28 March 2019

Full Year Results

 

Block Commodities Limited (NEX: BLCC), the innovative commodity trader operating in Africa, is pleased to announce its audited results for the year ended 30 June 2018.  The publication has been delayed pending progress on the proposed acquisition of the Company by The Eelleet Network Corp. ("TEN") and the subsequent entry of the Company into the medicinal cannabis market.

Chairman's Statement

During the year under review, the Company continued its evolution from a junior exploration company with its Lac Dinga potash exploration licence, to a forward-thinking agri-tech company in sub-Saharan Africa, deploying new technologies to maximise value in African agriculture. Leveraging its connections in Africa, the Company is developing a platform to empower small scale farmers ("SSF") to raise productivity and secure better returns for produce, while establishing African communities as significant future global agricultural players. The platform uses blockchain technology to provide loans of utility tokens to the SSF which are then used to procure inputs from the Company. 

Change of Name

On 12 February 2018, the Company changed its name from African Potash Limited to Block Commodities Limited in order to reflect this evolution in strategy.

Farmer 3.0 Ecosystem

On 22nd March 2018, the Company entered an agreement with Wala, a blockchain-powered financial services platform, and Dala, a crypto-currency token issuer that will support the further development of scalable, blockchain-enabled financial platforms for developing markets.  Initially the Wala platform will provide loans of Dala tokens to the SSF.  These tokens can only be used to purchase inputs from Block Commodities Limited. The loans will bear interest at rates significantly lower than local market rates. Close relationships with the SSF are maintained throughout the growing season through on-the ground teams monitoring crop development and providing advice. The loans are repaid by the delivery of outputs, either direct to a contracted off-taker or to Company warehouses where, together with our partner FinComEco, a system of warehouse receipts will enable SSF produce to be consolidated and traded on local commodities exchanges developed by FinComEco, further enhancing the return to the SSF and the Company. Overtime, as the volume of commodities traded on the local and regional exchanges scales up, the purchase of inputs will be secured with derivatives traded on these exchanges.  The blockchain will be fundamental to the development of this Ecosystem.

Vipa Acquisition

After extensive due diligence, the Board has determined that the proposed acquisition of Vipa Holdings (Pty) limited ("Vipa"), a South African wholesaler of commodity and speciality fertilisers, announced on 14 March 2018 will no longer proceed as originally envisaged.  The Company continues to work with the Vipa management team to explore the possibility of forming the fertiliser procurement arm of the Ecosystem.

Trading

The focus during the period was on sales to farmers registered under the Zambian Government's e-voucher scheme. There were significant delays in funding the e-vouchers and, in many areas, no vouchers were loaded. This limited our ability to turn inventory rapidly enough to meet our targeted volumes. All inventory has now been sold. This experience showed that there is indeed a pressing need for our blockchain based commodities eco-system. Subsequent to the year end, the Company prepared to roll out its commodities eco-system in a Zambian pilot. An off-taker was secured and a group of local farmers engaged to run a pilot over 300ha. However, with the seasonal rains arriving earlier than forecast and delays in procuring inputs, the pilot has had to be postponed.

Uganda

Work continues with our off-take partner Pure Grow Africa Limited, to develop a pilot program for the Farmer 3.0 Ecosystem. It was initially envisaged to engage with up to 1,000 farmers, however delays in obtaining the necessary product import licences, mean that the initial pilot will be of a smaller scale using product procured in country.  This is now ready to be rolled out.

Lac Dinga

The Company retains its interest in the exploration side of the fertiliser industry through its 70% interest in La Société des Potasses et des Mines S.A. ('SPM'), which holds the exclusive right to conduct exploration activities for potash salts over the Lac Dinga Project Area ('Lac Dinga' or the 'Project') in highly prospective Kouilou region in the Republic of Congo.  The second term of the Project license expired on 25 April 2018. SPM applied for a renewal of the license for a further two years in early 2018 in line with the provisions set out in the Mining Code and is now awaiting formal cabinet approval by the Government of the Republic of Congo. The farm out agreement with African Agronomix limited ("AAX") signed in July 2017, states that the licence must be in good standing before AAX can commence work on the Project. As set out in note 11 to the financial statements, the Company undertook an impairment review of the Project and a key assumption was that the licence is renewed and AAX would mobilise to start the work set out in the agreement.  No additional impairment is considered necessary. 

