REG - Beowulf Mining PLC - Audited Results for year ended 31 December 2022
02/06/2023 15:00
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RNS Number : 5379B Beowulf Mining PLC 02 June 2023
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation ("MAR")
(EU) No. 596/2014, as incorporated into UK law by the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement, this inside
information is now considered to be in the public domain.
02 June 2023
Beowulf Mining plc
("Beowulf" or the "Company")
Audited Financial Results for the year ended 31 December 2022
Beowulf (AIM: BEM; Spotlight: BEO), the mineral exploration and development
company, announces its audited financial results for the year ended 31
December 2022. The Chairman's statement, review of operations and activities,
and financial information have been extracted from the Company's Annual Report
for the year ended 31 December 2022.
The Annual Report and Accounts will be tabled to shareholders at the Annual
General Meeting ("AGM") of the Company, the details of which will be announced
in the coming days.
The 2022 Annual Report will shortly be posted to those shareholders who have
requested a copy and will be available on the Company's website today
(https://beowulfmining.com/ (https://beowulfmining.com/) ). The Notice of AGM
and Form of Proxy will follow once further details have been announced.
Enquires
Beowulf Mining plc
Daniel Lagerqvist Tel: +46 (079) 060 56 62
SP Angel
(Nominated Adviser & Broker)
Ewan Leggat / Stuart Gledhill / Adam Cowl Tel: +44 (0) 20 3470 0470
BlytheRay
Tim Blythe / Megan Ray Tel: +44 (0) 20 7138 3204
Cautionary Statement
Statements and assumptions made in this document with respect to the Company's
current plans, estimates, strategies and beliefs, and other statements that
are not historical facts, are forward-looking statements about the future
performance of Beowulf. Forward-looking statements include, but are not
limited to, those using words such as "may", "might", "seeks", "expects",
"anticipates", "estimates", "believes", "projects", "plans", strategy",
"forecast" and similar expressions. These statements reflect management's
expectations and assumptions in light of currently available information. They
are subject to a number of risks and uncertainties, including, but not limited
to , (i) changes in the economic, regulatory and political environments in the
countries where Beowulf operates; (ii) changes relating to the geological
information available in respect of the various projects undertaken; (iii)
Beowulf's continued ability to secure enough financing to carry on its
operations as a going concern; (iv) the success of its potential joint
ventures and alliances, if any; (v) metal prices, particularly as regards iron
ore. In the light of the many risks and uncertainties surrounding any mineral
project at an early stage of its development, the actual results could differ
materially from those presented and forecast in this document. Beowulf assumes
no unconditional obligation to immediately update any such statements and/or
forecast.
CHAIRMAN STATEMENT
Dear Shareholders
Introduction
Beowulf has transformed itself in the last year, with the award of
Exploitation Concession for the Kallak North Iron Ore Project and,
post-period, positive economics results from the Kallak North 'Only' Base
Case.
The preliminary economic assessment for Kallak North is only part of the
bigger Kallak story, and we have many levers to increase value, which will be
investigated as we proceed with Pre-feasibility. These include resource
expansion, a longer life mining operation, increased production capacity, and
higher proportion of high-grade concentrate sales to decarbonising steelmakers
in the Nordics and Europe, of which there are many.
We built new partnerships in Finland, firstly collaborating with Hensen, an
established graphite and anode materials company, and then, post period,
signing a new site agreement with the municipality of Korsholm for
establishing an anode materials production facility in the GigaVaasa area.
Grafintec continued its efforts to expand its natural flake graphite resource
inventory, with promising exploration findings for the Rääpysjärvi
prospect, which in the future, could potentially add to the Company's
resources already defined at Aitolampi, offering sustainable and secure
primary raw materials supply to a Finnish anode materials value chain.
In Kosovo, Vardar's exploration drilling defined a large polymetallic
epithermal system at Madjan Peak in the Mitrovica licence, with potential to
host economic concentrations of base and precious metals. Furthermore,
fieldwork at the Red Lead Prospect, also in Mitrovica, highlighted the
potential for discovery of lead-zinc carbonate hosted mineralisation. As the
prospect is located just 2km east of the world-class Stan Terg lead-zinc
deposit with similar geology, it is considered a priority target for follow up
drilling.
During the year, we made significant process in our ESG work, policy
development and in practice with our project development work. Beowulf and its
subsidiaries are focused on the role they play in society and contribution and
are committed to working constructively - and in good faith - with all
stakeholders and engaging in meaningful dialogue.
Kallak
The Company's longstanding commitment to Kallak was finally recognised when,
on 22 March 2022, the Company was awarded an Exploitation Concession for
Kallak North. This permit provides exclusive mining rights in the defined
areas for a period of 25 years.
The Kallak North deposit has an estimated Mineral Resource of 111 Mt, Measured
and Indicated, with an average grade of 28 per cent iron content. In the
Kallak area, the Company has additional defined mineral resources and
exploration targets which could support a longer life mining operation beyond
Kallak North.
Kallak is excellently positioned as a potential secure and sustainable
supplier of market-leading high-grade iron concentrate to Europe's
decarbonising steel sector and fossil-free steel making projects in the Nordic
region for decades to come.
During the year, the Company strengthened its leadership team in Sweden, with
the appointment of Ulla Sandborgh as CEO of Jokkmokk Iron bringing extensive
experience from trade and industry in Sweden and deep knowledge of
environmental permitting, and initiated the Scoping Study for Kallak North.
On 24 January 2023, Beowulf announced positive economic results for Kallak
North, forming part of the larger Kallak Iron Ore Project, from a Scoping
Study prepared by independent consulting firm SRK Consulting (UK) Ltd. The
study indicates a positive economic assessment for a mining operation
producing up to 2.7 million tonnes per annum ("Mtpa") of high-grade iron
concentrate over a production life of 14 years.
Grafintec Oy ("Grafintec")
Grafintec continued to focus on the creation of a Finnish anode materials
value chain, with exploration for more natural flake graphite, contracting the
Geological Survey of Finland ("GTK") to carry out an electromagnetic ("EM")
survey over the Rääpysjärvi exploration permit. This yielded extensive EM
anomalies, suggesting significant potential for a larger tonnage of high-grade
graphite mineralisation than that defined at Aitolampi and for localised very
high-grade mineralisation.
During the year, Grafintec entered into a MoU with GTK, providing Grafintec
and GTK with a framework and platform to promote and foster cooperation in the
fields of a circular economy, mineral processing and exploration of graphite
as pertaining to anode materials for the lithium-ion battery market and other
markets from different raw material sources.
During the year, Grafintec also entered into a new partnership with Hensen, a
company that has been operating in the graphite industry for 37 years and has
been producing graphite-based anode materials since 2003, as the Company
continued to pursue its downstream ambitions.
Vardar Minerals ("Vardar")
During 2022, the Company invested a further £1.2 million (2021: £300,000) to
fund drilling taking the Company's ownership of Vardar to approximately 59.5
per cent (2021: 49.4%). In 2023, Beowulf increased its ownership to 61.1 per
cent.
From late summer onwards, the Company published a number of positive
announcements, starting in August with the discovery of a large Polymetallic
Epithermal System (copper, gold and lead-zinc) at Majdan Peak ("MP"), part of
Mitrovica licence in Kosovo, with drilling results both supporting the
potential for epithermal mineralisation of economic grades to be present and
for comparisons to be drawn with the Chelopech copper-gold deposit in
Bulgaria. This was soon followed up with new exploration targets at MP and
then the identification, in December, of the Red Lead target, bearing striking
similarities observed at the neighbouring world-class Stan Terg deposit, such
as the same host rocks, trachyte heat source, hydrothermal breccias and
hydrothermal alteration patterns.
Shareholder Base
At 31 December 2022, there were 632,863,876 (2021: 621,366,320) Swedish
Depository Receipts representing 76.09 per cent (2021: 74.71 per cent) of the
issued share capital of the Company. The remaining issued share capital of the
Company is held in the UK.
Raising Finance
Maintaining sufficient funding to sustain the business is a significant
challenge for an exploration and development company in the natural resources
sector.
With the Kallak North Exploitation Concession awarded, and to fund work
programmes, with the focus being on Kallak, on 4 July 2022, the Company
announced bridging loan financing from a Nordic Institutional Investor of SEK
22 million (approximately £1.76 million) before expenses.
The Company announced on 20 December 2022 it had secured a preferential rights
issue of Swedish Depository Receipts ("SDRs") in Sweden ("Rights Issue") and a
PrimaryBid retail offer of ordinary shares in the UK ("PrimaryBid Offer")
which included a placing to certain UK investors ("Placing"). As part of this
the Company received underwriting commitments to the value of a maximum of SEK
60 million, or approximately 70 per cent of the intended Rights Issue.
On 28 February 2023, Beowulf announced the outcome of the Rights Issue and the
PrimaryBid offer. The Rights Issue raised approximately SEK 62.8 million
(approximately £5 million) and the PrimaryBid Offer raised approximately
£0.8 million. In addition to the PrimaryBid Offer, the Placing raised
approximately £0.4 million. Members of the Board and executive management
also subscribed to an agreed amount of £181,000.
Following the year end, it became apparent that due to the timing of the
receipt of the funds from the Rights Issue the Company was not be in a
position to pay back the bridging loan facility at its maturity. The outcome
of this is that the holder of the loan enforced the penalty interest for
entering another 30-day period, which was circa 1 million SEK (approximately
£80,000). The loan principal and interest totalling £2.13m was repaid via a
deduction to the gross proceeds from the Rights Issue.
The net funds raised after the loan repayment and share issue transaction
costs were £3.72 million.
The Board continues to adopt the going concern basis to the preparation of the
financial statements. The Group is dependent on further equity fundraising
to operate as a going concern for at least twelve months from the date of
approval of the financial statements, this conclusion has been reached
following managements review of both cost and foreign exchange sensitivities
and potential key hires required to advance projects. Although the Group has
had past success in fundraising and continues to attract interest from
investors, making the Board confident that such fundraising will be available
to provide the required capital, there can be no guarantee that such
fundraising will be available and as such this constitutes a material
uncertainty over going concern.
2022 Financial Performance
For the year, the consolidated loss increased in the year before tax from
£1,485,611 in 2021 to £2,041,452 in 2022. This increase is primarily due to
finance costs in relation to the bridging loan of £304,529 (2021: £Nil) and
share based payment expenses of £240,537 (2021: £Nil).
The underlying administration expenses of £1,806,582 were higher than the
previous year of £1,503,049, due to share-based payment expenses of £240,537
(2021: £Nil).
Consolidated basic and diluted loss per share for the 12 months ended 31
December 2022 was 0.23 pence (2021: loss of 0.16 pence).
The Company received loan financing from a Nordic Institutional Investor of
SEK 22 million, which generated £1,554,381 of net proceeds to fund working
capital.
£1,776,556 in cash was held at the year-end (2021: £3,336,134).
Exploration assets increased to £13,002,465 at 31 December 2022 compared to
£11,235,656 at 31 December 2021 primarily due to exploration activities in
Mitrovica and Kallak.
The translation reserve losses attributable to the owners of the parent
increased from £1,216,985 at 31 December 2021 to £1,289,415 at 31 December
2022. Much of the Company's exploration costs are in Swedish Krona which has
weakened against the pound since 31 December 2021.
Corporate
Post period end on 3 May 2023, Kurt Budge, the Company's CEO, announced that
he would step down from the Company to pursue other business interests.
