Unlocking the value of African Iron Ore

Transcription

1 International Mining & Infrastructure Corporation plc Annual Report Unlocking the value of African Iron Ore

2 International Mining & Infrastructure Corporation plc (IMIC), in conjunction with its privately held strategic partner African Iron Ore Group (AIOG), is working to unlock value in the metals and mining industry in West and Central Africa by providing infrastructure solutions, for railways, deep-water ports, power and/or iron ore beneficiation, that will allow the region s emerging iron ore projects to develop into globally significant export operations. IMIC and AIOG are well positioned to partner African host countries in the delivery of infrastructure arrangements, and to assist with initiatives that best address the longterm aspirations of their governments and people. Unlocking the value of African Iron Ore Business Review 01 Highlights 02 Chairman s statement Corporate Governance 06 Board of Directors 08 Directors report 12 Corporate governance statement Financial Statements 13 Independent auditor s report 14 Consolidated income statement 15 Consolidated statement of comprehensive income 16 Consolidated balance sheet 17 Consolidated statement of changes in equity 18 Consolidated cash flow statement 19 Notes to the consolidated financial statements 43 Statement of Directors responsibilities 44 Independent auditors report 45 Company balance sheet 46 Company statement of change in equity 47 Company cash flow statement 48 Notes to the Company financial statements ibc Company information

3 Business Review Highlights The proposed acquisition of Afferro Mining Inc. ( Afferro ) was a primary focus throughout the year, resulting in terms being agreed for an offer for each Afferro share of 80p in cash and a 2 year convertible loan note with a principal value of 40p. Post the year end, Afferro shareholders voted in favour of the proposed acquisition and the transaction is moving to completion. Appointment of Ousmane Kane, who has extensive experience in the mining, financial and governmental sectors within Africa, as Chief Executive Officer. Progress with the planned infrastructure and offtake solution for the Nkout Iron Ore Project including agreements with China Railways Eryuan Engineering Company ( CREEC ), a fully owned subsidiary of the leading Chinese state-owned infrastructure company in railway construction, and with CRM (Hong Kong) Trading Limited, a wholly-owned subsidiary of the leading Chinese state-owned trading enterprise, China Railway Materials Company Ltd. Letter of intent signed by African Iron Ore Group Limited, IMIC s strategic partner, with the government of Liberia with the objective of delivering iron-ore related infrastructure solutions in which IMIC would play a key role. We are close to completing the acquisition of Afferro Mining, which will transform IMIC into the owner of high quality iron ore assets in Cameroon, including the Nkout Iron Ore Project. During the coming months we expect to finalise our plans for the development of Nkout whilst also beginning the implementation of the infrastructure solution to transport iron ore from Nkout to the coast Business Review Corporate Governance Financial Statements 01

4 Business Review Chairman s statement opportunity to compete alongside Australia and Brazil as a major exporter of iron ore to China. IMIC s solution is to work in close partnership with African governments and with Chinese companies that specialise in engineering, rail and seaport construction, power, and iron ore offtake. IMIC also works closely with African Iron Ore Group Limited ( AIOG ), its privately held strategic partner. Haresh Kanabar, IMIC s Chairman It was a year of transformational progress, bringing us nearer to the delivery of our vision for unlocking the value of iron ore in Africa. I am delighted to report the financial results for International Mining & Infrastructure Corporation plc for the year ended 30 June. It was a year of transformational progress, bringing us nearer to the delivery of our vision for unlocking the value of iron ore in Africa. We made progress across our business throughout the year but a primary focus was the acquisition of Afferro Mining Inc ( Afferro ), a junior iron ore miner with high quality assets in Cameroon. This acquisition, which has already been approved by Afferro s shareholders on the 16 September, is expected to complete post year end subject to approval of IMIC shareholders. Before discussing the Afferro acquisition in detail, I would like to give a brief introduction to IMIC. IMIC was founded in 2010 to unlock the value of African iron ore by meeting demand from the Chinese steel industry and by working closely with major Chinese companies in the steel supply chain. There is continued demand for steel in China led by urbanisation and where a shortage of indigenous iron ore underpins the requirement for imported raw material. IMIC s strategy contrasts with that of other iron ore companies focused on Africa in that our starting point is recognition of the importance of infrastructure in the monetisation of African iron ore reserves. This infrastructure is expensive, typically costing several billion dollars, and is therefore the primary barrier to the growth of the iron ore industry in Africa. IMIC is creating a solution for the delivery of this infrastructure, giving Africa the IMIC and AIOG s ambition is to create mining-related infrastructure that will be multi-user and multi-purpose, becoming the backbone of emerging transport systems in African countries. Through this infrastructure, and through the development of the iron ore industry, IMIC intends to play a key role in the economic and social development of West and Central Africa. IMIC and AIOG have formal relationships with the governments of Guinea and Liberia and are also in discussions with other governments including that of Cameroon, where Afferro s assets are located. In the Republic of Guinea, IMIC, through AIOG, is participating in the development of the railway and seaport for the Simandou South iron ore project. IMIC and AIOG are continuing to focus on advancing the Simandou South project via a funding solution that avoids the need for a sovereign guarantee. In Cameroon, IMIC is in the early stages of planning a multi-purpose, multi-user rail line to connect the Nkout Iron Ore Project with the coast at Kribi, where a seaport is being built by the Cameroon government. In addition to a focus on infrastructure, IMIC s strategy includes investment in junior iron ore miners. The infrastructure and investment are complementary in that, through taking a stake in a junior miner, the Company can benefit directly from the use of the infrastructure it is involved in developing. I would now like to summarise progress during the year. 02

