REG - Capital Metals PLC - Final Results
26/09/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220926:nRSZ5391Aa&default-theme=true
RNS Number : 5391A Capital Metals PLC 26 September 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED. ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
26 September 2022
Capital Metals plc
("Capital Metals" or the "Company")
Final Results for the Year Ended 31 March 2022
&
Notice of General Meeting
Capital Metals (AIM: CMET), a mineral sands company approaching mine
development stage at the Eastern Minerals project in Sri Lanka (the
"Project"), one of the highest-grade mineral sands projects globally, is
pleased to announce its final results for the financial year ended 31 March
2022 (the "Year").
The Group's Annual Report and Accounts, along with the Company's Notice of
General Meeting ("GM"), which will be held to receive and consider the Annual
Report and Accounts, will be posted to shareholders later today and will be
available shortly on the Group's website at www.capitalmetals.com
(http://www.capitalmetals.com) . The GM will be held at 11:30 a.m. on 28
October 2022 at 48 Warwick Street, London, W1B 5AW.
Highlights:
· Approval by the Coast Conservation and Coastal Resources Management
Department in Sri Lanka of Environmental Impact Assessment
· Executed drilling programme which delivered exceptional higher
grades:
o All results from surface to a maximum of only 3.5m depth (with an average
depth 1.5m) ended in mineralisation
o +30% Total Heavy Minerals ("THM") and average grade of 19.37% THM from 560
drill holes, compared to existing JORC resource grade of 17.6%
· Grant of additional Exploration Licence, providing a further 12 km of
contiguous coverage over a total area of 24 km(2) including the Oluvil Port
· Cash balance of $1,776,000 at 31 March 2022
· Continued work with local communities
Post Year End:
· Completion of Development Study and Project Economics demonstrating
robust economics with a base case NPV of $155 million and IRR of 56%
· Grant of the first two Industrial Mining Licences ("IMLs")
Gregory Martyr, Chairman, commented:
"This has been an extremely busy period and we are delighted that the
activities undertaken led to the grant, in August 2022, of the first two IMLs.
The IMLs are a major step forward in enabling the commencement of mining
activities, and the advancement of ongoing discussions with offtakers, debt
providers and other strategic funding parties.
The strong current and forecast prices for our minerals, coupled with the
clear potential for further expansion of our high-grade resource, provides
excellent potential to further enhance the economics of the Project which are
already compelling. We thank our shareholders for their continuing support as
we remain focused on our objective of delivering sustainable value."
For further information, please visit www.capitalmetals.com or contact:
Capital Metals plc Via Vigo Consulting
Michael Frayne (CEO)
James Mahony (CFO)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com
SPARK Advisory Partners (Nominated Adviser) +44 (0)20 3368 3554
Neil Baldwin / James Keeshan
WH Ireland Limited (Joint Broker) +44 (0)20 7220 1666
Harry Ansell / Katy Mitchell
Tavira Securities Limited (Joint Broker) +44 (0)20 7100 5100
Jonathan Evans / Oliver Stansfield
About Capital Metals
Capital Metals is developing the Eastern Minerals Project in Sri Lanka,
approximately 220km east of Colombo. The Project is one of the highest-grade
mineral sands projects globally, with a current JORC Resource of 17.2Mt with
an average grade of 17.6% Total Heavy Minerals, and potential for significant
resource extension. In May 2022, a third-party Preliminary Economic Assessment
("PEA") provided an NPV for the Project of US$155-235M based on existing
resources, with further identified optimisation potential. The PEA outlined an
attractive low funding requirement of US$37.3M, with expansions funded through
cashflows from the Project, which is forecast to deliver US$645M of revenue
and net operating cashflows of US$391M.
CMET's goal is to become a high margin producer of mineral sands for the
international market, with a commitment to applying best-in-class mining
practices and bringing significant positive benefits to Sri Lanka and the
local community. We expect over 300 direct new jobs to be created and over
US$100m in direct government royalties and taxes to be paid.
For more information, visit our website www.capitalmetals.com
(http://www.capitalmetals.com) and follow us on social media:
LinkedIn: https://www.linkedin.com/company/capitalmetals/
(https://www.linkedin.com/company/capitalmetals/)
Twitter: https://twitter.com/MetalsCapital (https://twitter.com/MetalsCapital)
Chairman's Report
Welcome to the Annual Report for Capital Metals plc (the "Company") for the
financial year ended 31 March 2022 (the "Year").
This has been an extremely busy period for the management and Board of the
Company and we are delighted that it culminated in the grant in August 2022 by
the Geological Survey and Mines Bureau of the Government of Sri Lanka of the
first two Industrial Mining Licences ("IMLs") for the Eastern Minerals heavy
mineral sands project (the "Project"). The IMLs are a major step forward in
enabling the commencement of mining activities, in accordance with the
development plan outlined in the Preliminary Economic Assessment completed in
May 2022, and the advancement of ongoing discussions with offtakers, debt
providers and other strategic funding parties.
We are grateful to the Sri Lankan authorities for their cooperation,
especially given the current economic and political situation, and believe
this represents a strong endorsement of the Project and its future benefits to
Sri Lanka. These IMLs are the culmination of a rigorous approval process and
importantly provide a basis for the granting of further Industrial Mining
Licences. I would like to congratulate our management team in Sri Lanka and
thank those stakeholders working in the Sri Lankan government departments for
their continued assistance.
The Board and local management team are continuing to monitor the economic and
political developments in Sri Lanka and we are encouraged by the announcement
on 1 September 2022 by the International Monetary Fund ("IMF") of a
staff-level agreement to support Sri Lanka's economic policies. The objectives
of Sri Lanka's new IMF-supported programme include the restoration of
macroeconomic stability and debt sustainability, while safeguarding financial
stability, stepping up structural reforms and unlocking Sri Lanka's growth
potential. As a future contributor of foreign earnings and job creation
opportunities from the Project, we look forward to playing our part in that
economic recovery.
Significant achievements in addition to the granting of the IMLs during and
after the Year under review include:
· The drilling programme which commenced in October 2021 which
delivered exceptional higher grades. All results from surface to a maximum
of only 3.5m depth (with an average depth 1.5m) ended in mineralisation.
Exceptional high-grade results of +30% Total Heavy Minerals ("THM") and
average grade of 19.37% THM from 560 drill holes, compared to the existing
JORC resource grade of 17.6%, indicating the potential for both volume and
grade increases.
· The approval by the Coast Conservation and Coastal Resources
Management Department in Sri Lanka ("CCD") of the Environmental Impact
Assessment in November 2021, which resulted in the issue of a development
activity permit covering the northern half of the Project, paving the way
for the approval of the IMLs.
· The granting of an additional strategic Exploration Licence in March
2022, which extends from the northern boundary of the Project and provides a
further 12 km of contiguous coverage over a total area of 24 km2 including the
Oluvil Port.
· The completion of the Development Study and Project Economics in May
2022 demonstrating robust economics with a base case NPV of $155 million and
IRR of 56%.
· Continued work with the local communities and Sri Lanka as a whole
where we are increasingly seeing a growing awareness of the positive economic
and social benefits that the Project can bring.
Looking forward, the team has been active in developing exploration programmes
to extend the high-grade resource, with several identified potential areas
that could be drilled to increase the total resource. The Project currently
has a JORC Resource of 17.2 Mt with an average grade of 17.6% THM. Limited
sonic drilling so far undertaken offers a compelling indication of deeper
mineralisation, including assays of 26.3% and 26.6% THM at respective depths
of 14m and 8m. The Project's THM grades are some of the highest in the global
peer group. Less than 10% of the total Project area has been drilled to date.
Initial exploration also suggests potential for significant mineralisation
further inland. Additional work is planned in due course for infill and step
out drilling. We are extremely excited about the potential to expand our
resource and we look forward to updating you on further exploration activities
over the coming year.
The Company has been closely involved in the community and social development
in the Ampara District of the Eastern Province since it first started working
there. To this end, we set about funding a number of community projects
including beach clean ups, pre-school projects, water projects and
COVID-19-related projects. We are deeply committed to community programmes in
the areas in which we operate, not only to ensure that local communities share
in the benefits of future mining activity but also as part of the Company's
long-term social licence to operate.
The strong current and forecast prices for our minerals, coupled with the
clear potential for further expansion of our high-grade resource, provides
excellent potential to further enhance the economics of the Project which are
already compelling. Indeed, the results of the Development Study and
Preliminary Economic Assessment announced in May 2022 confirmed the
exceptional economics of the Project even on price assumptions well below the
current market prices for our minerals, and before considering any further
upside from potential resource extensions. With the low funding requirement of
$37.3 million to reach positive cash flow in the construction of the Project,
we have a range of financing options available to the Company, including
offtake financing structures and/or project debt, strategic partnering
options, all of which are the subject of ongoing discussions. Please refer to
the Going Concern Note 2.4.
We look forward to keeping shareholders updated with further progress as we
work with all stakeholders to bring the Project into production in a timely
manner. We would also like to thank our shareholders for their continuing
support as we remain focused on our objective of delivering sustainable value.
Gregory Martyr
Chairman
23 September 2022
Strategic Report
The Directors of the Company present their Strategic Report on the Group for
the year ended 31 March 2022.
Strategic approach
The Group's aim is to create value for shareholders through the exploration
and development of high grade mineral sands. The Group's strategy is to
continue to progress the development of the Project in Sri Lanka towards
production in the near future.
Organisation overview
The Group's business is directed by the Board and is managed on a day-to-day
basis by the Chief Executive Officer. The Board monitors compliance with
objectives and policies of the Group through monthly performance reporting,
budget updates and periodic operational reviews.
The Board comprises of one Non-Executive Chairman, one Executive Director and
two Non-Executive Directors.
Review of business
During the year the work programme built on previous exploration efforts
continued and additional exploration licences were also granted. Further
financing was raised with the completion of a Placing, raising a total of
$1,641,000 through the placing of 16,666,666 Ordinary Shares.
Since the year end, the first two Industrial Mining Licences for the Project
were granted by the Geological Survey and Mines Bureau as outlined in the
Preliminary Economic Assessment which was completed in May 2022.
Financial performance review
The loss of the Group for the year ended 31 March 2022 before taxation amounts
to $1,914,000 (31 March 2021: $7,886,000).
The Board monitors the activities and performance of the Group on a regular
basis. The Board uses financial indicators based on budget versus actual to
assess the performance of the Group. The indicators set out below will
continue to be used by the Board to assess performance over the period to 31
March 2023.
The three main KPIs for the Group are as follows. These allow the Group to
monitor costs and plan future exploration and development activities:
KPI 2022 2021
Cash and cash equivalents $1,776,000 $1,797,000
Administrative expenses as a percentage of total assets 18% 17%
Exploration costs capitalised during the period $490,000 $133,000
Cash has been used to fund the Group's operations and facilitate its
investment activities (refer to the Statements of Cash Flows.