Kurt had been with the Beowulf for nine years and his presence was pivotal to
the Company, especially in achieving the successful delivery of the
Exploitation Concession for Kallak North. I should like to thank him for his
many years of service and wish him all the best in his future endeavours.
The Company announced, on 8 July 2022, the implementation of a new Long-Term
Incentive Plan ("LTIP") available to eligible employees, an important element
of the Company's remuneration policies designed to retain and incentivise key
employees. Moving forwards, the Company's remuneration policies will be
developed on a systematic basis and matched to performance metrics, such as
achieving important business milestones and ESG objectives.
Staff and Employees
On behalf of the Board, I would like to express my sincere thanks to our
staff, employees and consultants in Sweden and Finland, and also to the staff,
employees and consultants of Vardar, for their significant efforts throughout
the past 12 months to drive our Company forwards.
ESG
The Company believes in living its values of Respect, Partnership and
Responsibility. Over the last year, our ESG work has identified, as material
to the Company's activities, specific Sustainable Development Goals which the
Company will be focusing on as it develops its projects. These goals and our
future compliance with The Equator Principles are being factored into our
thinking, design, engineering, and planning of our operations and management
systems. In 2022, Beowulf published its ESG Policy which can be viewed on
the Company's website following the link:
https://beowulfmining.com/about-us/esg-policy/
(https://beowulfmining.com/about-us/esg-policy/) .
Outlook
Beowulf's ambition is to become a trusted European supplier of metals needed
for the Green Transition. The Company has an attractive strategic position,
developing production assets, in magnetite iron ore and natural flake
graphite, in stable jurisdictions and proximity to growing downstream markets,
the decarbonising steel industry and the lithium-ion battery manufacturing
sector.
With Jokkmokk Iron and Grafintec, we have distinct businesses positioned to
benefit from the Green Transition and the demand for sustainable and secure
supply of primary raw materials. The status of our iron ore and natural flake
graphite resources can only be enhanced, as geopolitical uncertainties remain,
and Europe seeks to be sustainable and self-sufficient.
With the aim of bringing Kallak into production, and opportunities with
Grafintec to get into anode materials production, we are currently reassessing
our timelines for advancing our projects and look forward to a busy schedule
ahead progressing them.
J Röstin
Executive Chairman/Interim Chief Executive Officer
2 June 2023
REVIEW OF OPERATIONS AND ACTIVITIES
SWEDEN
Permits
Beowulf, via its subsidiaries, currently holds six exploration permits in
Sweden, and one Exploitation Concession, as set out in the table below:
Exploration Permit Name Licence no. Area (hectares) Valid from Valid to
( )
Parkijaure nr 2(1) 2008:20 285 18/01/2008 18/01/2025
Parkijaure nr 6(1) 2019:81 999 10/10/2019 10/10/2024
Parkijaure nr 7(1) 2021:47 2,212 16/06/2021 16/06/2024
Ågåsjiegge nr 3(1) 2021:73 2,771 27/10/2021 27/10/2024
Åtvidaberg nr 1(2) 2016:51 12,533 30/05/2016 30/05/2024
Exploitation Concession Name Licence no. Area Valid from Valid to
(hectares)
Kallak K nr 1(1 3) BK-2022:1 103 22/03/2013 22/03/2047
Notes:
(1) Held by the Company's wholly owned subsidiary, Jokkmokk Iron Mines AB
("JIMAB").
(2) Held by the Company's wholly owned subsidiary, Beowulf Mining Sweden AB.
(3) An application for the Exploitation Concession was lodged on 25 April 2013
(Mines Inspector Official Diary nr 559/2013) and an updated, revised and
expanded application was submitted in April 2014. On 21 September 2016, the
Company submitted a letter to the Mining Inspectorate of Sweden, revising its
application boundary to encompass both the Concession Area, delineated by the
Kallak North orebody, and the activities necessary to support a modern and
sustainable mining operation. On 22 March 2022, the Minister of Enterprise and
Innovation, announced the award of the Concession for Kallak nr 1.
Kallak Introduction
The Company's most advanced project is the Kallak iron ore deposit located
approximately 40 kilometres ("km") west of Jokkmokk in the County of
Norrbotten, Northern Sweden, 80 km southwest of the major iron ore mining
centre of Malmberget, and approximately 120 km to the southwest of LKAB's
Kiruna iron ore mine.
Kallak has the benefit of local infrastructure with all-weather gravel roads
passing through the project and forestry tracks allowing for easy access
throughout the licence. A major hydroelectric power station, with associated
electric power-lines, is located only a few kilometres to the southeast. The
nearest railway, the Inlandsbanan, passes approximately 40 km to the east. The
Inlandsbanan meets the Malmbanan railway at Gällivare, which provides routes
to the Atlantic harbour at Narvik in Norway or to the Bothnian Sea harbour at
Luleå in Sweden.
Kallak is excellently positioned as a potential secure and sustainable
supplier of market-leading high-grade iron concentrate to Europe's
decarbonising steel sector and fossil-free steel making projects in the Nordic
region for decades to come.
Kallak Resource
Kallak was discovered by The Swedish Geological Survey ("SGU") in the 1940s.
The first exploration licence for Kallak was awarded by the Mining
Inspectorate of Sweden in 2006. Drilling was conducted at Kallak North and
South between 2010-2014, a total of 131 holes and 27,895 m.
On 25 May 2021, the Company published a 'Mineral Resource Estimate and
Exploration Target Upgrade', prepared by BGS. For Kallak North, a Measured and
Indicated Resource of 111 Mt grading 28 per cent iron content was defined.
With an additional Inferred Resource of 25 Mt grading 28.3 per cent iron.
For Kallak North and South combined, BGS derived a Measured and Indicated
Mineral Resource of 132 Mt grading 27.8 per cent iron and an Inferred Mineral
Resource of 39 Mt grading 27.1 per cent iron. In addition to the figures
above, exploration targets were reported for Kallak South and the Company's
Parkijaure licences.
BGS prepared a Technical Report which serves as an independent report prepared
by the Competent Person ("CP") as defined by the Pan-European Reserves and
Resources Reporting Committee ("PERC") Standard for Reporting of Exploration
Results, Mineral Resources and Mineral Reserves. PERC sets out minimum
standards, recommendations and guidelines for Public Reporting of Exploration
Results, Mineral Resources and Mineral Reserves in Europe. PERC is a member
of CRIRSCO, the Committee for Mineral Reserves International Reporting
Standards, and the PERC Reporting Standard is fully aligned with the CRIRSCO
Reporting Template.
Below is a table showing the Mineral Resource Statement for the Kallak Project
at a 0% Fe cut-off grade:
Deposit Classification Million Density Fe FeO SiO(2) Al(2)O(3) P S
Tonnes (g/cm(3)) (%) (%) (%) (%) (%) (%)
Kallak North Measured 16 3.5 33.6 10.5 43.4 2.9 0.04 0.002
Indicated 95 3.3 27.0 7.1 49.8 4.5 0.03 0.002
Sub-Total 111 3.3 28.0 7.6 48.9 4.3 0.03 0.002
Inferred 25 3.4 28.3 7.8 48.1 4.2 0.04 0.002
Kallak South North Measured
Indicated 21 3.3 26.9 7.2 49.3 4.9 0.04 0.003
Sub-Total 21 3.3 26.9 7.2 49.3 4.9 0.04 0.003
Inferred 6 3.2 23.4 6.5 50.1 6.6 0.05 0.004
Kallak South South Measured
Indicated
Sub-Total
Inferred 8 3.3 26.1 12.0 50.1 5.2 0.05 0.009
Total Measured 16 3.5 33.6 10.5 43.4 2.9 0.04 0.002
Indicated 116 3.3 27.0 7.1 49.7 4.6 0.03 0.002
Sub-Total 132 3.3 27.8 7.5 48.9 4.4 0.03 0.002
Inferred 39 3.3 27.1 8.5 48.8 4.8 0.04 0.004
Notes:
(1) Mineral Resources, which are not Mineral Reserves, have no demonstrated
economic viability.
(2) The effective date of the Mineral Resource is 9 May 2021.
(3) The Open Pit Mineral Resource Estimate was constrained within lithological
and grade-based solids and within an optimised pit shell defined by the
following assumptions; base case metal price of USD130 / tonne for a 65% Fe
concentrate; Fe recovery of 71% at Kallak North, 86% at Kallak South North and
94% at Kallak South South; Fe concentrate grades of 68% at Kallak North, 70%
at Kallak South North and 69% at Kallak South South; Processing costs
of USD6.8 / t wet; Selling cost of USD21.0 / t wet concentrate; Mining
cost of Ore of USD3.3 / t, mining cost of waste of USD3.0 / t and an
incremental mining cost per 10 m bench of USD0.05 / t; Wall angles of 30°
within the overburden and 47.5° in the fresh rock.
(4) Mineral Resources have been classified according to the PERC Standards
2017, by Howard Baker (FAusIMM(CP)), an independent Competent Person as
defined in the PERC Standard 2017.
An overview of the interpreted mineralisation is shown in the diagram below,
a) left - plan view, b) top right - looking east, c) bottom right - oblique
view, looking northeast. Coloured by domain (Source: BGS).
BGS reported an Exploration Target in an untested gap between and Kallak South
North and Kallak South South, of between 25 Mt and 75 Mt grading between 20%
Fe to 30% Fe. In addition, an Exploration Target of between 45 Mt and 135 Mt
grading between 20% Fe to 30% Fe at has been reported at Parkijaure. The
potential quantity and grade are conceptual in nature as there has been
insufficient exploration to estimate a Mineral Resource. It is uncertain if
further exploration will result in the estimation of a Mineral Resource.
In September 2020, the Company published the findings of an investigation by
Dr. Arvidson MSc Mining/Mineral Processing, PhD Mineral Processing
(equivalent), Royal Institute of Technology, Stockholm, as Qualified Person,
into the market potential of future products from Kallak, based on the results
of laboratory and pilot plant testwork conducted to date, the highlights of
which can be summarised as follows:
· Testwork on Kallak ore has produced an exceptionally high-grade
magnetite concentrate at 71.5 per cent iron content with minimal detrimental
components;
· This would make Kallak the market leading high-grade product among
known current and planned future producers; and
· The next best magnetite product is LKAB's (the state-owned Swedish
iron ore company), which produces magnetite fines ("MAF") with a target
specification of 70.7 per cent iron and is regarded as unique, until now, due
to its exceptionally high iron content.
2022 Update
On 22 March 2022, the Swedish Government awarded an Exploitation Concession
for Kallak North; attached to the decision were 12 conditions for the Company
to comply with. The Company's legal advisers reviewed the Government's
decision and the conditions attached to it and, with respect to the
conditions, were satisfied that these were matters the Company would naturally
expect to address during project development and the Environmental Court
process. The award of the Concession was a long-awaited milestone on the
development timeline, and now the Company can focus its attention on project
development and applying for the Environmental Permit.
The Government's decision to grant the Exploitation Concession is subject to a
review by the Supreme Administrative Court following an application by the
Swedish Society for Nature Conservation, the Sirges Sami and the Jåhkågasska
Sami. They argue that the government was not entitled to make the decision in
question, on the grounds that it would be contrary to legal rules in support
of mainly nature conservation and the national interest of reindeer husbandry.
They argue that the Government's decision lacks support in the legal order and
that the Supreme Administrative Court should therefore declare the decision
invalid. There is a risk that the Supreme Administrative Court will find that
the Government has made the decision in violation of the law and therefore
annul it. In such a case, the Government may reconsider the issue, but such a
procedure risks delaying the start of mining production at Kallak North. There
is also a risk that the Government will not take a new decision on the
processing concession, which could prevent or at least delay the start of
mining production. There is also a risk that the Government will attach
additional conditions to a new decision, which may affect or delay the start
of mining production at Kallak North. The Company assesses the probability
of the described risks occurring to be low.