5 As announced on 11 July, IMIC made its first strategic investment in a junior iron ore miner, Afferro, and then began steps for the potential acquisition of Afferro s entire share capital. This acquisition is expected to complete, subject to shareholder vote, in the coming weeks. We were attracted to Afferro because it has a number of iron ore projects in Cameroon, notably its 100%-owned flagship asset, the Nkout Project, which is located at the heart of a rapidly emerging iron ore district in the south of Cameroon. It is an iron ore district currently without an infrastructure solution. On 22 May we announced that we had agreed terms in principle with the board of Afferro in which Afferro shareholders would be offered 80p in cash and a 2 year convertible loan note with a principal value of 40p for each Afferro share. IMIC s offer values Afferro at between 105 million and 147 million. Post the year end, on 16 September, Afferro s shareholders voted in favour of the acquisition of Afferro by IMIC. The acquisition of Afferro has taken a considerable amount of time and effort, in part because Afferro had a dual listing, with its stock trading both on the Toronto Stock Exchange and on London s AIM market. We believe that we are now close to completion and we look forward to developing Nkout into a world class iron ore asset. At the same time as seeking the required shareholder and regulatory approvals we began, along with our strategic partner AIOG, to put the contractual arrangements in place for the infrastructure and offtake solution for the Nkout Iron Ore Project. In April, we announced agreements with China Railways Eryuan Engineering Company ( CREEC ), a fully owned subsidiary of China Railway Group ( CREC ), the leading Chinese stateowned infrastructure company in railway construction, and with CRM (Hong Kong) Trading Limited, a wholly-owned subsidiary of the leading Chinese state-owned trading enterprise, China Railway Materials Company Ltd ( CRM ). IMIC s relationships are with major Chinese companies. For example, CRM imports the largest volume of iron ore into China of any trading firm. We recently announced that Hebei Iron and Steel Company ( Hebei ) had joined the CRM agreement so that it now includes four parties: Hebei, CRM, IMIC and AIOG. Hebei is the largest steel producer in China. Our relationships with Chinese companies, combined with the expertise of AIOG, give us confidence of delivering the infrastructure and offtake solution for Nkout. People We have been successful in building up our Board, senior management and consulting team to ensure the successful delivery of our strategy. In January this year, I was particularly pleased to welcome Ousmane Kane to IMIC as Chief Executive Officer. Ousmane, a Mauritanian national, has extensive experience in various public and commercial roles, including almost 15 years at the African Development Bank. We recently appointed Lui Guoping as a Non-Executive Director, as announced on 9 September. He was Senior Vice President at CRM between 1997 and 2011 and is a former Non-Executive Director at African Minerals Limited. As a result of the increased activity within the Group other Board changes include Andrew Macaulay stepping down in June to concentrate on his other interests. Business Review Corporate Governance Financial Statements 03