Potash Market Outlook

Over the last year, we have also seen a positive move in the potash market as agriculture commodities grow stronger. Over the past 12-months, the price of potash has risen by close to 25%, reaching $350 a ton and experts believe the amount will keep increasing. This scenario is sparked by a tight balance in the supply-demand scale: Demand is expected to grow about 1 million metric tons this year, prompted by wheat, corn and soy - while net incremental supply changes add up to an increase of about 700,000 metric tons. Potash is a fertiliser which helps crops retain water while also improving their taste and overall quality.

Joint Venture with SG Inc.

Block Commodities and SG Inc. have undertaken an initial prefeasibility study into a project to develop mineral opportunities and downstream resources in the Republic of Congo.  The Company is seeking additional investment partners to enable this project to move forward.

Financial Results

The trading result for the year showed a net loss of $12,000 (2017: profit $9,000). Operating expenses were reduced to $1.1m (2017: $ 1.3m).  After the impairment charge in respect of fixed assets of $0.1m and the impairment of the Company's initial investment in Vipa of $0.1m (2017: impairment charge in respect of exploration expenses of $0.7m) the loss before interest fell to $1.1m (2017:2.0m).  Finance charges for the period were $0.4m (2017: $0.3m) which led to the Group reporting a loss before and after tax of $1.5m (2017: $2.3m). Cash balances at 30 June 2018 were $153,000 (2016: $11,000).

Outlook

On 21 September 2018, the Company announced that it had signed a Letter of Intent in connection with the proposed acquisition of the Company by The Eelleet Network Corp. ("TEN") with a view to having the Company's shares listed on the Canadian Securities Exchange and requested that the Company's shares be suspended. The Company is no longer pursuing this transaction as, Over the past few months, during our suspension from NEX Exchange Growth Market, there have been some key developments which lead the Board to believe that the Company can continue to raise additional capital on NEX Exchange Growth Market to develop its blockchain platform with the addition of medicinal cannabis to the output product portfolio. 

New Commodity Opportunity: Entry into the Cannabis Market

The Board has identified a significant opportunity to enter the fast-growing legal cannabis market in a prime position as the operator of cannabis production in jurisdictions where this is legally permitted.  

 

The global legal marijuana market is expected to reach USD 146.4 billion by end of 2025, according to Grand View Research, Inc. In 2018, more than six new countries announced legislation with patient numbers growing by 40% month on month. Cannabis-based medicine is now legal in 22 countries in Europe, with a further 12 decriminalising the recreational use of personal amounts of the drug.

 

The potential number of medicinal cannabis patients in the UK is estimated to reach as high as 2.9 million, underlining the growing long-term opportunities available in this industry.  Europe is poised to become one of the world's largest cannabis, hemp and cannabidiol (CBD) importers as the European medical cannabis market could be worth over EUR55bn by 2028.

 

Entering the cannabis market represents a strategic move for Block Commodities. Leveraging on its existing connections in Africa, the Board believes that the use of blockchain technology can add significant value to the production and distribution of cannabis products.

 

The Company has worked to develop a number of opportunities to access the development of medicinal cannabis in low-cost jurisdictions. This includes options to acquire interests in cannabis licences in Sierra Leone, Lesotho, Niger, and Malta, all of which will be formalised once capital is raised.

 

To date, Block Commodities has signed a Heads of Agreement with shareholders of Greenbelt Company Limited to acquire a 100% interest ("Sale Shares").  Greenbelt was granted a licence by the Sierra Leone Minister of Agriculture and Forestry for medical cannabis production and processing in November 2018. Block Commodities plans to fast-track and streamline operations in Sierra Leone as soon as the acquisition is finalised. 

Financing

As announced on 27 March 2019 the company has raised £400,000 to enable it to acquire an option to acquire an exclusive licence to produce, process and market medicinal cannabis and for general working capital purposes.

 

In addition, the Company will now press ahead with its Uganda pilot as a proof of concept for the commodities eco-system platform.

The Board believe that the Company now has a firm foundation upon which to build a growing revenue generating business built around our blockchain platform and look forward to reporting continued progress in the current year.

