SGZ Cononish Limited - Accounts

SGZ Cononish Limited - Accounts

SGZ CONONISH LIMITED - Company Information

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SGZ Cononish Limited
Registered number SC569264
Report and Accounts
30 June 2018
SGZ Cononish Limited
Report and accounts
Contents
Page
Company information 1
Directors' report 2
Profit and loss account 3
Balance sheet 4
Statement of changes in equity 5
Notes to the accounts 6
SGZ Cononish Limited
Company Information
Directors
Richard Gray
Nathaniel Le Roux
Accountants
Parkes & Swan Limited
The Officers' Mess
Coldstream Road
Caterham
Surrey
CR3 5QX
Tax Advisers
Scott-Moncrieff
Exchange Place 3
Semple Street
Edinburgh
EH3 8BL
Registered office
Upper Tyndrum Station
Tyndrum
Stirlingshire
Scotland
FK20 8RY
Registered number
SC569264
SGZ Cononish Limited
Registered number: SC569264
Directors' Report
The directors present their report and accounts for the period ended 30 June 2018.
Principal activities
The Company's principal activity during the year was mineral exploration and mine development.
Directors
The following persons served as directors during the period:
Richard Gray
Nathaniel Le Roux
Small company provisions
This report has been prepared in accordance with the provisions in Part 15 of the Companies Act 2006 applicable to companies subject to the small companies regime.
This report was approved by the board on 11 March 2019 and signed on its behalf.
Richard Gray
Director
SGZ Cononish Limited
Profit and Loss Account
for the period from 21 June 2017 to 30 June 2018
Notes 2018
£
Administrative and exploration expenses written off (641,872)
Operating loss (641,872)
Interest payable on Promissory Notes (225,214)
Loss on ordinary activities before taxation (867,086)
Tax on loss on ordinary activities -
Loss for the period (867,086)
SGZ Cononish Limited
Registered number: SC569264
Balance Sheet
as at 30 June 2018
Notes 2018
£
Fixed assets
Intangible assets 5 13,280,224
Tangible assets 6 74,337
13,354,561
Current assets
Inventory 35,240
Debtors 7 2,024,179
Cash at bank and in hand 296,953
2,356,372
Creditors: amounts falling due within one year 8 (137,700)
Net current assets 2,218,672
Total assets less current liabilities 15,573,233
Creditors: amounts falling due after more than one year 9 (15,526,588)
Deferred taxation 11 (913,631)
Net liabilities (866,986)
Capital and reserves
Called up share capital 100
Profit and loss account (867,086)
Shareholder's funds (866,986)
The directors are satisfied that the company is entitled to exemption from the requirement to obtain an audit under section 477 of the Companies Act 2006.
The member has not required the company to obtain an audit in accordance with section 476 of the Act.
The directors acknowledge their responsibilities for complying with the requirements of the Companies Act 2006 with respect to accounting records and the preparation of accounts.
The accounts have been prepared and delivered in accordance with the special provisions applicable to companies subject to the small companies regime. The profit and loss account has not been delivered to the Registrar of Companies.
Richard Gray
Director
Approved by the board on 11 March 2019
SGZ Cononish Limited
Statement of Changes in Equity
for the period from 21 June 2017 to 30 June 2018
Share Profit Total
capital and loss
account
£ £ £
At 21 June 2017 - - -
Loss for the period (867,086) (867,086)
Shares issued 100 100
At 30 June 2018 100 (867,086) (866,986)
SGZ Cononish Limited
Notes to the Accounts
for the period from 21 June 2017 to 30 June 2018
1 First reporting period
The accounts of the Company for the period ended 30 June 2018 are the first accounts to be prepared since date of incorporation on 21 June 2017. Accordingly, no comparative information is applicable.
2 Accounting policies
Going Concern
The directors are of the opinion that the Company can continue to meet its obligations as they fall due for the foreseeable future due to the continued support of its parent company. The parent company itself is reliant upon raising funds from borrowings and share issues and the directors are confident that the parent company will be successful in these endeavours. As a consequence the directors have prepared the financial statements on a going concern basis.

