REG - Cadence Minerals PLC - Annual Results for the year ended 31 December 2023
27/06/2024 10:30
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RNS Number : 1593U Cadence Minerals PLC 27 June 2024
Cadence Minerals Plc
("Cadence Minerals", "Cadence", or "the Company")
Annual Results for the year ended 31 December 2023
Cadence Minerals (AIM/NEX: KDNC) is pleased to announce its final results for
the year ending 31 December 2023. The full Annual Report and Audited Financial
Statements will be available on the Company's website
at https://www.cadenceminerals.com/ (https://www.cadenceminerals.com/)
and posted to shareholders by 30 June 2024.
Chairman's Statement
I am pleased to present the Company's Annual Report and Audited Financial
Statements for the year ended 31 December 2023.
On behalf of the Cadence Minerals board and management, I want to express my
deep gratitude to all our consultants, advisors, service providers, and
especially our shareholders. Your support throughout this challenging year has
been invaluable to us.
Since our company's inception, your board has strived to build a portfolio
with enough balance and diversity to weather and thrive in challenging market
conditions.
However, the year to December 2023 provided Cadence with a particularly unique
set of challenges due to severe price movements in many of the underlying
commodities we are focused on as a Company. More specifically, we have seen
adverse price movements in lithium, rare earths, and iron ore beyond most
analyst expectations and fundamental predictions.
Cadence has always taken a long-term view of prices, and our models always
suggested such dramatic swings would reverse. However, this has not stopped
severe and sudden pressure on our share price, coupled with an impact on our
ability to raise capital in constrained markets. These factors have weighed
heavily on our valuation as a Company during the period in question, and both
the board and I are incredibly frustrated that the potential of our portfolio
is in no way reflected in our share price performance.
Challenging conditions remain across the commodities and resources space. But
we are not deterred. We see the potential for significant improvements in the
underlying commodities and our key investments and are determined to see this
potential translate into a higher share price.
On a more optimistic note, analysts continue to see constraints to supply and
continued demand from an ever-growing green EV revolution, ranging from
infrastructure expansion to cleaner iron ore production and targets for EV
penetration reflected in greater demand for Lithium. Added to this, the
challenge to control costs as new production is brought to market, combined
with expectations that acquisition is the way forward to grow production, are
factors that will continue to underpin prices of commodities exposed to the EV
sector and the Cadence Minerals portfolio.
With this blueprint in place for the foreseeable future, as our portfolio
matures and develops, your board will continue to seek new investment
opportunities and potential new companies to focus efforts on.
The Cadence board sends the best of wishes to all portfolio companies, hoping
we can all continue to weather the resource storm and arrive in calmer seas
soon. I look forward to a year when commodity prices rebound and our share
price start to reflect the fundamental benefits of a diversified portfolio and
its potential.
Lastly, I would like to thank my fellow board members, staff, partners of the
Cadence Community, and all shareholders for their continued support and
confidence in our company.
Andrew Suckling
For further information contact:
Cadence Minerals plc +44 (0) 20 3582 6636
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 20 7220 1666
James Joyce
Darshan Patel
Isaac Hooper
Fortified Securities - Joint Broker +44 (0) 20 3411 7773
Guy Wheatley
Brand Communications +44 (0) 7976 431608
Public & Investor Relations
Alan Green
Chief Executive Officer's Commentary
I am pleased to present the audited results for the year ended 31 December
2023, along with the Strategic Report, which comprehensively reviews our
business activities. These results reflect the historical position of the
Company's progress and financial standing, and we have included additional
information on key post-year-end events in the Strategic Report.
When reviewing Cadence's activities over the past year, it's important to note
that our two portfolios showed significant differences in performance. On the
one hand and by in large our private portfolio delivered to their operational
and have a positive long-term outlook for the commodities planned to be
produced. On the other hand, our publicly traded portfolio experienced a
substantial decrease in value, reflecting the strong outflows of capital from
the UK stock market in 2023.
The performance of our publicly traded portfolio has continued to reflect the
poor performance of the UK markets. This can partly be attributed to
inflationary global stock market impacts. However, we believe the primary
cause is capital flight from UK markets. In 2023, UK investors withdrew £8
billion from British stock funds, following the withdrawal of £8 billion in
2022 and £1 billion in 2021 * (#_ftn1) . This significant shift of retail
investors from the UK markets to non-UK-focused equity funds has negatively
impacted our portfolio value and Cadence's share price.
Our private portfolio saw solid operational performance, with most of our
goals delivered during the year. The Amapá iron ore project is our only
actively managed asset in the private portfolios and remains the primary focus
for Cadence's management. In my capacity as a director of the joint venture,
Cadence was heavily involved in the operational progress we have seen this
year, which included the delivery of a robust Pre-Feasibility Study ("PFS")
with post-tax net present value ("NPV") of US$949 million, the agreement with
the state of Amapá on an accelerated timeline for construction and
environmental permitting and lastly the execution of a MOU which plots a path
to the financing of the project. As of 31 May 2024, our investment has been
circa US$13.6 million for 34% of the Amapá iron ore project.
In early 2023, Cadence converted its passive private investments into publicly
traded equity. This was accomplished through two asset sales. Firstly, our
31.5% interests in Lithium Technology Pty Ltd and Lithium Supplies Pty Ltd
("LT and LS") were sold to Evergreen Lithium, listed on the Australian Stock
Exchange in March 2023. Secondly, our 30% interest in licenses within the
Yangibana Rare Earth Project ("Yangibana Project") were sold to owner/operator
Hastings Technology Metals in January 2023. Cadence had initially invested
approximately £1.7 million in these assets. After the year's end, Cadence
completed the sale of its stake in Hastings for approximately £1.1 million,
and the current value of our stake in Evergreen Lithium is around £0.50
million. These investments substantially decreased in value over the period
for the reasons I highlighted above.
Given the equity market's overall performance in 2023, we wanted to ensure
that we made a profit on our investments rather than hold them at a loss in
the future. This objective was achieved during the year in relation to our
stake in Hastings and European Metals, which to date have delivered 44.46% and
174.43% realised returns on our original investment, respectively. With
Evergreen Lithium, we are subject to a lock-in period, which will expire in
March next year.
We are excited about advancing the Amapá Iron Ore project in the coming year.
This includes obtaining the necessary environmental permits for construction,
enhancing the project's economics through increased production and capital
savings, and, most importantly, completing metallurgical test work for our
planned "green iron" 67% iron ore concentrate.
As for our other investments, we eagerly anticipate Evergreen Lithium's
progress. The latest announcement about the start of drilling and its
proximity to the Finnis project makes it the most promising investment in our
portfolio.
Cadence's goal is to minimise the reliance on external capital by growing and
reinvesting the profits generated from our assets under management. We are
progressing towards this objective, as demonstrated by our investments
totalling £10.71 million over the past four years. This amount was financed
by £9.92 million from profitable sales in our public portfolio and £0.79
million from equity and debt capital.
Kiran Morzaria
Investment Review
As outlined in the section "Our Business and Investment Strategy," Cadence
operates an investment strategy in which we invest in private projects via a
private and public equity model. In both investment classes, we take either an
active or passive role. We have reported in these segments below.
Private Investments, Active
The Amapá Iron Ore Project, Brazil
Interest - 33.12% at 31/12/2023 and 34.01% at 31/05/2024
The Amapá Project is a large-scale iron ore mine with associated rail, port,
and beneficiation facilities. It began operations in December 2007 but ceased
in 2014 due to a geotechnical failure at the port facility, which limited iron
ore export. Before closing, the Project made an underlying profit of US$54
million in 2012 and US$120 million in 2011. In 2008, the Project produced 712
thousand tonnes of iron ore concentrate, and production increased to 4.8
million tonnes in 2011 and 6.1 million tonnes in 2012.
Investment
In 2019, Cadence entered into a binding investment agreement to invest in and
acquire up to 27% of the Amapá iron ore mine, beneficiation plant, railway,
and private port owned by DEV Mineração S.A. ("DEV"). The agreement also
gave Cadence a first right of refusal to increase its stake to 49%.
To acquire its 27% interest, Cadence invested US$6 million over two stages in
a joint venture company, Pedra and Branca Alliance ("PBA"). The first stage
was for 20% of PBA, for which the consideration was US$2.5 million. The second
stage was for a further 7% of PBA for a consideration of US$3.5 million. Both
of these investments were completed in the first quarter of 2022. By the end
of 2023, Cadence had invested approximately £10.0 million (US$12.7 million)
for a 33.12% stake in the Amapá Project. As of 31 May 2023, Cadence has
invested approximately £10.8 million (US$13.6 million) for a 34.01% stake in
the Amapá Project.
Operations Review
During the reporting period, significant strides were made at the Amapá
Project. We published a robust PFS early in the year and conducted a port
optimisation study that identified potential capital savings. Additionally, we
secured an expedited timeline with the Amapá State Environmental Agency for
the environmental permits. Our unwavering focus on improving the safety and
stability of the Tailings Storage Facility ("TSF") has yielded positive
results. Most notably, we proudly announced that our joint venture company,
PBA and DEV, entered into a memorandum of understanding ("MOU") with Sinoma
Tianjin Cement Industry Design & Research Institute Co., Ltd., a wholly
owned subsidiary of Sinoma International Engineering Co., Ltd. ("TCIDR"), for
the development and financing of the Amapá Project.
After the period ended, we continued to improve the project's economics by
lowering the initial capital expenditure. We also embarked on metallurgical
test work on our ore to achieve a higher grade (67%) iron ore product.
Pre-Feasibility Study & Optimisation Studies
The results of the PFS were announced in early January 2023. The PFS confirmed
the potential for the Amapá Iron Ore Project to produce a high-grade iron ore
concentrate and generate strong returns over the life of the mine. It outlined
a robust 5.28 Mtpa (dry) operation, which can provide excellent cash flows and
a post-tax NPV of US$949 million.
We upgraded and increased the Amapá Project Mineral Resource Estimate as part
of the PFS. This resulted in a substantial increase in total Measured,
Indicated and Inferred Mineral Resources to 276.24 million tonnes grading
38.33% Fe and a maiden Measured Resource of 55.33 Mt grading 39.26% Fe.
The Key Highlights of the PFS are below:
· Annual average production of 5.28 million dry metric
tonnes per annum ("Mtpa") of Fe concentrate, consisting of 4.36 Mtpa at 65.4%
Fe and 0.92 Mtpa at 62% Fe concentrate.
· Post-tax Net Present Value ("NPV") of US$949 million
("M") at a discount rate of 10%.
· Post-tax Internal Rate of Return of 34%, with an
average annual life of mine EBITDA of US$235 M annually
· Maiden Ore Reserve of 195.8 million tonnes ("Mt") at
39.34% Fe demonstrates an 85% Mineral Resource conversion.
· Free on Board ("FOB") C1 Cash Costs of US$35.53 per dry
metric tonne ("DMT") at the port of Santana. Cost and Freight ("CFR") C1 Cash
Costs US$64.23/DMT in China.
· Pre-production capital cost estimate of US$399 million,
including the improvement and rehabilitation of the processing facility and
the restoration of the railway and the wholly owned port export facility.
After achieving positive results in the Preliminary Feasibility Study (PFS),
we conducted several studies to enhance the project's economics and
engineering. Firstly, we adjusted the layout of the port at Santana by
relocating the railway loop further from the shore. A scoping study indicated
a potential capital saving of US$28 million for the port refurbishment costs.
The second improvement involved reviewing the flowsheet to enhance the quality
of the final product beyond the current 65% iron ore concentrate and to reduce
operating costs. In the first quarter of 2024, a conceptual flowsheet was
developed to produce a 67% iron ore concentrate, which is currently being
tested with ore from the mine. In March 2024, a study revealed capital savings
of US$63.2 million associated with the beneficiation plant at the Amapá
Project.
Expedited Permitting Pathway & Re-Rating of Tailings Storage Facility
In September 2023, the Amapá Project shortened its expected environmental
permitting timeline from approximately 36 to 12 to 16 months. This means that
subject to state approvals, we expect the grant of mine Installation Licenses
("LI") over the wholly owned port, railway, beneficiation plant, and mine
during the course of 2024. The application for the railway, beneficiation
plant, and mine has been submitted, and we expect the port application to be
submitted by the end of July 2024.
While the Amapá Project was operating, it held all the necessary permissions
to mine, process, transport and ship some six million tonnes of iron ore
annually. However, many of these licenses lapsed after it ceased operations in
2014. Cadence has been working alongside the team at the Amapá Project to
obtain these licenses and permissions. To date, we have reinstated and
extended the railway concession to 2046 (completed in December 2019) and been
granted a change of control over the wholly owned port in November 2021, which
ensured the federal licenses could be maintained.
The Amapá Project owns the required Mining Concessions; however, it must
obtain a Mine Extraction and Processing Permit ("Mining Permit") to begin
operation. To obtain this permit, the Amapá Project must obtain an LI and,
when constructed, an Operational License ("LO") from the Amapá State
Environmental Agency.
Before the suspension of mining, the Project had numerous LOs across the
mining, rail, and port operations. These LOs expired between 2013 and 2018. In
2022, the Amapá Project began regularising the expired environmental permits
and started consultation with the Amapá State Environmental Agency and the
relevant state authorities. The Amapá Project requested that the requirement
for a full environmental impact study be waived. This request for a waiver was
on the basis that the previous LOs were granted on an operation that is
substantially the same as is currently planned and remains applicable to
future operations.
As a result of the productive discussions between the various state
authorities and the Amapá Project, we are delighted to announce that the
Amapá Project is on track to shorten the licensing timeline substantially. We
have reached an agreement with the Amapá State Environmental Agency that on
the mine and railway, we will be able to submit an Environmental Control Plan
- 'PCA' (Plano de Controle Ambiental) and an Environmental Control Report -
'RCA' (Relatório de Controle Ambiental). While a full environmental
assessment of the port is still required, the Amapá Project has already
initiated some background studies, leading us to anticipate a shortened
timeline for the grant of the port LI. This reassurance about the project's
future instils confidence in our stakeholders. This timeline is substantially
shorter than expected on a greenfield site, where the impact study and
associated approval can typically take between 24 and 36 months. The Amapá
Project could achieve this in 12 to 16 months.
Tailings Storage Facility ("TSF")
One of Cadence's initial investment criteria into the Amapá Project was the
safety and stability of the TSF. As such, before entering into the investment
agreement with our joint venture partners, we carried out a TSF review by an
internationally recognised consultant group and were satisfied with the
structure and stability of the TS. Nonetheless, given the lack of reporting
and maintenance from 2014 onwards, the TSF at the Amapá Project was
considered a high risk. The work carried out since 2019, including
maintenance, reporting, drilling and compliance, has meant that the Amapá
Project TSF is approaching the lowest risk rating for operating TSF. The
intent is for the TSF to continue to improve its risk rating. This will be
achieved by completing a dam break study, installing video monitoring on the
TSF, and ongoing inspection and remediation of various TSF-associated
infrastructure.
