Red Rock Resources plc Half-year Report (0388V)

TIDMRRR

RNS Number : 0388V

Red Rock Resources plc

03 April 2023

31 March 2023

Red Rock Resources plc

Unaudited half-yearly results for the six months ended

31 December 2022

Red Rock Resources plc ("Red Rock" or "the Company"), the natural resources exploration and development company with interests in gold, copper, cobalt, lithium and other minerals, announces its half-yearly results for the six months ended 31 December 2022.

Chairman's Statement

We have pleasure in presenting our financial results for the six months to 31(st) December 2022. The figures are not materially changed from the previous year, other than an increase in current liabilities as the Company has sought to avoid dilution while waiting for what were expected to be material positive developments in the DRC and in the listing of Elephant Oil. Both these developments have been slower than expected to eventualise.

DRC Legal Action

Much time over the last months has been spent on dealing with one important matter. In December 2019 our 50.1% owned joint venture assets in the Democratic Republic of Congo were signed away behind our backs for $20 million to an initial buyer and then immediately sold on for several hundred million dollars to a further party, although these transactions were carefully hidden from us at the time. In our efforts to restore every dollar of this lost value to the Company, we first took advice from UK counsel as to our course of action, and then litigated in the DRC in relation to the $20m. We obtained a final and executory judgment early in 2022 for 50.1% of $5m, which was the part of the $20m that had already been paid to VUP by the initial buyer, and then went to arbitration on the $15m balance which had not yet been paid out by the initial buyer. We were awarded a further $2m costs and damages in relation to the initial action on the $5m. We had not been able up to now to enforce the first $2.5m judgment against third parties that might hold VUP funds, since it was argued that the continuing appeal on costs and damages meant that the matter was not yet resolved. We believe that we are now able to do so, in relation to both the $2.5m and the $2m awards.

The arbitration in relation to the $15m, of which we again claim 50.1%, finished its hearings in July 2022 and awaits formal signature of the Minutes and Acte Transactionnel, which we expect at any time.

We will vigorously pursue payment of sums due in the DRC, but as a result of the undertakings given by the buyer, a parastatal company, in the course of the arbitration process, our expectation is that payments will be made promptly. This would be so significant an event for our cash flow outlook that anticipation of it has influenced our actions to date, and so were there likely to be any delay, we would need to accelerate alternative measures, whether by fund-raising or sale of non-core assets, to strengthen our balance sheet.

Given that we have established our rights as 50.1% owners of the JV property under Congolese law, we are turning our attention to those remedies available to us in other jurisdictions or from other parties, and in connection with this will be seeking further advice from counsel.

The long and gruelling process in the DRC that appears now to be ending has required patience, perseverance, and discretion on our part, and at times great courage on the part of our coadjutors in the DRC. The Administration has evidenced, though discreetly, its concern that foreign investors' rights should be respected and has made clear that it wishes to provide a better environment for foreign investment, particularly from the UK, than has sometimes in the past been the case.

We look forward to building on the strong relationships we have built in the DRC and to seeing many other investors follow our lead in a country that is rapidly developing. We have dealt with highly competent officials and professionals willing to work diligently and honestly to see their country progress, and those we have dealt with are not the only ones.

Other Assets

Besides copper and cobalt in the Congo, we have pursued new lithium opportunities in Zimbabwe, Africa's largest lithium producer. Our first project at Tin Hill has seen the final stage of the permitting process begin with the submission of a full Environment Impact Assessment, and we expect to be in production within weeks. Further projects are following the same process, and our object is to have production from more than one location and so to increase both production volume and the longevity of our operations.

Elsewhere, our portfolio consists of a spread of gold activities, ranging from our joint venture company New Ballarat Gold Corporation Plc, with gold exploration assets in Victoria, to our 723,000 ounce Resource in Kenya, that is capable of being enlarged by drilling, to our royalty in Colombia at El Limon where we expect payments to resume following the conclusion of an investment programme by the operator, to drilling in Burkina Faso with strong intercepts including 20m at 3.19 g/t gold from 22m depth, to some high quality and prospective applications in Côte d'Ivoire now very near grant, and to an application to joint venture with the Government a large formerly mined gold project in Algeria.

