REG - Aterian PLC - Final Results for the Year Ended 31 December 2022
02/05/2023 07:00
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RNS Number : 9673X Aterian PLC 02 May 2023
Aterian Plc
("Aterian" or the "Company")
Final Results for the Year Ended 31 December 2022
Aterian Plc (LSE: ATN) is pleased to announce its audited results for the
period ended 31 December 2022.
Chairman's Statement:
Dear Shareholder,
2022 marked a year of significant positive change for the Company. On 24
October 2022, we completed the acquisition of 15 copper-silver and base metal
exploration projects in the Kingdom of Morocco, moved the market listing to
the Main Market of the London Stock Exchange ("LSE''), and changed the name of
the Company from Eastinco Mining and Exploration Plc to Aterian Plc. This
transaction has transformed the Company into a multi-jurisdiction,
multi-commodity, critical and strategic metals focussed exploration and
development company, and we are excited to welcome Elemental Altus Royalties
as a significant shareholder.
The rationale for this acquisition was to acquire exciting prospective assets
that fit into our strategy of targeting critical and strategic metals to
exploration. Currently, the renewable energy, automotive and electronic
manufacturing sectors are driving the requirement to develop secure supply
chains of critical and strategic metals. This is the energy transformation
from carbon-based sources to renewable sources and storage systems. The
exploration conducted on the Moroccan assets highlights the strong potential
for the discovery of strategic metal deposits, in particular copper and
silver. We firmly believe the market fundamentals for copper are excellent and
specifically linked to the nascent growing demand for renewable energy and the
related electrification of transportation globally. We are keen to invest in
Morocco to demonstrate the potential of our assets there and we are keen to
demonstrate the full potential of our assets in Rwanda following a very
positive shift in focus from Musasa to the southern projects.
Importantly, the listing on the LSE will provide us with exposure to a broader
investor profile and greater liquidity in our shares, providing a more solid
platform to support the Company's continued growth.
We continue to work towards our objective of becoming an ethical, integrated
exploration, development, and trading company across multiple mineral assets
and jurisdictions.
Business Review and Future Developments
Morocco Acquisition - Aterian Resources Limited
On 24 October 2022, the Company completed the acquisition of 15 mineral
exploration projects covering 762 km(2) in the Kingdom of Morocco from Altus
Strategies PLC (now called Elemental Altus Royalties Corp). The completion of
the acquisition coincided with a move to the Main Market of the LSE from the
AQSE Growth Market, and a change in name from Eastinco Mining and Exploration
PLC to Aterian PLC, shortly thereafter. The name change demonstrates the
change taking place and pays homage to the geological potential offered by the
Moroccan assets acquisition.
As consideration for the Moroccan assets held by the UK-registered company
Aterian Resources Limited, the Company issued to Altus 241,173,523 ordinary
shares and issued warrants representing 10% of the enlarged share capital of
the Company, at the time of admission to the LSE. Warrants representing 5% of
the enlarged share capital of the Company have an exercise price of £0.01
whilst the balance of the warrants has a £0.02 exercise price. All the
warrants are exercisable for a period of five years from the admission date.
The amount of assets recognised on the acquisition was £3,241,000.
Aterian Resources Limited owns two Morocco registered subsidiaries which hold
the title to 50 permits, over 15 separate projects with a combined land area
of c.762 km(2). The licences are considered highly prospective for copper,
silver, tin, and base metals.
Rwanda Exploration
The main operational focus in 2022 shifted from the Musasa project to the
southern projects, where the geological team has identified 22 zones of
potential tantalum, niobium, and lithium-hosting pegmatite, making this a very
strong exploration play.
Work has targeted the HCK-1 prospect, where shallow exploration pitting has
outlined a potential target zone of c.2,500 m in strike
length.
The width of the target zone is uncertain but, in several locations, pitting
intersected pegmatite over a horizontal distance of c.100 m. A further
positive outcome from our work is that 800 m of the identified pegmatite
target zone occurs in a "greenfield" environment to the southeast of the main
ridgeline hosting HCK-1. This can be described simply as an area where there
are no observed artisanal workings, pegmatite outcrop, or surface
expressions, where the pegmatite remains blind to the surface, covered by soil
and regolith of variable thickness up to 4.50 m. A drone survey has been flown
over HCK-1, covering an area of 360 hectares, to provide detailed imagery
with topographic data and a current view of the earlier artisanal workings.
A post-period event is the completion of a detailed ground-based geophysical
survey over HCK-1. The multi-method survey of Induced Polarisation ("IP"),
Electrical IP Tomography, and ground magnetics was designed to provide
additional information allowing for a determination of the geological contacts
of the main pegmatite zone with the schistose country rock, controlling
geological structures and an approximation of the depth of weathering. The
final report of this work is pending, and it is expected that a limited scout
drilling programme will be planned based on the outcome of this work,
providing an opportunity to test the fresh bedrock for the underlying lithium
potential.
At the end of June 2022, we suspended operations on our Musasa Project based
on the recommendation of Quiver Ltd, our processing consultants. Their
assessment was to i) reconfigure the wash plant and ii) undertake additional
metallurgical test work to improve overall metal recoveries. The Company's
view is to refocus our activities to the southern projects and suspend further
investment in production until such time as the new licence at Musasa is
granted and then reassess the situation. The original application was made in
May 2021. While suspending production was a disappointment, we are excited at
the prospect of potentially expanding our potential exploration licence area.
As a result, management made the decision to fully impair the carrying value
of goodwill and property, plant and assets related to the Group's Musasa
Project amounting to £2,168,000 and £877,000 respectively. Appropriately,
following the decision to cease work on the Musasa Project the Eastinco
Limited Managing Director and Rwandan country manager, Daniel Hogan resigned.
Fieldwork undertaken at Musasa has been limited to geological examination of
the Kassava prospect. Kassava is one of five identified mineralized LCT
pegmatite targets occurring on the project, where historic artisanal miners
have excavated a 20 m x 30 m wide cut to a depth of c. 13 m, close to the
centre of the prospect. Field observations indicate Kassava to be a
lens-shaped body, with a maximum horizontal width of 80 m, with the
exploration pits covering a strike length of 250 m.
Financial Review
During the year under review the Group made a loss before taxation of
£4,383,0000 (2021: loss £1,351,000). The prudent impairment of both the
goodwill of £2,168,00 and property, plant and equipment of £877,000 relating
to the Musasa project in Rwanda accounts for the majority of the 2022 loss.The
consultant's assessment was to reconfigure the wash plant and to undertake
additional metallurgical test work to improve overall metal recoveries. As a
result, we made write-downs to goodwill of £2,168,000 and plant and equipment
of £877,000.
Administrative costs were contained during the year at £996,000 (2021:
£1,02,000), largely as a result of a reduction in Directors' remuneration
from £200,000 in 2021 to £55,000 in 2022 offset by increases in other
operating costs. All directors signed new service agreements (at prudent but
market rates) effective from the Company's admission to the main market in
October 2022. Accordingly, these savings will not be repeated in 2023.
These losses and acquisition costs were funded in the main by the placing of
85,4 million shares for a cash consideration of £854,000.
The issue of options, and warrants and options during the year resulted in a
share-based payment expense of £335,000 (2012: £267,000). Warrants issued to
Altus as additional consideration have also given rise to a share-based
payment expense with a total of £491,000 being capitalised as part of the
acquisition.
Loss per share for the year was 0.76 pence against 0.24 pence in 2021.
At the year-end, cash balances were £110,000 although the Group has the
benefit of a working capital facility made available by the Chairman. The
raising of new funds for developing the business is a key focus of the Board.
Director Changes
Mr. Simon Retter offered to resign as a Non-Executive Director in November
2022 following the Admission to the LSE, and Mr. Kasra Pezeshki and Mr.
Alister Masterton-Hume officially joined the Board of Directors as
Non-Executive Directors on the 24 of October 2022. Mr Retter formally left the
Board in early 2023.
Outlook
As a Board, we believe the outlook for Aterian remains very positive. We have
encouraging results coming back from preliminary work on the recently acquired
Moroccan projects and have identified a new rare-metal hosting pegmatite swarm
in southern Rwanda with lithium potential. We recently attended the Mining
Indaba in Cape Town where we received strong trade interest that supports and
vindicates our strategy to target critical and strategic metals through the
expansion of our portfolio. The market fundamentals remain strong for the
Group. I remain firmly optimistic about the Group's prospects going forward
and am encouraged by our developing relationships. Furthermore, the launch of
our trading operations will allow us to develop more important relationships
to drive product trading and revenues.
On behalf of the Company, I would like to take this opportunity to once again
thank my fellow Board members, our employees, and our shareholders for their
continued support and patience.
Signed on behalf of the Board:
Charles Bray
Director
28 April 2023
This announcement contains information which, prior to its disclosure, was
inside information as stipulated under Regulation 11 of the Market Abuse
(Amendment) (EU Exit) Regulations 2019/310 (as amended).
For further information, please visit the Company's website:
www.aterianplc.com (http://www.aterianplc.com) or contact:
Aterian Plc:
Charles Bray, Executive Chairman - charles.bray@aterianplc.com
(mailto:charles.bray@aterianplc.com)
Simon Rollason, Director - simon.rollason@aterianplc.com
(mailto:simon.rollason@aterianplc.com)
Financial Adviser and Broker:
Novum Securities Limited
David Coffman / George Duxberry
Colin Rowbury
Tel: +44 (0)207 399 9400
Financial PR:
Yellow Jersey PR - aterian@yellowjerseypr.com
Charles Goodwin / Bessie Elliot
Tel: +44 (0)20 3004 9512
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 DECEMBER 2022
Group
Notes Year to Year to
31-Dec-22 31-Dec-21
£'000 £'000
Revenue - -
Administrative expenses 4 (996) (1,020)
Impairment losses 5 (3,045) -
Share-based payment expense 21 (335) (267)
Provision for expected credit losses - (64)
(4,376) (1,351)
Operating loss (4,376) (1,351)
Interest payable and similar charges 6 (7) (18)
Loss before tax (4,383) (1,369)
Tax expense 7 - -
Loss after tax (4,383) (1,369)
Other comprehensive income:
Items that may be reclassified to profit or loss
Loss / (gain) on translation of foreign operations (50) 28
Total comprehensive loss (4,433) (1,341)
Loss per share
Basic and diluted loss per share (pence) 8 (0.76) (0.31)
All activities relate to continuing operations.
The accompanying notes are an integral part of these financial statements
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Group Company
Notes 31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21
£'000 £'000 £'000 £'000
Non-current assets
Investments 9 - - 3,241 2,261
Goodwill 11 - 2,168 - -
Exploration and evaluation assets 12 3,241 - - -
Trade and other receivables 14 - - 6 -
Amounts owed by group undertakings 14 - - - 1,703
Property, plant and equipment 13 421 1,226 6 -
Total non-current assets 3,662 3,394 3,253 3,964
Current assets
Trade and other receivables 14 319 188 266 143
Cash and cash equivalents 15 110 196 41 190
Total current assets 429 384 307 133
Total assets 4,091 3,778 3,560 4,297
Equity and liabilities
Share capital 20 9,647 5,671 9,647 5,671
Share premium 20 2,177 2,144 2,177 2,144
Share-based compensation reserve 21 2,441 1,615 2,441 1,615
Interest in shares in EBT 21 (839) (395) (839) (395)
Translation reserve (314) (263) - -
Accumulated losses (10,968) (6,629) (11,784) (6,373)
Other reserves - 80 - 58
Merger relief reserve 1,200 1,200 1,200 1,200
Total equity 3,345 3,423 2,843 3,920
Current liabilities
Trade and other payables 16 395 197 366 219
Deferred consideration 17 200 - 200 -
Total current liabilities 595 197 566 219
Non-current liabilities
Borrowings 18 151 158 151 158
Total non-current liabilities 151 158 151 158
Total equity and liabilities 4,091 3,778 3,560 4,297
(*:) The correction of prior period errors is disclosed in note 2 of the notes
to the financial statements.
