REG - Bens Creek Group PLC - Final Results
29/09/2023 16:15
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RNS Number : 2335O Bens Creek Group PLC 29 September 2023
29 September 2023
Bens Creek Group plc
("Bens Creek" or "Company" or "Group")
Final results for the year ended 31 March 2023
Posting of Annual Report and Notice of AGM
Bens Creek Group plc (AIM: BEN), the owner of a metallurgical coal mine in
North America supplying the steel industry, announces its audited results for
the year ended 31 March 2023.
Financial highlights for the year to 31 March 2023
Ø Raw tons produced - 494,861 (31 March 2022: 63,562)
Ø Clean tons produced - 272,318 (31 March 2022: 666)
Ø Clean tons sold - 236,631 (31 March 2022: nil)
Ø Revenue of $42.2m (31 March 2022: $5.4m)
Ø Loss before taxation - $24.7m (31 March 2022: profit before taxation of
$25.3m inclusive of a bargain purchase gain of $33.7m)
Ø Basic loss per share - $6.563 cents (31 March 2022: basic earnings per
share of $6.165 cents)
Ø Net assets, $22.4m (31 March 2022: $31.7m)
Ø Coal reserves, $24.5m (31 March 2022: $24.9m)
Ø Inventory as at 31 March 2023, valued at $5.2m (31 March 2022: $1.5m)
Ø Operating loss, $21.3m (31 March 2022: $7.5m)
Ø Adjusted EBITDA loss of $8.1m (31 March 2022: $3.4m)
Ø Adjusted basic EPS* loss per share - $2.205 cents (31 March 2022: loss of
$1.24 cents per share)
*Adjusted EBITDA and EPS Adjusted EPS before, depreciation, share-based
payment expense, provision expense.
Operational highlights
Ø Mining undertaken by contract mining arrangements
Ø Existing mining infrastructure remediated completed, including railway
line, with additional equipment purchased where necessary
Ø Total clean coal production of 272k tons of which 237k tons were sold in
the twelve months to March 2023, however first trains only
commenced in June 2022
Ø Second High Wall Miner operating on-site on double shifts since 11
September 2023, which will result in increased production
Ø Production steadily increasing month on month - production reaching 42,000
tons of clean coal in August
Ø Move from contractor model to equipment owner to "face-up" surface areas to
be highwall mined by our contractor, Mega Highwall Mining, to achieve cost
efficiencies
Posting of Annual Report and Notice of AGM
Extracted below is the annual report and accounts of the Group. A copy of this
announcement and the annual report and accounts and notice of annual general
meeting ("AGM") are available to view on the Company's website
(www.benscreek.com). The annual report and accounts for the year ended 31
March 2023 and notice of AGM are being posted to shareholders by 30 September
2023. The AGM will be held at the Royal Overseas League, Hall of India and
Pakistan, Six Park Place, St James's, London SW1A 1LR at 11.00 a.m. on Friday
27th October 2023.
Adam Wilson, Chief Executive Officer, commented:
"We are pleased to present the 2nd annual report and accounts for the Company
following what has been a difficult year with a range of problems, mostly
outside of our control, including a state of emergency storm in August 2022.
We did however successfully pass a number of milestones including the
establishment of our underground mine, the commencement of rail deliveries and
the introduction of a 2nd high wall miner. In addition, we successfully raised
£6m via a placing at 30p per share to fund our transition from contracted to
employed staff and to finance our fleet of earth moving equipment, 'yellow
goods'. We also received, after a long delay, our new mining permit. The price
of coal throughout most of the year was under severe pressure, down from $284
a ton to a low of $193 in the summer, which in turn adversely affected our
cashflow and profitability reducing our flexibility, particularly on capital
projects. Fortunately, we have had the support of our new shareholder, Avani,
who has stepped in to provide financing when required. We have been fortunate
with our distributors, Integrity, who have done an excellent job selling all
of the coal that we have produced, and post year end Avani demonstrated their
commitment to met coal by investing into Bens Creek. Since the year-end we
have seen a small improvement in the underlying price which has had a positive
move and is now at $235 per ton. The drop in met coal prices and its effect on
the results is disappointing however during the first part of the new
financial year we have made great strides in reducing our overall costs to
help improve margins and we continue to look for ways to improve our
efficiencies in a drive towards profitability. With a rising product price and
full production from our 2 High Wall Miners we believe that the current year
will show a substantial improvement.'
For further information please contact:
+44 (0) 204 558 2300
Bens Creek Group plc
Adam Wilson, CEO
Peter Shea Chief of Staff
Allenby Capital Limited (Nominated Adviser and Joint Broker) +44 (0) 203 328 5656
Nick Athanas / Nick Naylor / George Payne (Corporate Finance)
Kelly Gardiner / Guy McDougall (Sales and Corporate Broking)
W H Ireland Limited (Joint Broker) +44 (0) 207 220 1666
Harry Ansell/Katy Mitchell
BENS CREEK GROUP PLC CHAIRMAN'S STATEMENT
I am pleased to present our second annual report for the year ended 31 March
2023. As mentioned in our interim report, we completed the remediation of the
wash plant and railway line to the mine and delivered our first shipment of
our High Vol. B metallurgical coal by rail in early June 2022. We produced
172,390 tons and delivered 152,022 tons during the second half of the year,
which results in a total of 272,318 tons produced and 236,631 tons sold for
the full year. We continue to upgrade the infrastructure of the mine, plant
and load out facility to improve the efficiency of our operations. All this
has only been possible thanks to the dedication and commitment of our staff.
We are committed to safe and sustainable mining practices. We mine utilising
the least invasive and destructive techniques available to us to minimise our
environmental impact. The safety of our employees is paramount. We maintain an
unwavering commitment to fostering a culture of safety with vigorous safety
protocols along with comprehensive training programmes. We are proud to have
completed our first full year of operation without any of our personnel
sustaining injuries.
In late June 2022 we exercised our right to have a second high wall miner
provided by Mega High Wall Mining LLC, in anticipation of the arrival of our
new mining permit. This long-awaited permit finally arrived in September
2022, and we were able to complete the necessary benching to support the first
high wall miner in its new position to allow mining to recommence. The new
location yielded an improvement in productivity with a wider seam of 50 inches
as compared our original seam which was only 38 inches.
We took the decision in August 2022 to move from using a contractor for our
earth moving to buying our own fleet and operating it ourselves which was
successfully implemented. To finance this, we placed £6m of new shares at 30p
and we were pleased that this was fully subscribed.
Towards the end of 2022, we purchased 26% of BC Rail Holdings from MBU Capital
Group with an option to acquire the balance. We acquired a further 26% in
March 2023 confirming our control of BC Rail Holdings, which owns the private
railway to ship coal out of our plant. In addition, MBU agreed to convert all
of their outstanding loans, amounting to £4.3million, into equity.
In many respects the second half of our financial year to March 2023, and
early months of the new financial year, have been challenging. The price for
our product fell sharply in global markets and delays occurred with the
delivery and commissioning of the second high wall miner. It did not arrive
until March 2023 and then, despite the efforts of all concerned, the machine
could not be brought into service and Mega agreed to replace it. They did so,
with a functioning machine arriving in May 2023. Soon after its arrival and
commissioning, however, we were forced to remove it from service following a
mining incident where the cutterhead and some beams became stuck inside the
coal seam requiring us to stop production completely for a short period while
a recovery programme was implemented, fortunately successfully. Repairs to
this second high wall miner are now complete, and the machine has been
recommissioned and is back in production.
As previously reported, we appointed Murat Erden as Chief Financial Officer in
July 2022. Murat is a Turkish citizen and his family home is in the area of
the earthquake that occurred in February 2023. The Company granted Murat a
leave of absence at that time and he subsequently resigned. We have recently
started a search for a new CFO.
In May of this year, we were pleased to welcome Avani Resources as a new, and
the Company's largest, shareholder. They bring vast knowledge and experience
of the global coal market and we are sure they will contribute enormously to
the business. In July we were pleased to welcome Rajesh Johar as Avani's
nominee for the board of directors.
With prices continuing to be weak in the early part of the new financial year,
we took the decision to seek additional finance from our new shareholder. They
provided us with $13million in new loans. This allowed us to pay down one of
our existing convertible loan notes and provided the capital required to
finance the purchase of the equipment required to support our second high wall
miner.
Our dedication to the communities in which we operate remains resolute. We
actively engage with local communities striving to create shared values and
sustainable development. We collaborate with stakeholders where we can in the
promotion of education and healthcare and try to ensure that we have a
positive impact.
Whilst it has taken longer than we had hoped to ramp up to full production,
and the market for our product is currently weak, we remain optimistic for
your Company's future. We have a dedicated and hardworking team, the mine
infrastructure and equipment in place to increase production over the next
year, as well as the support of our major shareholders.
Robin Fryer
Non-Executive Director and Chairman
29 September 2023
BENS CREEK GROUP PLC CHIEF EXECUTIVE'S STATEMENT
To all shareholders,
I am delighted to report to all shareholders and stakeholders in this, our 2nd
annual report and audited financial statements of Bens Creek Group Plc ("BC").
Since we last reported, we have successfully fully restarted mining operations
at Glen Alum, WV and were in full production, although not yet quite at full
capacity, for the nine months since June 2022 (when our first train left the
property), with one High Wall Miner ("HWM').
Post the period end, on 11 September 2023, two HWM's started double shifts and
we are confident that we will now reach our planned production targets.
We thank Integrity for coal sales, who have been marketing our coal and
providing both logistics and financing support to great effect. Their positive
approach has driven our revenue which has risen some 800% from the start-up in
the previous year to, at the financial year ended 31 March 2023, $42m from the
production of 272,318 clean tons.
Please see the Strategic Report for the financial results during the year
ended 31 March 2023. Our adjusted earnings before Interest, tax, depreciation
and amortisation ("adjusted EBITDA") (the loss per the financial statements
after adjusting for depreciation, depletion, financing costs, share option
charge and provision expenses) was circa $8m loss, this equates to $30 a ton.
Loss before tax per financial statements (24,715,586)
Depreciation 4,885,932
Depletion 440,915
Interest 3,435,252
Share option charge 2,397,585
Change in accounting estimates 575,580
Change in revaluation of deferred consideration 4,859,839
Adjusted EBITDA (8,120,483)
As well as the increase in pricing post period end, we have reduced costs per
ton.
This is best demonstrated in the Underground Mining ("UM"), which is
illustrative of the cost cutting across the whole company, during the fall off
in met coal pricing. In March 2023, we were paying a contractor $45 a Run of
Mine ('ROM'') ton, but only recovering 35% coal per ton extracted. By August
2023, we had reduced the ROM ton amount to $35, and had increased recovery to
44.2%, this has led to a post balance cost reduction from $128 per clean ton
to $111 per clean ton on the UM.
The biggest issue we have suffered in this calendar year has been the effect
of the falling commodity price, HvB Met Coal, as measured on the S&P
Platts pricing index.
From a high last year in 2022 of $450 a ton, we have seen a steady decline to
$284 as at this time last year (March 2022) and a low of $193 (summer 2023).
The drop in pricing has been the primary driver for the losses which would
have been reversed had the coal price stayed where it was this time last year.
More recently we have seen HvB rise from its lows of $191 to the current price
of $238 per MT; this increase of $45 will drop straight to our bottom line.
During the period the Company moved from a contractor fleet to owner operator
at the end of November 2022. This meant we ended the services of JMAC LLC, who
had previously managed all our earth moving fleet ("Yellow iron"), and we
thank them for their early help in successfully getting the project moving.
The Company started excavating in late November with its own fleet and raised
$6m at 30p in the last quarter of the year to finance the deposit on further
additions to our fleet of yellow goods. The fleet, broadly complete, is now
valued at circa $14m which ensured that the Company was well prepared ahead
of getting its new permit for High Wall Mining (HWM) which will last for the
next 5 years.
Following the new Department of Environmental Protection permit granted in
November 2022, Marshall Miller produced a positive resource update which
demonstrated and increase to 4m defined tons on the property compared to the
2.3m previously reported.
The addition of Underground reserves identified by Marshall Miller, means that
the depletion rate has halved from 2022 due to reserves doubling. This has
resulted in an increase to the reserves in the Statement of Financial Position
as it was recognised at fair value at the date of acquisition.
Further and in line with our policy to ensure minimum environmental damage we
returned the first permit back to the state, fully reclaimed.
Post the year end, and sadly slightly behind schedule, Mega brought and
assembled their HWM (81) on-site. Unfortunately, this had an almost immediate
incident, which we were able to sort quickly so that now both miners are
working, and we are approaching our targeted monthly production.
We have now completed all the remediation required and us and our contractors
are in possession of a full set of mining equipment. So, the issues facing the
Company now, are macro issues, such as the demand for steel, the price of met
coal and the general state of the economy.
As the CEO I remain incredibly bullish for all the above, and with
infrastructure and global rebuilding (particularly in Ukraine) I expect a
positive rebound in HVB Met Coal pricing; this has already started to come
through with the met coal price up some $45, a 23% increase in a relatively
short period of time.
Post the period end we welcomed Avani Resources onto the BC shareholder list;
as the largest importer of Met Coal into India this must be a positive sign
both for BC and the Met Coal market. India is set to become the world's
largest steel market and we couldn't have picked a better partner.
Integrity remains with us in the US, as a trusted partner in marketing/sales
and logistics and, with Avani looking into the Indian market, the Company
would seem well set to benefit from any upturn globally and domestically.
The safety strategy, mining efficiency and our concerns for the environment
through reclamation are combined in a three-prong approach, we now have a
full-time mining engineer at the site in charge of this, and it is at the core
of mine planning for Bens Creek.
Bens Creek continues to use HWM which is the least invasive mining method
available, and we continue to actively reseed and reclaim areas previously
mined as soon as is possible.
Having restarted this project we have created over 100 new jobs in a
previously economically disadvantaged area, and all that have helped with this
should be very proud. The jobs generated have helped the region greatly, where
other employment has been in decline over recent years.
The safety and security of all our employees is of the utmost importance to us
and we are thankful therefore that we suffered no injuries in the period.
I want again to thank everyone involved at BC, both in the London and
Charleston offices and at the site at Glen Alum, from the equipment operators,
employees, plant workers, welders, electricians, operators, contractors as
well as all shareholders.
We are optimistic for the future.
Adam Wilson
Chief Executive Officer
29 September 2023
STRATEGIC REPORT
The Directors present their Strategic Report on the Group for the year ended
31 March 2023.
Strategic approach
Bens Creek Group plc is a holding company that owns and operates the Ben's
Creek mining project in West Virginia, USA. The Group's key objective is to
deliver sustainable shareholder value through the production, development and
further acquisition of metallurgical coal assets, the underlying commodity of
the Company. A key component of the Company's success will be the
metallurgical coal price, which has through the period been highly volatile.