The Company strengthened its leadership team in Sweden with the appointment of
Ulla Sandborgh as CEO of Jokkmokk Iron, Beowulf's wholly owned Swedish
subsidiary and the developer of the Kallak North. Before joining Jokkmokk
Iron, Ulla held senior positions in private enterprise and public
institutions, in sectors including infrastructure, electricity and water. Her
most recent role was a Director General in the Ministry of Enterprise of The
Government of Sweden, where she was responsible for issues affecting the
limestone and cement industries and led the development of a strategy to
promote the efficient and sustainable use of water. Ulla has extensive
experience in managing permitting processes and, as part of this, engaging
with stakeholders, to ensure interests are safeguarded, and benefits shared.
During the year, the Company contracted independent consulting firm SRK
Consulting (UK) Ltd ("SRK") Company to prepare a Scoping Study for Kallak
North and engaged Vulcan Technologies Pty Ltd ("VulcanTech"), an Australian
company specialising in the modelling of iron and steel making processes, to
complete a Marketing Study to consider traditional and non-traditional market
opportunities that might be served by Kallak concentrates. Workstreams
associated with the Environmental Permit continued, including updating
investigations regarding nature values, water management and options for
transporting production from the mine.
2023 Update
On 24 January 2023, Beowulf announced the positive economic results of the
Kallak North Scoping Study, forming part of the larger Kallak Iron Ore
Project, prepared by independent consulting firm SRK Consulting (UK) Ltd.
The Scoping Study presents a 'Base Case' solely focused on the Kallak North
deposit, incorporating a Mineral Resource Estimate ("MRE") with effective date
of 9 May 2021 and an economic assessment for a mining operation producing up
to 2.7 Mt per annum of high-grade iron concentrate over a production life of
14 years. The scoping study economic highlights include a Net Present Value
(NPV(8)) of US$177 million, Internal Rate of Return of 14.5 per cent and a
Payback Period of ~ 4.5 years from commencement of construction activity. The
'Base Case' assumes 67 per cent of Kallak production is sold to the Blast
furnace market and 33 per cent is sold to the Direct Reduction market,
consistent over the 14 years production life.
A Pre-feasibility Study (PFS) is due to commence in Q2 2023, and the offers
for the work was sent to the Company by the 11 May 2023. The offers are
evaluated and compared before the assignment is given to one or several
bidding companies. The PFS is an important part of the Environmental Permit.
The Permitting workstreams are continuing with all the necessary
investigations that must be included in the application for an Environmental
Permit that will be handed in to the court. Like background measuring of
noise, dust, waterflows and inventory of nature values.
FINLAND
Grafintec
Grafintec is recognised in Finland as one of the main companies in the anode
space and continues to be supported by Business Finland, the Finnish
governmental organisation for innovation funding and investments.
Finnish Exploration Permits
Grafintec's exploration programme is targeted at securing long-term
sustainably produced primary raw material supply to support a Finnish graphite
anode value chain. The Company has a rolling programme of exploration permit
and claim reservation applications and exploration permit renewals.
Tukes (the permitting authority) processes the Company's applications, which
if deemed satisfactory, are published as a 'Hearing' for one month, during
which time appeals can be submitted.
Exploration Permit Name Licence no. Area (hectares) Notes
Pitkäjärvi 1 ML2016:0040-02 407 27.4.2021: Extension permit granted by TUKES. 3.3.2022: The Administrative
Court dismissed all the appellants' claims and the litigation costs.
11.4.2022: Appeal application to the Supreme Administrative Court by Puhtaan
Saimaan puolesta ry, Kansalaisten kaivosvaltuuskunta ry and Vesiluonnon
puolesta ry. 3.11.2022: The Supreme Administrative Court dismissed the NGO's
application for leave to appeal the exploration permit. The permit is now
legally valid until 26.4.2024.
Rääpysjärvi 1 ML2017:0104 716 Exploration permit granted. The permit gained legal force 21.6.2021 and is
valid to 20.6.2025.
Karhunmäki 1 ML2019:0113 889 Granted by TUKES 29.9.2021. The decision has been appealed to the Vaasa
Administrative Court by Lapua municipality and MiningWatch Finland ry.
Luopioinen 1 ML2022:0004 218 Exploration permit application submitted 28.1.2022. The permit has not
gained legal force yet.
Aitolampi (Pitkäjärvi 1 Exploration Permit) - Graphite
Introduction
The Aitolampi graphite project sits within the Pitkäjärvi 1 licence and is
located in eastern Finland, approximately 40 km southwest of the
well-established mining town of Outokumpu, and an eastern extension of known
old graphite workings from many years ago. Infrastructure in the area is
excellent, with road access and good availability of high voltage power.
Discovered in 2016, the licence covers an area of graphitic schists on a fold
limb, coincidental with an extensive electromagnetic ("EM") anomaly. Many of
the EM zones are obscured by glacial till, but graphite observations in road
cuttings and outcrops are also associated with abundant EM anomalies.
The resource contains graphite of almost perfect crystallinity, and high
proportion of fine and medium flake, which is an important prerequisite for
high tech applications, such as lithium-ion batteries. Purification results
indicate that concentrates meet the purity specification of 99.95 per cent
C(t) for lithium-ion batteries.
Mineral Resource Estimate
In 2019, Grafintec delivered an upgraded MRE for Aitolampi, with an 81 per
cent increase in contained graphite (compared to the 2018 MRE) for the
higher-grade western zone with an Indicated and Inferred Mineral Resource of
17.2 Mt at 5.2 per cent Total Graphitic Carbon ("TGC") containing 887,000
tonnes of contained graphite.
An unchanged Indicated and Inferred Mineral Resource of 9.5 Mt at 4.1 per cent
TGC for 388,000 tonnes of contained graphite for the eastern lens.
In total, an Indicated and Inferred Mineral Resource of 26.7 Mt at 4.8 per
cent TGC for 1,275,000 tonnes of contained graphite. All material is contained
within two graphite mineralised zones, the eastern and western lenses,
interpreted above a nominal three per cent TGC cut-off grade.
An augmented global Indicated and Inferred Mineral Resource of 11.1 Mt at 5.7
per cent TGC for 630,000 tonnes of contained graphite, reporting above a five
per cent TGC cut-off, based on the grade-tonnage curve for the resource.
The Mineral Resource was estimated by CSA Global of Australia in accordance
with the JORC Code, 2012 Edition. See table below:
Zone Classification Mt TGC % S % Density (t/m(3)) Contained graphite (kt)
Western lens Indicated 9.2 5.1 5.0 2.80 468
Inferred 8.0 5.2 4.7 2.80 419
Indicated + Inferred 17.2 5.2 4.8 2.80 887
Eastern lens Indicated 1.8 4.1 4.4 2.82 74
Inferred 7.7 4.1 4.5 2.82 314
Indicated + Inferred 9.5 4.1 4.5 2.82 388
TOTAL Indicated + Inferred 26.7 4.8 4.7 2.81 1,275
2022 Update
Grafintec continued to focus on the creation of a Finnish anode materials
value chain, with exploration for more natural flake graphite, contracting
Geological Survey of Finland ("GTK") to carry out an EM survey over the
Rääpysjärvi exploration permit.
Grafintec entered into a Memorandum of Understanding ("MoU") with GTK,
providing Grafintec and GTK with a framework and platform to promote and
foster cooperation in the fields of circular economy, mineral processing and
exploration of graphite as pertaining to anode materials for the lithium-ion
battery market and other markets from different raw material sources.
Grafintec also entered into a new partnership with Hensen, a company that has
been operating in the graphite industry for 37 years and has been producing
graphite-based anode materials since 2003. The MoU includes an agreed
framework and key terms on which both companies are collaborating to establish
an anode materials hub in Finland.
Along with the MoU signed with Hensen, Grafintec also signed a MoU with
Dominik Georg Luh Technografit GmbH ("Technografit"), establishing the basis
for a commercial partnership for procuring sustainably produced natural flake
graphite for Grafintec's planned graphite anode materials plant. The MoU was
signed with Technografit in May 2022 and sets the heads of terms for
incorporating a formal sales agreement between Grafintec and Technografit,
This follows the Company's strategy to expand its resource footprint while its
projects are still in development, in order to develop downstream anode
capabilities. Samples received from Technografit will be tested by Hensen and
other possible technology partners and processed to anode material. Also, the
Company has testwork programmes on recycled graphite containing waste to
assess whether it can be processed to suitable feedstock for anode materials
production.
In the final quarter of the year, the Company announced the results from the
EM survey and assays for the Rääpysjärvi flake graphite prospect.
The EM survey indicated extensive EM anomalies, significant potential for a
larger tonnage of high-grade graphite mineralisation than that defined at
Aitolampi and for localised very high-grade mineralisation.
Highlights included:
· 13 highly conductive EM zones were identified, with isolated zones
extending for up to 850m strike length and 250m width.
· Analysis of eight grab samples from outcrops in the area range from
0.52 to >50 per cent TGC. The sample assaying more than 50 per cent TGC
(limit of the analysing methodology) was taken from a historic graphite quarry
situated close to the north-western limit of one of the largest EM conductive
zones.
· Six holes drilled in the 1980s have also been re-sampled and
re-assayed for TGC. Two of the drill holes intersected significant graphite
mineralisation:
o TN/SM-2: 19.29m at 5.62 per cent TGC (from 177.11m); and
o TN/SM-3: 9.84m at 6.70 per cent TGC (from 226.16m) and 35.55m at 4.98 per
cent TGC (from 266.45m).
· Previous metallurgical testwork on a 10kg composite grab sample has
produced a concentrate grade of 97.4 per cent TGC.
· The encouraging exploration data set indicates significant potential
for natural flake graphite mineralisation suitable for graphite anodes across
Rääpysjärvi.
Samples were taken from four trenches in different locations within the
identified EM conductive Zone 1, with assays confirming the existence of
significant flake graphite mineralisation grade and intersected width.
Flake graphite mineralisation was discovered in all four trenches sampled,
including:
· RAA-TR1-22: 10.6 m at 4.33 per cent TGC and 3.8m at 5.77 per cent
TGC;
· RAA-TR2-22: 9.96 per cent TGC from grab sample;
· RAA-TR3-22: 5.8m at 7.25 per cent TGC and 7.1 m at 7.43 per cent
TGC; and
· RAA-TR4-22: 1.0m at 26.00 per cent TGC.
2023 Update
Grafintec announced, on 9 January 2023, that it had awarded a Pre-feasibility
Study ("PFS") contract to RB Plant to assess the technical, economic,
statutory, regulatory and commercial options for a natural flake graphite
micronisation, spheronisation, purification, and coating plant in Finland.
The study will investigate the Best Available Technology ("BAT") with
consideration for environmental, operational and financial factors and
performance, for transforming a high-grade natural flake graphite concentrate
to graphite anode material suitable for the European lithium-ion battery
market opportunities.
The PFS is a key component of Grafintec`s strategy to develop a Finnish value
chain for anode materials production, aligned with the objectives of the
funding received from Business Finland as part of the BATCircle2.0
(Finland-based Circular Ecosystem of Battery Metals) consortium. BATCircle2.0
is a key project in Business Finland's Smart Mobility and Batteries from
Finland programmes.