The group has prepared detailed forecasts and projections for the period beyond 12 months from the date of approval of these accounts. These projections show the group (and hence Company) should be able to operate within the level of its current cash reserves. The company and its fellow group companies will continue to be reliant on each other.

The parent company has undertaken to provide additional capital to its wholly owned subsidiaries to fund their operations going forward as required. It has also undertaken to underwrite the costs of services incurred by its wholly owned subsidiaries in the conduct of their business.

Having considered fully the above, the directors have a reasonable expectation that the group (and hence Company) has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Basis of preparation
The accounts have been prepared under the historical cost convention and in accordance with FRS 102, The Financial Reporting Standard applicable in the UK and Republic of Ireland.

The financial statements present information about the company as an individual undertaking and not about its group. The company has not prepared group accounts as it is exempt from the requirement to do so by section 401 of the Companies Act 2006 as it is a subsidiary undertaking of Scotgold Resources Limited, a company incorporated in Australia, and is included in the consolidated accounts of that company.
Intangible fixed assets
Under current industry practice, exploration expenditure is capitalised if it meets certain criteria in accordance with International Financial Reporting Standards. As there is no equivalent standard under United Kingdom Generally Accepted Accounting Practice, the company has applied the provisions of International Financial Reporting Standard 6 'Exploration for and Evaluation of Mineral Resources' as best practice.