The Group may seek to make further acquisitions of metallurgical coal mines in
North America.
Organisation overview
The Group's business is directed by the Board of Directors and is managed on a
day-to-day basis by the Chief Executive Officer. The Board monitors compliance
with objectives and policies of the Group through monthly performance
reporting, budget updates and periodic operational reviews.
The Board comprises of one Executive Director and four Non-Executive
Directors.
The Corporate Head Office of the Group is located in London and provides
corporate support services to the overseas operations in West Virginia, United
States of America ("USA").
Review of business
The strategic approach of the business has been to complete the necessary
remediation and infrastructure works required to a dormant mine to enable it
to become operational with the aim of commencing the production of
metallurgical coal or met coal.
During the year under review and post 31 March 2023, the Group has completed
several milestones, which chronologically include:
· The Group commenced the financial year selling and supplying raw
coal by truck, In late April, with the wash plant fully remediated, we were
able to supply clean coal by truck. By the end of April, we completed and
had approved by the Northern Southern Railway Company, the rail remediation
and we were able to commence delivery of clean coal via train from June 2022.
· The Group acquired, on 14 April 2022, a new sub lease from Star
Ridge. It has not yet commenced mining operations at this site.
· In May 2022 the Company completed all preparations for the
commencement of underground mining, which started on May 26.
· Utilising our contract agreement with Mega High Wall Mining on 26
June 2022, Bens Creek exercised its right for the provision of a 2nd High Wall
Miner.
· On 18 August 2022 the Company completed a £6m placing of new
equity at a price of 30p per share. The placing funded the transition from
contracted staff to employed for earth moving equipment.
· On 23 December 2022, the Company purchased 26% of Bens Creek Rail
Holdings for $169k, with an option to acquire the balance.
· The Company exercised the option to acquire a further 26% on 31
March 2023, at the same price. The Company continues to have the option to
acquire the balance of the Company.
· Lease acquisition agreements were entered into on 16 December
2021 and 14 April 2022 for sites adjacent to the Group's site in West
Virginia, giving it rights to mine met coal reserves in situ. At the date of
approval of this strategic report, the Company had not commenced mining
operations on these sites.
The Group was also able to report during June 2022, the results of a reserve
base evaluation undertaken by Marshall Miller & Associates, Inc. which
summarised the Group's coal properties in West Virginia. This report stated
the Group has 92.7 million tons of in-place dry reserves, prior to any
recovery of washed coal, and 33.6 million tons that are recoverable reserves.
Outlook
The medium to long term demand for met coal is improving from the depressed
levels we have seen from the beginning of 2023 until now, which have hurt all
companies in the sector. The drop in met coal process from $485 to below $200
has seen multiple local WV companies' slow production, and issue WARN notices
with respect to laying of large numbers of staff.
With India overtaking China as the most populated country in the world, and
its inclusion with China into the BRIC's economic powerhouse, we see this as a
major expansion area internationally for Bens Creek. As such, welcoming Avani,
one of the largest commodity players in Met Coal into India onto our
shareholder list has been a huge step forward. We see in addition
infrastructure spending increasing as well as a robust defence sector
supporting the rise in steel production over the next 12-24 months.
We had hoped to get two HWM in production earlier in the year, and in time for
the Company's year-end in March 2023, but sadly delays and an incident with a
geological anomaly meant that this wasn't able to happen as fast as we would
have liked.
These issues have now all been successfully resolved and I can report that as
of September 11 both High Wall Miners have commenced double shift production.
Against the backdrop of falling prices for most of the period we have
proactively attacked our costs of mining and have been able to significantly
reduce them in a number of areas and in particular:
The pricing with the High Wall Miner contractor was reduced from $28 per ton
to $25 with a target for a further reduction to $23 as production increases.
The pricing with the Underground Mining contractor reduced from $45 per ROM
ton to $35 per ton and recovery improved from 30-35% to 45% by August 2023.
Overtime at the mine site has been reduced significantly, reducing staffing
costs.
We have also been shipping to new users of coal via Integrity, our long-term
offtake partner and hopefully in the future with Avani. Even with the
depressed pricing we have been selling all of our production to some of the
largest steel producers in the world.
The Group is focused on producing met coal which span two quality grades,
commonly referred to as High Vol A and High Vol B. The High Vol A product is
extracted from the Group's underground property in West Virginia, whilst the
High Vol B is extracted via highwall mining. The selling prices of the Group's
met coal is correlated to the daily prices published by Standard & Poor's
Global Platts Coal Trader.
The prices quoted are typically for metric tons. The weights used by the Group
in its commercial arrangements are US short tons, equivalent to 2,000 lbs per
metric ton.
The pricing of met coal has since the beginning of 2021 increased
substantially, setting record all-time highs in March 2022, the price having
increased from $120 to $465 per metric ton. However, this time last year the
pricing was $285, sadly we have seen it drop to a low of $191, as of writing
it is $235 per metric ton, delivered to the East Coast of the USA.
Financial review
Income Statement
The net loss generated by the Group for the year ended 31 March 2023, before
taxation was $24,715,586 (31 March 2022: net profit of $25,285,795). Basic
loss per ordinary share was 6.563 cents (31 March 2022: basic earnings per
share of 6.165 cents). The operating loss was $21,323,294 (31 March 2022:
$7,460,142).
The Company commenced the sale of High Vol B clean met coal on a monthly basis
in June 2022 to its offtake partner, Integrity. This generated revenue of
$42,208,848 in 2023 (2022: $5,411,816 related to raw coal).
The direct costs incurred in connection with the sales made amounted to
$38,091,159. This generated a gross margin of 8%.
The operating loss of $21,323,294 has been driven by administrative costs of
$12,079,599, as set out in note 9 to the financial statements, which includes
the costs of $1,712,746 associated with the operational and remediation costs,
insurance costs of $2,318,757 and staff costs of $3,651,828.
Total share option charges were $2,397,585, for further details please see
note 32 to the financial statements.
Other costs incurred include depletion expenses of $440,915, in connection
with the amortisation of the stock of met coal reserves sold to Integrity
during the year. Further details of the value of the Company's met coal
reserves is contained in note 17 of these financial statements.
Balance Sheet
The Group's gross assets in its mining activities amounts to $72,238,170
(2022: $59,175,112), excluding the right of use of assets and deferred tax
asset, and comprises of property, plant and equipment, coal rights to mine the
known met coal reserves along with the remediation works for the underground
mining operations and railway repairs and improvements recorded as
construction in progress.
Cash and cash equivalents were $471,651 held at the end of the year (31 March
2022: $5,555,296).
The Group undertook a series of financing for excavating equipment to move
away from the contractor model. Total debt related to the equipment financing
at 31 March 2023 was $10,568,529. See note 26 for further details.
The Group's coal reserves are valued at $24,514,572, net of depletion during
the year (31 March 2022: $24,955,487).
During the period the Company issued 44,731,978 ordinary shares. This included
the placing of 20,000,000 ordinary shares of the Group at a price of 30p per
ordinary share. Further details of the shares issued during the period are set
out in note 31 to the financial statements.
On 3 March 2023, MBU agreed to vary the conversion price of the proportion of
the Loan Facility that is convertible at 60p to now convert at 30p. They then
exercised their right to convert in March 2023, following the Conversion MBU
received 23,283,728 new Ordinary Shares.
As part of the Group's transition from a "start-up operation" to a fully
operational mining business, the Board is in the process of developing an
appropriate set of key performance indicators ("KPIs") against which to
benchmark how it performs against operational, health and safety and ESG
standards. The Board is fully committed to ensuring the Group operates to the
highest standards of sustainability and responsibility whilst delivering
shareholder value. The Board intends to communicate its proposed KPIs once the
transition has been fully completed. However, in the meantime the Board is
pleased to report the following KPIs for the year to 31 March 2023:
KPI / Financial Information 2023 2022
Cash and cash equivalents $471,651 $5,555,296
Net assets $22,451,173 $31,744,285
Clean tons produced 272,318 666
ROM tons produced 494,861 63,562
Cash has been used to fund the Group's operations and facilitate its
investment activities (refer to the Statements of Cash Flows on page 41).
The Board continues to monitor the activities and performance of the Group in
delivering its key milestones since IPO.
Principal risks and uncertainties
The management of the business and the execution of the Group's strategy are
subject to a number of risks.
Risks are formally reviewed by the Board, and appropriate processes are put in
place to monitor and mitigate them. If more than one event occurs, it is
possible that the overall effect of such events would compound the possible
adverse effects on the Group. The key business risks affecting the Group are
set out below:
Mining and processing risks
The Group's principal operation is the mining of met coal. Its operations are
subject to all of the hazards and risks normally encountered in mining and
processing coal. These include unusual and unexpected geological formations,
rock falls, flooding and other conditions involved in the extraction of
material, any of which could result in damage to the mine and infrastructure,
including, damage to life or property, environmental damage and possible legal
liability. Although adequate precautions to minimise risk are taken,
operations are subject to hazards, which may result in environmental pollution
and consequent liability which could have a material adverse impact on the
business, operations and financial performance of the Group.
As is common with all mining operations, there is uncertainty and therefore
risk associated with the Group's operating parameters and costs. These can
be difficult to predict particularly in a high inflationary environment and
are often affected by factors outside the Group's control.
The Group may be required to undertake clean-up programmes resulting from any
contamination from its operations or to participate in mine rehabilitation
programmes which may vary from project to project. The Group follows all
necessary laws and regulations and is not aware of any present material issues
in this regard.
Dependence on key personnel
The Group is dependent upon its executive management team and various
technical consultants. Whilst it has entered into contractual agreements with
the aim of securing the services of these personnel, the retention of their
services cannot be guaranteed. The development and success of the Group
depends on its ability to recruit and retain high quality and experienced
staff. The loss of the service of key personnel or the inability to attract
additional qualified personnel as the Group grows could have an adverse effect
on future business and financial conditions.
Uninsured risk
The Group, as a participant in mining and development programmes, may become
subject to liability for hazards that cannot be insured against or third party
claims that exceed the insurance cover. The Group may also be disrupted by a
variety of risks and hazards that are beyond control, including geological,
geotechnical and seismic factors, environmental hazards, industrial accidents,
occupational and health hazards and weather conditions or other acts of God.
Financial risks
The Group's operations expose it to a variety of financial risks that can
include market risk (including foreign currency, price and interest rate
risk), credit risk, and liquidity risk. The Group has a risk management
programme in place that seeks to limit the adverse effects on the financial
performance of the Group by monitoring levels of debt finance and the related
finance costs. The Group does not use derivative financial instruments to
manage interest rate costs and, as such, no hedge accounting is applied.
Further details on financial risks can be found in note 3 to the financial
statements.
Financial Instruments
The Group's financial instruments comprise of financial assets; trade and
other receivables and cash and cash equivalents, as set out in note 27 to the
financial statements. Financial liabilities comprise of short and long term
borrowings and trade and other payables also set out in note 27 to the
financial statements.
Reserve and resource estimates
The Group's reported reserves and resources are only estimates. No assurance
can be given that the estimated reserves and resources will be recovered or
that they will be recovered at the rates estimated. Reserve and resource
estimates are based on sampling and, consequently, are uncertain because the
samples may not be representative. Reserve and resource estimates may
require revision (either up or down) based on future actual production
experience.
The ability to extract coal reserves is dependent on obtaining the necessary
permits from the WVDEP.
Volatility of commodity prices
Historically, commodity prices have fluctuated and are affected by numerous
factors beyond the Group's control, including global demand and supply,
international economic trends, currency exchange fluctuations, expectations
for inflation, speculative activity, consumption patterns and global or
regional political events. The aggregate effect of these factors is
impossible to predict. Fluctuations in commodity prices, over the short term
to long term, may adversely impact the returns of the Group's investments.
A significant reduction in global demand for met coal, leading to a fall in
coal prices, could lead to a significant fall in the cash flow of the Group,
which may have a material adverse impact on the operating results and
financial condition of the Group.
Section 172(1) Statement - Promotion of the Company for the benefit of the
members as a whole
The Directors believe they have acted in the way most likely to promote the
success of the Company for the benefit of its members as a whole, as required
by s172 of the Companies Act 2006.
The requirements of s172 are for the Directors to:
· Consider the impact of the Group's operations on the community
and the environment;
The Company is conscious of the impact of its mining operations. Utilising
modern mining techniques means the ecological impact is minimal. The Company
additionally runs a full rehabilitation programme. The Company supports the
community in providing employment and supports local education via a programme
of grants made available to mining students through the University of West
Virginia.
· Maintain a reputation for high standards of business conduct;
The Company works closely with many of its suppliers, a number of whom are
permanently represented on site. Regular meetings are held to ensure that
standards are maintained across all areas.
· Foster the Group's relationships with suppliers, customers and
others;
In line with a commitment to business conduct, we support the relationships we
have with suppliers and customers by regular contact creating a two way
dialogue to monitor and improve our interaction.
· Consider the interests of the Group's employees;
The interests of our employees are always to the forefront of any of our
decisions. We met regularly with them and provide a comprehensive support
package of health and other benefits for their wellbeing. Safety is of the
utmost importance and this issue is under constant review.
· Act fairly between the members of the Group; and
· Consider the likely consequences of any decision in the long
term.
All decisions taken are done so in the light of the potential impact on all
participants. The Company attempts to ensure that no decision is taken that
would unfairly or adversely affect an individual member or group of members or
create a long-term negative result.
The Group has broadly completed the remediation of the plant and machinery and
mine site to allow for continuous production. In arriving at this state, the
company has made a number of key decisions during the year. In all cases the
Company remained focused upon the requirements of s172.
During the year ending 31 March 2023, the Board took a number of decisions
which impacted upon or were relevant to s172 (1).
· A new Chief Financial Officer, Murat Erden was appointed.
· The company completed a placing at 30p per share to raise £6
million. The money was deployed primarily as deposits for the purchase of
earth moving equipment as the company transitioned from a contractor model to
owner operator.
· Commenced operations in a newly permitted area of the site.
· Disposed of our owned High Wall Miner.
· Acquired a majority interest in Bens Creek Rail Holdings LLC.
· Commenced repayment of Convertible loan note obligations to ACAM
LP.
· A new non-executive director was appointed.
· All outstanding obligations to MBU Capital Group Limited were
converted into equity.
· We introduced a scholarship programme at the University of West
Virginia to support mining engineering students.