At the start of February, the Company signed an agreement with the
municipality of Korsholm to secure a new site at the GigaVaasa area (Plot 1,
Block 3017) to establish a Graphite Anode Materials Plant ("GAMP").
Grafintec will work closely with the municipality of Korsholm and other
important stakeholders and intends to apply for a long-term site reservation
for Plot 1 within the second half of 2023.
KOSOVO
Vardar Minerals Limited ("Vardar")
Beowulf's investment in Vardar gives the Company exposure to base metals and
precious metals exploration in the highly prospective Tethyan Belt.
Exploration Permits
Vardar has a rolling programme of exploration permit applications and
renewals, see table below:
Licence Number Term(1) Licence Valid From Valid To Area (km(2))
2879 2nd Mitrovica 2022-03-11 2024-01-27 27.1
2878 2nd Viti N 2022-03-22 2024-01-27 35.5
2912 2nd Viti SE 2022-03-11 2024-01-27 44.1
2935 1st Shala 2022-03-11 2025-02-25 87.5
3122 1st Shala East 2022-09-06 2025-08-17 78.8
3123 1st Shala West 2022-10-22 2025-10-11 36.2
3054 1st Zvecan 2022-06-27 2024-05-14 6.4
(1) Refers to whether the licence has been renewed e.g. 2nd means licence has
been renewed after its 1st term.
Exploration Overview
Vardar's exploration permits are located within the Tethyan Belt, a major
orogenic metallogenic province for gold and base metals which extends from the
Alps (Carpathians/Balkans) to Turkey, Iran and Indochina, and contains several
world class discoveries.
The Tethyan Belt of south-east Europe can be regarded as Europe's chief
copper-gold (lead-zinc-silver) province. Mitrovica and Viti occur within
calc-alkaline magmatic arc(s) which developed during the closure of the
Neotethys Ocean, primarily targeting epithermal gold, lead-zinc-silver
replacement deposits and porphyry related copper-gold mineralisation.
The lack of modern-day exploration in the Balkans presents a real opportunity
for new mineral deposit discoveries.
Mitrovica
The Mitrovica licence is located immediately to the west and north west of the
world class Stan Terg former lead-zinc-silver mine, which dates back to the
1930s; with current reserves of 29 Mt of ore at 3.45 per cent lead, 2.30 per
cent zinc, and 80 g/t silver (ITT/UNMIK 2001 report), together with the past
production of approximately 34 Mt of ore, the deposit represents an important
source of metals in the south eastern part of Europe (Source: Strmić
Palinkaš S., Palinkaš L.A et al, 2013. Metallogenic Model of the Trepča
Pb-Zn-Ag Skarn Deposit, Kosovo: Evidence from Fluid Inclusions, Rare Earth
Elements, and Stable Isotope Data. Economic Geology, 108, 135-162). The
licence is showing its potential for a range of porphyry related
mineralisation types.
Shala
During the year, three Shala exploration licences were approved, extending to
the north and northeast of the Mitrovica licence, its polymetallic epithermal
system and associated lead-zinc-silver and gold-silver-copper
mineralisation. The new areas are situated in the prospective Vardar
lead-zinc-silver belt along trend from historical mining districts.
The new licences include prospective carbonate host rocks along with Oligocene
magmatic rocks which provide the heat and metal source in the surrounding
lead-zinc ore districts; alteration and gossan outcrops have been noted in
early reconnaissance visits further demonstrating the potential for
lead-zinc-silver mineralisation in both of the licences.
Viti
The Viti project is located in south-eastern Kosovo and encompasses an
interpreted circular intrusive, indicated by regional airborne magnetic
data. There is evidence of intense alteration typically associated with
porphyry systems, with several copper occurrences and stream sample anomalies
in proximity to, and within the project area.
In 2019, two stratigraphic holes, totalling 439 metres, were drilled to test
for alteration type and potential associated mineralisation in the gossanous
zone, and identified highly altered trachyte porphyry dykes with associated
copper and gold mineralisation, with down the hole intersections of 1 m at 0.5
g/t and 10 m at 0.12 g/t.
In 2020, the Company reported results from detailed 3D IP and resistivity
surveys undertaken over the Metal Creek prospect, which forms part of the Viti
project. High chargeability anomalies associated with an extensive
north-northwest trending zone of alteration and anomalous multi-element soil
sample and rock grab sample results were delineated. The newly defined high
chargeability anomalies sit near gold and copper mineralisation, associated
with altered porphyritic trachyte dykes, intersected by previous stratigraphic
drilling. These anomalies could represent higher grade mineralised zones.
Zvecan
The Zvecan licence is a small extension licence east of the main Mitrovica
project and was created by changes in municipality boundaries.
2022 Update
During 2022, the Company invested a further £1.2 million to fund drilling
taking the Company's ownership of Vardar to approximately 59.5 per cent. At
the signing date of this report, the Company has invested a further £250,000
and now owns a 61.1 per cent interest in Vardar.
Significant and positive exploration results were delivered by Vardar in
2022, which resulted in the identification of a high sulphidation
Polymetallic Epithermal System at Majdan Peak ("MP"), part of the Mitrovica
licence. Epithermal systems, which are formed at shallow levels in the earth's
crust, are highly prospective for their gold and silver contents and can also
contain lead, zinc and copper.
During the year, drilling focused on the MP target and the results both
supported the potential for epithermal mineralisation of economic grades to be
present and for comparisons to be drawn with the Chelopech copper-gold deposit
in Bulgari. Numerous additional base and precious metal targets were also
defined for future drilling.
The exploration programme consisted of 16 holes, totalling 3709.7 metres(m) of
diamond drilling, including 3 holes (643.5 m) at MP South and 13 holes (3066.2
m) at MP North. All drillholes intersected abundant sulphides, intense
alteration, and multiple generations of veining which are all factors
indicative of a large polymetallic epithermal system. Significant
gold-copper-silver, lead-zinc-silver and gold intersections include:
· Drillhole MP006: 10.8m at 0.48 grammes per tonne ("g/t") gold ("Au"),
0.1 per cent copper ("Cu") and 18 g/t silver ("Ag"), including 3.2m at 1.1 g/t
Au, 0.2 per cent Cu and 50 g/t Ag;
· Drillhole MP006: 6.8m at 4.1 per cent lead ("Pb"), 0.6 per cent zinc
("Zn") and 15 g/t Ag; and
· Drillhole MP013: 16.1m at 0.21 g/t Au.
Following this, on 8 September 2022, the Company announced additional analysis
of drilling and exploration activities in and around the Majdan Peak South
("MPS") area. This analysis generated additional exploration targets
effectively increasing the significant district potential. The additional
targets include Gold Ridge and Red Lead.
The main objective of exploration is to discover an economic deposit of base
and precious metals, and recent drilling has shown this potential. Drilling at
MPS intercepted several noteworthy precious metals intersections, including:
· Drillhole MP002: 8.8 m at 0.34 g/t Au, including 0.9m at 1.52 g/t Au
and 20 g/t Ag; and
· Drillhole MP003: 36.4m at 19 g/t Ag, 0.5 per cent Pb and 0.2 per cent
Zn, including:
o 1.5m at 128 g/t Ag, 0.35 per cent Cu, 1.5 per cent Pb and 0.3 per cent Zn;
o 1.1m at 71 g/t Ag, 0.1 per cent Cu, 0.7 per cent Pb and 0.3 per cent Zn;
o 1.0m at 50 g/t Ag, 0.2 per cent Cu, 0.5 per cent Pb and 0.3 per cent Zn;
o 4.8m at 44 g/t Ag and 0.7 per cent Pb; and
o 1.1m at 46 g/t Ag, 2.7 per cent Pb and 0.6 per cent Zn.
On 14 December 2022, Beowulf released results from detailed geological mapping
over the Red Lead target, located within the Mitrovica Licence, situated
approximately 2km east of the world class Stan Terg lead-zinc deposit, which
is still in production. The target is defined by a two kilometre
East-Northeast trending lead-zinc-copper-gold in soil sample anomaly along
with:
Mineralised trachyte bodies (with up to three per cent zinc from rock
sampling);
· Prominent induced polarisation ("IP") anomalies indicative of
potential sulphide metal sources; and
· Hydrothermal breccias and gossanous outcrops.
Detailed geological mapping undertaken in December identified marble units
together with gossans, trachyte bodies and carbonate alteration, highlighting
the potential for carbonate-replacement style lead-zinc-silver mineralisation.
As this important target shares the same host rocks, and alteration as seen
the neighbouring Stan Terg deposit, it is considered a highly prospective
target for follow up drilling.
ESG
The Company's overall purpose is to be a responsible and innovative company
that creates value for our shareholders, the wider society and the
environment, through sustainably producing critical raw materials needed for
the global transition to a Green Economy.
On 13 May 2022, regarding Community Initiatives, the Company announced that
discussions were taking place with the responsible local agency in Jokkmokk
about conducting surveys to map the current workforce and future workforce,
school leavers and university students in the region, to determine what
initiatives need to be started to ensure sufficient locally based skilled
persons are available for work at the mine or in other businesses established
by the economic stimulus created by the mine.
The Company wants to be recognised for living its values of Respect,
Partnership and Responsibility. In its recent ESG work it has identified, as
material to the Company's activities, the following main Sustainable
Development Goals and relevant actions under each goal which the Company will
be focusing on:
· Goal 6: Ensure availability and sustainable management of water and
sanitation for all
o Target 6.1 - By 2030, achieve universal and equitable access to safe and
affordable drinking water for all
o Target 6.4 - By 2030, substantially increase water-use efficiency across
all sectors and ensure sustainable withdrawals and supply of freshwater to
address water scarcity and substantially reduce the number of people suffering
from water scarcity
· Goal 8: Decent work and economic growth
o Target 8.2 - Achieve higher levels of economic productivity through
diversification, technological upgrading and innovation, including through a
focus on high-value added and labour-intensive sectors
o Target 8.4 - Improve progressively, through 2030, global resource
efficiency in consumption and production and endeavour to decouple economic
growth from environmental degradation, in accordance with the 10-year
framework of programmes on sustainable consumption and production, with
developed countries taking the lead
o Target 8.5 - By 2030, achieve full and productive employment and decent
work for all women and men, including young people and persons with
disabilities, and equal pay for work of equal value
· Goal 9: Industry, innovation and infrastructure
o Target 9.1 - Develop quality, reliable, sustainable and resilient
infrastructure, including regional and transborder infrastructure, to support
economic development and human well-being, with a focus on affordable and
equitable access for all
o Target 9.4 - By 2030, upgrade infrastructure and retrofit industries to
make them sustainable, with increased resource-use efficiency and greater
adoption of clean and environmentally sound technologies and industrial
processes, with all countries taking action in accordance with their
respective capabilities
· Goal 12: Responsible production and consumption
o Target 12.2 - By 2030, achieve the sustainable management and efficient
use of natural resources
o Target 12.5 - By 2030, substantially reduce waste generation through
prevention, reduction, recycling and reuse
o Target 12.6 - Encourage companies, especially large and transnational
companies, to adopt sustainable practices and to integrate sustainability
information into their reporting cycle
· Goal 13: Climate Action
o Target 13.2 - Integrate climate change measures into national policies,
strategies and planning
When it comes to the development of the Company's projects and with Kallak as
the frontrunner, the above goals and our future compliance with The Equator
Principles are being factored into our thinking, design, engineering, and
planning of our operations and management systems.