Administrative expenses are the expenses related to the Group's ability to run
the corporate functions to ensure they can perform their operational
commitments.
Exploration costs capitalised during the period consist of exploration
expenditure on the Group's exploration licences net of foreign exchange rate
movements.
Principal risks and uncertainties
The management of the business and the execution of the Group's strategy are
subject to a number of risks. The key business risks affecting the Group are
outlined below.
The Company continuously monitors its risk exposures and reports to the Board
on a regular basis. Risks are reviewed by management and the Board, and
appropriate processes are put in place to monitor and mitigate them. If more
than one event occurs, it is possible that the overall effect of such events
would compound the possible adverse effects on the Group.
Exploration, evaluation and development risk
The exploration and mining business is controlled by a number of global
factors, principally supply and demand which in turn is a key driver of global
mineral prices; these factors are beyond the control of the Group. Exploration
is a high-risk business and there can be no guarantee that any mineralisation
discovered will result in proven and probable reserves or go on to be an
operating mine. At every stage of the exploration process the projects are
rigorously reviewed to determine if the results justify the next stage of
exploration expenditure ensuring that funds are only applied to high priority
targets.
The principal assets of the Group comprising the mineral exploration licences
are subject to certain financial and legal commitments. If these commitments
are not fulfilled the licences could be revoked. They are also subject to
legislation defined by the Government; if this legislation is changed it could
adversely affect the value of the Group's assets.
Dependence on key personnel
The Group and Company is dependent upon its executive management team and
various technical consultants. Whilst it has entered into contractual
agreements with the aim of securing the services of these personnel, the
retention of their services cannot be guaranteed. The development and success
of the Group depends on its ability to recruit and retain high quality and
experienced staff. The loss of the service of key personnel or the inability
to attract additional qualified personnel as the Group grows could have an
adverse effect on future business and financial conditions.
Uninsured risk
The Group, as a participant in exploration and development programmes, may
become subject to liability for hazards that cannot be insured against or
third party claims that exceed the insurance cover. The Group may also be
disrupted by a variety of risks and hazards that are beyond control, including
geological, geotechnical and seismic factors, environmental hazards,
industrial accidents, occupational and health hazards and weather conditions
or other acts of God.
Funding risk
The only sources of funding currently available to the Group are through the
issue of additional equity capital in the parent company or through bringing
in partners to fund exploration and development costs. The Company's ability
to raise further funds will depend on the success of the Group's exploration
activities and its investment strategy. The Company may not be successful in
procuring funds on terms which are attractive and, if such funding is
unavailable, the Group may be required to reduce the scope of its exploration
activities or relinquish some of the exploration licences held for which it
may incur fines or penalties.
Financial risks
The Group's operations expose it to a variety of financial risks that can
include market risk (including foreign currency, mineral price and interest
rate risk), credit risk, and liquidity risk. The Group has a risk management
programme in place that seeks to limit the adverse effects on the financial
performance of the Group by monitoring levels of debt finance and the related
finance costs. The Group does not use derivative financial instruments to
manage interest rate costs and, as such, no hedge accounting is applied.
Environmental risk
There may be unforeseen environmental liabilities resulting from both future
or historic exploration or mining activities, which may be costly to remedy.
In addition, potential environmental liabilities as a result of unfulfilled
environmental obligations by the previous owners may impact the Group. If the
Group is unable to fully remedy an environmental problem, it may be required
to stop or suspend operations or enter into interim compliance measures
pending completion of the required remedy.
Environmental management systems are in place to mitigate environmental risks,
including the engagement of an independent and multi-disciplinary team of
consultants.
Government regulation, political and country risks
The Project is located in Sri Lanka, where the Group's activities may be
affected in varying degrees by political stability, governmental regulations
and economic stability. Any changes in regulations or shifts in political
attitudes in these countries or any other countries in which the Group may
operate are beyond the control of the Group and may adversely affect its
operations.
The Group actively monitors political and regulatory developments through its
team of management, local partners, consultants and advisors.
Environmental, Social and Governance
The Project has the potential to open significant new economic opportunities
in eastern Sri Lanka, and the Group's work with local communities and
commitment to ecologically sensitive production procedures that ensures all
mining areas are fully rehabilitated. Some benefits to the local community
from development of the Project include:
· New high-quality construction, mining and processing work for
local workers as well as demand for local contracting services. The Group's
construction, mining and processing work will employ local workers, who will
be trained and supported by local and foreign mining experts. Demand for
contractor services is expected to create a multiplier effect benefiting the
wider economy and transferring skills/knowledge to the local work force.
· Community initiatives include waste disposal programmes,
ongoing financial and logistical support for a new pre-school, new drinking
water infrastructure, sponsorship of female entrepreneurship.
· Full consultation with the local community on any potential
environmental impact from the Project, and commitment to state-of-the-art
mineral sands processing integrating land rehabilitation into the mining
process.
· Potential to free up the port for the local fishing industry
and commercial shipping by removing the significant volume of sand that has
filled the port area due to the coastal currents depositing sand in the
harbour.
· Taxes and royalties flowing from the Group's operations will
generate government revenues for reinvestment in Sri Lanka's continued
economic development.
· The Country will also benefit from foreign direct investment
to bring the mine into production and export earnings from the sale of the
products into the international market.
The economic activity stimulated by the Project will be complemented by the
Group's ongoing engagement with the Eastern Province's local community. The
Company has already demonstrated its commitment to the coastal environment in
which it will operate by organising beach cleaning programmes with community
leaders, including the Sivan temple at Thambiluvil, with the collected plastic
waste transported to the local council refuse centre for ecological disposal.
For the past three years, the Group has sponsored a new pre-school in the
village of Umiri, currently supporting 15 students and two teachers, where
residents have struggled for years for the resources to secure a good
education for their children. The Group has worked in partnership with the
local authority and village council to furnish a village hall with new
furniture, stationery and equipment, and provides ongoing support through
building maintenance, payment of school staff salaries, replenishment of
school stationery, transportation, and the supply of safe drinking water
through drier months. The Group is currently working with the village to
provide long term drinking water facilities.
The Group is working closely with local communities in the Project area, to
empower female entrepreneurs supplying furniture, chairs, and other essentials
for the Women's Rural Development Society. Another initiative helps members of
the Society and other local women embrace sustainable agricultural practices
through home gardening and small-scale farming projects.
The Board and local management team are monitoring the economic and political
developments in Sri Lanka. The Board expects that recent political changes
should enable change to occur more rapidly with increased international
cooperation and an overriding requirement to encourage foreign investment and
job creation in the country.
Environmentally sensitive mining
The Group is committed to pursuing a state-of-the-art mineral sands mining
process that will respect the coastline along which the Project will operate.
The Project's commercial mineral sands will be extracted using proven
non-chemical processing methods. The proposed mining method is staged mining
of small 150m x 50m cells, with each cell continuously rehabilitated after
mining and then fully available for alternative uses such as agriculture and
tourism, or to remain as a wilderness.
Well-regulated mineral sands programmes integrate land rehabilitation into the
mining process. The shallow depth of mineral sands deposits allow them to be
mined using conventional surface mining methods including bulldozers,
excavators and trucks. Topsoil, subsoil and clay is removed and stockpiled
separately to allow it to be progressively returned after the mining process.
The mineral sand deposit is then removed from the ground and then pumped as a
slurry to a processing plant where the valuable heavy minerals are separated
from the sand. The waste sand (mostly silica) is pumped back to the mining
cell, where it is returned to the ground. Subsoil and topsoil are then
replaced and the land rehabilitated back to its original use.
Directors' statement under section 172 (1) of the Companies Act 2006
The Companies (Miscellaneous Reporting) Regulations 2018 require Directors to
explain how they considered the interests of key stakeholders and the broader
matters set out in section 172(1) (a) to (f) of the Companies Act 2006
("S172") when performing their duty to promote the success of the Company
under S172. This includes considering the interest of other stakeholders which
will have an impact on the long-term success of the company.
This S172 statement explains how the Directors have regard to:
(a) the likely consequences of any decision in the long term,
(b) the interests of the Company's employees,
(c) the need to foster the Company's business relationship with
suppliers, customers and others,
(d) the impact of the Company's operations on the community and
environment,
(e) the desirability of the Company maintaining a reputation for
high standards of business conduct, and
(f) the need to act fairly as between members of the Company.
The S172 statement focuses on matters of strategic importance to the Company
and the Group, and the level of information disclosed is consistent with the
size and the complexity of the business.
General confirmation of Directors' duties
The Board has a clear framework for determining the matters within its remit
and has approved Terms of Reference for the matters delegated to its
Committees. Certain financial and strategic thresholds have been determined to
identify matters requiring Board consideration and approval. When making
decisions, each Director ensures that they act in good faith in the way most
likely to promote the Company's success for the benefit of its members as a
whole.
S172(1) (a) "The likely consequences of any decision in the long term"
The application of the Section 172 (1) requirements can be demonstrated in
relation to some of the key decisions made during the reporting period,
including:
· approval of the EIA and final permitting towards grant of
Industrial Mining Licence for the Project, which has subsequently been granted
post year end
· an additional strategic exploration licence being granted
· completion of equity financing raising $1,641,000 to further
the companies exploration program
· commitment to an updated scoping and development study for
the Project
· commitment to developing an exploration strategy for the
Project towards increasing the overall resource and target of high value areas
of the Project
· continued assessment of corporate overheads and expenditure
The Group is focused on the development of the Eastern Minerals Project in Sri
Lanka. The raising of new capital advances the Company's objective,
facilitating access to a significant and globally respected financial market
to raise funds from London's deep pool of institutional and private investors,
towards the development of the Project, whilst providing important liquidity
to shareholders.
The EIA approval and grant of the IML, is a key milestone towards the
development of the Project and driving significant further shareholder value.
The undertaking of an updated scoping and development study will enhance the
technical and economic understanding of the Project towards progressing its
commercial development and the significant economic and social benefit to
stakeholders.
Although the current resource is of sufficient size for commercial mining
operations, the Group is to develop an exploration strategy towards increasing
the size of the resource and target of high value areas, enhance the economics
of the Project and drive further value to shareholders, as well as further
socio-economic benefits to stakeholders through increased production. The
undertaking of further significant drilling will be subject to procuring
sufficient further funding.
Management assesses overheads and expenditure on an ongoing basis towards the
most effective utilisation of funds to meet Group business and strategic
objectives to the benefit of shareholders.
S172(1) (b) "The interests of the company's employees"
The Board recognises that the Company's employees are fundamental and core to
our business and delivery of our strategic ambitions. The success of our
business depends on attracting, retaining and motivating employees. From
ensuring that we remain a responsible employer, from pay and benefits to our
health, safety and workplace environment, the Directors factor the
implications of decisions on employees and the wider workforce, where relevant
and feasible.