The Company throughout the year was focussed upon ensuring it was delivered to
all stakeholders in a fair and reasonable fashion. As a mining group the Board
takes seriously its responsibilities to the communities within which it
operates. We follow all local and UK legislation on bribery and corruption. We
engage where possible with local resources to provide such services as they
are able to in both geological and support functions. This provides both
employment and associated wider economic benefits to the community.
We follow international best practice on environmental issues relating to our
operations with an intention to meet or exceed such standards. Our employees
are of a primary consideration for the Board, and we continue to provide the
highest level of healthcare programme and security support to them all.
We thank our Shareholders for their continued support and our wider family of
Stakeholders all of whom have assisted us during this period of
re-establishment of our business.
The Group Strategic Report was approved by the Board on 29 September 2023.
We follow international best practice on environmental issues relating to our
operations with an intention to meet or exceed such standards. Our employees
are of a primary consideration for the Board, and we continue to provide the
highest level of healthcare programme and security support to them all.
We thank our Shareholders for their continued support and our wider family of
Stakeholders all of whom have assisted us during this period of
re-establishment of our business.
The Group Strategic Report was approved by the Board on 29 September 2023.
On behalf of the Board
Adam Wilson
Chief Executive Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS
For the year ended 31 March 2023
For the year ended 31 March 2023 For the year ended 31 March 2022
Note $ $
Revenue 7 42,208,848 5,411,816
Cost of goods sold 8 (31,036,252) (3,051,937)
Cost of sales 8 (9,390,635) (826,628)
Gross profit before depreciation & depletion 1,781,961 1,533,251
Depreciation & depletion 8 (5,326,847) (898,521)
Gross (loss)/profit (3,544,886) 634,730
Administrative expenses 9 (9,945,404) (5,999,721)
Change in revaluation of deferred consideration 23 (4,859,839) -
Change in estimates for provisions 26 (575,580) -
Share based payment charge 32 (2,397,585) (2,095,151)
Operating Loss (21,323,294) (7,460,142)
Finance income 42,960 1,235
Finance costs 11 (3,435,252) (997,449)
Fair value (loss)/gain on Convertible Loan Note embedded derivative - 53,462
Bargain Purchase gain 29 - 33,688,689
(Loss)/profit before taxation (24,715,586) 25,285,795
Tax expense 13 548,835 (8,222,085)
(Loss)/profit for the year (24,166,751) 17,063,710
(Loss)/profit) attributable to:
Owners of the parent (24,166,751) 17,063,710
(24,166,751) 17,063,710
All results arise from continuing operations.
The Accounting Policies and Notes on pages 43 to 78 form part of these
financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
For the year ended 31 March 2023 For the year ended 31 March 2022
Note $ $
(Loss)/profit for the year (24,166,751) 17,063,710
Other comprehensive income:
Exchange differences on translation of foreign operations 705,713 (1,249,783)
Revaluation gain of Plant and equipment - 5,411,476
Other comprehensive income before taxation (23,461,038) 21,225,403
Taxation relating to other comprehensive income - (1,488,156)
Total comprehensive income (23,461,038) 19,737,247
Basic earnings per share (cents) 14 (6.563) 6.165
Diluted earnings per share (cents) 14 (6.563) 5.922
The Accounting Policies and Notes on pages 43 to 78 form part of these
financial statements.
CONSOLIDATED AND PARENT STATEMENT OF FINANCIAL POSITION
For the year ended 31 March 2023
Group Company
Group
Group
Note 31 March 2023 31 March 2022 31 March 2023 31 March 2022 restated
$ Restated $ $
$
Non-current assets
Property, plant and equipment 15 43,579,689 28,948,808 3,184 539
Coal reserves 17 24,514,572 24,955,487 - -
Other assets 17 - 1,628,605 - -
Right of use assets 18 175,868 61,708 - -
Construction in progress 15 550,644 3,642,212 - -
Restricted investments through OCI 16 695,120 - - -
Investment in subsidiaries 35 - - 26,684,119 28,385,729
Deferred tax asset 13 576,151 576,151 - -
Trade and other receivables 19 - - 28,610,804 16,026,796
70,092,044 59,812,971 55,298,107 44,413,064
Current assets
Inventory 21 5,150,750 1,528,613 - -
Trade and other receivables 19 1,530,513 570,328 218,560 315,465
Property, plant and equipment held for sale 14 2,898,145 - - -
Cash and cash equivalents 20 471,651 5,555,296 51,897 2,971,515
10,051,059 7,654,237 270,457 3,286,980
Total assets 80,143,103 67,467,208 55,568,564 47,700,044
Current liabilities
Trade and other payables 22 9,678,100 3,451,346 1,424,153 291,263
Deferred consideration 23 1,254,206 816,000 - -
Borrowings 24 3,462,778 - - -
Lease liability 18 110,706 63,367 - -
Provisions 26 510,000 350,000 - -
Convertible loans 25 11,619,734 6,397,769 11,619,734 6,397,769
Embedded derivatives 25 1,503,775 2,839,817 1,503,775 2,839,817
28,139,299 13,918,299 14,547,662 9,528,849
Non-current liabilities
Borrowings 24 7,105,751 3,280,827 - -
Convertible loans notes 25 - 3,037,819 - 3,037,819
Provisions 26 5,567,987 2,841,888 - -
Deferred consideration 23 6,525,967 2,357,698 - -
Deferred tax liability 13 9,737,557 10,286,392 - -
Lease liability 18 66,534 - - -
29,003,796 21,804,624 - 3,037,819
Total liabilities 57,143,930 35,772,923 14,547,662 12,566,668
Net assets 23,000,008 31,744,285 41,020,902 35,133,376
Equity attributable to owners of the parent
Share capital 32 538,221 485,273 538,221 485,273
Share premium 32 50,989,150 38,712,008 50,989,150 38,712,008
Share based payments reserve 33 5,033,913 2,647,242 5,033,913 2,647,242
Translation reserve (544,070) (1,249,783) (3,226,486) (1,270,738)
Revaluation reserve 3,923,320 3,923,320 - -
Merger reserve (6,750,420) (6,750,420) - -
Retained losses (30,190,106) (6,023,355) (12,313,896) (5,440,409)
Total equity 23,000,008 31,744,285 41,020,902 35,133,376
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 from presenting the Parent Company Income Statement and
Statement of Comprehensive Income. The loss for the Company for the year ended
31 March 2023 was $6,873,487 (2022: $5,440,409).
The Financial Statements were approved and authorised for issue by the Board
on 29 September 2023 and were signed on its behalf by:
Adam Wilson
Chief Executive Officer
The Accounting Policies and Notes on pages 43 to 78 form part of these
financial statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Group
Note Share Share premium Share Based Payments Translation Reserve Revaluation Merger Reserve Retained losses Total
capital $ $ $ Reserve $ $ $
$ $
Balance as at 1 April 2021 - - - - - - (1,451,759) (1,451,759)
Profit for the year - - - - - - 17,063,710 17,063,710
Other comprehensive income
Gain on the revaluation of fixed assets - - - - 5,411,476 - - 5,411,476
Taxation on revaluation - - - - (1,488,156) - - (1,488,156)
Currency translation differences - - - (1,249,783) - - - (1,249,783)
Total comprehensive income for the year - - - (1,249,783) 3,923,320 - 17,063,710 19,737,247
Proceeds from issue of shares 32 152,390 12,578,569 - - - - - 12,730,959
Share based payments 33 - - 2,647,242 - - - - 2,647,242
Issue of ordinary shares relating to business combination 32 332,883 26,133,439 - - - (6,750,420) (21,635,306) (1,919,404)
Total transactions with owners, recognised directly in equity 485,273 38,712,008 2,647,242 - - (6,750,420) (21,635,306) 13,458,797
Balance as at 31 March 2022 485,273 38,712,008 2,647,242 (1,249,783) 3,923,320 (6,750,420) (6,023,355) 31,744,285
Group
Note Share Share premium Share Option Reserve Translation Reserve Revaluation Merger Reserve Retained losses Total
capital $ $ $ Reserve $ $ $
$ $
Balance as at 1 April 2022 485,273 38,712,008 2,647,242 (1,249,783) 3,923,320 (6,750,420) (6,023,355) 31,744,285
Loss for the year - - - - - - (24,166,751) (24,166,751)
Other comprehensive income
Currency translation differences - - - 705,713 - - - 705,713
Total comprehensive income for the year - - - 705,713 - - (24,166,751) (23,461,038)
Proceeds from issue of shares net of issue costs 32 52,948 12,277,142 - - - - - 12,330,090
Share based payments 31 - - 2,386,671 - - - - 2,386,671
Total transactions with owners, recognised directly in equity 52,948 12,277,142 2,386,671 - - - - 14,716,761
Balance as at 31 March 2023 538,221 50,989,150 5,033,913 (544,070) 3,923,320 (6,750,420) (30,190,106) 23,000,008
COMPANY STATEMENT OF CHANGES IN EQUITY
For the period ended 31 March 2023
Company
Note Share Share premium Share Option Reserve Translation Reserve Retained losses Total
capital $ $ $ $ $
$
Balance as at 11 August 2021 - - - - - -
Loss for the period - - - - (5,440,409) (5,440,409)
Currency translation differences - - - (1,270,738) - (1,270,738)
Total other comprehensive income (1,270,738) (5,440,409) (6,711,147)
Total comprehensive income for the period - - - (1,270,738) (5,440,409) (6,711,147)
Transactions with owners:
Proceeds from issue of shares 32 152,390 12,578,569 - - - 12,730,959
Share based payments 33 - - 2,647,242 - - 2,647,242
Issue of ordinary shares relating to business combination 32 332,883 26,133,439 - - (5,440,409) 21,025,913
Total transactions with owner, recognised directly in equity 485,273 2,647,242
38,712,008 - (5,440,409) 36,404,114
Balance as at 31 March 2022 485,273 38,712,008 2,647,242 (1,270,738) (5,440,409) 35,133,376
Company
Note Share Share premium Share Option Reserve Translation Reserve Retained losses Total
capital $ $ $ $ $
$
Balance as at 1 April 2022 485,273 38,712,008 2,647,242 (1,270,738) (5,440,409) 35,133,376
Loss for the period - - - - (6,873,487) (6,873,487)
Currency translation differences - - - (1,955,748) - (1,955,748)
Other comprehensive income
Total comprehensive income for the period - - - (1,955,748) (6,873,487) (8,829,235)
Transactions with owners:
Proceeds from issue of shares net of issue costs 32 52,948 12,277,142 - - - 12,330,090
Share based payments 31 - - 2,386,671 - - 2,386,671
Total transactions with owner, recognised directly in equity 52,948 12,277,142 2,386,671 - - 14,716,761
Balance as at 31 March 2023 538,221 50,989,150 5,033,913 (3,226,486) (12,313,896) 41,020,902
The Accounting Policies and Notes on pages 43 to 78 form part of these
financial statements.
CONSOLIDATED AND COMPANY STATEMENT OF CASH
FLOWS
Group Company
Year ended 31 March 2023 Year ended 31 March 2022 Year ended 31 March 2023 Period ended 31 March 2022
Note $ $ $ $
Cash flows from operating activities
(Loss)/profit (24,715,586) 25,285,795 (6,873,487) (5,440,409)
Adjustments for:
Depreciation and amortisation 4,886,904 154,008 341 27
Interest expense 3,435,252 997,449 1,733,555 355,780
Interest income (42,960) (1,235) (1,387,705) (254,686)
Change in revaluation of deferred consideration 4,859,839
Change in estimates 575,580 - - -
Fair value gain on revaluation of embedded derivative (168,691) (53,462) (168,691) (53,462)
Foreign exchange translation 568,329 (1,629,735) (167,588) (588,596)
Share based payment charge 2,397,585 2,095,150 2,397,585 2,095,150
Depletion expense 440,915 744,513 - -
Bargain purchase gain - (33,688,689) - -
Change in working capital
(Decrease)/Increase in trade and other receivables (960,185) (172,271) 96,905 (315,465)
Increase in trade and other payables 6,226,754 3,039,997 1,132,891 291,263
(Increase)/decrease in inventory (3,622,137) 1,528,613 - -
Net cash flows used in operating activities (6,118,401) (1,699,687) (3,236,194) (3,910,399)
Investing activities
Purchase of property, plant and equipment (17,024,823) (13,225,108) (2,986) (565)
Disposal of property, plant and equipment (172,149) - - -
Investment in deposit account (695,120) - - -
Loans granted to subsidiary undertakings - - (5,979,919) (15,296,261)
Acquisition of subsidiary - (1,412,637) - -
Acquisition of reclamation assets - (1,493,242) - -
Net cash used in investing activities (17,892,092) (16,130,987) (5,982,905) (15,296,826)
Financing activities
Proceeds from borrowings 18,419,042 1,439,252 - -
Proceeds from surety bonding 1,628,605 - - -
Repayment of borrowings (8,054,780) (54,454) (750,000) -
Proceeds from issue of shares, net of issue costs 7,049,481 10,178,740 7,049,481 10,178,740
Proceeds from issuance of convertible loan notes - 12,000,000 - 12,000,000
Repayment of lease liabilities principal (115,500) (122,934) - -
Net cash generated from financing activities 18,926,848 23,440,604 6,299,481 22,178,740
Net (decrease)/increase in cash and cash equivalents (5,083,645) 5,609,750 (2,919,618) 2,971,515
Cash and cash equivalents at beginning of year 5,555,296 (54,454) 2,971,515 -
Cash and cash equivalents as at end of year 471,651 5,555,296 51,897 2,961,515
Major non-cash transactions:
Share based payments amounted to $2,397,585 (2022: $2,095,150) and are set out
in note 32 of the financial statements.
Loan conversion into equity on 10 March 2023 amounted to $5,191,285 and is set
out in note 31 of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2023
1. General information
The principal activity of Bens Creek Group Plc (the Company) is that of a
holding company and through its subsidiaries, Ben's Creek Land WV LLC, Ben's
Creek Operations WV LLC and Ben's Creek Rail Holdings WV LLC (the
Subsidiaries) (together the Group), the Group's principal activity is the
production and sale of high-quality metallurgical coal products.
The Company was incorporated on 11 August 2021 in the United Kingdom. The
address of the Company's registered office is 15 Stratton Street, London,
United Kingdom, W1J 8LQ. The Company is listed on the AIM market of the London
Stock Exchange.
The Group financial statements cover the period from 1 April 2022 to 31 March
2023.
2. Accounting policies
The principal accounting policies applied in the preparation of the Financial
Statements is set out below (Accounting Policies or Policies). These Policies
have been consistently applied to all the periods presented, unless otherwise
stated.