The Company's ESG Policy is available on the website following the link below:
https://beowulfmining.com/about-us/esg-policy/
(https://beowulfmining.com/about-us/esg-policy/)
REMUNERATION REPORT
The Directors have chosen to voluntarily present an unaudited remuneration
report although is not required by the Companies Act 2006. Details of the
Remuneration Committee's composition and responsibilities are set out in the
Corporate Governance Report and its terms of reference can be found on the
Group's website: https://beowulfmining.com (https://beowulfmining.com)
Executive Directors' terms of engagement
Mr Budge was the sole Executive Director and Chief Executive Officer during
the reporting period. His annual salary was £210,000 (2021: £180,000). Post
period, Mr Budge stepped down as CEO on 3 May 2023.
Post period, Mr Röstin assumed the role of Executive Chairman and interim CEO
effective 3 May 2023 at the time of Mr Budge's resignation.
Non-Executive Directors' terms of engagement
The Non-Executive Directors have specific terms of engagement under a letter
of appointment. Their remuneration is determined by the Board. In the event
that a Non-Executive Director undertakes additional assignments or work for
the Company, this is covered under a separate consultancy agreement.
Mr Davies annual fee is £36,000 per annum (2021: £33,000). Mr Davies has a
consultancy agreement with the Company for the provision of exploration advice
over and above his Non-Executive duties. Mr Davies has a one month notice
period under his letter of appointment.
Mr Littorin resigned as Non-Executive Director and Mr Röstin was appointed as
Non-Executive Director on 31 October 2022. Under Mr Röstin's letter of
appointment, he is paid a fee in Swedish Krona of 500,000 per annum. Mr Rostin
has a notice period of one month under his letter of appointment.
Indemnity Agreements
Pursuant to the Companies Act 2006 and the Company's articles of association,
the Board may exercise the powers of the Company to indemnify its Directors
against certain liabilities, and to provide its Directors with funds to meet
expenditure incurred, or to be incurred, in defending certain legal
proceedings or in connection with certain applications to the court. In
exercise of that power, and by resolution of the Board on 26 July 2016, the
Company has agreed to enter into this Deed of Indemnity with each Director.
Aggregate Directors' Remuneration
The remuneration paid to the Directors in accordance with their agreements,
during the years ended 31 December 2022 and 31 December 2021, was as follows:
Name Position Salary & Fees(1) Benefits(2) Pension(3) Share-based payments 2022 2021
Total Total
£ £ £ £ £
Mr K R Budge(4) Chief Executive Officer 210,000 887 5,667 158,817 375,371 186,377
Mr C Davies Non-Executive Director 39,000 - - 14,528 53,528 33,000
Mr J Rostin(5) Non-Executive Director 25,328 - - - 25,328 -
Mr SO Littorin Non-Executive Director 34,215 - - - 34,215 38,041
Total 308,543 887 5,667 173,345 488,442 257,418
Notes:
(1) Does not include expenses reimbursed to the Directors.
(2) Personal life insurance policy
(3) Employer contributions to personal pension.
(4) Post period, Kurt Budge resigned as CEO effective 3 May 2023
(5) Post period, Johan Röstin assumed the role of Executive Chairman /
Interim CEO.
Each Director is also paid all reasonable expenses incurred wholly,
necessarily, and exclusively in the proper performance of his duties.
The beneficial and other interests of the Directors holding office on 31
December 2022 in the issued share capital of the Company were as follows:
ORDINARY SHARES 31 December 2022 31 December 2021
Mr K R Budge 5,957,997 5,957,997
Mr C Davies 88,800 88,800
As at 31 December 2022, 8,500,000 options have vested.
ORDINARY SHARES UNDER OPTION NUMBER EXERCISE PRICE EXPIRY DATE
Mr K R Budge 3,500,000 7.35 pence 14 January 2024
Mr K R Budge 9,500,000 5.25 pence 27 September 2032
Mr K R Budge 2,500,000 1 pence 27 September 2032
Mr C Davies 2,500,000 7.35 pence 14 January 2024
Mr C Davies 2,000,000 5.25 pence 27 September 2032
As at 31 December 2021, all options have vested.
ORDINARY SHARES UNDER OPTION NUMBER EXERCISE PRICE EXPIRY DATE
Mr K R Budge 3,500,000 7.35 pence 14 January 2024
Mr C Davies 2,500,000 12 pence 26 January 2022
Mr C Davies 2,500,000 7.35 pence 14 January 2024
ON BEHALF OF THE REMUNERATION COMMITTEE
Chris Davies
Non-Executive Director
2 June 2023
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £ £
CONTINUING OPERATIONS
Administrative expenses (1,806,582) (1,503,049)
Impairment of property, plant and equipment 9 - (48,966)
Impairment of exploration assets 8 (36,988) -
OPERATING LOSS (1,843,570) (1,552,015)
Gain on disposal of investment 21,951 -
Finance costs 3 (304,806) (256)
Finance income 3 176 71
Grant income 6 84,797 66,589
LOSS BEFORE TAX (2,041,452) (1,485,611)
Tax expense 5 - -
LOSS FOR THE YEAR (2,041,452) (1,485,611)
Loss attributable to:
Owners of the parent (1,948,459) (1,351,179)
Non-controlling interests 15 (92,993) (134,432)
(2,041,452) (1,485,611)
Loss per share attributable to the ordinary equity holder of the parent:
Basic and diluted (pence) 7 (0.23) (0.16)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £ £
LOSS FOR THE YEAR (2,041,452) (1,485,611)
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Exchange losses arising on translation of foreign operations (32,945) (794,368)
(32,945) (794,368)
TOTAL COMPREHENSIVE LOSS (2,074,397) (2,279,979)
Total comprehensive loss attributable to:
Owners of the parent (2,020,889) (2,110,892)
Non-controlling interests 15 (53,508) (169,087)
(2,074,397) (2,279,979)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Note 2022 2021
£ £
ASSETS
NON-CURRENT ASSETS
Intangible assets 8 13,002,465 11,235,656
Property, plant and equipment 9 129,715 133,428
Loans and other financial assets 11 5,181 5,247
Right-of-use asset 12 19,279 7,401
13,156,640 11,381,732
CURRENT ASSETS
Trade and other receivables 13 220,427 183,139
Cash and cash equivalents 14 1,776,556 3,336,134
1,996,983 3,519,273
TOTAL ASSETS 15,153,623 14,901,005
EQUITY
SHAREHOLDERS' EQUITY
Share capital 16 8,317,106 8,317,106
Share premium 18 24,689,311 24,689,311
Capital contribution reserve 18 46,451 46,451
Share based payment reserve 18 516,098 668,482
Merger reserve 18 137,700 137,700
Translation reserve 18 (1,289,415) (1,216,985)
Accumulated losses 18 (20,323,414) (18,470,675)
12,093,837 14,171,390
Non-controlling interests 15 568,732 325,039
TOTAL EQUITY 12,662,569 14,496,429
LIABILITIES
CURRENT LIABILITIES
Trade and other payables 19 625,730 357,236
Deferred income 20 - 39,849
Lease liability 21 10,840 7,491
Borrowings 22 1,845,947 -
2,482,517 404,576
NON-CURRENT LIABILITIES
Lease liability 8,537 -
8,537 -
TOTAL LIABILITIES 2,491,054 404,576
TOTAL EQUITY AND LIABILITIES 15,153,623 14,901,005
The financial statements were approved and authorised for issue by the Board
of Directors on 2 June 2023 and were signed on its behalf by:
Mr J Rostin - Director
Company Number 02330496
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Note Share capital Share premium Merger reserve Capital contribution reserve Share based payments reserve Translation reserve Accumulated Totals Non - controlling interest Totals
£ £ £ £ £ £ losses £ £ £
£
At 1 January 2021 8,281,752 24,684,737 137,700 46,451 732,185 (457,272) (17,083,186) 16,342,367 394,113 16,736,480
Loss for the year - - - - - - (1,351,179) (1,351,179) (134,432) (1,485,611)
Foreign exchange translation - - - - - (759,713) - (759,713) (34,655) (794,368)
Total comprehensive income - - - - - (759,713) (1,351,179) (2,110,892) (169,087) (2,279,979)
Transactions with owners
Issue of share capital 16 35,354 23,334 - - - - - 58,688 - 58,688
Cost of issue 16 - (18,760) - - - - - (18,760) - (18,760)
Step up interest in subsidiary 10 - - - - - - (100,013) (100,013) 100,013 -
Transfer of reserve on option exercised - - - - (63,703) - 63,703 - - -
At 31 December 2021 8,317,106 24,689,311 137,700 46,451 668,482 (1,216,985) (18,470,675) 14,171,390 325,039 14,496,429
Loss for the year - - - - - - (1,948,459) (1,948,459) (92,993) (2,041,452)
Foreign exchange translation - - - - - (72,430) - (72,430) 39,485 (32,945)
Total comprehensive income - - - - - (72,430) (1,948,459) (2,020,889) (53,508) (2,074,397)
Transactions with owners
Equity-settled share-based payment transactions 17 - - - - 240,537 - - 240,537 - 240,537
Step up interest in subsidiary 10 - - - - - - (297,201) (297,201) 297,201 -
Transfer of reserve on option lapsed - - - - (392,921) - 392,921 - - -
At 31 December 2022 8,317,106 24,689,311 137,700 46,451 516,098 (1,289,415) (20,323,414) 12,093,837 568,732 12,662,569
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
2022 2021
Note £ £
Cash flows from operating activities
Loss before income tax (2,041,452) (1,485,611)
Depreciation of property, plant and equipment 4 45,133 36,790
Equity-settled share-based transactions 240,537 23,334
Impairment of exploration costs 4 36,988 -
Impairment of property, plant and equipment 9 - 48,966
Finance income 3 (176) (71)
Finance cost 3 304,806 256
Grant income 6 (84,797) (66,589)
Gain on sale of property, plant and equipment - (17,414)
Gain on sale of investment (21,951) -
Amortisation of right-of-use assets 12 6,384 5,630
Unrealised foreign exchange losses 55,337 292,452
(1,459,191) (1,162,257)
Increase in trade and other receivables (36,535) (12,796)
Decrease in trade and other payables (43,827) (174,732)
Net cash used in operating activities (1,539,553) (1,349,785)
Cash flows from investing activities
Purchase of intangible assets 8 (1,536,674) (735,847)
Purchase of property, plant and equipment 9 (34,397) (86,219)
Proceeds from sale of property, plant and equipment - 24,806
Disposal of investments 4 21,951 -
Grant receipt 84,797 24,031
Grant repaid 20 (39,849) -
Interest received 3 176 71
Net cash used in investing activities (1,503,996) (773,158)
Cash flows from financing activities
Proceeds from issue of shares in prior year - 1,392,081
Proceeds from issue of shares 16 - 35,354
Payment of share issue costs 16 - (18,760)
Lease principal 21 (6,347) (5,594)
Lease interest paid 21 (264) (256)
Proceeds from borrowings, net of issue costs 22 1,554,381 -
Interest paid (10) -
Net cash from financing activities 1,547,760 1,402,825
Decrease in cash and cash equivalents (1,495,789) (720,118)
Cash and cash equivalents at beginning of year 3,336,134 4,329,414
Effect of foreign exchange rate changes (63,789) (273,162)
Cash and cash equivalents at end of year 1,776,556 3,336,134
1. ACCOUNTING POLICIES
Nature of operations
Beowulf Mining plc (the "Company") is domiciled in England. The Company's
registered office is 201 Temple Chambers, 3-7 Temple Avenue, London, EC4Y 0DT.
