REG - Blencowe Resources - Annual Financial Report
28/01/2022 07:00
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RNS Number : 8958Z Blencowe Resources PLC 28 January 2022
Blencowe Resources Plc
("Blencowe" or the "Company")
Annual Results for the year ended 30 September 2021
Blencowe Resources Plc, the natural resources company focused on the
development of the Orom-Cross Graphite Project in Uganda, is pleased to
announce its audited financial results for the year ended 30 September 2021
(the "Annual Report").
The Annual Report which includes an unqualified audit report and audited
Financial Statement for the year ended 30 September 2021 will be made
available on the Company's website at www.blencoweresourcesplc.com
(http://www.blencoweresourcesplc.com) . Hard copies will be posted to the
Company's shareholders.
For further information, please contact:
Blencowe Resources www.blencoweresourcesplc.com (http://www.blencoweresourcesplc.com)
Sam Quinn Tel: +44 (0) 1624 681 250
info@blencoweresourcesplc.com
Investor Enquiries Tel: +44 (0) 7891 677 441
Sasha Sethi sasha@flowcomms.com (mailto:sasha@flowcomms.com)
Tavira Securities Limited Tel: +44 (0)20 7100 5100
Jonathan Evans jonathan.evans@tavirasecurities.com
(mailto:jonathan.evans@tavirasecurities.com)
First Equity Limited Tel: +44 (0)203 192 1733
Jason Robertson jasonrobertson@firstequitylimited.com
(mailto:jasonrobertson@firstequitylimited.com)
Chief Executive Officer's Statement
Dear Shareholders,
It is with great pleasure that I update you on progress within the Company and
its operations for the year ended 30 September 2021. This was the first full
year of activities within Blencowe following the successful acquisition of the
Orom-Cross graphite project in April 2020 and a number of key milestones were
met as we continue to develop this exciting asset.
For those of you perhaps less aware, graphite has many uses (over 150
applications in total) from the more traditional use within refractory bricks
to line steel foundries - due to its high heat resistance - to electrodes in
furnaces. There is a growing market in fire and flame retardants and
expandable graphite is pressed into foils or sheets which are used in heat and
fire protection in applications ranging from building materials to consumer
electronics and fuel cells. But the seismic shift that will radically alter
demand ahead is the production of spherical graphite for anodes inside each
lithium-ion battery, which is the frontrunner technology to power electric
vehicles (EVs). Approximately 50kgs of graphite goes into each and every
Li-ion battery and it is non-replaceable; and as EV numbers start to take off
there is widespread expectation for exponential growth of all battery metals
(lithium, cobalt, nickel and graphite). We are thus highly leveraged into EV
growth.
Most leading analysts forecast severe shortages of graphite from as early as
2025, with this demand-supply imbalance growing ever-larger as EVs become more
widespread in the latter half of the current decade. Currently there are ~15
million EVs in the world and analysts predict this number to grow to somewhere
between 100-600 million by 2030. Whilst there will be any number of new
graphite mines that go into production to fulfil this demand there is unlikely
to be sufficient graphite produced to cover the shortfall, mainly due to (1)
the long lead time it takes to establish and develop a new mine from scratch,
(2) the complexity of funding new projects and (3) the very specific graphite
quality constraints imposed by battery producers. Blencowe has a strategy
for all of these and it is clear that any company with a high quality, low
cost graphite source that can develop its asset into production over the next
few years will have a valuable asset ahead.
Blencowe acquired the Orom-Cross graphite project in Uganda just 18 months ago
and is working to develop it towards first production before 2025. Orom-Cross
has an estimated 2-3 billion tonnes graphite making it one of the largest
deposits in the world, and substantial volumes of graphite present near to
surface (between 0-30 meters) which ultimately will make it easier and cheaper
to mine via open pits. Uganda is a landlocked country in East Africa which
has a strong, stable Government and the mining industry is well supported.
It has plentiful infrastructure such as roads, water and rail and it is
English speaking too, being a former British Protectorate. These are all key
advantages to successfully developing a mining venture there.
Over the past 18 months Blencowe has delivered two extensive programmes for
~5,000m diamond drilling that were required for Orom-Cross to progress;
firstly to deliver a maiden JORC Standard Resource of 16Mt grading at a
respectable 6.0% TGC, and more recently to upgrade this into a larger Measured
and/or Indicated Resource. The revised JORC Resource statement is due in
early 2022 and will likely deliver enough graphite for the first 10-15 years
life of mine. It is also hoped that the in situ grade will rise as a result
of including the higher grade Camp Lode deposit into the JORC Resource for the
first time. Whilst this drilling has been both costly and time consuming it
was absolutely necessary as one cannot proceed to mine planning and pit
designs without knowing where the graphite is positioned, geophysics (ground
conditions) and, very importantly, the metallurgical qualities of the product.
Over the past year Blencowe sent quantities of graphite from Orom-Cross to
leading technical experts SGS Lakeside in Toronto to establish the
metallurgical properties of our graphite, and I am pleased to report that the
results have exceeded our expectations. Not only did SGS deliver a higher
grade concentrate than we hoped for (97% versus 94% TGC), but they also
delivered a concentrate with almost zero impurities and high recoveries. The
quality of the end product is crucial in the sales and marketing process,
which will begin in early 2022 as prospective end users are identified and
samples sent to each of them to qualify and vet our products.
Our management team also delivered a Preliminary Economic Assessment (PEA) by
end-September, which was the first, internally driven, commercial overview of
the entire mining operation. This study highlighted strong economic returns
from a profitable mining venture and will form the basis of our next important
step, the Pre-Feasibility Study; already underway and due for completion by
mid-2022.
In amongst all of this work on the ground the Company has established strong
relationships on the ground which have been critical for work to continue
whilst Covid restrictions have forced many of us to remain unable to travel.
We thank these partners for their continued support and their efforts. In
addition the Company has honoured the payments as agreed by the former owner
of the project to the local Orom community, which resulted in substantial
farming equipment being purchased to make a difference to their lives. This
community agreement is vital in the long run and was a key requirement when
the project secured its 21-year Mining License in 2019.
Blencowe will be ever mindful of the environment as it develops Orom-Cross and
will look to establish a carbon neutral footprint via use of green (hydro)
power off the grid, plus solar power as backup, as well as full restoration of
areas mined ahead. This is increasingly important and will play a role in
attracting investors and funding parties in the years to come.
Finally, management, and I am well supported by a board and management team
(including third party contractors) who are not only experienced, capable
mining executives, but also people that have proven their ability to stand up
and deliver when the challenges present. I thank them for their efforts and
we will continue to add further key management as we progress.
It would be remiss to close without thanking all shareholders for their
efforts, as without your ongoing support we would not have a project.
Blencowe now owns 100% of a tier one project in a safe location that will
produce a key resource that the market is anticipating huge growth and demand
ahead. We also believe that the market will understand this value
proposition much better as we continue to develop our project and this will
naturally see further growth in market value and share price. Be assured of
our continued efforts to work hard to do all we can to underline this success.
Mike Ralston
Chief Executive Officer
Strategic Report
The Directors present the Strategic Report for the year ended 30 September
2021.
Results
The results are set out in the Consolidated Statements of Comprehensive
Income. The total comprehensive loss attributable to the equity holders of the
Group for the period was £694,726 (2020: £1,058,084).
The Group paid no distribution or dividends during the period.
Business model, review of the business and future developments
The Company was formed to undertake an acquisition of a target company or
business. The Company on 13 May 2019 announced that it had entered into
Heads of Agreement with Consolidated Africa Limited ("CRA") and New Energy
Minerals Africa Pty Ltd ("New Energy") for the proposed assignment to the
Company of a binding option for it to acquire 100% of the share capital of
Consolidated African Resources (Uganda) Ltd ("CARU"), a subsidiary of CRA, by
way of a reverse takeover ("Transaction"). On 28 April 2020, the Company
completed the acquisition of CARU, the owner of the Orom-Cross Graphite
Project ("Orom-Cross Graphite Project") in Northern Uganda.
The Group's aim is to create value for shareholders through the discovery and
development of economic mineral deposits. The Group's strategy is to
continue to progress the development of its existing project in Uganda and to
evaluate its existing and new mineral resource opportunities.
The Group's business is directed by the Board and is managed on a day-to-day
basis by the Executive Chairman, Cameron Pearce. The Board monitors
compliance with objectives and policies of the Group through performance
reporting, budget updates and periodic operational reviews.
Key performance indicators (KPIs)
Financial KPIs
Results for the year
With no income in the year the Group continues to monitor the loss before tax
to ensure the continued viability of the Group and ability to continue to
develop the Orom-Cross Graphite Project. The Group has made a loss before tax
of £694,726 for the year ended 30 September 2021 (2020: loss before tax of
£1,058,084).
Exploration expenditure - funding and development costs
At this stage in the Group's development, the Group is focusing on financing
and continued development of the Orom-Cross Graphite Project. Therefore, the
funding and development costs of Orom-Cross Graphite project have been chosen
as Key Performance Indicators.
The Group has incurred £976,084 (2020: £1,084,354) of development costs at
Orom-Cross Graphite Project which were required to carry out the initial
drilling costs and testing of the mineral. These development costs are in
line with the Board expectations.
In 2021 the Group raised funds of £1,373,414 (2020: £2,000,000) from the
equity markets. Please see note 21 for further details of the funds raised
after the year end.
At 30 September 2021 the Group had a cash balance of £93,288 (2020:
£205,856)
Employees
There were no employees during the year apart from the directors, the Chief
Executive Officer ("CEO") and the Chief Operating Officer ("COO"), who are the
key management personnel. All current members of the Board and the key
management personnel are males. For more information about the Group's key
management personnel see note 8.
Social, Community and Human Rights Issues
The Orom-Cross Graphite Project is still at an early stage of project
development and further consideration will need to be given to social,
community and human rights issues affecting the Project. Currently a key
consideration is that under Ugandan law the Company is required to
rehabilitate the area affected by the mining activities. Accordingly, there
will be a potential cost associated with undertaking this obligation. At this
time, although the Group continues to explore and test the minerals, the land
has not been affected and therefore the Group has not accounted for any costs
associated with the rehabilitation of the area.
Since the acquisition of CARU the Group has donated to local causes, such as a
scholarship programme and to fight against COVID-19. The Group will continue
to donate to the local communities around the region of Uganda in which the
Project Licences are located.
Principal risks and uncertainties and risk management
The Group operates in an uncertain environment and is subject to a number of
risk factors. The Directors have carried out a robust assessment on the
principal risks facing the Group, including those that threaten its business
model, future performance, solvency or liquidity.
The Group continues to monitor the principal risks and uncertainties with the
help of specialist to ensure that any emerging risk are identified, managed
and mitigated.
Geological risks
Only a small portion of the Orom-Cross Graphite Project has been explored with
no mineral resources estimated to date. Further exploration work is therefore
required to establish a mineral resource. The potential quantity and grade of
any product is presently conceptual in nature and it is uncertain if further
exploration will result in the estimation of a mineral resource. Flotation
testwork conducted on graphite obtained from the Orom-Cross Graphite Project
has confirmed a final concentrate grading of 94% with a TGC recovery of 31.7%.
Whilst it is expected that this recovery can be improved there is not
guarantee that it will be. The Group will need to undertakes additional
metallurgical test work and technical marketing to establish reasonable
grounds for a saleable product. If the final concentrate grading is less
than anticipated this will reduce the quantum of saleable product and as the
Orom-Cross Graphite Project is dependent on the production of quality graphite
to make the project economically viable this could have a material impact on
the Group's financial position in the future.
The Group uses advisors with specialist knowledge in mining and related
environmental management for reducing the impacts of environmental risk.