Exploration expenditure is capitalised until the results of the related projects are known. If a project is successful, the related expenditures will be amortised over the life of the estimated ore reserves on the unit of production basis. Provision for loss is made where a project is abandoned or considered to be of no further interest to the company.
Tangible fixed assets
Tangible fixed assets are measured at cost less accumulative depreciation and any accumulative impairment losses. Depreciation is provided on all tangible fixed assets, other than freehold land, at rates calculated to write off the cost, less estimated residual value, of each asset evenly over its expected useful life, as follows:
Motor vehicles 25% reducing balance
Plant and equipment 25% reducing balance
Fixtures & office equipment 15% reducing balance
Inventory
Inventories consist of gold and/or gold concentrates. Inventories are measured at the lower of cost and estimated selling price less costs to complete and sell. Cost is determined using the first in first out method. The carrying amount of stock sold is recognised as an expense in the period in which the related revenue is recognised. Where the inventory is produced as part of an exploration programme, the sales proceeds are offset against the costs of the exploration programme.
Debtors
Short term debtors are measured at transaction price (which is usually the invoice price), less any impairment losses for bad and doubtful debts. Loans and other financial assets are initially recognised at transaction price including any transaction costs and subsequently measured at amortised cost determined using the effective interest method, less any impairment losses for bad and doubtful debts.
Creditors
Short term creditors are measured at transaction price (which is usually the invoice price). Loans and other financial liabilities are initially recognised at transaction price net of any transaction costs and subsequently measured at amortised cost determined using the effective interest method.
Taxation
A current tax liability is recognised where there is tax payable on the taxable profit of the current period. Where applicable, deferred tax is recognised in respect of all timing differences between the recognition of income and expenses in the financial statements and their inclusion in tax assessments. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply to the reversal of the timing difference, except for revalued land and investment property where the tax rate that applies to the sale of the asset is used. Current and deferred tax assets and liabilities are not discounted.
Foreign currency translation
Transactions in foreign currencies are initially recognised at the rate of exchange ruling at the date of the transaction. At the end of each reporting period foreign currency monetary items are translated at the closing rate of exchange. Non-monetary items that are measured at historical cost are translated at the rate ruling at the date of the transaction. All differences are charged to profit or loss.
Leased assets
A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. All other leases are classified as operating leases. The rights of use and obligations under finance leases are initially recognised as assets and liabilities at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments. Minimum lease payments are apportioned between the finance charge and the reduction in the outstanding liability using the effective interest rate method. The finance charge is allocated to each period during the lease so as to produce a constant periodic rate of interest on the remaining balance of the liability. Leased assets are depreciated in accordance with the company's policy for tangible fixed assets. If there is no reasonable certainty that ownership will be obtained at the end of the lease term, the asset is depreciated over the lower of the lease term and its useful life. Operating lease payments are recognised as an expense on a straight line basis over the lease term.
3 Employees
The average number of employees (including directors) during the year was 5.
2018
£
Salaries 103,581
Employers National Insurance 8,592
Pensions 1,958
114,131
Recognised as follows:
Intangible fixed asset -
Administrative expenses 114,131
114,131
4 Taxation
On the basis of these financial statements no provision has been made for corporation tax.
Factors affecting the tax charge for the period:
2018
£
Loss on ordinary activities before taxation (867,086)
Loss on ordinary activities before taxation multiplied by standard rate of UK corporation tax of 19.00% (2017: 19.75%) (164,746)
Short term timing differences 164,746
-
No tax charge arises as a result of the tax losses incurred. As at 30 June 2018 the company has pre-trading losses to carry forward and pre-trading capital losses. The future benefit of these losses has not been recognised in the accounts as there is a lack of certainty of ultimate recoverability.
5 Intangible fixed assets
Mineral exploration Goodwill
Total
Balance at 21 June 2017 - - -
Acquisition - Asset Transfer (see below) 12,500,000 913,631 13,413,631
Net loss/(gain) from Bulk Processing Trial, capitalised (25,953) - (25,953)
Expenditure during the year, capitalised 75,272 - 75,272
Amortisation - (182,726) (182,726)
Balance at 30 June 2018 12,549,319 730,905 13,280,224
Asset transfer
On 1 January 2018 the Company acquired the assets and liabilities of the Cononish exploration activities from Scotgold Resources Limited (incorporated in Scotland)for £15,138,662. Scotgold Resources Limited is a 100% subsidiary of the company's parent company, Scotgold Resources Limited (incoroporated in Australia). The assets and liabilities acquired are included in the Company's balance sheet at fair value at the date of acquisition.
The summary details of the transaction are as follows:
Book Revaluation Fair value
value adjustments to company
£ £ £
Net assets at the date of acquiistion
Exploration expenditure 7,931,845 4,568,155 (a) 12,500,000
Rehabilitation bond 54,889 - 54,889
Fixed assets 94,180 - 94,180
Inventory 104,178 - 104,178
Prepayments 9,610 - 9,610
Intercompany receivable 2,420,637 - 2,420,637
Accruals (44,832) - (44,832)
Deferred taxation - (913,631) (b) (913,631)
Net assets 10,570,507 3,654,524 14,225,031
Goodwill arising on acquisition 913,631
15,138,662
Discharged by:
Promissory notes 15,138,662
Adjustments:
(a) Independent valuation of the exploration expenditure asset identified a fair value of £12.5 million
(b) Deferred tax liability arising on the fair value adjustment of the exploration expenditure asset.
Goodwill arising on the acquisition is being amortised evenly over the directors' estimate of its useful lfe of 5 years.
6 Tangible fixed assets
Plant and machinery etc Motor vehicles Total
£ £ £
Cost
Additions 280,745 40,035 320,780
At 30 June 2018 280,745 40,035 320,780
Depreciation
Charge for the period 209,378 37,065 246,443
At 30 June 2018 209,378 37,065 246,443
Net book value
At 30 June 2018 71,367 2,970 74,337
7 Debtors 2018
£
Amounts owed by group undertakings and undertakings in which the company has a participating interest 1,932,038
Other debtors 92,141
2,024,179
Amounts due after more than one year included above 54,889
8 Creditors: amounts falling due within one year 2018
£
Trade creditors 126,415
Other taxes and social security costs 6,884
Other creditors 4,401
137,700
9 Creditors: amounts falling due after one year 2018
£
Amounts owed to group undertakings and undertakings in which the Company has a participating interest 15,526,588
The Company relies upon the continued support of the parent company for a period of at least twelve months from the date of approval of these financial statements. As a result of this support £15,526,588 has been classified as falling due after more than one year.
10 Loans 2018
£
Creditors include:
Amounts payable otherwise than by instalment falling due for payment after more than five years 15,526,588
Included in creditors are Promissory Notes that total £15,138,662 owed to Scotgold Resources Limited (incorporporated in Scotland). The Promissory Notes have no maturity date and interest is charged at 3% per annum.
11 Deferred Taxation 2018
£
Arising on acquisition (see note 4) 913,631
913,631
12 Directors' Emoluments 2018
£
Salary Emoluments 50,000
Employers National Insurance 6,319
Pension 1,000
57,319
13 Contingent liabilities
Certain regional and community Developer Contributions were agreed as part of the Planning Application process with the Loch Lomond and Trossachs National Park Authority. The Developer Contributions are contingent upon commencement of mine production and are payable by the Company over a period of mine production and have been agreed, as follows:

i) £425,000 payable to Loch Lomond and the Trossachs Countryside Trust in annual instalments of £25,000 pa upon the commencement of production, increasing proportionately up to £50,000 pa as processing of ore increases from 3,000 to 6,000 tonnes per month (tpm). An amount of £25,000 becomes payable two years after date of commencement of development if production has not commenced by that time; and

ii) £240,000 payable to Strathfillan Community Development Trust in annual instalments of £15,000 pa upon reaching an ore processing rate of 3,000tpm, increasing to £50,000 per annum in any year upon reaching an ore processing rate of 6,000tpm, plus two lump sum payments of £125,000, the first being payable on the first anniversary of commencement of production, and the second lump sum being payable on the fifth anniversary of commencement of commercial production or on the commencement of an ore processing rate of 6,000tpm, whichever is the earlier.
14 Operating lease commitments
The company has entered into a lease with The Crown Estate for the mine at Cononish together with the right to search for and sell gold and silver from the mine for an initial annual rent of £150,000. The lease is for a term of ten years from the date of Planning Completion, as defined in the lease agreement. As at 30 June 2018, the lease term had not yet started.
15 Related party transactions
The company has taken advantage of the exemption in FRS102 from the requirement to disclose transactions with the parent company on the grounds that it is a wholly owned subsidiary.

On 18th May 2018 SGZ Cononish Limited entered into a secured loan facility of £5,000,000 with Bridge Barn Limited a wholly owned and controlled company of Nat le Roux, the company's Director. The terms of the secured loan are as follows:

i) Drawdown of up to £3,000,000 within 30 days of 1 September 2018 and the balance of £2,000,000 to be drawn down within 30 days after 1 October 2018;

ii) Term of loan is 30 months from earliest date of draw-down, being 1 September 2018, with early repayment at option of the Borrower for no penalty;

iii) Interest rate is 9.0% calculated and payable annually for the first 24 months from the earliest draw-down date on the outstanding principal and then for the six month stub period to repayment date. If the Secured Loan is repaid early, interest will be calculated up to date of repayment; and

iv) Security by way of Debenture over all of the assets and undertakings of the company, including the transfer of security of the issued capital.
16 Post balance sheet events
Subsequent to balance date, the Company has renegotiated and extended its secured loan facility with Nat le Roux, the Director, (see note 14) such that the loan has been increased by up to £1.0m, to £6.0m and interest payments have been amended to be paid upon repayment of the principal.
17 Controlling party
The immediate and ultimate parent company is Scotgold Resources Limited, a company incorporated in Australia. Group financial statements are available from the parent company’s website www.scotgoldresources.com.au.
18 Other information
SGZ Cononish Limited is a private company limited by shares and incorporated in Scotland. Its registered office is:
Upper Tyndrum Station
Tyndrum
Stirlingshire
Scotland
FK20 8RY
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