The Company made a loss of £5,433,000 for the year 2022 (2021 - loss of
£1,152,000).
These financial statements were approved by the Board and were authorised for
issue on 28 April 2023 and signed on their behalf by:
Charles G Bray
Chairman
Company number: 07496976
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Share-based compensation reserve Interest in shares in EBT Translation reserve Other Reserve Merger relief reserve Accumulated losses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 4,301 2,144 1,348 (133) (291) 80 1,200 (5,326) 3,323
Loss for the year - - - - - - - (1,369) (1,369)
Other comprehensive loss - - - - 28 - - 28
Transactions with owners:
Transfer from other reserve to accumulated losses - - - - - - - 66 66
Share based compensation - - 267 (262) - - - - 5
Issue of new shares 1,370 - - - - - - - 1,370
At 31 December 2021 5,671 2,144 1,615 (395) (263) 80 1,200 (6,629) 3,423
Loss for the year - - - - - - - (4,383) (4,383)
Other comprehensive loss - - - - (50) - - - (50)
Transactions with owners:
Discounting of loan notes - - - - - (36) - - (36)
Transfer from other reserve to accumulated losses - - - - - (44) - 44 -
Share based compensation - - 826 (444) - - - - 382
Issue of new shares 3,976 33 - - - - - - 4,009
At 31 December 2022 9,647 2,177 2,441 (839) (313) - 1,200 (10,968) 3,345
Share based compensation reserve
The entry to the share based compensation reserve in the year is made up of
£335,000 which was charged to the consolidated statement of comprehensive
income (note 21) and £491,000 which related to warrants capitalised in
connection with the Altus acquisition (note 10).
COMPANY STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 DECEMBER 2022
Share capital Share premium Share-based compensation reserve Interest in shares in EBT Other Reserve Merger relief reserve Accumulated losses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 4,301 2,144 1,348 (133) 80 1,200 (5,221) 3,719
Loss for the year - - - - - - (1,152) (1,152)
Transactions with owners:
Other reserve movement - - - - (22) - - (22)
Share based compensation - - 267 (262) - - - 5
Issue of new shares 1,370 - - - - - - 1,370
At 31 December 2021 5,671 2,144 1,615 (395) 58 1,200 (6,373) 3,920
Loss for the year - - - - - - (5,432) (5,432)
Transactions with owners:
Discounting of loan notes - - - - (36) - - (36)
Transfer from other reserve to accumulated losses - - - - (22) - 22 -
Share based compensation - - 826 (444) - - - 382
Issue of new shares 3,976 33 - - - - - 4,009
At 31 December 2022 9,647 2,177 2,441 (839) - 1,200 (11,784) 2,843
Reserves Description and purpose
Share capital Nominal value of the contributions made by shareholders in return for the
issue of shares.
Share premium Amount subscribed for share capital in excess of nominal value.
Share-based compensation reserve Cumulative fair value of the charge/(credit) in respect of share options
granted and recognised as an expense in the Income Statement.
Translation reserve The translation reserve comprises translation differences arising from the
translation of financial statements of the Group's foreign entities into
Sterling (£).
Other reserves The other reserve comprises differences arising from the discounting of loan
notes.
Merger relief reserve The merger relief reserve comprises differences between the fair value and at
par value of shares issued for the acquisition of subsidiary
Interest in shares in Employees Benefit Trust (EBT) The Company set up an Employees Benefit Trust on 6 March 2015 (the Equatorial
EBT) for the benefit of its employees. The cost of shares held by the EBT
are presented as a deduction from entity.
Accumulated losses Accumulated losses represents total losses.
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
YEAR ENDED 31 DECEMBER 2022
Note Group Company
31-Dec-22 31-Dec-21 31-Dec-22 31-Dec-21
£'000 £'000 £'000 £'000
Cash flow from operating activities
Loss after tax (4,383) (1,369) (5,433) (1,151)
Adjustments for:
Depreciation 22 2 - -
Share based expense 335 267 335 267
Costs not paid cash 50 - 50 -
Interest expense 7 18 7 18
Inter-company interest income - - (264) (224)
Provisions for expected credit losses - 64 2,444 64
Provision for impairment of investments 9 - - 2,261
Provision for impairment of goodwill 11 2,168 - - -
Impairment of property plant and equipment 13 877 - - -
Foreign exchange gains (134) (28) - -
Operating loss before working capital changes (1,058) (1,046) (600) (1,027)
Changes in working capital:
(Increase) / decrease in trade & other receivables 81 337 89 381
Increase / (decrease) in trade & other payables 168 (490) 117 (294)
Net cash outflows from operating activities (809) (1,199) (394) (940)
Cash flow from investing activities
Purchase of plant and equipment (10) (239) (6) -
Asset acquisition including directly attributable costs 10 (108) - (108) -
Funds advanced to subsidiary - - (482) -
(118) (239) (596) -
Net cash used in investing activities
Cash flow from financing activities
Net proceeds from borrowings 18 - 567 - 567
Loan received 20 150 495 150 -
Cash proceeds from issue of shares 691 520 691 520
Net cash flow from financing activities 841 1,582 841 1,086
Net (decrease) / increase in cash & cash equivalents (86) 144 (149) 141
Cash & cash equivalents at beginning of the year 196 52 190 49
Effect of exchange rate movements on cash - - - -
Cash and cash equivalents at end of the year 110 196 41 190
NOTES TO THE FINANCIAL STATEMENTS
YEAR ENDED 31 DECEMBER 2022
1. General information
Aterian plc ("the Company") is an investment company, focussed on African
mineral resource investment opportunities. The Company operates through its
100% owned subsidiary, Eastinco Limited ("EME Ltd"), a Rwandan tantalum, tin
and tungsten exploration company and Aterian Resources Limited which holds
copper-silver and base metal exploration projects in the Kingdom of Morocco.
On 24 October 2022, the Company completed the acquisition of 15 mineral
exploration projects covering 762 km2 in the Kingdom of Morocco from Altus
Strategies PLC (now called Elemental Altus Royalties Corp). The completion of
the acquisition coincided with a move to the Standard Sector of the London
Stock Exchange from the AQUIS Stock Exchange, and a change in name from
Eastinco Mining and Exploration PLC to Aterian PLC, shortly thereafter.
The Company is incorporated and domiciled in the UK. The address of its
registered office is 27-28 Eastcastle Street, London W1W 8DH.
The registered number of the company is 07496976.
2. Basis of preparation
2.1 General
These financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS and IFRIC interpretations) as adopted for
use in the United Kingdom ("UK adopted IFRS") and the Companies Act 2006. The
financial statements have been prepared under the historical cost convention
except for the valuation of assets acquired in an asset acquisition which are
measured at fair value.
The financial statements have been rounded to the nearest thousand pounds.
The Company has taken the exemption under s408 Companies Act 2006 and has
therefore not published its own profit and loss account in these financial
statements.
During the year, the Group identified a number of presentational matters
relating to the year ended 31 December 2021 which have been adjusted in the
year ended 31 December 2022. On the basis that this is immaterial, and the
errors relate to disclosures, a prior year adjustment was not made. In
particular
· The financial statements for the year ended 31 December 2021
overstated the number (but not the value) of shares issued by 50,000,000
ordinary shares Additionally, the brought forward number of shares in issue
was overstated by 510 shares. These financial statements have corrected this
by way of presentation restatement in Note 20. The basic and diluted loss per
share in 2021 has remained unchanged at 0.31 pence.
· The financial statements for the year ended 31 December 2021
understated the number (but not the value) of options issued by 12,346,660 and
these financial statements have corrected this by way of presentation
restatement in Note 21.
2.2 Functional and presentation currency
The financial statements of the Group are presented in Pounds Sterling, which
is also the functional currency of the Company. The individual financial
statements of each of the Company's wholly owned subsidiaries are prepared in
the currency of the primary economic environment in which it operates (its
functional currency).
2.3 Basis of consolidation
The consolidated financial statements comprise the financial statements of
Aterian Plc and its subsidiaries as at 31 December 2022. Subsidiaries are
entities controlled by the Group. Control exists when the Group is exposed, or
has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has
all of the following:
· Power over the investee (i.e., existing rights that give it the
current ability to direct the relevant activities of the investee)
· Exposure, or rights, to variable returns from its involvement
with the investee
· The ability to use its power over the investee to affect its
returns
· Generally, there is a presumption that a majority of voting
rights results in control. When the Group has less than a majority of the
voting, or similar, rights of an investee, it considers all relevant facts and
circumstances in assessing whether it has power over an investee, including:
· The contractual arrangements with the other vote holders of the
investee;
· Rights arising from other contractual arrangements; and
· The Group's voting rights and potential voting rights
The relevant activities are those which significantly affect the subsidiary's
returns. The ability to approve the operating and capital budget of a
subsidiary and the ability to appoint key management personnel are decisions
that demonstrate that the Group has the existing rights to direct the relevant
activities of a subsidiary.
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of
the subsidiary. Assets, liabilities, income and expenses of a subsidiary
acquired or disposed of during the year are included in the statement of
profit or loss and other comprehensive income from the date the Group gains
control until the date the Group ceases to control the subsidiary.
When necessary, adjustments are made to the financial statements of
subsidiaries to bring their accounting policies in line with the Group's
accounting policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group
are eliminated in full, on consolidation.
A change in the ownership interest of a subsidiary, without a loss of control,
is accounted for as an equity transaction.
If the Group loses control over a subsidiary, it derecognises the related
assets (including goodwill), liabilities, non-controlling interest and other
components of equity, while any resultant gain or loss is recognised in profit
or loss. Any investment retained is recognised at fair value.
The individual financial statements of each entity in the Group are presented
in the currency of the primary economic environment in which the entity
operates, which is the functional currency.
Business combinations are accounted for under the acquisition method. Under
the acquisition method, the results of the subsidiaries acquired or disposed
of are included from the date of acquisition or up to the date of disposal. At
the date of acquisition, the fair values of the subsidiaries' net assets are
determined and these values are reflected in the Consolidated Financial
Statements. The cost of acquisition is measured at the aggregate of the fair
values, at the date of exchange, of assets given, liabilities incurred or
assumed, and equity instruments issued by the Group in exchange for control of
the acquiree, plus any costs directly attributable to the business
combination, and directly expensed.
Any excess of the purchase consideration of the business combination over the
fair value of the identifiable assets and liabilities acquired is recognised
as goodwill. Goodwill, if any, is not amortised but reviewed for impairment at
least annually.
Intra-group transactions, balances and unrealised gains on transactions are
eliminated; unrealised losses are also eliminated unless the cost cannot be
recovered. Where necessary, adjustments are made to the financial statements
of subsidiaries to ensure consistency of accounting policies with those of the
Group.
