $615,000 (£550,000) through the further issue of Loan Notes. In January 2017, the Group raised a further $1.277 million (£1.020 million) through a direct subscription for new shares, whilst in March 2017; the Group raised further gross proceeds of $2.512 million (£2.0 million) through an underwritten offer through PrimaryBid.com. There remains an active and very liquid market for the Group's shares. 

 

The Directors have prepared cash flow forecasts for the period ended 31 December 2018, taking into account forecast operating cash flow and capital expenditure requirements for its RHA Tungsten mine, operating cash flows at TCT, available working capital and forecast expenditure for the rest of the Group including overheads and other development costs.  The forecasts include additional funding requirements which the directors believe will be met.

 

In the event that RHA fails to meet revenue predictions from the end of Q3, and any other relevant risk factor discussed in regard to RHA arises, the Group will need to obtain additional debt finance or equity to fund its operations and other project development activities for the period to 31 December 2018. The cash flow forecast is as much dependent on production targets being met at RHA, as the price of APT remaining stable during the period to 31 December 2018.

 

The Board believes it has a valuable asset in the Zulu Lithium and Tantalum exploration project and is considering a number of approaches that have been made that may result in a sale of all or part of this asset and a resultant liquidity event.

 

The Board also believes that it has a valuable asset in the Circum shares whose estimated fair value at 31 December 2016 remained at $4 million.

 

After careful consideration of those matters set out above, the Directors are of the opinion that the Group will be able to obtain adequate resources to enable it to undertake its planned activities for the period to 31 December 2018 from production and from additional fund raising and have prepared the consolidated financial statements on the going concern basis. Nevertheless due to the uncertainties inherent in meeting its revenue predictions and obtaining additional fund raising there can be no certainty in these respects. The financial statements do not include any adjustments that would result if the Group was unable to continue as a going concern.

 

6.         Segmental reporting

 

Segmental information is presented in respect of the information reported to the Directors.

For the purposes of the current financial year, segmental information has been changed to separately report the revenue generating segments of RHA Tungsten (Private) Limited that operates the RHA Tungsten Mine and TCT IF. 

The RHA Tungsten Mine segment derives income primarily from the production and sale of wolframite concentrate whilst the TCT segment includes a forestry concession and an exploration asset. All other segments are primarily focused on exploration and on administrative and financing segments.

Segmental results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

By operating segment	Unallocated Corporate	RHA Tungsten Mine* Zimbabwe	Exploration Zimbabwe	TCT IF** Mozambique	Total
2016	$ 000	$ 000	$000	$000	$ 000
Result
Revenue (1)	-	135	-	57	192
Impairment of exploration and evaluation assets	-	-	-	-	-
Operating loss	(2,274)	(2,499)	(149)	9	(4,912)
Loss before taxation	(2,328)	(3,214)	-	9	(5,632)
Assets
Exploration and evaluation assets	-	-	3,468	1,968	5,436
Other intangible assets				1,022	1,022
Goodwill	-	-	-	1,034	1,034
Investments	4,250	-	-	-	4,250
Property, plant and equipment	-	9, 412	-	173	9,585
Inventories	-	221	-	114	335
Trade and other receivables	216	241	-	7	464
Cash	352	38	1	7	399
Total assets	4,818	9,912	3,469	4,327	22,526
Liabilities
Other financial liabilities	2,127	179	-	-	2,306
Borrowings	566	-	-	-	566
Bank overdraft	-	155	-	-	155
Trade and other payables	1,037	2,165	8	214	3,424
Deferred tax	-	-	-	983	983
Loan notes	1,874	-	-	-	1,874
Total liabilities	5,604	2,499	8	1,197	9,308
Net assets	(786)	7,414	3,462	3,130	13,216
Other information
Depreciation	-	(1,566)	-	(18)	(1,584)
Exploration and evaluation additions	-	-	276	1,968	2,244
Other intangible asset additions	-	-	-	1,022	1,022
Property, plant and equipment additions	-	1,070	-	8	1,078
Property, plant and equipment additions - TCT	-	-	-	173	173

 

*Represents 100% of the results and financial position of RHA Tungsten (Private) Limited ("RHA") whereas the Group owns 49%. Non-controlling interests are disclosed in note 33.

**Represents 100% of the results and financial position of TCT Industrias Florestais Limitada ("TCT IF") whereas the Group controls 52%. Non-controlling interests are disclosed in note 33.

(1)  RHA Revenue is generated from sales to one customer, in line with RHA's off-take agreement, whilst TCT Revenue is generated from the sale of forestry products and the provision of hospitality services.

By operating segment	Unallocated Corporate	RHA Tungsten Mine, Zimbabwe*	Exploration Zimbabwe	Total
2015	$ 000	$ 000	$000	$ 000
Result
Revenue (1)	-	103	-	103
Impairment of exploration and evaluation assets	-	-	(844)	(844)
Operating loss	(2,356)	(2,910)	(877)	(6,143)
Loss before taxation	(4,018)	(2,967)	(877)	(7,862)
Assets
Exploration and evaluation assets	-	-	3,192	3,192
Investment	4,000	-	-	4,000
Property, plant and equipment	-	9,918	-	9,918
Inventories	-	183	-	183
Financial assets	328	353	-	681
Cash	44	-	1	45
Total assets	4,372	10,454	3,193	18,019
Liabilities
Bank overdraft	-	62	-	62
Segment liabilities	584	3,164	36	3,784
Other financial liabilities		190	-	190
Borrowings	505	303	-	808
Loan notes	1,230	-	-	1,230
Derivative financial liability	194	-	-	194
Total liabilities	2,513	3,719	36	6,268
Net assets	1,859	6,735	3,157	11,751
Other information
Depreciation	-	(714)	-	(714)
Exploration and evaluation additions	-	885	-	885
Property, plant and equipment additions	-	5,937	-	5,937

*Represents 100% of the results and financial position of RHA Tungsten (Private) Limited whereas the Group owns 49%. Non-controlling interests are disclosed in note 33.

(1)         Revenue is generated from sales to one customer, in line with RHA's off-take agreement.

 

2016 $ 000

2015 $ 000

7.         Cost of sales

Mining contractor	378	868
Staff costs	239	319
Consumables	87	203
Equipment hire and maintenance	100	130
Mining services	8	60
Plant services	9	46
Selling costs	37	51
E&E development costs	11	-
Inventory adjustment	(219)	(121)
	650	1,556

 

Cost of sales comprises production costs in both RHA Tungsten (Pvt) Limited and TCT Industrias Florestais Limitada.

 

8.         Administrative expenses

	2016 $ 000	2015 $ 000
Staff costs	462	655
Consulting and advisory fees	726	804
Directors' fees	59	145
Audit, accounting and legal fees	550	433
Marketing and public relations	99	107
Travel	273	265
Security costs	58	40
Vehicle operating costs	26	31
Insurance	61	40
Office and administration	290	264
Foreign exchange losses	61	16
Exploration costs expensed	-	24
Share based payment (notes 28 and 29)	204	308
	2,869	3,132

 

 

 

9.         Directors' remuneration

Directors' remuneration		300		487
2016	Directors' Fees $000		Consultancy Fees $ 000		Total   $ 000
Executive Directors
George Roach	-		180		180
Pamela Hueston (*)	-		85		85
Non-Executive Directors
John (Ian) Stalker	20		-		20
Michael Foster	15		-		15
	35		265		300

 

2015	Directors' Fees $000	Consultancy Fees $ 000	Total   $ 000
Executive Directors
George Roach	-	180	180
Pamela Hueston	5	180	185
Non-Executive Directors
John (Ian) Stalker	75	-	75
Neil Herbert	21	-	21
Michael Foster (*)	26	-	26
	127	360	487

(*)  These directors were not employed during the full financial year.

The Directors' fees disclosed in note 8 herein include $23,750 (31 December 2015: $15,000) being the fees paid to Directors of RHA Tungsten (Pvt) Limited, who are not directors of the parent company.

