REG - Cadence Minerals PLC - Interim Results
27/09/2024 07:00
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RNS Number : 8639F Cadence Minerals PLC 27 September 2024
27 September 2024
Cadence Minerals plc
("Cadence Minerals", "Cadence", or "the Company")
Interim Results for the six months ended 30 June 2024
Cadence Minerals plc (AIM/AQX: KDNC) is pleased to announce its interim
results for the six months ended 30 June 2024.
Despite the poor commodity and macro backdrop, our primary investment, the
Amapá Iron Ore Project, has progressed well. The three targets we set for the
year are either completed or scheduled to be completed by year-end.
Highlights for Amapá Project progress made in the period and post-period end
include:
· The completion of optimisation studies resulting in a 20%
increase of Post-tax Net Present Value ("NPV") to US$1.14 billion, with profit
after tax of US$3.14 billion over the Life of Mine
· A 10% increase in average production after ramp-up to 5.82
million dry metric tonnes per annum ("Mtpa") of Fe concentrate, consisting of
4.81 Mtpa at 65.4% Fe and 1.01 Mtpa at 62% Fe concentrate.
· A 6% decrease in Free on Board C1 Cash Costs to US$33.5/dry
metric tonne.
· The submission of required environmental studies and applications
for the grant of the installation licenses at the Amapá Project.
· The completion of the design of a 67% iron ore concentrate flow
sheet, with testing of the design currently underway.
The immediate focus of the Amapá Project is financing the next stage of
development, a goal to which all the partners are fully dedicated. We believe
this should be done via a trade sale or a joint venture with a highly
experienced mining operator.
We are actively working towards this goal and are currently discussing with
potential joint venture partners. These processes take time with extensive due
diligence and contract negotiations, and we know that shareholders want to be
informed about the detailed progress; however, for commercial reasons and
listing rule requirements, we will only announce once a material contract has
been executed.
Our other main investments are in the lithium sector. With lithium prices down
some 80% over the last twelve months, we have seen a reduction in lithium
equities, with the average producer down some 38% during the current year. As
our investments are in either early-stage exploration or development assets,
the decrease in equity price was the primary driver of our losses during the
period.
Nonetheless, we see positive indications in the lithium market, with market
commentators forecasting improvements in 2025 and supply shortfalls in the
2030s. However, it should be noted that we should not expect lithium prices to
return to levels seen in 2022 in the short to medium term. Lithium demand is
still growing significantly, so prices should improve over the coming year.
Investment Review
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 ("Amapá" or "Project")
Interest - 33.12% at 31/12/2023 and 34.14% at 30/06/2024
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"). This investment
was completed in the first quarter of 2022. Since then, Cadence has invested
another US$7.29 million for a further 7.14% equity. At the end of the period,
Cadence Minerals had invested some US$13.8 million for 34.14% in the Project.
Operations Review
During the reporting period, we continued to develop the Amapá Project. Our
main operational goals for this year were to complete our environmental
applications, reduce capital expenditure, improve Project economics, and
resume testing to produce a high-grade 67% iron ore concentrate.
These targets had been mainly achieved at the time of writing. Subsequently,
we reported on capital costs and increased mining during the period, which
delivered a 20% increase in the Project's Net Present Value. We also submitted
all the required environmental license applications, which should be granted
by the end of 2024.
We have started testing the flow sheet design we developed during the period,
which we expect to be completed in the fourth quarter of this year.
Updated Pre Feasibility Study ("PFS")-level economic study
In March this year, the Amapá Project announced the results of the
optimisation study, which delivered material capital savings to the Project.
The Amapá Project carried out an updated PFS-level economic analysis based on
these results.
Updated Mining Schedule
As part of the optimisation work, engineering consultants identified higher
availability at the processing plant, which increased the annual run-of-mine
feed rate to the processing plant. As a result, the mining and other related
engineering disciplines had to be re-examined, and in particular, the mine
schedule had to be recalculated to optimise the Project's NPV.