2.4 Business combinations
A business combination is defined as an acquisition of assets and liabilities
that constitute a business and is accounted for using the acquisition method.
A business is an integrated set of activities and assets that is capable of
being conducted and managed for the purpose of providing goods or services to
customers, generating investment income (such as dividends or interest) or
generating other income from ordinary activities. A business consists of
inputs, including non-current assets, and processes, including operational
processes, that when applied to those inputs, have the ability to create
outputs that provide a return to the Company and its shareholders. A business
also includes those assets and liabilities that do not necessarily have all
the inputs and processes required to produce outputs but can be integrated
with the inputs and processes of the Company to create outputs.
When acquiring a set of activities or assets in the exploration and
development stage, which may not have outputs, the Company considers other
factors to determine whether the set of activities or assets is a business.
The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of the acquisition-date fair values of
assets transferred by the Group, liabilities incurred by the Group to the
former owners of the acquiree and the equity interest issued by the Group in
exchange for control of the acquiree.
At the acquisition date, the identifiable assets acquired and the liabilities
assumed are recognised at their fair value at the acquisition date, except
that:
· deferred tax assets or liabilities and assets or liabilities
related to employee benefit arrangements are recognised and measured in
accordance with IAS 12 and IAS 19 respectively;
· liabilities or equity instruments related to share-based payment
arrangements of the acquiree or share-based payment arrangements of the Group
entered into to replace share-based payment arrangements of the acquiree are
measured in accordance with IFRS 2 at the acquisition date (see below); and
· assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5 are measured in accordance with that Standard.
Acquisition-related costs of a business combination, other than costs to issue
equity securities, are expensed as incurred.
2.5 Asset acquisitions
Asset acquisitions
Where the Company has determined that the assets acquired do not meet the
definition of a business, the transaction is accounted for as an asset
acquisition. In such cases, the Company identifies and recognises the
individual assets acquired and liabilities assumed. The cost of the group is
allocated to the individual identifiable assets and liabilities on the basis
of their fair values at the date of purchase. Such a transaction does not give
rise to goodwill. At the Group level, the transaction is an acquisition of
exploration and evaluation assets. At the Company level, the acquisition is
treated as an investment.
When determining the initial measurement of an asset acquisition, the Company
assesses both the fair value of the consideration paid as well as the fair
value of each asset acquired and liability assumed. The consideration is
presumed to equal to the fair value of the net assets acquired unless there is
evidence to the contrary. The fair value of the consideration determines the
cost to be allocated over the group of assets acquired and liabilities
assumed. The fair values of the individual assets and liabilities are used to
determine the proportional amount of that cost to be allocated to the
identifiable assets and liabilities that make up the transaction. No provision
for deferred tax is recognised on the acquisition.
Expenses incurred directly in relation to the acquisition are capitalised as
part of the cost of the assets acquired.
2.6 Going concern
The financial statements have been prepared on a going concern basis. The
Group has not yet earned revenues and as at 31 December 2022 was in the
feasibility, optimisation and commissioning phase of its ore processing plant
in Rwanda. In Morocco, each of its assets are in the early stages of
exploration and feasibility assessment. Continuing operations of the Group are
currently financed from funds raised from shareholders and this will likely
continue to be the case until revenue is generated from mining and/or trading
and subsequent ore sales. In the short term the Chairman of the Company has
made available to the Company a working capital facility, but the Group will
likely need to raise further funds in order to progress the Group from the
exploration phase into feasibility and eventually into production of revenues.
As at 31 December 2022, the Group had cash and cash equivalents of £110,000
and a working capital facility of £500,000 of which £50,000 remains to be
drawn. As at the date of this report, cash balances were approximately
£218,000. The Company also hopes to raise additional equity to fund both
day-to-day expenditure and potential growth although there can be no certainty
that such funding will be forthcoming.
As part of their assessment, the Directors have prepared financial cash-flow
forecasts on the basis that cost reduction and cost deferral measures can be
implemented over the going concern period The Company's base case financial
projections show that the Group will continue to operate within the available
facilities throughout the next 12 months. Much of the Group's planned
exploration expenditure is discretionary and, if necessary, could be scaled
back to conserve cash should circumstances coincide with our expectations.
The Directors have agreed, if circumstances require, to defer payment of their
fees until such time as adequate funding is received and if necessary, scale
back all discretionary expenditure including exploration expenditure.
The Directors have concluded that these circumstances give rise to a material
uncertainty relating to going concern, arising from events or conditions that
may cast significant doubt on the entity's ability to continue as a going
concern if a further fund raise was unsuccessful. However, considering recent
successful fund raises the Directors are confident that they can continue to
adopt the going concern basis in preparing the financial statements.
The financial statements do not include any adjustment that may arise in the
event that the Group is unable to raise finance, realise its assets and
discharge its liabilities in the normal course of business.
2.7 Changes in accounting policies
New standards, interpretations and amendments adopted from 1 January 2022
There were no new standards or interpretations impacting the Group that will
be adopted in the annual financial statements for the year ended 31 December
2022, and which have given rise to changes in the Group's accounting policies.
Standards and interpretations in issue but not yet effective or not yet
relevant
At the date of authorisation of these financial statements the following
Standards and Interpretations which have not been applied in these financial
statements were in issue but not yet effective:
Effect annual periods beginning before or after
IAS 1 Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice 1(st) January 2023
Statement 2);
IAS 8 Amendments regarding the definition of accounting estimates 1(st) January 2023
IAS 12 Amendments regarding deferred tax on leases and decommissioning obligations 1(st) January 2023
IFRS 17 Amendments to address concerns and implementation challenges that were 1(st) January 2023
identified after IFRS 17 was published
IAS 1 Amendments to defer the effective date of January 2020 amendments regarding 1(st) January 2023
the disclosure of accounting policies
IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback) 1(st) January 2024
IAS 1 Presentation of Financial Statements (Amendment - classification of 1(st) January 2024
Liabilities as Current or Non-current)
IAS 1 Presentation of Financial Statements (Amendment - Non-current Liabilities with 1(st) January 2024
Covenants)
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the Group's
financial statements.
2.8 Segment reporting
An operating segment is a component of an entity that engages in business
activities from which it may earn revenues and incur expenses (including
revenue and expenses relating to transactions with other components of the
same entity) whose operating results are reviewed regularly by the entity's
chief operating decision maker to make decision about resources to be
allocated to the segment and assess its performance and for which discrete
financial information is available.
The Directors are of the opinion that the Group is engaged in a one operating
segment being exploration activity in
Africa.
2.9 Accounting for interest in own shares held though an Employees Benefit Trust
The funds advanced to acquire the shares have been accounted for under IFRS as
a deduction from equity rather than as an asset.
2.10 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
on entity and a financial liability or equity instrument of another.
(a) Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently
measured at amortised cost, fair value through OCI, or fair value through
profit and loss.
The classification of financial assets at initial recognition that are debt
instruments depends on the financial asset's contractual cash flow
characteristics and the Group's business model for managing them. The Group
initially measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised cost
or fair value through OCI, it needs to give rise to cash flows that are
'solely payments of principal and interest (SPPI)' on the principal amount
outstanding. This assessment is referred to as the SPPI test and is performed
at an instrument level.
The Group's business model for managing financial assets refers to how it
manages its financial assets in order to generate cash flows. The business
model determines whether cash flows will result from collecting contractual
cash flows, selling the financial assets, or both.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in
four categories:
· Financial assets at amortised cost
· Financial assets at fair value through OCI with recycling of
cumulative gains and losses (debt instruments)
· Financial assets designated at fair value through OCI with no
recycling of cumulative gains and losses upon derecognition (equity
instruments)
· Financial assets at fair value through profit or loss
Financial assets at amortised cost
This category is the most relevant to the Group. The Group measures financial
assets at amortised cost if both of the following conditions are met:
· The financial asset is held within a business model with the
objective to hold financial assets in order to collect contractual cash flows;
and
· The contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
Financial assets at amortised cost are subsequently measured using the
effective interest rate (EIR) method and are subject to impairment. Interest
received is recognised as part of finance income in the statement of profit or
loss and other comprehensive income. Gains and losses are recognised in profit
or loss when the asset is derecognised, modified or impaired. The Group's
financial assets at amortised cost include trade receivables (not subject to
provisional pricing) and other receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part
of a group of similar financial assets) is primarily derecognised (i.e.,
removed from the Group's consolidated statement of financial position) when:
· The rights to receive cash flows from the asset have expired; or
· The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash flows in full
without material delay to a third party under a 'pass-through' arrangement;
and either (a) the Group has transferred substantially all the risks and
rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred
control of the asset.
Impairment of financial assets
The Group recognises an allowance for allowance for expected credit losses
("ECLs'') for all debt instruments not held at fair value through profit or
loss. ECLs are based on the difference between the contractual cash flows due
in accordance with the contract and all the cash flows that the Group expects
to receive, discounted at an approximation of the original EIR. The expected
cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms. ECLs are
recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, ECLs are
provided for credit losses that result from default events that are possible
within the next 12-months (a 12-month ECL). For those credit exposures for
which there has been a significant increase in credit risk since initial
recognition, a loss allowance is required for credit losses expected over the
remaining life of the exposure, irrespective of the timing of the default (a
lifetime ECL).
For trade receivables (not subject to provisional pricing) and other
receivables due in less than 12 months, the Group applies the simplified
approach in calculating ECLs, as permitted by IFRS 9. Therefore, the Group
does not track changes in credit risk, but instead, recognises a loss
allowance based on the financial asset's lifetime ECL at each reporting date.
The Group considers a financial asset in default when contractual payments are
90 days past due. However, in certain cases, the Group may also consider a
financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual
amounts in full before taking into account any credit enhancements held by the
Group.
A financial asset is written off when there is no reasonable expectation of
recovering the contractual cash flows and usually occurs when past due for
more than one year and not subject to enforcement activity. At each reporting
date, the Group assesses whether financial assets carried at amortised cost
are credit impaired. A financial asset is credit-impaired when one or more
events that have a detrimental impact on the estimated future cash flows of
the financial asset have occurred.
(b) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial
liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective
hedge, as appropriate. All financial liabilities are recognised initially at
fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs. The Group's financial liabilities
include trade and other payables, accruals and loan notes.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as
described below:
Loans and borrowings, trade and other payables, and accruals.
After initial recognition, interest-bearing loans and borrowings, trade and
other payables, and accruals are subsequently measured at amortised cost using
the EIR method. Gains and losses are recognised in the statement of profit or
loss and other comprehensive income when the liabilities are derecognised, as
well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss
and other comprehensive income.
This category generally applies to trade payables, other payables and
accruals.
Derecognition
A financial liability is derecognised when the associated obligation is
discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised in
profit or loss and other comprehensive income.
2.11 Taxation
Current tax is calculated according to local tax rules, using tax rates and
laws enacted or substantively enacted at the reporting date. Current and
deferred tax is recognised in profit or loss unless it relates to an item
recognised in other comprehensive income or equity in which case the related
current tax or deferred tax is recognised in other comprehensive income or
equity respectively.
Deferred tax is recognised on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the financial
statements, determined using tax rates and laws that are substantively enacted
at the reporting date and are expected to apply as or when the temporary
differences reverse. Deferred tax assets are recognised only to the extent
that it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
2.11 Property, plant and equipment
Property, plant, and equipment (PPE) is carried at cost less depreciation and
accumulated impairment losses. Where parts of an item of PPE have different
useful lives, they are accounted for as separate items of PPE.
