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Auditors issue qualified opinion on Abterra's FY2015 results

AUDITORS of Abterra have issued a qualified opinion on the minerals and resources group as they could not ascertain "the appropriateness of the carrying amount" of certain deposit receivable.

And should the deposit receivable be impaired, the carrying amount of the deposit receivable would be reduced by the impairment loss, with a corresponding charge to the profit or loss during the financial year ended Dec 31, 2015.

In its comments on the group's financial statements, Mazars LLP flagged an amount of S$43.52 million - net of accumulated impairment loss of S$37 million - that was included in the receivables of the group as at Dec 31, 2015.

This sum relates to a deposit paid to a third party, Shenzhen Manfu Industrial Co (Manfu), for the proposed acquisition of a 54.42 per cent stake in Zuoquan Xinrui Metallurgy Mine Co - a deal that was subsequently terminated in 2013.

An agreement was subsequently entered into between Abterra and Manfu for the latter to refund the deposit over five instalments starting from January 2014, with the last instalment scheduled to take place in September 2015. This deposit was secured using Manfu's 65 per cent stake in General Nice (SA) Resources Company (GNSA) held through Manfu's fully owned subsidiary Winner Industrial Co (Full Winner).

But after the repayment of two instalments in 2014, Abterra and Manfu entered into another conditional sales and purchase agreement for a proposed acquisition of Manfu's 60 per cent stake in Smart Harmony Investment, which in turn owned a commercial property located in Beijing for S$76.75 million. This sum was to be offset against the deposit receivable's gross balance of S$80.53 million.

"As at the date of this report, the conditional sales and purchase agreement is still subject to the finalisation and acceptance from both parties on various precedent conditions and the approvals of the relevant authorities and shareholders," Mazars said.

Abterra was notified on April 8 this year that Full Winner's shareholding in GNSA had decreased from 65 per cent to 19.5 per cent. Consequently, the pledged shares could no longer serve as security for the deposit receivable and the only security left is the commercial property in Beijing.

"Should the deposit receivable be impaired, the carrying amount of the deposit receivable would be reduced by the impairment loss, with a corresponding charge to the profit or loss during the financial year ended Dec 31, 2015," Mazars said.

The group incurred net losses of S$70.9 million and operating cash outflows of S$2.24 million for fiscal 2015 - conditions that "indicate the existence of a material uncertainty which may cast significant doubt" on the group's abilities to continue as going concerns, it added.