Government regulation and political risk
The Group's operating activities are subject to laws and regulations governing
expropriation of property, health and worker safety, employment standards,
waste disposal, protection of the environment, mine development, land and
water use, prospecting, mineral production, exports, taxes, labour standards,
occupational health standards, toxic wastes, the protection of endangered and
protected species and other matters. While the Group believes that it is in
substantial compliance with all material current laws and regulations
affecting its activities, future changes in applicable laws, regulations,
agreements or changes in their enforcement or regulatory interpretation could
result in changes in legal requirements or in the terms of existing permits
and agreements applicable to the Group or its properties, which could have a
material adverse impact on the Group's current operations or planned
exploration and development projects. Where required, obtaining necessary
permits and licences can be a complex, time consuming process and the Group
cannot assure whether any necessary permits will be obtainable on acceptable
terms, in a timely manner or at all. The costs and delays associated with
obtaining necessary permits and complying with these permits and applicable
laws and regulations could stop or materially delay or restrict the Group from
proceeding with any future exploration or development of its properties. Any
failure to comply with applicable laws and regulations or permits, even if
inadvertent, could result in interruption or closure of exploration,
development or mining operations or material fines, penalties or other
liabilities.
The Orom-Cross Graphite Project is located in Uganda. The Group's activities
may be affected in varying degrees by political stability and governmental
regulations. Any changes in regulations or shifts in political attitudes in
these countries or any other countries in which the Group may operate are
beyond the control of the Group and may adversely affect its operations. To
mitigate this risk, the Board continues to review any changes on the
government regulations and the political stability in Uganda.
Pricing risk
The development and success of any project of the Group will be primarily
dependent on the future prices of graphite. The graphite prices are subject to
significant fluctuation and are affected by a number of factors which are
beyond the control of the Company. Such factors include, but are not limited
to exchange rates, fluctuations in the value of the United States dollar and
foreign currencies, global and regional supply and demand, and political and
economic conditions. The price of graphite and other commodities have
fluctuated widely in recent years, and future price declines could cause any
future development of and commercial production from the Group's property to
be impracticable. Although the Group will have sufficient working capital for
the Working Capital Period, depending on the price of graphite, projected cash
flow from planned mining operations may not be sufficient for future
operations and the Group could be forced to discontinue any further
development and may lose its interest in, or may be forced to sell, some or
all of its properties. Future production from the Orom-Cross Graphite Project
is dependent on the production of graphite that is adequate to make the
project economically viable. The Board regularly monitors the prices of
graphite and is prepared to raise further capital if it is required.
Commodity and currency risk
As the Company's potential earnings will be largely derived from the sale of
graphite, the Company's future revenues and cash flows will be impacted by
changes in the prices and available market of this commodity. Any substantial
decline in the price of graphite or in transport or distribution costs may
have a material adverse effect on the Company.
Commodity prices fluctuate and are affected by numerous factors beyond the
control of the Company. These factors include current and expected future
supply and demand, forward selling by producers, production cost levels in
major mineral producing centers as well as macroeconomic conditions such as
inflation and interest rates.
Furthermore, the international prices of most commodities are denominated in
United States dollars while the Company cost base will be in Pounds Sterling
and Ugandan shilling. Consequently, changes in the Pound Sterling and Ugandan
Shilling exchange rates will impact on the earnings of the Company. The
exchange rates are affected by numerous factors beyond the control of the
Company, including international markets, interest rates, inflation and the
general economic outlook. The Directors are confident that they have put in
place a strong management team capable of dealing with the above issues as
they arise.
Financing
The Group is likely to remain cash flow negative for some time and, although
the Directors have confidence in the future revenue earning potential of the
Group from its interests in the Orom-Cross Graphite Project, there can be no
certainty that the Group will achieve or sustain profitability or positive
cash flow from its operating activities. However, should the Directors
identify working capital difficulties at the end of the Working Capital
Period, they will be in a position to reduce the Group's monthly overheads to
such an extent that a further twelve months of working capital will be
available to the Group. Should the Directors be required to undertake a cost
reduction exercise under this scenario, there will be no impact on the ability
on the Group to deliver the current work programme at the Orom-Cross Graphite
Project. This is on the basis that the cost reductions will be made from
administrative expenses, primarily Directors' salaries and professional fees.
With regards to future capital expenditure on the Orom-Cross Graphite Project,
the Company may need to raise additional capital beyond the Working Capital
Period to fund additional exploration work for the future development of the
Orom-Cross Graphite Project. The quantum of any future capital raise will be
dependent on the agreed work programme, which, at the time of this Document,
is unknown.
Future mineral prices, revenues, taxes, capital expenditures and operating
expenses and geological success will all be factors which will have an impact
on the amount of additional capital required. Additionally, if the Group
acquires further exploration assets or is granted additional permits and/or
exploration licences, this may increase its financial commitments in respect
of the Group's exploration activities.
In common with many exploration entities, the Group will need to raise further
funds in order to progress the Group from pre-construction phase of its
business and eventually into production of revenues.
COVID-19
Whilst the Group cannot predict any potential effect of COVID-19 in Uganda or
elsewhere, it does not believe that COVID-19 will impact the working capital
requirements of the Group. It is possible that if the current limited outbreak
of COVID-19 in Uganda increases then this may lead to the disruption of the
Group's operations in Uganda. An increase in the number of confirmed COVID-19
cases in Uganda may lead to the Ugandan government imposing travel
restrictions and other similar restrictions on economic activities within
Uganda. Such restrictions have the potential to delay the completion of the
Group's planned work programme until such time as such restrictions are lifted
and as such the Group's planned work programme may not be completed within the
anticipated timeframe.
Environmental and safety
The Orom-Cross Graphite Project is still at an early stage of project
development and further consideration will need to be given to environmental
and social issues affecting the Orom-Cross Graphite Project. Environmental and
safety legislation (e.g. in relation to reclamation, disposal of waste
products, protection of wildlife and otherwise relating to environmental
protection) may change in a manner that may require stricter or additional
standards than those now in effect, a heightened degree of responsibility for
companies and their directors and employees and more stringent enforcement of
existing laws and regulations. There may also be unforeseen environmental
liabilities resulting from both future and historic exploration or mining
activities, which may be costly to remedy. Risks may include on-site sources
of environmental contamination such as oil and fuel from the mining equipment
and rehabilitation of the site upon expiry of the Project Licences. Under
Ugandan law the Company is required to rehabilitate the area affected by the
mining activities, accordingly there will be a potential cost associated with
undertaking this obligation. It is currently unknown what this could be but
the funding of this could have a material impact on the Group's financial
position in the future.
If the Group is unable to fully remedy an environmental problem, it may be
required to stop or suspend operations or enter into interim compliance
measures pending completion of the required remedy. The potential exposure may
be significant and could have a material adverse effect on the Group.
The Group has not purchased insurance for environmental risks (including
potential liability for pollution or other hazards as a result of the disposal
of waste products occurring from exploration and production) as it is not
generally available at a price which the Group regards as reasonable.
Environmental management systems are in place to mitigate environmental hazard
risks. The Group uses advisors with specialist knowledge in mining and related
environmental management for reducing the impacts of environmental risk.
Section 172 Statement
The Board believes they have acted in a way most likely to promote the success
of the Group for the benefit of its members as a whole, as required by section
172.
The requirements of section 172 are or the Board to:
· consider the likely consequences of any decision in the long
term,
· act fairly between the members of the Group,
· maintain a reputation for high standards of business conduct,
· consider the interest of the Group's employees,
· foster the Group's relationship with suppliers, customers and
others, and
· consider the impact of the Group's operations on the community and
the environment.
The Group operates a mineral exploration business, which is inherently
speculative in nature and, without regular income, is dependent upon
fund-raising for its continued operation. The pre-revenue nature of the
business is important to the understanding of the Group by its members,
employees and suppliers, and the Directors are as transparent about the cash
position and funding requirements as is allowed under LES regulations.
The principal decisions taken by the Board during the year relate to the
ongoing research and development of the Orom-Cross Graphite Project, which
since its acquisition in 2020 is still at an early stage of project
development. The Board has looked to build upon the information available and
the exploration activities carried out by the Subsidiary prior to its
acquisition. Through work such as Metallurgical testwork and preliminary
economic assessment the board continues to gather information on the long-term
viability of the project and the impact on the local community and the
environment. The Board have outlined a work program for the future strategy of
the Project. In order to carry out its strategy, the company has entered into
a number of contracts with providers who are best placed to undertake the
necessary research and review,
The Board is ultimately responsible for the direction, management, performance
and long-term sustainable success of the Group. It sets the Group's strategy
and objective considering the interest of all its stakeholders. A good
understanding of the Company's stakeholders enables the Board to factor the
potential impact of strategic decisions on each stakeholder group into a
boardroom discussion. By considering the Company's purpose, vision and values
together with its strategic priorities the Board aims to make sure that its
decisions are fair. The Board has always, both collectively and individually,
taken decisions for the long term and consistently aims to uphold the highest
standards of business conduct. Board resolutions are always determined with
reference to the interests of the Company's employees, its business
relationships with suppliers and customers. Wherever possible, local
communities are engaged in the geological operations and support functions
required for field operations providing much needed employment and wider
economic benefits to the local communities. In addition, the Group contributes
annually towards a scholarship programme for the local community in Uganda.
The Board takes seriously its ethical responsibilities to the communities and
environment in which it works. We abide by the local and relevant UK laws on
anti-corruption and bribery.
The Group follows international best practice on environmental aspects of our
work.
Cameron Pearce
Director
27 January 2022
Directors' Report
The Directors submit their report with the audited Financial Statements for
the year ended 30 September 2021.
General information
Blencowe Resources Plc ("the Company"), was incorporated as a private Limited
Company under the laws of England and Wales with registered number 10966847 on
18 September 2017. On 13 July 2018, the Company was re-registered as a
public company under the Companies Act 2006.
Blencowe's primary focus is on developing the Orom-Cross Graphite Project
located in Northern Uganda.
Results for the year and distributions
The Group results are set out in the Consolidated Statements of Comprehensive
Income. The total consolidated comprehensive loss attributable to the equity
holders of the Group for the financial year was £694,726 (2020:
£1,058,084). The Group received no income, and the full amount of the loss
is due to expenses incurred in capital raising (to the extent not deducted
from share premium), identifying and evaluating suitable acquisition targets,
and general corporate overheads.
The Group paid no distribution or dividends during the financial year (2020:
£Nil).
The Board of Directors
The Directors who held office during the financial year and to the reporting
date, together with details of their interest in the shares of the Company at
the reporting date were:
Number of Ordinary Shares Percentage of Ordinary Shares
Sam Quinn 4,666,667 3.83%
Cameron Pearce 7,016,667 5.75%
Alexander Passmore 1,500,000 1.23%
The Board comprises of one Executive Director and two Non-Executive Directors
as detailed below:
Cameron Pearce - Executive Chairman
Cameron Pearce was a founder of the Company and has extensive professional
experience in both the Australian and United Kingdom finance industries. In
recent times he has provided corporate, strategic, financial and advisory
assistance to private and public companies in both Australia and the United
Kingdom. Mr Pearce is a member of the Australian Institute of Chartered
Accountants and has been in commerce over twenty years holding senior
financial and management positions in both publicly listed and private
enterprises in Australia, Europe, Asia, Africa and Central America. Mr. Pearce
has considerable corporate and international expertise and over the past
decade has focussed on mining and exploration activities.
Sam Quinn - Non Executive Director
Sam Quinn is a corporate lawyer with over a decade's worth of experience in
the natural resources sector, in both legal counsel and executive management
positions. Mr Quinn was formerly the Director of Corporate Finance and Legal
Counsel for the Dragon Group, a London-based natural resources venture capital
firm and is currently a partner of Silvertree Partners, a natural resource
focussed back office outsourcing business. Mr Quinn has in addition held
several management roles for listed and unlisted natural companies and has
gained significant experience in the administration, operation, financing and
promotion of natural resource companies. Prior to working in the natural
resources sector, Mr Quinn worked as a corporate lawyer for Jackson McDonald
Barristers & Solicitors in Perth, Western Australia and for Nabarro LLP in
London.