The Group assesses at each reporting date whether items of PPE are impaired.
Depreciation is provided on PPE, at rates calculated to write off the cost
less the estimated residual value of each asset, on a straight-line basis,
over their expected useful lives as follows:
Mining
equipment
10 years
Mining Assets (incl exploration and evaluation
expenditure)
8 years
Office
equipment
4 years
Motor
vehicles
5 years
Computer
equipment
2 years
Land
not depreciated
Mine
site
not depreciated
Depreciation methods, useful lives and residual values are reviewed if there
is an indication of a significant change since the last annual reporting date
in the pattern by which the Group expects to consume an asset's future
economic benefits.
The Company capitalizes expenditures incurred in exploration and evaluation
(E&E) activities as project costs, categorized as intangible assets
(exploration and evaluation assets), when those costs are associated with
finding specific mineral resources. Expenditure included in the initial
measurement of project costs and which are classified as intangible assets
relate to the acquisition of rights to explore. Capitalization of
pre-production expenditure ceases when the mining property is capable of
commercial production. Project costs are recorded and held at cost and no
amortization is recorded prior to commencement of production. An annual review
is undertaken of each area of interest to determine the appropriateness of
continuing to capitalize and carry forward project costs in relation to that
area of interest, in accordance with the indicators of impairment as set out
in IFRS 6. An impairment provision of £877,000 has been made in the year
ended 31 December 2022 (2021: nil) as more fully described in Note 13.
2.13 Intangible assets - Goodwill
Goodwill represents the excess of the cost of a business combination over the
Group's interest in the fair value of identifiable assets, liabilities and
contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed, and equity
instruments issued, plus the amount of any non-controlling interests in the
acquiree. Contingent consideration is included in cost at its acquisition date
fair value and, in the case of contingent consideration classified as a
financial liability, remeasured subsequently through profit or loss.
Goodwill is capitalised as an intangible asset with any impairment in carrying
value being charged to profit or loss. Where the fair value of identifiable
assets, liabilities and contingent liabilities exceed the fair value of
consideration paid, the excess is credited in full to the consolidated
statement of comprehensive income on the acquisition date. An impairment
provision of £2,168,000 has been made in the year ended 31 December 2022
(2021: nil) as more fully described in Note 11.
2.14 Impairment of non-financial assets (excluding inventories and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite
useful economic lives are undertaken annually at the financial year end. Other
non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and fair value less costs to sell),
the asset is written down accordingly. Where it is not possible to estimate
the recoverable amount of an individual asset, the impairment test is carried
out on the smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units ('CGUs').
Goodwill is allocated on initial recognition to each of the Group's CGUs that
are expected to benefit from a business combination that gives rise to the
goodwill.
Impairment charges are included in profit or loss, except to the extent they
reverse gains previously recognised in other comprehensive income. An
impairment loss recognised for goodwill is not reversed.
2.15 Investment in subsidiaries
The Company, through its 100% owned Rwanda registered subsidiary, Eastinco
Limited which was acquired on 15 October 2019, is actively engaged
in mineral exploration and development of its portfolio of critical and
strategic metals in Rwanda, with the focus on extracting and recovery of
tantalum and tin.
Eastinco Limited also holds a metal trading license, issued by the
authorities in Rwanda, which allows for the trading of metals from our mine
supply and third-party producers and suppliers.
The Company also holds a portfolio of 15 highly prospective copper-silver and
other base metal exploration projects in Morocco, acquired in October 2022
through its 100% owned Moroccan subsidiary, Aterian Resources Limited.
The Directors have reviewed evidence which might suggest whether the
investments in the subsidiaries have become impaired.
In particular, the Directors reviewed whether there exist:
· significant financial difficulty in the subsidiaries;
· a breach of contract, such as a default or past-due event;
· it is becoming probable that the subsidiaries will enter
bankruptcy or another financial reorganisation;
· the disappearance of any market for the debt of the subsidiaries
because of financial difficulties; or
· the financial liabilities of the subsidiaries trade at a deep
discount that reflects likely incurred credit losses.
As more fully described in Note 9, the Directors have considered the evidence
in respect of the Company's investments in its Rwandan subsidiaries and made
full impairment against such investment amounting to £2,2,61,000. The
Company's subsidiaries as at 31 December 2022 were as follows:
Shareholding Nature of Business Country of Incorporation
Held directly:
Eastinco Limited 100% Mining & exploration Rwanda
Eastinco ME Ltd 100% Mining & exploration UK
Aterian Resources Ltd 100% Mining & exploration UK
Held indirectly:
Musasa Mining Ltd 85% Dormant Rwanda
Kinunga Mining Ltd 70% Mining & exploration Rwanda
Atlantic Minerals Ltd 100% Mining & exploration Seychelles
Adrar Resources S.A.R.L.A.U. 100% Mining & exploration Morocco
Azru Resources S.A.R.L.A.U. 100% Mining & exploration Morocco
Strat Co Limited 100% Dormant Isle of Man
Notes:
(i) The registered office of each of the UK subsidiaries is: Eastcastle
House, 27/28 Eastcastle Street, London, United Kingdom, W1W 8DH.
(ii) The registered office of each of the Rwandan subsidiaries is: Remera,
Gasabo, Umujyi wa Kigali, Rwanda.
(iii) The registered office of each of the Morrocann subsidiaries is: 18 Rue
Jabel Tazekka, 4ème Etage, Appt 9, Agdal, Rabat, Morocco.
(iv) The registered office of Strat Co Limited is: Alma House, 7 Circular
Road, Douglas, Isle of Man, IM1 1AF.
2.16 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash
equivalents includes cash on hand and deposits held at call with financial
institutions and deposits with maturities of three months or less from
inception.
2.17 Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at
the rates of exchange ruling at the reporting date. Transactions in foreign
currencies are translated into sterling at the rate of exchange ruling at the
date of the transaction. Exchange differences are taken into account in
arriving at the operating result.
On consolidation of a foreign operation, assets and liabilities are translated
at the closing rate at the reporting date, income and expenses where the
average rate is not materially different to the rates of exchange ruling at
the dates of the transactions are translated at average exchange rates. All
resulting exchange differences shall be recognised in other comprehensive
income and are accumulated in a separate component of equity. On disposal of
the foreign operation the accumulated gains or losses previously recognised in
entity are transferred to profit or loss and are recognised as a part of the
overall profit or loss on disposal of the foreign operation.
2.18 Share-based payment arrangements
Equity-settled share-based payments are measured at fair value at the date of issue.
Aterian Plc has granted both share options and warrants that will be settled
through the issuance of shares of the Company. The cost of equity-settled
transactions is measured by reference to the fair value at the date on which
they were granted and is recognised as an expense over the vesting period,
which ends on the date the recipient becomes fully entitled to the award. Fair
value is determined by using the Black-Scholes option pricing model.
In valuing equity-settled transactions, no account is taken of any service and
performance conditions (vesting conditions), other than performance conditions
linked to the price of the shares of the Company (market conditions). Any
other conditions which are required to be met in order for the recipients to
become fully entitled to an award are considered to be non-vesting conditions.
Market performance conditions and non-vesting conditions are taken into
account in determining the grant date's fair value.
No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market or non-vesting condition,
which are vesting irrespective of whether or not the market or non-vesting
condition is satisfied, provided that all other performance or service
conditions are satisfied.
At each reporting date before vesting, the cumulative expense is calculated;
representing the extent to which the vesting period has expired and
management's best estimate of the number of equity instruments that will
ultimately vest. The movement in the cumulative expense since the previous
reporting date is recognised in profit and loss, with a corresponding entry in
equity.
Where the terms of the equity-settled award are modified, or a new award is
designated as replacing a cancelled or settled award, the cost based on the
original award terms continues to be recognised over the original vesting
period. In addition, an expense is recognised over the remainder of the new
vesting period for the incremental fair value of any modification, based on
the difference between the fair value of the original award and the fair value
of the modified award, both as measured on the date of the modification. No
reduction is recognised if the difference is negative.
Where an equity-based award is cancelled (including when a non-vesting
condition within the control of the entity or employee is not met), it is
treated as if it had vested on the date of the cancellation, and the cost not
yet recognised in profit and loss for the award is expensed immediately. Any
compensation paid up to the fair value of the award at the cancellation or
settlement date is deducted from equity, with any excess over fair value being
treated as an expense.
2.19 Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense when employees have rendered service entitling them to the
contributions. Payments made to state-managed retirement benefit plans are
accounted for as payments to defined contribution plans where the Group's
obligations under the plans are equivalent to those arising in a defined
contribution retirement benefit plan.
The Group has several joint venture agreements in relation to operating at the
mining sites. These are not yet operational and therefore no assets or
liabilities have been consolidated into these accounts as at 31 December 2023.
2.20 Exploration, evaluation and development expenditures
Exploration expenditue
Exploration expenditures reflect the costs related to the initial search for
mineral deposits with economic potential or obtaining more information about
existing mineral deposits. Exploration expenditures typically include costs
associated with the acquisition of mineral licences, prospecting, sampling,
mapping, geophysical survey, laboratory work, diamond drilling and other work
involved in searching for mineral deposits. All expenditures relating to
exploration activities are expensed as incurred except for the costs
associated with the acquisition of mineral licences which are capitalised.
Evaluation expenditure
Evaluation expenditures reflect costs incurred at projects related to
establishing the technical and commercial viability of mineral deposits
identified through exploration or acquired through a business combination or
asset acquisition.
Evaluation expenditures include the cost of:
· establishing the volume (tonnage) and grade of deposits through
drilling of core samples, trenching and sampling activities for an ore body
that is classified as either a mineral resource or a proven and probable
reserve;
· determining the optimal methods of extraction and metallurgical
and treatment processes;
· studies related to surveying, transportation and infrastructure
requirements;
· permitting activities; and
· economic evaluations to determine whether development of the
mineralised material is commercially viable, including scoping, prefeasibility
and final feasibility studies.
Evaluation expenditures are capitalised if management determines that there is
evidence to support probability of generating positive economic returns in the
future. A mineral resource is considered to have economic potential when it is
expected that the technical feasibility and commercial viability of extraction
of the mineral resource can be demonstrated considering long-term metal
prices. Therefore, prior to capitalising such costs, management determines
that the following conditions have been met:
· There is a probable future benefit that will contribute to future
cash inflows;
· The Group can obtain the benefit and control access to it; and
· The transaction or event giving rise to the benefit has already
occurred.
The evaluation phase is complete once technical feasibility of the extraction
of the mineral deposit has been determined through the preparation of a
reserve and resource statement, including a mining plan as well as receipt of
required permits and approval of the Board of Directors to proceed with
development of the mine. On such date, capitalised evaluation costs are
assessed for impairment and reclassified to development costs.
Development expenditure
Development expenditures are those that are incurred during the phase of
preparing a mineral deposit for extraction and processing. These include
pre-stripping costs and underground or open-pit development costs to gain
access to the ore that is suitable for sustaining commercial mining, preparing
land, construction of plant, equipment and buildings and costs of
commissioning the mine and processing facilities. It also includes proceeds
received from pre-commercial production.
Expenditures incurred on development projects continue to be capitalised until
the mine and mill move into the production stage. The Group assesses each mine
construction project to determine when a mine moves into the production stage.