2.1. Basis of preparing the Financial Statements
The Group and Company Financial Statements has been prepared in accordance
with UK-adopted international accounting standards and the requirements of the
Companies Act 2006. The Group and Company Financial Statements has also been
prepared under the historical cost convention, subsequent to any fair value
adjustments required upon acquisition via a business combination.
Additionally, convertible loan notes, embedded derivative, deferred
consideration and Plant are held under the fair value through profit or loss
"FVTPL" model. The prior year financial statements were prepared as noted
above other than the Plant which was measured at fair value at acquisition and
subsequently at cost.
The Group and Company Financial Statements are presented in United States
Dollars rounded to the nearest dollar, which is the Group's functional
currency.
The preparation of Group and Company Financial Statements 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 Financial Information are
disclosed in note 4 to these financial statements.
a) Changes in Accounting Policies
i) New and amended standards adopted by the Group
There were no new or amended accounting standards that required the Group to
change its accounting policies for the year ended 31 March 2023 and no new
standards, amendments or interpretations were adopted by the Group
ii) New IFRS Standards and Interpretations not adopted
At the date on which the Group and Company Financial Statements was
authorised, there were no Standards, Interpretations and Amendments which had
been issued but were not effective for the period ended 31 March 2023 that are
expected to materially impact the Group and Company Financial Statements.
iii) New standards, amendments and interpretations in issue but not yet
effective or not yet endorsed and not early adopted
Standards, amendments and interpretations that are not yet effective and have
not been early adopted are as follows:
Standard Impact on initial application Effective date
IFRS 17 Insurance contracts 1 January 2023
IAS 8 Accounting estimates 1 January 2023
IFRS Practice Statement 2
IAS 1 Classification of Liabilities as Current or Non-Current. 1 January 2023
IFRS 16 Lease liability in sale and leaseback 1 January 2024
IAS 12 Income Taxes Deferred Tax Related to Assets and Liabilities 1 January 2023
IAS 1 Non-current liabilities with covenants 1 January 2024
The Group is evaluating the impact of the new and amended standards above
which are not expected to have a material impact on the Group's results or
shareholders' funds.
2.2. Basis of consolidation
The Group and Company Financial Statements consolidates the financial
information of the Company and the accounts of all of its subsidiary
undertakings for all periods presented.
Subsidiaries are entities over which the Group has control. The Group controls
an entity when the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases.
The Group applies the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued
by the Group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date.
Acquisition-related costs are expensed as incurred unless they result from the
issuance of shares, in which case they are offset against the premium on those
shares within equity.
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of
the contingent consideration that is deemed to be an asset or liability is
recognised in accordance with IAS 39 either in profit or loss or as a change
to other comprehensive income. Contingent consideration that is classified as
equity is not re-measured, and its subsequent settlement is accounted for
within equity.
Investments in subsidiaries are accounted for at cost less impairment.
Where considered appropriate, adjustments are made to the financial
information of subsidiaries to bring the accounting policies used into line
with those used by other members of the Group. All intercompany transactions
and balances between Group enterprises are eliminated on consolidation.
2.3. Going concern
The Group's and Company's business activities, together with the factors
likely to affect their future development, performance and position are set
out in the Strategic Report. The Directors' Report includes the Group's and
Company's objectives, policies and processes for managing their capital, their
financial risk management objectives and their exposure to credit risk and
liquidity risk.
The Directors have reviewed the cashflow forecast and the future requirements
of the Group for the period to 30 June 2025. They have considered current and
future offtake agreements, changes in the economic climate and other
contracts, such as vendors in place.
Key assumptions in the cashflow were production rates, pricing, and recovery
rates. The Directors and executive team discussed these assumptions in detail
to ensure future cashflow forecasts are accurate. Details of assumptions are
as follows.
The Group is confident that it will be able to achieve its targeted increased
production rates using two High Wall Miners on double shifts. Although there
is a risk of not being able to achieve this due to repairs, maintenance and
anomalies, the Group considers the risk of downtime is minimal. One of the
biggest contributors to downtime was the risk of generators breaking down. The
Group in September 2023 installed Line Power to one of the High Wall Miners,
which will now result in far less downtime due to having two generators and
Line Power to ensure both High Wall Miners are running.
There are an estimated 92m tons of reserve in situ, which was confirmed by
Marshall Miller, an independent expert in the field. This indicates that there
is significant coal both underground and overground in which the Group can
explore and mine in the future. This gives management confidence that there
are enough reserves to continue mining beyond 10 years.
The price of metallurgical coal has fluctuated in the year and post year-end,
with a sharp fall in the price to a low of $191/ metric ton, High Vol B.
However, management is confident even at the current price ($235/ metric ton,
High Vol B) that the Group will be able to generate positive cash flows in the
future.
The Group undertook a cost-cutting exercise amid the fall in coal prices post
year-end. Contractor costs have decreased significantly, as underground mining
has been cut from $45/ton to $35/ton. In addition to the reduction in costs
the recoverability of underground mining has significantly improved since
August 2023. It was achieving lows of 32% to currently around 45%, which
significantly improves the profitability.
High wall mining costs have been cut from $28/ton to $25/ton with a view to
achieving further decreases at full production. These and other costs that
have been reduced have significantly helped the cash flow during the low of
the coal prices.
Several events occurred post year-end which have given further reassurance
that the Group is a going concern. The most immediate of which was the
issuance of two loan notes to provide extra funding for both working capital
and repayment of outstanding convertible loan notes. At 30 June 2023 the
convertible loan note issued in February 2022 was due for repayment (post
modification of repayment date). To ensure the Group was able to meet this
repayment, some of the funds were used to repay this loan.
The Directors are also confident that the Group is able to raise funds
elsewhere if required. This can be done through several methods including
raising finance against property, plant and equipment currently on the balance
sheet, re-negotiating with contractors and suppliers for lower rates or an
equity raise.
The Directors are of the opinion that the Group has adequate resources to
continue in operational existence 18 months from signing of the audited annual
report. The financial statements have been prepared on a going concern basis,
however there is a material uncertainty.
2.4. Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief
Executive Officer.
2.5. Foreign currencies
a) Functional and presentation currency
Items included in the Financial Statements are measured using the currency of
the primary economic environment in which the entity operates (the functional
currency). Bens Creek Group Plc, the parent company, is based in the United
Kingdom and has a functional currency in GBP Sterling. The Financial
Statements are presented in US Dollars, rounded to the nearest dollar as this
is where the entity primarily operates.
b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where such items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the Statement of Profit and Loss. All
other foreign exchange gains and losses are presented in the Consolidated
Statement if Comprehensive Income.
Translation differences on non-monetary financial assets and liabilities such
as equities held at fair value through profit or loss are recognised in profit
or loss as part of the fair value gain or loss. Translation differences on
non-monetary financial assets measured at fair value, such as equities
classified as available for sale, are included in Consolidated Statement of
Profit and Loss.
c) Group companies
The results and financial position of all the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
· assets and liabilities for each period end date presented are
translated at the period-end closing rate;
· income and expenses for each Income Statement are translated at
average exchange rates (unless this average is not a reasonable approximation
of the cumulative effect of the rates prevailing on the transaction dates, in
which case income and expenses are translated at the dates of the
transactions); and
· all resulting exchange differences are recognised in other
comprehensive income.
2.6. Property, plant and equipment
Vehicles, office equipment, plant, underground equipment and leasehold
improvements are stated at cost, plus any purchase price allocation uplift.
Plant upon acquisition has been accounted for under the fair value method of
accounting, less accumulated depreciation and any accumulated impairment
losses. Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is probable that
future economic benefits associated with the item will flow to the Group and
the cost of the item can be measured reliably. The carrying amount of the
replaced part is derecognised. All other repairs and maintenance are charged
to the Income Statement during the financial period in which they are
incurred.
Depreciation is provided to write off the cost less estimated residual value
of each asset over its expected useful economic life on a straight-line basis
at the following annual rates:
Equipment 5 year straight-line
Plant and machinery 5 year straight-line
Vehicles 5 year straight-line
Plant 10 year straight-line
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount.
Gains and losses on disposal are determined by comparing the proceeds with the
carrying amount and are recognised within 'Other net gains/(losses)' in the
Statement of Profit and Loss.
2.7. Inventory
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the average costing method. Components of inventories consist
of coal, parts and supplies, net of allowance for obsolescence. Coal
inventories represent coal contained in stockpiles, coal that has been mined
and hauled to the wash plant for processing raw coal and coal that has been
processed (crushed, washed and sized) and stockpiled for shipment to
customers.
The cost of raw and prepared coal comprises extraction costs, direct labour,
other direct costs and related production overheads (based on normal operating
capacity). It excludes borrowing costs. Net realisable value is the estimated
selling price in the ordinary course of business, less applicable variable
selling expenses.
2.8. Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable, and represent amounts receivable for goods supplied, stated net of
discounts, returns and value added taxes. Under IFRS 15 there is a five-step
approach to revenue recognition which is adopted across all revenue streams.
The process is:
Step 1: Identify the contract(s) with a customer;
Step 2: Identify the performance obligations in the contract;
Step 3: Determine the transaction price;
Step 4: Allocate the transaction price to the performance obligations in the
contract; and
Step 5: Recognise revenue as and when the entity satisfies the performance
obligation.
The Group has two revenue streams being the sale of coal and other aggregate
bi-products produced by the Group through trucking and trains. During the year
under review, such revenue was recognised at the point of contact at a
pre-agreed fixed price on a per tonnage basis. For deliveries made via truck
the revenue is recognised once the product leaves the Group's premises, which
is the point at which the risk and rewards are transferred to the customer.
For sales made via railway it is at the point at which the coal has arrived at
the dock and is of satisfactory quality.
2.9. Construction in Progress
Assets under construction are accounted for at cost, based on the value of
receipts and other direct costs incurred to the relevant financial reporting
date. They are not depreciated until the period in which they are brought into
use, where the asset is transferred to the relevant category and depreciated
the following month.
There were no costs committed at the year end.
2.10. Assets held of sale
Current assets held for sale at the end of the year are measured at lower of
cost or net realisable value.
2.11. Coal rights and restoration assets
Coal land, mine development costs, which include directly attributable
construction overheads, land and coal rights are recorded at cost, plus any
purchase price allocation uplift if applicable upon acquisitions accounted for
under the acquisition method of accounting. Coal land and mine development are
depleted and amortised, respectively, using the units of production method,
based on estimated recoverable tonnage. The depletion of coal rights and
depreciation of restoration costs are expensed by reference to the estimated
amount of coal to be recovered over the expected life of the operation.
Future cost requirements for land reclamation are estimated where surface
operations have been conducted, based on the Group's interpretation of the
technical standards of regulations enacted by the U.S. Office of Surface
Mining, as well as West Virginia state regulations. These costs relate to
reclaiming the pit and support acreage at surface mines and sealing portals at
deep mines. Other costs include reclaiming refuse and slurry ponds as well as
related termination/exit costs.
The Group records asset retirement obligations that result from the
acquisition, construction or operation of long-lived assets at fair value when
the liability is incurred. Upon the initial recognition of a liability, that
cost is capitalised as part of the related long-lived asset and expensed over
the useful life of the asset. The asset retirement costs are recorded in Coal
Rights and Restoration Assets - see note 16 of these financial statements.
The Group expenses reclamation costs prior to the mine closure. The
establishment of the end of mine reclamation and closure liability is based
upon permit requirements and requires significant estimates and assumptions,
principally associated with regulatory requirements, costs and recoverable
coal lands. Annually, the end of mine reclamation and closure liability is
reviewed and necessary adjustments are made, including adjustments due to mine
plan and permit changes and revisions of cost and production levels to
optimize mining and reclamation efficiency. The amount of such adjustments is
reflected in the year end reclamation provision calculation - see note 26 of
these financial statements.
2.12. Restricted investments
The Group's placed funds in a Morgan Stanely investment account as a result of
Surety bonding. The investment is treated as a non-current it is restricted
until the liability has been cleared.
2.13. Financial assets
Classification
The Group's financial assets consist of loans and receivables. The
classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at
initial recognition.
(i) Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They are
included in current assets, except for maturities greater than 12 months after
the balance sheet date. These are classified as non-current assets. The
Group's loans and receivables comprise trade and other receivables and cash
and cash equivalents at the year-end.
Recognition and Measurement
Regular purchases and sales of financial assets are recognised on the trade
date - the date on which the Group commits to purchasing or selling the
asset. Financial assets carried at fair value through profit or loss are
initially recognised at fair value, and transaction costs are expensed in the
Statement of Profit and Loss. Financial assets are derecognised when the
rights to receive cash flows from the assets have expired or have been
transferred, and the Group has transferred substantially all of the risks and
rewards of ownership.
Loans and receivables are subsequently carried at amortised cost using the
effective interest method.
Gains or losses arising from changes in the fair value of financial assets at
fair value through profit or loss are presented in the Statement of Profit and
Loss within "Other (Losses)/Gains" in the period in which they arise.
Impairment of Financial Assets
The Group assesses at the end of each reporting period whether there is
objective evidence that a financial asset, or a group of financial assets, is
impaired. A financial asset, or a group of financial assets, is impaired and
impairment losses are incurred, only if there is objective evidence of
impairment as a result of one or more events that occurred after the initial
recognition of the assets (a "loss event"), and that loss event (or events)
has an impact on the estimated future cash flows of the financial asset, or
group of financial assets, that can be reliably estimated.
The criteria that the Group uses to determine that there Is objective evidence
of an impairment loss include:
· significant financial difficulty of the issuer or obligor;
· a breach of contract, such as a default or delinquency in
interest or principal repayments;
· the Group, for economic or legal reasons relating to the
borrower's financial difficulty, granting to the borrower a concession that
the lender would not otherwise consider; and
· it becomes probable that the borrower will enter bankruptcy or
another financial reorganisation.
The Group first assesses whether objective evidence of impairment exists.
The amount of the loss is measured as the difference between the asset's
carrying amount and the present value of estimated future cash flows
(excluding future credit losses that have not been incurred), discounted at
the financial asset's original effective interest rate. The asset's carrying
amount is reduced and the loss is recognised in the Statement of Profit and
Loss.
If, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the
impairment was recognised (such as an improvement in the debtor's credit
rating), the reversal of the previously recognised impairment loss is
recognised in the Statement of Profit and Loss.
The Group recognises an 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 effective interest rate. 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.
Derecognition
The Group derecognises a financial asset only when the contractual rights to
the cash flows from the asset expire, or when it transfers the financial asset
and substantially all the risks and rewards of ownership of the asset to
another entity.
On derecognition of a financial asset measured at amortised cost, the
difference between the asset's carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss. This is
the same treatment for a financial asset measured at FVTPL.