The 2016 Directors fees noted above remain unpaid at the financial year-end.

No pension benefits are provided for any Directors.

10.       Finance costs

	2016 $ 000	2015 $ 000
Interest charged by suppliers	138	57
Interest on borrowings	81	35
Derivative financial liability transaction costs	423	1,567
Unwinding of discount on provisions	74	35
Interest on finance lease	5	25
	721	1,719

 

11.       Taxation

Taxation charge for the year	-	-

There is no taxation charge in the year ended 31 December 2016 (31 December 2015: Nil). As the Group is an international Business Group, the British Virgin Islands imposes no corporate taxes or capital gains tax. However, the Group may be liable for taxes in the jurisdictions of the underlying operations.

There are no recognised tax assets in respect of accumulated losses in West Africa or Zimbabwe.  The Group has incurred tax losses; however a deferred tax asset has not been recognised in the accounts due to the unpredictability of future profit streams.

Deferred tax

	2016 $ 000	2015 $ 000
Deferred tax TCT	983	-
	983	-

 

12.       Earnings (Loss) per share

The calculation of earnings (loss) per share is based on the income (loss) after taxation divided by the weighted average number of shares in issue during the year:

	2016	2015
Net loss attributable to owners of the parent ($000)	(3,405)	(5,992)
Weighted average number of Ordinary Shares in calculating basic earnings per share ('000)	1,798,808	655,650
Basic income (loss) per share (US cents)	(0.2c)	(0.1c)
Diluted income (loss) per share (US cents)	(0.2c)	(0.1c)

As the Group incurred a loss for the year, there is no dilutive effect from share options and warrants in issue or the shares issued after the reporting date.

13.       Intangible assets excluding goodwill

				2016 $ 000			2015 $ 000
	Exploration and evaluations assets			5,436			3,192
	Other intangible assets			1,022			-
				6,458			3,192
			Exploration & Evaluation assets $000		Other intangible assets $000		Total $000
Opening carrying value 2015			6,806				6,806
Expenditure on exploration and evaluation			885		-		885
Transferred to property, plant and equipment **			(3,655)		-		(3,655)
Impairment *			(844)		-		(844)
Opening carrying value 2016			3,192		-		3,192
Expenditure on exploration and evaluation			276		-		276
Acquisition - limestone license			1,968		-		1,968
Acquisition - forestry concession			-		1,022		1,021
Closing carrying value 2016			5,436		1,022		6,458

Exploration costs not specifically related to a licence or project or on speculative properties are expensed directly to profit or loss in the year incurred. During the year $ Nil (31 December 2015: $24,000) exploration costs were expensed.

Exploration and evaluation assets at 31 December 2016 relate to the Zulu Lithium and Tantalite Project located in Zimbabwe and the provisional valuation of the limestone licence in Mozambique (2015: Zulu Lithium and Tantalite Project only).

During the year $276,000 (2015: $ Nil) was capitalised to the Zulu Lithium and Tantalite Project. In the prior year $885,000 capitalised to Katete and Tinde was impaired.  Exploration work conducted during the year indicated that both lithium and tantalum recovery may be a viable option. The Group views this project as strategic and exploration work will be continued in the future, cash flow permitting.

The group acquired a limestone licence as part of the TCT acquisition.  The value of this asset has been estimated on a provisional basis because management are assessing the geological potential of the license and determining an appropriate valuation method.

During the year within the TCT acquisition, a forestry concession was acquired, which has been provisionally valued at $1,022,000 (2015: $ Nil) and is further described in note 14 herein.

  * In the prior year capitalised costs relating to the Katete ($717,000) and Tinde ($127,000) assets located in Zimbabwe were impaired. The Tinde Project holds 9 mineral block claims mainly prospective for fluorspar.   The Company plans to retain the claims however there are no immediate or future plans for development whilst the Group focuses its attention on other more prospective projects. The Katete Project holds 25 mineral block claims mainly prospective for rare earth elements. The Group has maintained the four key blocks of claims in the expansive area. The Board of Directors may decide at some future date to explore the properties however as at this time there is no formal exploration plan in place or funding allocated for future development. 

** In the prior year, on the date of commercial viability and technical feasibility the carrying amount of exploration and evaluation assets related to the RHA Tungsten Project was transferred to Property, Plant and Equipment.

 

14.       Business combination and goodwill

Acquisition

In October 2016 the company completed the acquisition of a 52% interest in Mozambique based TCT Industrias Florestais Limitada. TCT owns a substantial limestone deposit located on rail in the Sofala Province of Mozambique and is the holder of the exploration licence together with significant forestry operations.

In accordance with our stated strategy, Premier's business objective is to find, invest and acquire interests in low capex potentially near-term production assets. The TCT limestone project provides this opportunity in a region that the company currently operates and TCT's limestone and timber interests complement the company's current portfolio of natural resource interests.

In accordance with IFRS 3 Business Combinations, all acquired assets and liabilities were recognised at their fair values or provisional fair values on the date of acquisition, with the residual excess of the fair value of the consideration over net assets being recognised as goodwill.

The following table summarises the consideration and fair and provisional fair values of assets acquired and liabilities assumed at the date of acquisition:

		$ 000
Property, plant and equipment *		188
Intangible assets - limestone exploration license **		1,968
Intangible assets - forestry concession ***		1,022
Inventories *		72
Trade receivables and prepayments *		34
Cash and cash equivalents *		25
Trade and other payables *		(225)
Deferred tax liabilities ****		(983)
Fair value of net assets acquired		2,101
Non-controlling interest		(1,008)
Goodwill		1,034
Acquisition cost		2,127

 

*            These assets and liabilities are carried at their fair value

**          The value of this asset has been estimated on a provisional basis because management are assessing the geological potential of the license and determining an appropriate valuation method

***        The value of this asset has been estimated on a provisional basis because management have not yet completed the fair value exercise

****      The deferred tax liability has been calculated based on the applicable tax rate applied to the intangible assets valuation

 

The acquisition cost will be satisfied by either cash or shares, which will be determined by the seller's request (see note 21.2).

 

Net cash outflow arising on acquisition:

		$ 000
Cash consideration paid (less cash retention)		-
Acquisition related costs		(25)
Cash and cash equivalents within the TCT business on acquisition		25
Total net cash outflow on acquisition		-

 

Other costs relating to the acquisition have not been included in the consideration cost.  Directly attributable acquisition costs include external legal and accounting costs incurred in compiling the acquisition legal contracts and the performance of due diligence activity amounted to $25,000.  These costs were converted to equity as per note 25. TCT has a 31 December calendar year end.  In the period between acquisition and 31 December 2016, TCT contributed revenue of $57,000 and net loss before taxation of $13,000.

 

15.       Investments

	2016 $ 000	2015 $ 000
Opening carrying value	4,000	2,500
Fair value of shares on acquisition	250	-
Fair value adjustment	-	1,500
Closing carrying value	4,250	4,000
Reconciliation of movement in investments
Investment in Circum Minerals Limited *	1,400	1,400
Fair value adjustment **	1,100	1,100
Fair value adjustment ***	1,500	1,500
Investment in Casa Mining Limited ****	250	-
Closing carrying value	4,250	4,000

The shares are considered to be level 3 financial assets under the IFRS 13 categorisation of fair value measurements.    

 

* Represents 2 million shares in unlisted entity Circum Minerals Limited ('Circum').

** As Circum is unlisted there are no quoted market prices. Fair value of the shares was therefore estimated using the price at which warrants in Circum shares were exercised by a third party in February 2015 at $1.25 per share.

*** Fair value of the shares was adjusted to the most recent placing price of $2 per share during August 2015.

**** Represents a 4.5% interest in Casa Mining Limited acquired in October 2016. Due to the recent purchase date, no change in fair value has been recognised

The fair value of these available-for-sale investments at 31 December 2016 amounted to $4,250,000 (31 December 2015: $4,000,000). The Directors consider that the carrying amount of investments approximates their fair value.