These consolidated financial statements comprise the Company and its
subsidiaries (collectively the "Group" and individually "Group companies").
The Group is engaged in the acquisition, exploration and evaluation of natural
resources assets and has not yet generated revenues.
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below:
Going concern
At 31 December 2022, the Group had a cash balance of £1.78 million (2021:
£3.34 million) and the Company had a cash balance of £1.67 million (2021:
£3.08 million).
Management prepared cash flow forecasts which indicate that although there is
no immediate short term funding requirement, the Group would need to raise
further funds within a short period of the 12 months used in the going concern
cashflow model for corporate overheads and to advance its key projects and
investments. This conclusion has been reached following management's review of
both cost and foreign exchange sensitivities and potential key hires required
to advance projects. Management is confident the Group will have sufficient
cash after taking into account a reasonable movement in these currencies.
On 20 December 2022, the Company secured a Rights Issue in Sweden and a
PrimaryBid Offer and Placing in the UK As part of this the Company received
underwriting commitments to the value of a maximum of SEK 60 million, or
approximately 70 per cent of the intended Rights Issue. Therefore, at the year
end, the Directors were confident that the Group would be able to raise
sufficient capital to fund the Group's key projects and investments.
Since the year end, the Group have completed the Rights Issue raising SEK 62.8
million (approximately £5 million) before expenses and the PrimaryBid Offer
and Placing raising an aggregate of £1.3 million before expenses. As a
result, the underwriting commitments were not activated.
Following the year end, it became apparent that due to the timing of the
receipt of the funds from the Rights Issue the Company will not be in a
position to pay back the bridging loan facility at its maturity. The outcome
of this is that the holder of the loan enforced the penalty interest for
entering another 30-day period, which was circa 1 million SEK. The loan
principal and interest totalling £2.13m was repaid via a deduction to the
gross proceeds from the Rights Issue.
The net funds raised after the loan repayment and share issue transaction
costs are £3.72 million.
The Board continues to adopt the going concern basis to the preparation of the
financial statements. The Group is confident it has raised sufficient funds
to continue as a going concern for at least 12 months from the date of
approval of the financial statements.
Basis of preparation
The consolidated and individual Company financial statements have been
prepared in accordance with UK adopted international accounting standards. The
policies have been consistently applied to both the parent Company and Group.
The financial statements are presented in GB Pounds Sterling. They are
prepared on the historical cost basis or the fair value basis where the fair
valuing of relevant assets and liabilities has been applied.
Merger relief under s612 of the Companies Act 2006 removes the requirement to
credit the share premium account and where the conditions are met, the relief
must be applied. However, it allows the investment to be accounted for at the
nominal value of the shares issued or the fair value of the consideration.
Where the investment is to be recorded at fair value, then the credit will be
to the merger relief reserve.
The conditions to qualify for merger relief are:
· the consideration for shares in another company includes issued
shares;
· on completion of the transaction, the company issuing the shares will
have secured at least a 90% equity holding in the other company.
Merger relief was required to be applied in acquisition of Grafintec, in which
the Company obtained 100% of the share capital of Grafintec for shares issued
by the Company. Further details of this acquisition are outlined in note 10.
New standards, amendments and interpretations
Standards and interpretations adopted during the year
Information on new standards, amendments and interpretations that are relevant
to the Group and Company annual report and accounts is provided below:
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS
37);
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16);
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS
1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3).
These standards have no material impact on the Group or Company.
Standards, amendments and interpretations that are not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January
2023:
· Amendments to IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current and Amendments to IAS
1: Classification of Liabilities as Current or Non-current - Deferral of
Effective Date - effective 1 January 2023*
· Amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting Policies - effective 1 January
2023
· Amendments to IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors -Definition of Accounting Estimates - effective 1 January
2023
· Amendments to IAS 12 Income Taxes - Deferred Tax Related to Assets
and Liabilities arising from a Single Transaction - effective 1 January 2023
The following amendments are effective for the period beginning 1 January
2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback)
· IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current)
· IAS 1 Presentation of Financial Statements (Amendment - Non-current
Liabilities with Covenants)
Beowulf Mining Plc is currently assessing the impact of these new accounting
standards and amendments.
Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the amounts reported for
income and expenses during the year and the amounts reported for assets and
liabilities at the balance sheet date. However, the nature of estimation means
that the actual outcomes could differ from those estimates. The estimates and
underlying assumptions are reviewed on an on-going basis. Revisions to
accounting estimates are recognised in the period in which the revision is
made.
Critical judgements
Loan treatment
The loan agreement provides that in the event of default the lender the option
to convert the outstanding principal and accumulated interest into shares in
the Company at a discounted valuation. The Directors considered whether the
definition of default is genuine or whether, in substance, it represents an
option granted to the lender which can be exercised at any time. The Directors
are satisfied that the default provisions are genuine and therefore there the
loan does not contain an embedded derivative.
The bridging loan constitutes a financial liability as in the event of default
the Company settles its loan obligation using its own equity instruments,
which are variable depending on the loan balance and share price and therefore
does not include an equity component.
Control of Vardar Group
The other key areas of judgement and sources of estimation uncertainty that
have a significant risk of causing material adjustment to the carrying amounts
of assets and liabilities within the next financial year is the judgment
exercised in assessing the control of the Vardar Group and in respect of the
Parent Company the recoverability of the loans made to subsidiary
undertakings.
The Company was assessed to have control on the 1 April 2019 as the Company
was able to exercise power over Vardar through the appointment of Kurt Budge
as Investor Director. The investment agreement conveyed substantive rights to
the Investor Director and through the combination of the increased
shareholding and these rights the Company was able to affect the overall
returns of the investee. This judgement has continued to be applied
consistently throughout the year ended 31 December 2022.
Exploration costs capitalisation
The Group has to apply judgement in determining whether exploration and
evaluation expenditure should be capitalised within intangible assets as
exploration costs or expensed. The Group has a policy of capitalising all
costs which relate directly to exploration costs (as set out above).
Management apply judgement in determining if Directors' remuneration costs are
directly attributable to a specific exploration area (project) and should be
capitalised or expensed as incurred. The total value of exploration costs
capitalised as at each of the reporting dates is set out in Note 8.
Sources of estimation and uncertainty
Åtvidaberg licence
The Åtvidaberg licence is located in the Bergslagen area, southern Sweden. It
was renewed during 2019 due to COVID-19, the exploration permit was awarded an
additional year to the existing term and now expires on 30 May 2024.
Bergslagen is one of Europe's oldest mining districts and yielded a
substantial portion of Sweden's mineral wealth in the 1800-1900s, with several
large mines and hundreds of smaller mines producing copper, zinc, lead, gold,
silver, and iron ore. Current operating mines in the area include Boliden's
Garpenberg and Lundin Mining's Zinkgruvan. Most of southern Bergslagen has
seen little modern exploration, yet it hosts Bersbo, one of Sweden's largest
early copper mines, and Zinkgruvan, Sweden's most important zinc mine.
During the year, no fieldwork was undertaken, due to COVID-19 restrictions and
as the Company's exploration focus moved to Kosovo. However, the Company is
now in discussions with potential partners to continue with the next stage of
work on the licence. At the date of this report the Company will have two
years remaining on the term of the licence.
Exploration assets
The Board has considered the impairment indicators as outlined in the
Company's accounting policies and having done so is of the opinion that no
impairment provisions are required for Company's main assets, Kallak,
Aitolampi, Mitrovica, Viti and Åtvidaberg (see note 8).
Sources of estimation and uncertainty
Expected credit losses
The Company, in applying the ECL model under IFRS 9, must make assumptions
when implementing the forward-looking ECL model. This model is required to be
used to assess the intercompany loans receivable from subsidiaries for
impairment.
Estimations were made regarding the credit risk of the counterparty and the
underlying probability of default in each of the credit loss scenarios. The
scenarios identified by management included Production, Divestment, Fire-sale
and Failure. These scenarios considered technical data, necessary licences to
be awarded, the Company's ability to raise finance, and ability to sell the
project. A reasonable change in the probability weightings of both the
downside scenarios of failure and fire-sale of 3% would result in further
impairment of £626,927 (2021: £624,464).
Basis of consolidation
(i) Subsidiaries and acquisitions
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company (and its subsidiaries) made
up to 31 December each year. Control is recognised where an investor is
exposed, or has rights, to variable returns from its investment with the
investee, and has the ability to affect these returns through its power over
the investee.
The results of subsidiaries acquired or disposed of during the year are
included in the statement of comprehensive income from the effective date of
acquisition, or up to the effective date of disposal, as appropriate.
Non-controlling interests in subsidiaries are presented separately from the
equity attributable to equity owners of the parent Company. When changes in
ownership in a subsidiary do not result in a loss of control, the
non-controlling shareholders' interests are initially measured at the
non-controlling interests' proportionate share of the subsidiaries net assets.
Subsequent to this, the carrying amount of non-controlling interests is the
amount of those interests at initial recognition plus the non-controlling
interests' share of subsequent changes in equity. Total comprehensive income
is attributed to non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
(ii) Transactions eliminated on consolidation
Intra-Group balances and any unrealised gains and losses or income and
expenses arising from intra-Group transactions are eliminated in preparing the
consolidated financial statements.
Business combinations
On acquisition, the assets, liabilities, and contingent liabilities of a
subsidiary are measured at their fair value at the date of acquisition. Any
excess of the cost of the acquisition over the fair values of the identifiable
net assets acquired is recognised as goodwill. If the aggregate of the
acquisition-date fair value of the consideration transferred and the amount
recognised for the non-controlling interest (and where the business
combination is achieved in stages, the acquisition-date fair value of the
acquirer's previously held equity interest in the acquiree) is lower than the
fair value of the assets, liabilities and contingent liabilities and the fair
value of any pre-existing interest held in the business acquired, the
difference is recognised in profit and loss.
Intangible assets - deferred exploration costs
All costs incurred prior to the application for the legal right to undertake
exploration and evaluation activities on a project are expensed as incurred.
Each asset is evaluated annually at 31 December, to determine whether there
are any indications that impairment exists.
Exploration and evaluation costs arising following the application for the
legal right, are capitalised on a project-by-project basis, pending
determination of the technical feasibility and commercial viability of the
project. Costs incurred include appropriate employee costs and costs
pertaining to technical and administrative overheads.
Exploration and evaluation activity include:
• researching and analysing historical
exploration data;
• gathering exploration data through
topographical, geochemical and geophysical studies;
• exploratory drilling, trenching and
sampling;
• determining and examining the volume
and grade of the resource;
• surveying transportation and
infrastructure requirements; and
• conducting market and finance
studies.
Administration costs that are not directly attributable to a specific
exploration area are expensed as incurred.
Exploration costs are carried at historical cost less any impairment losses
recognised. When a project is deemed to no longer have commercially viable
prospects to the Group, exploration costs in respect of that project are
deemed to be impaired and written off to the statement of comprehensive
income. Once the decision for investment is taken, the assets will be assessed
for impairment and to the extent that these are not impaired, will be
classified as development assets. At the point that production commences these
assets will be depreciated.
Impairment
Whenever events or changes in circumstance indicate that the carrying amount
of an asset may not be recoverable an asset is reviewed for impairment. An
asset's carrying value is written down to its estimated recoverable amount
(being the higher of the fair value less costs to sell and value in use) if
that is less than the asset's carrying amount.