Secured Bank Settlement Iron Ore Shipments
As per the settlement agreement announced in December 2021 here
(http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=31142821540789137)
, the net proceeds of the one shipment carried out in 2022, along with
approximately half of the net proceeds from the shipments in 2021, have been
used to pay the secured bank creditors. We have continued productive dialogue
with the secured bank creditors regarding the best way to repay the historic
lender amounts. We believe that a one-time settlement using DEV's stockpile of
iron ore as collateral would be the best solution, and we are advancing
discussions with the secured bank creditors in this regard.
Strategic Development and Financing MOU for the Amapá Iron Ore Project
In October 2023, our joint venture company, PBA and DEV, entered into an MOU
with TCIDR. Under the MOU, TCIDR will submit a fixed-price Engineering
Procurement and Construction ("EPC") contract for the Amapá Project. The EPC
contract and any other services provided by TCIDR are subject to being
provided on a competitive basis and to PBA's and DEV's commercial evaluation
and approval. TCIDR will be appointed as the General EPC contractor for the
Amapá Project once these approvals have been granted and the provision of
TCIDR-facilitated project financing is secured. This will require the
execution of legally binding documents.
Under the MOU, TCIDR will use its best commercial efforts to secure the
required financing for the construction and re-development of the Amapá
Project, including the necessary guarantees, project finance insurance, and
debt financing. In this regard, TCIDR continues its discussion with SinoSure
China Export & Credit Insurance Corporation and China Development Bank.
Development Plan for the Amapá Project
The goal is to bring this project back into production. Based on the positive
results derived from the PFS optimisation study announced in March 2024, which
included an increase in output to 5.5 Mtpa annum of iron ore concentrate, we
have decided to redesign the mine plan with our joint venture partners to
reduce mining costs.
This revision and the revised capex will form the basis of an amended economic
assessment of the Project at a PFS level. Additionally, we are fully committed
to advancing the development of the 67% Fe product flow sheet, as previously
outlined in the announcement on 7 March 2024. We also anticipate it being at a
production rate of 5.5 Mtpa. This will also form the basis of an additional
amended economic assessment of the Project at a PFS level.
Alongside this, we expect the grant of the LIs by the end of the year,
allowing the commencement of construction and the recommissioning of the
Project in 2025. Of course, this will be subject to the Project securing
appropriate debt and equity financing.
With the various work streams progressing well studies, Cadence and Its joint
venture partners have agreed that the lowest risk and currently best
commercial approach to developing this project is to bring on a highly
experienced mining operator alongside TCIDR as a joint venture partner. We are
working towards this goal. However, the above strategy does not preclude the
option for our joint venture to develop the project or a trade sale. The
funding of debt and equity for the recommissioning and construction of the
Project is anticipated to occur at the asset or joint venture level via a
third party. In the interim and subject to financing availability, Cadence
intends to continue its investment into the Project.
Private Investments, Passive
Ferro Verde Iron Ore, Brazil
Interest - 1% on 31/12/2023 and 31/05/2024
In 2022, Cadence invested a small amount (£0.21 million) in an advanced iron
ore deposit in Brazil the previous year. The Ferro Verde Deposit is located in
the southern portion of the state of Bahia, in the northeastern region of
Brazil, next to the town of Urandi, some 700 km southwest of Salvador, the
state of Bahia.
The project is currently progressing with its Definitive Feasibility Study
(DFS). It has a historic inferred resource of 284 million tonnes of iron ore
at 31% Fe. The intent is to produce 4.5 Mtpa of 67% Fe. Our intended exit
strategy is either when the asset is listed or the owners carry out a trade
sale.
Private investments, Passive
Sonora Lithium Project, Mexico
Interest - 30% on 31/12/2023 and 31/05/2024
Cadence holds an interest in the Sonora Lithium Project through a 30% stake in
the joint venture interests in Mexalit S.A. de CV ("Mexalit") and Megalit S.A.
de CV ("Megalit").
Mexilit and Megalit form part of the Sonora Lithium Project (the "Project").
The Sonora Lithium Project consists of nine granted concessions. Two of the
concessions (La Ventana, La Ventana 1) are owned 100% by subsidiaries of
Ganfeng Lithium Group Co., Ltd ("Ganfeng"). El Sauz, El Sauz 1, El Sauz 2,
Fleur and Fleur 1 concessions are owned by Mexilit S.A. de C.V. ("Mexilit"),
which is owned 70% by Ganfeng and 30% by Cadence. The Buenavista and San
Gabriel concessions are owned by Megalit, which is owned 70% by Ganfeng and
30% by Cadence. Ganfeng Lithium has been developing the project, which
consists of an open-pit mine and a lithium chemical product processing
facility. The principal planned lithium product for the project is lithium
hydroxide.
In April 2022 and May 2023, the Mexican Government changed its Mining Law,
which included prohibiting lithium concessions, declaring lithium as a
strategic sector, and giving exclusive rights for lithium mining operations to
a state-owned entity. These changes were not meant to affect existing
concessions, such as those held by Mexilit and Megalit. Ganfeng and Cadence
believe the reforms should not impact their project's concessions because they
were granted before the Mining Law Reform. This aligns with the principles of
legality and non-retroactivity of laws outlined in the Constitution of Mexico.
While Ganfeng was in discussions with the Secretary of Economy, the General
Directorate of Mines ("DGM") started reviewing nine lithium concessions held
by Mexican subsidiaries, including those owned by Mexilit and Megalit.
The DGM warned that the concessions could be cancelled if the Mexican
subsidiaries did not provide enough evidence within a specified timeframe to
prove their compliance with minimum investment obligations for developing
lithium concessions from 2017 to 2021.
As of May 2023, Mexilit and Megalit had submitted extensive evidence of their
timely compliance with the minimum investment obligations for the lithium
concessions. However, in August 2023, the DGM issued a formal decision notice
to the Mexican subsidiaries, cancelling nine lithium concessions, including
those owned by Mexilit and Megalit.
The cancellations for the lithium concessions issued by the DGM are not final
and are subject to ongoing appeals. Ganfeng and Cadence believe that the
Mexican Subsidiaries have complied with their minimum investment obligations,
as Mexican law requires. The mine development investment by the Mexican
Subsidiaries has significantly exceeded the minimum investment obligations,
and the Mexican Subsidiaries regularly submitted annual reports detailing
their operations within the prescribed period annually. Ganfeng and Cadence
have filed administrative review recourses before the Secretary of Economy
against the resolutions cancelling the concessions, as they believe these
resolutions violate Mexican and international law and infringe upon their
fundamental due process rights.
In November 2023, Cadence issued a Request for Consultations and Negotiations
("Request") to the Government of Mexico under the United Kingdom-Mexico
Bilateral Investment Treaty ("BIT"). The Request pertains to the alleged
revocation of the mining concessions for the Sonora Lithium Project (the
"Project") by the Mexican General Directorate of Mines, as announced by
Cadence on 31 August 2023, and related acts and omissions by Mexico.
The affected concessions include those granted to Mexilit S.A. de CV
("Mexilit") and Minera Megalit S.A. de CV ("Megalit"), which are joint venture
companies in which Cadence holds a 30% stake through REMML.
In their Request, Cadence and REMML have identified various BIT obligations
that Mexico has breached, including Mexico's obligation not to unlawfully
expropriate the investments of UK investors such as Cadence and REMML and its
obligation to treat such investments fairly and equitably.
In accordance with Article 10 of the BIT, Cadence and REMML have requested
consultations and negotiations with Mexico to resolve the dispute amicably.
The BIT provides for disputes to be resolved by international arbitration if
they cannot be resolved through consultation and negotiation.
INVESTMENT REVIEW (CONTINUED)
PUBLIC EQUITY
The public equity investment segment includes active and passive investments
in our trading portfolio. The trading portfolio consists of investments in
listed mining entities that the board believes possess attractive underlying
assets. The focus is to invest in mining companies that are significantly
undervalued by the market and where there is substantial upside potential
through exploration success and/or the development of mining projects for
commercial production. Ultimately, the aim is to make capital gains in the
short to medium term. Investments are considered individually based on various
criteria and are typically traded on the TSX, ASX, AIM or LSE.
During the period, our public equity investments generated an unrealised loss
of £3.10 million (2022: £4.59 million). These unrealised losses tracked our
largest holding, European Metals Holdings ("EMH"), down some 49% over the
year. Overall, our return to date on our investment inEMH is approximately
147%. We realised an accounting loss from sales of £3.70 million (2022:
profit of £0.55 million) of our Hastings investment as it is booked against
the sale price of the licenses rather than against our original purchase
value, using the later metric our return on the original investment (inclusive
of post-year-end sales) was circa 44.46%. Our investment in EMH is the only
active investment in the public equity portfolio.
The movement in public portfolio values during the year is summarised below.
Commentary £,000
Portfolio value at the beginning of period 5,244
Transfer of privately held assets to publicly held assets at market value Transfer of Yangibana Licenses and Evergreen investments. 6,962
Disposal of public Investments during the year The majority of disposal was in EMH, with proceeds reinvested into Amapá. (2,150)
Realised and Unrealised loss on portfolio value for the year The majority of the loss was driven by a reduction in EMH's and Hastings share (5,894)
price
Portfolio value at the end of the year 4,162
As of 31 December 2023, our public equity stakes consisted of the following:
Company 31-Dec-23 £,000 31-Dec-22 £,000 31-Dec-21 £,000 31-Dec-20
£,000
European Metals Holding Ltd 2,339 4,882 11,287 13,426
Charger Metals NL - 301 342 -
Macarthur Minerals Ltd - - 181 329
Evergreen 1,481
Hasting Technology Metals 321
Eagle Mountain Mining Ltd - 37 122 -
Miscellaneous 21 24 42 6
Total 4,162 5,244 11,974 13,761
Public Equity, Active
European Metals Holdings Limited ("European Metals")
Interest - 7.0% at 31/12/2023 and 2.96% on 31/05/2024
European Metals owns 49% of Geomet s.r.o. with 51% owned by České
Energetické Závody, a.s. ("CEZ"). CEZ is a significant energy group listed
on various European Exchanges. Geomet s.r.o. owns 100% of Cinovec which hosts
a globally significant hard-rock lithium deposit with a total Indicated
Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn and an Inferred Mineral
Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn containing a combined 7.22
million tonnes Lithium Carbonate Equivalent and 263kt of tin, as reported to
ASX on 28 November 2017 (Further Increase in Indicated Resource at Cinovec
South).
An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn reported
on 4 July 2017 Cinovec Maiden Ore Reserve -has been declared to cover the
first 20 years' mining at an output of 22,500tpa of battery-grade lithium
carbonate reported on 11 July 2018 (Cinovec Production Modelled to Increase to
22,500tpa of Lithium Carbonate). This makes Cinovec the largest hard-rock
lithium deposit in Europe, the fourth largest non-brine deposit in the world
and a globally significant tin resource.
Cinovec is centrally located for European end-users and is well serviced by
infrastructure, with a sealed road adjacent to the deposit, rail lines located
5 km north and 8 km south of the deposit and an active 22 kV transmission line
running to the historic mine.
On January 30, 2023, European Metals announced that the Cinovec Project has
been classified as a Strategic Project for the Usti Region of the Czech
Republic. This classification means that the project has priority for grant
funding from the Just Transition Fund ("JTF") co-funding. The total amount
allocated by the Just Transition fund for the Czech Republic is CZK 41 billion
(€1.64 billion), of which the Usti region has been allocated CZK 15.8
billion (approximately €632 million).
In July 2023, European Metals completed a capital raising of approximately
€6 million from the European Bank for Reconstruction and Development
("EBRD") as a strategic investment in the Company and the development of the
Cinovec Project. Furthermore, the results of the Lithium Chemical Plant (LCP)
pilot program have confirmed the robustness of the Cinovec LCP process
flowsheet and provide a strong foundation for executing the Cinovec Project.
The pilot program, conducted at ALS Laboratories in Perth, Western Australia,
aimed to confirm the LCP flowsheet and produce enough marketing samples for
potential off takers to test in their own laboratories. The pilot program has
achieved these objectives without necessitating any further development of the
LCP process flowsheet.
The pilot program has provided extensive data throughout all of the LCP
process steps, contributing to the confirmation of design and engineering for
the ongoing Definitive Feasibility Study (DFS) and the post-DFS execution of
the Cinovec Project.
Public Equity, PassivE
Evergreen Lithium Limited, Australia
Interest - 8.74% at 31/12/2023 and 8.74% on 31/05/2024
In July 2022, Cadence Minerals received approximately 15.8 million shares in
Evergreen Lithium ("Evergreen") when Cadence sold its 31.5% stake in Lithium
Technologies and Lithium Supplies ("LT and LS") to Evergreen as announced on
27 June 2022.
During 2023 Evergreen was listed on the Australian Stock Exchange ("ASX").
Before listing, Cadence's equity stake in Evergreen was 13.16%; due to the IPO
and associated fundraising, this was reduced to 8.74%. At the time of writing,
the value of this stake is approximately £0.71 million; our initial
investment into this asset was £0.83 million.
A further AS$ 6.63 million (£3.80 million) shares in Evergreen are due to
Cadence on achieving certain performance milestones by Evergreen. Further
details of these milestones can be found in the Evergreen prospectus.
Cadence's shares are subject to a 2-year escrow agreement as determined by the
listing rules of the ASX (expiring in May 2025).
On acquiring LT and LS, Evergreen became the 100% owner of three exploration
tenements. The Bynoe Lithium Project and Fortune Lithium Project (awaiting
grant of exploration permit) are located in the Northern Territory, and the
Kenny Lithium Project is located in Western Australia.
The Bynoe Lithium Project is Evergreen's flagship prospect. Evergreen Lithium
Limited, Australia, it is located contiguous to Core Lithium's Finnis hard
rock lithium project situated in the strongly endowed Litchfield pegmatite
province. Evergreens' tenure covers 231 km2, providing Evergreen and Cadence,
as shareholders, with a regional-scale project area and significant scope to
achieve a regional-scale discovery in the event of exploration success.
Evergreen, listed on the ASX, has continued to progress the development of
these assets, with some initial positive results from the geochemical results
on both the Byone and Kenny lithium prospects. Most importantly, Evergreen
secured all the required permits to commence its drilling programme over the
Bynoe project after the period ended and is due to start drilling this year.
The exploration strategy for the near term will include auger and AC/RB
drilling to test soil sample geochemical anomalies, geophysical targets and
high-potential areas identified in recent mapping and desktop interpretation
programs. The auger and AC/ RB programs will also allow the geology team to
test beneath the shallow cover units, which are common in this area.
Public Equity, Passive
Hastings Technology Metals, Australia
Interest - 1.9% on 31/12/2023 and 0% on 31/05/2024
In June 2022, Cadence entered into a binding agreement to sell its working
interest in the leases in the Yangibana Project to Hastings Technology Metals
(ASX: HAS) ("Hastings"), the current owner and operator of the Yangibana Rare
Project. Cadence sold its privately held investment, being a 30% working
interest in the Yangibana Project tenements, to Hastings for A$9 million
(£5.1 million), which was satisfied via the issue of publicly held investment
of 2,452,650 new ordinary shares in Hastings to Cadence. The transaction was
completed in January 2023. At the time of writing, Cadence had disposed of the
entire investment in Hastings. Cadence's initial investment into this asset
was £0.91 million. The realised return on our original acquisition is
approximately 30%, and the sale proceeds have been reinvested into the Amapá
project.