S172(1) the "The need to foster the company's business relationships with
suppliers, customers and others"
Delivering on our strategy to develop the Project requires strong mutually
beneficial relationships with suppliers, customers, governments, and local
partners. We aim to have a positive and enduring impact on the communities in
which we operate, including engagement with local suppliers, and through
payments to governments in taxes and other fees. The Group values all of its
suppliers and aims to build strong positive relationships through open
communication and adherence to trade terms. The Group is committed to being
a responsible entity and doing the right thing for its customers, suppliers
and business partners.
S172(1) (d) "The impact of the company's operations on the community and the
environment"
As a mineral sands Group operating in Sri Lanka, the Board takes seriously its
ethical responsibilities to the communities and environment in which it works.
We abide by the local and relevant UK laws on anti-corruption and bribery. The
Group is committed to following international best practice on environmental
aspects of our work and the development of the Project. We actively engage
with the local communities in order to ensure we maintain our social licence
to operate and develop the Project. Management and employees conduct site
visits and hold external stakeholder engagements. Wherever possible, local
communities are engaged in the Group's activities and the development of the
Project will provide much needed employment and wider socio-economic benefits
to the local communities.
S172(1) (e) "The desirability of the company maintaining a reputation for high
standards of business conduct"
The Group aims to achieve the development of the Project in ways which are
economically, environmentally and socially responsible. The Board periodically
reviews and approves clear frameworks, such as the Company's Code of Business
Ethics, to ensure that its high standards are maintained both within the Group
and the business relationships we maintain. This, complemented by the various
ways the Board is informed and monitors compliance with relevant governance
standards, help ensure its decisions are taken and that the Group acts in ways
that promote high standards of business conduct.
S172(1) (f) "The need to act fairly as between members of the company"
After weighing up all relevant factors, the Directors consider which course of
action best enables delivery of our strategy over the long-term, taking into
consideration the impact on stakeholders. The Directors believe they have
acted in the way they consider most likely to promote the success of the
Company for the benefit of its members as a whole.
The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The Company has close ongoing
relationships with key private shareholder, analysts and brokers, providing
the opportunity to discuss issues and provide feedback at meetings with the
Company. All shareholders are encouraged to attend the Company's Annual
General Meeting and any general meetings held by the Company.
Outlook
The reporting period saw positive progress towards the major milestones of the
approval of the EIA and Industrial Mining Licences, both of which have now
been completed.
In common with many exploration and evaluation entities, the Group will need
to raise further funds within the next 12 months, in order to meet its
expected expenditures, and progress the Group into the next phase of
definitive feasibility, and then into construction and finally into
production. For further details please see the going concern disclosure in
Note 2.4.
We look forward to reporting on the next phase of the Project, including the
potential expansion of the Resource, as well as further technical, engineering
and economic studies towards construction and bringing the Project into
production.
Michael Frayne
Chief Executive Officer
23 September 2022
Directors' Report
The Directors present their Annual Report on the affairs of Capital Metals plc
together with the Financial Statements for the year ended 31 March 2022.
Principal activities
The principal activity of the Group is the development of the Eastern Minerals
Project located in the Ampara District of the Eastern Province of Sri Lanka.
Dividends
The Directors do not recommend the payment of a dividend for the year (2021:
Nil).
Directors & Directors' interests
The Directors who served during the year ended 31 March 2022 are shown below
and had, at that time the following beneficial interests in the shares of the
Company:
31 March 2022 31 March 2021
Ordinary Shares Options Ordinary Shares Options
Gregory Martyr 4,582,746 1,500,000 4,582,746 1,500,000
Michael Frayne 13,190,006 3,000,000 13,056,672 3,000,000
Anthony Samaha (1) - - 347,881 1,500,000
Geoffrey Brown (2) 26,447 500,000 26,447 500,000
James Leahy 188,333 1,500,000 55,000 1,500,000
Teh Kwan Wey - 500,000 - 500,000
(1) Anthony Samaha resigned on 29 October 2021.
(2) Geoffrey Brown retired on 28 February 2022.
Further details on options can be found in Note 16 to the Financial
Statements.
Substantial shareholders
The substantial shareholders at 31 March 2022 are shown below:
31 March 2022
Holding Percentage
Brent Holdings Limited 24,793,095 13.11
Roman Resources Management Pty Ltd 14,423,869 7.63
Stanton Investment Ltd 12,678,820 6.70
KL-Kepong International Ltd 11,197,984 5.92
Chulu Holding Pty Ltd 8,093,048 4.27
Corporate responsibility
The Board is committed to ensuring good standards of corporate governance in
so far as practicable for a company of this size. The London Stock Exchange
has required all AIM companies to apply a recognised corporate governance
code. In connection with these requirements, the Quoted Companies Alliance has
published a new Corporate Governance Code which the Company has adopted. The
Company has adopted and operates a share dealing code for Directors and senior
employees on substantially the same terms as the Model Code appended to the
Listing Rules of the UK Listing Authority. Information in relation to the
Corporate Governance of the Group is contained within the Corporate Governance
Report.
Environmental
The Group's operations are, and will be, subject to environmental regulation
(with regular environmental impact assessments and evaluation of operations
required before any permits are granted to the Group) in the jurisdiction in
which it operates. Although the Group intends to be in compliance with all
applicable environmental laws and regulations, there are certain risks
inherent to its activities, such as accidental spills, leakages or other
circumstances, which could subject the Group to extensive liability. Further,
the Group may fail to obtain the required approval from the relevant
authorities necessary for it to undertake activities which are likely to
impact the environment. The Group is unable to predict the effect of
additional environmental laws and regulations which may be adopted in the
future, including whether any such laws or regulations would materially
increase the Group's cost of doing business or affect its operations in any
area. No environmental breaches have been notified by any governmental agency
as at the date of this report.
Health and safety
The Group operates a comprehensive health and safety programme to ensure the
wellness and security of its employees. The control and eventual elimination
of all work related hazards requires a dedicated team effort involving the
active participation of all employees. A comprehensive health and safety
programme is the primary means for delivering best practices in health and
safety management. This programme is regularly updated to incorporate employee
suggestions, lessons learned from past incidents and new guidelines related to
new projects with the aim of identifying areas for further improvement of
health and safety management. This results in continuous improvement of the
health and safety programme. Employee involvement is regarded as fundamental
in recognising and reporting unsafe conditions and avoiding events that may
result in injuries and accidents.
Employment policies and remuneration
The Company is committed to promoting policies which ensure that high calibre
employees are attracted, retained and motivated, to ensure ongoing success for
the business. Employees and those who seek to work with the Company are to be
treated equally regardless of sex, marital status, creed, age, colour, race or
ethnic origin.
Directors' remuneration
The Group remunerates the Directors at a level commensurate with the size of
the Group and the experience of its Directors. The Board has reviewed the
Directors' remuneration and believes it upholds the objectives of the Company
and the Group with regard to this issue.
Please refer to Note 19 for details of Directors' remuneration.
Energy and carbon report
The Group is not required to report energy and emissions information under The
Companies (Directors' Report) and Limited Liability Partnerships (Energy and
Carbon Report) Regulations 2018, given its size. The Group will review
providing voluntary disclosures in future reporting periods, where it
continues to be below the reporting thresholds.
Corporate and social responsibility
The Company maintains high, ethical standards in its business activities. We
act responsibly, promoting accountability as individuals and as a company. We
operate with ethics and fairness and comply with all required rules and
regulations.
The Company requires that in respect to all of it operations there runs
alongside this a comprehensive community engagement plan. It is vital that we
engage, listen and communicate effectively with local communities,
particularly when they begin the process of planning new developments. Whilst
the Company is cognisant of its corporate social responsibilities, the Company
considers that it is not of the size to warrant a formal policy.
Going concern
These financial statements have been prepared on the going concern basis, as
set out in Note 2.4.
The Directors have prepared cash flow forecasts for the period ending 31
December 2023, which take into account the cost and operational structure of
the Group and Parent Company, planned exploration and evaluation expenditure,
licence commitments and working capital requirements. These forecasts indicate
that the Group and parent Company's cash resources are not sufficient to cover
the projected expenditure for the period of 12 months from the date of
approval of these financial statements. These forecasts indicate that the
Group and Parent Company, in order to meet their operational objectives, and
expected liabilities as they fall due, will be required to raise additional
funds within the next 12 months.
Whilst the Directors are confident that they will be able to secure the
necessary funding, the current conditions do indicate the existence of a
material uncertainty that may cast doubt regarding the applicability of the
going concern assumption and the auditors have made reference to this in their
audit report. The Directors are confident in the Company's ability to raise
additional funds as required, from existing and/or new investors, within the
next 12 months. Thus, they continue to adopt the going concern basis of
accounting preparing these financial statements.
Directors' and Officers' indemnity insurance
The Company maintains a directors' and officers' liability policy on normal
commercial terms which includes third party indemnity provisions.
Financial Risk Management Objectives
The Group's activities expose it to foreign currency, credit and liquidity
risks. The size of the Company means that it is unnecessary and impractical
for the Directors to delegate the responsibility of monitoring financial risk
management to a sub-committee of the Board. Refer to Note 3.1 of the financial
statements, for further details.
Events after the reporting period
Events after the reporting period are set out in Note 26 to the Financial
Statements.
Future developments
Details of future developments for the Group are disclosed in the Chairman's
Report.
Provision of information to Auditor
So far as each of the Directors is aware at the time this report is approved:
· there is no relevant audit information of which the Company's auditor
is 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 auditor is aware of that information.
Auditor
BDO LLP has signified its willingness to continue in office as auditor.
This report was approved by the Board on 23 September 2022 and signed on its
behalf.
Michael Frayne
Chief Executive Officer
23 September 2022
STATEMENT OF DIRECTORS RESPONSIBILITIES
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 are required to prepare the Group
and Company financial statements in accordance with UK adopted international
accounting standards. 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 of the Group and Company and of the profit or
loss of the Group and Company for that period.
In preparing these Financial Statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgments and accounting estimates that are reasonable and
prudent;
· state whether they have been prepared in accordance with UK adopted
international accounting standards 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 group and 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 and Group's transactions and
disclose with reasonable accuracy at any time the financial position of the
Group and 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 Group and Company, and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the financial
statements are made available on a website. Financial statements are
published on the Company's website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions. The
maintenance and integrity of the Company's website is the responsibility of
the Directors. The Directors' responsibility also extends to the ongoing
integrity of the financial statements contained therein.
The Company is compliant with AIM Rule 26 regarding the Company's website.
The Directors confirm that they have complied with the above requirements in
preparing the Financial Statements.