6 Business Review Chairman s statement (continued) We also recently appointed a Chief Operating Officer, Mohamedoune Khalifa Ould Beyah. Another highly experienced executive, he worked at Mauritania s state-owned iron ore company, Société Nationale Industrielle et Minière ( SNIM ) for many years, most recently as its managing director in Paris responsible for global sales and marketing. SNIM is Africa s second largest iron ore producer. During the financial year, the Company appointed two strategic advisors: Claude Guéant, for his depth of experience in Cameroon, Gabon and Congo, and Martin Botha, an experienced natural resources banker for his knowledge of infrastructure financing solutions. Financials Non-current assets have increased as a result of the strategic investment in Afferro made during the year with the acquisition of an 18.12% shareholding with a fair value of 15,336,852 (: nil) at the year end. The Group intends to complete the acquisition of the entire shareholding of Afferro. A long term loan was also extended to IMIC s strategic partner AIOG in relation to the Simandou South iron ore project as well as a number of other project working capital advances. These advances and the long term loan amounted to 7.85 million (US$11.9 million) at 30 June (30 June : 3.3 million (US$ 5 million) and have been advanced to continue the I was particularly pleased to welcome Ousmane Kane to IMIC as Chief Executive Officer. Ousmane, a Mauritanian national, has extensive experience in various public and commercial roles, including almost 15 years at the African Development Bank development of the relevant infrastructure assets. This is repayable at project vehicle SPV Financial Close with an interest rate of 25% per annum or which may be converted into project vehicle equity upon the agreement of both parties at a price to be determined at the point of conversion. The cash balance has increased to 30,012,441 at 30 June (: 2,778,248) as IMIC has secured funding towards the possible acquisition of Afferro by raising funds through a number of unsecured bonds and convertible bond notes, see note 17. IMIC has recorded a loss after tax of 6,146,377 (: 1,562,108) equating to a loss per share of 10.2p (: loss of 25.8p). The financial result for the year reflects the increased activity relating to the strategic investments IMIC has made in the year ended 30 June and is reflective of increased administration expenses, transaction costs and finance costs. The increase in the administration costs to 1,810,941 (: 680,281) has been driven by the recruitment of key staff including IMIC s CEO during the year and increased professional fees and travel expenses. The exceptional items of 1,370,073 (: nil) are costs associated with the acquisition of Afferro 04

7 and the finance costs of 2,223,017 (: nil) are as a result of the raising of finance during the year. There were also fair value adjustments recognised in respect of the loss on the Afferro shares of 567,217 (: nil) and movement of the embedded derivative of 1,312,150 (: nil) which are both non-cash transactions. Outlook We are close to completing the acquisition of Afferro Mining, which would transform IMIC into the owner of substantial and high quality iron ore assets in Cameroon, particularly the Nkout Iron Ore Project. During the coming months we expect to finalise our plans for the development of Nkout whilst also beginning the implementation of the infrastructure solution to transport iron ore from Nkout to the coast. We are highly fortunate in already having contractual relationships with some of China s largest companies in the steel supply chain. We look forward to working with them to deliver the infrastructure and offtake solution for Nkout whilst also contributing to social and economic development in Cameroon. These are exciting times for IMIC. We are on the threshold of making progress on the ground in the delivery of our strategy for unlocking the value of African iron ore. Haresh Kanabar Chairman 17 October Business Review Corporate Governance Financial Statements 05

8 Corporate Governance Board of Directors The Board of Directors The Board of Directors is responsible for formulating, reviewing and approving the Group s strategy, budgets, major items of capital expenditure and acquisitions, and reporting to the shareholders. All Non-Executive Directors are independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. The Group intends to hold at least four Board meetings throughout each year and did so in. The Board of Directors comprises of: Haresh Kanabar (54) Chairman and Non-Executive Director Ousmane Kane (58) Director James Ward (40) Finance Director Biography Haresh Kanabar has more than 20 years experience in senior management of various companies and industries, including many AIM listed companies. He is currently a director of Aurum Mining plc, Gasol plc, Hermes Pacific Investments plc, Silentpoint ltd, Silentpoint Property Limited and Venteco plc. Prior to this, he has held a number of management and senior finance positions in several companies since Biography Ousmane Kane has a wealth of experience in leading Mauritanian and pan-african public institutions. Prior to joining IMIC, Mr Kane was a senior adviser to Mauritania s Head of State and a Vice President of the African Development Bank. He served as Minister of Finance and as the Governor of the Central Bank of Mauritania and was Director General of Mauritania s state-owned iron ore company and Africa s second-largest iron ore exporter, Société Nationale Industrielle et Minière where he successfully implemented a US$1 billion modernisation project. He was previously largely involved in the West and Central African iron ore sector while serving as Vice Chairman of African Iron Ore Group and as a non-executive director of Afferro Mining Inc. Mr Kane is a qualified engineer and a graduate of the Ecole Nationale Supérieure des Mines de Saint-Etienne (France) and the Ecole Polytechnique, Palaiseau (France). Biography James Ward is a qualified Chartered Accountant and Chartered Company Secretary. He is managing director of Whale Rock Accounting Limited; a division of Capita plc specialising in accounting solutions to the natural resource sector. James has many years of experience advising AIM and Main Market companies. His natural resources experience included acting as the finance director of Global Coal Limited whose shareholders include Glencore, BHP-Billiton, Anglo American and Rio Tinto. In addition, he previously assisted Gasol Plc as interim financial controller. He has also advised a number of investment and private funds in the sector. Prior to this he worked on PPP/PFI infrastructure projects with Vinci and Willis Construction insurance team. James trained at Grant Thornton. 06