At the end of February 2024, Cadence disposed of its interest in Hastings
Technology Metals. The realised return on our original acquisition of 30% of
the mineral concessions (£0.9 million) was approximately 30% or (£0.3
million), and the sale proceeds were reinvested into the Amapá project.
Financial Review
Total comprehensive income for the year attributable to equity holders was a
loss of £3.02m (2022: £5.49m). This decrease in loss from the previous year
of approximately £2.47m is mainly due to the reduced amount of realised and
unrealised profits and losses on for the year of approximately £1.85m
relating to our share investment portfolio (listed financial investments) held
during the year, and the disposal of our interest in Mojito which contributed
£3.9m profit. In 2023 our unlisted investments provided a realised gain of
£1m. Administrative expenses were down £0.14m from £1.44m to £1.30m, and
foreign exchange gains were up £0.294m from £0.003 to £0.297m.
Basic negative earnings per share was 1.762p (2022: 3.355p).
The net assets of the Group at the end of the period were £18.45 million
(2022: £21.32 million). This decrease of approximately £3m reflects the
losses and shares issued in the year.
Principal Risks and Uncertainties
Cadence continuously monitors its risk exposures and reports its review to the
Board. The Board reviews these risks and focuses on ensuring effective systems
of internal financial and non-financial controls are in place and maintained.
The main business risk is considered to be investment risk.
The Company faces external risks that can materially impact or influence the
investment environment within which the Company operates and can include
changes in commodity prices, and the numerous factors which can influence
those changes, including economic recession and investor sentiment and
including the current and potential effects of the coronavirus pandemic.
Commodity prices have an impact on the investment performance and prospects of
all our investments. The extent of the impact varies depending on a wide
variety of factors but depend largely by where the investment sits on the
mineral development curve. The majority of Cadence's investments sit at the
more advanced stage of the development curve. Commodity price risk is
pervasive at all stages of the development curve, but other prominent risks
such as exploration risk and technical and funding risks at the
exploration/development stage, may be considered to be weighted higher earlier
in the curve than pure commodity risk which tends to have a greater impact on
producers.
The Company's investments are located in jurisdictions other than the UK and
therefore carries with it country risk, regulatory/permitting risk, political
risk and environmental risk. Our investments can be at different stages of
development and each stage within the mining exploration and development cycle
can carry its own risks.
Where possible Cadence seeks to mitigate these risks by structuring its
investments in a format which the Board can influence, obtain high level
oversight (often at board level) and use legal agreements to provide control
mechanisms (often negative control) to protect the Company's investments. In
addition, we seek to further mitigate our risk exposure by obtaining a deep
fundamental understanding of an asset, its potential economics, operating and
legal environment and its management team, prior to investment.
It should be noted that because the Company does not operate its project
investments on a day-to-day basis, there is a risk that the operator does not
meet deadlines or budgets; fails to propose or pursue the appropriate
strategy; does not adhere to the legal agreements in place or does not provide
accurate or sufficient information to Cadence on a timely basis.
The Equity Investment segment of the Company's investments is exposed to price
risk within the market, interest rate changes, liquidity risk and volatility.
Although the investment risk within the portfolio is dependent on many
factors, the Group's principal investments at the year-end are in companies
with significant iron ore and lithium assets and, to some extent, dependent on
the market's view of these commodities or chemicals and/or the market's view
of the management of the companies in managing those assets. As with our
private investment, the Board seeks to mitigate this by obtaining a deep
fundamental understanding of an asset and its potential economics; its
operating and legal environment and its management team, prior to any
investment by Cadence.
All countries carry political risk that can lead to interruption of activity.
Politically stable countries can have enhanced environmental and social risks;
risks of strikes and changes to taxation; whereas less developed countries can
have, in addition, risks associated with changes to the legal framework; civil
unrest and government expropriation of assets. The Company has working
knowledge of the countries in which the joint venture holds exploration
licences, and its local joint venture partner has experienced local operators
to assist the Company in its management of its investment in order to help
reduce possible political risk.
Directors' Section 172 Statement
The following disclosure describes how the Directors have had regard to the
matters set out in section 172(1)(a) to (f) and forms the Directors' statement
required under section 414CZA of The Companies Act 2006. This new reporting
requirement is made in accordance with the new corporate governance
requirements identified in The Companies (Miscellaneous Reporting) Regulations
2018, which apply to company reporting on financial years starting on or after
1 January 2019.
The matters set out in section 172(1) (a) to (f) are that a Director must act
in the way they consider, in good faith, would be most likely to promote the
success of the Company for the benefit of its members as a whole, and in doing
so have regard (amongst other matters) to:
· the likely consequences of any decisions in the long-term;
· the interests of the Company's employees;
· the need to foster the Company's business relationships with
suppliers/customers and others;
· the impact of the Company's operations on the community and
environment;
· the Company's reputation for high standards of business conduct; and
· the need to act fairly between members of the Company.
As set out above in the Strategic Report the Board remains focused on
providing for shareholders through the long term success of the Company. The
means by which this is achieved is set out further below.
Likely consequences of any decisions in the long-term;
The Chairman's Statement, the Chief Executive Officer's Commentary and the
Strategic Review set out the Company's strategy. In applying this strategy,
particularly in seeking new Project Investments and strategic holdings in
other public companies, the Board assesses the long term future of those
companies with a view to shareholder return. The approach to general strategy
and risk management strategy of the group is set out in the Statement of
Compliance with the Quoted Companies Alliance ("QCA") Corporate Governance
Code (the "QCA Code") (Principles 1 and 4).
Interest of Employees;
The Group has a very limited number of employees, and all have direct access
to the Executive Directors on a daily basis and to the Chairman, if necessary.
The Group has a formal Employees' Policy manual which includes process for
confidential report and whistleblowing.
Need to foster the Company's business relationships with suppliers/customers and others;
The nature of the Group's business is such that the majority of its business
relationships are with joint venture partners, the boards of directors of the
companies in which the Group has strategic stakes to the extent that such
relationships are permitted, and with suppliers for services. As the success
of the business primarily depends on its relationship with its partners and
investees, the Executive Directors manage these relationships on a day-to-day
basis. Where possible, the Group will take a board, or similar appointment, in
strategic investees to ensure that there is a close and successful ongoing
dialog between the parties. Service providers are paid within their payment
terms and the Group aims to keep payment periods under 30 days wherever
practical.
Impact of the Company's operations on the community and environment;
The Group takes its responsibility within the community and wider environment
seriously. Its approach to its social responsibilities is set out in the
Statement of Compliance with the QCA Code (Principle 3).
The desirability of the Company maintaining a reputation for high standards of business conduct;
The Directors are committed to high standards of business conduct and
governance and have adopted the QCA Code. Where there is a need to seek advice
on particular issues, the Board will consult with its lawyers and nominated
advisors to ensure that its reputation for good business conduct is
maintained.
The need to act fairly between members of the Company;
The Board's approach to shareholder communication is set out in the Statement
of Compliance with the (Principle 2). The Company aims to keep shareholders
fully informed of significant developments in the Group's progress.
Information is disseminated through Stock Exchange announcements, website
updates and, where appropriate video/web casts. During the year the Company
issued various RNS and videos to update shareholders. All information is made
available to all shareholders at the same time and no individual shareholder,
or group of shareholders, is given preferential treatment.
REPORT OF THE DIRECTORS
The Directors present their annual report together with the audited financial
statements of the Company for the Year Ended 31 December 2023.
Principal activity
The Company is an investment entity. The principal activity of the Company is
that of holding assets involved in the identification, investment and
development of mineral resources.
Domicile and principal place of business
Cadence Minerals plc is domiciled in the United Kingdom, which is also its
principal place of business.
Business review and Future Development
The results of the Company are shown in the financial statements below.
Results and Dividends The Directors do not recommend the payment of a
dividend. A review of the performance of the Company and its future prospects
is included in the Strategic Report.
Key Performance Indicators
Due to the current status of the Company, the Board has not identified any
performance indicators as key other than cash management and the carrying
value of investments. Having sufficient cash for business operations is vital
and must be managed accordingly. The Directors review and manage the Group's
cash flow on a monthly basis. The financial strategy is to ensure that,
wherever possible, there are sufficient funds to cover corporate overheads and
exploration expenditure for as long a period as possible. Management has
confidence that financing of the Company can continue as and when required,
albeit the board is keen to avoid excessive dilution and will manage the
financing process with that objective in mind. Investments are closely
managed and monitored; further details are included in the Chairman's
statement.
The monitoring and management of the carrying value of investments are
specified in the strategic report and financial statements.
Furthermore, the Company has ensured that where possible it has built
operational flexibility in its corporate and exploration expenditure to be
paused should the financing environment prove difficult and cash preservation
prove essential.
Principal risks and uncertainties
The principal risks and uncertainties facing the Company involve are specified
in the strategic report.
Financial risk management objectives and policies
The Company's principal financial instruments are available for sale assets,
trade receivables, trade payables, loans and cash at bank. The main purpose of
these financial instruments is to fund the Company's operations.
It is, and has been throughout the period under review, the Company's policy
that no trading in financial instruments shall be undertaken. The main risks
arising from the Company's financial instruments are liquidity risk and
interest rate risk. The Board reviews and agrees policies for managing each of
these risks and they are summarised below. Further information is available in
Note 12 .
Liquidity risk
The Company's objective is to maintain a balance between continuity of funding
and flexibility through the use of equity and its cash resources. Further
details of this are provided in the principal accounting policies, headed
'going concern' and Note 12 to the financial statements.
Interest rate risk
The Company only has borrowings at fixed coupon rates and therefore minimal
interest rate risk, as this is deemed its only material exposure thereto. The
Company seeks the highest rate of interest receivable on its cash deposits
whilst minimising risk.
Market risk
The Company is subject to market risk in relation to its investments in listed
Companies held as available for sale assets.
Foreign exchange risk
The Company operates foreign currency bank accounts to help mitigate the
foreign currency risk, and currently has little exposure except through its
investments.
Political Donations and Expenditure
No charitable or political contributions were made during the current or
previous year.
Directors
The membership of the Board is set out below. All directors served
throughout the period unless otherwise stated.
Andrew Suckling
Kiran Morzaria
Donald Strang
Adrian Fairbourn
Substantial shareholdings
Interests in excess of 3% of the issued share capital of the Company which had
been notified as at 25 June 2024 were as follows:
Ordinary shares held Number Percentage of capital %
Hargreaves Lansdown (Nominees) Limited (15942) 24,323,172 12.31%
Interactive Investor Services Nominees Limited (SMKTISAS) 17,008,661 8.61%
Hargreaves Lansdown (Nominees) Limited (VRA) 15,574,748 7.88%
Barclays Direct Investing Nominees Limited 14,774,129 7.48%
Interactive Investor Services Nominees Limited (SMKTNOMS) 10,721,024 5.42%
HSDL Nominees Limited 10,298,276 5.21%
JIM Nominees Limited 9,682,068 4.90%
Hargreaves Lansdown (Nominees) Limited (HLNOM) 9,673,643 4.89%
Vidacos Nominees Limited 6,970,562 3.53%
Link Market Services Trustees (Nominees)Limited 6,380,000 3.23%
Peel Hunt Partnership Limited 6,191,966 3.13%
Payment to suppliers
It is the Company's policy to agree appropriate terms and conditions for its
transactions with suppliers by means ranging from standard terms and
conditions to individually negotiated contracts and to pay suppliers according
to agreed terms and conditions, provided that the supplier meets those terms
and conditions. The Company does not have a standard or code dealing
specifically with the payment of suppliers.
Trade payables at the year end all relate to sundry administrative overheads
and disclosure of the number of days purchases represented by year end
payables is therefore not meaningful.
Events after the Reporting Period
Events after the Reporting Period are outlined in Note 15 to the Financial
Statements.
Going concern
The Directors have prepared cash flow forecasts for the period ending 30 June
2025 which take account of the current cost and operational structure of the
Company, as described further in the financial statements.
The cost structure of the Company comprises a high proportion of discretionary
spend and therefore in the event that cash flows become constrained, costs can
be quickly reduced to enable the Company to operate within its available
funding.
These forecasts demonstrate that the Company has sufficient cash funds
available to allow it to continue in business for a period of at least twelve
months from the date of approval of these financial statements. Accordingly,
the financial statements have been prepared on a going concern basis.
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have elected to prepare the
Company financial statements in accordance with UK adopted International
Accounting Standards (IAS). Under company law the Directors must not
approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs and profit or loss of the Company
for that period. In preparing these financial statements, the Directors are
required to:
- select suitable accounting policies and then apply them
consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable IFRSs have been followed, subject to any
material departures disclosed and explained in the financial statements;
- prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
In so far as each of the Directors are aware:
· there is no relevant audit information of which the Company's auditors
are unaware; and
· the Directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to establish that
the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
Auditors
PKF Littlejohn LLP offer themselves for re-appointment as auditor in
accordance with Section 489 of the Companies Act 2006.
ON BEHALF OF THE BOARD
Kiran Morzaria
Corporate Governance
Introduction to Governance
The Directors recognise that good corporate governance is a key foundation for
the long-term success of the Company. As the Company is listed on the AIM
market of the London Stock Exchange and is subject to the continuing
requirements of the AIM Rules. The Board has therefore adopted the principles
set out in the Corporate Governance Code for small and midsized companies
published by the Quoted Companies Alliance ("QCA Code"). The principles are
listed below.
While building a strong governance framework, we also try to ensure that we
take a proportionate approach and that our processes remain fit for purpose as
well as embedded within the culture of our organisation. We continue to evolve
our approach and make ongoing improvements as part of building a successful
and sustainable company.
1. Establish a strategy and business model which promote long-term value
for shareholders
Our strategy is to identify undervalued assets with irreplaceable strategic
advantages that will deliver capital growth to our shareholders. We invest in
these assets and where required help deliver capital growth. To meet long-term
demand, we believe the metals and mining sectors require focused investment
capital from knowledgeable investors that understand the substantial risk of
the mineral resource sector and how to mitigate these risks to maximise
potential returns for our investors.
A more detailed description of its Strategy and Business Model is available in
the strategic report. Details on the principal risks and uncertainties which
the Company faces are specified in the strategic report. The Company seeks to
share this vision and details of the implementation of its strategy through
internal dialogue with employees as well as external communications by way of
public announcements and dissemination of information through this website and
the annual report and accounts.
2. Seek to understand and meet shareholder needs and expectations
The Board is committed to maintaining an open dialogue with shareholders.
Communication with the Board is committed to maintaining an open dialogue with
shareholders. Communication with shareholders is coordinated by the CEO.
Cadence encourages two-way communication with institutional and private
investors. The Company's major shareholders maintain an active dialogue and
ensure that their views are communicated fully to the Board. Where voting
decisions are not in line with the Company's expectations the Board will
engage with those shareholders to understand and address any issues. The
Company Secretary is the main point of contact for such matters.