The criteria used to assess the start date are determined based on the nature
of each mine construction project, such as the complexity of a plant or its
location. Various relevant criteria are considered to assess when the mine is
substantially complete and ready for its intended use and moved into the
production stage. The criteria considered include, but are not limited to, the
following:
· the level of capital expenditures compared to construction cost
estimates;
· the completion of a reasonable period of testing of mine plant
and equipment;
· the ability to produce minerals in saleable form (within
specification); and
· the ability to sustain ongoing production of minerals.
If the factors that impact the technical feasibility and commercial viability
of a project change and no longer support the probability of generating
positive economic returns in the future, expenditures will no longer be
capitalised and the capitalised development costs will be assessed for
impairment.
2.21 Critical accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
financial statements, are disclosed below:
Key judgements:
a) Acquisition of Aterian Resources Limited
As part of its preparation of consolidated financial statements for the year
ended 31 December 2022, the Company has considered relevant accounting
guidance and.in particular, whether the acquisition of Aterian Resources
Limited falls within IFRS3 Business Combinations. In determining whether the
acquisition falls within the scope of IFRS 3 the Company has considered a
number of factors outlined below.
A business combination must involve the acquisition of a business, which
generally has three elements:
· Inputs - an economic resource (e.g. non-current assets,
intellectual property) that creates outputs when one or more processes are
applied to it
· Process - a system, standard, protocol, convention or rule that
when applied to an input or inputs, creates outputs (e.g. strategic
management, operational processes, resource management)
· Output - the result of inputs and processes applied to those
inputs
Considering this guidance, management has determined that Aterian Resources'
projects are in the exploratory phase and have not yet started
revenue-generating operations. In particular, it holds research permits and a
mining licence for mining projects, mainly copper, in Morocco.
In assessing whether there are inputs and substantive process, management has
considered whether the business has outputs or not.
Management believes there are no such outputs present on acquisition. In these
circumstances, when it does not have outputs, then inputs should include an
organized workforce and other inputs that the workforce can develop or convert
into outputs.
As an alternative to assessing whether the acquisition comprised inputs,
substantive process and all other features of business, IFRS 3 introduced a
new simplification option - The Concentration of fair value test.
Whist optional, it is relevant to the Company as the principal question in
this test is:
Is substantially all of the fair value of the gross assets concentrated in a
single identifiable asset or group of similar identifiable assets. The
assembled workforce was small and of low value. No other assets were acquired.
Management has assessed this to be the case and therefore considers the
acquisition is not that of a business falling under IFRS 3, i.e. it is an
asset purchase and the following accounting treatment applies:
· The total transaction price of the acquisition is allocated to
individual items or group of similar items based on their relative fair
values;
· No goodwill is recognised;
· Transaction costs are capitalised; and
· Contingent consideration is not recognised until it is confirmed
whether or not the conditions are met. In particular, this applies to the
Royalty Deeds and Musasa Royalty Deed.
In applying this test, management has judged that substantially all the fair
value is concentrated in a group of assets, these being the Moroccan projects
acquired. In particular, management considered:
· The Gross assets acquired (being exploration and evaluation
assets) do not include cash and cash equivalents, deferred tax assets and
goodwill arising from the effects of deferred tax liabilities.
· The fair value of the gross assets acquired includes any
consideration transferred in excess of the fair value of net identifiable
assets acquired.
· A single identifiable asset must include any asset or group of
assets that would be recognised and measured as a single identifiable asset in
a business combination.
· When assessing whether assets are similar, management has
considered the nature of each single identifiable asset and the risks
associated with managing and creating outputs from the assets (that is, the
risk characteristics).
On the basis of the above, management has concluded that the acquired set of
activities and assets is not a business.
Exploration and Evaluation assets acquired in a business combination are
initially recognised at fair value, including resources and exploration
potential that is considered to represent value beyond proven and probable
reserves. Similarly, the costs associated with acquiring an E&E asset
(that does not represent a business) are also capitalised. They are
subsequently measured at cost less accumulated impairment. Once JORC-compliant
(or equivalent) resources and/or reserves are established and development is
sanctioned, E&E assets are to be tested for impairment and transferred to
'Mines under construction'. No amortisation is charged during the E&E
phase.
Acquisition and other transaction expenses
The Company has considered how the costs of the acquisition, which involved
both issuing new shares and Admission to the Official List (by way of Standard
Listing) should be accounted for. In accordance with IAS 32 Financial
Instruments: Presentation, the Company has allocated such costs as follows:
- Incremental costs that are directly attributable to issuing new
shares should be deducted from equity where such shares are issued at a
premium - in this case, all shares were issued at par so no deduction has been
made and all such costs have been expensed - IAS 32.37; and
- Costs that relate to the stock market listing or are otherwise
not incremental and directly attributable to issuing new shares, should be
recorded as an expense in the statement of comprehensive income.
- Costs that relate to the acquisition have been capitalised.
IAS 32.37 requires that: "The costs of an equity transaction are accounted for
as a deduction from equity (net of any related income tax benefit)". Raising
additional equity through the offering and issuance of new shares is an equity
transaction for this purpose, but the listing procedure is not. Only costs
attributable to the offer of new shares may be deducted from equity.
The acquisition and listing was a combined exercise. Certain costs, such as
stamp duties and broking fees, are clearly attributable to raising additional
equity. Other costs, such as listing fees, relate only to the listing and have
been expensed. The costs of due diligence are considered to be related to the
acquisition and thus, as an asset purchase, have been capitalised.
The Company has identified the following costs to be directly related to the
acquisition and Admission:
Transaction costs £
Total costs capitalised as part of the acquisition 87,958
Costs expensed in profit and loss 308,440
Total fair value of assets acquired 396,398
b) Going concern
In their assessment of going concern, the Directors have prepared cash flow
forecasts which require a number of judgments to be made including the
Directors' ability to access further financing and to implement cost saving
and deferral measures, where necessary.
The Directors have prepared a cash flow forecast to 30 September 2024 which
assumes that the Group is not able to raise additional funds within the going
concern period and if that was the case, the forecasts demonstrate that
mitigating measures can be implemented, or significant project expenditure
delayed to reduce the cash outflows to the minimal contracted and committed
expenditure while also maintaining the Group's licences and permits.
In this going concern analysis, the base case cash flow forecast has been
prepared on the following bases:
· Separate budgets have been prepared for each of the Kinunga and
Musasa projects in Rwanda and the Moroccan projects, as well as the Rwanda
trading operations and corporate expenditure for the 18 months to September
2024.
· Each project has an assumed sampling, mapping, drilling testing
and survey exploration programme with supporting overhead functions and
capital expenditure in a phased approach.
· In Morocco, exploration is planned primarily for the Agdz and
Tata permits, with lower levels of expenditure for Azra, Jebilet and others.
· Trading activity commencing in Q2 with the first sales proceeds
being received in July 2023.
· In particular, the Company anticipates Ore purchases that will be
sold to off-takers who are currently buying at between $215 and $225/Kg of
Ta205. A trading cacility is subject to financial due diligence and is
expected to be concluded in May 2023. The facility will incorporate a funding
schedule with funds being disbursed in tranches as agreed. Interest at 15% per
annum will be payable monthly in arrears and secured by a first-ranking fixed
charge over the Company's assets.
· Trade funding is provided for 100% of the commodity acquisition
costs.
· Corporate expenditure is assumed to continue at current levels.
· New equity funds are not assumed although the Directors are in
discussion with advisors and investors for an additional funding round. We
have similarly excluded related fundraising costs.
· Inflationary assumptions have not been specifically factored as
the impact is not considered material.
The significant judgements involved in this going concern assessment included
consideration of a heightened inflationary environment and the availability of
working capital facilities. In the Directors' judgement, many of the Group's
expenditures are fixed in nature and as a consequence inflation doesn't
represent a significant source of estimation uncertainty.
Based on their assessment of the financial position, the Directors have a
reasonable expectation that the Group will be able to continue in operational
existence for the next twelve months and continue to adopt the going concern
basis of accounting in preparing these financial statements.
Key estimates:
a) Share-based payments
The Company recognises compensation expense for share-based transactions by
reference to the fair value of the related instruments at the date at which
they are granted. Estimating fair value for share-based payments requires
making assumptions and determining the most appropriate inputs to the
valuation model and estimating the number of units expected to vest. This
estimate is based on a Black and Scholes model which utilises a key number of
assumptions The inputs used in the valuations are presented in note 20.
The sensitivity to changes in volatility assumptions is particularly
significant. An increase / decrease of 10% (from the 67% volatility rate
assumed) would have the following impact on the share-based payment expense
for the year and the amounts recognised within the purchase consideration of
Aterian Resources, respectively:
Expense Purchase
consideration
£ £
10% increase in volatility 18,533 68,907
10% decrease in volatility (18,807) (71,790)
b) Impairment of intangible assets
The Group tests annually for impairment or more frequently if there are
indications that the Company's investments or the Group's goodwill and
exploration and evaluation assets might be impaired.
IFRS requires management to test for impairment if events or changes in
circumstances indicate that the carrying amount of a finite life asset may not
be recoverable.
For the year ended 31 December 2022, the Group performed a review for
indicators of impairment in the values of its intangibles and evaluated key
assumptions. These included considering any revisions to the mine plan,
including current estimates of recoverable mineral reserves and resources,
recent operating results and future expected production.
Management performed a detailed impairment review of the Rwandan exploration
assets. In management's opinion, the recoverable amount of the Rwandan assets
do not support either the Company's investment carrying value of £2,261,000
or the Group's goodwill of £2,168,000.
Management has determined that all expenditure capitalised in relation to the
Group's Musasa Project should be fully impaired on the basis that all
production activity has been suspended. Accordingly, the Group's goodwill of
£2,168,000 and the Company's investment in Eastinco ME Limited, amounting to
£2,261,000 have been impaired.
The Company's investment in Aterian Resources Limited of £3.2m was based on
the agreed transaction price with Altus Strategies Plc. The Directors have not
conducted detailed impairment testing at 31 December 2022 as no impairment
triggers have been identified during the period since acquisition in October
2022. The data generated since acquisition and published on the Company's
website demonstrates the strong potential for economic discovery However,
the Directors have given consideration to a research note from the Company's
broker which was published when there were 10 projects held in Morocco by
Altus. The Company acquired 15 projects and since this research, copper was
identified on the Tata and Azrar projects. Tata has the potential to be
large-scale and would significantly increase overall valuations. The research
note prepared in 2021 assigned a $5 million valuation to the 10 projects. In
the Directors' opinion, based on test results since acquisition, the carrying
value of the Moroccan assets would be no less than the agreed transaction
price.
3. Directors' remuneration
Director salaries Fees and salaries Share-based payment expense 2022 2021
Totals Totals
£'000 £'000 £'000 £'000
Executive Directors
Charles Bray 26 3 29 -
Simon Rollason 24 - 24 200
Non-Executive Directors
Simon Retter - 1 1 -
Devon Marais - 1 1 -
Alister Hume - - - -
Kasra Pezeshki - - - -
Mike Staten - - - -
50 5 55 200
4. Administrative expenses
2022 2021
£'000 £'000
Directors' salaries 50 200
Staff costs 91 71
Auditor's remuneration 75 63
Travel expenses 12 1
Metallurgical tests 55 -
Legal expenses 194 129
Professional fees 216 361
Accounting fees 30 27
Depreciation 22 2
Other expenses 251 166
996 1,020
Auditor's remuneration
2022 2021
£'000 £'000
Auditor's remuneration:
- Audit fee 75 63
75 63
Staff Costs
During the year the average number of employees (including Directors) was 22
(2021: 38).