CORPORATE GOVERNANCE REPORT
The Company continues to be guided by the Quoted Companies Alliance Corporate
Governance Code. Throughout the past year, the Company has complied with all
aspects of the QCA Code and completed periodic reviews of its charter in order
to maintain the robustness of its governance systems. No material issues were
identified over the past twelve months.
The Company is committed to maintaining the highest standards in corporate
governance throughout its operations and to ensure all of its practices are
conducted transparently, ethically and efficiently. The Company believes
scrutinising all aspects of its business and reflecting, analysing and
improving its procedures will result in the continued success of the Company
and deliver value to shareholders. Therefore, and in accordance with the AIM
Rules for Companies (the "AIM Rules"), the Company has chosen to formalise its
governance policies by complying with the UK's Quoted Companies Alliance
Corporate Governance Code 2018 (the "QCA Code").
The Board currently consists of four Directors: a Chief Executive Officer,
Non-Executive Chairman, and two Non-Executive Directors ("NED"s). The Board
considers that appropriate oversight of the Company is provided by the
currently constituted Board.
Corporate Governance Report
The QCA Code sets out 10 principles that should be applied. These are listed
below together with a short explanation of how the Company applies each of the
principles:
Principle One
Business Model and Strategy
The business objective of the Group is to successfully evaluate, permit,
finance and develop the Eastern Minerals Project in Sri Lanka into a
profitable mining operation in a socially and environmentally responsible way.
The Company's business model and strategy are outlined in the strategic report
commencing.
Principle Two
Understanding Shareholder Needs and Expectations
The Board is committed to maintaining good communications and having
constructive dialogue with its shareholders. Institutional shareholders and
analysts have the opportunity to discuss issues and provide feedback at
meetings with the Company. In addition, all shareholders are encouraged to
attend the Company's Annual General Meeting and any other General Meetings
that are held throughout the year.
Investors also have access to current information on the Company through its
website www.capitalmetals.com (http://www.capitalmetals.com) and its Chief
Executive Officer, who is available to answer investor relations enquiries at:
info@capitalmetals.com (mailto:info@capitalmetals.com) . The Company provides
regulatory, financial and business news updates through the Regulatory News
Service in accordance with the AIM Rules for Companies.
Principle Three
Considering Wider Stakeholder and Social Responsibilities
The Board recognises that the long term success of the Group is reliant upon
the collective efforts of management, employees, consultants, suppliers,
regulators and other stakeholders. The Board has put in place a range of
processes and systems to ensure that there is close oversight and contact with
its key resources and relationships, including ongoing two-way communication,
control and feedback processes to enable appropriate and timely response.
As part of the Mining Licence application by the Group for the Project in Sri
Lanka, a detailed social impact assessment study was undertaken, as well as a
public stakeholder consultation process. The results of this public
consultation and engagement process have been overall positive, with the
Project receiving overall support from relevant stakeholders.
Principle Four
Risk Management
The Board regularly reviews the risks to which the Group is exposed and
ensures through its meetings and regular reporting that these risks are
minimised as far as possible whilst recognising that its business
opportunities carry an inherently high level of risk. The principal risks and
uncertainties facing the Group at this stage and in the foreseeable future are
detailed in the Risk Factors report of the Company's AIM Admission Document
and updated in the annual report and accounts, which are available on the
Company's website www.capitalmetals.com (http://www.capitalmetals.com) .
Principle Five
A Well Functioning Board of Directors
The Board's role is to agree the Company's long-term direction and strategy
and monitor achievement of key milestones against its business objectives. The
Board meets formally at least six times a year for these purposes and holds
additional meetings when necessary to transact other business. The Board
receives reports for consideration on all significant strategic, operational
and financial matters.
The Board is comprised of a Chief Executive Officer (Michael Frayne); a
Non-Executive Chairman (Gregory Martyr) and two NEDs (James Leahy and Teh Kwan
Wey). Each member of the Board is committed to spending sufficient time to
enable them to carry out their duties as a Director. The Board meets regularly
throughout the year as deemed appropriate formally and informally, in person
and by telephone.
The Company constantly keeps under review the constitution of the Board and
may seek to add more members as required as the Company grows and develops.
The Board as a whole considers the NEDs to be independent of management and
free from any business or other relationship which could materially interfere
with the exercise of their independent judgement.
The Board has implemented an effective committee structure to assist in the
discharge of its responsibilities. All committees of the Board have written
terms of reference dealing with their authority and duties. Membership of the
Audit, Remuneration and Nominations Committees is comprised exclusively of
Non-Executive Directors. The Company Secretary acts as secretary to each of
these committees.
Details of the Directors' attendance at the Board and Board committee meetings
are set out below:
Board Meetings attended Nominations committee Audit committee
Gregory Martyr 6/6 - 2/2
Michael 6/6 - -
Frayne
Anthony Samaha (resigned 29 October 3/6 - -
2021)
Geoffrey Brown (retired 28 February 5/6 1/1 -
2022)
James Leahy 6/6 1/1 -
Teh Kwan Wey 5/6 - 2/2
Principle Six
Appropriate Skills and Experience of the Directors
The Board considers the current balance of sector, financial and public market
skills and experience which it embodies is appropriate for the size and stage
of development of the Company and that the Board has the skills and requisite
experience necessary to execute the Company's strategy and business plan
whilst also enabling each Director to discharge their fiduciary duties
effectively. Biographies for each member of the Board is provided on the
Company's website www.capitalmetals.com (http://www.capitalmetals.com) .
All Directors, through their involvement in other listed companies as well as
the Company, including attendance at seminars, forums and industry events and
through their memberships of various professional bodies, keep their skill
sets up to date.
The Board reviews annually, and when required, the appropriateness of its mix
of skills and experience to ensure that it meets the changing needs of the
Company.
The Company has a professional Company Secretary in the UK who assists the
Chief Executive Officer in preparing for and running effective Board meetings,
including the timely dissemination of appropriate information. The Company
Secretary provides advice and guidance to the extent required by the Board on
the legal and regulatory environment.
Principle Seven
Evaluation of Board Performance
Review of the Group's progress against the long-term strategy and aims of the
business provides a means to measure the effectiveness of the Board. This
progress is reviewed in Board meetings held at least six times a year. The
Chief Executive Officer's performance is reviewed once a year by the Board and
measured against a definitive list of strategic targets set by the Board.
The Company conducts periodic reviews of its Board succession planning
protocols which includes an assessment of the number of Board members and
relative experience of each Board member vis-a-vis the Company's requirements
given its stage of development, with the goal of having in place an adequate
and sufficiently experienced Board at all times.
Principle Eight
Corporate Culture
The corporate culture of the Company is promoted throughout its employees and
consultants and is underpinned by compliance with local regulations and the
implementation and regular review and enforcement of various policies
including a Share Dealing Policy and Code, Anti-Corruption and Anti-Bribery
Policy, Matters Reserved for the Board, Code of Business Ethics, Whistle
Blowing Policy, and Media and Communications Policy, so that all aspects of
the Company are run in a robust and responsible way.
The Board is aware that the culture set by the Board will impact all aspects
of the Group and the way that employees and consultants behave. The
exploration, evaluation and development of mineral resources can have a
significant impact and it is important that the communities view the Group's
activities positively. Therefore, the importance of sound ethical values and
behaviours is crucial to the ability of the Group to successfully achieve its
corporate objectives.
Principle Nine
Maintenance of Governance Structures and Processes
The Board is responsible for setting the vision and strategy for the Company
to deliver value to the Company's shareholders by effectively putting in place
its business model.
The roles and responsibility of the Chief Executive Officer, Non-Executive
Chairman and other Directors are laid out below:
· The Chief Executive Officer's primary responsibilities are
to: implement the Company's strategy in consultation with the Board; take
responsibility for the Company's projects in Sri Lanka; run the Company on a
day-by-day basis; implement the decisions of the Board; monitor, review and
manage key risks; act as the Company's primary spokesman; communicate with
external audiences such as investors, analysts and media; and be responsible
for the administration of all aspects of the Company.
· The Non-Executive Chairman's primary responsibilities are to:
lead the Board and to ensure the effective working of the Board; in
consultation with the Board, ensure good corporate governance and set clear
expectations with regards to the Company culture, values and behaviour; set
the Board's agenda and ensures that all Directors are encouraged to
participate fully in the decision-making process of the Board and take
responsibility for relationships with the Company's professional advisers and
major shareholders.
· The Company's NEDs participate in all Board level decisions
and play a particular role in the determination and articulation of strategy.
The Company's NEDs provide oversight and scrutiny of the performance of the
Executive Directors, whilst both constructively challenging and inspiring
them, thereby ensuring the business develops, communicate and execute the
agreed strategy and operate within the risk management framework.
· The Company Secretary is responsible for ensuring that Board
procedures are followed and applicable rules and regulations are complied
with.
The Board is supported by the audit, remuneration and nominations committees
as described below.
Audit Committee
The Audit Committee comprises Gregory Martyr (Chair) and Teh Kwan Wey.
The Audit Committee reviews reports from management and from BDO LLP, the
Company's auditor, relating to the interim and annual accounts and to the
system of internal financial control.
The Audit Committee is responsible for assisting the Board's oversight of the
integrity of the financial statements and other financial reporting, the
independence and performance of BDO LLP, the regulation and risk profile of
the Company and the review and approval of any related party transactions. The
Audit Committee may hold private sessions with BDO LLP without management
present. Further, the Audit Committee is responsible for making
recommendations to the Board on the appointment of BDO LLP and the audit fee
and reviews reports from management and BDO LLP on the financial accounts and
internal control systems used throughout the Company.
The Audit Committee meets at least two times a year and is responsible for
ensuring that the Company's financial performance is properly monitored,
controlled and reported. The Audit Committee is responsible for the scope and
effectiveness of the external audit and compliance by the Company with
statutory and other regulatory requirements.
The Audit Committee:
· monitors in discussion with BDO LLP the integrity of the
financial statements of the Company, any formal announcements relating to the
Company's financial performance and reviews significant financial reporting
judgments contained in them;
· reviews the Company's internal financial controls and reviews
the Company's internal control and risk management systems;
· considers annually whether there is a need for an internal
audit function and makes a recommendation to the Board;
· makes recommendations to the Board for it to put to the
shareholders for their approval in the general meeting, in relation to the
appointment, re-appointment and removal of BDO LLP and to approve the
remuneration and terms of engagement of BDO LLP;
· reviews and monitors BDO LLP's independence and objectivity
and the effectiveness of the audit process, taking into consideration relevant
professional and regulatory requirements;
· develops and implements policy on the engagement of BDO LLP
to supply non-audit services, taking into account relevant external guidance
regarding the provision of non-audit services by BDO LLP; and
· reports to the Board, identifying any matters in respect of
which it considers that action or improvement is needed and making
recommendations as to the steps to be taken.