A six hole, 988 metre, diamond drill programme has been carried out in Victoria over the Australian Summer months by New Ballarat Gold Corporation , and encountered visible gold in four of the six holes. Final sample results are awaited but it is already obvious that the programme was a technical success, intersecting structures where anticipated, confirming the presence of gold mineralisation in the target zones, and identifying one new area of mineralisation.

In the months ahead, we expect to make progress towards listing of New Ballarat, and will be entering the process of licence renewal in Kenya.

Our longstanding investment in Elephant Oil Corporation, which has filed a form S-1/A with the SEC with the intention of listing on the U.S. markets, takes us into what has become one of the most interesting oil exploration provinces, in Namibia, as well as onshore Benin on the Nigerian border. The listing has been delayed beyond our expectation, but we are still anticipating this proceeding this year and after the six-month lock-in we will have the opportunity of realizing our investment.

Although the market environment may not be strong currently, gold has investment attractions as an alternative and safe currency, battery metal demand continues strong, and our projects are we believe good ones so we do not see why we should be held back from achieving a higher valuation, more reflective of the Company's exceptional potential. From DRC we expect a return of capital, and from Zimbabwe we expect some positive cash flows from sales of lithium, which will be a significant alteration to our prospects. Longer term we look for liquidity events in Australia and at Elephant Oil, as well as potentially in Kenya, to improve the balance sheet further, but in the short term the Company's financial projections are highly dependent on assumptions of progress in the DRC.

Working Capital Requirements

As noted above, whilst the Company remains confident that it will receive funds pursuant to the judgments and arbitration in the DRC, it is appropriate to consider how the immediate cashflow needs of the Company can be met in the short-term were these funds not to be forthcoming. The Company has received indications of equity and loan-note funding which it is confident will meet these short-term needs. If the anticipated funds from the DRC remain outstanding beyond that period, then there will clearly be a longer-term funding gap and the Company will seek to realize assets, a process which has already started with a number of parties who have made approaches to the Company in this regard. The Company has always worked on the basis that every asset is for sale at a price, and no serious approach is rejected out of hand.

Andrew Bell

Chairman

31 March 2023

Consolidated statement of financial position

as at 31 December 2022

 
                                       Notes  31 December  31 December   30 June 
                                                     2022         2021      2022 
                                               Unaudited,   Unaudited,  Audited, 
                                                  GBP'000      GBP'000   GBP'000 
ASSETS 
Non-current assets 
Investments in associates and joint 
 ventures                                           1,030        1,699     1,030 
Financial instruments                   8             736          748       736 
Exploration assets                      9          13,287       13,653    13,265 
Mineral tenements                                     525          180       511 
Property, Plant & Equipment                             2            -         - 
Non-current receivables                             2,320        1,344     2,320 
                                              -----------  -----------  -------- 
Total non-current assets                           17,900       17,624    17,862 
Current assets 
Cash and cash equivalents                             242          182        66 
Financial assets - investment in                        -            -         - 
 derivatives 
Loans and other receivables                           770          508       824 
                                              -----------  -----------  -------- 
Total current assets                                1.012          690       890 
                                              -----------  -----------  -------- 
TOTAL ASSETS                                       18,912       18,314    18,752 
                                              -----------  -----------  -------- 
 
  EQUITY AND LIABILITIES 
Equity attributable to owners 
 of the parent 
Called up share capital                 10          2,847        2,835     2,839

Share premium account                              31,270       30,924    31,077 
Other reserves                                      1,565          652     1,434 
Retained earnings                                (20,984)     (18,314)  (19,812) 
                                              -----------  -----------  -------- 
Total equity attributable to owners 
 of the parent                                     14,698       16,097    15,538 
 
  Non-controlling interest                          (537)        (319)     (420) 
                                              -----------  -----------  -------- 
Total equity                                       14,161       15,778    15,118 
 
  LIABILITIES 
Non-current liabilities 
Trade and other payables                              540          316       415 
Borrowings                                            822            -       822 
                                              -----------  -----------  -------- 
Total non-current liabilities                       1,362          316     1,237 
Current liabilities 
Trade and other payables                            1,461        1,231     1,355 
Short term borrowings                   11          1,928          989     1,042 
                                              -----------  -----------  -------- 
Total current liabilities                           3,389        2,220     2,397 
                                              -----------  -----------  -------- 
TOTAL EQUITY AND LIABILITIES                       18,912       18,314    18,752 
                                              -----------  -----------  --------

The accompanying notes form an integral part of these financial statements.

Consolidated statement of income