Aggregate staff costs including directors comprise: 2022 2021
£'000 £'000
Salaries and wages 130 65
Staff welfare 3 2
Social security and pension contributions 8 4
Share capital issued as remuneration - 200
141 271
Key management personnel of the Group comprised the directors.
5. Impairment losses
Impairment tests on goodwill and other intangible assets with indefinite
useful economic lives are undertaken annually at the financial year end. Other
non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. As more fully described in Notes 11 and 13, the Group has made
provisions to fully impair the carrying value of goodwill and property, plant
and assets related to the Group's Musasa Project as follows:
2022 2021
£'000 £'000
Impairment of goodwill (Note11) 2,168 -
Impairment of property, plant and equipment (Note 13) 877 -
3,045
6. Finance costs
2022 2021
£'000 £'000
Interest expense on loan notes 6 18
Interest on related party loan 1 -
7 18
7. Taxation
2022 2021
£'000 £'000
Current tax:
UK taxation - -
Overseas taxation - -
Total tax - -
Reconciliation of income tax
2022 2021
£'000 £'000
Loss before tax (4,383) (1,369)
UK corporation tax rate 19% 19%
Tax at expected rate of corporation tax (833) (260)
Effects of:
Effect of overseas tax rates (16) (16)
Unutilised tax losses carried forward 849 276
Total tax - -
The United Kingdom has a 19% tax rate, Rwanda has a 30% tax rate and Morocco
has a 31% tax rate. For the purposes of the reconciliation of tax expense,
the UK rate of corporation tax 19% (2021: 19%) has been used. With effect from
April 2023, the main rate of corporation tax was increased to 25%.
The Group had losses for tax purposes of approximately £6.4 million as at 31
December 2022 (£2.1 million as at 31 December 2021) which, subject to
agreement with taxation authorities, are available to carry forward against
future profits. Such losses have no expiry date. The tax value of such losses
amounted to approximately £1.6 million (£530,000 as at 31 December 2021). A
deferred tax asset has not been recognised in respect of such losses carried
forward at the year end, as there is insufficient evidence that taxable
profits will be available in the foreseeable future against which the
deductible temporary difference can be utilised.
8. Loss per share
The calculation of the basic and diluted loss per share is based on the
following data:
2022 2021
Earnings £'000 £'000
Loss from continuing operations for the year attributable to the equity (4,383) (1,369)
holders of the Company
Number of shares
Weighted average number of ordinary shares for the purpose of basic and
diluted earnings per share
579,581,027 436,493,246
Basic and diluted earnings per share (pence) (0.76) (0.31)
The potential number of shares which could be issued following the exercise of
options and warrants currently outstanding amounts to 1.63 Billion. Dilutive
earnings per share equals basic earnings per share as, due to the losses
incurred, there is no dilutive effect from the existing share options and
warrants.
9. Investments
Investment in Subsidiaries
2022 2021
£'000 £'000
Investment
Cost:
At the beginning of the year 2,261 2,261
Additions (Note 10) 3,241 -
At 31 December 5,502 2,261
Impairment
At the beginning of the year -
Impairment provision (2,261) -
At 31 December (2,261) -
Carrying Amount
At 31 December 3,241 2,261
Details of Subsidiaries are disclosed in Note 2.15.
As more fully described in Note 13, mining activity at the Group's Musasa
Project has been suspended until such a time as the wash plant becomes fully
operational. Management concluded that the mine assets capitalised in Eastinco
Limited should be fully impaired. Accordingly, management has concluded that
the carrying value of the Company's investment should also be fully impaired
on the basis that the carrying value represented the Company's investment cost
in acquiring the Musasa Project. Accordingly, an impairment provision of the
full carrying value of £2,261,000 has recognised.
10. Acquisition of Aterian Resources Limited
On 21 November 2021, the Company entered into a sale and purchase agreement
with Altus Strategies Plc ("Altus'' or "HoldCo'') and Altus Exploration
Management Ltd ("AEM'' or the "Seller'')) to acquire:
· the 1 Ordinary share of £0.001 Aterian Resources Ltd (AEM's 100%
owned subsidiary), (the "Company Sale Share''); and
· the one ordinary share of USD$1.00 held by the Seller in Atlantic
Minerals Limited (the "Seychelles Subsidiary''), constituting 50% of the
entire issued share capital of the Seychelles Subsidiary, (together, the "Sale
Shares'').
Completion of the acquisition took place on 24 October 2022. Aterian Resources
Limited, an indirect subsidiary of Altus holds the licences for Altus's
mineral projects in Morocco. These projects are all in the exploratory phase.
Under the terms of the Acquisition Agreement, the total consideration to be
paid by the Company to AEM was satisfied in full by:
Consideration
The aggregate price for the Sale Shares was to be satisfied in full by:
the allotment and issue of the Consideration Shares (being new Ordinary Shares
representing no less than 17.5% of the Enlarged Share Capital of the Company
(i.e. no less than 168,821,467 shares) to the Seller at the Issue Price of
£0.01 per share) on Completion, credited as fully paid for a total
consideration of £1,688,215, subject only to Completion and Admission
together with the granting of the Initial Warrants (on the terms of the
Warrant Deed and entering into the Royalty Deeds and the Musasa Royalty Deed;
and the allotment and issue of Additional Consideration Shares at the Issue
Price of £0.01 credited as fully paid, upon the later of the confirmation of
the grant of the SAgsz Mining Licence and:
a) Admission, representing no less than 7.5% of the Enlarged Share Capital
i.e. no less than 72,352,056 shares, of £723,520 (including the Additional
Consideration Shares and the Consideration Shares), the Additional
Consideration Shares being such number of shares that will ensure that if they
had been in issue at Admission, when taken together with the Consideration
Shares, they would in aggregate have been equal to 25.0% of the enlarged
issued share capital of the Company as at Admission, i.e. 241,173,525 shares
(including the Consideration Shares and the Additional Consideration Shares);
and
b) the granting of Initial Warrants and Additional Warrants.
The Initial Warrants were warrants granted to the Seller by the Company upon
Admission to purchase such number of Buyer Shares as to represent 5% of the
Enlarged Share Capital (48,234,705 shares) exercisable for a period of five
years from Admission (subject to extension as set out in the Warrant Deed),
with an exercise price equal to the First Exercise Price of £0.01; and
The Company also agreed to grant Additional Warrants to the Seller to purchase
such number of Buyer Shares as to represent 5% of the Enlarged Share Capital
(i.e. 48,234,705 shares) exercisable for a period of five years from Admission
(subject to extension as set out in the Warrant Deed), with an exercise price
of a 100% premium to the First Exercise Price or £0.02p.
The Company also agreed to make the following payments to the Seller:
a) upon Completion £50,000 in cash to the Seller; and
b) four subsequent payments of £50,000 each to the Seller within 30 days
of the end of each subsequent quarter following the Completion Date with the
final instalment being made on or before 18 months from the Completion Date
i.e. a total cash payment of £250,000 over 18 months. At 31 December 2022,
£200,000 remained outstanding.
Additional undertakings
The Company also agreed to:
· subject to a minimum amount raised, allocate a sum at least equal
to the Agreed Work Amount from the proceeds raised from the Placing, in
connection with the development of the Projects in accordance with a budget to
be approved by the Board at Completion, within 12 months of Admission;
· procure that the Moroccan Subsidiaries pursuant to the Royalty
Deeds grant to Altus Royalties or its Affiliate a 2.5% net smelter royalty in
respect of their interest in Projects through the Licences, which will include
a right for the Company to repurchase up to 1% of the net smelter royalty for
USD500,000 per 0.5%;and
· if within the 12 months after Admission the Company raises
further capital, the Company will procure that no less than 50% of the net
amount raised will be used to repay the Seller for any amounts outstanding in
relation to the £250,000 payment plan referred to above and any remaining
balance will fund Moroccan mining exploration projects within the 12 months
following the capital being raised.
If within the first 3 months after Admission the Company or any of the
Moroccan Subsidiaries were granted a new mining licence in Morocco (not
including licences which relate to the Rwandan Projects and the Moroccan
Projects), the Company would procure that Altus Royalties (or its Affiliate)
is granted a 2.5% net smelter return royalty over any production from that
mining licence subject to a right for the Company to repurchase up to 1% of
the net smelter royalty for USD500,000 per 0.5%.
If after 3 months of Admission but before the first anniversary of Admission
the Company or any of the Moroccan Subsidiaries were granted a new mining
licence in Morocco (not including licences which relate to the Rwandan
Projects and the Moroccan Projects), the Company would procure that the Altus
Royalties (or its Affiliate) is granted a 1.5% net smelter return royalty over
any production from that mining licence subject to a right for the Company to
repurchase up to 1% of the net smelter royalty for USD500,000.
If Altus or its Affiliate procure that EME or an Affiliate of the Company are
granted a new mining licence (not including licences which relate to the
Rwandan Projects and the Moroccan Projects) within 24 months of Admission,
then the Company will procure that Altus Royalties (or its nominee) are
granted:
i) a 1.5% net smelter return royalty over any production from such
mining licences and,
ii) grant to Altus Royalties (or its Affiliate) an additional 1.5% net
smelter return royalty over any production from such mining licence (the
"Additional Royalty")
with such royalties being granted on the substantially same terms as the
Royalty Deed provided that EME and/or any Affiliate of the Company shall have
the right to repurchase up to 1% of the net smelter royalty for USD500,000 per
0.5%.
On Admission EME entered into the Musasa Royalty Deed whereby it will grant to
Altus Royalties a 0.5% net smelter royalty in respect of its interest in
Musasa Project through the Rwandan Licence Application and an additional 1.5%
net smelter royalty in respect of its interest in Musasa Project through the
Rwandan Licence Application (Additional 1.5%) with the Additional 1.5% being
conditional upon the Company, or its Affiliate, having a right to repurchase
up to 1% of the net smelter royalty for USD500,000 per 0.5%.
The right to the 1.5% royalty and the right to the Additional Royalty are both
conditional upon the Seller or one of its Affiliates purchasing new equity in
the Company in any Qualifying Financing such that its percentage participation
in the Qualifying Financing relative to the aggregate total of the capital
raised in the Qualifying Financing is at least equal to 50% of the aggregate
equity holding in the Company of the Seller and its Affiliates immediately
prior to the Qualifying Financing Closing. In the event that this condition is
not satisfied, the parties agreed that any 1.5% royalty so granted and
Additional Royalty so granted shall be terminated upon the relevant Qualifying
Financing Closing with no cost to the Company or any of its Subsidiaries. The
parties will enter into such documentation as is reasonably required to
terminate the relevant royalty deed.
In the event that the Takzim Permits in Morocco expire and the Company or any
of its Affiliates obtains a new licence or permit over any of the ground that
was covered by either of the Takzim Permits as at Completion (New Permit
Application) then provided the Seller or its Affiliates provided all
reasonable requested assistance in respect of the New Permit Application then
the Buyer will procure that the Altus Royalties (or is Affiliate) is granted a
2.5% net smelter return royalty over any production from that mining licence
on substantially the same terms as the Royalty Deed subject to (i) the royalty
including a right for the Company to repurchase up to 1% of the net smelter
royalty for USD500,000 with such royalties being granted and (ii) the Seller
procuring that any royalties granted over the ground covered as at Completion
by either of the Takzim Permits will be terminated.