The Audit Committee also reviews arrangements by which the staff of the
Company and the Company may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other matters and ensure
that arrangements are in place for the proportionate and independent
investigation of such matters with appropriate follow-up action.
Remuneration Committee
The Remuneration Committee comprises James Leahy (Chair) and Gregory Martyr.
The Remuneration Committee is responsible for considering all material
elements of remuneration policy, the remuneration and incentivisation of
Executive Directors and senior management (as appropriate) and to make
recommendations to the Board on the framework for executive remuneration and
its cost. The role of the Remuneration Committee is to keep under review the
Company's remuneration policies to ensure that the Company attracts, retains
and motivates the most qualified talent who will contribute to the long-term
success of the Company. The Remuneration Committee also reviews the
performance of the Chief Executive Officer and sets the scale and structure of
his remuneration, including the implementation of any bonus arrangements, with
due regard to the interests of shareholders.
The Remuneration Committee is also responsible for reviewing the terms of
granting options by the Company, in particular, the price per share and the
application of the performance standards which may apply to any grant,
ensuring in determining such remuneration packages and arrangements, due
regard is given to any relevant legal requirements, the provisions and
recommendations in the AIM Rules and The QCA Code.
The Remuneration Committee:
· determines and agrees with the Board the framework or broad
policy for the remuneration of the Chief Executive Officer;
· determines targets for any performance-related pay schemes
operated by the Company;
· ensures that contractual terms on termination and any
payments made are fair to the individual, the Company, that failure is not
rewarded and that the duty to mitigate loss is fully recognised;
· determines the total individual remuneration package of the
Chief Executive Officer, including bonuses, incentive payments and share
options;
· is aware of and advises on any major changes in employees'
benefit structures throughout the Company;
· ensures that provisions regarding disclosure, including
pensions, as set out in the (Directors' Remuneration Policy and Directors'
Remuneration Report) Regulations 2019, are fulfilled; and
· is exclusively responsible for establishing the selection
criteria, selecting, appointing and setting the terms of reference for any
remuneration consultants who advise the Remuneration Committee.
Nominations Committee
The Nominations Committee comprises Gregory Martyr (Chair) and James Leahy.
The Nominations Committee shall be responsible for considering all criteria
for new Executive and Non-Executive Director appointments, including
experience of the industry in which the Company operates and professional
background. Specifically, the Nominations Committee:
· is responsible for identifying and nominating for the
approval of the Board, candidates to fill Board vacancies as and when they
arise;
· evaluates the balance of skills, knowledge, experience and
diversity of the Board and, in the light of this evaluation, prepares a
description of the role and capabilities required for a particular
appointment;
· reviews annually the time required from the Non-Executive
Directors and assess whether each Non-Executive Director is spending enough
time to fulfil their duties;
· considers candidates from a wide range of backgrounds;
· gives full consideration to succession planning in the course
of its work, taking into account the challenges and opportunities facing the
Company, and the skills and expertise therefore needed on the Board, reporting
to the Board regularly;
· regularly reviews the structure, size and composition
(including the skills, knowledge and experience) of the Board and make
recommendations to the Board with regard to changes;
· keeps under review the leadership needs of the Company, both
executive and non-executive, with a view to ensuring the continued ability of
the Company to compete effectively in the marketplace;
· makes a statement in the annual report about its activities,
the process used for appointments and explains if external advice or open
advertising has not been used, the membership of the Nominations Committee,
number of Nominations Committee meetings and attendance over the course of the
year;
· ensures that on appointment to the Executive and
Non-Executive Directors receive formal letters of appointment setting out
clearly what is expected of them in terms of time commitment, committee
service and involvement outside Board meetings;
· considers and makes recommendations to the Board about the
re-appointment of any Non-Executive Director at the conclusion of their
specified term of office or retiring in accordance with the Company's Articles
of Association; and
· considers and make recommendations to the Board on any matter
relating to the continuation in office of any Director at any time.
Principle Ten
Shareholder Communication
The Board is committed to maintaining good communication and having
constructive dialogue with its shareholders. The Company has close ongoing
relationships with key private shareholder, analysts and brokers, providing
the opportunity to discuss issues and provide feedback at meetings with the
Company.
The Company also provides regular updates on the progress of the Company,
detailing recent business and strategy developments, in news releases which is
available on the Company's website www.capitalmetals.com. The Company's
financial reports can also be found on its website.
All shareholders are encouraged to attend the Company's Annual General Meeting
and any general meetings held by the Company. The Company has elected to host
its AGMs in London. The Directors believe hosting the AGM in London will
enhance engagement with the Company's shareholders by making the meeting more
accessible. The Board is always open to receiving feedback from
shareholders. Communications should be directed to info@capitalmetals.com. The
Chief Executive Officer has been appointed to manage the relationship between
the Company and its shareholders and will review and report to the Board on
any communications received.
The Company also participates in various investor events including conferences
and presentation evenings, at which shareholders can meet with management in
person to answer queries, provide information on current developments and to
take into consideration shareholder views and suggestions.
Gregory Martyr
Chairman
23 September 2022
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CAPITAL METALS PLC
Opinion on the financial statements
In our opinion:
• the financial statements give a true and fair view of the state of
the Group's and of the Parent Company's affairs as at as at 31 March 2022 and
of the Group's loss for the year then ended;
• the Group financial statements have been properly prepared in
accordance UK adopted international accounting standards
• the Parent Company financial statements have been properly
prepared in accordance with UK adopted international accounting standards and
as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of Capital Metals Plc (the 'Parent
Company') and its subsidiaries (the 'Group') for the year ended 31 March 2022
which comprise the Consolidated & Company statements of financial
position, the Consolidated income statement, the Consolidated statement of
comprehensive income, the Consolidated statement of changes in equity, the
Company statement of changes in equity, the Statements of cash flows, and
notes to the financial statements, including a summary of significant
accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and UK adopted international accounting
standards and, as regards the Parent Company financial statements, as applied
in accordance with the provisions 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 believe that the
audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Independence
We remain independent of the Group and the Parent 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.
Material uncertainty related to going concern
We draw attention to Note 2.4 to the financial statements, which indicates
that the Group and Parent company will need to raise additional funding within
twelve months from the date of approval of financial statements. As stated
in Note 2.4, these events or conditions indicate that a material uncertainty
exists that may cast significant doubt on the Group and Parent Company's
ability to continue as a going concern. Our opinion is not modified in respect
of this matter.
Our evaluation of the Directors' assessment of the Group and the Parent
Company's ability to continue to adopt the going concern basis of accounting
and our audit procedures in response to key audit matter included the
following:
· We discussed with Directors their assessment of potential risks and
uncertainties associated with areas such as the Group's operations, ability to
secure funding that are relevant to the Group's business model and operations.
We formed our own assessment of risks and uncertainties based on our
understanding of the business and mineral sands sector.
· We obtained Directors' sensitivity analysis to determine the point at
which liquidity breaks and considered whether such scenarios were reasonably
possible.
· We critically assessed Directors' base case cash flow forecasts and
the underlying key assumptions which have been approved by the Board. In doing
so, we considered factors such as historical operating expenditure. We
evaluated commitments under the exploration licenses, reviewed board minutes
and market announcements for indications of additional cash requirements.
· We discussed with management and the Board the Group's strategy to
access capital to fund its development plans. We considered management's
judgement that they had reasonable expectation of securing necessary funding
and the timing of such funding requirement.
· We reviewed and considered the adequacy of the going concern
disclosure within the financial statements in reference the requirements of
the financial reporting framework, our understanding of the business, and the
Directors assessment.
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 responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Overview
99% of Group profit before tax
Coverage 99%of Group total assets
2022 2021
Going concern P P
Carrying value of exploration assets P P
Accounting for the reverse acquisition - P
Key audit matters Given that the reverse acquisition was a one-off transaction in the prior
year, accounting for the reverse acquisition is not considered to be a key
audit matter in the current year.
Group financial statements as a whole
Materiality
US$100,000 based on 1.5% of Total Assets.
Given that the reverse acquisition was a one-off transaction in the prior
year, accounting for the reverse acquisition is not considered to be a key
audit matter in the current year.
Materiality
Group financial statements as a whole
US$100,000 based on 1.5% of Total Assets.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
In assessing the risk of material misstatement to the Group financial
statements, and to ensure we had adequate quantitative coverage of significant
accounts in the financial statements, our Group audit scope focused on the
Group's principal operating locations being Sri Lanka (Eastern Minerals (Pvt)
Limited and Damsila Exports (Pvt) Limited) and the United Kingdom (Capital
Metals Plc) .
These were regarded as being significant components of the Group and were
subject to full scope audits based on their size and risk characteristics.
The remaining components of the Group were considered non- significant and
these components were principally subject to analytical review procedures.
The full scope audits and analytical review procedures in each component were
performed in the United Kingdom by the Group engagement team.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, 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. In addition to the matter
described in the Material uncertainty in relation to going concern section of
our report, we have determined the matter described below to be a key audit
matter.
Key audit matter How the scope of our audit addressed the key audit matter
Carrying value of exploration assets As detailed in Note 8, the carrying value of Exploration and Evaluation Assets Our procedures in relation to Managements assessment of the Carrying value of
("E&E assets") amounted to US$6.2 million at 31 March 2022. E&E assets included:
Management are required to assess each year whether there are any potential · We reviewed Managements impairment review assessment and performed
impairment triggers under IFRS 6 Exploration for and Evaluation of Mineral our own assessment of impairment indicators in accordance with IFRS 6 in order
Resources which would indicate that the carrying value of E&E assets may to determine whether their assessment was complete and in accordance with the
not be recoverable. requirements of the accounting standard.
As disclosed in Notes 2.7, 4 and 8, the impairment review of the carrying · We evaluated Managements assessment of the Group's right to tenure
value of E&E assets requires significant judgment to be made by over the Eastern Minerals Project licence area by reviewing licence
Management. agreements.
Given the materiality of the assets in the context of the Group's statement of · We challenged Managements expectation that the industrial mining
financial position and the judgement involved in making this assessment we licence application ("IML") over the DEL licence which had expired, will be
consider this to be a key audit matter. obtained. In doing so, we reviewed the IML applications and the two IML's
which was granted subsequent to the year end. We discussed with the Group's
Sri Lankan external solicitor on the likelihood of IML applications not
granted being received. We assessed the solicitor's competence and
We also consider appropriate disclosure of the judgements involved in independence.
Managements assessment is important to the understanding of the financial
statements and therefore adequacy of disclosure is also considered a key audit
matter.
· We discussed with Managements and reviewed board minutes and press
releases to assess the exploration activity undertaken in the year, the
results of exploration activity and the future plans for the licence area, for
indicators that the exploration activity in the period have not led to the
discovery of commercially viable quantities of mineral resources and the
entity has decided to discontinue such activities in the project area, which
would be an indicator of impairment.