Subsequent to the yearend Circum Minerals Limited announced a 4.9 billion ton potash resource with seismic data suggesting further potential total resources. Annual low cost, low risk solution mining, scalable production plan, mine gate cash costs projected to be amongst the lowest in the world and the potential for the lowest capital intensity production indicate that potash recovery may be a viable option. 

16.       Property, plant and equipment

	Mine $000	Assets under construction $000	Plant & equipment $000	Land & buildings $000	Total $000
Cost
At 1 January 2015	284	688	165	30	1,167
Additions	3,001	-	2,165	771	5,937
Transfers	3,615	(688)	728	-	3,655
At 31 December 2015	6,900	-	3,058	801	10,759
Additions	842	-	228	8	1,078
Acquisition of TCT	-	-	169	4	173
At 31 December 2016	7,742	-	3,455	813	12,010
Depreciation
At 1 January 2015	-	-	119	8	127
Charge for the year	431	-	242	41	714
At 31 December 2015	431	-	361	49	841
Charge for the year	1,161	-	343	80	1,584
At 31 December 2016	1,592	-	704	129	2,425
Net Book Value
At 31 December 2016	6,150	-	2,751	685	9,585
At 31 December 2015	6,469	-	2,697	752	9,918

 

 

 

 

 

 

 

 

17.       Subsidiaries

Premier had investments in the following subsidiary undertakings as at 31 December 2016, which principally affected the losses and net assets of the Group:

 

Name	Country of incorporation and operation	Proportion of voting interest %	A ctivity
ZimDiv Holdings Limited RRCC Ltd Regent Resources Capital Corporation SAU	Mauritius BVI Togo	100 100 100	Holding Company Holding Company Exploration
G and B African Resources Benin SARL	Benin	100	Exploration
Zulu Lithium Mauritius Holdings Limited R.H.A. Tungsten Mauritius Limited	Mauritius Mauritius	100 100	Holding Company Holding Company
Kavira Minerals Holdings Limited Tinde Fluorspar Holdings Limited Lubimbi Minerals Holdings Limited Gwaaii River Minerals Holdings Limited	Mauritius Mauritius Mauritius Mauritius	100 100 100 100	Holding Company Holding Company Holding Company Holding Company
Zulu Lithium (Private) Limited RHA Tungsten (Private) Limited	Zimbabwe Zimbabwe	100     49*	Exploration Development
Katete Mining (Private) Limited	Zimbabwe	100	Exploration
Tinde Fluorspar (Private) Limited LM Minerals (Private) Limited BM Mining & Exploration (Private) Limited	Zimbabwe Zimbabwe Zimbabwe	100 100 100	Exploration Exploration Exploration
TCT Industrias Florestais Limitada	Mozambique	52**	Forestry and Exploration

* Accounted as a controlled subsidiary, refer note 4 significant accounting judgements, estimates and assumptions - Basis of consolidation.

**   Accounted for as a subsidiary, refer note 3 Basis of consolidation and note 21.2 explaining power of attorney and right to appoint director.

 

18.       Inventories

	2016 $ 000	2015 $ 000
Wolframite concentrate and ore work-in-process	119	120
Mine consumables	102	63
Forestry raw material	20	-
Forestry work-in-progress	74	-
Forestry finished goods	20	-
	335	183

 

 

 

 

 

 

 

19.       Trade and other receivables

	2016 $ 000	2015 $ 000
VAT input tax receivable	199	303
Other receivables	213	284
Prepayments	52	94
	464	681
Current	268	426
Non-current	196	255
	464	681

 

Other receivables at 31 December 2016 include $196,000 (31 December 2015: $255,000) receivable from AgriMinco Corp ('AgriMinco'). The AgriMinco receivable is due on settlement of the Agriminco loan (refer note 22). The Directors consider that the carrying amount of other receivables and prepayments approximates their fair value.

 

In note 34.5 Events after the balance sheet date a settlement agreement has been reached with regard to this receivable and the loan payable.

 

20.       Trade and other payables  

	2016 $ 000	2015 $ 000
Trade payables *	937	1,270
Accruals **	1,443	1,618
Payroll liabilities	235	161
	2,615	3,049

All trade and other payables at 31 December 2016 are due within one year, non-interest bearing, and comprise amounts outstanding for mine purchases and on-going costs, except as described further below. The Directors consider that the carrying amount of trade and other payables approximates their fair value.

* Trade payables include an amount owing to Senet (Pty) Ltd. ("Senet"), for EPCM services relating to the construction of the infrastructure supporting the RHA Tungsten processing plant.  The Company signed an Acknowledgment of Debt and Agreement to Pay on 16 April 2015 on behalf of RHA Tungsten (Private) Limited ("RHA") for all amounts due. All invoices are due within 30 days, after which interest will accrue at an annual interest rate of 25%, compounded daily, with all amounts due by 31 August 2015. On 26 October 2015, the Company agreed an extension of the payment terms with monthly repayments beginning 1 October 2015 and ending 30 April 2016. Senet agreed a reduction in the interest rate charged from the period 1 October 2015 until final settlement at the South African prime lending rate. As at 31 December 2015, the amount owing to Senet is $160,586, including accrued interest.

The full debt to Senet plus interest was settled during the current year.

** In the prior year, amounts owing to JR Goddard Contracting (Pvt) Ltd ("JRG"), the open pit mining contractor for RHA, were co-guaranteed by the Company and attracted interest at a rate of 12% per annum, compounded monthly. The Company entered into an agreement with JRG in September 2015 that JRG would receive no less than $50,000 per month in settlement of outstanding liabilities. At 31 December 2015, the amount owing to JRG was $533,032 including accrued interest. 

On 10 March 2016, the contact with JRG was terminated and the Company entered into a Memorandum of Agreement to settle all outstanding amounts under the contract which was entered into on 9 March 2015. The parties agreed to terminate the open pit contract from 10 March 2016. Amounts owing to JRG as at 11 March 2016 amount to $851,312 including a $247,000 termination benefit and interest but excluding VAT of 15% with first payment deferred to 1 May 2016.  Interest is charged at 12% per annum, compounded monthly.  Repayments are agreed at $54,626 per month for a period of 20 months. At the year-end $655,512 (31 December 2015: $533,032) was outstanding in terms of this Memorandum of Agreement.

21.       Other financial liabilities

21.1      Finance lease

During 2015, the Company entered into a finance lease with Board Market Trading 258 (Pty) Ltd for the purchase of two generators with net book value of $148,779 (31 December 2015: $181,336) to be used at the RHA Tungsten Mine. The finance lease is for a term of 48 months with interest charged at 19.5% per annum with monthly repayment of $5,960 beginning from 1 August 2016. Depreciation charged on the assets financed by leases during the year was $19,457 (31 December 2015: $19,457).

The agreement is classified as a finance lease as the rental period amounts to the estimated useful economic life of the assets concerned and the Group has the right to purchase the assets outright at the end of the minimum lease term by paying a nominal amount.

Future lease payments are due as follows:

2016	Minimum lease payments $000	Interest $000	Present value $000
Not later than one year	50	11	61
Between one year and five years	130	29	159
Later than five years	-	-	-
	180	40	219

 

2015	Minimum lease payments $000	Interest $000	Present value $000
Not later than one year	10	25	35
Between one year and five years	180	40	220
Later than five years	-	-	-
	190	65	255

 

21.2    Acquisition of TCT Industrias Florestais Limitada                         

	2016 $ 000	2015 $ 000
Purchase price of 52% interest (see note 14)	2,127	-
Current	1,320	-
Non-current	807	-
	2,127	-

 

On 31 October 2016 the Company announced it had concluded the public deeds for the assignment of quotas to acquire a 26% interest in TCT IF from Transport Commodity Trading Mozambique Limitada ("TCTM") and a further 26% interest from GAPI Sociedade de Investimentos S.A. ("GAPI"), in aggregate amounting to 52% for a total consideration of US$2.1 million.