The Company seeks out appropriate platforms to communicate to a broad audience
its current activities, strategic goals and broad view of the sector and other
related issues. This includes but is not limited to media interviews, website
videos in -person investor presentations and written content. Communication to
all stakeholders is the direct responsibility of the Senior Management team.
Managers work directly with professionals to ensure all inquiries (through
established channels for this specific purpose such as email or phone) are
addressed in a timely matter. Managers also ensure that the Company
communicates with clarity on its proprietary internet platforms. The Board
routinely reviews the Company communication policy and programmes to ensure
the quality communication with all stakeholders.
The Board believes that the Annual Report and Accounts, and the Interim Report
published at the half-year which can be found on the Company's website, play
an important part in presenting all shareholders with an assessment of the
Company's position and prospects. All reports and press releases are published
under the "Investors" tab of the Company's website.
3. Take into account wider stakeholder and social responsibilities and
their implications for long-term success
The Board recognises its prime responsibility under UK corporate law is to
promote the success of the Company for the benefit of its members as a whole.
The Board also understands that it has a responsibility towards employees,
partners, customers, suppliers and to the community and environment it
operates in as a whole.
Communication with and feedback from these various groups is achieved in a
variety of ways. The Executive Directors hold investor roadshows and webcasts
on a regular basis, at which feedback from shareholders is sought. Regular
dialogue is maintained with employees through regular discussion and updates
given by the Executive Directors.
The nature of the Cadence's business as an investment company means that
although it has no direct effect on the working environments and communities
of the companies it invests in, it nonetheless liaises with the management of
its investee companies to understand their approach to stakeholder engagement
and their policies, which will form part of its investment criteria.
4. Embed effective risk management, considering both opportunities and
threats, throughout the organisation
The Board has an established Audit Committee, a summary of its roles and
responsibilities is available on the corporate governance webpage. The
Committee is specifically charged with ensuring that Cadence as a whole has
the appropriate policies and processes in place to identify the risks which
the Company is exposed to and to proactively mitigate those risks as
appropriate.
The Company maintains a register of risks and publishes an overview of
significant risks and uncertainties in its Annual Report. Please refer to the
Company's Annual Report and Accounts for further details on the principal
risks and uncertainties which the Company faces.
The Company receives regular feedback from its external auditors on the state
of its internal controls. The Board maintains a register of risks and
publishes an annual summary of the significant risks and uncertainties in the
Annual Report.
5. Maintain the Board as a well-functioning, balanced team led by the
chair
The Board is comprised of Andrew Suckling the Non-Executive Chairman, a
Non-Executive Director and two Executive Directors. The CEO, Kiran Morzaria,
is engaged to work a minimum of a 27-hour week and is an employee of the
Company. The Finance Director, Donald Strang, is engaged to work a minimum of
a 27-hour week.
The Board deemed that given the stage and development of the Company, it would
be more cost efficient to employ a full-time accountant which along with the
finance director ensure that Company's financial systems are robust,
compliant, and support current activities and future growth.
The service agreements of the Non-Executive Directors anticipate that the
Non-Executive Chairman should spend 5 working days per month and the
Non-Executive Director 3 working days per month. All Directors dedicate such
time as required to effectively perform their roles.
The roles of the Chairman and CEO are clearly separated. The Directors ensure
the skills required to undertake their roles are kept current through training
and consultation with subject matter experts as required.
5. Maintain the board as a well-functioning, balanced
team led by the chair (continued)
The CEO is responsible for the operational management of the business of
Cadence and for the implementation of strategy and policies as agreed by the
Board. The non-executive Chairman is responsible for the leadership and
effective working of the Board, for setting the Board agenda, and ensuring
that Directors receive accurate, timely and clear information.
The CEO is responsible for the operational management of the business of
Cadence and for the implementation of strategy and policies as agreed by the
Board. The Non-Executive Chairman is responsible for the leadership and
effective working of the Board, for setting the Board agenda, and ensuring
that Directors receive accurate, timely and clear information.
The Non-Executive Directors are not considered independent under the FRC Code
as they hold options in the Company. However, the Board considers that the
Non-Executive Directors are independent of management under all other measures
and are able to exercise independence of judgement. Whilst conflicts of
interest are fully disclosed and understood, as appropriate Non-Executive
Directors exercise independence of judgement. No Director is involved in
discussions or decisions where he has a conflict of interest. An Audit
Committee and a Remuneration Committee support the Board.
Cadence intends that the Board endeavours to hold full board meetings at least
3 times each year. The attendance of Board members for meetings during the
current financial year is as follows:
Andrew Suckling 3 of 5
Adrian Fairbourn 3 of 5
Kiran Morzaria 5 of 5
Donald Strang 5 of 5
6. Ensure that between them the directors have the necessary up-to-date
experience, skills and capabilities
Directors who have been appointed to the Company have been chosen because of
the skills and experience they offer. The Board continually strives to ensure
that it has the right balance of knowledge, skills, experience and contacts
across the sectors in which it operates. This is evaluated in line with
Cadence's business model as it changes.
It is of primary importance that the Board's knowledge is kept up to date in
a rapidly changing mining and metals marketplace. This is achieved by
maintaining a broad network of contacts across the industry and ensuring
regular dialogue is held and feedback obtained by both the executive and
non-executive directors as appropriate.
As necessary, Directors receive externally provided refresher and update
training specific to their individual roles.
The Company Secretary advises the Board members on their legal and corporate
responsibilities and matters of corporate governance.
Biographical details of each of the Directors are given in the strategic
report and on the website.
7. Evaluate board performance based on clear and relevant objectives,
seeking continuous improvement
On 28 September 2018, the Company adopted the QCA Code. Prior to this point,
given the nature and the development of the Company, it did not set Key
Performance Indicators.
The Company now measures its performance, and therefore inherently the
performance of the Board as a unit, against Key Performance Indicators. Due to
the current status of the Company, the Board has not identified any
performance indicators as key other than cash management and the carrying
value of investments.
The performance of the Executive Directors is monitored and regularly reviewed
by the Non-Executive Directors. Such review considers both the KPIs outlined
above, The Board intends to introduce qualitative performance measurements for
the Executive Directors to ensure that the right degree of focus is applied to
the strategic direction as well as the current financial performance of the
business.
8. Promote a corporate culture that is based on ethical values and
behaviours
The Company has a strong ethical culture, which is promoted by the actions of
the Board and Executive team.
These include the following key policies which govern its ethical culture.
· Equal opportunities policy
· Code of conduct
· Whistleblowing policy
· Health and safety policy
· Email and internet policy
· Social media policy
The Company has an anti-bribery policy and has implemented adequate procedures
described by the Bribery Act 2010. The Company reports on its compliance to
the Board on an annual basis. The Company has undertaken a review of its
requirements under the General Data Protection Regulation, implementing
appropriate policies, procedures and training to ensure it is compliant.
9. Communicate how the company is governed and is performing by
maintaining a dialogue with shareholders and other relevant stakeholders
The Company encourages two-way communication with both its institutional and
private investors and responds quickly to all significant queries received.
The "Investors" tab of our website contains all required regulatory
information together with other information which shareholders may find
useful.
The AGM is an important forum for shareholder engagement, and the directors
are always available immediately after the AGM to listen to the views of any
shareholders in attendance and to provide them with an update on the business.
10. Maintain governance structures and processes that are fit for purpose
and support good decision-making by the board
Details of the Company's corporate governance arrangements are provided within
this Corporate Governance section of the Annual Report and Accounts. The Board
considers the appropriateness of these arrangements against the size and
complexity of the Company as it evolves over time.
The Chairman leads the Board and is responsible for ensuring its effectiveness
in all aspects of its role. The Chairman promotes a culture of openness and
debate, in particular by ensuring the Non-Executive Directors provide
constructive challenge to the Executive Directors.
The matters reserved for the board are:
· Definition of the strategic goals for the Company, sets corporate
objectives to enable the goals to be met, and measures performance against
those objectives;
· Ensuring that the necessary financial and human resources are in
place to both meet its obligations to all stakeholders and to provide a
platform for profitable growth;
· Recommending any interim and final dividends;
· Approving all mergers and acquisitions and all capital expenditure
greater than £200,000;
· Receiving recommendations from the Audit Committee in relation to
the reporting requirements and the appropriate accounting policies for the
Company, the appointment of auditors and their remuneration, and the
identification and management of risk;
· Receives recommendations from the Appointments Committee concerning
the appointment of executive directors, and from the Remuneration Committee
concerning the remuneration of the executive directors;
· Determination of the fees paid to the Non-Executive Directors.
The CEO has the overall responsibility for creating, planning, implementing,
and integrating the strategic direction of the Company. This includes
responsibility for all components and departments of a business. The CEO also
ensures that the organisation's leadership maintains constant awareness of
both the external and internal competitive landscape, opportunities for
expansion, customer base, markets, new industry developments and standards.
The Finance Director works alongside the CEO and has overall control and
responsibility for all financial aspects of company strategy. The Finance
Director takes overall responsibility of the Company's accounting function and
ensures that Company's financial systems are robust, compliant and support
current activities and future growth. The Finance Director will co-ordinate
corporate finance and manage company policies regarding capital requirements,
debt, taxation, equity and acquisitions as appropriate.
The Board is supported by two committees being the Audit Committee and
Remuneration Committee. The Audit Committee advises the Board on the reporting
requirements and the appropriate accounting policies for the Company, the
appointment of auditors and their remuneration, and the identification and
management of risk. The Remuneration Committee advises the Board on all
matters pertaining to the remuneration of the Executive Directors.
Board Members
The Board comprises of a Non-Executive Chairman, one Non-Executive Director
and two Executive Directors.
Andrew Suckling, Non-Executive Chairman
Andrew has over 25 years' experience in the commodity industry. He began in
1994 as a trader on the London Metal Exchange and subsequently became a
founding partner, research analyst and trader with the multi-billion fund
management group Ospraie. Andrew is a graduate of Brasenose College, Oxford
University, earning a BA (Hons) in Modern History in 1993 and an MA in Modern
History in 2000. Andrew is the chair of the Audit and Remuneration
Committee.
Kiran Morzaria, Chief Executive Officer
Kiran holds a B.Eng. from the Camborne School of Mines and an MBA (Finance).
He has over 20 years' experience in the mineral resource industry, working in
both operational and management roles. The first four years of his career were
spent in exploration, mining and civil engineering, after which he was
involved in the acquisition, recommissioning and eventual sale of the
Vatukoula Gold Mine.
Donald Strang, Finance Director
Donald is a member of the Australian Institute of Chartered Accountants and
has over 20 years of experience in both publicly listed and private
enterprises in Australia, Europe and Africa. He has considerable corporate and
international expertise, and over the past decade, has focused on mining and
exploration activities.
Adrian Fairbourn, Non-Executive Director
Adrian began his career as an investment analyst before moving to build and
manage the highly successful alternative fund-of-funds operation at the Bank
of Bermuda. Adrian has co-managed a multi-family office in London, responsible
for hedge fund investments, direct investments and also asset-raising for
co-investment opportunities. He has successfully assisted in over $US1 billion
of structuring, capital and fundraising projects for private companies and
alternative funds. Adrian is a member of the Audit and Remuneration Committee.
The Board is responsible for formulating, reviewing and approving the
Company's strategy, financial activities and operating performance. Day-to-day
management is devolved to the Executive Directors, who are charged with
consulting the Board on all significant financial and operational matters. The
Board retains ultimate accountability for governance and is responsible for
monitoring the activities of the executive team.
The roles of Chairman and Chief Executive Officer are split in accordance with
best practice. The Chairman has the responsibility of ensuring that the Board
discharges its responsibilities. The Chairman is responsible for the
leadership and effective working of the Board, for setting the Board agenda,
and ensuring that Directors receive accurate, timely and clear information. No
one individual has unfettered powers of decision.
The two Executive Directors are comprised of a Chief Executive Officer ("CEO")
and Finance Director. The CEO has the overall responsibility for creating,
planning, implementing, and integrating the strategic direction of the
Company. This includes responsibility for all components and departments of a
business. The CEO also ensures that the organisation's leadership maintains
constant awareness of both the external and internal competitive landscape,
opportunities for expansion, customer base, markets, new industry developments
and standards.
The non-executive directors are not considered independent under the Financial
Reporting Council's Corporate Governance Code (April 2016) ("FRC Code") as
they both have options in the Company. However, the Board considers that both
non-executives are independent of management under all other measures and able
to exercise independence of judgement.
The Committees
Audit Committee
The Audit Committee consists of two non-executive members of the board and
meet at least once a year.
The principal duties and responsibilities of the Audit Committee include:
· Overseeing the Company's financial reporting disclosure process;
this includes the choice of appropriate accounting policies
· Monitor the Company's internal financial controls and assess
their adequacy
· Review key estimates, judgements and assumptions applied by
management in preparing published financial statements
· Assess annually the auditor's independence and objectivity
· Make recommendations in relation to the appointment,
re-appointment and removal of the company's external auditor
Remuneration Committee
The Remuneration Committee consists of two non-executive members of the board
and meet at least once a year.
The principal duties and responsibilities of the Remuneration Committee
include:
· Setting the remuneration policy for all Executive Directors
· Recommending and monitoring the level and structure of
remuneration for senior management
· Approving the design of, and determining targets for, performance
related pay schemes operated by the company and approve the total annual
payments made under such schemes
· Reviewing the design of all share incentive plans for approval by
the Board and shareholders
· None of the Committee members have any personal financial
interest (other than as shareholders and option holders), conflicts of
interest arising from cross-directorships or day-to-day involvement in the
running of the business. No director plays a part in any financial decision
about his or her own remuneration.
Principle and Approach of the Board
Cadence is committed to achieve and maintain high standards of governance. As
such, the Board has chosen to adopt the Quoted Companies Alliance Corporate
Governance Code for Small and Mid-Size Quoted Companies 2018 ("the QCA Code").
Detailed below is how the Board applies the 10 principles of Corporate
Governance, which form part of the QCA code.
Internal Controls
The Directors acknowledge their responsibility for the Company's systems of
internal controls and for reviewing their effectiveness. These internal
controls are designed to safeguard the assets of the Company and to ensure the
reliability of financial information for both internal use and external
publication. While they are aware that no system can provide absolute
assurance against material misstatement or loss, in light of increased
activity and further development of the Company, continuing reviews of
internal controls will be undertaken to ensure that they are adequate and
effective.
Risk Management
The Board considers risk assessment to be important in achieving its strategic
objectives. There is a process of evaluation of performance targets through
regular reviews by Senior Management to forecasts. Project milestones and
timelines are reviewed regularly.
Business Risk
The Board regularly evaluates and reviews any business risks when reviewing
project timelines. The types of risks reviewed include:
· regulatory and compliance obligations
· environmental requirements
· commodity price, interest rate, liquidity and volatility risks
· political and country risks where appropriate.
Insurance
The Company maintains insurance in respect of its Directors and Officers
against liabilities in relation to the Company.