· We reviewed the planned works programme to determine if substantive
expenditure is planned in each licence area to identify whether there were
circumstances whereby no further substantive expenditure was planned, which
would be an indicator of impairment.
· We evaluated the adequacy of the Group's disclosures in respect of
the impairment assessment against the requirements of the financial reporting
framework.
Key observations:
Based on the work performed we found Management's assessment of the carrying
value of exploration assets to be reasonable.
We found the disclosures in the financial statements to be appropriate.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group financial statements Parent company financial statements
2022 2021 2022 2021
Materiality US$ 100,000 US$ 122,000 US$ 60,000 US$ 72,000
Basis for determining materiality 1.5% of Total Assets 0.2% of Total assets
Rationale for the benchmark applied We consider total assets to be the most significant determinant of the Group's The Company is a holding company which performs fund raising activities and
financial performance used by the users of financial statements. incurs other administrative expenditure. As the strategic focus of the Company
is monetising its asset base we have determined that an asset based
materiality is the appropriate basis of materiality.
The Group has invested significant sums on its Exploration assets and these
are considered to be the key value driver for the Group as its assets are an
indicator of future value to the users of financial statements.
Performance materiality US$ 65,000 US$ 78,000 US$ 39,000 US$ 46,000
Basis for determining performance materiality 65% of materiality based on our assessment of a number of factors including 65% of materiality based on our assessment of a number of factors including
the expected total value of known and likely misstatements (based on past the expected total value of known and likely misstatements (based on past
experience), our knowledge of the group's internal controls and management's experience), our knowledge of the group's internal controls and management's
attitude towards proposed adjustments. attitude towards proposed adjustments.
Component materiality
We set materiality for each component of the Group based on a percentage of
between 60% and 70% (2021: 50% and 70%) of Group materiality dependent on the
size and our assessment of the risk of material misstatement of that
component. Component materiality ranged from US$60,000 to US$70,000 (2021:
US$60,000 to US$84,000) In the audit of each component, we further applied
performance materiality levels of 65% (2021: 65%) of the component materiality
to our testing to ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £2,000 (2021: £2,000). We also agreed to
report differences below this threshold that, in our view, warranted reporting
on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information
comprises the information included in the Annual Report and Financial
Statements other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. 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.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during
the course of the audit, we are required by the Companies Act 2006 and ISAs
(UK) to report on certain opinions and matters as described below.
Strategic report and Directors' report 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.
In the light of the knowledge and understanding of the Group and Parent
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.
Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements 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 statement of Directors' responsibilities the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to
liquidate the Group or the Parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including
fraud
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:
· Holding discussions with Directors and Audit Committee and
considering any known or suspected instances of non-compliance with laws and
regulations or fraud;
· Gaining an understanding of the laws and regulations relevant to the
Group and the Parent Company and the industry in which it operates, through
discussion with management and our knowledge of the industry. These included
the AIM rules, the financial reporting framework, UK Companies Law, tax
legislation and environmental regulations in the UK and Sri Lanka;
· Communicating relevant identified laws and regulations and potential
fraud risks to all engagement team members and remaining alert to any
indications of fraud or non-compliance with laws and regulations throughout
the audit;
· Assessing the susceptibility of the Group's financial statements to
material misstatement, including how fraud might occur by making enquiries of
the Directors and the Audit Committee during the planning and execution phases
of our audit to understand where they considered there to be susceptibility to
fraud. We believed the areas in which fraud might occur were in the management
override of controls.
In response our procedures included, but were not limited to;
- Agreeing the financial statement disclosures to underlying
supporting documentation;
- Addressing the risk of management override of internal controls,
including testing journals and evaluating whether there was evidence of bias
by the Directors that represented a risk of material misstatement due to
fraud;
- Assessing areas of the financial statements which include judgement
and estimates, as set out in Note 4 to the financial statements and in our Key
audit matters section above and evaluated whether there was evidence of bias;
- Made of enquiries of Directors as to whether there was any
correspondence from regulators in so far as the correspondence related to the
financial statements;
- Reading minutes from board meetings of those charges with governance
to identify any instances of non-compliance with laws and regulations and
fraud.
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are
to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities
(http://insite.bdo.co.uk/sites/audit/Documents/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 Parent 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 Parent 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 Parent Company and
the Parent Company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Jack Draycott (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
23 September 2022
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC3051Financial).
CONSOLIDATED & COMPANY STATEMENTS OF FINANCIAL POSITION
For the year ended 31 March 2022
Group Company
Note For the year ended 31 March 2022 For the year ended 31 March For the year ended 31 March 2022 For the year ended 31 March 2021
2021
$
$ $
$
Non-Current Assets
Property, plant and equipment 7 29,000 48,000 - -
Investment in subsidiaries 9 - - 35,030,000 36,800,000
Loans to subsidiairies 10 - - 1,835,000 -
Exploration & evaluation assets 8 4,556,000 6,178,000 - -
4,585,000 6,226,000 36,865,000 36,800,000
Current Assets
Loans to subsidiaries 10 - - - 1,195,000
Trade and other receivables 11 36,000 115,000 65,000 112,000
Cash and cash equivalents 12 1,776,000 1,797,000 1,603,000 1,706,000
1,812,000 1,912,000 1,668,000 3,013,000
Total Assets 6,397,000 8,138,000 38,533,000 39,813,000
Non-Current Liabilities
Trade and other payables 13 602,000 600,000 - -
602,000 600,000 - -
Current Liabilities
Trade and other payables 13 724,000 707,000 101,000 95,000
724,000 707,000 101,000 95,000
Total Liabilities 1,326,000 1,307,000 101,000 95,000
Net Assets 5,071,000 6,831,000 38,432,000 39,718,000
Equity attributable to owners of the Parent
Share capital 15 6,062,000 6,019,000 6,062,000 6,019,000
Share premium 15 48,947,000 47,470,000 48,947,000 47,470,000
Other reserves 17 (35,507,000) (34,141,000) 37,414,000 38,521,000
Retained losses (14,431,000) (12,517,000) (53,991,000) (52,292,000)
Total Equity 5,071,000 6,831,000 38,432,000 39,718,000
The Company has elected to take the exemption under Section 408 of the
Companies Act 2006 from presenting the Parent Company Income Statement and
Statement of Comprehensive Income. The loss for the Company for the year ended
31 March 2022 was $1,699,000 (period ended 31 March 2021: $1,634,000).
The Financial Statements were approved and authorised for issue by the Board
of Directors on 23 September 2022 and were signed on its behalf by:
Michael Frayne
Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2022
Continued operations Note For the year ended 31 March 2022 For the year ended 31 March 2021
$ $
Administrative expenses 22 (1,194,000) (1,432,000)
Cost of acquiring listing - (5,454,000)
Share based payment charge 16 (721,000) (1,111,000)
Other gains 1,000 -
Operating loss (1,914,000) (7,997,000)
Finance income - 111,000
Loss before income tax (1,914,000) (7,886,000)
Income tax 20 - -
Loss for the year attributable to owners of the Parent (1,914,000) (7,886,000)
Basic (Loss) Per Share attributable to owners of the Parent during the period 21 (0.36) (5.61)
(expressed in cent per share)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2022
For the year ended 31 March 2022
$ For the year ended 31 March 2021
$
Loss for the year (1,914,000) (7,886,000)
Other Comprehensive Income:
Items that may be subsequently reclassified to profit or loss
Foreign exchange on translation of foreign subsidiaries (2,100,000) 167,000
Other comprehensive profit/(loss) for the year, net of tax (2,100,000) 167,000
Total Comprehensive Income attributable to owners of the Parent (4,014,000) (7,719,000)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Note Share capital Share premium Other reserves Retained losses Total
$ $ $ $ $
Restated balance as at 1 April 2020 5,611,000 47,267,000 (43,514,000) (4,767,000) 4,597,000
Loss for the year - - - (7,886,000) (7,886,000)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive income - - 167,000 - 167,000
Total comprehensive income/(loss) for the year - - 167,000 (7,886,000) (7,719,000)
Cancellation of options - - (136,000) 136,000 -
Reverse acquisition 360,000 - 5,880,000 - 6,240,000
Issue of share capital for cash 47,000 2,795,000 - - 2,842,000
Costs of issue of share capital - (299,000) - - (299,000)
Issue of share warrants - (2,320,000) 2,694,000 - 374,000
Issue of options - - 768,000 - 768,000
Issue of share capital to settle CML convertible bond interest 1,000 27,000 - - 28,000
Total transactions with owners, recognised directly in equity 408,000 203,000 9,206,000 136,000 9,953,000
Balance as at 31 March 2021 6,019,000 47,470,000 (34,141,000) (12,517,000) 6,831,000
Balance as at 1 April 2021 6,019,000 47,470,000 (34,141,000) (12,517,000) 6,831,000
Loss for the year - - - (1,914,000) (1,914,000)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive loss - - (2,100,000) - (2,100,000)
Total comprehensive loss for the year - - (2,100,000) (1,914,000) (4,014,000)
Issue of share capital for cash 43,000 1,598,000 - - 1,641,000
Costs of issue of share capital - (121,000) - - (121,000)
Share based payments - - 734,000 - 734,000
Total transactions with owners, recognised directly in equity 43,000 1,477,000 734,000 - 2,254,000
Balance as at 31 March 2022 6,062,000 48,947,000 (35,507,000) (14,431,000) 5,071,000
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Note Share capital Share premium Other reserves Retained Losses Total
$ $ $ $ $
Balance as at 1 October 2020 5,611,000 47,242,000 (1,061,000) (50,658,000) 1,134,000
Loss for the year - - - (1,634,000) (1,634,000)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive loss - 511,000 - 511,000
Total comprehensive income/(loss) for the year - - 511,000 (1,634,000) (1,123,000)
Issue of shares to acquire CML 360,000 - 35,634,000 - 35,994,000
Issue of share capital for cash 47,000 2,795,000 - - 2,842,000
Transaction costs on issue of share capital - (299,000) - - (299,000)
Issue of share warrants - (2,295,000) 2,669,000 - 374,000
Issue of share options - - 768,000 - 768,000
Issue of share capital to settle CML convertible bond loan interest 1,000 27,000 - - 28,000
Total transactions with owners, recognised directly in equity 408,000 228,000 39,071,000 - 39,707,000
Balance as at 31 March 2021 6,019,000 47,470,000 38,521,000 (52,292,000) 39,718,000
Balance as at 1 April 6,019,000 47,470,000 38,521,000 (52,292,000) 39,718,000
2021
Loss for the year - - - (1,699,000) (1,699,000)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive loss - - (1,841,000) - (1,841,000)
Total comprehensive loss for the year - - (1,841,000) (1,699,000) (3,540,000)
Issue of share capital for cash 43,000 1,598,000 - - 1,641,000
Transaction costs on issue of share capital - (121,000) - - (121,000)
Share option expense - - 734,000 - 734,000
Total transactions with owners, recognised directly in equity 43,000 1,477,000 734,000 - 2,254,000
Balance as at 31 March 2022 6,062,000 48,947,000 37,414,000 (53,991,000) 38,432,000
STATEMENTS OF CASH FLOWS
For the year ended 31 March 2022
Group Company
Note Year ended Year ended Year ended Year ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
$ $ $ $
Cash flows from operating activities
(Loss) before income tax (1,914,000) (7,886,000) (1,699,000) (1,634,000)
Adjustments for:
Depreciation 7 9,000 19,000 - 2,000
Share based payments 16 721,000 1,111,000 721,000 768,000
Deemed reverse acquisition expense - 5,454,000 - -
Foreign exchange 105,000 165,000 5,000 -
Interest received - (1,000) - -
Interest expense - 45,000 - -
Waiver of loans owed - (110,000) - -
Changes in working capital:
(Increase)/Decrease in trade and other receivables 11 73,000 48,000 40,000 (45,000)
Increase/(Decrease) in trade and other payables 22,000 (442,000) 13,000 (12,000)
Net cash used in operating activities (984,000) (1,597,000) (920,000) (921,000)
Cash flows from investing activities
Purchase of property plant and equipment 7 (6,000) - - -
Disposal of property, plant and equipment 7 4,000 - - -
Cash expenditure on exploration and evaluation activity 8 (490,000) (133,000) - -
Loan to subsidiaries - - (640,000) (1,195,000)
Interest received - 1,000 - -
Net cash used in investing activities (492,000) (132,000) (640,000) (1,195,000)
Cash flows from financing activities
Proceeds from issue of share capital 15 1,641,000 2,842,000 1,641,000 2,842,000
Transaction costs of share issue 15 (121,000) (299,000) (121,000) (299,000)
Cash acquired in reverse acquisition - 938,000 - -
Proceeds from borrowings - 33,000 - -
Repayment of borrowings - (204,000) - -
Interest paid - (26,000) - -
Net cash generated from financing activities 1,520,000 3,284,000 1,520,000 2,543,000
Net increase/(decrease) in cash and cash equivalents 44,000 1,555,000 (40,000) 427,000
Cash and cash equivalents at beginning of year 1,797,000 114,000 1,706,000 1,172,000
Exchange gain on cash and cash equivalents (65,000) 128,000 (63,000) 107,000
Cash and cash equivalents at end of year 12 1,776,000 1,797,000 1,603,000 1,706,000
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. General information
The principal activity of Capital Metals plc (the 'Company') and its
subsidiaries (together the 'Group') is the exploration and development of the
Eastern Minerals Project located in the Ampara District of the Eastern
Province of Sri Lanka. The Company's shares are listed on AIM of the London
Stock Exchange. The Company is incorporated and domiciled in England.