2.14. Trade receivables
Trade receivables are amounts due from third parties in the ordinary course of
business. If collection is expected in one year or less, they are classified
as current assets. If not, they are presented as non-current assets. Trade
receivables are recognised initially at fair value, and subsequently measured
at amortised cost using the effective interest method, less provision for
impairment.
2.15. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and are subject to
an insignificant risk of changes in value.
2.16. Reserves
Equity comprises the following:
· "Share capital" represents the nominal value of the Ordinary
shares;
· "Share Premium" represents consideration less nominal value of
issued shares and costs directly attributable to the issue of new shares;
· "Other reserves" represents the merger reserve, translation
reserve, revaluation reserve and share based payments reserve where;
o "Merger reserve" represents the difference between the fair value of an
acquisition and the nominal value of the shares allotted in a share exchange;
o "Revaluation reserve" represents the change in valuation of assets
measured at fair value;
o "Translation reserve" (foreign currency) represents the translation
differences arising from translating the financial statement items from
functional currency to presentational currency; and
o "Share based payments reserve" represents share options awarded by the
Group;
· "Retained earnings" represents retained profits and losses.
2.17. Share Capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
2.18. Share Based Payments
The Group operates a number of equity-settled, share-based schemes, under
which it receives services from employees or third party suppliers as
consideration for equity instruments (options and warrants) of the Group.
The Group may also issue warrants to share subscribers as part of a share
placing. The fair value of the equity-settled share based payments is
recognised as an expense in the income statement or charged to equity
depending on the nature of the service provided or instrument issued. The
total amount to be expensed or charged is determined by reference to the fair
value of the options granted:
· including any market performance conditions;
· excluding the impact of any service and non-market performance
vesting conditions (for example, profitability or sales growth targets, or
remaining an employee of the entity over a specified time period); and
· including the impact of any non-vesting conditions (for example,
the requirement for employees to save).
In the case of warrants the amount charged to the share premium account is
determined by reference to the fair value of the services received if
available. If the fair value of the services received is not determinable, the
warrants are valued by reference to the fair value of the warrants granted as
previously described.
Non-market vesting conditions are included in assumptions about the number of
options or warrants that are expected to vest. The total expense or charge
is recognised over the vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied. At the end of each
reporting period, the entity revises its estimates of the number of options
that are expected to vest based on the non-market vesting conditions. It
recognises the impact of the revision to original estimates, if any, in the
income statement or equity as appropriate, with a corresponding adjustment to
a separate reserve in equity.
When the options are exercised, the Company issues new shares. The proceeds
received, net of any directly attributable transaction costs, are credited to
share capital (nominal value) and share premium.
2.19. Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less. If not, they are presented as non-current liabilities.
Trade payables are recognised initially at fair value, and subsequently
measured at amortised cost using the effective interest method.
2.20. Provisions
The Group provides for the costs of restoring a site where a legal or
constructive obligation exists. The estimated future costs for known
restoration requirements are determined on a site-by-site basis and are
calculated based on the present value of estimated future costs. The Group
also provides for minimum lease payments on land where they have leased and
are obligated per agreements. The estimated cost of these leases over the
shorter of the life of the mine or the lease terms is calculated at present
value.
The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the end of the reporting period,
taking into account the risks and uncertainties surrounding the obligation.
When a provision is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value of those cash
flows (where the effect of the time value of money is material). The increase
in provisions due to the passage of time is included in the Consolidated
Statement of Profit or Loss and Comprehensive Income. Any increase in
provision due to reclamation obligations is capitalised as part of the mine
asset and subsequently depreciated. This is through depletion or impairment if
the provision is larger than the carrying value of the mine.
2.21. Convertible Loan Notes
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual agreement.
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Group are recognised as the proceeds are received, net of direct
issue costs.
Where warrants are granted in conjunction with other equity instruments, which
themselves meet the definition of equity, they are recorded at their fair
value, which is measured using an appropriate valuation model. Warrants which
do not meet the definition of equity are classified as derivative financial
instruments.
The component parts of compound instruments, such as Convertible Loan Notes,
issued by the Group are classified separately as financial liabilities and
equity in accordance with the substance of the contractual arrangement.
If the conversion feature of a Convertible Loan Notes issued does not meet the
definition of an equity instrument, that portion is classified as an embedded
derivative and measured accordingly. The debt component of the instrument is
determined by deducting the fair value of the conversion option at inception
from the fair value of consideration received for the instrument as a whole.
The debt component amount is recorded as a financial liability on an amortised
cost basis using the effective interest rate method until extinguished upon
conversion or at the instrument's maturity date.
Where debt instruments issued by the Group are repurchased for cancellation,
the financial liability is derecognised at the point at which the cash
consideration is settled. Upon derecognition, the difference between the
liability's carrying amount that has been cancelled and the consideration paid
is recognised as a gain in the Statement of Profit and Loss, net of any direct
transaction costs.
In December 2021 and February 2022 the Group raised $6m and $6m respectively
from the placement of two Convertible Loan Notes. They were both issued at par
and carry a coupon of 15% and 12% payable quarterly in arrears. The
Convertible Loan Notes are convertible into fully paid Ordinary Shares with
the initial conversion prices set at £0.28 and £0.40 per ordinary share. The
number of Ordinary shares at the year end that could be issued if all the
Convertible Loan Notes were converted is 33,325,929 (assuming that the
exchange rate at the year-end is $1.235/£1). Unless previously converted,
redeemed or purchased and cancelled, the Convertible Loan Notes will be
redeemed at par on 13 December 2023 and 28 February 2024 respectively. During
the year, the Group negotiated a change in repayment date for the second
Convertible Loan forward to 30 June 2023.
The conversion feature of the Convertible Loan Notes is classified as an
embedded derivative as the number of shares issued to settle the liability is
not fixed due to the variable nature of the US$ and £ exchange rate.
Therefore, the Convertible Loan Note does not meet the 'fixed for fixed'
criteria outlined in IAS 32 for recognition as an equity instrument. It has
therefore been measured at fair value through profit and loss. The amount
recognised at inception in respect of the host debt contract was determined by
deducting the fair value of the conversion option at inception (the embedded
derivative) from the fair value of the consideration received for the
Convertible Loan Notes. The debt component is then recognised at amortised
cost, using the effective interest method, until extinguished upon conversion
or maturity. The effective interest rate applicable to the debt component is
15% and 12% respectively.
Embedded derivatives
Derivatives embedded in financial instruments or other host contracts that are
not financial assets are treated as separate derivatives when their risks and
characteristics are not closely related to those of the host contracts and the
host contracts are not measured at FVTPL. Derivatives embedded in financial
instruments or other host contracts that are financial assets are not
separated; instead, the entire contract is accounted for either at amortised
cost of fair value as appropriate.
An embedded derivative is presented as current due to the remaining maturity
of the compound instrument to which the embedded derivative relates is less
than 12 months and is expected to be realised or settled within 12 months.
The table below analyses the derivatives, by valuation method. The different
levels are defined as follows:
Level 1 Level 2 Level 3 Total
Financials instruments by valuation method $ $ $ $
Fair value at 31 March 2022 - 9,436,021 2,839,817 12,275,838
Repayments - (750,000) - (750,000)
Interest - 1,766,362 - 1,766,362
Foreign exchange movement - - (168,691) (168,691)
Revaluation - 1,167,351 (1,167,351) -
Fair value at 31 March 2023 - 11,619,734 1,503,775 13,123,509
The embedded derivative component of the Convertible Loan Note is categorised
within Level 3 of the fair value hierarchy, as the derivatives themselves are
not traded on an active market and their fair values are determined using a
valuation technique that uses one key input that is not based on observable
market data, being share price volatility.
Borrowing costs
Borrowing costs directly relating to the construction or production of a
qualifying capital project under construction are capitalised and added to the
project cost during construction until such time as the assets are
substantially ready for their intended use, i.e. when they are capable of
commercial production. The amount of borrowing costs eligible to be
capitalized is reduced by an amount equivalent to any interest income received
on temporary reinvestment of those borrowings.
Borrowings
Interest-bearing loans are recognised initially at fair value less
attributable transaction costs. All borrowings are subsequently stated at
amortised cost with the difference between initial net proceeds and redemption
value recognised in the Statement of Profit or Loss over the period to
redemption on an effective interest basis.
Debt component $ Derivative component $
Total $
As at 1 April 2022 9,436,021 2,839,817 12,275,838
Repayments (750,000) - (750,000)
Foreign exchange losses - (168,691) (168,691)
Fair value gains 1,167,351 (1,167,351) -
Interest charged 1,766,362 - 1,766,362
As at 31 March 2023 11,619,734 1,503,775 13,123,509
2.22. Taxation
Tax is recognised in the Statement of Profit or Loss, except to the extent
that it relates to items recognised in other comprehensive income or directly
in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity, respectively.
No current tax is yet payable in view of the losses to date.
Deferred tax is recognised for using the liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the consolidated financial statements and the
corresponding tax bases used in the computation of taxable profit. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets (including those
arising from investments in subsidiaries), are recognised to
the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised.
Deferred income tax assets are recognised on deductible temporary differences
arising from investments in subsidiaries only to the extent that it is
probable the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary difference can
be used.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred tax assets and liabilities relate to income taxes levied
by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances on a net
basis.
Deferred tax is calculated at the tax rates (and laws) that have been enacted
or substantively enacted by the statement of financial position date and are
expected to apply to the period when the deferred tax asset is realised or
the deferred tax liability is settled.
Deferred tax assets and liabilities are not discounted.
2.23. Leases and right of use assets
The Group leases certain property, plant and equipment. Leases of plant and
equipment where the Group has substantially all the risks and rewards of
ownership are classified as finance leases under IFRS 16. Finance leases are
capitalised on the lease's commencement at the lower of the fair value of the
leased assets and the present value of the minimum lease payments. Other
leases are either under the de-minimis in value or cover a period of less than
12 months and are therefore exempt from IFRS 16.
The lease liability is initially measured at the present value of the lease
payments that are not paid. Lease payments generally include fixed payments
less any lease incentives receivable. The lease liability is discounted using
the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group's incremental borrowing rate. The Group estimates the
incremental borrowing rate based on the lease term, collateral assumptions,
and the economic environment in which the lease is denominated. The lease
liability is subsequently measured at amortised cost using the effective
interest method. The lease liability is remeasured when the expected lease
payments change as a result of new assessments of contractual options and
residual value guarantees.
The right-of-use asset is recognised at the present value of the liability at
the commencement date of the lease less any incentives received from the
lessor. Added to the right-of-use asset are initial direct costs, payments
made before the commencement date, and estimated restoration costs. The
right-of-use asset is subsequently depreciated on a straight-line basis from
the commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
Each lease payment is allocated between the liability and finance charges. The
corresponding rental obligations, net of finance charges, are included in
lease liabilities, split between current and non-current depending on when the
liabilities are due. The interest element of the finance cost is charged to
the Statement of Profit and Loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability
for each period. Assets obtained under finance leases are depreciated over
their useful lives. The lease liabilities are shown in note 18 to these
financial statements.
2.24. Earnings per share
The calculation of the total basic earnings per share is based on the loss
attributable to equity holders of the parent company and on the weighted
average number of ordinary shares in issue during the year.
In accordance with IAS 33, basic and diluted earnings per share for the year
ended 31 March 2023 are identical for the Group as the effect of the exercise
of share options would be to decrease the earnings per share due to the Group
making a loss.
2.25. Deferred consideration
The Deferred Consideration consists of ongoing royalty payments over the life
of the mine which the Directors estimated to be 10 years. It is recognised at
the present value over the life of the mine considering the tonnage of clean
coal predicted to be produced and sold. This is split between current and
non-current liabilities.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk,
credit risk and liquidity risk. The Group's overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance.
Risk management is carried out by the management team under policies approved
by the Board of Directors.
a) Market Risk
The Group is exposed to market risk, primarily relating to interest rate,
foreign exchange and commodity prices. The Group has not sensitised the
figures for fluctuations in interest rates, foreign exchange or commodity
prices as the Directors are of the opinion that these fluctuations are
immaterial and would not have a significant impact on the Financial Statements
at the present time. The Directors will continue to assess the effect of
movements in market risks on the Group's financial operations and initiate
suitable risk management measures where necessary.
b) Credit Risk
Credit risk arises from cash and cash equivalents as well as exposure to
customers including outstanding receivables. To manage this risk, the Group
periodically assesses the financial reliability of customers and
counterparties. The Group regularly reviews ageing of receivables to ensure
there is no risk of default.
No credit limits were exceeded during the year, and management does not expect
any losses from non-performance by these counterparties.
c) Liquidity Risk
The Group's continued future operations depend on the ability to raise
sufficient working capital through the issue of equity share capital or debt.
The Directors are reasonably confident that adequate funding will be
forthcoming with which to finance operations. Controls over expenditure are
carefully managed.
3.2. Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern, in order to enable the Group to
continue its activities, and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
issue of shares or sell assets to reduce debts.
The Group defines capital based on the total equity of the Company. The Group
monitors its level of cash resources available against future planned
operational activities and the Company may issue new shares in order to raise
further funds from time to time.
The gearing ratio at 31 March 2023 is as follows:
31 March 2023
$
Total borrowings (Notes 24 & 25) 22,188,263
Less: Cash and cash equivalents (Note 20) (471,651)
Net debt 21,716,612
Total equity 22,674,442
Gearing ratio 96%
4. Critical accounting judgements and estimates
The preparation of the Financial Statements in conformity with UK-adopted IAS
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the Financial Statements and the reported amount of
expenses during the year. Actual results may vary from the estimates used to
produce these Financial Statements.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Significant items subject to such estimates and assumptions include, but are
not limited to:
a) Valuation of provision for reclamation costs (see note 26)
The Group's provision for reclamation costs has a carrying value at 31 March
2023 of $4,147,212 (2022: $1,949,888) and relates to the Group's reclamation
obligations. The provision for reclamation costs is calculated by discounting
the future cash outflows in respect of reclamation work based on the estimated
future cost provided by independent experts (Heritage Technical Associates,
Inc). The reclamation costs are expected to be incurred in 10 years (at the
end of the mine life per management's forecasted mine plan). The cash outflows
have been discounted at 15% and an inflation rate of 8.3% has been used. The
discounted provision for reclamation costs is broadly equivalent to the
reclamation bond assessments made by the WVDEP. The restoration provision is
a commitment to restore the site to a safe and secure environment. The
provisions are reviewed annually and res-estimated if there are significant
changes in underlying assumptions.
b) Deferred Consideration (See note 23)
The Deferred Consideration was initially comprised of $4,485,428, payable to
Ben's Creek Holding LLC. This comprised the re-imbursement of reclamation
bonds of $1,412,637 and ongoing royalty payments of $3,072,791 over the life
of the mine based on initial assessment pre-production. In May 2021, $130,000
was paid to Ben's Creek Holding LLC (the seller) in respect of the
re-imbursement of reclamation bonds with the outstanding balance having been
paid from the listing proceeds. The ongoing royalties payable, has been
accepted at a rate of $2 per tonne of clean coal mined and sold, over the
expected life of the mines discounted at 15% in calculating the deferred
consideration. The deferred consideration has been recalculated due
management's production and valuation based on forecasted production over 10
years.