Pursuant to the agreement with TCTM as announced on 27 April 2016, and announced as completed in October 2016, the Group obtained control over TCTM's 26% interest in TCT IF (the "TCT Agreement") for a consideration of US$1.1 million, payable in four tranches in either new Premier Ordinary Shares or cash at the election of TCTM.

·     The amended payment tranches are as follows: the first tranche now amounts to US$220,000 and is payable within five working days to TCTM following pending approval by the Mozambican authorities;

·     The second tranche amounts to US$440,000 and is payable within 60 days following the first tranche;

·     The third tranche amounts to US$220,000 and is payable within 90 days following the first tranche;

·     The final tranche amounts to US$220,000 and is payable within 120 days following the first tranche.

Pursuant to the agreement with GAPI, the Group obtained GAPI's 26% interest (the "GAPI Agreement") for a consideration of US$1.0 million, payable in five tranches in either new Premier Ordinary Shares or cash at the election of GAPI.

·     The first tranche amounts to US$220,000 and is payable within five working days to GAPI following pending approval by the Mozambican authorities;

·     The second tranche amounts to US$195,000 and is payable within 13 months following the first tranche;

·     The third tranche amounts to US$195,000 and is payable within 21 months following the first tranche;

·     The fourth tranche amounting to US$195,000 is payable within 29 months following the first tranche;

·     The final tranche amounting to US$195,000 is payable within 36 months following the first tranche.

 

The Original Public Deed Certificates ("Certificates") for both the TCTM Agreement and the GAPI Agreement shall remain in the care of Premier's elected solicitors, until written confirmation is received from either GAPI or TCTM confirming that the final instalment of the purchase price has been received, thereafter, the Certificates will be released to Premier whereby final procedural registration of the assignment of quotas as well as the publication of the amendment of the articles of association of the TCT IF shall be enacted.

 

Furthermore, the Parties have acknowledged and agreed that during the period, Premier shall have an irrevocable power of attorney to permit Premier to participate and vote in all General Assembly meetings on behalf of both parties. Premier shall also be allowed to appoint a representative to the TCT IF's Board of Directors. The company has elected George Roach to TCT IF's Board of Directors. Premier has further been appointed as the manager of TCT IF.

 

22.       Borrowings

	2016 $ 000	2015 $ 000
As at 1 January	808	767
Loans received (1) (2) (3)	-	800
Loans repaid through conversion to equity (1)	(247)	-
Loans capitalised as equity (4)	-	(794)
Accrued interest	5	35
As at 31 December	566	808
Current	566	549
Non-current	-	259
	566	808

Borrowings comprise loans from a related party and a non-related party. Loans from a related party are further disclosed in Note 32, Related Party Transactions.

(1)         On 9 April 2015, the CEO and Chairman George Roach provided a $250,000 bridge loan facility and agreed the repayment and conversion terms of the loan outstanding at 31 December 2014. Together the loans with any accrued interest will become repayable by the Company as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of LIBOR plus 3%. George Roach may elect to convert all or part of the loans into new ordinary shares in the Company at a conversion price that is the lesser of the volume-weighted average price of the ordinary shares for the five trading days immediately prior to the date of conversion or the closing price of the ordinary shares on the date of the loans.

 

On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824 ($247,000) to George Roach for conversion of this loan refer note 25 (27).

 

(2)         On 27 April 2015, AgriMinco Corp ("AgriMinco") provided a $250,000 loan facility. The loan with any accrued interest will become repayable by the Company in 24 months or earlier with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of 5% per annum. AgriMinco may elect to convert all or part of the loan into new units when the loan facility becomes payable. One unit comprises one new ordinary share and one new warrant. The conversion price will be the lesser of the fifteen day volume-weighted average price of the ordinary shares for the two business days immediately prior to the maturity date and the date of a repayment notice, if any. Each new warrant would entitle the unit holder to subscribe for one new ordinary share at an exercise price equivalent to a 20% premium to the conversion price for a period of two years.

 

(3)         On 15 September 2015, the CEO and Chairman George Roach provided a $300,000 loan direct to RHA Tungsten (Pty) Limited ('RHA'). The loan with any accrued interest will become repayable by RHA as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of LIBOR plus 3%.

 

(4)         On 4 December 2015 George Roach converted $650,000 of his loans to Premier into new ordinary shares and on 11 December 2015 Mr Roach converted a further $144,119 of his loans into new ordinary shares (refer note 25). 

 

23.       Provisions

	2016 $ 000	2015 $ 000
Rehabilitation provision As at 1 January	735	700
Unwinding of discount	74	35
As at 31 December	809	735

A provision is recognised for site restoration and decommissioning of current mining activities based on current environmental and regulatory requirements. The net present value of the provision at a discount rate of 10% over an 8 year life of mine amounts to $809,000 (31 December 2015: $735,000) and has been capitalised as an addition to mine costs and depreciated in PPE as explained in the accounting policy note. 

 

 

 

 

24.       Loan notes and derivative financial liabilities

	2016 $ 000	2015 $ 000
Convertible loan notes
As at 1 January	1,230	-
Loans notes issued	2,920	4,005
Loan notes converted (note 25)	(1,523)	(2,495)
Premium on notes converted	-	35
Foreign exchange	(39)	10
Deferred finance costs	(714)	(324)
As at 31 December	1,874	1,230
	2016 $ 000	2015 $ 000
Derivative financial instruments
Derivative financial liability on issue of loan notes	194	1,151
Loan notes issued	-	-
Loan notes converted (note 25)	(199)	(968)
Premium on notes converted	-	5
Foreign exchange	(5)	6
As at 31 December	-	194

Loan notes

On 23 August 2016, the Company entered into an agreement with Darwin whereby Darwin could subscribe for a total of £3.5 million in convertible loan notes in which the Company would receive 90% of the par value of the notes. The loan notes were to be issued in three tranches on fulfilment of certain milestones. The notes will redeem 12 months from the subscription date unless repaid or converted.  As at the reporting date, only tranches 1 and 2 were drawn down and during the year $220,000 of these were converted into equity (refer note 25).  The gross amount of the loans issued can be converted between 105% and 100% of principal into ordinary shares at 90% of the traded share price when certain conditions are met. This conversion option represents a derivative liability of the company that is separately presented on the statement of financial position and fair valued through profit or loss. The directors have concluded that the value of the conversion option is not material and accordingly there is no value presented above.   

During the year under review Darwin converted, in total, $1,523,000 (31 December 2015: $2,495,000) into equity.

The loan notes are secured by a put option held by the loan note holder that would require George Roach to purchase the shares held in Circum Minerals Limited at $2 per share, representing the carrying value of the investment in note 15. This represents a guarantee given by the director and the put option has been valued by a third party at approximately $1.6m.

For details of the fair value hierarchy, valuation techniques, and significant observable inputs related to determining the fair value derivative financial instruments, which are classified in level 2 hierarchy, refer to note 31.

 

Warrant liabilities

The Darwin instruments were issued with warrants equal to 30% of the aggregate par value of the loan notes issued on each of the relevant issue dates with the right to purchase one newly issued ordinary share for each warrant. The warrants have an exercise price of 125% of the initial market price and can be issued within three years and 7 days of the issue date. During the year ended 31 December 2016 Darwin were issued with 77,777,778 warrants in respect of issue date one and 44 million in respect of warrants issued on issue date 2.

For details of the fair value hierarchy, valuation techniques, and significant observable inputs related to determining the fair value derivative financial instruments, which are classified in level 2 hierarchy, refer to notes 29 and 31.