The address of its registered office is Suite 1, 15 Ingestre Place London, W1F
0DU.
2. Summary of significant Accounting Policies
The principal Accounting Policies applied in the preparation of these
Consolidated Financial Statements are set out below. These Policies have been
consistently applied to all the periods presented, unless otherwise stated.
2.1. Basis of preparation of Financial Statements
These financial statements have been prepared in accordance with International
Financial Standards and UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006. The Financial
Statements have also been prepared under the historical cost convention,
except as modified for assets and liabilities recognised at fair value on
business combination.
The Financial Statements are presented in US Dollars rounded to the nearest
dollar. The functional currency of the Company is Pound Sterling.
The preparation of financial statements in accordance with the applicable
financial reporting framework requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the
process of applying the Accounting Policies. The areas involving a higher
degree of judgement or complexity, or areas where assumptions and estimates
are significant to the Consolidated Financial Statements are disclosed in Note
4.
Prior year reverse acquisition
On 13 January 2021, the Company completed a reverse acquisition of Capital
Metals Limited, a company registered in the British Virgin Islands. Further
information about this transaction is disclosed in Note 6.
Although the transaction resulted in Capital Metals Limited becoming a wholly
owned subsidiary of the Company, the transaction constitutes a reverse
takeover in accordance with Rule 14 of the AIM Rules for Companies as the
previous shareholders of Capital Metals Limited own a substantial majority of
the Ordinary Shares of the Company and the executive management of Capital
Metals Limited became the executive management of Capital Metals Plc,
previously Equatorial Palm Oil Plc.
Being a reverse takeover, the legal subsidiary, Capital Metals Limited was
treated in consolidation as the accounting acquirer and the legal parent
company, Capital Metals Plc, was treated as the accounting subsidiary.
The comparative period for the Group was the year ended 31 March 2021 and
included the results of Capital Metals Limited and its subsidiaries only.
2.2. New and amended standards
(a) New and amended standards adopted by the Group and Company
A number of new and amended standards and interpretations issued by the
International Accounting Standards Board (IASB) have become effective for
the first time for financial periods beginning on (or after) 1 April 2021 and
have been applied by the Company and Group in these financial statements. None
of these new and amended standards and interpretations had a significant
effect on the Company or Group because they are either not relevant to the
Company or Group's activities or require accounting which is consistent with
the Company or Group's current accounting policies.
ii) New standards, amendments and interpretations in issue but not yet
effective or not yet endorsed and not early adopted
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods and which have not been adopted early.
2.3. Basis of Consolidation
These consolidated financial statements comprise the financial statements of
Capital Metals Plc and its subsidiaries as at 31 March 2022. Subsidiaries
are fully consolidated from the date on which control is transferred to the
Group and cease to be consolidated from the date on which control is
transferred out of the Group. Control exists where the company has the power
to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. Where subsidiaries follow differing accounting
policies from those of the Group, those accounting policies have been adjusted
to align with those of the Group. Inter-company balances and transactions
between Group companies are eliminated on consolidation, though foreign
exchange differences arising on inter-company balances between subsidiaries
with differing functional currencies is recognised in profit or loss.
2.4. Going concern
These financial statements have been prepared on the going concern basis. The
Group's business activities, together with the factors likely to affect its
future development, performance and position are set out in the Chairman's
Statement and the Strategic Report.
As at 31 March 2022, the Group had cash and cash equivalents of $1,776,000.
The Directors have prepared cash flow forecasts to 31 December 2023, which
take account of the cost and operational structure of the Group and Parent
Company, planned exploration and evaluation expenditure, licence commitments
and working capital requirements. These forecasts indicate that the Group and
Parent Company's cash resources are not sufficient to cover the projected
expenditure for the period for a period of 12 months from the date of approval
of these financial statements. These forecasts indicate that the Group and
Parent Company, in order to meet their operational objectives, and meets their
expected liabilities as they fall due, will be required to raise additional
funds within the next 12 months.
In common with many exploration and evaluation entities, the Company will need
to raise further funds within the next 12 months in order to meet its expected
liabilities as they fall due, and progress the Group into definitive
feasibility and then into construction and eventual production of revenues.
The Directors are confident in the Company's ability to raise additional funds
as required, from existing and/or new investors, within the next 12 months.
The Company has demonstrated its access to financial resources, as evidenced
by the successful completion of a Placing in February 2022 with an equity
raising of £1,250,000 ($1,641,000).
Given the Group and Parent Company's current cash position and its
demonstrated ability to raise capital, the Directors have a reasonable
expectation that the Group and Parent Company has adequate resources to
continue in operational existence for the foreseeable future.
Notwithstanding the above, these circumstances indicate that a material
uncertainty exists that may cast significant doubt on the Group and Parent
Company's ability to continue as a going concern and, therefore, that the
Group and Parent Company may be unable to realise their assets or settle their
liabilities in the ordinary course of business. As a result of their review,
and despite the aforementioned material uncertainty, the Directors have
confidence in the Group and Parent Company's forecasts and have a reasonable
expectation that the Group and Parent Company will continue in operational
existence for the going concern assessment period and have therefore used the
going concern basis in preparing these consolidated and Parent Company
financial statements.
2.5. Segment reporting
An operating segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other business segments.
The Directors are of the opinion that the Group comprises a single activity
being the exploration and evaluation of mineral sand resources in one
geographical area in Sri Lanka. As such the financial information of the
segment is the same as that set out in the primary statements.
2.6. Foreign currencies
(a) Functional and presentation currency
Items included in the Financial Statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates (the 'functional currency'). The functional currency of the UK
parent entity is Pound Sterling, the functional currency of the BVI
subsidiaries is US Dollars and the functional currency of the Sri Lankan
subsidiaries is Sri Lankan Rupee. The Financial Statements are presented in US
Dollars which is the Group's presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the dates of the transactions or
valuation where such items are re-measured. Foreign exchange gains and losses
resulting from the settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the income statement.
(c) Group companies
The results and financial position of all the Group entities (none of which
has the currency of a hyperinflationary economy) that have a functional
currency different from the presentation currency are translated into the
presentation currency as follows:
· assets and liabilities for each period end date presented are
translated at the period-end closing rate;
· income and expenses for each Income Statement are translated at average
exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the transactions); and
· all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the translation of the net
investment in foreign entities, and of monetary items receivable from foreign
subsidiaries for which settlement is neither planned nor likely to occur in
the foreseeable future, are taken to other comprehensive income. When a
foreign operation is sold, such exchange differences are recognised in the
Income Statement as part of the gain or loss on sale.
2.7. Intangible assets
Exploration and evaluation assets
Exploration and evaluation assets include the cost of acquisition,
exploration, determination of resources and recoverable reserves, technical
studies, economic feasibility studies and all technical and administrative
overheads directly associated with these assets, where a mineral deposit has
development potential.
Exploration and evaluation assets which are acquired are recognised at fair
value. Capitalised exploration and evaluation expenditure is recorded and held
at cost.
The Group performs an impairment test on the exploration and evaluation assets
when specific facts and circumstances indicate an impairment test is required,
including:
i) the Group's right to explore in an area has expired, or
will expire in the near future without renewal;
ii) no further exploration or evaluation is planned or
budgeted for;
iii) a decision has been taken by the Board to discontinue
exploration and evaluation in an area due to the absence of a commercial level
of reserves; and
iv) sufficient data exists to indicate that the book value will
not be fully recovered from future development and production.
If any such facts or circumstances are noted, the Group, as a next step,
perform an impairment test in accordance with the provisions of IAS 36
"Impairment of Assets". In such circumstances, the aggregate carrying value of
the exploration and assets is compared against the expected recoverable amount
of the cash-generating unit. The recoverable amount is the higher of value in
use and the fair value less costs to sell. Management considers all licences
relating to the Project to represent one asset when undertaking their
impairment assessment.
2.8. Investments in subsidiaries
Investments in Group undertakings are stated at cost, which is the fair value
of the consideration paid, less any impairment provision.
