Page 49 - Sundance Resources Ltd Annual Report 2013

SUNDANCE RESOURCES LIMITED ANNUAL REPORT 2013 47
directors’ report (continued)
FOR THE YEAR ENDED 30 JUNE 2013
Engineering, Procurement and Construction (‘EPC’) of the port and rail with accompanying debt and equity
options. Term sheets were also issued for off take and mine/project equity options.
The material business risks faced by the Company that are likely to have an effect on the prospects of the Company
are considered below:
• Working Capital Funding – At 30 June 2013, Sundance held cash of $19.6M. Sundance is not currently in
a position to generate income from operations and as such is reliant upon the equity and/or debt markets for
additional working capital funding. The Directors believe that at the date of signing the financial statements there
are reasonable grounds to believe that the Consolidated Entity and Company will have sufficient funds to meet
its obligations as and when they fall due. Refer to note 2 to the Financial Statements.
• Project Funding – Sundance will need to raise further capital or debt financing in order to advance the
development of the Project. The success and the pricing of any such capital raising and/or debt financing will be
dependent upon the prevailing conditions at that time. Failure to secure appropriate funding for the development
of the Project will result in a delay or inability to develop the Project.
• Foreign Jurisdiction – Sundance’s operations in Cameroon and Congo, in Central Africa, are exposed to
various levels of political, economic and other risks and uncertainties associated with operating in foreign
jurisdictions. These risks and uncertainties include, but are not limited to: currency exchange rates; high rates
of inflation; labour unrest; renegotiation or nullification of existing concessions, licenses, permits and contracts;
changes in taxation policies; restrictions on foreign exchange; changing political conditions; and currency
controls and governmental regulations that favour or require the awarding of contracts to local contractors or
require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction.
• Commodity Price – The price of iron ore fluctuates widely and is affected by numerous factors beyond
Sundance’s control such as supply and demand; and changes in global economies. The decision to develop
the Project, and the returns to be achieved from it, are dependent upon the future price of iron ore.
• Political – Changes, if any, in mining or investment policies or shifts in political attitude in Cameroon and Congo
may adversely affect Sundance operations. Operations may be affected in a varying degrees by government
regulations with respect to, but not limited to: restrictions on production; pricing controls; export controls;
currency remittance; income taxes; foreign investment; maintenance of claims; environmental legislation; land
use; land claims of local people; water use; mine safety and government and local participation. Failure to
comply strictly with applicable laws, regulation and local practices relating to mineral tenure and development
could result in loss, reduction or expropriation of entitlements. The occurrence of these various factors and
uncertainties cannot be accurately predicted.
• Resource/Reserve estimates – The resources and reserve estimates are expressions of judgements based on
knowledge, experience and industry practice. These estimates are currently considered appropriate and have
been made in accordance with Joint Ore Reserves Committee (‘JORC’) code requirements, however, they may
change significantly when additional data becomes available or economic assumptions change.
• Production and other operational risks – Future operations will be subject to a number of factors that can
cause material delays or changes in operating costs for varying lengths of time. These factors include weather
conditions and natural disasters, disruption to supply, unexpected technical problems, unanticipated geological
conditions, equipment failures, personnel issues, or disruptions of rail and ship loading facilities.
• Litigation – Sundance may be exposed to risks of litigation which may have a material adverse effect on
the financial position of the consolidated entity. As at the date of this report, the litigation matters considered
significant to Sundantce’s business are disclosed in Note 23 to the Consolidated Financial Statements.
Financial Position
During the financial year considerable focus was directed to progressing the Scheme Implementation Agreement
(‘SIA’) with Hanlong (Africa) Mining Investments Ltd (‘Hanlong’) and development of the Mbalam-Nabeba Iron Ore
Project (‘the Project’); the activities related to this necessitated additional spend on scheme implementation costs
including consultants, legal fees and travel.
It is estimated that the SIA resulted in an additional $3.6M of expenses from the inception of the SIA process, the
cash flows from which were offset by the $5M in convertible note funding received from Hanlong (the interest on
which was waived under a condition of the SIA termination agreement). Details of the convertible note are provided
in Note18 to the financial statements. Additional disclosure was announced to the ASX on 6 February 2013 and
amendments thereto on 9 April 2013.
5. REVIEW OF OPERATIONS