9 Dr Rilwanu Lukman (74) Non-Executive Director Biography Dr Rilwanu Lukman, KBE, is an internationally known and respected figure in the oil and gas industry, with over forty years of experience in that sector. He was the Honorary Advisor on Energy and Strategic Matters to the President of Nigeria, a former President and Secretary General of OPEC, a former Nigerian petroleum minister, Founder and Chairman of the African Petroleum Producers Association and one of the founders of Afren plc, a FTSE250 company. Dr Lukman holds a Bachelor of Science degree from the Royal School of Mines, Imperial College (London) and follow-on diplomas and certificates, including doctorates, from prestigious institutions including the University of Leoben (Austria), McGill University (Montreal), University of Bologna (Italy), Ahmadu Bello University and the University of Maiduguri in Nigeria. He was made an Officer of the Legion d Honneur of France in Dr Babacar Ndiaye (76) Non-Executive Director Biography Dr Babacar Ndiaye is the Ambassador at large of Senegal. His professional career was predominantly with the African Development Bank. During his time there, he was awarded International Banker of the Year 1984 by the influential International Finance Review and served two terms as President. He is also a founder of the African Business Round Table ( ABR ) and the African Export Import Bank ( Afreximbank ), a member of the African Forum of former African Heads of State and Government and other African leaders, a member of the Presidential Council for investment in Mauritania, a member of the Scientific Committee of Teresys Foundation and Chairman of the West African Observatory of Business Ethics. Dr Ndiaye is a chartered accountant, a graduate of l Ecole Superieure de Commerce, Toulouse, l Institut d Etudes Politiques Sciences Po, Paris, and Centre d Etudes Bancaires et Financieres, Paris. Dr. Ndiaye was also awarded honorary doctorates by Clark Atlanta University, Atlanta Georgia and Lincoln University, Philadelphia. Liu Guoping (62) Non-Executive Director Biography Mr Liu Guoping, a well know figure in Chinese iron ore and steel industry, held a position of Senior Vice President of China Railway Materials Company Limited ( CRM ) for 14 years since CRM is a major Chinese state owned enterprise focused on providing integrated services in the railway industry and the largest steel trading enterprise in China. Prior to that, he assisted in the development of CRM s Kong Hong division as General Manager for two years. Mr Liu gained vast experience in the West African iron ore industry while serving as Non-Executive Director of African Minerals Limited between 2010-, during which time he contributed to the development of that company s financial strategy and facilitated relationships with iron ore off-takers. Mr Liu was Non-Executive Director of Australian FerrAus Limited. Presently, he is President of Orix Group China, a Tokyo and NYSE listed integrated financial services group, and Chairman of Orix Asia Limited. He is a senior economist and a graduate of Heilongjiang University in China. Business Review Corporate Governance Financial Statements 07

10 Corporate Governance Directors report The Directors present their annual report on the affairs of the Group, together with the financial statements and auditor s report for the year ended 30 June. The Corporate Governance Statement on page 12 forms part of this report. Principal activities and review of the business The principal activity of the Group continued to be that of investing in the mining sector. A review of the results for the year and of expected future developments is set out in the Chairman s Statement. Going Concern The Group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman s Statement on pages 2 to 5 and the Directors Report on pages 8 to 11. The Directors monitor the cash position of the business on a monthly basis and believe they have sufficient current cash resources to cover operational costs forecast for the next 12 months. At 30 June IMIC held cash and cash equivalents of 30 million (: 2.8 million) and had a working capital balance of 27.6m (: 6.3m). During the year the Group drew down on US$85 million (GBP equivalent of 55 million) from the unsecured bonds. IMIC intends to continue to raise further funds to finance its activities in the future. In making their going concern assessment, the Directors have considered Group budgets and cash flow forecasts for a period of at least the next 12 months and believe that IMIC has sufficient working capital to continue in operational existence for at least the next 12 months. The Directors are confident of raising sufficient additional working capital to further IMIC s investment strategy, and such investment decisions are conditional on the suitability and availability of sufficient working capital. Results and dividends The loss for the year of 6,146,377 (: 1,562,108) includes exceptional transaction costs totalling 1,370,073 (: nil) in respect of the ongoing acquisition of Afferro. There is also a 1,312,150 (: nil) charge in respect of the movement in the fair value of the embedded derivative issued as part of the convertible bond note. The results for the year ended 30 June are set out on page 14. The Directors do not recommend the payment of a dividend for the year (: nil). Directors The following directors have held office since 1 July to the date of authorisation of the accounts:- Executive Chairman H. D. Kanabar Executive Directors O. Kane (appointed 24 January ) J. Ward Non-Executive Directors B. Ndiaye R. Lukman L. Guoping (appointed 9 September ) A. Macaulay (resigned 20 June ) Creditor payment policy The Group s current policy concerning the payment of trade creditors is to agree terms of payment when arranging the terms of each transaction, to ensure suppliers are aware of the terms and abide by them. The average credit period taken for trade purchases is 38 days (: 43 days). Principal risks and uncertainties The Groups financial and capital risk management policies are set out in note 24 of the consolidated financial statement of this financial report. The Group s principal risks and uncertainties are shown below: Recoverability of loans The Group s working capital loans to AIOG in respect of infrastructure projects are inherently risky and dependent upon the successful financial close of projects failing which these unsecured loans will be irrecoverable. The Group confirms outstanding balances with AIOG on a monthly basis and considers the impacts on their recoverability of any updates on projects. 08