As a result, a new life of mine production plan was scheduled. This revised
schedule allows for 15 years of production with the current economic values
and a cut-off of 25% Fe. The resultant life of the mine strip ratio is
approximately 0.4:1 (tonnes waste: tonnes ore), and the average ore mine
delivered to the plant is 13 million metric tonnes per annum.
Project Financial Analysis
An updated PFS financial model, which included the updated mining schedule,
lower capex, and lower operational costs, was developed to evaluate the
Project's economics. All other aspects of the financial analysis remained the
same as per the PFS published in January 2023. Summary results from the
economic model outputs are presented in the table below. The financial model
considers 100% equity funding for the Project, although the financing of the
Project will be a mix of debt and equity. A summary of the key financial
information is presented below, alongside the 2023 PFS data.
Table 1.1 Key Project Metrics (100% Project basis)
Metric Unit 2023 PFS Data 2024 PFS Data
Total ore feed to the plant Mt (dry) 176.88 176.93
Life of Mine Years 16 15
Fe grade of ore feed to the plant % 39.34 39.34
Recovery % 76.27 76.27
62.0% iron ore concentrate production Mtpa 0.89 0.95
65.4% iron ore concentrate production Mtpa 4.23 4.51
C1 Cash Costs FOB * US$/DMT 35.53 33.50
C1 Cash Costs CFR ** US$/DMT 64.23 52.20
Pre-Production capital investment*** US$M 399 343
Sustaining capital investment over LOM**** US$M 245 245
Post-tax NPV (10%) US$M 949 1,145
Post-tax IRR % 34 42
Project payback Years 4 4
Total profit after tax (net operating profit) US$B 2.96 3.14
* Means operating cash costs, including mining, processing, geology, OHSE, rail,
port and site G&A, divided by the tonnes of iron ore concentrate produced.
It excludes royalties and is quoted on a FOB basis (excluding shipping to the
customer).
** Means the same as C1 Cash Costs FOB; however, it includes shipping to the
customer in China (CFR).
*** Includes direct tax credit rebate over 48 months
**** Includes both sustaining CAPEX and deferred capital expenditure, specifically,
improvements to the railway and the installation of conveyor belt and mine
site to rail load out
Project Permitting
As announced in September 2023 (News Release Here
(https://irs.nbtrader.co.uk/ir/cadence/newsArticle.php?ST=REM&id=311428232448661110)
), the Amapá Project has agreed with the Amapá State Environmental Agency
("SEMA") to an expedited environmental licensing process, given that the
Project was previously operating and had been granted all required licenses.
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
Installation License ("LI") to begin construction and, when constructed, an
Operational License ("LO"). An LI and LO are also required to build and
operate the railway and port.
In April, the Amapá Project submitted the required environmental studies and
applications for the Amapá mine and railway. This application was in the form
of the Environmental Control Plan, "PCA" (Plano de Controle Ambiental), and an
Environmental Control Report, "RCA" (Relatório de Controle Ambiental). This
was followed in early September when
The Project submitted the required environmental studies and application for
the LI grant for the iron ore port.
Our joint venture has continued engaging with SEMA and other relevant
authorities, who have indicated that the LI for the rail and mine remain on
schedule for the grant this year. Given the impact that the railway's restart
will make on local communities, the installation license for the railway is
anticipated to have some conditions precedent. This is expected in any project
of this nature. The Amapá Project management team always anticipated this as
part of the required licensing requirements to redevelop the Amapá Iron Ore
Project. Our understanding from SEMA is that, based on the current timeline,
all the LIs will be granted by the end of 2024.
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.
In early 2024, we reached an in-principle agreement on a one-time settlement
amount with the secured creditors and had a financing solution to make this
payment. However, we could not crystallise the financing due to a
longer-than-expected approval process from the secured creditors and
unfavourable iron ore prices. We remain optimistic that as the iron ore price
improves, we will be able to secure the funding needed to make this one-time
payment.