25.       Share capital

Authorised share capital

4 billion (31 December 2015: 2 billion) ordinary shares of no par value.                                                    

Issued share capital

	Number of Shares '000	$ 000
As at 1 January 2015	503,117	16,283
Shares issued on exercise of share options (1)	12,206	-
Shares issued on conversion of loan notes (2)	20,086	229
Shares issued for employee share award (3)	4,000	50
Shares issued on conversion of loan notes (4)	18,519	384
Shares issued on conversion of loan notes (5)	44,444	914
Shares issued on exercising of warrants (6)	9,000	172
Shares issued on exercising of warrants (7)	35,000	688
Shares issued under subscription agreement (8)	22,500	700
Shares issued on exercise of share options (9)	5,537	-
Shares issued on exercise of share options (10)	7,500	135
Shares issued under subscription agreement (11)	21,000	434
Shares issued under indigenisation agreement (12)	6,596	100
Shares issued on conversion of loan notes (13)	81,572	768
Shares issued on conversion of loan notes (14)	118,536	854
Shares issued under indigenisation agreement (15)	7,017	50
Shares issued on conversion of loan (16)	79,945	650
Shares issued under subscription agreement (17)	30,000	171
Shares issued on conversion of loan (18)	21,088	144
Shares issued on conversion of loan notes (19)	57,586	314
As at 31 December 2015	1,105,249	23,040

 

Shares issued on conversion of loan notes ( 20 )	40,000	189
Shares issued on conversion of loan notes ( 21 )	30,303	144
Shares issued under subscription agreement ( 22 )	4,615	17
Shares issued under subscription agreement ( 23 )	7,692	29
Shares issued under subscription agreement ( 24 )	3,000	11
Shares issued under subscription agreement ( 25 )	50,000	190
Shares issued under subscription agreement ( 26 )	54,000	205
Shares issued on conversion of loan ( 27 )	47,479	247
Shares issued on conversion of loan notes ( 28 )	77,954	267
Shares issued on conversion of loan notes ( 29 )	53,976	204
Shares issued on conversion of loan notes ( 30 )	25,703	97
Shares issued on conversion of loan notes ( 31 )	42,818	240
Shares issued on conversion of loan notes ( 32 )	59,898	462
Shares issued on conversion of loan notes ( 33 )	36,860	285
Shares issued under subscription agreement ( 34 )	100,000	696
Shares issued under subscription agreement ( 35 )	146,667	1,584
Shares issued under subscription agreement ( 36 )	93,750	366
Shares issued on conversion of loan notes ( 37 )	79,397	221
Shares issued on conversion for fees ( 38 )	25,763	88
Shares issued on conversion for fees ( 39 )	19,214	75
Shares issued on conversion for fees ( 40 )	7,273	24
As at 31 December 2016	2,111,611	28,680

 

(1)        On 10 February 2015, the Company issued 12,206,271 shares on exercise of share options under the Group's share option plan. The share options had an exercise price of $nil. The fair value of the share options has been credited to retained earnings.

(2)        On 4 March 2015, the Company issued 20,085,699 shares to Darwin Strategic Limited on conversion of £150,000 of loan notes (refer note 23) at an issue price of 0.7468p per share.

(3)        On 13 March 2015, the Company issued 4,000,000 shares at nil cost to the Company's Chief Operating Officer in conjunction with an employee share award. The average price of the Company's shares on issue date was 0.85p per share valuing the award at £34,000 ($50,170).

(4)        On 30 April 2015, the Company issued 18,518,518 shares to Darwin Strategic Limited on conversion of £250,000 of loan notes (refer note 23) at an issue price of 1.35p per share.

(5)        On 5 June 2015, the Company issued 44,444,444 shares to Darwin Strategic Limited on conversion of £600,000 of loan notes (refer note 23) at an issue price of 1.35p per share.

(6)        On 5 June 2015, the Company issued 9,000,000 shares to YAGM on the exercising of warrants at an exercise price of 1.25p per share.

(7)        On 24 June 2015, the Company issued 35,000,000 shares to Darwin Strategic Limited on the exercising of warrants at an exercise price of 1.25p per share.

(8)        On 9 July 2015, the Company issued 22,500,000 shares under a subscription agreement at a price of 2p per share.

(9)        On 10 July 2015, the Company issued 5,536,864 shares on exercise of share options under the Group's share option plan. The share options had an exercise price of $nil. The fair value of the share options has been credited to retained earnings.

(10)     On 29 July 2015, the Company issued 7,500,000 shares on exercise of share options under the Group's share option plan. The share options had an exercise price of 1.15p per share. 

(11)     On 22 September 2015, the Company issued 21,000,000 shares under a subscription agreement at a price of 1.35p per share.

(12)     On 2 October 2015, the Company issued 6,596,300 shares to the National Indigenisation Economic and Empowerment Fund ('NIEEF') in settlement of the first tranche payment of $100,000 on the RHA Tungsten Project reaching commercial production. The shares were issued at a price of 1p per share.

(13)     On 23 October 2015, the Company issued 81,572,190 shares to Darwin Strategic Limited on conversion of £500,000 of loan notes (refer note 23) at an issue price of 0.613p per share.

(14)     On 30 November 2015, the Company issued 118,535,383 shares to Darwin Strategic Limited on conversion of £567,500 of loan notes (refer note 23) at an issue price of 0.47876p per share.

(15)     On 2 December 2015, the Company issued 7,017,447 shares to NIEEF in settlement of the second payment of $50,000 in respect of the RHA Tungsten Project. The shares were issued at a price of 0.47p per share.

(16)     On 4 December 2015, the Company issued 79,945,167 shares at an issue price of 0.538p per share for a total value of £430,105 ($650,000) to George Roach for conversion of a portion of his loans (refer note 21).

(17)     On 10 December 2015, the Company issued 30,000,000 shares under a subscription agreement at a price of 0.375p per share.

(18)     On 11 December 2015, the Company issued 21,087,680 shares at an issue price of 0.4505p per share for a total value of £95,000 ($144,119) to George Roach for conversion of a portion of his loans (refer note 21).

(19)     On 16 December 2015, the Company issued 57,586,206 shares to Darwin Strategic Limited on conversion of £208,750 of loan notes (refer note 23) at an issue price of 0.3625p per share.

(20)     On 13 January 2016, the Company issued 40,000,000 shares to Darwin Strategic Limited on conversion of £132,000 of loan notes (refer note 23) at an issue price of 0.33p per share.

(21)     On 13 January 2016, the Company issued 30,303,030 shares to Darwin Strategic Limited on conversion of £100,000 of loan notes (refer note 23) at an issue price of 0.33p per share.

(22)     On 29 January 2016, the Company issued 4,615,386 shares under a subscription agreement at a price of 0.26p per share.

(23)     On 29 January 2016, the Company issued 7,692,308 shares under a subscription agreement at a price of 0.26p per share.

(24)     On 29 January 2016, the Company issued 3,000,000 shares under a subscription agreement at a price of 0.26p per share.

(25)     On 29 January 2016, the Company issued 50,000,000 shares under a subscription agreement at a price of 0.26p per share.

(26)     On 29 January 2016, the Company issued 54,000,000 shares under a subscription agreement at a price of 0.26p per share.

(27)     On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824 ($247,000) to George Roach for conversion of a portion of his loans (refer note 21).

(28)     On 12 February, the Company issued 77,954,475 shares to Darwin Strategic Limited on conversion of £210,000 of loan notes (refer note 23) at an issue price of 0.269388p per share.

(29)     On 17 February, the Company issued 53,975,695 shares to Darwin Strategic Limited on conversion of £157,500 of loan notes (refer note 23) at an issue price of 0.291798p per share.

(30)     On 17 February, the Company issued 25,702,712 shares to Darwin Strategic Limited on conversion of £75,000 of loan notes (refer note 23) at an issue price of 0.291798p per share.

(31)     On 19 February, the Company issued 42,817,855 shares to Darwin Strategic Limited on conversion of £175,000 of loan notes (refer note 23) at an issue price of 0.408708p per share.

(32)     On 22 February, the Company issued 59,897,676 shares to Darwin Strategic Limited on conversion of £325,000 of loan notes (refer note 23) at an issue price of 0.542592p per share.