Treasury Policy
The Company finances its operations through equity and holds its cash as a
liquid resource to fund the obligations of the Company. Decisions regarding
the management of these assets are approved by the Board.
Securities Trading
The Board has adopted a Share Dealing Code that applies to Directors, Senior
Management and any employee who is in possession of 'inside information'. All
such persons are prohibited from trading in the Company's securities if they
are in possession of 'inside information'. Subject to this condition and
trading prohibitions applying to certain periods, trading can occur provided
the individual has received the appropriate prescribed clearance.
Remuneration Report
On behalf of the Board, I am pleased to present the Directors' Remuneration
Report summarising the Company's remuneration policy and providing information
on the Company's remuneration approach and arrangements for Executive
Directors, Non-Executive Directors and Senior Executive Management for the
year ended 31 December 2023.
This report is prepared in accordance with the QCA Remuneration Committee
Guide for small and mid-sized quoted companies, revised in 2020. A summary of
the Remuneration Committee's role, membership and relevant qualifications can
be found in the corporate governance section.
Remuneration Committee meetings are held at least once a year with the primary
focus of setting goals for the coming period and then assessing results at the
end of that period. During the year, the Remuneration Committee met 2 times
and;
· Benchmarked the Boards Remuneration, both fixed and variable and
as a whole, and compared it to AIM-listed companies of a similar market
capitalisation.
· Reviewed the above comparisons and establish short, medium and
long-term incentive schemes, which it then recommended to the Board for
approval,
· Reviewed the performance of the Board against targets and awarded
incentives covering the reporting period.
The Board recognises that Directors' remuneration is of legitimate concern to
the shareholders. The Company operates within a competitive environment;
performance depends on the individual contributions of the Directors and
employees, and it believes in rewarding vision and innovation.
Policy on executive Directors' Remuneration
The policy of the Board is to provide executive remuneration packages designed
to attract, motivate and retain Directors of the calibre necessary to maintain
the Company's position and to reward them for enhancing shareholder value and
return. It aims to provide sufficient levels of remuneration to do this but
to avoid paying more than is necessary. The remuneration will also reflect
the Directors' responsibilities and contain incentives to deliver the
Company's objectives.
Salary and Fees
Benchmarking data indicates that at the time of the review, for Salary and
Fees, Cadence is slightly above the median remuneration for an exploration and
mining company between a £5 million and £15 million market capitalisation on
the AIM market. As such the renumeration committee recommended no changes to
salary or fees.
Share Awards (Share Incentive Plan)
No share awards we made during this period.
Pensions
The Company only operates a basic pension scheme for its directors and
employees as required by UK legislation. The Company made the following
pension contributions in the year: K Morzaria £4,403 (2022: £4,403) and D
Strang £Nil (2022: £2,201).
Benefits in kind
No benefits in kind were paid during the year to 31 December 2023 or the year
ended 31 December 2022.
Notice periods
Andrew Suckling, Kiran Morzaria, Donald Strang and Adrian Fairbourn each have
a 12 month rolling notice period.
Share option incentives
At 31 December 2023 each Director held 1,800,000 (31 December 2022: 1,800,000)
options which are exercisable at any time before 30 April 2026. The exercise
price is 29p. No options were exercised by Directors during the period (2022:
None).
The remuneration of the Directors was as follows:
A Fairbourn A Suckling K Morzaria D Strang Total
£ £ £ £ £
Year to 31 December 2023
Salary and fees 48,000 120,000 230,000 120,000 518,000
Total 48,000 120,000 230,000 120,000 518,000
Year to 31 December 2022
Salary and fees 48,000 120,000 230,000 120,000 518,000
Cost of shares awarded (1) 19,680 19,680 44,477 38,304 122,141
Total 67,680 139,680 274,477 158,304 640,141
(1) The cost of shares awarded represents the value of the shares awarded
to the Directors for milestones reached.
At 31 December 2023 £58,000 (2022: £Nil)was outstanding to directors.
The high and low share price for the year were 16.625p and 4.85p respectively
(year ended 31 December 2022: 31.225p and 8.5p). The share price at 31
December 2023 was 5.75p (31 December 2022: 11.35p).
Andrew Suckling
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CADENCE MINERALS PLC
Opinion
We have audited the financial statements of Cadence Minerals Plc (the
'company') for the year ended 31 December 2023 which comprise the Statement of
Comprehensive Income, the Statement of Financial Position, the Statement of
Changes in Equity, the Statement of Cash Flows and notes to the financial
statements, including significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and
UK-adopted international accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the state of the company's affairs as at
31 December 2023 and of its loss for the year then ended;
· have been properly prepared in accordance with UK-adopted
international accounting standards; and
· 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 company 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 as applied to listed entities, 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.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group's and parent company's ability to continue to adopt
the going concern basis of accounting included
· Obtaining and evaluating management's going concern assessment,
including their assumptions, key risks and uncertainties, and any available
supporting documentation.
· Assessing the historical forecasting accuracy and consistency of the
going concern assessment with information obtained from other areas of the
audit, such as our audit procedures on management's impairment assessments.
· Testing the clerical accuracy of the assessment
· Evaluating whether the assumptions made by management are reasonable
and appropriately conservative, considering the Group's relevant principal
risks and uncertainties. We challenged the assumptions and estimates made by
management where necessary.
· Evaluating the adequacy of working capital, including assessing the
reasonableness of assumptions used in the cash flow forecasts and budgets and
any plans to address potential shortfalls.
· Performing sensitivity analysis on management's assumptions,
including applying incremental adverse cash flow sensitivities to assess the
potential impact of severe but plausible scenarios such as significant
movement in prices level 1 investments.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's or parent company's
ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures. The
materiality applied to the financial statements was set at £289,000 (2022:
£223,000), with performance materiality set at £202,300 (2022: £223,300).
Materiality has been calculated as 2% (2022: 1.5%) of the benchmark of net
assets, which we have determined, in our professional judgement, to be one of
the principal benchmarks within the financial statements relevant to members
of the Company in assessing financial performance. The reason for the change
was to ensure that materiality would be more or less consistent with prior
year as the overall risk has not changed.
We agreed with the Audit Committee that we would report to them misstatements
identified during our audit above £14,450 (2022: £15,950).
We applied the concept of materiality both in planning and performing the
audit, and in evaluating the effect of misstatement.
Our approach to the audit
In designing our audit, we determined materiality, as above, and assessed the
risk of material misstatement in the financial statements. We addressed the
risk of management override of internal controls, including evaluating whether
there was evidence of bias by the directors that represents a risk of material
misstatement due to fraud. In particular we looked at areas involving
significant accounting estimates and judgements by the directors and
considered future events that are inherently uncertain, such as the fair value
of unquoted investments and the value of the share options scheme.
In addition, we focused our audit on the significant risk areas including the
Key Audit Matter as outlined below.
A full scope audit was performed on the complete financial information of the
Company.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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) we identified, including 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.
Key Audit Matter How our scope addressed this matter
Carrying value of Financial Assets (Refer to note 6)
The Company held investments with a value of £15.8m as at 31 December 2023. Our audit work will include:
These are valued in accordance with IFRS 13 and the fair value hierarchy; and
classified as per IFRS 9. § Reviewing and challenging the valuation methodology for the investments
held and ensuring that the carrying values are supported by sufficient and
There is the risk that these investments have not been valued in accordance appropriate audit evidence.
with IFRS 13 and IFRS 9 and require impairment.
§ Ensuring that all asset types are categorised according to IFRS, including
Investments which fall under Tier 3 of the fair value hierarchy are subject to the accounting disclosures as required under IFRS 9;
significant management estimate and judgment, which increases the risk of
material misstatement. § Reviewing the movement in investments to ensure they are accounted for and
disclosed correctly in line with IFRS 9;
The group's investments include £4,1m (2022:£6,2m) invested in level 1
listed investments, which are not subject to management judgement or § Reviewing disclosures in relation to said assets;
estimation, and are valued at their year-end share price per the relevant
exchange. § Ensuring that Cadence Minerals Plc has full title to the investments held;
The balance of the group's investments are in unlisted companies and § Ensuring that appropriate disclosures surrounding the estimates made in
categorised as Level 3 investments. Given the value of the investments is respect of any valuations are included in the financial statements; and
material at the year end and significant judgement needed when valuing level 3
investment we have assessed valuation of investments as a Key audit matter. § Considering whether the transactions have been accounted for correctly
within the financial statements.
Based on the work performed, we are satisfied that the carrying value of the
financial assets is materially correct and adequately disclosed
Carrying value and classification of loans receivable from Investee (refer to
note 7)
There is a risk that the loan amounts are not recoverable given that no Our audit work will include:
repayments were made by the debtors for the loans outstanding and in addition
to the existing loans another loan was extended. § Ensuring that the loans have been classified and disclosed correctly in
accordance with IFRS 9;
There is also a risk that the loans have not been accounted for in accordance
with IFRS 9. § Discussing with Management to ascertain their justification for no IFRS 9
ECL charge being recognised in the year. Challenge management's key
Risk has been assessed as a Key Audit Matter due to the uncertainty over the assumptions and consider whether the loans are fully recoverable or whether an
recoverability of £3.9 million in loans from REM Mexico. IFRS 9 ECL charge is required; and
§ Ensuring that the loans are correctly classified as current or non-current
in accordance with the payment terms per the loan agreements.
Cadence holds an interest in the Sonora Lithium Project through REM Mexico,
which has a 30% stake in the joint venture interests in Mexalit S.A. de CV
("Mexalit") and Megalit S.A. de CV ("Megalit"). The remaining 70% is held by
Ganfeng Lithium Group Co., Ltd ("Ganfeng")
Following a change in the Mexican Mining Law and the submission of evidence to
support the investment spend to the regulatory authorities, a preliminary
cancellation of nine lithium concessions was issued in August 2023. The
cancellations are not final and both Ganfeng and Cadence have filed
administrative review recourses before the Secretary of Economy against the
resolutions cancelling the concessions, as they believe these resolutions
violate Mexican and international law and infringe upon their fundamental due
process rights. The case is still ongoing and the recovery of these loans from
REM Mexico is dependent on the success of the administrative review. If the
concessions are not granted back and compensation is not received from the
Mexican government for concessions, a full impairment of the loan may be
required. Further details are disclosed in the critical accounting estimates
of these financial statements.
Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. 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. 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 course of 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 this gives rise to a material misstatement in the financial
statements themselves. 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, based on the work undertaken in the course of the 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 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, or returns adequate
for our audit have not been received from branches not visited by us; or
· the financial statements 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 directors
As explained more fully in the directors' responsibilities statement, 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 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 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, are 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
irregularities, including fraud is detailed below:
· We obtained an understanding of the company and the sector in which
it operates to identify laws and regulations that could reasonably be expected
to have a direct effect on the financial statements. We obtained our
understanding in this regard through discussions with management and
application of cumulative audit knowledge and experience of the sector.
· We determined the principal laws and regulations relevant to the
company in this regard to be those arising from Companies Act 2006, AIM
listing rules, GDPR, QCA compliance, International Financial Reporting
Standards (in compliance with the Companies Act 2006) and tax legislation
within the United Kingdom.
· We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the company with those
laws and regulations. These procedures included, but were not limited to:
o Discussions with management
o Review of board minutes
o Review of legal and professional expenditure
o Review of letter of good standing
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, that the potential for management bias was in the valuation of
investments. We addressed the risk by challenging the assumptions and
judgements made by management when auditing that significant accounting
estimate.
· As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
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
(http://www.frc.org.uk/auditorsresponsibilities) . This description forms part
of our auditor's report.
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.
Zahir Khaki (Senior Statutory Auditor)
15 Westferry Circus
For and on behalf of PKF Littlejohn
LLP
Canary Wharf
Statutory
Auditor
London E14 4HD
Year ended Year ended
Note 31 December 2023 31 December 2022
£'000 £'000
Income
Unrealised loss on financial investments 6 (3,101) (4,593)
Realised (loss)/profit on financial investments 6 (2,793) 552
(5,894) (4,041)
Share based payments (25) (13)
Impairment of intangibles (905) -
Loan from subsidiary written off 8 4,810 -
Other administrative expenses (1,302) (1,443)
Total administrative expenses 2,578 (1,456)
Operating loss 1 (3,316) (5,497)
Finance cost 3 (3)
Foreign exchange gain 297 3
Loss before taxation (3,019) (5,497)
Taxation 4 - -
Loss attributable to the equity holders of the Company (3,019) (5,497)
Total comprehensive earnings for the year, attributable to the equity holders (3,019) (5,497)
of the company
Earnings per ordinary share
Basic earnings per share (pence) 5 (1.762) (3.355)
Diluted earnings per share (pence) 5 n/a n/a
The accompanying principal accounting policies and notes form an integral part
of these financial statements.
31 December 2023 31 December 2022
ASSETS Note £'000 £'000
Non-current
Financial Assets 6 11,660 11,365
11,660 11,365
Current
Trade and other receivables 7 3,937 3,957
Financial Assets 6 4,162 6,206
Cash and cash equivalents 215 110
Total current assets 8,314 10,273
Total assets 19,974 21,638
LIABILITIES
Current
Trade and other payables 8 288 317
Borrowings 9 933 -
Total current liabilities 1,221 317
Non-current
Borrowings 9 302 -
Total liabilities 1,523 317
EQUITY
Issued share capital 10 2,226 2,144
Share premium 10 37,654 37,612
Share based payment reserve 258 252
Investment in own shares (64) (64)
Retained earnings (21,623) (18,623)
Equity attributable 18,451 21,321
to equity holders of the Company
Total equity and liabilities 19,974 21,638
The financial statements were approved by the Board on 26 June 2024, and
signed on their behalf by;
Company number 05234262
The accompanying principal accounting policies and notes form an integral part
of these financial statements.