Impairment reviews for exploration costs are carried out on a project by
project basis, with each project representing a potential single cash
generating unit. An impairment review is undertaken when indicators of
impairment arise such as:
(i) unexpected geological occurrences that render the resource
uneconomic;
(ii) title to the asset is compromised;
(iii) variations in mineral prices that render the project
uneconomic;
(iv) substantive expenditure on further exploration and evaluation
of mineral resources is neither budgeted nor planned; and
(v) the period for which the Group has the right to explore has
expired and is not expected to be renewed.
Property, plant and equipment
Items of property, plant and equipment are stated at historical cost less
accumulated depreciation.
Depreciation is provided at the following annual rates in order to write off
each asset over its estimated useful life.
Office equipment - 25 per cent on reducing balance
Computer equipment - 25 per cent on reducing balance
Motor Vehicles - 20 per cent on reducing balance
Machinery and equipment - 20 to 25 per cent on reducing balance
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at each balance sheet date.
Leased assets
When entering into a contract the Group assesses whether or not a lease
exists. A lease exists if a contract conveys a right to control the use of an
identified asset under a period of time in exchange for consideration. Leases
of low value items and short-term leases (leases of less than 12 months at the
commencement date) are charged to the profit or loss on a straight-line basis
over the lease term in administrative expenses.
The Group recognises right-of-use assets at cost and lease liabilities at the
lease commencement date based on the present value of future lease payments.
The right-of-use assets are amortised on a straight-line basis over the length
of the lease term. The lease liabilities are recognised at amortised cost
using the effective interest rate method. Discount rates used reflect the
incremental borrowing rate specific to the lease.
Investments in subsidiaries
Investments in subsidiary undertakings are stated at cost less provision for
any impairment in value.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original maturities
of three months or less.
Financial assets
The Group classifies all of its financial assets at amortised cost.
Management determines the classification of its financial assets at initial
recognition.
Amortised cost
The Group's financial assets held at amortised cost comprise trade and other
receivables, cash and cash equivalents and loans and other financial assets in
the consolidated statement of financial position.
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through financial assets where the objective is to hold their assets in order
to collect contractual cash flows and the contractual cash flows are solely
payments of the principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables are recognised based on the
simplified approach within IFRS 9 using the lifetime ECLs. During this process
the probability of the non-payment of the trade receivables is assessed. This
probability is then multiplied by the amount of the expected loss arising from
default to determine the lifetime ECL for the trade receivables. For trade
receivables, which are reported net; such provisions are recorded in a
separate provision account with the loss being recognised within
administrative expenses in the consolidated statement of comprehensive income.
On confirmation that the trade receivable will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
Expected credit loss provisions for other receivables are recognised based a
forward-looking expected credit loss model. The methodology used to determine
the amount of the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset. For
those where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net
basis are recognised.
Financial liabilities
The Group's financial liabilities include trade and other payables and
borrowings. All financial liabilities are recognised initially at fair value,
net of transaction costs incurred, and are subsequently stated at amortised
cost, using the effective interest method.
Loans and borrowings with settlement terms that that fail the fixed for fixed
criterion will be treated as a containing an embedded derivative liability,
where this is recognised the loan value will be allocated between the
derivative value and the loan residual which will be carried amortised cost.
Loans and borrowings are derecognised when the obligation is extinguished.
Unless otherwise indicated, the carrying values of the Group's financial
liabilities measured at amortised cost represents a reasonable approximation
of their fair values.
Fair value
All assets and liabilities for which fair value is measured or disclosed in
the consolidated financial statements are
categorised within the fair value hierarchy. The fair value hierarchy
prioritises the inputs to valuation techniques used to measure fair value. The
Group uses the following hierarchy for determining and disclosing the fair
value of financial instruments and other assets and liabilities for which the
fair value was used:
- level 1: quoted prices in active markets for identical assets or
liabilities;
- level 2: inputs other than quoted prices included in level 1 that
are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices); and
- level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs)
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds
received, net of direct issue costs. Where equity instruments are issued as
part of an acquisition they are recorded at their fair value on the date of
acquisition.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised, using the liability method, in respect of
temporary differences between the carrying amount of the Group's assets and
liabilities and their tax base.
Deferred tax assets and deferred tax liabilities are offset, if a legally
enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and the
same taxation authority. Any remaining deferred tax asset is recognised only
when, on the basis of all available evidence, it can be regarded as probable
that there will be suitable taxable profits, within the same jurisdiction, in
the foreseeable future against which the deductible temporary difference can
be utilised.
Deferred tax is determined using tax rates that are expected to apply in the
periods in which the asset is realised or liability settled, based on tax
rates and laws that have been enacted or substantively enacted by the balance
sheet date.
Current and deferred tax is recognised in the profit or loss, except when the
tax relates to items charged or credited directly in equity, in which case the
tax is also recognised directly in equity.
Foreign currencies
The individual financial statements of each Group entity are presented in the
currency of the primary economic environment in which the entity operates (its
functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each entity are expressed in
GB Pounds Sterling which is the presentation currency for the Group and
Company financial statements. The functional currency of the Company is the
GB Pounds Sterling.
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity's functional currency (foreign currencies)
are recorded at the rates of exchange prevailing on the dates of the
transactions. At each balance sheet date, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at the balance
sheet date.
Exchange differences arising on the settlement of monetary items and on the
retranslation of monetary items are included in the statement of comprehensive
income for the period.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are expressed in GB Pounds
Sterling using exchange rates prevailing at the balance sheet date. Income and
expense items are translated at the average exchange rates for the period.
Exchange differences arising, if any, are classified as other comprehensive
income and are transferred to the Group's translation reserve.
Foreign currency movements arising from the Group's net investment, which
comprises equity and long-term debt, in subsidiary companies whose functional
currency is not the GB Pounds Sterling are recognised in the translation
reserve, included within equity until such time as the relevant subsidiary
company is sold, whereupon the net cumulative foreign exchange difference
relating to the disposal is transferred to profit and loss.
Share-based payment transactions
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the income statement over the
vesting period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each balance
sheet date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually vest.
Market vesting conditions are factored into the fair value of all options
granted. As long as all other vesting conditions are satisfied, a charge is
made irrespective of whether market vesting conditions are satisfied. The
cumulative expense is not adjusted for failure to achieve a market vesting
condition.
Where terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the income statement over the
remaining vesting period.
Where equity instruments are granted to persons other than employees, the
income statement or share premium account, if appropriate, are charged with
the fair value of goods and services received.
Government grant
Government grants received on capital expenditure are generally deducted in
arriving at the carrying amount of the asset purchased. Grants for revenue
expenditure are recorded gross in the Group income statement. Where retention
of a government grant is dependent on the Group satisfying certain criteria,
it is initially recognised as deferred income. When the criteria for retention
have been satisfied, the deferred income balance is released to the
consolidated statement of comprehensive income or netted against the asset
purchased.
3. FINANCE INCOME AND COSTS
Group Company
2022 2021 2022 2021
£ £ £ £
Finance income:
Deposit account interest 176 71 170 71
176 71 170 71
Finance costs:
Interest on lease liabilities 267 256 - -
Interest on loans and borrowings 304,529 - 304,529 -
Other interest paid 10 - - -
304,806 256 304,529 -
7. BASIC AND DILUTED LOSS PER SHARE
The calculation of basic and diluted loss per share at 31 December 2022 was
based on the loss attributable to ordinary shareholders of £1,948,459 (2021:
£1,351,179) and a weighted average number of Ordinary Shares outstanding
during the year ended 31 December 2022 of 831,710,636 (2021: 829,879,971)
calculated as follows:
2022 2021
£ £
Loss attributable to ordinary shareholders (1,948,459) (1,351,179)
Weighted average number of ordinary shares
2022 2021
Number Number
Number of shares in issue at the beginning of the year 831,710,636 607,815,562
Effect of shares issued during year - 222,064,409
Weighted average number of ordinary shares in issue for the year 831,710,636 829,879,971
The diluted earnings per share is identical to the basic loss per share as the
exercise of warrants and options would be anti-dilutive.
8. INTANGIBLE ASSETS - Group
Exploration
Costs
£
COST
At 1 January 2021 11,371,916
Additions for the year 682,367
Foreign exchange movements (818,627)
At 31 December 2021 11,235,656
At 1 January 2022 11,235,656
Additions for the year - cash 1,536,674
Additions for the year - non-cash 314,272
Foreign exchange movements (47,149)
Impairment (36,988)
At 31 December 2022 13,002,465
NET BOOK VALUE
At 31 December 2022 13,002,465
At 31 December 2021 11,235,656
The net book value of exploration costs is comprised of expenditure on the
following projects:
2022 2021
£ £
Kallak 7,666,563 7,210,380
Åtvidaberg 358,694 363,131
Ågåsjiegge 7,718 6,482
Pitkäjärvi 1,641,836 1,457,826
Karhunmaki 56,089 51,622
Rääpysjärvi 148,430 73,859
Merivaara - 36,096
Mitrovica 2,430,150 1,376,598
Viti 687,065 659,662
Emas 1,663 -
Luopioinen 4,257 -
13,002,465 11,235,656
Total Group exploration costs of £13,002,465 are currently carried at cost in
the financial statements. The Group will need to raise funds and/or bring in
joint venture partners to further advance exploration and development work. An
amount of £262,684 was recorded against the projects for services provided by
the Directors during the year (2021: £121,226).
In Sweden, on 22 March 2022, the Swedish Government awarded an Exploitation
Concession for Kallak North Iron Ore Project, then, in June 2022, the Company
appointed Ulla Sandborgh as CEO of JIMAB, since starting, she has commenced
the development of the Company's application for an Environmental Permit for
Kallak North.
The Company anticipates the start of Kallak North Pre-feasibility work in Q2
2023.
The Åtvidaberg licence is located in the Bergslagen area, southern Sweden.
Bergslagen is one of Europe's oldest mining districts and yielded a
substantial portion of Sweden's mineral wealth in the 1800-1900s, with several
large mines and hundreds of smaller mines producing copper, zinc, lead, gold,
silver, and iron ore. Current operating mines in the area include Boliden's
Garpenberg and Lundin Mining's Zinkgruvan. Most of southern Bergslagen has
seen little modern exploration, yet it hosts Bersbo, one of Sweden's largest
early copper mines, and Zinkgruvan, Sweden's most important zinc mine.
During the year, no fieldwork was undertaken as the Company focused resources
and expenditure on Grafintec and Vardar. The Company continues to evaluate
partnering options for Åtvidaberg.
In Finland, the development of downstream capabilities is a key part of
Grafintec's strategy and the Company continues to form partnerships with other
companies to achieve this. On 26 September 2022, Beowulf announced that
Grafintec had signed a Memorandum of Understanding with Qingdao Hensen
Graphite Ltd, which includes an agreed framework and key terms on which both
companies are collaborating with regards to establishing an anode materials
hub in Finland.
To support a sustainable graphite anode value chain in Finland, Grafintec is
focused on expanding its resource footprint and increasing its raw materials'
inventory, primary and recycled, feeding downstream processing, leveraging
renewable power, targeting net zero CO2 emissions across the supply chain.
The Company's most advanced natural flake graphite project, Aitolampi, has an
Indicated and Inferred Mineral Resource of 26.7 Mt at 4.8 per cent TGC for
1,275,000 tonnes of contained graphite. In addition to Aitolampi, the Company
has other graphite exploration prospects, including Rääpysjärvi for which
positive exploration results were announced during Q4 2022.
In Kosovo, Vardar has two exploration licence areas, Mitrovica and Viti.
Significant progress continues to be made in Kosovo. The Company has also made
further investments to fund drilling and taking the Company's ownership of
Vardar to approximately 59.5 per cent.