Alex Passmore - Non Executive Director
Alex Passmore is an experienced corporate executive with strong financial and
technical background. Mr Passmore managed the arrangement of debt for many
well-known resources companies and has a wealth of experience in project
evaluation. He also managed the WA natural resources business of CBA which
comprised a substantial portfolio of loan, hedge, trade finance and working
capital products to ASX-listed and multi-national resource companies. Prior to
this, Mr Passmore held senior roles at Patersons Securities and was director
of corporate finance and head of research. Mr Passmore holds a BSc (Hons) in
Geology from the University of Western Australia and a graduate diploma of
Applied Finance and Investments from the Institute of Securities Australia.
Directors' indemnities
To the extent permitted by law and the Articles, the Company has made
qualifying third-party indemnity provisions for the benefit of its directors
during the year, which remain in force at the date of this report.
Policy for new appointments
Without prejudice to the power of the Company to appoint any person to be a
Director pursuant to the Articles the Board shall have power at any time to
appoint any person who is willing to act as a Director, either to fill a
vacancy or as an addition to the existing Board, but the total number of
Directors (other than alternate directors) must not be less than two and must
not be more than 15 in accordance with the Articles. Any Director so appointed
shall hold office only until the annual general meeting of the Company next
following such appointment and shall then be eligible for re-election but
shall not be taken into account in determining the number of Directors who are
to retire by rotation at that meeting. If not re-appointed at such annual
general meeting, he shall vacate office at the conclusion thereof.
Rules for amendments of articles
Directors cannot alter the Company's Articles unless a special resolution is
approved by the shareholders. A special resolution requires at least 75% of a
company's members to vote in favour for it to pass.
Substantial shareholders
The share capital of Blencowe consist of only one class: ordinary shares.
Therefore, all of the Company's shares rank pare passu and no preferential
rights apply. No single person directly or indirectly, individually or
collectively, exercises control over the Company. The Directors are aware of
the following persons, who had an interest in 3% or more of the issued
ordinary share capital of the Company as at 30 September 2021:
% of issued share capital of the Company
Shareholder
Jim Nominees Limited 38.87%
Spreadex Limited 9.61%
ISI Nominees Limited 4.24%
The Bank of New York (Nominees) Limited 3.28%
Hargreaves Lansdown (Nominees) Limited 3.23%
Financial risk management
The Group's principal financial instruments comprise cash balances, accounts
payable and accounts receivable arising in the normal course of its
operations.
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. In order to maintain or
adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares, or
sell assets to reduce debt.
The Group's activities expose it to a variety of financial risks: market risk
(including currency risk and price risk), credit risk, liquidity risk and cash
flow interest rate risk. See note 19.2 for more information on the financial
risk management objectives and policies.
Employee and Greenhouse Gas (GHG) Emissions
The Group is trading with two employees (see note 8) and the Directors
disclosed above.
During 2021 the Company had gas emissions of 30t CO2-e from its operations. As
the project was acquired part way through the prior year there were no
procedures to measure gas emissions in 2020.
The energy consumption has not been disclosed as the Group's consumption is
below 40,000 kWh.
Responsibility statement
The Directors are responsible for preparing the Directors' Report and the
Financial Statements in accordance with applicable law and regulations. In
addition, the Directors have elected to prepare the Financial Statements in
accordance with International Financial Reporting Standards ("IFRSs"), as
adopted by the European Union ("EU").
The Financial Statements are required to give a true and fair view of the
state of affairs of the Group and of the profit or loss of the Group for that
period.
In preparing these Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· present information and make judgements that are reasonable, prudent
and provide relevant, comparable and understandable information.
· provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact
of particulars transactions, other events and conditions on the entity's
financial position and financial performance; and
· make an assessment of the Group and Parent Company's ability to
continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Group's transactions and disclose with
reasonable accuracy at any time the financial position of the Group to enable
them to ensure that the financial statements comply with the requirements of
the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and Financial Statements. Legislation governing the preparation
and dissemination of Financial Statements may differ from one jurisdiction to
another.
We confirm that to the best of our knowledge:
· the Financial Statements, prepared in accordance with
International Financial Reporting Standards as adopted by the EU, give a true
and fair view of the assets, liabilities, financial position and profit or
loss of the Group for the period;
· the Director's report includes a fair review of the development
and performance of the business and the position of the company, together with
a description of the principal risks and uncertainties that they face.
· the annual report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for
shareholders to assess the company's performance, business model and strategy.
Embed effective risk management, considering both opportunities and threats,
throughout the organisation
The Directors are responsible for maintaining the Group's systems of controls
and risk management in order to safeguard its assets.
Risk is monitored and assessed by the Board who meet regularly and are
responsible for ensuring that the financial performance of the Group is
properly monitored and reported. This process includes reviews of annual and
interim accounts, results announcements, internal control systems, procedures
and accounting policies.
The Board receives guidance from FIM Capital Limited, the Company Secretary to
the Group, covering updates to relevant legalisation and rules to ensure they
remain fully informed and able to make informed decisions.
Subsequent events
Please see note 21 for details of the Group's subsequent events.
Auditors
So far as the directors are aware, there is no relevant audit information of
which the Group's auditors are unaware, and they have taken all steps that
they ought to have taken as directors in order to make themselves aware of any
relevant audit information and to establish that the Group's auditors are
aware of that information.
The auditors, Crowe U.K LLP, have expressed their willingness to continue in
office and a resolution to reappoint them will be proposed at the Annual
General Meeting.
By Order of the Board
Cameron Pearce
Director
27 January 2022
Corporate Governance
The Group recognises the importance of, and is committed to, high standards of
Corporate Governance. At the date of this Report, and whilst the Group is
not formally required to comply with the UK Corporate Governance Code 2018,
the Group will try to observe, where practical, the requirements of the UK
Corporate Governance Code 2018, as published by The Financial Reporting
Council.
In addition, the Company intends to voluntarily observe the requirements of
the UK Corporate Governance Code 2018, save as set out below. As at the date
of the financial statements the Group is in compliance with the UK Corporate
Governance Code 2018 with the exception of the following:
· Given the composition of the Board, certain provisions of the
UK Corporate Governance Code, are considered by the Board to be inapplicable
to the Company. The Company does not comply with the requirements of the UK
Corporate Governance Code in relation to the requirement to have a senior
independent director and the Audit Committee does not have three independent
non-executive directors
· Due to the current size of the company, and the early stages of
the Project's life cycle, the Company has not developed a formal diversity
policy, and investment in and rewarding of the workforce. Furthermore, there
have been no board evaluations conducted within the year.
· The UK Corporate Governance Code also recommends the submission
of all directors for re-election at annual intervals. No Director will be
required to submit for re-election until the first annual general meeting of
the Company following the acquisition.
· No new Directors' nominations were brought forward by the
Nomination Committee during the year.
As at the date of the financial statements, the Board has a share dealing code
that complies with the requirements of the Market Abuse Regulations. All
persons discharging management responsibilities (comprising only the Directors
at the date of this Document) shall comply with the share dealing code from
the date of Admission.
Set below are Blencowe Resources Plc's corporate governance practices for the
year ended 30 September 2021.
Leadership
The Company is headed by an effective Board which is collectively responsible
of the long term success of the Company.
The role of the Board - The Board sets the Company's strategy, ensuring that
the necessary resources are in place to achieve the agreed strategic
priorities, and reviews management and financial performance. It is
accountable to shareholders for the creation and delivery of strong,
sustainable financial performance and long-term shareholder value. To achieve
this, the Board directs and monitors the Company's affairs within a framework
of controls which enable risk to be assessed and managed effectively. The
Board also has responsibility for setting the Company's core values and
standards of business conduct and for ensuring that these, together with the
Company's obligations to its stakeholders, are widely understood throughout
the Company. The Board has a formal schedule of matters reserved which is
provided later in this report.
Board Meetings - The core activities of the Board are carried out in scheduled
meetings of the Board. These meetings are timed to link to key events in the
Company's corporate calendar and regular reviews of the business are
conducted. Additional meetings and conference calls are arranged to consider
matters which require decisions outside the scheduled meetings. During the
year, the Board met on 15 occasions.
Outside the scheduled meetings of the Board, the Directors maintain frequent
contact with each other to discuss any issues of concern they may have
relating to the Company or their areas of responsibility, and to keep them
fully briefed on the Company's operations.
Matters reserved specifically for Board - The Board has a formal schedule of
matters reserved that can only be decided by the Board. The key matters
reserved are the consideration and approval of:
· the Group's overall strategy;
· financial statements and dividend policy;
· management structure including succession planning, appointments
and remuneration;
· material acquisitions and disposal, material contracts, major
capital expenditure projects and budgets;
· capital structure, debt and equity financing and other matters;
· risk management and internal controls;
· the Group's corporate governance and compliance arrangements; and
· corporate policies
Leadership (continued)
Summary of the Board's work in the financial year - During the year, the Board
considered all relevant matters within its remit, but focused in particular on
exploration and development of the Orom-Cross Graphite Project in the Republic
of Uganda.
Attendance at meetings:
Member Meeting attended
Cameron Pearce Executive Chairman 15
Sam Quinn Non-Executive Director 15
Alexander Passmore Non-Executive Director 15
The Board is pleased with the level of attendance and participation of
Directors at Board and committee meetings.
The Chairman, Cameron Pearce, sets the Board Agenda and ensures adequate time
for discussion.
Non-executive Directors - The non-executive Directors bring a broad range of
business and commercial experience to the Company and have a particular
responsibility to challenge independently and constructively the performance
of the Executive management (where appointed) and to monitor the performance
of the management team in the delivery of the agreed objectives and targets.
Non-executive Directors - Are initially appointed for a term of three years,
which may, subject to satisfactory performance and re-election by
shareholders, be extended by mutual agreement.
Other governance matters - All of the Directors are aware that independent
professional advice is available to each Director in order to properly
discharge their duties as a Director. In addition, each Director and Board
committee has access to the advice of the Company Secretary.
The Company Secretary - The Company Secretary is FIM Secretaries Limited which
is retained on a consultancy basis. FIM Secretary Limited is available to
Directors and advises the Board on UK compliance matters.
Effectiveness
For the period under review the Board comprised of an Executive Chairman and two non-executive Directors.
The Directors are of the view that the Board and its committees consist of
Directors with an appropriate balance of skills, experience, independence and
diverse backgrounds to enable them to discharge their duties and
responsibilities effectively.
Independence - None of the Directors are considered to be independent, as they
have shareholdings in the Company. It is intended that additional Directors
will be appointed in future and that independence will be one of the key
factors taken into account at that time. As at the date of this Report no
prospective Directors have been identified and no arrangements exist (formal
or informal) for the appointment of any other Director.
Appointments - The Board is responsible for reviewing and the structure, size
and composition of the Board and making recommendations to the Board with
regards to any required changes.
Commitments - All Directors have disclosed any significant commitments to the
Board and confirmed that they have sufficient time to discharge their duties.
Induction - All new Directors received an induction as soon as practical on
joining the Board.
Conflict of interest - A Director has a duty to avoid a situation in which he
or she has, or can have, a direct or indirect interest that conflicts, or
possibly may conflict with the interests of the Company. The Board had
satisfied itself that there is no compromise to the independence of those
Directors who have appointments on the Boards of, or relationships with,
companies outside the Company. The Board requires Directors to declare all
appointments and other situations which could result in a possible conflict of
interest.