Share capital Share premium Share based payment reserve Investment in own shares Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 1,903 33,207 249 (70) (13,136) 22,153
Share based payments - - 13 - - 13
Transfer on exercise of warrants - - (10) - 10 -
Issue of shares held in Trust - 6 - 6 - 12
Share issue 241 4,775 - - - 5,016
Share issue costs - (376) - - - (376)
Transactions with owners 241 4,405 3 6 10 4,665
Loss for the period - - - - (5,497) (5,497)
Total comprehensive earnings for the period - - - - (5,497) (5,497)
Balance at 31 December 2022 2,144 37,612 252 (64) (18,623) 21,321
Share based payments - - 25 - - 25
Transfer on lapse of warrants - - (19) - 19 -
Share issue 82 42 - - - 124
Transactions with owners 82 42 6 - 19 149
Loss for the period - - - - (3,019) (3,019)
Total comprehensive earnings for the period - - - - (3,019) (3,019)
Balance at 31 December 2023 2,226 37,654 258 (64) (21,623) 18,451
The accompanying principal accounting policies and notes form an integral part
of these financial statements.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Cash flow from operating activities
Continuing operations
Operating loss (3,316) (5,497)
Loss on financial investments 5,894 4,041
Impairment of investments 905 -
Write off of loan from subsidiary 8 (4,810) -
Equity settled share based payments 25 13
Decrease in trade and other receivables 20 24
Decrease in trade and other payables (29) (536)
Net cash outflow from operating activities from continuing operations (1,311) (1,955)
Cash flows from investing activities
Payments for non-current financial investments (2,088) (4,600)
Payments for investments in current financial investments - (235)
Receipts on sale of current investments 2,150 1,926
Net cash inflow/(outflow) from investing activities 62 (2,909)
Cash flows from financing activities
Proceeds from issue of share capital - 5,016
Share issue costs - (376)
Net borrowings 1,400 -
Net finance cost - (3)
Net cash inflow from financing activities 1,400 4,637
Net change in cash and cash equivalents 151 (227)
Foreign exchange movements on cash and cash equivalents (46) 13
Cash and cash equivalents at beginning of period 110 324
Cash and cash equivalents at end of period 215 110
Material non-cash transactions
During the year ended 31 December 2023 the company received shares in Hastings
Technology Metals valued at £5,152,000, and wrote off the loan from Mojito of
£4,810,000 which arose on the disposal of its interest in the Yangibana
Project, by Mojito. During the year ended 31 December 2022 the Company
disposed of its 31.5% stake in in Lithium Technologies and Lithium Supplies,
(non-current financial investments) for initial proceeds of £1,810,000 which
were settled in shares of Evergreen PTY Ltd (non-current investment). The
reconciliation of net debt movements is shown in Note 13.
The accompanying principal accounting policies and notes form an integral part
of these financial statements.
General Information
Cadence Minerals plc is a company incorporated and domiciled in the United
Kingdom. The Company's shares are listed on the AIM market of the London Stock
Exchange, and on the AQUIS Growth Market as operated by AQUIS Stock Exchange
("AQUIS").
The Financial Statements are for the year ended 31 December 2023 and have been
prepared under the historical cost convention, except for the measurement to
fair value of financial assets, and in accordance with UK adopted
International Accounting Standards (IAS) in conformity with the requirements
of the Companies Act 2006. These Financial Statements (the "Financial
Statements") have been prepared and approved by the Directors on 26 June 2024
and signed on their behalf by Donald Strang and Kiran Morzaria.
The accounting policies have been applied consistently throughout the
preparation of these Financial Statements, and the financial report is
presented in Pound Sterling (£) and all values are rounded to the nearest
thousand pounds (£'000) unless otherwise stated.
Investing Policy
The Company is an investment entity. The Company's investing policy, which was
approved at a General Meeting on 29 November 2010, is to acquire a diverse
portfolio of direct and indirect interests in exploration and producing rare
earth minerals and/or other metals projects and assets ('Investing Policy').
In light of the nature of the assets and projects that will be the focus of
the Investing Policy, the Company will consider investment opportunities
anywhere in the world.
The Directors have considerable investment experience, both in structuring and
executing deals and in raising funds. Further details of the Directors'
expertise are set out on the Company website. The Directors will use this
experience to identify and investigate investment opportunities, and to
negotiate acquisitions. Wherever necessary, the Company will engage suitably
qualified technical personnel to carry out specialist due diligence prior to
making an acquisition or an investment. For the acquisitions that they expect
the Company to make, the Directors may adopt earn-out structures with specific
performance targets being set for the sellers of the businesses acquired and
with suitable metrics applied.
The Company may invest by way of outright acquisition or by the acquisition of
assets - including the intellectual property - of a relevant business,
partnership or joint venture arrangement. Such investments may result in the
Company acquiring the whole or part of a company or project (which, in the
case of an investment in a company, may be private or listed on a stock
exchange, and which may be pre-revenue), and such investments may constitute a
minority stake in the company or project in question. The Company's
investments may take the form of equity, joint venture, debt, convertible
documents, licence rights, or other financial instruments such as the
Directors deem appropriate.
The Company may be both an active and a passive investor depending on the
nature of the individual investments in its portfolio. Although the Company
intends to be a long-term investor, the Directors will place no minimum or
maximum limit on the length of time that any investment may be held.
INVESTING POLICY (CONTINUED)
There is no limit on the number of projects into which the Company may invest,
or on the proportion of the Company's gross assets that any investment may
represent at any time, and the Company will consider possible opportunities
anywhere in the world.
The Directors may offer new ordinary shares in the capital of the Company by
way of consideration as well as cash, thereby helping to preserve the
Company's cash for working capital and as a reserve against unforeseen
contingencies including, by way of example and without limit, delays in
collecting accounts receivable, unexpected changes in the economic environment
and unforeseen operational problems. The Company may, in appropriate
circumstances, issue debt securities or otherwise borrow money to complete an
investment. There are no borrowing limits in the Articles of Association of
the Company. The Directors do not intend to acquire any cross holdings in
other corporate entities that have an interest in the ordinary shares.
Going Concern
The Directors have prepared cash flow forecasts for the period ending 30 June
2025 which take account of the current cost and operational structure of the
Company.
The cost structure of the Company comprises a high proportion of discretionary
spend and therefore in the event that cash flows become constrained, costs can
be quickly reduced to enable the Company to operate within its available
funding.
In 2023, the Company secured a Mezzanine Loan Facility, obtaining net
borrowings of £1,427,000 and £2,150,000 in net receipts, from sales less
purchases, of listed investments. These funds have been used to further
finance its investment in the Amapá Project
These forecasts demonstrate that the Company has sufficient cash funds
available to allow it to continue in business for a period of at least twelve
months from the date of approval of these financial statements. Accordingly,
the financial statements have been prepared on a going concern basis.
It is the prime responsibility of the Board to ensure the Company remains a
going concern. At 31 December 2023 the Company had cash and cash equivalents
of £215,000, current financial assets of £4,162,000 and £1,235,000 in
borrowings. The Company has minimal contractual expenditure commitments, and
the Board considers the present funds sufficient to maintain the working
capital of the Company for a period of at least 12 months from the date of
signing the Annual Report and Financial Statements. With overheads of
£1,302,000 in 2023, and creditors of £288,000 at 31 December 2023 the
Company would still be able to meet its obligations, without the requirement
to cut costs, should the value of the current listed financial assets be
reduced by 65%. For these reasons the Directors adopt the going concern basis
in the preparation of the Financial Statements.
Statement of Compliance With IAS
The Company's financial statements have been prepared under the historical
cost convention except for the measurement to fair value of financial assets
as described in the accounting policy below, and the financial statements have
been prepared in accordance with UK adopted International Accounting
Standards (IAS) in conformity with the provisions of the Companies Act 2006.
The principal accounting policies adopted by the Company are set out below.
Taxation
Current income tax assets and/or liabilities comprise those obligations to, or
claims from, fiscal authorities relating to the current or prior reporting
period, which are unpaid at the balance sheet date. They are calculated
according to the tax rates and tax laws applicable to the fiscal periods to
which they relate, based on the taxable result for the period. All changes to
current tax assets or liabilities are recognised as a component of tax expense
in the income statement.
Deferred income taxes are calculated using the liability method on temporary
differences. This involves the comparison of the carrying amounts of assets
and liabilities in the financial statements with their respective tax bases.
In addition, tax losses available to be carried forward as well as other
income tax credits to the Company are assessed for recognition as deferred tax
assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets
are recognised to the extent that it is probable that they will be able to be
offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to
their respective period of realisation, provided they are enacted or
substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a
component of tax expense in the income statement. Only changes in deferred tax
assets or liabilities that relate to a change in value of assets or
liabilities that is charged directly to equity are charged or credited
directly to equity.
Financial Assets
The Company's financial assets include cash, other receivables and financial
assets. Except for those trade receivables that do not contain a significant
financing component and are measured at the transaction price in accordance
with IFRS 9, all financial assets are initially measured at fair value
adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging
instruments, are classified into the following categories:
• amortised cost
• fair value through profit or loss (FVTPL)
• fair value through other comprehensive income (FVOCI).
In the periods presented the corporation does not have any financial assets
categorised as FVOCI.
The classification is determined by both:
• the entity's business model for managing the financial asset
• the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in
profit or loss are presented within finance costs, finance income or other
financial items, except for impairment of trade receivables which is presented
within other expenses.
FINANCIAL ASSETS (CONTINUED)
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the
following conditions (and are not designated as FVTPL):
• they are held within a business model whose objective is to hold the
financial assets and collect its contractual cash flows
• the contractual terms of the financial assets give rise to cash flows
that are solely payments of principal and interest on the principal amount
outstanding
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Company's cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments.
Financial assets at fair value through profit or loss (FVTPL)
Financial assets that are held within a different business model other than
'hold to collect' or 'hold to collect and sell' are categorised at fair value
through profit and loss. Further, irrespective of business model financial
assets whose contractual cash flows are not solely payments of principal and
interest are accounted for at FVTPL. All derivative financial instruments fall
into this category, except for those designated and effective as hedging
instruments, for which the hedge accounting requirements would apply.
Assets in this category are measured at fair value with gains or losses
recognised in profit or loss. The fair values of financial assets in this
category are determined by reference to active market transactions or using a
valuation technique where no active market exists.
Impairment of financial assets
The Company considers trade and other receivables individually in accounting
for trade and other receivables as well as contract assets and records the
loss allowance as lifetime expected credit losses. These are the expected
shortfalls in contractual cash flows, considering the potential for default at
any point during the life of the financial instrument. In calculating, the
Company uses its historical experience, external indicators and
forward-looking information to calculate the expected credit losses using a
provision matrix.
Fair Value Measurement
IFRS 13 establishes a single source of guidance for all fair value
measurements. IFRS 13 does not change when an entity is required to use fair
value, but rather provides guidance on how to measure fair value under IFRS
when fair value is required or permitted. The resulting calculations under
IFRS 13 affected the principles that the Company uses to assess the fair
value, but the assessment of fair value under IFRS 13 has not materially
changed the fair values recognised or disclosed. IFRS 13 mainly impacts the
disclosures of the Company. It requires specific disclosures about fair value
measurements and disclosures of fair values, some of which replace existing
disclosure requirements in other standards.
Financial Investments
Non-derivative financial assets comprising the Company's strategic financial
investments in entities not qualifying as subsidiaries, associates or jointly
controlled entities. These assets are classified as financial assets at fair
value through profit or loss. They are carried at fair value with changes in
fair value recognised through the income statement. Where there is a
significant or prolonged decline in the fair value of a financial investment
(which constitutes objective evidence of impairment), the full amount of the
impairment is recognised in the income statement.
Due to the nature of these assets being unlisted investments or held for the
longer term, the investment period is likely to be greater than 12 months and
therefore these financial assets are shown as non-current assets in the
Statement of financial position, unless their disposal is likely to occur
within the forthcoming year. Listed investments are valued at closing bid
price on 31 December 2023. For measurement purposes, financial investments are
designated at fair value through income statement. Gains and losses on the
realisation of financial investments are recognised in the income statement
for the period. The difference between the market value of financial
instruments and book value to the Company is shown as a gain or loss in the
income statement for the period.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank and in hand, bank deposits
repayable on demand, and other short term highly liquid investments that are
readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value, less advances from banks repayable
within three months from the date of advance if the advance forms part of the
Company's cash management.
Equity
Share capital is determined using the nominal value of shares that have been
issued.
The share premium account represents premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax
benefits.
The share based payment reserve represents the cumulative amount which has
been expensed in the income statement in connection with share based payments,
less any amounts transferred to retained earnings on the exercise of share
options.
Retained earnings include all current and prior period results as disclosed in
the statement of comprehensive income.
Employee Benefit Trusts ("EBTs") are accounted for under IFRS 10 and are
consolidated on the basis that the parent has control, thus the assets and
liabilities of the EBT are included on the Company balance sheet and shares
held by the EBT in the Company are presented as a deduction from equity.
Operating Leases
The Company does not have any leases within the scope of IFRS 16 in the
current or prior year.
Payments, including prepayments, made under low value or short-term operating
leases of less than 12 months (net of any incentives received from the lessor)
are charged to the statement of comprehensive income on a straight-line basis
over the period of the lease.
Foreign Currencies
The financial statements are presented in Sterling, which is also the
functional currency of the Company.
In the financial statements of the Company, foreign currency transactions are
translated into the functional currency of the Company entity using the
exchange rates prevailing at the dates of the transactions. 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 recognised in profit or loss.
Share Based Payments
The Company issues equity-settled share-based payments to certain employees
(including directors). Equity-settled share-based payments are measured at
fair value at the date of grant. The fair value determined at the grant date
of the equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, together with a corresponding increase in
equity, based upon the Company's estimate of the shares that will eventually
vest.
Fair value is measured using the Black-Scholes model, as the options have no
market related conditions. The expected life used in the model has been
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural considerations.
The expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Non-market vesting
conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised, if there
is any indication that the number of share options expected to vest differs
from previous estimates.
No adjustment is made to the expense or share issue cost recognised in prior
periods if fewer share options are, ultimately exercised than originally
estimated. Upon exercise of share options, the proceeds received net of any
directly attributable transaction costs up to the nominal value of shares
issued are allocated to share capital with any excess being recorded as share
premium.
Warrants
The Group has also issued equity settled share-based payments in respect of
services provided by debt holders in the form of warrants. The share-based
payment is measured at fair value of the services provided at the grant date,
or if the fair value of the services cannot be reliably measured using the
Black-Scholes model. The expense is allocated over the vesting period.
Financial Liabilities
The Company's financial liabilities include trade and other payables.
Financial liabilities are obligations to pay cash or other financial assets
and are recognised when the Company becomes a party to the contractual
provisions of the instrument.
All financial liabilities are recognised initially at fair value, net of
direct issue costs. After initial recognition, trade and other payables are
subsequently measured at amortised cost using the effective interest rate
('EIR method'). Gains and losses are recognised in the statement of profit or
loss and other comprehensive income when the liabilities are derecognised, as
well as through the EIR amortisation process. Amortised cost is calculated by
considering 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 Consolidated Statement of Comprehensive Income.
FINANCIAL LIABILITIES (CONTINUED)
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.
Critical Accounting Estimates and Judgements
Sources of Estimation and Key Judgements
The preparation of the Financial Statements requires the Company to make
estimates, judgements and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and related disclosure of
contingent assets and liabilities. The Directors base their estimates on
historic experience and various other assumptions that they believe are
reasonable under the circumstances, the results of which form the basis of
making judgements about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Significant judgments and estimates
The preparation of financial statements requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenditure during the
reported period. The estimates and associated judgments are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgments about carrying values of assets and liabilities that are not
readily apparent from other sources.
· The estimates and underlying judgments are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised if the revision affects only that period, or
in the period of the revision and future periods if the revision affects both
current and future periods.
· In the preparation of these financial statements, estimates
and judgments have been made by management concerning calculating the fair
values of the assets acquired on business combinations, and the assumptions
used in the calculation of the fair value of the share options. Actual amounts
could differ from those estimates.
· Management has made the following estimates that have the
most significant effect on the amounts recognised in the financial statements.