In 2022, the focus was on drilling at the Mitrovica licence area and this
resulted in the discovery of a large polymetallic epithermal deposit and new
exploration targets for drilling.
In the year, an impairment provision of £36,988 was recognised for project
costs capitalised for projects at Merivaara (2021: £Nil) on the basis that
the licence was not renewed. In respect of the other licence areas, no
impairment indicators have been identified. The impairment is charged as an
expense and included within the consolidated income statement.
13. TRADE AND OTHER RECEIVABLES
Group Company
2022 2021 2022 2021
£ £ £ £
Other receivables 78,148 122,701 - -
VAT 121,284 37,195 32,289 17,942
Prepayments and accrued income 20,995 23,243 20,995 23,243
220,427 183,139 53,284 41,185
Included in other receivables is a deposit of £17,724 held by Finnish
regulatory authorities (2021: £16,810).
14. CASH AND CASH EQUIVALENTS
Group Company
2022 2021 2022 2021
£ £ £ £
Bank accounts 1,776,556 3,336,134 1,667,840 3,075,741
1,776,556 3,336,134 1,667,840 3,075,741
15. NON-CONTROLLING INTERESTS
The Group has material non-controlling interests arising from its subsidiaries
Wayland Copper Limited and Vardar Minerals Limited. These non-controlling
interests can be summarised as follows;
2022 2021
£ £
Balance at 1 January 325,039 394,113
Total comprehensive loss allocated to NCI (53,508) (169,087)
Effect of step acquisitions 297,201 100,013
Total 568,732 325,039
2022 2021
£ £
Wayland Copper Limited (163,666) (162,484)
Vardar Minerals Limited 732,398 487,523
Total 568,732 325,039
Wayland Copper Limited is a 65.25% per cent owned subsidiary of the Company
that has material non-controlling interests ("NCI").
Summarised financial information reflecting 100 per cent of the Wayland's
relevant figures is set out below:
2022 2021
£ £
Administrative expenses (2,931) (1,212)
Loss after tax (2,931) (1,212)
Loss allocated to NCI (1,019) (422)
Other comprehensive loss allocated to NCI (155) (396)
Total comprehensive loss allocated to NCI (1,174) (818)
Current assets 15,298 17,498
Current liabilities (486,280) (485,102)
Net liabilities (470,982) (467,604)
Net cash outflow (725) (25)
Non-controlling interest (163,666) (162,484)
Vardar Minerals Limited, a 59.5% per cent owned subsidiary of the Company that
has material non-controlling interests ("NCI").
Summarised financial information reflecting 100 per cent of the Vardar
Minerals relevant figures is set out below:
2022 2021
£ £
Administrative expenses (199,197) (248,093)
Loss after tax (199,197) (248,093)
Loss allocated to NCI (91,974) (134,011)
Other comprehensive income/(loss) allocated to NCI 39,640 (34,259)
Total comprehensive loss allocated to NCI (52,334) (168,270)
Current assets 109,099 55,793
Non-Current assets 2,186,253 1,098,746
Current liabilities (214,294) (160,940)
Net assets 2,081,058 993,599
Net cash inflow/(outflow) 34,043 (24,984)
Non-controlling interest 732,398 487,523
16. SHARE CAPITAL
2022 2022 2021 2021
Number £ Number £
Allotted, called up and fully paid
At 1 January 831,710,636 8,317,106 828,175,224 8,281,752
Issued for cash - - 3,535,412 35,354
At 31 December 831,710,636 8,317,106 831,710,636 8,317,106
All issues are for cash unless otherwise stated.
Share Capital Share Premium Total
Number £ £ £
At 1 January 2022 831,710,636 8,317,105 24,689,311 33,006,416
At 31 December 2022 831,710,636 8,317,105 24,689,311 33,006,416
Share Capital Share Premium Total
Number £ £ £
At 1 January 2021 828,175,224 8,281,751 24,684,737 32,966,488
8 July - Issue of new shares 3,535,412 35,354 4,574(1) 39,928
At 31 December 2021 831,710,636 8,317,105 24,689,311 33,006,416
(1)Includes issue costs of £18,760.
The par value of all Ordinary Shares in issue is £0.01.
The Company has removed the limit on the number of shares that it is
authorised to issue in accordance with the Companies Act 2006.
There were no shares issued in 2022.
Shares issued in 2021
On 8 July 2021, the company announced the issue of 3,535,412 new ordinary
shares at £0.01 each, in settlement of 9,000,000 options held by Kurt Budge
with an exercise price of £0.0166.
19. TRADE AND OTHER PAYABLES
Group Company
2022 2021 2022 2021
£ £ £ £
Current:
Trade payables 448,045 263,062 148,567 62,215
Social security and other taxes 34,493 11,976 22,771 8,693
Other payables 24,834 17,114 2,142 3,600
Accruals 118,358 65,084 42,790 39,983
625,730 357,236 216,270 114,491
22. BORROWINGS
Group Company
2022 2021 2022 2021
£ £ £ £
Opening balance - - - -
Funds advanced, net of commission and transaction costs 1,554,381 - 1,554,381 -
Finance costs 304,529 - 304,529 -
Effect of FX (12,963) - (12,963) -
1,845,947 - 1,845,947 -
On 3 July 2022, the Company secured a bridging loan from Nordic investors of
SEK 22 million, gross of commission and transaction costs (approximately:
£1.76 million). The loan has a fixed interest rate of 1.5 percent per stated
30-day period during the duration. Accrued interest is compounding. The loan
has a commitment fee of 5 per cent and a maturity date of 28 February 2023.
The loan and accrued interest is repayable at any time prior to the maturity
date. If the loan and accrued interest is not repaid by maturity date, at the
latest, the creditors have the right to offset a minimum of SEK 1 million at a
time of the loan and accrued interest into SDRs at a price per SDR calculated
with a 15 per cent discount on the volume weighted average price of the SDR
during the preceding 5 trading days to the conversion decision.
The loan was accounted for using an amortised cost using an effective rate of
interest. The conversion feature contained within the loan is considered an
embedded derivative and was not assessed to be significant given the available
inputs.
Following the year end, it became apparent that due to the timing of the
receipt of the funds from the Rights Issue the Company will not be in a
position to pay back the bridging loan facility at its maturity. The outcome
of this is that the holder of the loan enforced the penalty interest for
entering another 30-day period, which was circa 1 million SEK. The loan
principal and interest totalling £2.13m was repaid via a deduction to the
gross proceeds from the Rights Issue subsequent to the year-end (refer note
28).
23. CHANGES IN LIABILITIES FROM FINANCING ACTIVITIES
Group
Leases Borrowings Total
£ £ £
Opening balance 1 January 2022 7,491 - 7,491
Cash movements
Borrowings advances - 1,554,381 1,554,381
Lease payments (6,611) - (6,611)
Total 880 1,554,381 1,555,261
Non-cash movements
Lease additions 17,506 - 17,506
Finance cost 264 304,529 304,793
Effect of FX 727 (12,963) (12,236)
Closing balance 31 December 2022 19,377 1,845,947 1,865,324
Group
Leases Borrowings Total
£ £ £
Opening balance 1 January 2021 2,026 - 2,026
Cash movements
Lease payments (5,850) - (5,850)
Total (3,824) - (3,824)
Non-cash movements
Lease additions 10,852 - 10,852
Finance cost 256 - 256
Effect of FX 207 - 207
Closing balance 31 December 2021 7,491 - 7,491
Company
Borrowings Total
£ £
Opening balance 1 January 2022 - -
Cash movements
Borrowings advances 1,554,381 1,554,381
Total 1,554,381 1,554,381
Non-cash movements
Finance cost 304,529 304,529
Effect of FX (12,963) (12,963)
Closing balance 31 December 2022 1,845,947 1,845,947
The Company had no liabilities from financing activities in the prior year.
26. RELATED PARTY DISCLOSURES
Transactions with subsidiaries
During the year, cash advances of £524,614 (2021: £356,613) were made to
Jokkmokk Iron Mines AB and net settled costs of £194,754 with the Company
(2021: incurred costs of £12,310). The advances are held on an interest free
inter-group loan which has no terms for repayment. At the year end the
inter-Group loan amounted to £9,991,673 (2021: £9,272,305).
Beowulf Sweden AB received cash advances of £7,320 (2021: £Nil) and net
settled costs of £118 (2021: net settled costs of £2,338). The advances are
held on an interest free inter-Group loan which has no terms for repayment. At
the year end the inter-Group loan amounted to £781,071 (2021: £773,633).
Grafintec Oy received cash advances of £180,287 (2021: £687,845) and net
settled costs of £1,507 (2021: incurred costs of £17,883) with the Company.
The advances are held on an interest free inter-Group loan which has no terms
for repayment. At the year end the inter-Group loan amounted to £2,741,305
(2021: £2,559,511).
In accordance with its service agreement, Grafintec charges Beowulf Mining plc
for time incurred by its staff on exploration projects held by other entities
in the Group. In turn Beowulf Mining plc recharges the other entities
involved.
In addition, Beowulf Mining plc charges entities in the Group for time and
expenses spent by Directors on providing services. An arm's length margin has
been included at entity level, but this is subsequently eliminated on
consolidation.
The Company has made unsecured interest-free loans to its subsidiaries.
Although they are repayable on demand, they are unlikely to be repaid until
the projects becomes successful and the subsidiaries start to generate
revenues. An assessment of the expected credit loss arising on intercompany
loans is detailed in note 11.
Transactions with other related parties
Key management personnel include all Directors and those who have authority
and responsibility for planning, directing and controlling the activities of
the entity, the aggregate compensation paid to key management personnel of the
Company is set out below.
2022 2021
£ £
Short-term employee benefits (including employers' national insurance 711,962 482,895
contributions)
Post-retirement benefits 44,764 27,749
Share-based payments 173,345 -
Share settled expense - 103,281
Insurance 887 877
930,958 614,802
28. EVENTS AFTER THE REPORTING DATE
On 12 January 2023, the Company announced further investment in Vardar
Minerals Limited of £250,000. The investment increases the Company's
ownership in Vardar from 59.5 per cent to 61.1 per cent approximately. This
funding will be used to start preparations for the 2023 exploration programme.
On 28 February 2023, the Company announced the outcome of the Rights Issue and
Primary Bid Offer. The Rights Issue raised approximately SEK 62.8 million
(approximately £5 million) before expenses. The PrimaryBid Offer raised
approximately £0.8 million before expenses. In addition to the PrimaryBid
Offer, the Placing raised approximately £0.4 million. Members of the Board
and executive management also subscribed to an agreed amount of £181,000.
Following the year end, it became apparent that due to the timing of the
receipt of the funds from the Rights Issue the Company will not be in a
position to pay back the bridging loan facility at its maturity. The outcome
of this is that the holder of the loan enforced the penalty interest for
entering another 30-day period, which was circa 1 million SEK. The loan
principal and interest totalling £2.13m was repaid via a deduction to the
gross proceeds from the Rights Issue.
The net funds raised after the loan repayment and share issue transaction
costs are £3.72 million.
On 30 May 2023 there were 907,945,973 Swedish Depository Receipts representing
79 per cent of the issued share capital of the Company. The remaining issued
share capital of the Company is held in the UK.
On 3 May 2023, Mr Kurt Budge resigned as Chief Executive Officer ("CEO") and
director of the Plc and its subsidiaries. Mr Johan Röstin assumed the role of
Executive Chairman and acting CEO on the same date.
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