11 Political and regulatory risk The Group s stated investment policy is in mining and infrastructure projects or iron ore in West & Central Africa. The Group is subject to political, economic and environmental risks. The Group monitors the political environment where it has its investments. Market risk The nature of the market in which the Group trades can be volatile and is fast changing. Accordingly, the Group s shareholdings do have a degree of risk in terms of timing and quantum of realisation. The Group monitors the value of its investments on a monthly basis with a view to realising the full value of their investments. Foreign exchange risk The Group has secured financing totalling $85 million during the year denominated in USD dollars; the Group is therefore exposed to significant fluctuation in the foreign exchange rate. The Group monitors foreign exchange movements and holds cash in USD dollars to minimise its exposure to risk. Financing risk The future development of the Group will require additional fund raising and the current global financial market uncertainty has impacted our ability to access the debt and equity markets. The Group continues to actively seek further financing to fund its future investments. The key risks and how these are managed are identified in note 24 of the financial statements. Key Performance Indicators The Directors consider the performance of the share price of the Group to be a Key Performance Indicator. During the year ended 30 June the share price increased in value by 6.75p (: decrease in value of 2.5p) taking the share price up from 25p to 31.75p. This is a reflection of the progress the Group has made during the year as it aims to unlock the value of African Iron Ore through strategic investments in junior miners. The Directors also consider the cash position of the Group to be a Key Performance Indicator. During the year ended 30 June the cash position rose from 2,778,248 to 30,012,441 as a result of issuing bonds to raise funds to complete the proposed acquisition of Afferro. The Group monitor the progress of the infrastructure development projects it has invested in. After the year end the shareholders of Afferro voted in favour for the proposed acquisition by IMIC and this is expected to complete in the near future. The relationship agreement with AIOG to finance the Simandou project is progressing with further working capital advanced during the year to fund development costs however this project remains in its early stages. Further KPI s will be developed once the Group makes further investments in line with its investment strategy in / 14. Subsequent events On 10 July the Group purchased an additional 1,080,000 shares in Afferro for 859,680 taking their total holding to 20,111,342 ordinary shares representing 19.15% of Afferro s voting rights. On 10 July the Group purchased an additional 886,000 shares in Afferro for 708,445 taking their total holding to 20,997,342 ordinary shares representing % of Afferro s voting rights. On 29 August the Group acquired a 100% holding in IMIC Investments Limited for a total consideration of 1. IMIC Investments Limited is an intermediary holding Company with a total share capital issued of 1 ordinary share. Business Review Corporate Governance Financial Statements On 2 September Hebei iron and steel company joined the strategic collaboration agreement with China Railway Materials Company Limited and AIOG to develop strategies and development. On 16 September Afferro held a special meeting of shareholders and option holders and voted in favour of the proposed acquisition by IMIC of 100% of the issued and outstanding share capital. 09