The Group completed the re-imbursement of the reclamation bonds earlier than
planned and on 23 July 2021, it paid $1,258,520 to the seller in full and
final settlement. MBU Capital Group Limited provided a bridging loan of
GBP 918,164 ($1,258,520) to the Group to fund the re-imbursement. The bridging
loan accrued interest at 1% per month. This bridging loan was paid from the
proceeds following the Group's IPO.
c) Share based payments (See note 33)
The Group has made awards of options and warrants over its unissued share
capital to certain Directors and employees as part of their remuneration
package which have market conditions attached in relation to the performance
of the Company's share price. The valuation of these options and warrants
involves making a number of critical estimates relating to price volatility,
future dividend yields, expected life of the options and forfeiture rates.
These assumptions have been described in more detail in note 32 to these
financial statements.
d) Embedded derivative (See note 25)
Valuation of the embedded derivative within the Convertible Loan Notes
requires a number of estimates, the most significant of which is the estimated
equivalent bond yield applied to the debt component. The fair value
calculations and related sensitivities for the embedded derivative are
disclosed in note 24 to these financial statements.
In December 2021 and February 2022, the Group raised $6m and $6m respectively
from the placement of two Convertible Loan Notes. They were both issued at par
and carry a coupon of 15% and 12% payable quarterly in arrears. The
Convertible Loan Notes are convertible into fully paid Ordinary Shares with
the initial conversion prices set at £0.28 and £0.40. The number of Ordinary
shares at the year-end that could be issued if all the Convertible Loan Notes
were converted is 33,325,929 (assuming that the exchange rate at the year-end
is $1.235/£1). Unless previously converted, redeemed, or purchased and
cancelled, the Convertible Loan Notes will be redeemed at par on 13 December
2023 and 28 February 2024 respectively. During the year, the Group negotiated
a change in repayment date for the second Convertible Loan forward to 30 June
2023 which was treated as a modification and subsequent revaluation of the
associated embedded derivative.
e) Impairment of Investment in subsidiaries (See note 35)
The Company's investment in its subsidiaries has a carrying value at 31 March
2023 of $26,684,119.
Management tests annually whether the investment in subsidiaries have future
economic value in accordance with the accounting policies. The investment is
subject to an annual impairment review by management. This calculates the net
present value of future cash flows of the subsidiary's operations over
managements estimated life of the mine which is 10 years. The review takes
into consideration changing coal prices, anticipated resources estimated by
experts (92m in situ), increases in production and sales volumes and cost of
production. The estimated future cash flows are discounted (15%) to their
present value at the Company's cost of capital in order to determine the
recoverable amount of the mine.
The Group currently has an intra group loan between Bens Creek Group Plc and
Ben's Creek Carbon WV LLC. The terms of the loan are over 5 years, with a
total facility of $20,000,000. Interest is accrued monthly at 6% which is
considered a market rate. As the interest rate is deemed market value the loan
has not been discounted over the term.
f) Minimum lease payments (See note 26)
The Group has a provision in place at a value of $2,734,218 in relation to
minimum lease payments. This is based on minimum lease payments for leases
with mining rights. The present value of the minimum lease payments has been
calculated based on the life of the mine or if shorter, the lease term. The
provision will be discounted over this period at 15%. During the year the
Group acquired a new lease for mining rights which have been discounted over
the estimated life of the mine of 10 years.
g) Valuation of coal reserves (See note 17)
The Group has coal reserves of $24,514,572 as at 31 March 2023.
Management tests annually whether the asset should be impaired through
calculating the net present value of future cash flows of the subsidiary's
operations over managements estimated life of the mine which is 10 years. The
review takes into consideration changing coal prices, anticipated resources
confirmed by experts (92m in situ), increases in production and sales volumes
and cost of production. The estimated future cash flows are discounted (15%)
to their present value at the Company's cost of capital in order to determine
the recoverable amount of the mine.
5. Dividends
No dividend has been declared or paid by the Company during the period ended
31 March 2023 (31 March 2022: $Nil).
6. Segment information
Management has determined the operating segments based on reports reviewed by
the Board of Directors that are used to make strategic decisions. During the
year the Group had interests in two geographical segments, the United Kingdom
and the United States of America ("USA"). Activities in the UK are mainly
administrative in nature whilst the activities in the USA relate to coal
production and sale of coal. The reportable operating segments derive their
revenue from the sale of prepared coal to industrial and retail customers. All
of the revenue and costs of Ben's Creek Carbon are US based, whereas all the
costs of Ben's Creek Group Plc are from the UK.
USA UK Total
2022 $ $ $
Revenue 5,411,816 - 5,411,816
Cost of sales (3,878,565) - (3,878,565)
Administrative & other expense (3,600,617) (5,392,776) (8,993,393)
Operating loss (2,067,366) (5,392,776) (7,460,142)
Additions to plant and equipment 12,325,171 565 12,325,736
Reportable segment assets 64,179,689 3,287,519 67,467,208
Reportable segment liabilities 23,156,255 12,566,668 35,772,923
USA UK Total
2023 $ $ $
Revenue 42,208,848 - 42,208,848
Cost of sales (45,753,734) - (45,753,734)
Administrative & other expense (11,250,771) (6,527,637) (17,778,408)
Operating loss (14,795,657) (6,527,637) (21,323,294)
Reportable segment assets 79,869,462 273,641 80,143,103
Reportable segment liabilities 43,144,268 14,547,662 57,691,930
7. Revenue
31 March 2022 31 March 2022
$ $
Coal sales 42,208,848 5,411,816
42,208,848 5,411,816
Revenue was derived from one external customer. This revenue was all generated
in the USA.
8. Cost of sales
31 March 2023 31 March 2022
$ $
Production costs 31,036,252 3,051,937
Transportation costs 3,145,205 -
Coal & sale taxes 2,335,728 -
Royalty expense (See note 4) 3,909,702 826,628
Depreciation 4,885,932 154,008
Coal Depletion 440,915 744,513
45,753,734 4,777,086
Production costs include staff costs directly attributable to production
including subcontracted Underground and High Wall Mining costs.
9. Administrative expenses
31 March 2023 31 March 2022
$ $
Expenses by nature:
Operational and remediation costs 1,794,153 -
Staff costs 3,651,828 1,928,301
Legal, professional and brokerage 1,118,565 1,420,034
Travel and subsistence 353,958 139,920
Insurance 2,318,757 564,551
AIM related costs 66,824 1,299,484
Sale of scrap - (133,982)
Loss on disposal 115,333 -
Foreign exchange 32,455 (125,505)
Other administrative costs 493,531 906,918
Total administrative expenses 9,945,404 5,999,721
During the year the Group obtained the following services from the Company's
auditors and its subsidiaries:
31 March 2023 31 March 2022
$ $
Fees payable to the Group's auditor and its associates for the audit of the 172,913 152,456
Company and Consolidated Financial Statements
Fees payable to the Company's auditor for other services:
- Reporting accountant services - 104,494
- Interim financial statements review 30,877 3,000
203,790 259,950
10. Employee benefits expense
31 March 2023 31 March 2022 31 March 2023 Company 31 March 2022 Company
Group Group
Staff costs $ $ $ $
Salaries and wages 5,146,900 1,139,642 1,136,204 139,934
Bonuses 1,790,211 624,079 1,460,247 624,079
Social security contributions and similar taxes 440,061 89,449 94,735 13,568
Other benefits 409,072 75,131 - -
7,786,244 1,928,301 2,691,186 777,581
Direct mining salaries are capitalised as part of inventory costs in so far as
they related to the year-end inventory balance held. Net salaries not related
to this can be seen in note 9.
Share based payment expenses totalled $2,397,585 (2022: $2,095,151).
Average number of employees by function 31 March 2023 31 March 2022 Group Numbers 31 March 2023 Company Numbers 31 March 2022 Company Numbers
Group Numbers
Operations 31 10 - -
Administration 8 2 2 -
Directors - - 4 4
39 12 6 4
Details of the directors' emoluments are set out in note 30 to these financial
statements.
11. Finance costs
31 March 2023 31 March 2022
$ $
Interest expense 2,774,704 682,130
Unwinding of discount of reclamation liability 247,441 315,319
Unwinding of discount of minimum lease payments 113,195 -
Unwinding of discount of deferred consideration 299,192 -
Total finance costs 3,435,252 997,449
12. Taxation
31 March 2023 31 March 2022
Tax recognised in profit or loss $ $
Current tax - -
Deferred tax (note 13) 548,835 10,286,392
Total tax charge in the Statement of Profit and Loss - 10,286,392
The tax on the Group's profit/(loss) before taxation differs from the
theoretical amount that would arise using the weighted average tax rate
applicable to the profits/(losses) of the consolidated entities as follows:
31 March 2023 31 March 2022
$ $
(Loss)/profit on ordinary activities before tax (24,715,586) 25,285,795
Tax on profit on ordinary activities at combined CT rate of 29.3% (2021: - 7,408,738
27.5%)
Effects of:
Disallowed Expenditure 3,289,011 767,687
Tax losses not recognised (3,289,011) 726,846
Brought forward deferred tax asset on US losses not previously recognised - (143,017)
Other timing differences - (538,169)
Tax charge - 8,222,085
The overseas tax rate used is a combination of 21% US federal tax rate and
6.5% West Virginia state tax rate, to give an applicable rate of 27.5%. The
rate used for the UK tax is 19%, which with the overseas tax rate gives a
blended rate of 29.3%.
The Group has tax losses of approximately $15,970,995 available to carry
forward against future taxable profits. No deferred tax asset has been
recognised in respect of Group tax losses due to the uncertainty on timing in
which they may be offset against future expected profits.
13. Deferred tax
Group
Deferred tax liability Deferred tax asset
$ $
As at 1 April 2022 10,286,392 576,151
Movement (548,835) -
Total deferred tax 9,737,557 576,151
Current - -
Non-current 9,737,557 576,151
A deferred tax liability of $8,798,236 arose in the year ended 31 March 2022
as part of the acquisition of Ben's Creek Operations LLC and Ben's Creek Land
LLC. Additionally, a deferred tax liability of $1,488,151 was recognised on
the increase in fair value of the plant in relation to Other Comprehensive
Income. The total deferred tax liability amounted to $10,286,392. The charge
in the profit and loss of $8,222,085 consisted of the liability from the
acquisition of $8,798,236 less a deferred tax asset of $576,151 recognised on
the basis of future profits. Additionally, a deferred tax liability of
$1,488,151 was recognised on the increase in fair value of the plant for the
prior year. The total deferred tax liability amounted to $10,286,392.
The movement in the year ended 31 March 2023 relates to the depletion and
depreciation on the plant and reserves recognised at fair value upon
acquisition.
14. Earnings per share
The calculation of the total basic loss per share of 6.563 cents is based on
the profit/loss attributable to equity holders of the Company of ($24,166,751)
(2022: $17,063,710) and on the weighted average number of ordinary shares of
368,214,862 (2022: 276,774,515) in issue during the period. Diluted loss per
share is 6.563 (2022: 5.922 cents) based on a weighted average of 388,838,846
shares (2022: 288,162,165 shares).
Details of share options that could potentially dilute earnings per share in
future periods are set out in note 33 to these financial statements.
15. Property, Plant and Equipment
Group
Vehicles Equipment Plant Underground equipment Leasehold Improvements Construction in progress Total
$ $ $ $ $ $ $
Cost or valuation
As at 1 April 2021 - - - - - - -
Acquired from business combination - - - - 13,692,000
- 13,692,000
Additions during the year 114,597 420,396 - - 13,405,108
544,379 12,325,736
Transfers - - 18,588,524 3,787,000 -
- (22,375,524)
Gain on revaluation - - 5,411,476 - 5,411,476
- -
As at 31 March 2022 124,397 531,821 24,000,000 3,787,000 544,379 3,642,212 32,629,809
As at 1 April 2022 124,397 531,821 24,000,000 3,787,000 544,379 3,642,212 32,629,809
Additions during the year 7,500 1,304,649 394,635 891,320 14,426,719 17,024,823
Transfers - 14,126,947 - 493,194 - (14,620,142) -
Assets held for sale - - - - - (2,898,145) (2,898,145)
Acquired through business combinations - - - - 650,000 - 650,000
Change in estimate (Note 26) - - 1,949,883 - - - 1,949,883
Disposals - (420,000) - - - - (420,000)
As at 31 March 2023 131,897 15,543,418 25,949,883 4,674,829 2,085,699 550,644 48,936,370
Depreciation
As at 1 April 2021 (653) (1,169) - - - - (1,822)
Depreciation during the year (4,367) (14,454) - - (36,967)
(18,146) -
As at 31 March 2022 (5,020) (15,623) - - (38,789)
(18,146) -
As at 1 April 2022 (5,020) (15,623) - - (38,789)
(18,146) -
Depreciation during the year (25,629) (1,428,286) (2,400,000) (682,426) (242,574) - (4,778,915)
Disposals - 11,667 - - - - 11,667
As at 31 March 2023 (30,649) (1,432,242) (2,400,000) (682,426) (260,720) - (4,806,037)
Net book value as at 31 March 2022 119,377 516,198 24,000,000 3,787,000 526,233 3,642,212 32,591,020
Net book value as at 31 March 2023 101,248 14,111,176 23,549,883 3,992,403 1,824,979 550,644 44,130,333
Assets held for sale relate to a Highwall Miner ($2,898,145).
Assets acquired through business combinations relate to the purchase of Bens
Creek Rail Holdings LLC and its associated assets. This is the rail line on
the Glen Alum site which link to the Norfolk Southern Railway.
The Group has not had an expert value the Plant in the year. Management have
assessed the value and are confident there is no material change.
Company
Office equipment Total
$ $
Cost or valuation
As at 1 April 2022 565 565
Acquired during period 2,986 2,986
As at 31 March 2023 3,551 3,551
Depreciation
As at 1 April 2022 (26) (26)
Depreciation charge during the period (341) (341)
As at 31 March 2023 (367) (367)
Net book value as at 31 March 2023 3,184 3,184
Net book value as at 31 March 2022 539 539
16. Investments
31 March 2023 31 March 2022
$ $
Investment 695,120 -
Investments total 695,120 -
During the year the Company released its reclamation bonding through a Surety.