Accountability
The Board is committed to provide shareholders with a clear assessment of the
Group's position and prospects. This is achieved through this report and as
required other periodic financial and trading statements.
Going concern - As part of their going concern assessment, the Board of
Directors have reviewed cash flow forecasts reviewed for the 12 months from
the date these financial statements were signed and considered the medium term
outlook through to 2025 as described in the Viability Statement. The Directors
have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period to
December 2025 provided further funding can be raised as required.
Internal controls - The Board of Directors reviews the effectiveness of the
Company's system of internal controls in line with the requirement of the
Code. The internal control system is designed to manage the risk of failure to
achieve its business objectives. This covers internal financial and
operational controls, compliance and risk management. Key controls consist
of segregation of duties, authorisation and approval policies and accounting
controls such as monthly reconciliations. The Company has necessary procedures
in place for the year under review and up to the date of approval of the
Annual Report and Financial Statements. The Directors acknowledge their
responsibility for the Company's system of internal controls and for reviewing
its effectiveness. The Board confirms the need for an ongoing process for
identification, evaluation and management of significant risks faced by the
Company. The Directors carry out a risk assessment before signing up to any
commitments.
The Audit Committee
The Audit Committee comprises of Cameron Pearce, chairman of the committee,
and Alex Passmore and aims to meet at least twice a year and is responsible
for ensuring that the Group's financial performance is properly monitored,
controlled and reported to the Board. During the year of review, the Audit
Committee met twice. The Audit Committee is responsible for the scope and
effectiveness of the external audit and compliance by the Group with statutory
and other regulatory requirements. Given the size of the Group and the
relative simplicity of the systems, the Board considers that there is no
current requirement for an internal audit function. The procedures that have
been established to provide internal financial control are considered
appropriate for a Group of its size and include controls over expenditure,
regular reconciliations and management accounts.
The Audit Committee monitors in discussion with the auditors:
· the integrity of the financial statements of the Group and
significant financial reporting judgments contained in them
· any formal announcements relating to the Group's financial
performance
· the Group's internal financial controls and risk management
systems
· the external auditor's independence and objectivity and the
effectiveness of the audit process, taking into consideration relevant UK
professional and regulatory requirements.
The Directors are responsible for taking such steps as are reasonably
available to them to safeguard the assets of the Company and to prevent and
detect fraud and other irregularities.
External auditor's independence
Since the last tender which was conducted in 2018, Crowe U.K LLP has acted as
independent auditor for four years.
Remuneration and Nominations Committee
A Remuneration and Nominations Committee was established during 2020 and is
made up of the two non-executive directors. The Committee comprises Sam Quinn,
chairman of the committee, and Ales Passmore. The Remuneration and Nomination
Committee meets at least annually and is responsible for setting the
remuneration policy for all executive directors and the Company's chairman,
including pension rights and any compensation payments, recommends and
monitors the level and structure of remuneration for senior management and
evaluates the board of directors and examines the skills and characteristics
required of board candidates. During the year of review, the Remuneration and
Nomination Committee met once.
Remuneration paid to Directors in the period under review is disclosed in the
Directors' Remuneration Report.
Shareholder relations
Communication and dialogue - Open and transparent
communication with shareholders is given high priority and there is
regular dialogue with institutional investors, as well as general
presentations made at the time of the release of the annual and interim
financial results. All Directors are kept aware of changes in major
shareholdings in the Company and are available to meet with shareholders who
have specific interests or concerns. The Company issues its results promptly
to the market via RNS and also publishes them on the Company's website:
www.blencoweresourcesplc.com (https://blencoweresourcesplc.com/) . Regular
market news updates are made in relation to the Company including the status
of its exploration and development programme which is also included on the
Company's website.
Shareholders and other interested parties can subscribe to receive news updates by email
by registering online on the website free of charge.
The Directors are available to meet with institutional shareholders to discuss
any issues and gain an understanding of the Company's business, its strategies
and governance. Meetings are also held with the corporate governance
representatives of institutional investors when requested.
Annual General Meeting - At every AGM individual shareholders are given the
opportunity to put questions to the Chairman and to other members of the Board
that may be present although, due to COVID-19 pandemic, physical attendance at
the AGM was not possible in 2021. Notice of the AGM is sent to shareholders at
least 21 working days before the meeting. Details of proxy votes for and
against each resolution, together with the votes withheld are announced to the
London Stock Exchange and are published on the Company's website as soon as
practical after the meeting.
Viability statement
In accordance with provision 31 of the UK Corporate Governance Code (2018),
the Board has assessed the prospects of the Company over a five-year period,
taking account of the Company's current position and principal risks.
Time frame
The Board believes that four years is the most appropriate time frame over
which the Board should assess the long-term viability of the Group. The
Group's current activities do not generate any revenues or positive operating
cash flow, and the development of the Orom-Cross Graphite Project to commence
production and generate revenues will require significant capital
expenditures. The Orom-Cross Graphite Project is not expected to generate
positive net cash flow until approximately 2025, some four years from now.
Assessing viability
The main assumption in the Board making its viability assessment is the
ability of the Group to raise further funds in order to progress from the
exploration phase into feasibility and eventually into production of revenues.
The Group may not be able to obtain additional financing as and when needed
which could result in a delay or indefinite postponement of exploration and
development activities. The expected cost of bringing the project to an
initial production target of 75,000t is USD80,000,000.
Principal risk
The Directors have carried out a robust assessment of the principal risks
facing the Group as described on the preceding pages including those that
threaten its business model, future performance, solvency or liquidity. The
Directors are confident that they have put in place a strong management team
wide-ranging expertise in mineral exploration who are capable of dealing with
the risk management in order to safeguard the Group's assets.
Based on the financial impact of the analysis outlined above and the
associated risks, management actions and controls that are either in place or
could be implemented, the Board has been able to conclude that the Company
will be able to deliver the Orom-Cross Graphite Project.
Confirmation of viability
Taking account of these matters, the Directors have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period to December 2025, assuming that
the financing referred to above is completed as described. The Company's going
concern statement is detailed in note 2.7.
The Directors' Remuneration Report sets out the Company's policy on the
remuneration of Directors together with the details of Directors' remuneration
packages and services contracts for the year ended 30 September 2021.
The Remuneration and Nomination Committee comprises Sam Quinn, who acts as
chairman of the committee and Alex Passmore, and meets at least annually.
The Remuneration Committee reviews the scale and structure of the Directors'
fees, taking into account the interests of the shareholders and the
performance of the Company and Directors.
The items included in this report are unaudited unless otherwise stated.
The Company maintains contact with its shareholders about remuneration in the
same way as other matters and, as required by Section 439 of the Companies Act
2006, this remuneration report will be put to an advisory vote of the
Company's shareholders at the forthcoming Annual General Meeting.
Directors' Remuneration report
Statement of Blencowe Plc's policy on Directors' Remuneration
As set out in the Company's Prospectus dated 30 March 2020, each of the
Directors may be paid a fee at such rate as may from time to time be
determined by the Board. All the Directors are entitled to be reimbursed by
the Company for travel, hotel and other expenses incurred by them in the
course of their directors' duties relating to the Company.
Any fees payable to the Directors after an Acquisition will be determined as
part of the negotiations for the Acquisition, and will be dependent on whether
the Directors remain on the board of the Company in any event.
There have been no changes to the Directors' remuneration or remuneration
policy since the publication of the Company's Prospectus dated 30 March 2020
with the exception of those mentioned below. The terms and conditions of
appointment for all the members of the Board are available for inspection at
our registered office.
Terms of employment
Cameron Pearce was appointed on 8 June 2018 by the Company to act as a
Non-Executive Director and Chairman of the Company with fees of £36,000 per
annum. Following the Company's readmission to the London Stock Exchange
("LSE") on 28 April 2020, Mr Pearce was reappointed with fees of £96,000 per
annum. The appointment is for an initial term of 24 months and thereafter can
be terminated by the Company on six months written notice or by Mr Pearce on
three months written notice. If there is a change of control (as defined in
the letter of appointment), Mr Pearce will be entitled to 100% of his annual
fee as a lump sum payment if the Company terminates his employment, or if Mr
Pearce chooses to terminate his appointment within 12 months following a
change of control.
Sam Quin was appointed on 8 June 2018 by the Company to act as a Non-Executive
Director with fees of £24,000 per annum. Following the readmission of the
Company to the LSE on 28 April 2020, Mr Quinn was engaged as a Non-Executive
director with fees of £24,000 per annum. The appointment is for an initial
term of 24 months and thereafter the appointment can be terminated by the
Company on six months written notice or by Mr Quinn on three months written
notice. If there is a change of control (as defined in the letter of
appointment), Mr Quinn will be entitled to 100% of his annual fee as a lump
sum payment if the Company terminates his employment, or if Mr Quinn chooses
to terminate his appointment within 12 months following a change of control.
Alex Passmore was appointed on 8 June 2018 by the Company to act as a
Non-Executive Director with fees of £12,000 per annum. Following the
readmission of the Company to the LSE on 28 April 2020, Mr Passmore was
engaged as a Non-Executive director with fees of £24,000 per annum. On 12 May
2020, the Board agreed to keep Mr Passmore's fees at £12,000 per annum until
further capital is raised. On 15 March 2021, the Board agreed to increase Mr
Passmore's fees from 1 March 2021 to £18,000 per annum. The appointment is
for an initial term of 24 months and thereafter the appointment can be
terminated by the Company on six months written notice or by Mr Passmore on
three months written notice. If there is a change of control (as defined in
the letter of appointment), Mr Passmore will be entitled to 100% of his annual
fee as a lump sum payment if the Company terminates his employment, or if Mr
Passmore chooses to terminate his appointment within 12 months following a
change of control.
Remuneration Policy
Base salary levels will take into account market data for the relevant role,
internal relativities, the individual's experience and their current base
salary. Where an individual is recruited below market norms, they may be
re-aligned over time (e.g. two to three years), subject to performance in the
role. Benefits will generally be in accordance with the approved policy.
Currently, there are no benefits in place.
Directors' emoluments and compensation (audited)
Set out below are the emoluments of the Directors:
Cameron Pearce Sam Quinn Alexander Passmore Total
30 September 2020
Base fee 61,000 26,000 12,000 99,000
Share Based Payments - - -
Total 30 September 2020 61,000 26,000 12,000 99,000
30 September 2021
Base fee 96,000 24,000 15,000 135,000
Share Based Payments 71,318 49,923 21,395 142,636
Total 30 September 2021 167,318 73,923 36,395 277,636
The percentage of directors' emoluments of the total administrative costs for
the year is 34% (2020: 10%). The directors' base fees increased by 36%. While
the base salary costs of the key management employees increased by 82%.
Statement of Directors' shareholding and share interest
The Directors who served during the year ended 30 September 2021, and their
interests at that date, are disclosed above.
Issue of options
As at the reporting date, the number of shares options that the Company has
issued to the Board and Senior Management are as follow;
Cameron Pearce (Chairman) 2,500,000
Mike Ralston (CEO) 2,500,000
Lionshead Consultants Ltd (Sam Quinn) (Non Exec Director) 1,750,000
Alexander Passmore (Non Exec Director) 750,000
Iain Wearing (COO) 2,500,000
For further information, please see notes 18 and 21.
Other matters
The Company does not currently have any annual or long-term incentive schemes
(other than the one stated above) in place for any of the Directors and as
such there are no disclosures in this respect.
The Company does not have any pension plans for any of the Directors and does
not pay pension amounts in relation to their remuneration.
The Company has not paid out any excess retirement benefits to any Directors
or past Directors. The Company has not paid any compensation to past
Directors.
As the Company currently has no trade, no performance graph and table has been
included but will be included in future accounting periods.