12 Corporate Governance Directors report (continued) Substantial shareholdings The Group is aware of the following shareholdings of 3% or more in the share capital as at 6 October : No. of shares % Sorena Holdings Ltd 10,000, African Ventures Fund 8,485, African Iron Ore Group Limited 7,777, System Trade Services Limited 7,500, Delfro Ltd 5,000, Delorean Trading Inc 5,000, Freegate Investments Ltd 5,000, Hexagon Finance (BVI) Limited 3,623, Mr Indimi 2,500, The shareholdings as at the 30 June were as follows: No. of shares % Sorena Holdings Ltd 10,000, African Iron Ore Group Limited 7,777, System Trade Services Limited 7,500, African Ventures Fund 6,790, Delfro Ltd 5,000, Delorean Trading Inc 5,000, Freegate Investments Ltd 5,000, Hexagon Finance (BVI) Limited 3,623, Mr Indimi 2,500, Financial instruments The Group s financial risk management objectives and policies are discussed in note 24 to the financial statements. Remuneration policy The Group takes into account both Group and individual performance, market value and sector conditions in determining director and senior employee remuneration. The Group has maintained a policy of paying salaries comparable with peer companies in the mining sector in order to attract and retain key personnel. All current salaries are without pension benefit. Directors remuneration and Directors interests Salaries Share grants H. D Kanabar 225, ,000 36,667 J. Ward 126, ,000 94,444 O. Kane* 87,035 87,035 S. R Lakhani 8,333 B. Ndiaye 19,091 19,091 21,395 R. Lukman 19,091 19,091 21,489 A. Macaulay** 31,997 31,997 21, , , ,748 * Ousmane Kane was appointed during the year ** Andrew Macaulay resigned during the year 10

13 The Directors who held office at 30 June, had the following interests in the shares of the Group: Number of ordinary shares held Ordinary shares as % of issued share capital H. D Kanabar J. Ward 22, % B. Ndiaye 48, % R. Lukman 48, % 119, % Auditors In accordance with section 485 of the Companies Act 2006, a resolution proposing that Ernst & Young LLP be re-appointed as auditors of the Group will be put to the annual general meeting. Indemnity of Directors The Group has purchased and maintains, for all directors, insurance against any liability and the Group maintains appropriate insurance cover against legal action bought against its directors. Directors responsibilities statement The Directors are responsible for preparing the Directors Report and the Group financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare Group financial statements for each financial year. Under that law they have elected to prepare the group financial statements in accordance with International Financial Reporting Standards as adopted by the EU and applicable law. Under company law the directors must not approve the Group financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and of its profit or loss for that period. In preparing the Group financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRSs as adopted by the EU; and prepare the Group financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that its financial statements comply with the Companies Act They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Business Review Corporate Governance Financial Statements Statement of disclosure to the auditors So far as the Directors are aware: (a) there is no relevant audit information of which the Company s auditors are unaware, and (b) they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company s auditors are aware of that information. On behalf of the board J. Ward 17 October 11

14 Corporate Governance Corporate governance statement The Directors are committed to maintaining high standards of corporate governance. Whilst AIM companies are not obliged to comply with the Combined Code, the Board has used the Combined Code as a guide for best practise guidelines in implementing its corporate governance framework. In establishing the Group s corporate governance framework the Directors have considered the Group s size and nature. Risk Management and Corporate Governance The Group has adopted a model code for Directors and certain employee share dealings which the Directors believe is appropriate for an AIM quoted company. The Directors will comply with Rule 21 of the AIM Rules relating to Directors dealings and in addition will take all reasonable steps to ensure compliance by the Group s applicable employees (as defined in the AIM Rules). The Board of Directors The Board of Directors is responsible for formulating, reviewing and approving the Group s strategy, budgets, major items of capital expenditure and acquisitions, and reporting to the shareholders. All Non-Executive Directors are independent of management and free from any business or other relationship which could materially interfere with the exercise of their independent judgement. The Group intends to hold at least four Board meetings throughout each year and did so in. The Board of Directors is detailed on pages 6 and 7. Compliance with the Bribery Act At IMIC we uphold all laws relevant to countering bribery and corruption in all jurisdictions in which we operate, including the Bribery Act 2010 which came into force on 1 July In order to comply with the Bribery Act 2010, the Group has engaged external professionals to advise on implementing adequate procedures on an ongoing basis, including training its staff at all levels on anti-bribery policies and communicating internally and externally its zero-tolerance approach to bribery and corruption within our business and indeed within the businesses of those we work with. Attendance at Board Meetings Owing to the international aspect of the Group and its Board in the year Board meetings were held by telephone with one in person meeting. All the Board attended or dialled into each formal Board meeting. The board met seven times during the year with the full board meeting three times since the board restructuring. Internal financial control and reporting The Board is responsible for establishing and maintaining the Group s system of internal controls and reviewing its effectiveness. The procedures, which include financial, compliance and risk management, are reviewed on an on-going basis. The Board approves the annual budget and performance against budget is monitored and reported by the Board. The internal control system can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has considered the need for an internal audit function but does not consider it necessary at the current time with the current controls in place, external accountant monitoring of processes and the relative complexity of the business. IMIC s financial management team is currently reviewed and approved by Haresh Kanabar, the Chairman. Whistleblowing procedures The Group s whistleblowing procedures ensure that arrangements are in place to enable employees and suppliers to raise concerns about possible improprieties on a confidential basis. Any issues raised are investigated and appropriate actions are taken. Should any significant issue arise they are highlighted to the Board. Non-audit services The Board review the appointment, reappointment and removal of external auditors and approves their remuneration and terms of engagement including developing and implementing a policy on the provision of non-audit services by the external audit firm. It also reviews and monitors the independence and objectivity of the external auditor. Relations with shareholders The Group reports to shareholders twice a year. The Group dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The chairmen of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their responsibilities. 12