Development Plan for the Amapá Project
The goal is to bring this Project back into production. Based on the positive
results derived from the updated economic assessment at a PFS level, we are
now testing the 67% iron ore concentrate product flow sheet. Once the flow
sheet is proven to the PFS level, this revised flow sheet will form the basis
of an amended economic assessment of the Project.
Alongside this, and based on discussion with SEMA, 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.
Cadence, along with its joint venture partner, has agreed that the lowest risk
and currently the best commercial approach for our investment in the Project
should be either a trade sale or a joint venture with a highly experienced
mining operator. We are actively working towards this goal and discussing it
with potential joint venture partners. 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.
Private Investments, Passive
Ferro Verde Iron Ore, Brazil
Interest - 1% on 31/12/2023 and 30/06/2024
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 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 30/06/2024
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).
In April 2022 and May 2023, the Mexican Government made changes to its Mining
Law, which included prohibiting lithium concessions, declaring lithium a
strategic sector, and giving a state-owned entity exclusive rights for lithium
mining operations. Despite existing concessions, including those held by
Mexilit and Megalit, being supposedly unaffected, the General Directorate of
Mines ("DGM") started reviewing nine lithium concessions held by Mexican
subsidiaries. Mexilit and Megalit submitted evidence of compliance with
minimum investment obligations, but these concessions were still cancelled.
Ganfeng and Cadence believe the cancellations violate Mexican and
international law and have filed administrative review recourses. Cadence also
issued a Request for Consultations and Negotiations to the Government of
Mexico under the United Kingdom-Mexico Bilateral Investment Treaty regarding
the revocation of mining concessions for the Sonora Lithium Project.
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.
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.
Public Investments
The public equity investment segment is composed of passive investment. 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.
The movement in public portfolio values during the year is summarised below.
Commentary £,000
Portfolio value on 31 December 2023 4,162
Disposal of public Investments during the year Disposal of investments held in European Metals & Hastings Technologies (1,321)
Realised and Unrealised loss on portfolio value for the year Realised and unrealised loss on European Metals & unrealised loss on (1,902)
Evergreen due to decrease in equity price
Portfolio value on 30 June 2024 939
As of 30 June 2024, our public equity stakes consisted of the following:
30-Jun-24 31-Dec-23 30-Jun-23 31-Dec-22
Company £'000 £'000 £'000 £'000
European Metals Holding Ltd 359 2,339 5,207 4,882
Evergreen Lithium Ltd 567 1,481 2,738 -
Hastings Technology Metals Ltd - 321 1,570 -
Charger Metals NL - - 187 301
Eagle Mountain Mining Ltd - - 20 37
Miscellaneous 13 21 17 24
Total 939 4,162 9,740 5,244
Public Equity, Passive
European Metals Holdings Limited ("European Metals")
Interest - 7.0% at 31/12/2023 and 2.96% on 30/06/2024
European Metals owns 49% of Geomet s.r.o. with 51% owned by České
Energetické Závody, a.s. ("CEZ"). Geomet s.r.o. owns 100% of the Cinovec
lithium deposit, which hosts a globally significant hard-rock lithium deposit
with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and an
Inferred Mineral Resource of 323.5Mt at 0.39% Li2O. This is a combined
resource of 7.22 million tonnes of lithium carbonate equivalent. The Cinovec
lithium deposit contains a Probable Ore Reserve of 34.5Mt at 0.65% Li2O, which
covers the first 20 years of mining at an output of 22,500tpa of battery-grade
lithium carbonate.22,500tpa of Lithium Carbonate).
The Cinovec lithium project has achieved key milestones, including the
successful production of lithium carbonate and lithium hydroxide from the
pilot programme - both to battery grade, the granting of extensions to our
exploration licenses, and the selection of a significantly superior site for
the lithium processing plant. It's important to note that there have been
delays in the definitive feasibility study. However, EMH's work on important
processing enhancements is expected to improve the project's economics
significantly.