By Order of the Board
Sam Quinn
Director
27 January 2022
Independent Auditor's Report to the Members of Blencowe Resources Plc
Opinion
We have audited the financial statements of Blencowe Resources PLC (the
"Parent Company") and it's subsidiaries (the "Group") for the year ended 30
September 2021 which comprise the Consolidated Statement of Comprehensive
Income, Consolidated Statement of Financial Position, Parent Statement of
Financial Position, Consolidated Statement of Changes in Equity, Parent
Statement of Changes in Equity, Consolidated Statement of Cash Flows, Parent
Statement of Cash Flows and notes to the financial statements, including a
summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International
Accounting Standards in conformity with the requirements of the Companies Act
2006 and, as regards the Parent Company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state
of the Group and Parent Company's affairs as at 30 September 2021 and of the
Group's loss for the year then ended;
· the Group financial statements have been properly prepared in
accordance with International Accounting Standards in conformity with the
requirements of the Companies Act 2006;
· the Parent Company financial statements have been properly
prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and as applied in accordance
with the provisions of the Companies Act 2006; and
· the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2.7 to the financial statements which explains that
the Group and Parent Company's ability to continue as a going concern is
dependent on the availability of future further fundraising. These conditions
indicate the existence of a material uncertainty which may cast significant
doubt over the Parent Company's and the Group's ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the director's
assessment of the group and parent company's ability to continue to adopt the
going concern basis of accounting included review of management's assessment
against reports from metallurgical experts, the Preliminary Economic
Assessment as well as financial forecasts for the Orom-Cross Graphite project.
Our responsibilities and the responsibilities of the director's with respect
to going concern are described in the relevant sections of this report.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the concept of materiality. An
item is considered material if it could reasonably be expected to change the
economic decisions of a user of the financial statements. We used the concept
of materiality to both focus our testing and to evaluate the impact of
misstatements identified.
Based on our professional judgement, we determined overall materiality for the
group financial statements as a whole to be £105,000 (2020: £95,000) and
parent company's financial statements to be £90,000 (2020: £75,000), based
on 2% of total assets as the carrying value of exploration assets is
considered to be line item of most interest to the users.
We use a different level of materiality ('performance materiality') to
determine the extent of our testing for the audit of the financial
statements. Performance materiality is set based on the audit materiality as
adjusted for the judgements made as to the entity risk and our evaluation of
the specific risk of each audit area having regard to the internal control
environment and was determined to be £74,550 (2020: £67,450) for the group
financial statements as a whole and £63,900 (2020: £53,250) for the parent
company's financial statements.
Where considered appropriate performance materiality may be reduced to a lower
level, such as, for related party transactions and directors' remuneration.
We agreed with the Audit Committee to report to it all identified errors in
excess of £5,250 (2020: £430). Errors below that threshold would also be
reported to it if, in our opinion as auditor, disclosure was required on
qualitative grounds.
Overview of the scope of our audit
The Group is accounted for from one central operating location, the Company's
registered office. The main exploration activity of the group is performed in
Uganda. Our audit was performed remotely and the scope of the audit included
both the parent and the entity acquired in the period.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified. These matters
included those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
We set out below, together with the material uncertainty over going concern
above, those matters we identified as key audit matters. This is not a
complete list of all risks identified by our audit.
Key audit matter How the scope of our audit addressed the key audit matter
Surface liability
As discussed in Note 16, The Ugandan Mining Act 2003 requires an applicant for The following work was undertaken:
a mining lease to obtain surface rights from land owners in the mineral area
before the respective mining lease can be granted. Accordingly, when the Group
acquired its subsidiary it obtained surface rights by way of 49 years lease
over the area. The liability to the land owners is to be paid in 10 · We reviewed the calculations provided by the client to ascertain
instalments on a section basis as the project progresses. The progress on the reasonableness of the assumptions and judgements.
each section is not limited to any time frames and is at the Group's
discretion. After reviewing the project's time frame, the Board believes that · We reviewed and performed sensitivity analysis on the discount
the value of the liability to the land owners needs to be adjusted to reflect rate used in calculating the present value of the surface rights liability.
the current status of the project.
· We discussed and challenged management on the change in the
project's time frame.
There is a risk that inappropriate assumptions could result in material errors
in the surface liability recognised.
We consider managements methodology and determination of the surface liability
as at 30 September 2021 to be acceptable.
Carrying value of intangible assets
Following the acquisition of CARU the Group now owns a mining licence and has We considered the indicators of impairment applicable to the Orom-Cross
significant exploration assets. exploration asset, including those indicators identified in IFRS 6:
'Exploration for the Evaluation of Mineral Resources' and reviewed
There is a risk that these may be impaired. management's assessment of these indicators. The following work was
undertaken:
Management performed an impairment indicator review to assess whether there
were any indicators of impairment for the Orom-Cross exploration assets and · We reviewed the licence documentation to confirm the exploration
whether an impairment test was required to be performed. No indicators of permits are valid and whether there is an expectation that these will be
impairment of the asset were identified. renewed in the ordinary course of business.
· We made specific enquiries of management and reviewed market
announcements, budgets and plans which confirmed the plan to continue
investment in the Orom-Cross project subject to sufficient funding being
available, as disclosed in note 2.7.
· We considered whether the feasibility studies to date indicated
any impairment for the project.
· We reviewed the adequacy of disclosures provided within the
financial statements in relation to the impairment assessment against the
requirements of the accounting standards.
We are satisfied that there are no indicators at present that require an
impairment assessment.
Our audit procedures in relation to these matters were designed in the context
of our audit opinion as a whole. They were not designed to enable us to
express an opinion on these matters individually and we express no such
opinion.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors' remuneration report to be audited
has been properly prepared in accordance with the Companies Act 2006.
In our opinion based on the work undertaken in the course of our audit
· the information given in the strategic report and the directors'
report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
· the strategic report and the directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Company
and its environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received from
branches not visited by us; or
· the Parent Company financial statements and the part of the
directors' remuneration report to be audited are not in agreement with the
accounting records and returns; or
· certain disclosures of directors' remuneration specified by law
are not made; or
· we have not received all the information and explanations we
require for our audit
Responsibilities of the directors for the financial statements
As explained more fully in the directors' responsibilities statement set out
above, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and
for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, ate instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
fraud is detailed below:
We design our procedures so as to obtain sufficient appropriate audit evidence
that the financial statements are not materially misstated due to
non-compliance with laws and regulations or due to fraud or error.
We are not responsible for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations - this responsibility lies
with management with the oversight of the Directors and the Audit Committee.
Based on our understanding of the Group and industry, discussions with
management and the Audit Committee we identified financial reporting standards
and Companies Act 2006 as having a direct effect on the amounts and
disclosures in the financial statements.
Other laws and regulations where non-compliance may have a material effect on
the Group's operations are laws and regulations associated with the listing on
the London Stock Exchange and the mining licence held.
As part of the engagement team discussion about how and where the Group's
financial statements may be materially misstated due to fraud, we did not
identify any areas with an increased risk of fraud.
Our audit procedures included:
· enquiry of management about the Group's policies, procedures and
related controls regarding compliance with laws and regulations and if there
are any known instances of non-compliance;
· examining supporting documents for all material balances,
transactions and disclosures;
· review of the Board of directors minutes;
· enquiry of management, external legal counsel about litigations
and claims and inspection of relevant correspondence
· evaluation of the selection and application of accounting
policies related to subjective measurements and complex transactions;
· analytical procedures to identify any unusual or unexpected
relationships;
· testing the appropriateness of journal entries recorded in the
general ledger and other adjustments made in the preparation of the financial
statements;
· review of accounting estimates for biases including the carrying
value of intangibles which is included in the Key Audit Matters.
Owing to the inherent limitations of an audit, there is an unavoidable risk
that some material misstatements of the financial statements may not be
detected, even though the audit is properly planned and performed in
accordance with the ISAs (UK).
The potential effects of inherent limitations are particularly significant in
the case of misstatement resulting from fraud because fraud may involve
sophisticated and carefully organized schemes designed to conceal it,
including deliberate failure to record transactions, collusion or intentional
misrepresentations being made to us.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor's report.
Other matters which we are required to address
We were appointed by the Board of Directors on 14 December 2018 to audit the
financial statements for the period ending 30 September 2018. Our total
uninterrupted period of engagement is 4 years, covering the periods ending 30
September 2018 to 31 September 2021.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group and we remain independent of the Group in conducting our
audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
Matthew Stallabrass
Senior Statutory Auditor
For and on behalf of
Crowe U.K. LLP
Statutory Auditor
55 Ludgate Hill
London
EC4M 7JW
27 January 2022
Consolidated Statement of Comprehensive Income for the year ended 30 September
2021
Notes 30 Sep 2021 30 Sep 2020
GBP GBP
Exploration costs (11,690) (9,736)
Administrative fees and other expenses 6 (815,415) (1,015,053)
Adjustments to Liability to the Land Owners 16 177,639 -
Operating loss (649,466) (1,024,789)
Finance costs (45,260) (33,295)
Loss before tax (694,726) (1,058,084)
Income tax 9 - -
Loss for the year attributable to owners of the parent (694,726) (1,058,084)
Other comprehensive income
Exchange differences on translation of foreign operation: 3,662 -
Other comprehensive income, net of tax 3,662
Total comprehensive loss (691,064) (1,058,084)
Basic and diluted loss per share (pence) 11 (0.61) (1.74)
Consolidated Statement of Financial Position as at 30 September 2021
Notes 30 Sep 2021 30 Sep 2020
GBP GBP
Non-Current Assets
Intangible assets 10 5,296,289 4,377,127
Current assets
Trade and other receivables 14 52,580 72,021
Cash and cash equivalents 93,288 205,856
Total current assets 145,868 277,877
Total assets 5,442,157 4,655,004
Current liabilities
Creditors: Amounts falling due within one year 15 280,071 498,588
Total current liabilities 280,071 498,588
Non-current liabilities
Surface liabilities 16 887,560 849,512
Total liabilities 1,167,631 1,348,100
Net assets 4,274,526 3,306,903
Equity
Share capital 17 901,316 783,333
Share premium 18 5,132,081 3,876,650
Share options reserve 19 317,876 100,471
Translation reserve 2.10 3,662 -
Retained earnings (2,080,409) (1,453,551)
Total equity 4,274,526 3,306,903
Parent Statement of Financial Position as at 30 September 2021
Notes 30 Sep 2021 30 Sep 2020
GBP GBP
Fixed assets
Investment in subsidiaries 12 2,000,000 2,000,000
Intangible assets 10 1,936,953 1,036,486
Non-current assets 13 445,804 326,221
Total fixed assets 4,382,757 3,362,707
Current assets
Trade and other receivables 14 187,163 113,688
Cash and cash equivalents 93,288 205,740
Total current assets 280,451 319,428
Total assets 4,663,208 3,682,135
Current liabilities
Creditors: Amounts falling due within one year 15 280,110 305,742
Total current liabilities 280,110 305,742
Net assets 4,383,098 3,376,393
Equity
Share capital 17 901,316 783,333
Share premium 17 5,132,081 3,876,650
Share options reserve 18 317,876 100,471
Retained earnings (1,968,175) (1,384,061)
Total equity 4,383,098 3,376,393
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own Statement of
Comprehensive Income in these financial statements. The loss after tax of the
parent Company for the year was £651,982 (2020: £977,421).