15 Independent auditor s report To the Members of International Mining & Infrastructure Corporation Plc We have audited the Group financial statements of International Mining & Infrastructure Corporation plc for the year ended 30 June which comprise the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Balance Sheet, Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement and the related notes 1 to 27. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. This report is made solely to the company s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act Our audit work has been undertaken so that we might state to the company s members those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors Responsibilities Statement set out on page 11, the directors are responsible for the preparation of the Group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the Group financial statements: give a true and fair view of the state of the Group s affairs as at 30 June and of its loss for the year then ended; have been properly prepared in accordance with IFRSs as adopted by the European Union; and have been prepared in accordance with the requirements of the Companies Act Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors Report for the financial year for which the Group financial statements are prepared is consistent with the Group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: certain disclosures of directors remuneration specified by law are not made; or we have not received all the information and explanations we require for our audit. Business Review Corporate Governance Financial Statements Other matter We have reported separately on the parent company financial statements of International Mining & Infrastructure Corporate plc for the year ended 30 June. Steven Dobson (Senior statutory auditor) for and on behalf of Ernst &Young LLP, Statutory Auditor London 17 October Notes: 1. The maintenance and integrity of the International Mining & Infrastructure Corporation plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 13

16 Financial Statements Consolidated income statement For the year ended 30 June Note Year ended 30 June Year ended 30 June Administrative expenses 5 (1,810,941) (680,281) Exceptional items 5 (1,370,073) Other gains and losses 8 80,944 Operating loss (3,181,014) (599,337) Finance income 6 1,434,851 3,008 Finance cost 6 (2,223,017) Net foreign exchange loss 6 (222,985) Fair value of shares issued under anti-dilution agreement 12 (956,127) Net gains and losses associated with shares in Afferro 13 (567,217) Expiration of option 13 (72,222) Impairment of available for sale asset 13 (2,623) (9,652) Fair value of movement of embedded derivative 17(c) (1,312,150) Loss before taxation (6,146,377) (1,562,108) Tax charge 9 Loss for the year (6,146,377) (1,562,108) Loss per ordinary share (recalculated) Basic and diluted loss per share 10 (10.2p) (25.8p) 14

17 Consolidated statement of comprehensive income For the year ended 30 June Year ended 30 June Year ended 30 June Loss for the year (6,146,377) (1,562,108) Items that may be reclassified subsequently to profit or loss: Net gain / (loss) on available for sale investments ,284 (16,703) Total comprehensive loss for the year (5,799,093) (1,578,811) All losses and other comprehensive income for the year are attributable to equity shareholders of the parent. All results relate to continuing activities. Business Review Corporate Governance Financial Statements 15

18 Financial Statements Consolidated balance sheet For the year ended 30 June Note Year ended 30 June Year ended 30 June Assets Non-current assets Property, plant and equipment 11 91,153 20,650 Investments AIOG , ,726 Investments Available for sale 13 a) 12,033,886 12,498 Investments FVTPL 13 b) 3,316,116 Loans and receivables 15 9,289,635 3,239,586 Total non-current assets 24,837,516 3,379,460 Current assets Cash and cash equivalents 14 30,012,441 2,778,248 Other financial assets 15 3,287,657 Trade and other receivables ,942 4,102,459 Total current assets 33,575,040 6,880,707 Total assets 58,412,556 10,260,167 Liabilities Current liabilities Trade and other payables 16 (5,385,796) (560,811) Borrowings 17 (548,673) Total current liabilities (5,934,469) (560,811) Net current assets 27,640,571 6,319,896 Non-current liabilities Borrowings 17 a) (32,631,040) Convertible loan notes 17 b) (10,069,827) Embedded derivatives 17 c) (5,727,258) Total non-current liabilities (48,428,125) Total liabilities (54,362,594) (560,811) Net assets 4,049,962 9,699,356 Equity Share capital 18 1,004,685 1,004,685 Share premium account 18 11,777,204 11,777,204 Available-for-sale reserve ,284 Warrant reserve ,699 Accumulated losses 21 (9,228,910) (3,082,533) Share based payment reserve 25 20,000 Equity attributable to equity holders of the parent 4,049,962 9,699,356 The financial statements were approved by the board of directors and authorised for issue on 17 October. They were signed on its behalf by: H. D. Kanabar Director Company registration number:

19 Consolidated statement of changes in equity As at 30 June Share capital Share premium Share based payment reserve Available for-sale reserve Warrant reserve Retained earnings At 1 July ,518 1,276,988 4,310 16,703 (1,520,425) 671,094 Total loss for the year (1,562,108) (1,562,108) Other comprehensive loss (16,703) (16,703) Share based payments 5,690 5,690 Share based payments settled in cash (2,260) (2,260) Anti dilutive share issue to AIOG 9, , ,127 Shares issued 101,606 9,553,650 (7,740) 9,647,516 At 30 June 1,004,685 11,777,204 (3,082,533) 9,699,356 Total loss for the year (6,146,377) (6,146,377) Other comprehensive gain 347, ,284 Issue of warrants 129, ,699 Share based payment 20,000 20,000 At 30 June 1,004,685 11,777,204 20, , ,699 (9,228,910) 4,049,962 Total Business Review Corporate Governance Financial Statements 17

20 Financial Statements Consolidated cash flow statement For the year ended 30 June Note Year ended 30 June Year ended 30 June Net cash outflow from operating activities 23 (2,018,191) (512,420) Investing activities Interest received 7,684 3,008 Loan advanced to AIOG Simandou (4,276,652) (3,239,586) Purchase of property, plant and equipment (82,464) Investment in Afferro mining (15,632,282) Disposal of Trillium North 166,419 Net cash used in investing activities (19,983,714) (3,070,159) Financing activities Proceeds from issue of share capital 4,000,000 6,000,000 Share issue costs (450,000) (75,000) Proceeds from issue of bond and warrants 54,553,480 Bond commission costs (9,566,216) Draw down of loan 1,000,000 Finance costs (320,519) Net cash from financing activities 49,216,745 5,925,000 Increase in cash and cash equivalents 27,214,840 2,342,421 Reconciliation to net funds Cash and cash equivalents at the beginning of the year 23 2,778, ,827 Foreign exchange movement 23 19,353 Cash and cash equivalents at the end of the year 23 30,012,441 2,778,248 18

21 Notes to the consolidated financial statements For the year ended 30 June 1. Basis of preparation The financial statements of International Mining & Infrastructure Corporation plc and its subsidiaries (the Group ) for the year ended 30 June were authorised for issue by the board of directors on 17 October and the balance sheet was signed on the board s behalf by H.D. Kanabar. International Mining & Infrastructure Corporation plc is a public limited company incorporated and domiciled in England and Wales. Its registered office is 40 New Bond Street, London, W1S 2RX. The Company s ordinary shares are traded on the AIM market. The Group s financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The Group financial statements are presented in Sterling. The financial statements have been prepared under the historical cost convention or fair value where appropriate. The principal accounting policies adopted by the Group are set out in note Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiary) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. The financial statements of subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting year as the parent company and are based on consistent accounting policies. All intragroup balances and transactions, including unrealised profits arising from them, are eliminated in full. Going concern The Group s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman s Statement on pages 2 to 5 and the Directors Report on pages 8 to 11. The Directors monitor the cash position of the business on a monthly basis and believe they have sufficient current cash resources to cover operational costs forecast for the next 12 months. At 30 June IMIC held cash and cash equivalents of 30 million (: 2.8 million) and had a working capital balance of 27.6m (: 6.3m). During the year the Group drew down on US$85 million (GBP equivalent of 55 million) from the unsecured bonds. IMIC intends to continue to raise further funds to finance its activities in the future. In making their going concern assessment, the Directors have considered Group budgets and cash flow forecasts for a period of at least the next 12 months and believe that IMIC has sufficient working capital to continue in operational existence for at least the next 12 months. The Directors are confident of raising sufficient additional working capital to further IMIC s investment strategy and such investment decisions are conditional on the suitability and availability of sufficient working capital. Business Review Corporate Governance Financial Statements Foreign currencies Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the income statement for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. Investments Investments are recognised and derecognised on the trade date where the purchase or sale of the investment is under a contract whose terms require delivery within a timeframe established by the market concerned. Investments are initially measured at fair value plus in the case of investments not at fair value through profit and loss, directly attributable transaction costs. 19