Public Equity, Passive
Evergreen Lithium Limited ("Evergreen")
Interest - 8.74% at 31/12/2023 and 8.74% on 30/06/2024
In 2023, Evergreen was listed on the Australian Stock Exchange, and Cadence's
equity stake in Evergreen was reduced to 8.74% from 13.16% due to the IPO and
associated fundraising. Further shares in Evergreen are due to Cadence upon
achieving certain performance milestones.
Evergreen is the 100% owner of three exploration tenements, including the
Bynoe Lithium Project, Fortune Lithium Project, and Kenny Lithium Project. The
Bynoe Lithium Project, located contiguous to Core Lithium's Finnis hard rock
lithium project, is considered Evergreen's flagship prospect, offering
significant exploration potential.
During the period Evergreen continued its exploration of the Byone projects,
the main highlights included approving the mine management plan, which enabled
drilling to commence. This was announced in July 2024, with an auger sampling
program drilling short holes over areas identified as high-priority targets.
Samples generated from this program will be analysed at an offsite laboratory.
Results from this work will be used in conjunction with surface soil sample
results to target LCT pegmatites in the future. In addition, RAB/Air Core
drilling began, testing geochemical, geophysical and other targets identified
in the previous exploration programmes. This drilling programme has
intersected shallow pegmatites along strike from Core Lithium's BP33 deposit.
Given the early success of the current air-core drill program, RC drill
planning is currently underway. RC drilling will be used to test pegmatites at
depth and along strike.
FINANCIAL RESULTS:
During the period, the Group made a loss before taxation of £2.53 million (6
months ended 30 June 2023: £1.95 million, year ended 31 December 2023:
£3.02 million). There was a weighted basic loss per share of 1.392p (30 June
2023: 1.163p, 31 December 2023: 1.762p). The total assets of the group
decreased from £19.97 million at 31 December 2022 to £17.79 million.
During the period, our net cash outflow from operating activities was £0.32
million, and we raised gross proceeds of £0.47m via the issue of shares and a
further £1.33m from the sale of our investments. Most of the capital raised
was reinvested (£1.01m), with £0.55m used to pay down existing debt. As a
result, our net cash position was reduced from £0.22 million to £0.13
million.
Kiran Morzaria
Director
26 September 2024
For further information contact:
Cadence Minerals plc +44 (0) 20 3582 6636
Andrew Suckling
Kiran Morzaria
Zeus Capital Limited (NOMAD & Broker) +44 (0) 20 3829 5000
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
Cautionary and Forward-Looking Statements
Certain statements in this announcement are or may be considered
forward-looking. Forward-looking statements are identified by their use of
terms and phrases such as "believe", "could", "should", "envisage",
"estimate", "intend", "may", "plan", "will", or the negative of those
variations or comparable expressions including references to assumptions.
These forward-looking statements are not based on historical facts but rather
on the Directors' current expectations and assumptions regarding the company's
future growth results of operations performance, future capital, and other
expenditures (including the amount, nature, and sources of funding thereof)
competitive advantages business prospects and opportunities. Such
forward-looking statements reflect the Directors' current beliefs and
assumptions and are based on information currently available to the
Directors. Many factors could cause actual results to differ materially from
the results discussed in the forward-looking statements, including risks
associated with vulnerability to general economic and business conditions,
competition, environmental and other regulatory changes actions by
governmental authorities, the availability of capital markets reliance on
crucial personnel uninsured and underinsured losses and other factors many of
which are beyond the control of the company. Although any forward-looking
statements contained in this announcement are based upon what the Directors
believe to be reasonable assumptions. The company cannot assure investors that
results will be consistent with such forward-looking statements.
The company deems the information contained within this announcement to
constitute Inside Information as stipulated under the Market Abuse Regulation
(E.U.) No. 596/2014, as it forms part of U.K. domestic law under the European
Union (Withdrawal) Act 2018, as amended. Upon the publication of this
announcement via a regulatory information service, this information is
considered to be in the public domain.