The Financial Statements were approved and authorised for issue by the Board
of Directors on 27 January 2022 and were signed on its behalf by:
Cameron
Pearce Sam
Quinn
Director
Director
Consolidated Statement of Changes in Equity for the year ended 30 September 2021
Share Share premium Share option reserve Retained earnings Translation reserve Total equity
capital
GBP GBP GBP GBP GBP GBP
Balance as at 30 Sep 2019 450,000 209,983 33,778 (406,639) - 287,122
Loss for the year - - - (1,058,084) - (1,058,084)
Total comprehensive loss - - - (1,058,084) - (1,058,084)
Transactions with owners
New shares issued (note 17) 333,333 3,666,667 - - - 4,000,000
Issue of share options/warrants - - 66,693 - - 66,693
Adjustment on consolidation - IFRS 9 - - - 11,172 - 11,172
Total transactions with owners 333,333 3,666,667 100,471 11,172 - 4,077,865
Balance as at 30 Sep 2020 783,333 3,876,650 100,471 (1,453,551) - 3,306,903
Loss for the year - - - (694,726) - (694,726)
Total comprehensive loss - - - (694,726) - (694,726)
Transactions with owners
New shares issued (note 17) 117,983 1,344,300 - - - 1,462,283
Share issue costs - (88,869) - - - (88,869)
Issue of share options/warrants - - 285,273 - - 285,273
Movement on warrant reserve* - - (67,868) 67,868 - -
Exchange differences on translation of foreign operations - - - - 3,662 3,662
Total transactions with owners 117,983 1,255,431 217,405 67,868 3,662 1,662,349
Balance as at 30 Sep 2021 901,316 5,132,081 317,876 (2,080,409) 3,662 4,274,526
*The reserves transfer was made to appropriately reflect the value of share
options/warrants that are outstanding at 30 September 2021.
Parent Statement of Changes in Equity for the year ended 30 September 2021
Share Share premium Share option reserve Retained earnings Total equity
capital
GBP GBP GBP GBP GBP
Balance as at 30 Sep 2019 450,000 209,983 33,778 (406,640) 287,121
Loss for the year - - - (977,421) (977,421)
Total comprehensive loss - - - (977,421) (977,421)
Total transactions with owners
New shares issued (note 17) 333,333 3,666,667 - - 4,000,000
Issue of share options/warrants - - 66,693 - 66,693
Total transactions with owners 333,333 3,666,667 66,933 - 4,066,693
Balance as at 30 Sep 2020 783,333 3,876,650 100,471 (1,384,061) 3,376,393
Loss for the year - - - (651,982) (651,982)
Total comprehensive loss - - - (651,982) (651,982)
Total transactions with owners
New shares issued (note 17) 117,983 1,344,300 - - 1,462,283
Share issue costs - (88,869) - - (88,869)
Issue of share options/warrants - - 285,273 - 285,273
Movement on warrant reserve* - - (67,868) 67,868 -
Total transactions with owners 117,983 1,255,431 217,405 67,868 1,658,687
Balance as at 30 Sep 2021 901,316 5,132,081 317,876 (1,968,175) 4,383,098
*The reserve transfer was made to correctly show the Share Based Payment that
were incurred in the prior year.
Consolidated Statement of Cash Flows for the year ended 30 September 2021
Notes 30 Sep 2021 Restated
30 Sep 2020
GBP GBP
Operating activities
Loss after tax (694,726) (1,058,084)
Finance costs 45,260 33,295
Adjustment to Surface Liability 16 (177,639) -
Share issue/warrant cost 18 285,273 66,693
Unrealised currency translation 55,785 1,919
Changes in working capital
Decrease/(Increase) in trade and other receivables 19,441 (27,426)
(Decrease)/Increase in trade and other payables (9,494) 236,598
Net cash flows utilised by operating activities (476,100) (747,005)
Cash flows from investing activities
Investment in exploration assets 10 (976,084) (1,084,354)
Net cash flows utilised by investing activities (976,084) (1,084,354)
Cash flows from financing activities
Payment of Surface Liability (33,798) (104,777)
Shares issued (net of issue cost) 17 1,373,414 2,000,000
Net cash flows from financing activities 1,339,616 1,895,223
(Decrease)/increase in cash and cash equivalents (112,568) 63,864
Cash and cash equivalents at the beginning of the year 205,856 141,992
Cash and cash equivalents at 30 September 93,288 205,856
Net Debt note
Cash at bank Surface Total
and in hand Liability
GBP GBP GBP
At 1 October 2019 141,992 - 141,992
On acquisition - (1,009,049) (1,009,049)
Cash flows 63,864 104,777 168,641
Other non-cash changes - (120,465) (120,465)
As 30 September 2020 (restated) 205,856 (1,024,737) (818,881)
As 30 September 2020 205,856 (1,024,737) (818,881)
Cash flows (112,568) 33,798 (112,568)
Other non-cash changes - 103,379 137,177
As 30 September 2021 93,288 (887,560) (794,272)
* The comparative information has been restated to correctly show the payment
of the Surface Liability as a Financing cash flow.
Parent Statement of Cash Flows for the year ended 30 September 2021
30 Sep 2021 30 Sep 2020
Notes GBP GBP
Operating activities
Loss after tax (651,982) (977,421)
Less finance income (21,564) (16,415)
Increase in bad debt provision 13,14 12,048 -
Share issue/warrant cost 18 285,273 66,693
Changes in working capital
Increase in trade and other receivables (80,559) (166,640)
(Decrease)/increase in trade and other payables (25,632) 194,017
Net cash flows from operating activities (482,416) (899,766)
Cash flows from investing activities
Loan advanced to subsidiary (102,983) -
Investment in exploration assets 10 (900,467) (1,036,486)
Net cash flows from investing activities (1,003,450) (1,036,486)
Cash flows from financing activities
Shares issued (net of issue cost) 17 1,373,414 2,000,000
Net cash flows from financing activities 1,373,414 (2,000,000)
Increase/(decrease) in cash and cash equivalents (112,452) 63,748
Cash and cash equivalents at the beginning of the year 205,740 141,992
Cash and cash equivalents at 30 September 93,288 205,740
Notes to the Financial Statements for the year ended 30 September 2021
1. General
Blencowe Resources Plc (the "Company") is a public limited company
incorporated and registered in England and Wales on 18 September with
registered company number 10966847 and its registered office is situated in
England and Wales at 1 King Street Office 3.05, London, England, EC2V 8AU.
The Group did not earn any trading income during the year under review but
incurred expenditure associated with financing and operation of the Group and
developing its principal assets.
2. Accounting Policies
2.1 Basis of preparation
The principal accounting policies applied in the preparation of the Company
and Group's Financial Statements are set out below. These policies have been
consistently applied to the periods presented, unless otherwise stated.
The Company and Group's Financial Statements have been prepared in accordance
with IFRS as adopted by EU. The Company Financial Statements have been
prepared using the measurement bases specified by IFRS for each type of asset,
liability, income and expense.
The Group's Financial Statements are presented in GBP, which is the Company's
functional currency. All amounts have been rounded to the nearest pound,
unless otherwise stated.
2.2 Basis of consolidation
The Consolidated Financial Statements comprise the financial statement of the
Company and Consolidated African Resources (Uganda) Ltd ("CARU") following the
Company's acquisition of CARU on 27 April 2020.
Subsidiaries are fully consolidated from the date of acquisition, being the
date on which the Group obtains control. Control is achieved when the Group
is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over an
investee, including:
• the contractual arrangement with the other vote
holders of the investee;
• rights arising from other contractual arrangements;
and
• the Group's voting rights and potential voting rights
The Group re-assesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated from the
date that control ceases. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the period are included in the Group
Financial Statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.
All intra-group balances, transactions, income and expenses and profits and
losses resulting from intra-group transactions that are recognised, are
eliminated in full.
2.3 Changes in significant accounting policies
The following standards, interpretation and amendments were adopted by the Group during the year:
· Definition of a business (Amendments to IFRS 3)
· Definition of Material (Amendments to IAS 1 and IAS 8)
· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and
IFRS 7)
· COVID-19-Related Rent Concessions (Amendment to IFRS 16)
· Amendments to References to Conceptual Framework in IFRS
Standards
The transition to these standards had no material impact on the Group. Future
changes in accounting policies.
2.4 Standards, amendments and interpretations to published standards not yet effective
At the date of authorisation of these financial statements, the following
standards and interpretations, were in issue but not yet effective, and have
not been early adopted by the Group:
· Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16) - Effective for periods beginning on or
after 1 January 2021
· COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendment
to IFRS 16) - Effective for periods beginning on or after 1 April 2021
· Onerous Contracts - Cost of Fulfilling a Contract (Amendments to
IAS 37) - Effective for periods beginning on or after 1 January 2022
· Annual Improvements to IFRS Standards 2018-2020 - Effective for
periods beginning on or after 1 January 2022
· Property, Plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16) - Effective for periods beginning on or after 1 January
2022
· Reference to the Conceptual Framework (Amendments to IFRS 3) -
Effective for periods beginning on or after 1 January 2022
· IFRS 17 Insurance Contracts - Effective for periods beginning on
or after 1 January 2023
· Classification of liabilities as current or non-current
(Amendments to IAS 1) - Effective for periods beginning on or after 1 January
2023
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2) - Effective for periods beginning on or after 1 January
2023
· Definition of Accounting Estimate (Amendments to IAS 8) -
Effective for periods beginning on or after 1 January 2023
· Deferred Tax Related to Assets and Liabilities Arising from a
Single Transaction - Amendments to IAS 12 Income Taxes - Effective for periods
beginning on or after 1 January 2023
The Directors have reviewed the IFRS standards in issue which are effective
for annual accounting years ending on or after the stated effective date. In
their view, none of these standards would have a material impact on the
financial statements of the Group.
2.5 Intangible assets
Exploration and evaluation assets
The Group recognises expenditure as exploration and evaluation assets when it
determines that those assets will be successful in finding specific mineral
resources. Expenditure included in the initial measurements of exploration and
evaluation assets and which are classified as intangible assets relate to the
acquisition of rights to explore, exploratory drilling, sampling and
activities to evaluate the technical feasibility and commercial viability of
extracting a mineral resource. Capitalisation of pre-production expenditure
ceases when the mining property is capable of commercial production.
Impairment
Exploration and evaluation assets are not subject to amortisation until
production commences but are assessed for impairment when an event or trigger
requires an assessment to be carried out. The assessment is carried out by
allocating exploration and evaluation assets to cash generating units
("CGU's"), which are based on specific projects or geographical areas.
Currently there is only one CGU relating to the Orom-Cross Project. Whenever
the exploration for and evaluation of mineral resources in cash generating
units does not lead to the discovery of commercially viable quantities of
mineral resources and the Group has decided to discontinue such activities of
that unit, the associated expenditures are written off to the Statement of
Comprehensive Income.
Exploration and evaluation assets recorded at fair-value on acquisition
Exploration assets which are acquired are recognised at fair value. When an
entity is acquired whose only significant assets are its exploration asset
and/or rights to explore, the Directors consider that the fair value of the
exploration assets is equal to the consideration.
2.6 Financial instruments
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another.
(i) Financial assets
Financial assets are classified at initial recognition. The classification of
financial assets at initial recognition that are debt instruments depends on
the financial asset's contractual cash flow characteristics and the Group's
business model for managing them. The Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair
value through profit or loss, transaction costs.
In order for a financial asset to be classified and measured at amortised
cost, it needs to give rise to cash flows that are 'solely payments of
principal and interest (SPPI)' on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument
level.
Classification and measurement is based on both whether contractual cash flows
are solely payments of principal and interest; and whether the debt instrument
is held to collect those cash flows. In the case of the Group, all financial
assets meet this criteria and they are held at amortised cost.
Impairment of financial assets
IFRS 9's impairment requirements use more forward-looking information to
recognise expected credit losses - the ECL model.
ECLs are based on the difference between the contractual cash flows due in
accordance with the contract and all the cash flows that the Company expects
to receive, discounted at the original effective interest rate. The expected
cash flows will include cash flows from the sale of collateral held or other
credit enhancements that are integral to the contractual terms.