Allocation of Purchase Price
The total transaction price of the acquisition has been allocated to
individual items or group of similar items based on their relative fair
values. In this case, the 15 projects acquired are considered to constitute a
group of similar items.
No fair value adjustments were deemed necessary as book values were considered
to approximate their fair values.
A summary of the acquisition is set our below. The total transaction price was
£3,135,279. The Company has identified the following assets acquired:
Fair value
Transaction price £'000
Fair value of Consideration and Additional Consideration Shares 2,412
Grant of Initial and Additional Warrants (Note 21) 491
Deferred consideration payable in cash 250
Expenses incurred on acquisition, capitalised 88
Total transaction price 3,241
Total identifiable net assets acquired:
Exploration and evaluation assets 3,241
Total fair value of assets acquired 3,241
The Company considers that the fair value of the assets acquired is equal to
the consideration given (comprising the issue of shares at market value,
warrants granted and valued by reference to Black-Scholes methods and deferred
cash payable) plus expenses incurred directly on such acquisition.
Accordingly, no gain or loss has been recognised on acquisition.
The Acquisition Agreement provided for contingent consideration in the form of
royalties as described above. At the acquisition date these were determined to
be deferred contingent consideration and the fair value has been assessed to
be immaterial but will be recognised if or when it becomes probable and
reasonably estimable. Likewise contingent consideration is payable on
additional capital raised. At the acquisition date, this was determined to
have nil value.
Transaction costs of £87,958 have been capitalised as part of the acquisition
and other transaction costs of £308,440 relating to the Admission of the
Company's ordinary shares to the Official List of the London Stock Exchange
have been expensed in the year ended 31 December 2022.
The total cash outflows capitalised amounted to £137,958, comprising £87,958
of expenses and £50,000 of deferred consideration.
11. Goodwill
Goodwill represents the excess consideration over the net assets on the
acquisition of the Musasa Project held by Eastinco Ltd in 2019. Accordingly,
the carrying value of goodwill was allocated to the Rwandan cash generating
unit (CGU).
2022 2021
£'000 £'000
Cost:
At the beginning of the year 2,168 2,168
At 31 December 2,168 2,168
Impairment:
At the beginning of the year - 2,168
Impairment provision 2,168 -
At 31 December 2,168 2,168
Carrying Amount
At 31 December - 2,168
Goodwill is reviewed at each reporting date. If any such indication exists, an
impairment loss is recognised in the profit or loss as the difference between
the carrying amount and the present value of estimated future cash flows.
The Directors have undertaken an impairment assessment as more fully described
above in Note 2.21. Following their assessment, the Directors concluded that
an impairment charge for the entire carrying value of £2,168,000 is necessary
for the year ended 31 December 2022.
12. E&E Assets
The Company acquired the assets of Aterian Resources Limited in Morocco at a
total transaction price of £3,135,279 as described in Note 10 above.
Moroccan Total
Assets
Cost £'000 £'000
At 1 January 2022 - -
Additions 3,241 3,241
At 31 December 2022 3,241 3,241
Amortisation
At 1 January 2022 - -
Charge for the year - -
At 31 December 2022 - -
Net book value
At 31 December 2022 3,241 3,241
13. Property, plant and equipment
Group
Mine Mining Equipment Office Equipment Motor vehicles Computer Equipment Processing Equipment Land Total
Cost £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 571 642 7 - 1 - 30 1,251
Foreign exchange 53 29 - - - - 2 84
adjustment
Additions - - - 6 1 3 - 10
At 31 December 2022 624 671 7 6 2 3 32 1,345
Depreciation
At 1 January 2022 - 22 3 - - - - 25
Charge for the year - 20 1 - 1 - - 22
Impairment provision 624 253 - - - - - 877
At 31 December 2022 624 295 4 - 1 - - 924
Net book value
At 31 December 2022 - 376 3 6 1 3 32 421
Mine Mining Equipment Office Equipment Motor vehicles Computer Equipment Processing Equipment Land Total
Cost £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 595 428 7 - 1 - 29 1,060
Foreign exchange (28) (20) - - - - - (48)
adjustment
Additions 4 234 - - - - 1 239
At 31 December 2021 571 642 7 - 1 - 30 1,251
Depreciation
At 1 January 2021 - 21 2 - - - - 23
Charge for the year - 1 1 - - - - 2
At 31 December 2021 - 22 3 - - - - 25
Net book value
At 31 December 2021 571 620 4 - 1 30 1,226
The Property, Plant and Equipment held by the company is immaterial.
Impairment reviews
IFRS requires management to undertake an annual test for impairment of
indefinite lived assets and, for finite lived assets, to test for impairment
if events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable.
At the end of June, the Company temporarily suspended operations on our Musasa
Project based on the recommendation of Quiver Ltd, an independent processing
consultancy, to undertake additional metallurgical test work to improve
overall metal recoveries. While suspending production was a disappointment,
the Company is excited at the prospect of potentially expanding the potential
exploration licence area. The Company's view is to suspend further investment
in production until such time as the new licence at Musasa is granted and then
reassess the situation. The original application was made in May 2021.
Mining remains suspended until such a time as the wash plant becomes fully
operational. The wash plant was not operational from July 2022 based on the
recommendation of Quiver Ltd to suspend operations until metallurgical test
work is completed to improve recoveries significantly. Current levels of metal
recovery is not economically sustainable.
On the basis that mining has been suspended and low metal recovery, management
has concluded that the mine assets capitalised in Eastinco Limited should be
fully impaired on the basis they related specifically to capitalised
exploration costs of the Musasa mine site, which is now essentially halted.
Accordingly, an impairment provision of the full PPE mine site and associated
equipment value of £877,000 is necessary.
14. Trade and other receivables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Amounts owed by group undertakings due - - 6 1,703
Other debtors - 128 -
83
Taxes receivable 86 - 54 -
Share subscriptions receivable 212 - 212 -
Prepayments 21 60 - 60
319 188 272 1,846
The share subscriptions receivable comprises of monies due from four
shareholders. Subsequent to the year-end £200,000 has been received.
Amounts owed by group undertakings are stated net of a provision of
£2,444,000 (2021: £Nil).
15. Cash and cash equivalents
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Cash at bank and in hand 110 196 41 190
16. Trade and other payables
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade payables 287 75 192 30
Other payables 33 72 27 67
Amounts due by group undertakings due in less than one year - - 72 72
Accruals 75 50 75 50
395 366 219
197
17. Deferred consideration
Group Company
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Deferred consideration - Altus 200 - 200 -
200 200 -
-
Deferred consideration is payable to Altus Exploration Management Ltd in
respect of the acquisition of Aterian Resources Limited as set out in Note 10
above. £50,000 was paid on 4 November 2022.
18. Borrowings
Group Company
Non-current liabilities 2022 2021 2022
2021
£'000 £'000 £'000 £'000
Loan from related party 151 - 151 -
Convertible loan notes - 158 - 158
151 158 151 158
Loan from a related party
On 17 October 2022, the Company entered into a working capital facility with
the trustees of the C Bray Transfer Trust pursuant to which the C Bray
Transfer Trust agreed to make available to the Company a Working capital
facility of up to £500,000.
Up to £150,000 can be drawn down under the facility each quarter starting at
Admission (25 October 2022). The facility will be available for two years. The
facility is secured by a fixed and floating charge over all the property or
undertaking of the Company.
Interest of 2% per annum accrues on undrawn amounts and interest of 9% per
annum will accrue on drawn amounts. interest will roll up and is repayable
with the outstanding principal on the second anniversary of Admission. An
arrangement fee of £10,000 was payable and has been added to the principal
outstanding. C Bray, a director, is a beneficiary of the C Bray Transfer
Trust.
Convertible loan notes
Convertible loan notes with a principal sum of £850,000 which were
interest-free and due for repayment on 31 December 2024, were converted into
85,000,000 Ordinary Shares of £0.01 each of the Company on 25 October 2022 as
more fully described in Note 20 below.
19. Financial instruments
Categories of financial instruments Group Company
2022 2021 2022 2021
Financial assets measured at amortised cost £'000 £'000 £'000 £'000
Other receivables 319 128 266 183
Cash and cash equivalents 110 196 41 190
429 324 307 373
Financial liabilities measured at amortised cost
Trade and other payables 395 197 366 219
Deferred consideration 200 - 200 -
Borrowings 151 - 151 -
Convertible loan notes - 158 - 158
746 355 717 377
Financial risk management objectives and policies
The Group is exposed through its operations to credit risk and liquidity risk.
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout this financial information.
General objectives, policies and processes
The Directors have overall responsibility for the determination of the Group's
risk management objectives and policies. Further details regarding these
policies are set out below:
Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The capital structure of the Group consists of issued capital, reserves and
retained earnings. The Directors review the capital structure on a semi-annual
basis. As a part of this review, the Directors consider the cost of capital,
the risks associated with each class of capital and overall capital structure
risk management through the new share issues and share buy-backs as well as
the issue of new debt or the redemption of existing debt.
The Group is not subject to externally imposed capital requirements.
Market price risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices will affect the Group's
income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within
acceptable parameters, while optimising the return.
The development and success of any project of the Group will be primarily
dependent on the future prices of various minerals being exploited. Mineral
prices are subject to significant fluctuation and are affected by a number of
factors which are beyond the control of the Company.
Future production from the projects is dependent on mineral prices that are
adequate to make the projects economic. The Group reviews current and
anticipated future mineral prices and adjusts the allocation of financial
resources accordingly.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and arises principally from the Group's receivables and cash and
cash equivalents.
The Group manages its exposure to credit risk by the application of monitoring
procedures on an ongoing basis. The amount of expected credit losses is
updated at each reporting date to reflect changes in credit risk since initial
recognition of the respective financial instrument. For other financial assets
(including cash and bank balances), the Group minimises credit risk by dealing
exclusively with high credit rating counterparties.
Liquidity risk
Liquidity risk arises from the Company's management of working capital. It is
the risk that the Company will encounter difficulty in meeting its financial
obligations as they fall due.
The Company's policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. The principal
liabilities of the Group arise in respect of trade payables which are all
payable within 12 months and borrowings which are repayable between one and
two years. At 31 December 2022, total trade payables within one year were
£507,000 (2021: £197,000), which is more than the Group's cash held at the
year-end of £110,000. The borrowings are repayable after between one and two
years. The Board monitors cash flow projections on a regular basis as well as
information on cash balances, and manages such cash flows through short-term
borrowings, including a working capital facility, and the raising of equity to
support long-term expenditure.
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Rwandan
Franc ("RWF").
Foreign exchange risk arises from future commercial transactions, recognised
monetary assets and liabilities and net investments in foreign operations.
At 31 December 2022, had the exchange rate between the Sterling and RWF
increased or decreased by 10% with all other variables held constant, the
increase or decrease respectively in net assets would amount to approximately
£138k/£(113k). The Group does not hedge against foreign exchange movements.
20. Share capital
The Ordinary Shares issued by the Company have a 1p par value. The Ordinary
Shares rank pari passu in all respects, including the right to attend and vote
in general meetings, to receive dividends and any return of capital.