CADENCE MINERALS PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2024
Notes Unaudited Period ended 30 June 2024 Unaudited Period ended 30 June 2023 Audited Year ended 31 December 2023
£'000 £'000 £'000
Income -
Unrealised loss on financial investments (1,126) (1,319) (3,101)
Realised loss on financial investments (776) (213) (2,793)
(1,902) (1,532) (5,894)
Share based payments - (25) (25)
Impairment of intangibles - - (905)
Loan from subsidiary written off - - 4,810
Other administrative expenses (630) (768) (1,302)
Total administrative expenses (630) (793) 2,578
Operating profit/(loss) (2,532) (2,325) (3,316)
Foreign exchange (losses)/gains (1) 407 297
Finance cost - (36) -
Loss before taxation (2,533) (1,954) (3,019)
Taxation - - -
Loss attributable to the equity holders of the Company (2,533) (1,954) (3,019)
Total comprehensive loss for the period, attributable to the equity holders of (2,533) (1,954) (3,019)
the Company
Loss per share
Basic (pence per share) 3 (1.392) (1.163) (1.762)
Diluted (pence per share) 3 n/a n/a n/a
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2024
Share capital Share premium account Share-based payment reserve Investment in own shares Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2023 2,144 37,612 252 (64) (18,623) 21,321
Share based payments - - 25 - - 25
Issue of share capital 82 42 - - 124
Transactions with owners 82 42 25 - - 149
Loss for the period - - - (1,954) (1,954)
Total comprehensive loss for the period - - - (1,954) (1,954)
Balance at 30 June 2023 (unaudited) 2,226 37,654 277 (64) (20,577) 19,516
Transfer on lapse of warrants - - (19) 19 0
Transactions with owners - 0 (19) 0 19 0
Loss for the period - - - (1,065) (1,065)
Total comprehensive loss for the period - - - - (1,065) (1,065)
Balance at 31 December 2023 2,226 37,654 258 (64) (21,623) 18,451
Issue of share capital 167 333 - - 500
Costs of share issue (35) (35)
Transactions with owners 167 298 0 0 0 465
Loss for the period - - - - (2,533) (2,533)
Total comprehensive loss for the period - - - - (2,533) (2,533)
Balance at 30 June 2024 (unaudited) 2,393 37,952 258 (64) (24,156) 16,383
CADENCE MINERALS PLC
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
Assets Notes £'000 £'000 £'000
Non-current
Financial Assets 11,857 10,530 11,660
11,857 10,530 11,660
Current assets
Trade and other receivables 3,903 3,978 3,937
Financial Assets 1,901 10,702 4,162
Cash and cash equivalents 133 577 215
Total current assets 5,937 15,257 8,314
Total assets 17,794 25,787 19,974
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 561 348 288
Borrowings 850 565 933
Total current liabilities 1,411 913 1,221
Liabilities due after one year
Borrowings - 611 302
Amounts owed to subsidiaries - 4,747 -
Total liabilities 1,411 6,271 1,523
Equity
Share capital 4 2,393 2,226 2,226
Share premium 37,952 37,654 37,654
Share based payment reserve 258 277 258
Investment in own shares (64) (64) (64)
Retained earnings (24,156) (20,577) (21,623)
Total equity attributable
to owners of the company 16,383 19,516 18,451
Total equity and liabilities 17,794 25,787 19,974
CADENCE MINERALS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD 30 JUNE 2024
Unaudited Period ended Unaudited Period ended Audited Year ended
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Cash flows from operating activities
Operating loss (2,532) (2,325) (3,316)
Net realised/unrealised loss on financial investments 1,902 1,532 5,894
Impairment of investments - 905
Write off of loan from subsidiary - (4,810)
Equity settled share-based payments - 25 25
(Increase)/decrease in trade and other receivables 34 (21) 20
Increase/(decrease) in trade and other payables 273 31 (29)
Net cash outflow from operating activities (323) (758) (1,311)
Taxation - - -
Cash flows from investing activities
Receipts on sale of current investments 1,321 935 2,150
Payments for non-current financial investments (1,001) (975) (2,088)
Net cash inflow from investing activities 320 (40) 62
Cash flows from financing activities
Proceeds from issue of share capital 500 124 -
Share issue costs (35) - -
Borrowings - 1,187 1,400
Loan repayments (557) - -
Finance cost - (12) -
Net cash (outflow)/inflow from financing activities (92) 1,299 1,400
Net increase/(decrease) in cash and cash equivalents (95) 501 151
Foreign exchange movements on cash and cash equivalents 13 (34) (46)
Cash and cash equivalents at beginning of period 215 110 110
Cash and cash equivalents at end of period 133 577 215
Material non-cash transactions
There were no material non-cash transactions in the period to 30 June 2024.