ECLs are recognised in two stages. For credit exposures for which there has
not been a significant increase in credit risk since initial recognition, ECLs
are provided for credit losses that result from default events that are
possible within the next 12 months (a '12-month ECL'). For those credit
exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected
over the remaining life of the exposure, irrespective of the timing of the
default (a 'lifetime ECL').
For trade receivables, the Group applies a simplified approach in calculating
ECLs. Therefore, the Company does not track changes in credit risk, but
instead recognises a loss allowance based on lifetime ECLs at each reporting
date.
(ii) Financial liabilities
Financial liabilities are classified, at initial recognition, as financial
liabilities at amortised cost. The Group's financial liabilities include trade
and other payables and surface liabilities.
Subsequent measurements
Surface liabilities and trade and other payables.
After initial recognition, surface liabilities and trade and other payables
are subsequently measured at amortised cost using the EIR method. Gains and
losses are recognised in the statement of profit or loss when the liabilities
are derecognised, as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees or costs that are an integral part of the EIR. The EIR
amortisation is included as finance costs in the statement of profit or loss.
Derecognition
A financial liability is derecognised when the associated obligation is
discharged or cancelled or expires.
When an existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the
derecognition of the original liability and the recognition of a new
liability. The difference in the respective carrying amounts is recognised in
profit or loss and other comprehensive income.
2.7 Going concern
The Company's business activities, together with the factors likely to affect
its future development, performance and positions are set out in the Chief
Executive Officer's Statement.
The Group had £5,442,157 of total assets at 30 September 2021 (2020:
£4,655,004), of which £93,288 are held as cash and cash equivalents (2020:
£205,856).
Subsequent to the year-end the Group has raised additional funding through a
share capital raised in order to further the development of the Group's
activities (see note 21) however, the Board of Directors appreciate that
significant further funding will be required to achieve the desired project
outcome of cash generative production in 2025. The raising of further funding
is not guaranteed and will be dependent on successful exploration results to
demonstrate the commercial potential of the project, for these reasons there
is a material uncertainty in respect of going concern.
As part of their going concern assessment, the Board of Directors have
reviewed cash flow forecasts reviewed for the 12 months from the date these
financial statements were signed and considered the medium term outlook
through to 2025 as described in the Viability Statement. The Directors have a
reasonable expectation that the Group will be able to continue in operation
and meet its liabilities as they fall due over the period to December 2025
provided further funding can be raised as required.
Accordingly, the Directors have a reasonable expectation, subject to the
uncertainty noted above, that the Company and the Group will continue in
operational existence for the foreseeable future, provided future funding can
be obtained following anticipated positive feasibility study results, for a
period of at least 4 years from the date of signing of these financial
statements. Therefore, the financial statements have been prepared as a going
concern.
2.8 Comparative figures
The comparative figures have been presented as the Group Financial Statements
cover the Company's figures for the year ended 30 September 2020.
2.9 Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from proceeds.
Warrants
Warrant options are classified as equity. The fair value of the warrants has
been calculated using the Black-Scholes option pricing model. For more
information, please see note 18.
2.10 Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the group's entities are
measured using the currency of the primary economic environment in which the
entity operates ('the functional currency'). The consolidated financial
statements are presented in Great British Pounds currency (GBP).
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are
retranslated to the functional currency at the exchange rate at that date.
Foreign exchange gains and losses resulting from the settlement of such
transactions, and from the translation of monetary assets and liabilities
denominated in foreign currencies at year end exchange rates, are generally
recognised in profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the
exchange rate at the date that the fair value was determined. Non-monetary
items in a foreign currency that are measured in terms of historical cost are
translated using the exchange rate at the date of the transaction. Foreign
currency differences arising on the consolidation of the Group's companies are
accumulated in the translation reserve. The Company's only subsidiary is
CARU, whose functional currency is USD.
2.11 Earnings per share
The Company presents basic and diluted earnings per share ("EPS") data for its
Ordinary Shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of Ordinary Shares outstanding during the year. Diluted EPS is
calculated by adjusting the earnings and number of shares for the effects of
dilutive potential Ordinary Shares.
2.12 Income tax
Income tax expense comprises current tax and deferred tax.
Current income tax
Being resident in England and Wales, a 19% rate of corporate income tax
applies to the Company.
Deferred income tax
Deferred tax is recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or
in other comprehensive income. Deferred income tax is recognised on temporary
differences arising between the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements. Deferred income tax assets and
liabilities are measured on an undiscounted basis at the tax rates that are
expected to apply to the period when the related asset is realised or the
liability is settled, based on tax rates (and tax laws) that have been enacted
or substantively enacted at the date of the Consolidated Statement of
Financial Position.
2.13 Cash and cash equivalents
Cash and cash equivalents in the Company and Group statements of financial
position comprise bank balances only. For the purpose of the statement of cash
flows, cash and cash equivalents consist of bank balances only.
3. Business Combination
On 27 April 2020 the Company acquired 100% of the voting equity instrument of
CARU. The Group applies the acquisition method in accounting for business
combinations. The Consideration transferred by the Group to obtain control
of a subsidiary is calculated as the sum of the acquisition date fair value of
assets transferred, liabilities incurred, and the equity interests issued by
the Group, which includes the fair value of any asset or liability arising
from a contingent consideration arrangement. Acquisition costs are expensed
as incurred.
The Company was formed for the purposes of acquiring a natural resources
asset. Graphite is a metal that has a strong future for the next 20 years
given that graphite is the largest component of the lithium battery. The board
believe that the Orom-Cross Graphite Project can be globally significant due
to the high-quality product and scale of the target resource.
The Group recognises identifiable assets acquired and liabilities assumed in a
business combination regardless of whether they have been previously
recognised in the acquiree's financial statements prior to the acquisition.
Assets acquired and liabilities assumed are generally measured at their
acquisition-date fair values.
Details of the fair value of the identifiable assets and liabilities and
purchase consideration are as follows;
Book Value Adjustment Fair Value
GBP GBP GBP
Exploration assets 1,391,366 1,903,326 3,294,692
Cash 116 - 116
Payables (285,759) - (285,759)
Surface liabilities (1,009,049) - (1,009,049)
Total 96,674 1,903,326 2,000,000
On acquisition the exploration assets were fair valued to bring the fair value
of the assets in line with the consideration paid to the company. The
company has minimal other assets and liabilities other that those relating to
the mining licence and therefore the fair value is considered to the value
that the Company has paid to acquire CARU in the year.
4. Critical accounting estimates and judgments
In preparing the Company and Group Financial Statements, the Directors are
required to make judgements, estimates and assumptions that affect the amounts
reported. These estimates and judgements are continually reviewed and are
based on experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances.
Accounting estimates and assumptions are made concerning the future and, by
their nature, may not
accurately reflect the related actual outcome. There are no key assumptions
and other sources of estimation uncertainty that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year.
Critical accounting estimates
a) Impairment of intangible assets - exploration and evaluation costs
Exploration and evaluation costs have a carrying value as at 30 September 2021
of £5,296,289 (2020: £4,377,895). Licences have a useful life of 49 years
and the Group has a right to renew exploration licences. The surface rights
are amortised at a rate of 2.25% per annum once extraction of the resource
commences. The results of actual or future mining test will be taken into
consideration when evaluating the value of the intangible assets.
b) Interest charge on amounts falling after one year
At year end NPV of the surface rights owed to the owners of the land is
£887,560 (2019: £1,024,737). Interest is charged on the liability at a rate
of 5%, if the discount rate used to calculate the present value of the
liability was to increase by 1%, the carrying value of the liability would
decrease by around £25,000. The interest charged during the year was £45,260
(2020: £33,295), if the rate was increased by 1% then the interest charge
would increase by approximately £17,000 (2020: £10,000). For further
information on the lease, please see note 16.
Critical accounting judgements
Interest charge on amounts falling after one year
The surface rights are to be paid in 10 instalments on a section basis as the
project progress. The progress on each section is not limited to any time
frames and is at the Group's discretion. The value of the surface liability is
measured at the present value of the estimated payments due to the Land
Owner's Association over the lease term. If the payments were made one year
earlier the difference in the liability to the Land Owners would increase by
USD59,848. It the payments were made one year later the difference in the
liability to the Land Owners would decrease by USD51,815.
5. Operating Segment activities
The Group is engaged in the business of mining. At this stage in the Group's
development, the Group is focusing on financing and continued development of
the Orom-Cross Graphite Project. Which is the only operating segment, and all
non-current assets are located in Uganda.
With no income in the year the Group continues to monitor the loss before tax
to ensure the continued viability of the Group and ability to continue to
develop the project.
6. Administrative fee and other expenses
30 Sep 2021 30 Sep 2020
GBP GBP
Directors' remuneration (see note 7) 138,787 107,102
Professional fees 100,256 437,340
Salaries (see note 8) 58,000 27,500
Listing fees 42,535 26,599
Audit fees 25,000 25,000
Fees payable to group auditors for non-audit services - 69,275
Share option/warrant cost (see note 18) 285,273 66,693
Administration fees 52,000 24,486
Broker fees 48,990 190,833
Travelling expenses 1,529 7,260
Miscellaneous fees 63,046 32,965
Total 815,415 1,015,053
Key management remuneration is disclosed in note 8.
7. Directors' remuneration
30 Sep 2021 30 Sep 2020
GBP GBP
Base fees 135,000 99,000
Employer NI 2,095 2,287
Directors expenses 1,691 5,815
Share based payments 142,636 -
Total 281,423 107,102
In addition, the Directors received options which are disclosed in note 18.
The total value of warrants issued to the Directors during the financial year
is £Nil (2020: £11,229)
Directors' fees do not include any accrued fees from the previous year (2020:
£2,000).
8. Key management personnel
The number of key management (excluding members the Board) employees
throughout the year was as follows;
30 Sep 2021 30 Sep 2020
By the Company 2 2
By the Group 2 2
The key management employees who were appointed during the year, together with
details of their interest in the shares of the Company as at the reporting
date were:
Number of shares Value of the shares
Michael Ralston - CEO 2,725,000 £163,950
Iain Wearing - COO 208,333 £12,500
The total base salary costs for the year was £111,000 (2020: £61,000) of
which £53,000 (2020: £33,500) were capitalised as they are related to the
Orom-Cross Graphite Project. Total share based payments for the year were
£142,636 (2020: nil). There was no other component of compensation.
9. Taxation
Analysis of charge in the year 30 Sep 2021 30 Sep 2020
GBP GBP
Current tax:
UK Corporation tax on loss for the year - -
Deferred tax - -
Tax on loss on ordinary activities - -
30 Sep 2021 30 Sep 2020
GBP GBP
Loss on ordinary activities before tax (694,726) (1,058,084)
Analysis of charge in the year
Loss on ordinary activities multiplied by rate of corporation tax in the UK of (131,998) (201,036)
19% (2019: 19%)
Tax losses carried forward 131,998 201,036
Current tax charged - -
The Parent Company has accumulated tax losses arising in the UK of £2,096,238
(2020: £1,401,512) that are available, under current legislation, to be
carried forward against future profits.
10. Intangible and other assets
For the year ended in 30 September 2021 intangible assets represent only
capitalised costs associated with the Group's exploration, evaluation and
development of mineral resources.
Group Exploration assets Total
GBP GBP
Balance at 30 September 2019 - -
Additions - on acquisition 3,294,692 3,294,692
Additions - during the year 1,084,354 1,084,354
Exchange Differences (1,919) (1,919)
Balance at 30 September 2020 4,377,127 4,377,127
Additions - during the year 976,084 976,084
Exchange Differences (56,922) (56,922)
Balance at 30 September 2021 5,296,289 5,296,289
Company Exploration assets Total
GBP GBP
Balance at 30 September 2019 - -
Additions - during the year 1,036,486 1,036,486
Balance at 30 September 2020 1,036,486 1,036,486
Additions - during the year 900,467 900,467
Balance at 30 September 2021 1,936,953 1,936,953
The additions during the year represent the development costs at Orom-Cross
Graphite Project which were required to carry out the initial drilling costs
and testing of the mineral.
