Page 38 - Sundance Resources 2014 Annual Report

36 SUNDANCE RESOURCES LIMITED ANNUAL REPORT 2014
DIRECTORS’ REPORT
FOR THE YEAR ENDED 30 JUNE 2014
5. Review of Operations (continued)
Total comprehensive loss amounted to $22.8 million (2013: income $10.9 million) for the year ended 30 June 2014, which
includes an exchange gain on translation of foreign operations. This gain amounted to $10.2 million (2013: gain $42.6
million) and is due to a movement in the Central African CFA francs against the Australian Dollar from 461:1 at 30 June 2013
to 454:1 at 30 June 2014.
The Group has reviewed the timing of all discretionary expenditures, including exploration and development costs, and
wherever necessary these costs have been minimised or deferred to match the Group’s cash flow forecast. A number of
cost saving initiatives have been undertaken in an effort to maintain prudent management of existing funds with a view to
conserve cash while the Group completes its project development negotiations.
Material Business Risks
The material business risks faced by Sundance that are likely to have an effect on the prospects of the Group are
considered below:
• Working Capital Funding – At 30 June 2014, Sundance held cash of $14.4 million. 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. An amount of $40 million has been raised for working capital purposes subsequent to 30
June 2014. The Directors believe that at the date of signing these financial statements there are reasonable grounds to
believe that the Group will have sufficient funds to meet its obligations as and when they fall due.
• Project Funding – Sundance will need to raise further capital and/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 or will potentially result in the loss of 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; tropical
diseases; acts of terrorism; 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 or
elsewhere may adversely affect Sundance operations. Operations may be affected in 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’) 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 Group. The litigation matters considered significant to Sundance’s business are as disclosed in the
Consolidated Financial Statements.