Unlisted investments
The Company is required to make judgements over the carrying value of
investments in unquoted companies where fair values cannot be readily
established and evaluate the size of any impairment required. It is important
to recognise that the carrying value of such investments cannot always be
substantiated by comparison with independent markets and, in many cases, may
not be capable of being realised immediately. Management's significant
judgement in this regard is that the value of their investment represents
their cost less previous impairment. The fair value of unquoted investments of
the Company at 31 December 2023 was £11,660 (2022: £12,327). Management have
assessed each unlisted investment and concluded that Mojito
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
Resources requires and impairment of £905,000. This was due to the disposal
of the Yangibana Project Tenements owned by Mojito in 2023 to Hastings
Technology Metals (ASX: HAS), the owner and operator of the Yangibana Rare
Earth Project. This resulted in Mojito holding no assets and therefore the
investment was considered to have no value. Further information regarding
the Group's unquoted investments is provided in the investment review of the
Strategic Report and in Note 6.
Loan accounting policy
The Company has applied judgement in respect of the accounting treatment of
the various contractual elements with regards to the Mezzanine Loan Facility
agreement, entered into during the period. The loan includes a clause whereby
If the Company elects not to settle a monthly payment in cash they will
automatically grant a right for the payment to be settled in shares as per the
non-cash repayment terms contained in the Loan Facility Agreement (see Note 9
- Borrowings for further details). The Company intends, and has planned to
make all repayments in cash and therefore has considered the value of the
embedded derivative to be £nil. The directors have considered treatment of
the loan in its component parts as liability and equity and has determined the
equity component is immaterial."
· Management has made the following judgement that has the most
significant effect on the amounts recognised in the financial statements.
Sonora Lithium Project License
As stated in the strategic report, In April 2022 and May 2023, the Mexican
Government changed its Mining Law, which included prohibiting lithium
concessions, declaring lithium as a strategic sector, and giving exclusive
rights for lithium mining operations to a state-owned entity. These changes
were not meant to affect existing concessions, such as those held by Mexilit
and Megalit. Ganfeng and Cadence believe the reforms should not impact their
project's concessions because they were granted before the Mining Law Reform.
This aligns with the principles of legality and non-retroactivity of laws
outlined in the Constitution of Mexico.
While Ganfeng was in discussions with the Secretary of Economy, the General
Directorate of Mines ("DGM") started reviewing nine lithium concessions held
by Mexican subsidiaries, including those owned by Mexilit and Megalit.
The DGM warned that the concessions could be cancelled if the Mexican
subsidiaries did not provide enough evidence within a specified timeframe to
prove their compliance with minimum investment obligations for developing
lithium concessions from 2017 to 2021. As of May 2023, Mexilit and Megalit had
submitted extensive evidence of their timely compliance with the minimum
investment obligations for the lithium concessions. However, in August 2023,
the DGM issued a formal decision notice to the Mexican subsidiaries,
cancelling nine lithium concessions, including those owned by Mexilit and
Megalit.
The cancellations for the lithium concessions issued by the DGM are not final
and are subject to ongoing appeals. Ganfeng and Cadence believe that the
Mexican Subsidiaries have complied with their minimum investment obligations,
as Mexican law requires. The mine development investment by the Mexican
Subsidiaries has significantly exceeded the minimum investment obligations,
and the Mexican Subsidiaries regularly submitted annual reports detailing
their operations within the prescribed period annually. Ganfeng and Cadence
have filed administrative review recourses before the Secretary of Economy
against the resolutions cancelling the concessions, as they believe these
resolutions violate Mexican and international law and infringe upon their
fundamental due process rights.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED)
In November 2023, Cadence issued a Request for Consultations and Negotiations
("Request") to the Government of Mexico under the United Kingdom-Mexico
Bilateral Investment Treaty ("BIT"). The Request pertains to the alleged
revocation of the mining concessions for the Sonora Lithium Project (the
"Project") by the Mexican General Directorate of Mines, as announced by
Cadence on 31 August 2023, and related acts and omissions by Mexico.
The affected concessions include those granted to Mexilit S.A. de CV
("Mexilit") and Minera Megalit S.A. de CV ("Megalit"), which are joint venture
companies in which Cadence holds a 30% stake through REMML.
In their Request, Cadence and REMML have identified various BIT obligations
that Mexico has breached, including Mexico's obligation not to unlawfully
expropriate the investments of UK investors such as Cadence and REMML and its
obligation to treat such investments fairly and equitably.
In accordance with Article 10 of the BIT, Cadence and REMML have requested
consultations and negotiations with Mexico to resolve the dispute amicably.
The BIT provides for disputes to be resolved by international arbitration if
they cannot be resolved through consultation and negotiation.
Recoverability of loan due from REM Mexico
In April 2022 and May 2023, the Mexican Government changed the Mexican Mining
Legislation, which included prohibiting new lithium concessions, declaring
lithium as a strategic sector, and giving exclusive rights for lithium mining
operations to a state-owned entity. These changes were not meant to affect
existing concessions, such as those held by Mexilit and Megalit. In May 2023,
the General Directorate of Mines ("DGM") began reviewing and subsequently
cancelled nine lithium concessions, including those owned by Mexilit and
Megalit. The cancellations are not final, and Ganfeng has filed an
administrative review before the Secretary of Economy against the resolutions
cancelling the concessions (including those owned in part by Cadence), as they
believe these resolutions violate Mexican and international law and infringe
upon their fundamental due process rights. The case is still ongoing, and the
recovery of these loans from REM Mexico depends on the success of the
administrative review or any claim filed by Cadence or Ganfeng in the
international court of arbitration.
Adoption of New or Amended IFRS
New standards, amendments and interpretations adopted by the Company
The company has applied the following standards and amendments for the first
time for its annual reporting period commencing 1 January 2023:
· IAS 1 Presentation of Financial Statements
· IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
The adoption of the above has not had any material impact on the disclosures
or amounts reported in the financial statements.
New standards, amendments and interpretations not yet adopted
There are no IFRSs or IFRIC interpretations that are not yet effective that
would be expected to have a material impact on the Company.
Segment reporting
Segmental analysis is not applicable as there is only one operating segment of
the continuing business - investment activities.
1. Profit Before Taxation And Segmental Information
Profit before taxation - continuing operations
The loss before taxation is attributable to the principal activities of the
Company.
The loss before taxation is stated after charging:
Year ended 31 December 2023 Year ended 31 December 2022
£'000 £'000
Share based payment charge 25 13
Directors' fees and consulting (see Note 2) 518 518
Fees payable to the Company's auditor for the audit of the financial 52 40
statements
Segment reporting
The Company operates a single primary activity to invest in businesses so as
to generate a return for the shareholders. The performance and position are
therefore as stated in the primary statements.
Year ended 31 December 2023 Year ended 31 December 2022
£'000 £'000
Unrealised loss on financial investments (3,101) (4,593)
Realised (loss)/profit on financial investments (2,793) 552
(5,894) (4,041)
2. Employee Remuneration
Employee benefits expense
The expense recognised for employee benefits, including Directors' emoluments,
is analysed below:
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
Short-term benefits
Wages, salaries and consulting fees 628 623
Employers NI 43 66
Shares awarded - 122
671 811
The average number of employees (including directors) employed by the Company
during the period was:
2023 2022
No. No.
Directors 4 4
Other 2 2
6 6
Included within the above are amounts in respect of Directors, who are
considered to be the key management personnel, as follows:
Year ended Year ended
31 December 31 December
2023
2022
£'000 £'000
Short-term benefits
Wages, salaries and consulting fees 518 518
Shares awarded - 122
518 640
Details of Directors' emoluments are included in the Report on Remuneration.
3. Finance Costs
Year ended 31 December 2023 Year ended 31 December 2022
£'000 £'000
Loan interest - -
Finance Fees - 3
- 3
4. Taxation
The tax assessed for the period differs from the standard rate of corporation
tax in the UK as follows:
Year ended Year ended
31 December 2023 2023 31 December 2022 2022
£'000 % £'000 %
(Loss) before taxation (3,019) (5,497)
(Loss) multiplied by standard rate (710) 23.52 (1,044) 19
of corporation tax in the UK
Effect of:
Deferred tax asset not recognised 283 43
Remeasurement of deferred tax for changes in tax rates (17) -
Other permanent differences -
Chargeable gains - 229
Income not taxable - (105)
Expenses not deductible for tax purposes 444 877
Total tax charge for year - -
The Company has tax losses in the UK of £27.35m (2022: £26.22m), subject to
His Majesty's Revenue and Customs approval, available for offset against
future operating profits. The Company has not recognised any deferred tax
asset in respect of these losses, due to there being insufficient certainty
regarding its recovery. The unrecognised deferred tax asset is £6.84m (2022:
£6.56m). The main rate of UK corporation tax for the year ended 31 December
2023 and up to 1 April 2023 was 19 per cent. From 1 April 2023, the main rate
of UK corporation tax increased to 25 per cent, resulting in an effective tax
rate of 23.52% for the year ended 31 December 2023.
5. Earnings per Share
The calculation of the basic earnings per share is calculated by dividing the
consolidated profit attributable to the equity holders of the Company by the
weighted average number of ordinary shares in issue during the period. The
weighted average number of shares excludes shares held by an Employee Benefit
Trust (see Note 10) and has been adjusted for the issue of shares during the
period.
Year ended Year ended
31 December 2023 31 December 2022
£'000 £'000
(Loss) attributable to owners of the Company (3,019) (5,497)
2023 2022
Number Number
Weighted average number of shares in issue 177,693,153 170,208,788
Less: shares held by the Employee Benefit Trust (weighted average) (6,380,000) (6,380,000)
Weighted average number of shares for calculating basic earnings per share 171,313,153 163,828,788
Share options and warrants exercisable n/a n/a
Weighted average number of shares for calculating diluted earnings per share n/a n/a
2023 2022
Pence Pence
Basic earnings per share (1.762) (3.355)
Diluted earnings per share n/a n/a
The impact of the share options is considered anti-dilutive when the Company's
result for a period is a loss.
6. Financial Investments
Financial assets at fair value through profit or loss: £'000 £'000 £'000 £'000
Level 1 Level 2 Level 3 Total
Fair value at 31 December 2021 11,974 - 5,660 17,634
Additions 235 - 7,479 7,714
Fair value changes (4,593) - - (4,593)
Gains on disposals (446) - 998 552
Disposal (1,926) - (1,810) (3,736)
Fair value at 31 December 2022 5,244 - 12,327 17,571
Transfer 1,810 - (1,810) -
Additions 5,152 - 2,048 7,200
Fair value changes (3,101) - - (3,101)
Impairment of assets - - (905) (905)
Loss on disposals (2,793) - - (2,793)
Disposal (2,150) - - (2,150)
Fair value at 31 December 2023 4,162 - 11,660 15,822
Loss on investments held at fair value through profit or loss
Fair value loss on investments (3,101) - - (3,101)
Realised loss on disposal of investments (2,793) - - (2,793)
Net loss on investments held at fair value through profit or loss (5,894) - - (5,894)
Financial assets £'000 £'000 £'000 £'000
Level 1 Level 2 Level 3 Total
Non-current - - 11,660 11,660
current 4,162 - - 4,162
4,162 - 11,660 15,822
Level 1 represents those assets, which are measured using unadjusted quoted
prices for identical assets.
Level 2 applies inputs other than quoted prices that are observable for the
assets either directly (as prices) or indirectly (derived from prices). Level
3 applies inputs, which are not based on observable market data.
Level 1 assets comprise investments in listed securities which are traded on
stock markets throughout the world and are held by the Company as a mix of
strategic and short term investments. These are classified as current assets
by virtue of their liquidity. The listed investments have been valued at bid
price, as quoted on their respective Stock Exchanges, at 31 December 2023.
During the year ended 31 December 2023 the company disposed of a variety of
its shareholdings.
Level 3 assets comprise of investment in exploration costs where licences are
not 100% owned by the Company, and investments in other companies.
The Directors conducted an impairment review as of 31 December 2023 and
determined that an impairment of £905,000 was necessary for the investment in
Mojito. This was due to the disposal of the Yangibana Project Tenements owned
by Mojito in 2023 to Hastings Technology Metals (ASX: HAS), the owner and
operator of the Yangibana Rare Earth Project. This resulted in Mojito holding
no assets and therefore the investment was considered to have no value.
Hastings Technology Metals issued 2,452,650 new ordinary shares in Hastings to
Cadence Minerals Plc as consideration, which created an intercompany loan
between Cadence and Mojito, which was written off in the year, see Note 8]
During 2023, £2,048,000 was invested in exploration costs by the Company
(2022: £5,669,000).
7. Trade and Other Receivables
31 December 2023 31 December 2022
£'000 £'000
Current
Other receivables - 27
Amounts owed by subsidiaries 3,883 3,883
Prepayments and accrued income 54 47
3,937 3,957
There is no impairment of receivables, and no amounts are past due at 31
December 2023 or 31 December 2022.
The fair value of these financial assets is not individually determined as the
carrying amount is a reasonable approximation of fair value.
8. Trade and Other Payables
31 December 2023 31 December 2022
£'000 £'000
Trade payables 198 246
Tax and social security 14 -
Other payables 1 1
Accruals and deferred income 75 70
288 317
The fair value of trade and other payables has not been disclosed as, due to
their short duration, management considers the carrying amounts recognised in
the balance sheet to be a reasonable approximation of their fair value.
In June 2022, Cadence entered into an agreement binding its wholly owned
subsidiary, Mojito to sell its working interest in the leases in the Yangibana
Project to Hastings. Hastings is the owner and operator of the Yangibana Rare
Project. This investment being a 30% working interest in the Yangibana Project
tenements was sold to Hastings, for A$9 million, which was satisfied via the
issue of 2,452,650 new ordinary shares in Hastings to Cadence. As Cadence
received the consideration for the sale of the asset in Mojito a trade payable
from Cadence to Mojito of AS$9 million was generated. At the end of the period
the payable was valued at £4.18 million (A$ 9 million).
During the year Mojito was closed and the Company wrote off an intergroup
balance owed to its wholly owned subsidiary, Mojito Resources Limited, in the
amount of £4.18 million. This transaction represents the forgiveness of the
debt by the subsidiary to the parent company. The write-off was approved by
the board of directors of both companies and was deemed necessary due to
broader restructuring or simplification strategy aimed at streamlining the
corporate structure. As a result of the write-off, the parent company's
liabilities were reduced by £4.18 million.
9. Borrowings
31 December 2023 31 December 2022
£'000 £'000
Loan Notes 1,221 -
Interest accrued 14 -
1,235 -
During the year ended 31 December 2023, the Company entered into a Mezzanine
Loan Facility to finance its investment in the Amapá Project.
The Mezzanine Loan Facility ("Loan Facility") involves an unconditional and
committed initial tranche by the Investors of US$ 2 million and a further
conditional Loan Facility amount of US$ 8 million, subject to agreement by the
Investors. The Loan Facility is valid for three years.
The First Tranche of US$ 2 million, drawn down in 2023, has a 24-month term
("Maturity Date"). It has a six-month principal repayment holiday, followed by
18 equal monthly cash repayments thereafter to the Maturity Date. The Loan
Facility has an effective annual interest rate of 9.5% and has a 5%
implementation on the value of the First Tranche.