11. Loss per share
The calculation of the basic and diluted loss per share is based on the
following data:
30 Sep 2021 30 Sep 2020
Earnings
Loss from continuing operations for the year attributable to the equity (694,726) (1,058,084)
holders of the Company (£)
Number of shares
Weighted average number of Ordinary Shares for the purpose of basic and 114,070,173 60,707,758
diluted earnings per share
Basic and diluted loss per share (pence) (0.61) (1.74)
The share options issued during the year to the Board and Senior Management have not been included in this calculation as they would be anti-dilutive.
12. Investment in subsidiary
Details of the Company's subsidiary at 30 September 2021 are as follows:
Name of the subsidiary Place of incorporation Portion of ordinary shares held Principal activity
Consolidated African Resources (Uganda) Ltd Uganda 100% Exploration
13. Long term: non-current assets
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Loan to subsidiaries (see below) - 469,267 - 344,720
Less: ECL provision - (23,463) - (18,499)
Total - 445,804 - 326,221
On 18 December 2020 the Company and its subsidiary entered into a loan
agreement. This agreement replaces any previous loan agreements. The facility
is for an amount up to £5,000,000 and carries an interest of 5% per annum
chargeable at year end.
Following the acquisition of CARU, the loan now is considered to be a long
term asset.
During the year, the Company agreed to cover some expenses for Consolidated
African Resources (Uganda) Ltd ("CARU") for the value of £102,983 (2020:
£121,289). The amount borrowed at the yearend was £431,288 (2020:
£328,305). The total interest charged for the year ended 30 September 2021
was £21,564 (2020: £16,415). The interest payable at the yearend was
£37,979 (2020: £16,415).
The value of the loan is subject to 12 months ECL of 5%, representing the
possible default events over the next 12 months of the financial instrument.
Due to the increase of expenses paid by the Company on behalf of CARU, the
loan and its interest has increased, this has led to an increase in the
provision during the year.
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Brought forward ECL provision - 18,499 - 11,172
Provision expense - 4,964 - 7,327
Carried forward ECL provision - 23,463 - 18,499
14. Trade and other receivables
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Other receivables 8,752 143,335 67,902 109,569
Prepayments 43,828 43,828 4,119 4,119
Total 52,580 187,163 72,021 113,688
Included within other receivables is amounts receivable from CARU.
Group Company Group Company
GBP GBP GBP GBP
Amount receivable from CARU - 141,667 - 41,667
Less: ECL provision - (7,084) - -
Total - 134,583 - 41,667
In the current year the value of the receivable was subject to 12 months ECL
of 5%. The increase in the provision expense is due to the charge of
management fees from the Company to its subsidiary CARU. As of the year end,
the amount that CARU owes the Company on management services was £141,667
(2020: £41,667).
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Brought forward ECL provision - - - -
Provision expense - 7,084 - -
Carried forward ECL provision - 7,084 - -
15. Creditors: Amounts falling due within one year
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Trade Payables 238,614 238,653 281,726 264,105
Land Owners Liability - - 175,225 -
Accruals 41,457 41,457 41,637 41,637
Total 280,071 280,110 498,588 305,742
16. Creditors: Amounts falling after one year
The Ugandan Mining Act 2003 requires an applicant for a mining lease to obtain surface rights from land owners in the mineral area before the respective mining lease can be granted. Accordingly, when the Group acquired its subsidiary it obtained surface rights by way of 49 years lease over the area. The liability to the land owners is to be paid in 10 instalments on a section basis as the project progresses. The progress on each section is not limited to any time frames and is at the Group's discretion. At the point of inception assumptions were made about the timing of the payments and that now, with further information about the likely development of the project, those assumptions have been revised so as to better align payment dates with project milestones and this has resulted in an adjustment of £177,639.
30 Sep 2021 30 Sep 2020
GBP GBP
Total payable as at 1 October 1,024,737 -
Addition to non-current liabilities - 1,009,049
Change in estimate (177,639) -
Interest charged during the period 45,260 11,923
Exchange (gain)/loss on valuation (4,798) 3,765
Total payable as at 30 September 887,560 1,024,737
Analysis between current and non-current liability
Payable within 12 months - 175,225
Payable after 12 months 887,560 849,512
887,560 1,024,737
The value of the liability is measured at the present value of the contractual
payments due to the Land Owners' Association over the lease term, with the
discount rate of 5%.
At the balance sheet date, the Group undiscounted amount payable to the land
owners is;
2021 2020
GBP GBP
Payable within 1 years - 142,027
Payable within 2-5 years 279,964 568,110
Payable after 5 years 979,875 568,110
1,259,839 1,278,247
17. Share capital
Number of shares issued Nominal value per share Share capital Share Premium Total share capital
GBP GBP GBP GBP
At 30 Sep 2019 31,666,664 450,000 209,983 659,983
Issue of Ordinary Shares 66,666,662 0.005 333,333 3,666,667 4,000,000
Share issue costs - - - - -
At 30 Sep 2020 98,333,326 783,333 3,876,650 4,659,983
Issue of Ordinary Shares 23,596,624 0.005 117,983 1,344,300 1,462,283
Share issue costs - - - (88,869) (88,869)
At 30 Sep 2020 121,929,950 901,316 5,132,081 6,033,397
On 28 April 2020, the Company issued a further 66,666,662 Ordinary Shares of
0.5p each at a price of 6p per share, to raise £4,000,000 before costs.
£2,000,000 of this capital raised was used for the acquisition of CARU.
During the year ended 30 September 2021, the Company issued the following
shares;
Date Number of Ordinary Shares issued Nominal Share Value Share price
GBP GBP
12 October 2020 3,339,806 0.005 0.0515
27 November 2020 1,750,000 0.005 0.0400
2 December 2020 1,540,984 0.005 0.0610
23 December 2020 5,000,000 0.005 0.0600
29 January 2021 6,250,000 0.005 0.0800
12 February 2021 666,667 0.005 0.0400
30 March 2021 437,500 0.005 0.0600
14 April 2021 520,000 0.005 0.0600
14 April 2021 166,667 0.005 0.0400
20 July 2021 3,925,000 0.005 0.0600
All of the shares issued, with different nominal values, are classed as
ordinary and have similar rights attached to them.
The Directors are authorised to issue 138,333,326 ordinary shares. As at 30
September 2021 the number of shares issued and fully paid were 121,929,950
(2020: 98,333,326).
18. Share based payments
Warrants
The following warrants were issued in exchange for a good or service:
30 Sep 2021 30 Sep 2020
Warrants Number warrants Weighted Average exercise price Number warrants Weighted Average exercise price
Outstanding on 01 Oct 1,250,000 6.00p - -
Issued during the year - - 1,250,000 6.00p
Cancelled/ Exercised - - - -
Outstanding on 30 Sep 1,250,000 6.00p 1,250,000 6.00p
Weighted average remaining contractual Life 1.57 years 2.57 years
The warrants have no vesting period and have been recognised in full upon
issue. If the warrants remain unexercised after a period of three years from
the date of grant, they will expire. The holder may exercise the subscription
right at any time within the subscription period.
The above warrants were valued using the Black Scholes valuation method. The
assumptions used are detailed below. The expected future volatility has been
determined by reference to the average volatility of similar entities:
Warrants 30 Sep 2021 30 Sep 2020
Weighted Average Share Price 6.00p 6.00p
Weighted Average Exercise Price 6.00p 6.00p
Expected Volatility 51% 51%
Expected Life 3 years 3 years
Risk-free Rate 0.23% 0.23%
Expected Divided Nil Nil
Weighted Average Fair Value (GBP) 32,603 32,603
Options
The following options were issued in exchange for a good or service:
30 Sep 2021 30 Sep 2020
Options Number Options Weighted Average exercise price Number Options Weighted Average exercise price
Outstanding on 01 Oct - - - -
Issued during the year 10,000,000 6.00p - -
Cancelled/ Exercised - - - -
Outstanding on 30 Sep 10,000,000 6.00p - -
Weighted average remaining contractual Life 4.21 years -
The options have no vesting periods and have been recognised upon issue. If
the options remain unexercised after a period of five years from the date of
grant they will expire. The share options cannot be exercised if the holder
has ceased employment.
The above options were valued using the Black Scholes valuation method. The
assumptions used are detailed below. The expected future volatility has been
determined by reference to the average volatility of similar entities:
Options 30 Sep 2021 30 Sep 2020
Weighted Average Share Price 6.13p -
Weighted Average Exercise Price 6.00p -
Expected Volatility 54% -
Expected Life 5 years -
Risk-free Rate 0.27% -
Expected Divided Nil -
Weighted Average Fair Value (GBP) 285,273 -
Deferred Tax
No deferred tax asset has been recognised in respect of share options and
warrants due to the uncertainty of the future trading profits.
19. Financial instruments
19.1 Categories of financial instruments
30 Sep 2021 30 Sep 2020
Group Company Group Company
GBP GBP GBP GBP
Financial assets at amortised cost
Trade and other receivables - 150,419 4,119 4,119
Cash and cash equivalents 93,288 93,288 205,856 205,856
Financial liabilities at amortised cost
Trade and other payables 280,071 280,110 498,588 305,742
Surface liability 887,560 - 849,512 -
19.2 Financial risk management objectives and policies
The Company's major financial instruments include cash and cash equivalents, trade and other payables and trade and other receivables. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments, and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner.
Currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the United States Dollar ("USD") and Ugandan shilling ("UGX"). Foreign exchange risk arises from recognised monetary assets and liabilities. The Group also exposes to currency exposure, CARU expenses are paid in both USD and UGX, with the amount payable to the land owners denominated in UGX.
The table below summaries the financial assets and liabilities denominated in
foreign currencies.
30 Sep 2021 30 Sep 2020
USD UGX USD UGX
Financial Assets 566 - 591 -
Financial Liabilities 185,268 887,560 177,659 1,024,737
With all other variables held constant, the effect on profit and loss had the
functional currency of the Group weakened or strengthened against USD/UGX by
5% at the yearend results in a £35,000 (2020: £7,000) change in value.
Credit risk
Credit risk arises on cash balances. The amount of credit risk is equal to the
amounts stated in the statements of financial position for each of the assets
(notes 13 & 14).
The Group's policy to manage this risk is to deal with banks that are
regulated entities. The Group's principal banker, Barclays Bank PLC, is
regulated by the United Kingdom Financial Services Authority, and has a credit
rating of A1 (2020: A1).
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and
marketable securities and the availability of funding through an adequate
amount of committed credit. The Company aims to maintain flexibility in
funding.
The maturity of the Company's financial liabilities at the statement of
financial position date, based on the contracted undiscounted payments is
disclosed in notes 145, falls within one year and payable on demand.
Capital risk
The Company defines capital as the total equity of the Company. The Company's
objectives when managing capital are to safeguard the Company's ability to
continue as a going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
20. Related party transactions
Details of Directors' remuneration are disclosed in note 7.
Sam Quinn is a director and shareholder of the Company and a Director of
Lionshead Consultants Limited. During the year, Lionshead Consultants
Limited charged consultancy fees of £24,000 (2020: £10,000).
21. Events after the reporting date
On 12 November 2021, the Company issued 40,000,000 new ordinary shares of
0.06p at a price of 6p per new ordinary share with half a warrant per new
ordinary share that is exercisable at 8p for 3 years from admission to
trading. The share capital raised was £2,000,000 before costs.
On 16 December 2021, the Company issued the Board and Senior Management with
6,000,000 share options. These options will not vest unless the share price
of the Company trades in excess of 10p per share for 10 consecutive days.
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