Chris Cleverly

Executive Chairman

28 March 2019

 

CONSOLIDATED INCOME STATEMENT

For the year ended 30 June 2018

 

			2018		2017
			$'000		$'000
Other trading (loss) / income			(12)		9
Operating expenses			(948)		(1,251)
Share of loss of associate			-		(24)
Impairment of loan to unquoted company			(100)		-
Impairment of evaluation and exploration costs			-		(719)
Impairment of fixed assets			(86)		-
Other losses			(20)		(2)
Operating loss			(1,166)		(1,987)
Finance expense			(357)		(286)
Loss before taxation			(1,523)		(2,273)
Income tax			-		-
Loss for the year attributable to the owners of the parent company			(1,523)		(2,273)
Earnings per share - attributable to the owners of the parent company: - basic and diluted (cents)			(0.05c)		(0.17c)

 

All results relate to continuing activities.

 

CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the year ended 30 June 2018

		2018		2017
		$'000		$'000
Loss for the year		(1,523)		(2,273)
Other comprehensive (loss) / income for the year
Items that may be reclassified subsequently to profit or loss
- Foreign exchange translation differences		4		46
Total comprehensive loss for the year attributable to the owners of the parent company		(1,519)		(2,227)

 

There is no taxation arising on other comprehensive income.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

			30 June 2018		30 June 2017
	Note		$'000		$'000
ASSETS
Non-current assets
Intangible assets: exploration activities			3,000		3,000
Investment in associate			-		101
Property, plant and equipment			6		99
Total non-current assets			3,006		3,200
Current assets
Inventory			10		-
Trade and other receivables			92		25
Cash and cash equivalents			153		11
Total current assets			255		36
TOTAL ASSETS			3,261		3,236
LIABILITIES
Current liabilities
Trade and other payables			(1,719)		(1,574)
Loan note			(1,423)		(1,170)
Total current liabilities			(3,142)		(2,744)
NET ASSETS			119		492
EQUITY
Share capital			19.314		18,551
Share based payment reserve			2,882		2,633
Foreign exchange translation reserve			(573)		(577)
Retained losses			(21,504)		(20,115)
Total equity attributable to the owners of the parent company			119		492

 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 June 2018

							2018		2017
		Note					$'000		$'000
Operating activities
Loss before tax							(1,523)		(2,273)
Adjustments for:
- Depreciation							7		-
- Profit on disposal of investments							(24)		(37)
- Impairment of evaluation and exploration assets							-		719
- Impairment of property, plant and equipment							86		-
- Impairment of loan to unquoted company							100		-
- Share of loss of associate							-		24
- Foreign exchange							65		(4)
- Share based payment							334		98
- Finance expense							357		286
Operating cash flow before movements in working capital							(598)		(2,166)
Working capital adjustments:
- Increase in inventory							10		-
- Decrease in receivables							-		51
- Increase in payables							158		659
Cash used in operations							(449)		(478)
Finance expense							(42)		(152)
Net cash used in operating activities							(491)		(630)
Investing activities
Purchase of evaluation and exploration assets							-		(626)
Sale of quoted investments							-		80
Purchase of property, plant and equipment							-		(14)
Loan to unquoted company							(100)		-
Net cash used in investing activities							(100)		(560)
Financing activities
Proceeds from issue of share capital							733		713
Drawdown of loan note							-		190
Net cash from financing activities							733		903
Net increase / (decrease in cash and cash equivalents							142		(287)
Cash and cash equivalents at start of the year							11		298
Cash and cash equivalents at end of the year							153		11

 

Non cash transactions

The principal non cash transactions relate to:

			2018		2017
Shares issued in settlement of:			$'000		$'000
-          Advisory and consultancy and directors' fees			232		182
-          Acquisition of associate			-		125
Share based payments			334		98
			566		405

 

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

  

For further information, please contact:

 

Block Commodities Limited
Chris Cleverly	info@blockcommodities.com
NEX Exchange Corporate Adviser:
Alexander David Securities Limited
David Scott - Corporate Finance	+44 (0) 20 7448 9820
James Dewhurst - Corporate Broking	+44 (0) 20 7448 9820
Public and Investor Relations:
Cassiopeia Services - Stefania Barbaglio	stefania@cassiopeia-ltd.com