(33)     On 24 February, the Company issued 36,860,109 shares to Darwin Strategic Limited on conversion of £200,000 of loan notes (refer note 23) at an issue price of 0.542592p per share.

(34)     On 29 February 2016, the Company issued 100,000,000 shares under a subscription agreement at a price of 0.5p per share.

(35)     On 26 April 2016, the Company issued 146,666,667 shares under a subscription agreement at a price of 0.75p per share.

(36)     On 18 October 2016, the Company issued 93,750,000 shares under a subscription agreement at a price of 0.32p per share.

(37)     On 23 November, the Company issued 79,396,838 shares to Darwin Strategic Limited on conversion of £250,000 of loan notes (refer note 23) at an issue price of 0.314874p per share.

(38)     On 21 December 2016, the Company issued 25,763,185 shares at an issue price of 0.275p per share for a total value of £70,849 ($87,684) for conversion of Directors fees.

(39)     On 21 December 2016, the Company issued 19,213,580 shares at an issue price of 0.3162p per share for a total value of £60,753 ($75,190) to Afmine for conversion of fees.

(40)     On 22 December 2016, the Company issued 7,272,727 shares at an issue price of 0.275p per share for a total value of £20,000 ($24,513) to Sam Levy for conversion of fees.

 

Reconciliation to balance as stated in the consolidated statement of financial position

	2016	2015
	$ 000	$ 000
As at 1 January	21,469	14,792
Issued share capital	5,640	6,757
Share issue costs	(253)	(80)
As at 31 December	26,856	21,469

 

26.       Merger reserve

		2016			2015
		$ 000			$ 000
	Merger reserve *		(176)	(176)

* Relates to the agreement to issue shares to acquire 100% of the shares in ZimDiv Holdings entered into on 4 December 2012.

 

27.       Foreign exchange reserve

	2016	2015
	$ 000	$ 000
As at 1 January 2015	349	299
Change in reserves during the year	(65)	50
As at 31 December 2016	284	349

28.       Share based payment reserve and warrant options

		2016	2015
		$'000s	$'000s
Share options and warrants outstanding beginning of year		1,079	1,118
	Share options granted	78	258
	Share options exercised	-	(662)
	Warrant options granted	127	797
	Warrant options exercised	-	(432)
Share options and warrants outstanding end of year		1,284	1,079
No share options or warrants expired during the year.

29.       Share based payments

Under IFRS 2 "Share Based Payments", the Group determines the fair value of shares, options and warrants issued to Directors and Employees as remuneration and Consultants and Advisors as consideration for their services, and recognises an expense in profit or loss, a deduction from equity or an addition to intangible assets depending on the nature of the services received.  A corresponding increase is recognised in equity in the share based payment reserve.

Details of share issues are provided in note 25 and details of share options and warrants are set out below.

Share Options

The Company adopted a new incentive share option plan (the 'Plan') during 2012. The essential elements of the Plan provide that the aggregate number of common shares of the Company's capital stock issuable pursuant to options granted under the Plan may not exceed 15% of the issued and outstanding Ordinary Shares at the time of any grant of options. Options granted under the Plan will have a maximum term of 10 years. All options granted to Directors and management are subject to vesting provisions of one to two years.

The Company has granted the following share options during the years to 31 December 2016:

Issued to	Date Granted	Vesting Term	Number of Options Granted '000	Exercise Price	Expiry Date	Estimated Fair Value
Employees and consultants	10/02/2011	1 year	2,250	1.135c	09/02/2014	0.87c
Directors	04/12/2012	See 1 below	20,386	Nil	03/12/2022	1.11p
Directors	04/12/2012	See 2 below	20,386	2p	03/12/2022	1.85p
Employees and associates	04/12/2012	See 3 below	5,536	Nil	03/12/2022	1.85p
Directors	29/07/2014	See 4 below	6,000	1.15p	28/07/2024	1.15p
Directors	29/07/2014	See 5 below	6,000	1.50p	28/07/2024	1.15p
Management	29/07/2014	See 4 below	6,500	1.15p	28/07/2024	1.15p
Management	29/07/2014	See 5 below	6,500	1.50p	28/07/2024	1.15p
Directors	13/03/2015	See 4 below	2,000	0.9p	12/03/2025	0.67p
Directors	13/03/2015	See 5 below	2,000	1.17p	12/03/2025	0.64p
Management	13/03/2015	See 4 below	3,250	0.9p	12/03/2025	0.67p
Management	13/03/2015	See 5 below	3,250	1.17p	12/03/2025	0.64p
Totals			84,058

1.     These share options vest on the two-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee's period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.

2.     These share options vest in equal instalments annually on the anniversary of the grant date over a two year period. The options are exercisable at any time after vesting during the grantee's period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.

3.     These share options vested on the grant date. The options are exercisable at any time after vesting during the grantee's period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.

4.     These share options vest on the one-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee's period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.

5.     These share options vest on the two-year anniversary of the grant date. The options are exercisable at any time after vesting during the grantee's period as an eligible option holder, and must be exercised no later than 10 years after the date of grant, after which the options will lapse.

No options were granted during the year ended 31 December 2016 (31 December 2015: 10,500,000), however due to the two year vesting period a $78,000 charge (31 December 2015: $258,000) was recognised in respect of the above option schemes.

The fair value of the options granted during the year ended 31 December 2016 was $ nil (31 December 2015: $102,000). The assessed fair value of options granted to directors and management 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 price volatility of the underlying share, the expected dividend yield and the risk-free rate interest rate for the term of the option. 

The Group has the following share options outstanding:

Grant Date	Expiry Date	Exercise Price	Number of options outstanding '000	Number of options vested and exercisable '000
04/12/2012	03/12/2022	Nil	2,013	2,013
04/12/2012	03/12/2022	2p	12,458	12,458
29/07/2014	28/07/2024	1.15p	3,000	3,000
29/07/2014	28/07/2024	1.50p	10,500	10,500
13/03/2015	12/03/2025	0.9p	5,250	5,250
13/03/2015	12/03/2025	1.17p	5,250	-
			38,471	33,221

A summary of the status of the Group's share options as of 31 December 2016 and changes during the year are as follows:

	2016			2015
	Shares '000	Weighted Average Exercise Price		Shares '000	Weighted Average Exercise Price
Options outstanding, beginning of year	38,471	1.15p		53,215	1.05p
Granted	-	-		10,500	0.41p
Exercised	-	-		(25,244)	0.34p
Options outstanding, end of year	38,471	1.15p		38,471	1.15p

No share options were cancelled and expired during the year.

Warrants

During the year the Company granted 144,777,778 warrants (31 December 2015: 83,684,382) over Ordinary Shares.

Issued to	Date Granted	Number of Warrants Issued '000	Exercise Price	Expiry Date
Advisors	04/12/2012	7,017	4p	03/12/2017
Funders	28/01/2014	9,000	1.25p	27/01/2017
Funders	02/02/2015	40,000	1.25p	09/02/2018
Funders	28/04/2015	16,674	2.96875p	04/05/2018
Subscribers	09/07/2015	1,500	3p	08/07/2018
Funders	15/09/2015	3,559	1.4047p	22/09/2017
Funders	09/10/2015	21,951	1.025p	16/10/2018
Funders	23/08/2016	77,778	0.8437p	29/08/2019
Advisors	20/09/2016	23,000	0.8p	19/09/2019
Funders	19/12/2016	44,000	0.375p	26/12/2019
Totals		200,479

 

The fair value of the warrants granted to advisors during the year ended 31 December 2016 was $127,000 (31 December 2015: $715,000). The fair value of the warrants issued to funders for the year ended 31 December 2016 was $562,000 and is shown separately on the statement of financial position (31 December 2015: nil).