As part of the Surety requirements $695,120 is held in an investment account
until the reclamation obligations have been fulfilled.
17. Coal reserves and reclamation assets
Group Coal Reserves
$
Cost or valuation 25,700,000
As at April 2021 25,700,000
Additions during the year -
As at 31 March 2022 25,700,000
As at 1 April 2022 25,700,000
As at 31 March 2023 25,700,000
Depletion
As at 1 April 2021 -
Additions during the year (744,513)
As at 31 March 2022 (744,513)
As at 1 April 2022 (744,513)
Charge for the period (440,915)
As at 31 March 2023 (1,185,428)
Net book value
As at 1 April 2022 24,955,487
As at 31 March 2023 24,514,572
Movement in the year relates to the depletion of coal reserves from coal mined
underground during the year.
The reclamation bond is based on a number of mining permits which is held with
the West Virginia Department of Environmental Protection and is interest
bearing.
The group has provided certificates of deposit as collateral to secure mine
reclamation obligations as required by the West Virginia Department of
Environmental Protection. The certificates were released during the year
through a Surety. This enabled the Company to realise the cash element of the
Deposits.
Group Company
31 March 2023 31 March 2022 31 March 2023 31 March 2022
$ $ $ $
Certificates of deposit - 1,628,605 - -
18. Leases
The following lease liabilities arose in respect of the recognition of right
of use assets with a net book value of $177,240 (2022: $63,367). The Group
holds two leases that it accounts for under IFRS 16.
Office Housing Vehicle Total
$ $ $ $
Balance at 1 April 2021 92,073 76,727 67,964 237,214
Disposal right of use assets - - (59,804) (59,804)
Principal reduction (60,000) (50,000) (12,934) (122,934)
Interest 2,490 2,077 4,324 8,891
Balance as 31 March 2022 34,563 28,804 - 63,367
Balance at 1 April 2022 34,563 28,804 - 63,367
Disposal right of use assets - - - -
Additions 121,172 100,977 - 222,149
Principal reduction (63,000) (52,500) - (115,500)
Interest 3,941 3,283 - 7,224
Balance at 31 March 2023 96,676 80,564 - 177,240
Less: Current portion (60,385) (50,321) - (110,706)
Non-current portion 36,291 30,243 - 66,534
The leases are split between current and non-current portions. The cash flows
of the leases are as follows:
31 March 2023 31 March 2022
Current $ $
Interest charge 4,794 801
Principal reduction 115,500 64,167
Depreciation 107,989 44,077
Non-current
Interest charge 841 -
Principal reduction 67,375 -
Depreciation 64,793 -
The right of use assets are as follows:
Office lease Apartment lease Vehicle lease Total
$ $ $ $
Balance at 1 April 2021 91,360 76,133 77,689 245,182
Disposal - - (68,156) (68,156)
Additions - - - -
Depreciation (57,701) (48,084) (9,533) (115,318)
Balance at 31 March 2022 33,659 28,049 - 61,708
Balance at 1 April 2022 33,659 28,049 - 61,708
Disposal - - - -
Additions 121,172 100,977 - 222,149
Depreciation (58,903) (49,086) - (107,989)
Balance at 31 March 2023 95,928 79,940 - 175,868
During the period, the Group leased an office for $121,853 recognised in
administrative expenses. The operating lease was a short-term lease and
therefore not recognised as a right of use asset.
19. Trade and other receivables
Group Company
31 March 2023 31 March 2022 31 March 2023 31 March 2022
Current $ $ $ $
Trade receivables 475,000 - - -
Prepayments 352,103 298,096 131,090 146,517
Other receivables 703,410 272,232 87,470 168,948
1,530,513 570,328 218,560 315,465
Group Company
31 March 2023 31 March 2022 31 March 2023 31 March 2022
Non-current $ $ $ $
Amount due from Ben's Creek Carbon LLC -
- 28,610,804 16,026,796
- - 28,610,804 16,026,796
Amount due from Ben's Creek Carbon LLC is funding provided by the parent
company to Bens Creek Carbon LLC for working capital and other projects.
Interest is accruing at 6% per annum and the loan is repayable immediately
following the first business day of the fifth anniversary of Admission, or a
later day as the parties may agree.
20. Cash and cash equivalents
Group Company
31 March 2023 31 March 2022 31 March 2023 31 March 2022
$ $ $ $
Cash at bank and on hand 471,651 5,555,296 51,897 2,971,515
471,651 5,555,296 51,897 2,971,515
The carrying amounts of the majority of the Group's cash and cash equivalents
are denominated in USD.
21. Inventory
Group
As at 31 March 2023 As at 31 March 2022
$ $
Coal inventory 5,150,750 1,528,613
22. Trade and other payables
Group Company
31 March 2023 31 March 2022 31 March 2023 31 March 2022
Current $ $ $ $
Trade payables 1,442,491 2,367,290 77,452 91,111
Tax liabilities 447,507 - - -
Other payables 5,924,025 30,150 - -
Payroll liabilities 402,725 27,971 95,052 24,123
Accruals 1,461,352 1,025,935 1,251,648 176,029
9,678,100 3,451,346 1,424,153 291,263
23. Deferred consideration
Total $
As at 1 April 2022 3,173,698
Payments in the year (552,556)
Unwinding of discount 299,192
Change in estimate 4,859,839
As at 31 March 2023 7,780,173
31 March 2023 Group 31 March 2022
Group
$ $
Current liabilities
Deferred consideration 1,254,206 816,000
1,254,206 816,000
Non-current liabilities
Deferred consideration 6,525,967 2,357,698
6,525,967 2,357,698
The deferred consideration relates to the purchase consideration for the
acquisition of Ben's Creek Operations LLC and Ben's Creek Land LLC. For
further information, see notes 4 and 29 of the prior year financial
statements.
Increase in deferred consideration relates to the increase in the rate of
extraction predicted over the next 10 years based on management's estimate and
impairment reviews.
24. Borrowings
MBU Capital Group
$
As at 1 April 2021 1,646,768
Drawdowns 1,439,252
Interest charge 194,807
Payments -
As at 31 March 2022 3,280,827
As at 1 April 2022 3,280,827
Drawdown 5,254,410
Interest charge 768,142
Repayment (4,086,995)
Conversion (5,216,384)
As at 31 March 2023 -
The Loan provided by MBU Capital Group Limited was a convertible facility up
to £10,000,000 (GBP) draw down. The loan commenced on 1 November 2020 and is
repayable in full by 30(th) June 2023 or such earlier date as may be agreed
between lender and borrower. The interest rate is 7% per annum, accruing
monthly. On 3 March 2023 MBU exercised their conversion of the loan at 15p
& 30p respectively. For further details of this transaction please see the
related party note disclosed in note 34 of these financial statements.
31 March 2023
$
Equipment financing
Principal 13,164,632
Interest 621,682
Repayments (3,217,785)
As at 31 March 2023 10,568,529
Current 3,462,778
Non-current 7,105,751
The primary reason for borrowings in the year were for equipment financing.
During the period the Group moved away from a contractor model to an equipment
owned model for excavation, therefore financing was undertaken to fund this
change.
25. Convertible Loan Notes
Debt component $ Derivative component $
Total $
As at 1 April 2022 9,436,021 2,839,817 12,275,838
Repayments (750,000) - (750,000)
Foreign exchange losses - (168,691) (168,691)
Fair value gains 1,167,351 (1,167,351) -
Interest charged 1,766,362 - 1,766,362
As at 31 March 2023 11,619,734 1,503,775 13,123,509
31 March 2023 Group 31 March 2022
Group
$ $
Current liabilities
Convertible loan 11,619,734 6,397,769
Embedded derivative 1,503,775 2,839,817
13,123,509 9,237,586
Non-current liabilities
Convertible loan - 3,037,819
Embedded derivative - -
- 3,037,819
The fair value of the embedded derivative was determined using the Black
Scholes valuation model. The parameters used are detailed below:
Loan
Granted on: 17 Feb 2022
Life (years) 24 months
Exercise price (cents per share) 40 pence
Risk free rate 5.13%
Expected volatility 25.2%
Fair value per share £0.00004
In December 2021 and February 2022, the Group raised $6m and $6m from the
placement of two Convertible Loan Notes. They were both issued at par and
carry a coupon of 15% and 12% respectively payable quarterly in arrears. The
Convertible Loan Notes are convertible into fully paid Ordinary Shares with
the initial conversion prices set at £0.28 and £0.40. The number of Ordinary
shares at the year-end that could be issued if all the Convertible Loan Notes
were converted is 33,325,929 (assuming that the exchange rate at the year-end
is $1.235/£1). Unless previously converted, redeemed, or purchased and
cancelled, the Convertible Loan Notes will be redeemed at par on 13 December
2023 and 28 February 2024 respectively. During the year, the Group negotiated
a change in repayment date for the second Convertible Loan forward to 30 June
2023.Volatility is calculated by reviewing historic share price movements of
comparable companies to the Group being newly listed, as well as historic
foreign exchange volatility between USD and GBP (5%). The derivative is to be
revalued at the year-end based on the year-end foreign exchange rate.
A prior year adjustment has been made in relation to the Convertible Loan
Notes. The adjustment relates to the classification of current/non-current
liabilities. This is purely a reclassification of liabilities and has no
effect on the net assets as at 31 March 2022. For more information, please see
note 37.
After the year-end the Convertible Loan Note raised in February 2022 was fully
repaid. Please see note 38 for further information.
26. Provisions
Reclamation provision Minimum lease payments
Total
$ $ $
As at 1 April 2022 1,949,888 1,242,000 3,191,888
Additions - 302,146 302,147
Change in estimate 1,949,883 273,434 2,223,322
Unwinding of discount 247,441 113,195 360,636
As at 31 March 2023 4,147,212 1,930,775 6,077,987
Current provisions - 510,000 510,000
Non-current provisions 4,147,212 1,420,775 5,567,987
The Group's provision for reclamation costs has a carrying value at 31 March
2023: $4,147,212 (31 March 2022 of $1,949,888) and relates to the Group's
reclamation obligations. The provision for reclamation costs is calculated by
discounting the expected future cash outflows in respect of reclamation work
based on the estimated future cost provided by independent experts (Heritage
Technical Associates, Inc), being $7,816,773. The reclamation costs are
expected to be incurred in 10 years (at the end of the mine life per the
management's mine plan). The cash outflows have been discounted at 15% and
inflation assumed to be 8.6%. The reclamation provision is a commitment to
restore the site to a safe and secure environment. The provisions are reviewed
annually.
The Group's provision for minimum lease payments amount to $1,930,775 relate
to leases held with Pocahontas, MGC, Carbon Fuels and Star Ridge. In the
agreements with each respectively there is a minimum monthly payment which has
been calculated based on the life of the mine or if shorter the lease
agreement. The lease payments have been discounted to present value and will
be reviewed annually. The royalty agreements contain further clauses in which
further royalties are payable when mining on the land. However, as there is no
accurate method to estimate the level of production, no provision has been
included.
27. Reconciliation of debt
Group As at 1 April 2021 Cash transactions Non-cash transactions As at 31 March 2022
2022 $ $ $ $
Borrowings (note 23) 1,701,203 1,384,798 194,826 3,280,827
Convertible loan notes (note 24) - 12,000,000 275,405 12,275,405
Lease liability (note 17) 237,214 (122,934) (50,913) 63,367
As at 1 April 2022 Cash transactions Non-cash transactions As at 31 March 2023
2023 $ $ $ $
Borrowings (note 24) 3,280,827 (2,050,370) 9,338,072 10,568,529
Convertible loan notes (note 25) 12,275,838 (750,000) 1,597,671 13,123,509
Lease liability (note 18) 63,367 (115,500) 229,373 177,240
Company As at 1 April 2021 Cash transactions Non-cash transactions As at 31 March 2022
2022 $ $ $ $
Convertible loan notes (note 24) - 12,000,000 275,405 12,275,405
As at 1 April 2022 Cash transactions Non-cash transactions As at 31 March 2023
2023 $ $ $ $
Convertible loan notes (note 25) 12,275,838 (750,000) 1,597,671 13,123,509
28. Financial instruments by category
Consolidated 31 March 2023
At amortised cost FVTPL Total
Financial Assets $ $ $
Trade and other receivables (excluding prepayments) 1,178,410 - 1,178,410
Cash and cash equivalents 471,651 - 471,651
1,650,061 - 1,650,061
At amortised cost FVTPL Total
Financial Liabilities $ $ $
Borrowings 22,188,263 1,503,775 23,692,038
Trade and other payables 9,678,100 - 9,678,100
Lease liability 110,706 - 110,706
31,977,069 1,503,775 33,480,844
Consolidated 31 March 2022
At amortised cost FVTPL Total
Financial Assets $ $ $
Trade and other receivables (excluding prepayments) 272,231 - 272,231
Cash and cash equivalents 5,555,296 - 5,555,296
5,827,527 - 5,827,527
At amortised cost FVTPL Total
Financial Liabilities $ $ $
Borrowings 12,716,415 2,839,817 15,556,232
Trade and other payables 2,425,411 - 2,425,411
Lease liability 63,367 - 63,367
15,205,193 2,839,817 18,045,010
The periods where the financial liabilities are payable are as follows:
31 March 2023
Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
$ $ $ $
Borrowings 15,082,512 7,105,751 - -
Trade and other payables 9,678,100 - - -
Leases 110,706 - - -
24,871,318 7,105,751 - -
31 March 2022
Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
$ $ $ $
Borrowings - 15,556,232 - -
Trade and other payables 2,425,411 - - -
Leases 63,367 - - -
2,488,778 15,556,232 - -
Company 31 March 2023
Loans & receivables FVTPL Total
Financial Assets $ $ $
Trade and other receivables (excluding prepayments) 87,470 - 87,470
Cash and cash equivalents 51,897 - 51,897
139,367 - 139,367
At amortised cost FVTPL Total
Financial Liabilities $ $ $
Borrowings 11,619,734 - 13,123,509
Trade and other payables 1,424,153 - 1,424,153
13,043,887 - 13,043,887
The periods where the financial liabilities are payable are as follows:
31 March 2023
Less than 1 year Between 1 and 2 years Between 2 and 5 years Over 5 years
$ $ $ $
Borrowings 11,619,734 - - -
Trade and other payables 1,424,153 - - -
13,043,887 - - -
29. Fair Value of Financial Assets and Liabilities Measured at Amortised
Costs
Financial assets and liabilities comprise the following:
· Trade and other receivables;
· Cash and cash equivalents; and
· Trade and other payables.
The fair values of these items equate to their carrying values as at the
reporting date.