If the Company elects not to settle a monthly payment in cash (each being a
"Missed Payment"), they will automatically grant a right for the Missed
Payment to be settled in shares as per the non-cash repayment terms contained
in the Loan Facility Agreement ("Non-Cash Repayment"). Following a Non-Cash
Repayment, the Investors will be automatically granted conversion rights over
such principal and interest balances due concerning the Missed Payment. The
Investors will then have the right for 12 months to convert such amounts
either at a price equal to 12.7 pence (representing a 30% premium to the
closing price on 25/05/2023) or at a 7% discount to the average of the five
daily VWAPs chosen by the Investors in the 20 trading days preceding its
conversion notice or at the price the Company issues further equity if lower
than the existing conversion price.
Cadence has provided a security package to the Investors as part of the Loan
Facility. This package includes a floating charge over the Company's
investments, placing its holding in European Metals Holdings into escrow and
the issue of new ordinary shares to the Investors ("Initial Issued Shares").
The Initial Issued Shares represent 50% of the value of the First Tranche, or
8,251,224 new ordinary shares. These initial Issued Shares will be used as
part of any Non-Cash Repayments if applicable. On the Maturity Date, the
Company can utilise the Initial Issued Shares to pursue its investment
strategy or for working capital purposes. If it has settled all amounts in
cash and these Initial Issued Shares revert to the Company.
As part of the Loan Facility, the Company has agreed to grant 8,251,224
warrants to subscribe for ordinary shares in the Company at an exercise price
of 13.2 pence (representing roughly a 35% per cent premium to the current
share price of the Company's Shares) with a 48-month term.
During the year ended 31 December 2023, £1,622,000 ($2,000,000) less costs
was drawn down. £124,000 ($153,000) was repaid through the issue of the
Initial Issued Shares. The borrowing costs (and resulting fx) have been
capitalised under IAS23, as the sole purpose of the loan was to finance the
Amapá Project.
The Company had no borrowings at 31 December 2022.
10. Share Capital
31 December 2023 31 December 2022
£'000 £'000
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p 417 417
180,971,037 ordinary shares of 1p (31 December 2022: 172,719,813 ordinary 1,809 1,727
shares of 1p)
2,226 2,144
Ordinary shares Ordinary Share Capital Share Premium
No. £'000 £'000
Allotted and issued
At 1 January 2022 148,649,098 1,486 33,207
Issue of shares during the year 24,070,715 241 4,775
Reissue of shares held in trust - - 6
Share issue costs - - (376)
At 31 December 2022 172,719,813 1,727 37,612
Issue of shares during the year 8,251,224 82 42
At 31 December 2023 180,971,037 1,809 37,654
During the year ended 31 December 2023 the following shares were issued: On 1
May 2023, 8,251,224 shares were issued for proceeds of £124,000 in respect of
security for the Mezzanine Loans.
Investment in Own Shares
At 31 December 2023 the Company held in Trust 6,380,000 (2022: 6,380,000) of
its own shares with a nominal value of £63,800 (2022: £63,800). The Trust
has waived any entitlement to the receipt of dividends in respect of its
holding of the Company's ordinary shares. The market value of these shares at
31 December was £0.37m (2022: £0.72m). In the current period nil were
repurchased (2022: nil) and nil were transferred into the Trust (2022: nil),
with Nil (2022: 640,000) reissued on award of shares to directors.
The deferred shares have no voting rights and are not eligible for dividends.
11. Share Based Payments
Share Options
The Company operates share option schemes for certain employees (including
directors). Options are exercisable at the option price agreed at the date
of grant. The options are settled in equity once exercised. The expected
life of the options varies between 1 and 6 years. All options issued in the
prior years vested immediately, with no vesting requirements.
Details of the number of share options and the weighted average exercise price
(WAEP) outstanding during the period are as follows:
31 December 2023 31 December 2022
Number WAEP Number WAEP
£ £
Outstanding at the beginning of the year 7,200,000 0.290 7,200,000 0.290
Outstanding at the end of the year 7,200,000 0.290 7,200,000 0.290
Exercisable at year end 7,200,000 7,200,000
The share options outstanding at the end of the period have a weighted average
remaining contractual life of 2.33 years (31 December 2022: 3.33 years) and
have the following exercise prices and fair values at the date of grant:
First exercise date (when vesting conditions are met) Grant date Exercise price Fair value 31 December 2023 31 December 2022
£ £ Number Number
30 April 2021 30 April 2021 0.29 0.02742 7,200,000 7,200,000
7,200,000 7,200,000
At 31 December 2023 7,200,000 options were exercisable (31 December 2022:
7,200,000).
For those options and warrants granted where IFRS 2 "Share-Based Payment" is
applicable, the fair values were calculated using the Black-Scholes model.
The inputs into the model for share based payments recognised in the current
and prior year were as follows:
Risk free rate Share price volatility Expected life Share price at date of grant
30 April 2021 0.19% 21.6% 5 years £0.2375
Expected volatility was determined by calculating the historical volatility of
the Company's share price for 12 months prior to the date of grant. The
expected life used in the model has been adjusted, based on management's best
estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
11. SHARE BASED PAYMENTS (CONTINUED)
Warrants
Details of the number of warrants and the weighted average exercise price
(WAEP) outstanding during the period are as follows:
31 December 2023 31 December 2022
Number WAEP Number WAEP
£ £
Outstanding at the beginning of the year 2,519,850 0.18345 1,798,405 0.16147
Issued 8,251,224 0.13195 1,157,350 0.20500
Exercised - - (435,905) (0.015)
Lapsed (562,500) (0.11556) - -
Outstanding at the end of the year 10,208,574 0.10665 2,519,850 0.18345
Exercisable at year end 10,208,574 2,519,850
The warrants outstanding at the end of the period have a weighted average
remaining contractual life of 1.32 years (31 December 2022: 1.67 years) and
have the following exercise prices and fair values at the date of grant:
First exercise date (when vesting conditions are met) Grant date Exercise price 31 December 2023 31 December
2022
£ Number Number
06 May 2020 06 May 2020 0.06 - 41,667
20 August 2020 20 August 2020 0.12 - 520,833
28 September 2021 28 September 2021 0.20 800,000 800,000
25 February 2022 25 February 2022 0.205 1,157,350 1,157,350
1 May 2023 1 May 2023 0.13195 8,251,224 -
10,208,574 2,519,850
For those warrants granted where IFRS 2 "Share-Based Payment" is applicable,
the fair values were calculated using the Black-Scholes model. The inputs
into the model for share based payments recognised in the current and prior
year were as follows:
Risk free rate Share price volatility Expected life Share price at date of grant
25 February 2022 1.03% 14.9% 3 years £0.1825
1 May 2023 4.54% 18.2% 2 years £0.0975
The Company recognised total expenses of £25,000 (year ended 31 December
2022: £13,000) relating to equity-settled share-based payment transactions
during the period.
12. Financial Instruments
The Company is exposed to a variety of financial risks which result from both
its operating and investing activities. The Board is responsible for
co-ordinating the Company's risk management and focuses on actively securing
the Company's short to medium term cash flows. Long term financial
investments are managed to generate lasting returns.
The Company has purchased shares in Companies which are listed on public
trading exchanges such as the LSE, TSX and ASX, and these shares are held as
an available-for-sale asset. The most significant risks to which the Company
is exposed are described below:
a Credit risk
The Company's credit risk will be primarily attributable to its trade
receivables. At 31 December 2023 and 31 December 2022, the Company had no
trade receivables and therefore minimal risk arises.
Generally, the Company's maximum exposure to credit risk is limited to the
carrying amount of the financial assets recognised at the balance sheet date,
as summarised below:
31 December 2023 31 December 2022
Investments (carried at fair value) Loans and receivables (carried at amortised cost) Derivative financial assets Statement of Financial position total Investments (carried at fair value) Loans and receivables (carried at amortised cost) Derivative financial assets Statement of financial position total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investments (carried at fair value) 4,162 - - 4,162 6,206 - - 6,206
Other long term financial assets 11,660 - - 11,660 11,365 - - 11,365
Other receivables - - - - - 27 - 27
Receivables from investee companies 3,883 - 3,883 3,883 - 3,883
Prepayments and accrued income - 54 - 54 - 47 - 47
Cash and cash equivalents - 215 - 215 - 110 - 110
Total 15,822 4,152 - 19,974 17,571 4,067 - 21,638
Financial instruments that are measured subsequent to initial recognition at
fair value, grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
· Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities;
· Level 2 fair value measurements are those derived from inputs other
than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived
from prices); and
12. FINANCIAL INSTRUMENTS (CONTINUED)
· Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, an investment's
level within the fair value hierarchy is based on the lowest level of input
that is significant to the fair value measurement. Management's assessment
of the significance of a particular input to the fair value measurement in its
entirety requires judgement and considers factors specific to the investment.
Investments
The Company's investment in shares in Listed Companies are included as a
financial investment and has been classified as Level 1, as market prices are
available, and the market is considered an active, liquid market.
The Company's investment in exploration costs where licences are not 100%
owned by the Company, and investments in other companies are classified as
non-current Level 3.
The credit risk on liquid funds is limited because the Company only places
deposits with leading financial institutions in the United Kingdom.
a Liquidity risk
The Company seeks to manage financial risk by ensuring sufficient liquidity is
available to meet foreseeable needs and to invest cash assets safely and
profitably. The Directors prepare rolling cash flow forecasts and seek to
raise additional equity funding whenever a shortfall in funding is forecast.
Details of the going concern basis of preparing the financial statements are
included in the principal accounting policies.
b Market risk
The amount and quality of minerals available and the related costs of
extraction and production represent a significant risk to the Company. The
Company is exposed to fluctuating commodity prices in respect of the
underlying assets. The Company seeks to manage this risk by carrying out
appropriate due diligence in respect of the projects in which it invests.
The Company is exposed to the volatility of the stock markets around the
world, on which it holds shares in various listed entities, and the
fluctuation of share prices of these underlying companies. The Company manages
this risk through constant monitoring of its investments share prices and news
information but does not hedge against these investments.
c Interest rate risk
The Company only has borrowings at fixed coupon rates and therefore minimal
interest rate risk, as this is deemed its only material exposure thereto.
d Foreign exchange risk
The Company had borrowings of £1,235,000 (USD$1,573,000) at 31 December 2023,
which are subject to exchange rate fluctuations. The Company had no
borrowings at 31 December 2022. The Company operates foreign currency bank
accounts to help mitigate the foreign currency risk.
12. FINANCIAL INSTRUMENTS (CONTINUED)
Exposure to currency risk Currency risk sensitivity to a +/- 10 per cent
change in the exchange rate is shown for the net currency position per
currency. The summary of quantitative data relating to the Group's exposure to
currency risk as reported to the Group management is as follows.
GBP thousand USD AUD BRL
Exposure (1,161) 98 1
Sensitivity Analysis (+/-10%) 116 10 -
e Financial liabilities
The Company's financial liabilities are classified as follows:
31 December 2023 31 December 2022
Other financial liabilities at amortised cost Liabilities not within the scope of IAS 39 Total Other financial liabilities at amortised cost Liabilities not within the scope of IAS 39 Total
£'000 £'000 £'000 £'000 £'000 £'000
Trade payables 198 - 198 246 - 246
Accruals and deferred income - 75 75 - 70 70
Tax and social security 14 - 14
Other payables 1 - 1 1 - 1
Borrowings 1,235 - 1,235 - - -
Total 1,448 75 1,523 247 70 317
Maturity of financial liabilities
All financial liabilities at 31 December 2022 mature in less than one year. At
31 December 2023 £302,000 of borrowings mature between one and two years.
Borrowing facilities for the period ended 31 December 2023
The Company had no committed and undrawn borrowing facilities at 31 December
2023 (31 December 2022: £Nil).
The Company had no committed undrawn facilities at 31 December 2023 or 31
December 2022.
12. FINANCIAL INSTRUMENTS (CONTINUED)
f Capital risk management
The Company's objectives when managing capital are:
- to safeguard the Company's ability to continue as a going concern,
so that it continues to provide returns and benefits for the shareholders;
- to support the Company's stability and growth; and
- to provide capital for the purpose of strengthening the Company's
risk management capability.
The Company actively and regularly reviews and manages its capital structure,
to ensure an optimal capital structure, and equity holder returns, taking into
consideration the future capital requirements of the Company and capital
efficiency, prevailing and projected profitability, projected operating cash
flows, projected capital expenditures and projected strategic investment
opportunities. Management regards total equity as capital and reserves, for
capital management purposes.
13. Reconciliation of Liabilities Arising from Financing Activities
There was no financing activity in the year ended 31 December 2022.
Short-term borrowings Long-term borrowings Total
1 January 2023 - - -
Cash-flows:
- loans received 1,338 - 1,338
- Interest charged 224 - 224
- Repayments (162) - (162)
Non-cash:
- Transfer to non-current (302) 302 -
- Loans repaid in shares (124) - (124)
- Unrealised Foreign exchange movement (41) - (41)
31 December 2023 933 302 1,235
14. Related Party Transactions
The Company was charged rent totalling £26,572 by Gunsynd Plc, a company of
which Don Strang is a director (2022: £19,931). Of this £11,250 (2022:
£9,500) was accrued and Nil (2022: £131) was unpaid at 31 December 2023.
In June 2022, Cadence entered into an agreement binding its wholly owned
subsidiary, Mojito to sell its working interest in the leases in the Yangibana
Project to Hastings. Hastings is the owner and operator of the Yangibana Rare
Project. This investment being a 30% working interest in the Yangibana Project
tenements was sold to Hastings, for A$9 million, which was satisfied via the
issue of 2,452,650 new ordinary shares in Hastings to Cadence. As Cadence
received the consideration for the sale of the asset in Mojito a trade payable
from Cadence to Mojito f AS$9 million was generated. At the end of the period
the payable was valued at £4.18 million (A$ 9 million).
During the year Mojito was closed and the Company wrote off an intergroup
balance owed to its wholly owned subsidiary, Mojito Resources Limited, in the
amount of £4.18 million. This transaction represents the forgiveness of the
debt by the subsidiary to the parent company. The write-off was approved by
the board of directors of both companies and was deemed necessary due to
broader restructuring or simplification strategy aimed at streamlining the
corporate structure. As a result of the write-off, the parent company's
liabilities were reduced by £4.18 million.
Key Management Personnel are considered to be the Company Directors only, and
their fees and remuneration are disclosed in the Directors Remuneration, and
within Note 2 to the financial statements.
15. Events after the end of the Reporting Period
On 5 April 2024, the Company announced that it had issued 16,666,667 New
Ordinary Shares at 3p raising £500,000 before expenses, and the issue of
warrants to the subscriber of the New Ordinary Shares in the ratio of one
warrant to each one New Ordinary Share subscribed exercisable at 5p.
16. Ultimate Controlling Party
In the opinion of the directors there is no controlling party.
* (#_ftnref1)
https://www.reuters.com/world/uk/uk-stock-funds-suffer-third-year-outflows-2023-calastone-2024-01-09/
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