The following table lists the inputs into the valuation model for the year to 31 December 2016:

				23 August 2016 issue	20 September 2016 issue	19 December 2016  issue
Dividend yield (%)				-	-	-
Expected volatility (%)				203.0	206.0	214.0
Risk-free interest rate (%)				0.56	1.05	1.40
Share price at grant date				0.475p	0.475p	0.250p
Exercise price				0.8437p	0.375p	0.800p

Re-set provisions

The warrants attached to the Darwin loan notes issued in 2016 contain certain re-set provisions as to exercise price and/or number of warrants issued depending on certain conditions. Any share subscriptions priced at a price lesser than the warrant exercise price will trigger a re-set of the exercise price to the lower share subscription price. This occurred on 19 December 2016. Therefore, the warrants exercise price was re-set for all remaining Darwin warrants issued under the loan notes to a new exercise price of 0.375p being the lowest subscription price on 16 December 2016. 

A summary of the status of the Company's share warrants as of 31 December 2016 and changes during the year are as follows:

	2016 '000	2015 '000
Warrants outstanding, beginning of year	55,701	16,017
Granted	144,778	83,684
Expired	-	-
Exercised	-	(44,000)
Warrants outstanding, end of year	200,479	55,701

 

30.       Notes to the statement of cash flows

	2016 $ 000	2015 $ 000
Loss before tax	(5,632)	(7,862)
Adjustments for:
Depreciation and amortization	1, 584	714
Impairment of exploration and evaluation assets	-	844
Share of Joint Venture results	-	-
Foreign exchange	-	16
Finance costs	721	1,719
Fees settled in shares	187	-
Share based payments	204	308
Operating cash flows before movements in working capital	(2,936)	(4,261)
Increase in inventories	(152)	(183)
Decrease/(increase) in receivables	217	(409)
(Decrease) / increase in payables	(615)	1,754
Net cash (outflow) from operating activities	(3,486)	(3,099)

Cash and cash equivalents comprise cash at bank, bank overdrafts and short term bank deposits with an original maturity of three months or less. The carrying value of these assets is approximately equal to their fair value.

 

31.       Financial instruments

The Group uses financial instruments comprising cash, receivables, available-for-sale assets (investments in Circum and Casa shares), bank overdraft, payables, borrowings, loan notes, and other financial liabilities. Cash balances are held in Sterling, US Dollars and the Euro.

The Group has a policy of not hedging and therefore takes market rates in respect of foreign exchange risk. However, rates are monitored closely by management.

Financial assets and liabilities

2016	Available-for-sale financial assets $ 000	Loans and receivables $ 000	Financial liabilities at amortised cost $ 000	Financial liabilities at fair value through profit or loss $ 000	Total $ 000
Trade and other receivables	-	464	-	-	464
Available-for-sale assets	4,250	-	-	-	4,250
Cash and cash equivalents	-	399	-	-	399
	4,250	863	-	-	5,113
Bank overdraft	-	-	155	-	155
Trade payables	-	-	937	-	937
Accrued liabilities	-	-	1,443	-	1,443
Payroll liabilities	-	-	235	-	235
Borrowings	-	-	566	-	566
Loan notes	-	-	1,874	-	1,874
Other financial liabilities	-	-	2,307	-	2,307
	-	-	7,517	-	7,517
2015	Available-for-sale financial asset $ 000	Loans and receivables $ 000	Financial liabilities at amortised cost $ 000	Financial liabilities at fair value through profit or loss $ 000	Total $ 000
Trade and other receivables	-	284	-	-	284
Investment	4,000	-	-	-	4,000
Cash and cash equivalents	-	45	-	-	45
	4,000	329	-	-	4,329
Bank overdraft	-	-	62	-	62
Trade payables	-	-	1,270	-	1,270
Accrued liabilities	-	-	1,618	-	1,618
Payroll liabilities	-	-	161	-	161
Borrowings	-	-	808	-	808
Loan notes	-	-	1,230	-	1,230
Derivative financial liability	-	-	-	194	194
Other financial liabilities	-	-	190	-	190
	-	-	5,339	194	5,533

Valuation techniques and assumptions applied for the purposes of measuring fair value

The   fair value of cash and receivables and liabilities approximates the carrying values disclosed in the financial statements.

The fair value of available-for-sale financial assets is estimated by using other readily available information. As the Circum and Casa shares are in privately held exploration companies, the fair values were estimated using observable placing prices where available or movements in the share price of comparable listed companies.

The fair value of the derivative instruments is calculated using the value of the convertible loan note in the absence of the conversion features and the likelihood of default. This bond component of the convertible loan note has a value equal to the sum of the discounted interest payments and capital redemptions on the note. These cash flows are typically discounted using a risk free discount rate.

The embedded derivative represents the additional value of the conversion features on the note. The value depends on the probability of the conversion triggers being triggered and the expected payoff under that scenario. The valuation of the embedded derivative requires the estimation of the probability of default and the probability of the conversion triggers being triggered at each date where the company is contracted to redeem the notes. The value of the embedded derivative is the discounted probability weighted payoff under the different conversion trigger scenarios.

Capital management

The Group manages its capital resources to ensure that entities in the Group will be able to continue as a going concern, while maximising shareholder return.

The capital structure of the Group consists of equity attributable to shareholders, comprising issued share capital and reserves. The availability of new capital will depend on many factors including a positive mineral exploration environment, positive stock market conditions, the Group's track record, and the experience of management. There are no externally imposed capital requirements.  The Directors are confident that adequate cash resources exist or will be made available to finance operations but controls over expenditure are carefully managed. 

Foreign currency risk

The Group undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fluctuations arise.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

	Liabilities			Assets
		2016 $ 000	2015 $ 000	2016 $ 000	2015 $ 000
Sterling		189	275	350	21
Euro ( € )		163	168	1	1
Canadian dollar (CDN$)		-	21	-	-
South African Rand (ZAR)		32	51	-	-
Mozambique metical (MZM)		234	-	3
		618	515	354	22

 

The presentation currency of the Group is US dollars.

The Group is exposed primarily to movements in USD, the currency in which the Group receives most of its funding, against other currencies in which the Group incurs liabilities and expenditure. 

 

Sensitivity analysis

Financial instruments affected by foreign currency risk include cash and cash equivalents, other receivables, trade and other payables and convertible loan notes. The following analysis, required by IFRS 7 Financial Instruments: Disclosures, is intended to illustrate the sensitivity of the Group's financial instruments (at year end) to changes in market variables, being exchange rates.

The following assumptions were made in calculating the sensitivity analysis:

·     All income statement sensitivities also impact equity

·     Translation of foreign subsidiaries and operations into the Group's presentation currency have been excluded from this sensitivity as they have no monetary effect on the results

 

Income Statement / Equity

			2016				2015
			$'000s				$'000s
Exchange rates:
+10% US$ Sterling (GBP)		23					38
-10% US$ Sterling (GBP)		(23)					(38)
+10% US$ Euro (€)		17					18
-10% US$ Euro (€)		(17)					(18)
+10% US$ South African Rand (ZAR)		0.2					0.3
-10% US$ South African Rand (ZAR)		(0.2)					(0.3)
+10% US$ Canadian dollar (CDN$)		0					2.1
-10% US$ Canadian dollar (CDN$)		(0)					(2.1)
+10% Mozambique metical (MZM)		23					-
-10% Mozambique metical (MZM)		(23)					-

 

The above sensitivities are calculated with reference to a single moment in time and will change due to a number of factors including:

·     Fluctuating other receivable and trade payable balances

·     Fluctuating cash balances

·     Changes in currency mix

 

Credit risk

Financial instruments that potentially subject the Group to a significant concentration of credit risk consist primarily of trade debtors and cash and cash equivalents. The Group limits its exposure to credit loss by placing its cash with major financial institutions. As at 31 December 2016, the Group held $399, 000 in cash and cash equivalents (2015: $45,000) and had a $155,000 bank overdraft (2015: $62,000).

Liquidity risk

Some of the Group's financial liabilities are classified as current and some are non-current. The Group intends to settle these liabilities from revenue generated from sales production, sale of assets and working capital.