30. Business combinations
On 22 December 2022, the Group acquired 26% of the membership interests in
Ben's Creek Rail Holding LLC ("BCRH"), Delaware United States of America,
which is registered and incorporated in Delaware, United States of America and
operates from its office in West Virginia, United States of America. On 31
March 2023, the Group acquired a further 26% of the membership interest. This
brought the Companies total shareholding to 52%, with a further option to
purchase the remaining consideration of 48%. The purchase was made by Bens
Creek Carbon LLC and therefore is not part of the investment value in Bens
Creek Group Plc. On 22 December 2022 BCRH was considered to be controlled by
the Group due to the Group's ability to obtain the rest of the shareholding.
The following table summarises the consideration paid for Ben's Creek Rail
Holding LLC and the values of the net assets assumed at the acquisition date.
Acquisition accounting has been completed using merger accounting, as the
transaction was between entities under common control, and is not within the
scope of IFRS 3 - Business Combinations:
2023
$
Recognised amounts of assets and liabilities acquired
Total assets 659,939
Total liabilities (659,452)
Total identifiable net assets 477
Total consideration paid so far is $348,000. As the Group has the option to
purchase the remaining 48%, the subsidiary is considered 100% controlled by
the Group.
The identifiable net assets of Ben's Creek Rail Holding LLC have been
consolidated into the results of the Group as at 31 March 2023. Liabilities
owed to Bens Creek Carbon LLC in relation to intercompany loans have been
eliminated on consolidation. Bens Creek Rail Holding LLC is immaterial to the
group.
31. Directors' emoluments
Year ended 31 March 2023
Short-term benefits salary Short-term Bonuses Total Share options
Notice period months $ $ No.
$
Executive Directors
Adam Wilson 6 586,895 816,928 1,403,823 -
Raju Haldankar 6 164,586 123,777 288,363 2,000,000
Non-executive Directors
Robin Fryer - 108,489 123,777 232,266 -
David Harris - 82,872 99,022 181,893 -
Mark Cooper - 12,862 - 12,862 -
955,704 1,163,504 2,119,207 2,000,000
Year ended 31 March 2022
Short-term benefits salary Short-term Bonuses Total Share options
Notice period months $ $ No.
$
Executive Directors
Adam Wilson 6 259,489 459,848 719,337 10,500,000
Raju Haldankar 6 43,759 98,539 142,298 -
Non-executive Directors
Robin Fryer - 21,428 26,277 47,705 -
David Harris - 16,151 19,708 35,859 -
Mohammed Iqbal - - - -
340,827 604,372 945,199 10,500,000
On 6 May 2022, Raju Haldankar was granted 2,000,000 share options in the
Company at an exercise price of 5p per ordinary share. The vesting conditions
of the grant were related to performance criteria as set out in the Group's
admission document. The performance criteria was such that three targets of
2,000,000 share options would vest on conditions that the ordinary share price
of the Group's shares would increase by 100%, 200% and 300% of the admission
price of the Group following its IPO on 19 October 2021. These conditions have
been met.
Short term benefits paid to Adam Wilson include a discretionary bonus of
$816,928 (£660,000) in connection with his employment contract with Bens
Creek Operations WV LLC. Short term benefits paid to Raju Haldankar includes a
discretionary bonus of $123,777 (£100,000). The discretionary bonuses paid to
both Adam Wilson and Raju Haldankar were in recognition of their efforts in
managing the affairs of the Group's subsidiaries including the rapid
development of the business.
On 14 March 2023, Raju Haldankar exercised 250,000 share options in the
Company at an exercise price of 5p per ordinary share. The market value of the
ordinary shares at the time of exercise was 18.50p, which resulted in a profit
of $40,925 (£33,750).
32. Share capital and share premium
Shares issued Ordinary shares Share premium Total
$ $ $
As at 1 April 2022 353,991,751 485,273 38,712,008 39,197,281
Issue of shares - 12 April 2022 40,000 53 5,200 5,253
Issue of shares - 18 May 2022 250,000 312 30,904 31,216
Issue of shares - 18 May 2022 118,250 145 14421 14,566
Issue of shares - 30 August 2022 20,000,000 23,383 6,991,397 7,014,780
Issue of shares - 14 October 2022 790,000 887 43,457 44,344
Issue of shares - 10 March 2023 23,283,728 27,869 5,163,416 5,191,285
Issue of shares - 17 March 2023 250,000 300 14,744 15,044
Exercise of options - - 89,326 89,326
Share issuance costs - - (75,723) (75,723)
398,723,728 538,221 50,989,150 51,527,371
On 12 April 2022, warrants were exercised for 40,000 new ordinary shares in
the capital of the Company at a price of 10p per share, with the proceeds of
issue amounting to $5,253 (£4,000).
On 18 May 2022, warrants were exercised for 368,250 new ordinary shares in the
capital of the Company at a price of 10p per share, with the proceeds of issue
amounting to $45,783 (£36,825).
On 30 August 2022, 20,000,000 ordinary shares of the Group were issued by way
of a placing at a price of 30p per ordinary share. The aggregate gross
proceeds of this issue was $7,014,780 (£6,000,000).
On 14 October 2022, options were exercised for 790,000 new ordinary shares in
the capital of the Company at a price of 5p per share.
On 10 March 2023, MBU agreed to vary the conversion price of the proportion of
the Loan Facility that is convertible at 60p to now convert at 30p. Following
the Conversion MBU received 23,283,728 new Ordinary Shares.
On 17 March 2023, options were exercised for 250,000 new ordinary shares in
the capital of the Company at a price of 5p per share.
33. Share based payments reserve
Share options and warrants
Share options and warrants outstanding at the end of the year have the
following expiry dates and exercise prices:
Share options
Grant Date Expiry Date Exercise price in £ per share 31 March 2023
Opening 16,300,000
Exercised (1,165,000)
1 April 2022 31 March 2023 0.05 150,000
6 May 2022 5 May 2023 0.05 1,750,000
17 May 2022 16 May 2023 0.05 150,000
15 August 2022 14 August 2023 0.05 50,000
23 November 2022 22 November 2023 0.05 50,000
29 December 2022 N/a 0.05 1,000,000
1 January 2023 31 December 2023 0.05 300,000
18,585,000
Warrants
Grant Date Expiry Date Exercise price in £ per share 31 March 2023
Opening 2,291,014
Exercised (408,250)
25 April 2022 24 April 2025 0.93 206,389
30 August 2022 29 August 2025 0.23 100,000
30 August 2022 29 August 2025 0.23 200,000
2,189,153
Total 20,774,153
The Company and Group have no legal or constructive obligation to settle or
repurchase the options or warrants in cash.
The fair value of the share options were determined using the Monte Carlo
model and warrants were determined using the Black Scholes valuation model.
The parameters used are detailed below using the weighted average:
Options Warrants Warrants
Granted: 2022 April 2022 August 2022
Life (years) 10 years 3 years 3 years
Average price at grant 52 pence 93 pence 37 pence
Exercise price (pence per share) 5 pence 93 pence 30 pence
Risk free rate 1.63 - 3.67% 1.25% 1.25%
Expected volatility 50% 26.3% 26.3%
Average fair value per share £0.0979 £0.1548 £0.0960
Volatility is calculated looking back at the historic exchange rate movement.
A reconciliation of share options and warrants granted and lapsed during the
period ended 31 March 2023 are
shown below:
Number
Outstanding as at 1 April 2022 18,591,014
Granted 3,700,000
Exercised (1,523,250)
Outstanding as at 31 March 2023 20,767,764
Exercisable at 31 March 2023 20,767,764
The total fair value of the options and warrants granted in the current year
resulted in a charge of $2,386,671 (2022: $2,095,151) to the Consolidated
Statement of Comprehensive Income. The total charge to share premium at 31
March 2023 was $13,603 of which $89,326 related to exercising of options and
($75,723) related to issue of warrants. (2022: $552,091) due to the broker
warrants which had not been exercised at the year end and exercised share
options during the year.
34. Related party transactions
MBU Capital Group Limited ("MBU"), at 31 March 2023 owned 60% of the voting
issued share capital of the
Company.
The Group is party to the following arrangements with MBU:
MBU loan facility
MBU, was a member of Ben's Creek Carbon LLC until 22 September 2021, had a GBP
£10,000,000 draw down
facility with the Group. This facility commenced on 1 November 2020 and was
repayable in full by 30 June 2023 or such earlier date as may be agreed
between lender and borrower. The facility also allowed MBU to convert any
funding provided, along with accrued interest, into ordinary shares of the
Group at a premium of 50% of the IPO price of 10p per share. Accordingly, the
conversion price is 15p per share. The interest applicable on this facility is
7% per annum, which accrued monthly. During the year total interest accrued
was $159,689.
On 7 April 2022, the Group renegotiated and agreed with MBU, the balance of
the unused facility, if drawn down
by the Group, can be converted at a price of 60p per ordinary share, if MBU
exercises its option to convert into
shares of the Group rather than seeking repayment of it loan and accrued
interest. On 3 March 2023 the Group renegotiated the conversion price from 60p
to 30p.
Subsequently MBU exercised their conversion right on all outstanding loans.
Following the Conversion MBU received 23,283,728 new shares the value of which
was $5,216,384.
On 3 March 2023 MBU converted its total loan balance of $3,184,596
(£2,647,917) into 17,652,770 ordinary shares. As at 31 March 2023 the
outstanding balance was $Nil (2022: $3,180,826).
The Group purchased from MBU Group Limited, the membership interests in Ben's
Creek Rail Land LLC. Additionally, the Group terminated MBU administrative
services and licence agreement.
Executive Directors
The Board of Directors includes one Executive Director: Raju Haldankar (CFO
resigned during the year) and one Non-Executive Director: Mark Cooper
(appointed 27 February 2023), who were regarded as related parties by virtue
of their employment with MBU GBR Limited, a 100% subsidiary of MBU.
During the year Raju Haldankar received 2,000,000 share options, for full
details of his emoluments please see note 31.
35. Investment in Subsidiaries
Company
31 March 2023
$
Shares in Group
At beginning of period 28,385,729
Consideration -
Deferred consideration for subsidiaries -
Foreign exchange (1,701,610)
At end of period 26,684,119
Investments in Group undertakings are stated at cost, which is the fair value
of the consideration paid, less any impairment provision. Investments are
eliminated upon consolidation.
Name of subsidiary Country of incorporation and place of business Proportion of ordinary shares held by parent (%) Nature of business
Ben's Creek Carbon LLC United States 100% Direct Mining
Ben's Creek WV Operations LLC United States 100% Indirect Mining
Ben's Creek Land WV LLC United States 100% Indirect Lease rights
Ben's Creek Rail Holdings LLC United States 52% Indirect Lease rights
The registered address of all three subsidiary companies is 109 Capitol St,
Charleston, WV, 25301. The subsidiaries are exempt from individual audits.
36. Ultimate Controlling Party
As at 31 March 2023, MBU Capital Group Limited is the ultimate controlling
party as a result of owning 60% (2022: 59.25%) of the Group.
37. Prior year adjustment
The Group has restated the year-ended 31 March 2022 balance sheet in relation
to the Convertible Loan Notes. This is a reclassification restatement and has
no effect on the net assets of the Group as of 31 March 2022.
The two Convertible Loan Notes entered into in December 2021 and February 2022
have a two-year Final Maturity Date. Both Notes also have an early redemption
clause on the first anniversary of the date of the Notes, to the extent if
demanded by the Noteholders by 20 Business Days' notice in writing to the
Group prior to first anniversary of the Notes. This early redemption clause
entitles the Noteholders to demand fifty per cent of the Notes together with
the accrued and unpaid interest. To the extent the that the Noteholders have
not made such demand, all outstanding Notes are due on the Final Maturity
Dates, i.e December 2023 and February 2024.
Accordingly, the Group has reclassified fifty per cent of the Notes together
with the accrued and unpaid interest of the Notes to current liabilities as of
31 March 2022.
Please refer to note 25 on details on the renegotiation of these loans.
38. Events After Reporting Date
On 23 June 2023 Bens Creek Operations entered into an unsecured loan note
agreement with Avani Resources Pte Ltd (the Company's largest shareholder) for
a total subscription of $6,500,000 in Loan Notes. The Loan Notes have a term
of two years and interest will roll up and be repaid as a bullet on the
second anniversary of the Loan Note.
Bens Creek Operations will repay to the Lender $2 per tonne of clean coal sold
within 7 business days of production. The principal outstanding under the Loan
Notes, less coal payments or other prepayments, will be repayable on the
repayment date.
Simple interest shall be added to the principal amount of the outstanding
Notes on each relevant repayment date. The interest shall be calculated at a
rate of 15.1% per annum from and including the date of issue of each Note up
to and including the date of the redemption or repurchase of the relevant
Notes. The interest shall be payable in the same manner as in the case of the
original principal amount of the Note and shall otherwise be treated as
principal of the Note for all purposes.
In the event Bens Creek Operations redeems or fully repays any Note prior to
the repayment date it shall, together with the payment of the principal amount
outstanding, pay for the account of the Avani a prepayment calculated at a
rate of 15% per annum from and including the date of issue of each Note up to
and including the date of the redemption or repurchase of the relevant Notes.
On 7 July 2023 Bens Creek entered into a second unsecured loan note agreement
with the Avani Resources Pte Ltd for a total subscription of $6.5 million of
Loan Notes. The Loan Notes have a term of 18 months and interest will roll up
and be repaid as a bullet at the maturity of the Loan Note. The terms of the
loan note are the same as the note issued on 23 June 2023.
Proceeds from the Loan Note issuance were used to repay one of the Convertible
Loan Notes held by ACAM LP which was due at 30 June 2023. Total repayment
amounted to $5.7m.
On 7 July 2023 Bens Creek also issued c.$7.57 million of unsecured loan notes
to ACAM LP.
The Loan Notes have been issued to ACAM in replacement for the now cancelled
$6m of convertible loan notes issued to ACAM on 14 December 2021, full details
of which were included in the Company's announcement of 15 December 2021. The
CLNs were due for repayment on 31 December 2023.
Following negotiations with ACAM it has been agreed that they would cancel the
CLNs and accept the Loan Notes by way of replacement. The Loan Notes have a
term of 18 months. The Loan Notes are not convertible into new ordinary shares
in the Company.
The terms of the Loan Notes are the same as the loan notes issued to Avani
Resources Pte Ltd.
The Company has also issued ACAM with a total of 21,082,257 warrants to
subscribe for new ordinary shares in Bens Creek exercisable at 28 pence per
ordinary share. The warrants have a life of five years from the date of issue
and can be exercised at any time by ACAM during the period ending 10 July
2028.
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