2022 2021
Number of Share Capital Share Premium Number of Share Capital Share Premium
shares
£'000
£'000
shares
£'000
£'000
Brought forward at 1 January 488,692,170 5,671 2,144 430,068,763 4,301 2,144
Shares issued for acquisition (a) 241,173,523 2,411 - - - -
Shares issued for sterling (b) 85,405,000 854 - 25,000,000 250 -
Conversion of 2021 loan notes (c) 85,000,000 67 33 6,666,667 850 -
Conversion of loan 2019 notes (d) 20,000,000 200 - - - -
Shares issued to EBT (e) 44,423,400 444 - 26,236,740 263 -
Other share issues - - - 720,000 7 -
As at 31 December 2022 964,694,093 9,647 2,177 488,692,170 5,671 2,144
The Company issued the following shares in the year ended 31 December 2022:
a) On the Company's Admission to the Official List and to trading on the
London Stock Exchange's Main Market for listed securities on 25 October 2022,
the Company issued 241,173,523 of £0.01 each in consideration for the
acquisition of Aterian Resources Limited for a total non-cash consideration of
£2,411,735.
b) On the same date, the Company completed a Placing of 85,405,000
Ordinary Shares of £0.01 for consideration of £854,050 (£212,000 was
outstanding as at 31.12.22 - see note 14).
c) On Admission, outstanding Convertible Loan Notes issued in 2021
totaling £850,000 were converted into 85,000,000 Ordinary Shares at £0.01
each.
d) On Admission, the Company issued 20,000,000 Ordinary Shares at £0.01
per Ordinary Share to certain CLN Holders for a total consideration of
£200,000.
e) On the same date, the Company issued 44,423,400 EBT Shares at £0.01
per EBT Share for a non-cash consideration of £444,234.
21. Share-based payment arrangements
Options
Equity settled share-option plan
The Company has established a trust for the benefit of the employees and
former employees of the Company's Group and their dependants. The EBT is
managed by a Trustee, who exercises independent decision making with respect
to any voting of shares on behalf of Summerhill Trust.
The Company issued a total of 44,490,000 EBT options in 2022 as summarised
below.
2022 2021
Number of EBT Options Number of EBT Options
Outstanding at beginning of year 51,907,400 13,257,400
Granted during the year 44,490.000 38,650,000
Outstanding at end of the year 96,397,400 51,907,400
EBT Options
Options issued in 2022:
A total of 44,490,000 options were issued during the year, exercisable at
£0.01 per ordinary share, such awards expiring on 30 December 2030. These
include 30,250,000 options which were issued to Directors of the Company and
14,240,000 options issued to a former Director. These were granted subject to
Admission.
The fair values of the options granted have been calculated using
Black-Scholes model assuming the inputs shown below:
Share price £0.0100
Exercise price £0.0100
Time to maturity 8.19 years
Risk free rate 3.74%
Volatility 67.0%
Value £0.0071
An expense of £317,000 has been recognised in the year (2021: £267,330) in
respect of a share-based payment charge for the share options issued during
the accounting period under the Employee Benefit Trust and CSOP.
The weighted average remaining life of the options at the end of 2022 was 6.70
years (2021: 4.38 years).
Warrants
The following warrants were issued as part of share subscriptions:
2022 2021
Average exercise price per warrant Number of warrants Average exercise price per warrant Number of warrants
Outstanding at beginning of year 2.65p 190,156,935 2.7p 58,718,666
First Altus warrants (ii) 1p 48,234,705 - -
Second Altus warrants (iii) 2p 48,234,705 - -
Novum warrants (iv) 2,500,000 139,438,269
1.5p 2.5p
Shard warrants (v) 1.5p 405,000
Lapsed in the year - - 2.79p (8,000,000)
Outstanding at end of the year 1.752.04p 289,531,345 2.65p 190,156,935
The total expense recognised in the Statement of Comprehensive Income during
the year was £18,503 (2021: £nil). In addition, a total of £491,000 has
been recognised as part of the Purchase Consideration in relation to the First
and Second Altus Warrants, as more fully described in Note 10. The weighted
average remaining life of the warrants at the end of 2022 was 3.31 years
(2021: 3.55 years)
During the year, the following changes occurred:
i. A total of 126,666,668 Warrants over Ordinary Shares with an original
exercise price of £0.02 pursuant to the 2021 Warrant Instrument in connection
with the issue of Pre-IPO Shares, were amended to reflect an adjusted exercise
price of £0.015. These expire on 30 December 2024.
ii. First Altus Warrant Instrument: On 17 October 2022, the Company
created a warrant instrument pursuant to which the Company could issue
48,234,705 warrants over Ordinary Shares at an exercise price equal to the
First Exercise Price being the weighted average of the price of the price of
the Pre-IPO Fundraise (being the fundraising completed by the Company on 22
November 2021 consisting of the issue of £850,000 of CLNs and £100,000 of
Ordinary Shares at £0.015 per new Existing Ordinary Share raising in
aggregate £950,000) and the Issue Price of £0.01. The warrants are
exercisable from the date of Admission and until the fifth anniversary of such
date. The exercise of warrants under this instrument is subject to the shares
that are the subject of the exercise not giving the warrant holder and those
persons acting in concert with them for the purposes of the Takeover Code more
than 29.9% of the Company
iii. Second Altus Warrant Instrument: On 17 October 2022, the Company
created a warrant instrument pursuant to which the Company could issue
48,234,705 warrants over Ordinary Shares at an exercise price equal to the
Second Exercise Price being a 100% Premium to the First Exercise Price. The
warrants are exercisable from the date of Admission and until the fifth
anniversary of such date. The exercise of warrants under this instrument is
subject to the shares that are the subject of the exercise not giving the
warrant holder and those persons acting in concert with them for the purposes
of the Takeover Code more than 29.9% of the Company share capital at any time.
iv. Novum Warrant Deed: On 17 October 2022, the Company entered into a
warrant deed pursuant to which the Company agreed to grant to Novum Corporate
Finance subject to Admission 2,500,000 warrants over Ordinary Shares
exercisable at 150% (£0.015) of the Issue Price (the "Novum Warrants"). These
warrants are exercisable for a period of three years from Admission.
v. Shard Warrant Deed: On 17 October 2022, the Company entered into a
warrant deed pursuant to which the Company agreed to grant to Shard Capital
Partners LLP subject to Admission 405,000 warrants over Ordinary Shares
exercisable at 150% of the Issue Price (the "Shard Warrants"). These warrants
are exercisable for a period of three years from Admission.
Fair value of share awards
The fair values for the Options and warrants granted in 2022 were calculated
using the Black Scholes option pricing model. The inputs in the model were as
follows:
EBT First Altus Second Altus Warrants Shard warrants Novum
Options Warrants Warrants
Share price at grant £0.01 £0.01 £0.01 £0.01 £0.01
Average exercise price £0.01 £0.01 £0.02 £0.015 £0.015
Expected life (years) 8.19 5 5 3 3
Risk-free interest rate 3.74% 3.74% 3.74% 3.74% 3.74%
Expected dividend yield 0% 0% 0% 0% 0%
Expected volatility 67% 67% 67%
67% 67%
The volatility was determined by reference to the historical volatility of the
Company's share price at the time of grant.
The weighted average remaining life of the options at the end of 2022 was 5.68
years (2021: 3.55 years).
22. Reconciliation of liabilities from financing activities
Company and Consolidated financing Opening balances Cash received / (paid) Conversion of loan notes Release of fair value discount Closing balance
cash flows
Year ended 31 December 2022 £'000 £'000 £'000 £'000 £'000
Borrowings 158 151 (200) 42 151
Totals 158 151 (200) 42 151
Consolidated financing Opening balances Conversion of loan notes Issue of shares to EBT Closing balances
cash flows
Year ended 31 December 2021 £'000 £'000 £'000 £'000
Borrowings 219 (61) - 158
Totals 219 (61) - 158
23. Related party transactions
Transactions with subsidiary companies:
Eastinco Ltd is a subsidiary and during the year, received total funds of
£720,364 (2021: £210,438). Eastinco Ltd owes £2,222,815 (before impairment
provisions) to Aterian PLC at the end of the year (2021: £1,502,451).
Eastinco ME Ltd is a subsidiary and is owed £17,962 by Aterian PLC at the end
of the year (2021: £70,487).
Transactions with Directors
Charles Bray is a Director of the Company and during the year, Charles Bray
received total fees of £26,086 (2021: £nil). Charles Bray is owed by the
Company £20,514 at the end of the year (2021: £2,026 owed to the Company).
The Company has received a loan of £150,000 (2021: £nil) from IQ EQ (Jersey)
Limited, trustee of Charles Bray Transfer Trust as more fully described above
in Note 18.
Simon Rollason is a Director of the Company and during the year, Simon
Rollason received total fees of £23,993 (2021: £200,000).
Edlin Holdings Limited is an Isle of Man company which invests and operates
non-US based investments. The ultimate beneficial owners of Edlin Holdings
Limited are Bray family members.
At the year end, Directors hold interests in Ordinary Shares, warrants and
options as below:
Name No. of Warrants No. of Options No. of Shares
Charles Bray 26,669,999 22,250,000 78,270,000
Edlin Holdings Limited* 19,333,334 - 36,000,000
Simon Rollason - - 20,000,000
D Marais 6,670,000 4,000,000 14,670,000
Details of Directors' remuneration during the year are given in Note 3.
24. Ultimate controlling party
The Directors consider that there is no controlling or ultimate controlling
party of the Company.
25. Expenditure commitments
The Company is committed to paying deferred consideration to Altus Exploration
Management Ltd, as more fully described in Note 9 amounting to four quarterly
payments of £50,000 each to Altus Exploration Management Ltd, i.e. a total
cash commitment of £200,000.
26. Capital commitments
As at 31 December 2022, the were no capital commitments entered into by the
Group (31 December 2021: nil).
27. Contingencies
With the exception of deferred contingent consideration described in Note 10,
as at 31 December 2022, the were no contingent liabilities (31 December 2021:
nil).
As mentioned earlier in the report, the Managing Director of the local Rwanda
subsidiary, Eastinco Limited, charged with the Musasa wash plant operations,
resigned from his role in late 2022. Regretfully, Daniel Hogan initiated legal
proceedings against Eastinco Limited in Rwanda for i) compensation related to
salary forgone during the senior management cash preservation period that was
actioned during the COVID-19 Pandemic and ii) a related party payment for his
personal vehicles being leased to the company. Despite Mr Hogan receiving
share-based compensation matching that of the other senior managers over the
period and his signing a waiver of claims upon resignation, and after attempts
to resolve the related party matter amicably, Mr Hogan has chosen to pursue
legal action against Eastinco Limited. We are confident that Eastinco
Limited's position is strong, and we have retained legal counsel to defend the
company. We remain committed to defending the interests of the company and
will take all necessary steps, including the pursuit of legal action in both
Rwanda and the United Kingdom, to protect our reputation and financial
interests.
The Board of Directors determined that a restructuring of the Rwandan
subsidiaries was warranted to mitigate and segregate the risk arising from
exploration activities and operational activities. More specifically, a new
holding company is being formed to hold the exploration project companies,
while another company is being formed for the purpose of mineral trading
operations. The transfer of the various assets and shares from Eastinco
Limited, the existing sole holding and operating company, is pending the
resolution of the Hogan dispute.
28. Events after the reporting date
There were no events that have occurred subsequent to 31 December 2022 that
require disclosure in these financial statements.
29. Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Regulation (EU) No
596/2014 until the release of this announcement
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