During the period to 30 June 2023 the Company acquired 2,452,650 shares in
Hastings Technology Metals Ltd from its wholly owned subsidiary Mojito
Resources, at a cost of AUD$ 9m (£5.152m). This amount was not paid in cash
but treated as a intercompany loan from Mojito Resources. This has been
treated as a non-current liability.
NOTES TO THE INTERIM REPORT
FOR THE PERIOD ENDED 30 JUNE 2024
1 BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention.
The financial information set out in this interim report does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
Group's statutory financial statements for the year ended 31 December 2023
have been delivered to the Registrar of Companies. The auditor's report on
those financial statements was unqualified.
The principal accounting policies of the Group are consistent with those
detailed in the 31 December 2023 financial statements, which are prepared
under the historical cost convention and in accordance with UK adopted
International Accounting Standards (IAS).
GOING CONCERN
The Directors have prepared cash flow forecasts for the period ending 30
September 2025. The forecasts demonstrate that the Group has sufficient funds
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
accounts have been prepared on a going concern basis.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results
2 SEGMENTAL REPORTING
The Company operates a single primary activity to invest in businesses so as
to generate a return for the shareholders.
3 EARNINGS PER SHARE
The calculation of the earnings per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in
issue during the period.
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Profit/(loss) on ordinary activities after tax (£'000) (2,533) (1,954) (3,019)
Weighted average number of shares for calculating basic profit/loss per share 188,388,620 174,360,940 177,693,153
Less: shares held by the Employee Benefit Trust (weighted average) (6,380,000) (6,380,000) (6,380,000)
Weighted average number of shares for calculating basic (loss)/profit per 182,008,620 167,980,940 171,313,153
share
Share options and warrants exercisable n/a n/a n/a
Weighted average number of shares for calculating diluted profit per share n/a n/a n/a
Basic profit/(loss) per share (pence) (1.392) (1.163) (1.762)
Diluted profit per share (pence) n/a n/a n/a
4 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 2022 5,244 - 12,327 17,571
Additions 5,152 - 2,048 7,200
Transfers on listings 1,810 - (1,810) -
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
Additions - - 1,159 1,159
Fair value changes (1,126) - - (1,126)
(Loss)/Gains on disposals (776) - - (776)
Disposal (1,321) - - (1,321)
Fair value at 30 June 2024 939 - 12,819 13,758
Losses on investments held at fair value through profit or loss
Fair value loss on investments (1,319) - - (1,319)
Realised loss on disposal of investments (213) - - (213)
Net loss on investments held at fair value through profit or loss (1,532) - - (1,532)
Non-current - - 10,530 10,530
Current 9,740 - 962 10,702
9,740 - 11,492 21,232
5 SHARE CAPITAL
Unaudited Unaudited Audited
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p (30 June and 31 December 2023: 417 417 417
173,619,050)
197,637,704 ordinary shares of 1p (30 June 2023 and 31 December 2023 1,976 1,809 1,809
180,971,037 ordinary shares of 1p)
2,393 2,226 2,226
6 LOANS
BORROWINGS
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 share price
of the Company's Shares at the date of grant.) with a 48-month term.
During the period to 30 June 2024 £557,000 ($698,000) of capital and interest
was repaid in cash. 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.
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