Market risk

The Group's investments in available-for-sale financial assets comprise small shareholdings in unlisted companies. The shares are not readily tradable and any monetisation of the shares is dependent on finding a willing buyer.  

32.       Related party transactions

Borrowings

1.          On 9 April 2015, the CEO and Chairman George Roach provided a $250,000 bridge loan facility and agreed the repayment and conversion terms of the loan outstanding at 31 December 2014. Together the loans with any accrued interest are repayable by the Company as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of LIBOR plus 3%. George Roach may elect to convert all or part of the loans into new ordinary shares in the Company at a conversion price that is the lesser of the volume-weighted average price of the ordinary shares for the five trading days immediately prior to the date of conversion or the closing price of the ordinary shares on the date of the loans.

On 29 January 2016, the Company issued 47,479,109 shares at an issue price of 0.364p per share for a total value of £172,824 ($247,000) to George Roach for conversion of this loan refer note 25 (27).

2.          On 15 September 2015, through the Company the CEO and Chairman George Roach provided a $300,000 loan direct to RHA Tungsten (Pty) Limited ('RHA'). The loan with any accrued interest will become repayable by RHA as soon as all other third party indebtedness has been repaid in full or with the prior consent of all third party lenders. The loans are unsecured and interest will accrue at the rate of LIBOR plus 3%.

The balance of the loans to Premier at 31 December 2016 was $566,000 (refer note 22).

Subsequent to the reporting date, Mr. Roach converted the balance of his loans plus accrued interest to Premier into equity (refer note 34).  During the 2016 financial year, Mr. Roach earned a total of $7,000 (31 December $27,000) in interest on his loans.

Supplies and Services    

During 2016 administration fees of $36,500 (2015: $35,500) were paid by Premier to a trading business in which Mr G Roach, Director is the beneficial owner. Administration fees comprised allocated rental costs and administrative support services.  At the financial year-end nothing remains outstanding of this amount (31 December 2015: $8,500).

During 2016 capital goods, consumables and small equipment for RHA totalling $38,380 (31 December 2015: $36,624) was purchased on behalf of RHA by a business in which Mr G Roach, Director is a beneficial owner. At the financial year end $20,016 remains in creditors.

Put option

Premier entered into a put option agreement in respect of its holding of shares in Circum Minerals Limited (Circum) with George Roach. Under the Circum Agreement, in the event that:

•            Premier fails to meet its obligations under the JRG Memorandum;

•            JRG exercises its rights under the surety against George Roach and;

•            Premier fails to find an alternative buyer for its Circum shares,

Then the company may require George Roach to purchase such number of Circum shares at a price of US$2 per Circum Share (being the fair market value of the Circum shares in the audited results for the year ended 31 December 2015) equal to the total amount then owed to JRG.

Remuneration of key management personnel

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

	2016 $ 000	2015 $ 000
Consulting fees	265	360
Staff costs	80	206
Directors' fees	35	127
Share based payments	-	50
	380	743

 

33.       Non-controlling interests

				2016 $ 000			2015 $ 000
	At 1 January		(1,497)			373
	Non-controlling interest at acquisition		1,008			-
	Non-controlling interest in share of losses for the year - RHA		(2,209)			(1,870)
	Non-controlling interest in share of losses for two months ended December 2016 - TCT		(18)			-
	At 31 December		(2, 716)			(1,497)

The share of losses in the year represents the losses attributable to non-controlling interests in RHA Tungsten for the year and for the two months ended 31 December 2016 for TCT IF.

 

34.       Events after the reporting date

34.1    Conversion of loan note and issue of equity

·      On 3 January 2017 the company received a notice of exercise by Darwin Capital Limited ("Darwin") to convert 19 loan notes with an aggregate value of £475,000 into equity ("Conversion Notice"). As a result, the Company issued 204,121,975 new ordinary shares to Darwin at an issue price of 0.232704p per Share.

 

·      On 19 January 2017 the Company issued 20 Loan Notes of the available 48 Loan notes as part of the Issue Date Two and Three of the Loan Note agreement with Darwin, full terms of which were set out in the announcement dated 22 August 2016. Darwin was issued with 42,857,143 warrants at 0.35 pence per warrant as part of the subscription.

 

·      On 31 January 2017 the Company converted 16 loan notes with an aggregate par value of £400,000 into equity in relation to the convertible loan notes announced on 23 August 2016. The Conversion Notice was received in aggregate for £400,000 of the loan notes. The Company therefore issued 196,430,851 new ordinary shares to Darwin at an issue price of 0.203634p per Share.

 

·      On 1 February 2017 the Company announced that it had received a notice of exercise by Darwin to convert a further 16 loan notes with an aggregate par value of £400,000 into equity in relation to the convertible loan notes announced on 22 August 2016. The Conversion Notice was received in aggregate for £400,000 of the loan notes. The Company therefore issued 196,430,851 new ordinary shares to Darwin at an issue price of 0.203634p per Share.

 

·      On 3 February 2017 the Company announced that it had received a notice of exercise by Darwin to convert a further 24 loan notes with an aggregate par value of £600,000 into equity in relation to the convertible loan notes announced on 22 August 2016. The Conversion Notice was received in aggregate for £600,000 of the loan notes. The Company therefore issued 294,646,277 new ordinary shares to Darwin at an issue price of 0.203634p per Share.

 

·      On 7 February 2017 the company, announced that it had received a notice of exercise by Darwin to convert the remaining 27 loan notes with an aggregate par value of £675,000.00 into equity in relation to the convertible loan notes announced on 22 August 2016. The Conversion Notice was received in aggregate for £675,000.00 of the loan notes the Company therefore issued 317,844,496 new ordinary shares to Darwin at an issue price of 0.212368p per Share.

 

34.2      Settlement of Loan Facility with AgriMinco

As announced on 27 April 2015 the Company had entered into a two year US$250,000 loan facility with AgriMinco Corp. ("Loan Facility"). On 19 January 2017, Premier and AgriMinco agreed to settle the Loan Facility, subject to TSX Exchange approval, whereby the outstanding amount owed by Premier under the Loan Facility (amounting to US$260,922.39 including accrued interest) would be offset by the historic amounts owed by AgriMinco (amounting to US$195,578.88). The net balance owed by Premier amounted to US$65,343.51 and Premier agreed to repay AgriMinco in four equal instalments of US$12,335.88 from 15 March 2017, with an initial amount of US$16,000 on execution of the settlement agreement.

 

34.3      Placings

On 30 January 2017 the company issued 536,842,105 new ordinary shares to raise £1,020,000 before costs (the "Placing") through a subscription.

 

On 24 March 2017 the company announced that it had raised gross proceeds of £2,011,396.27 via an offer on PrimaryBid.com through the issue of 402,279,254 ordinary shares at an issue price 0.5p each

 

34.4      Loan Agreement with George Roach and Loan Agreement Conversion Rights

On 15 September 2015, George Roach provided a US$300,000 loan direct to Premier for the use at RHA Tungsten (Pty) Limited ("RHA"). The loan is unsecured and accrues interest at a rate of 3% per annum. As at 28 March 2017, the loan and accrued interest totalled US$ 309,457. On 28 March 2017 the Company announced that it had amended the terms of the existing loan agreement ("Loan") with George Roach through the grant of conversion rights. The Board granted conversion rights in respect of the Loan, which can now be converted into new ordinary shares at a price of 0.5p per new ordinary share.

 

34.5      Conversion of Directors fees into equity 

On 31 March 2017  the company announced that certain of its Directors (the "Relevant Directors") have accepted new ordinary shares in the Company ("Ordinary Shares") as payment for their services ("Director Fees") from year ending December 2016 (the "Relevant Period"). The Company approved the conversion of £30,000, representing Director Fees owed to the Relevant Directors covering the Relevant Period into 6,000,000 new Ordinary Shares which were issued at 0.5p per Ordinary Share.

 

35.          Ultimate controlling party

There is no single ultimate controlling party.

 

ENDS