2.9. Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation
and any accumulated impairment losses. Depreciation is provided on all
property, plant and equipment to write off the cost less estimated residual
value of each asset over its expected useful economic life on a straight line
basis at the following annual rates:
Computer & office equipment - 3 years
Motor vehicles - 4 years
Field equipment - 5 years
Drilling equipment - 10 years
Furniture & fittings - 5 years
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred.
The assets' residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. If an impairment review is conducted following an
indicator of impairment, assets which are not able to be assessed for
impairment individually are assessed in combination with other assets within a
cash generating unit.
Gains and losses on disposal are determined by comparing the proceeds with the
carrying amount and are recognised within 'Other (losses)/gains' in the Income
Statement.
2.10. Impairment of non-financial assets
Assets that have an indefinite useful life, for example, intangible assets not
ready to use, and goodwill, are not subject to amortisation and are tested
annually for impairment. Property, plant and equipment is reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for
the amount by which the asset's carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately
identifiable cash flows (cash generating units). Non-financial assets that
suffered impairment are reviewed for possible reversal of the impairment at
each reporting date.
2.11. Financial assets
(a) Recognition and measurement
Management determines the classification of its financial assets at initial
recognition, the classification of which depends on the purpose for which the
financial assets were acquired.
Financial assets are classified in four categories:
i) amortised cost;
ii) fair value through other comprehensive income ("FVOCI")
with gains or losses recycled to profit or loss on derecognition;
iii) FVOCI with no recycling of gains or losses to profit or
loss on derecognition; and
iv) fair value through profit or loss ("FVTPL").
Financial assets are classified as at amortised cost only if both of the
following criteria are met:
· the asset is held within a business model whose objective is
to collect contractual cash flows; and
· the contractual terms give rise to cash flows that are solely
payments of principal and interest
The Group's financial assets comprise cash and receivables which are
classified as financial assets at amortised cost. The Company's financial
assets comprise cash and loans to subsidiaries, which are classified as
financial assets at amortised cost.
The Company accounts for loan receivables at amortised cost as the objective
is to hold these assets in order to collect contractual cash flows and the
contractual cash flows are solely payments of principal and interest. After
classification as amortised cost, the financial assets are initially measured
at fair value plus directly attributable transaction costs, and subsequently
measured at amortised cost using the effective interest method, less provision
for impairment.
Financial assets are derecognized when the rights to receive cash flows from
the assets have expired or have been transferred, and the Group has
transferred substantially all of the risks and rewards of ownership.
(b) Impairment
Impairment provisions for loans to subsidiaries are recognised based on a
forward-looking expected credit loss model. The methodology used to determine
the amount of the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset.
For those where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit losses along
with gross interest income are recognised. For those for which credit risk has
increased significantly, lifetime expected credit losses along with the gross
interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net
basis are recognised.
2.12. Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets
and are recognised when the Group becomes a party to the contractual
provisions of the instrument.
All financial liabilities are initially recognised at fair value and
subsequently measured either as:
· amortised cost using the effective interest method, with
interest-related charges recognised as an expense in the income statement; or
· financial liabilities measured at FVTPL, re-measured at subsequent
reporting dates to fair value through the income statement.
During the reporting period, the Group's financial liabilities comprised trade
and other payables, deferred consideration payable, loans and convertible
bonds. The trade and other payables, and loans, are classified at amortised
cost.
The deferred consideration payable in respect of the acquisition of the
Project is treated as a financial liability measured at FVTPL.
The convertible bonds were assessed to contain an embedded derivative
conversion feature and the Group elected to treat the entire instrument as a
financial liability measured at FVTPL.
A financial liability is derecognised only when the obligation is
extinguished, that is, when the obligation is discharged or cancelled or
expires.
2.13. Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
2.14. Equity
Equity comprises the following:
· "Share capital" represents the nominal value of the Ordinary shares;
· "Share Premium" represents consideration less nominal value of issued
shares and costs directly attributable to the issue of new shares;
· "Other reserves" represents the capital contribution reserve,
deferred share reserve, merger reserve, foreign currency translation reserve,
reverse acquisition reserve and share option and warrant reserve where;
o "Merger reserve" represents the difference between the fair value of an
acquisition and the nominal value of the shares allotted in a share exchange;
o "Foreign currency translation reserve" represents the translation
differences arising from translating the financial statement items from
functional currency to presentational currency;
o "Reverse acquisition reserve" represents a non-distributable reserve
arising on the acquisition of Capital Metals Limited;
o "Share option and warrant reserve" represents share options and warrants
awarded by the group;
o Capital contribution reserve - represents capital contributed by one or
more of the members without taking shares in return or creating a debt.
o Deferred share reserve - represents shares to be issued upon certain
conditions being met.
o "Retained earnings" represents retained losses.
2.15. Share capital, share premium and deferred shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity, as a
deduction, net of tax, from the proceeds provided there is sufficient premium
available. Should sufficient premium not be available placing costs are
recognised in the Income Statement.
Deferred shares are classified as equity. Deferred shares represent shares to
be issued upon certain conditions being met. The holders of deferred shares do
not have any right to receive written notice of or attend, speak or vote at
any general meeting of the Company. As regards income, on any dividend or
other distribution of the Company, the holders of deferred shares shall be
entitled to payment in priority to any dividend or distribution to the holders
of any other class of shares in the Company, £1 in aggregate. Upon any
capital distribution of the Company (including upon winding up), the holders
of the deferred shares shall be entitled to payment in priority to any
distribution to the holders of any other class of shares in the Company, £1
in aggregate. The deferred shares may be cancelled by the Company at any
time at its determination for no payment and without obtaining sanction of
such holders.
2.16. Share based payments
The Group has granted options over its unissued share capital to certain
Directors, management, employees and consultants as part of their
remuneration. The fair value of options granted in respect of services
provided, is measured at the grant date and recognised as an expense over the
vesting period, with a corresponding increase in the Share warrants and
options reserve.
The fair value of the share options and warrants are determined using the
Black Scholes valuation model or Monte Carlo analysis, as appropriate, taking
into account the terms and conditions upon which the warrants or options were
issued or granted.
Non-market vesting conditions are included in assumptions about the number of
options that are expected to vest. The total expense or charge is recognised
over the vesting period, which is the period over which all of the specified
vesting conditions are to be satisfied. At the end of each reporting period,
the entity revises its estimates of the number of options that are expected to
vest based on the non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in the Income Statement or equity
as appropriate, with a corresponding adjustment to a separate reserve in
equity.
When the options are exercised, the Group issues new shares. The proceeds
received, net of any directly attributable transaction costs, are credited to
share capital (nominal value) and share premium when the options are
exercised.
2.17. Taxation
No current tax is yet payable in view of the losses to date.
Deferred tax is recognised for using the liability method in respect of
temporary differences arising from differences between the carrying amount of
assets and liabilities in the consolidated financial statements and the
corresponding tax bases used in the computation of taxable profit. However,
deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
In principle, deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets (including those arising from
investments in subsidiaries), are recognised to the extent that it is probable
that taxable profits will be available against which deductible temporary
differences can be utilised.
Deferred income tax assets are recognised on deductible temporary differences
arising from investments in subsidiaries only to the extent that it is
probable the temporary difference will reverse in the future and there is
sufficient taxable profit available against which the temporary difference can
be used.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in except where the Group is able to control the
reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred tax assets and liabilities relate to income taxes levied
by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle the balances on a net
basis.
Deferred tax is calculated at the tax rates (and laws) that have been enacted
or substantively enacted by the statement of financial position date and are
expected to apply to the period when the deferred tax asset is realised or the
deferred tax liability is settled.
Deferred tax assets and liabilities are not discounted.
3. Financial risk management
3.1. Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk
(foreign currency risk), credit risk and liquidity risk. The Group's overall
risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Group's financial
performance. None of these risks are hedged.
Risk management is carried out by the management team under policies approved
by the Board of Directors.
Market risk
(a) Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Sri
Lankan Rupee (LKR), Australian Dollar (AUD) and the British Pound Sterling
(GBP or £). Foreign exchange risk arises from future commercial transactions,
recognised assets and liabilities and net investments in foreign operations.
The Group negotiates all material contracts for activities in relation to its
subsidiaries in either LKR, AUD or USD. The Group does not hedge against the
risks of fluctuations in exchange rates. The volume of transactions is not
deemed sufficient to enter into forward contracts as most of the foreign
exchange movements result from the retranslation of inter company loans. The
Group has sensitised the figures for fluctuations in foreign exchange rates,
as the Directors acknowledge that, at the present time, the foreign exchange
retranslations have resulted in rather higher than normal fluctuations and is
predominantly due to the exceptional nature of the LKR exchange rate in the
current economic climate.
As at 31 March 2022, the exposure of the Group to foreign exchange rates is
summarised as follows:
Group Group Company Company
2022 2021 2022 2021
Cash and cash equivalents $'000 $'000 $'000 $'000
US Dollar 167 131 7 119
Sri Lankan Rupee 13 79 - -
Pound Sterling 1,596 1,587 1,596 1,587
1,776 1,797 1,603 1,706
Other receivables
US Dollar - - - -
Sri Lankan Rupee - 3 - -
Pound Sterling 23 17 8 96
23 20 8 96
1,799 1,817 1,611 1,802
As at 31 March 2022, if Sterling had gained or lost 10 per cent. against the
USD, the impact on comprehensive loss would have been as follows:
Group Group Company Company
2022 2021 2022 2021
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% GBP/USD 162 160 160 237
-10% GBP/USD (162) (160) (160) (237)
As at 31 March 2022, if the Sri Lankan Rupee had gained or lost 10 per cent.
against the USD, the impact on comprehensive loss would have been as follows:
Group Group Company Company
2022 2021 2022 2021
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% LKR/USD 1 8 - -
-10% LKR/USD (1) (8) - -
Credit risk
Credit risk is the risk of financial loss to the Group if a counterparty to a
financial instrument fails to meet its contractual obligations.
Credit risk relating to the Group's financial assets which comprise
principally cash and cash equivalents, arises from the potential default of
counterparties. The credit risk on liquid funds is limited because the
counterparties are reputable banks with high credit ratings assigned by
international credit-rating agencies.
The carrying amount of financial assets represents the maximum credit
exposure, which at the reporting date was:
Group Group Company Company
2022 2021 2022 2021
$'000 $'000 $'000 $'000
Cash and bank balances 1,776 1,797 1,603 1,706
Trade and other receivables 28 19 57 16
Loan to subsidiaries - - 1,835 1,195
1,804 1,816 3,495 2,917
The expected credit risk for both the Group and the Company was assessed as
not material.
Liquidity risk
In keeping with similar sized mineral exploration groups, the Group's
continued future operations depend on the ability to raise sufficient working
capital through the issue of equity share capital or debt. The Directors are
reasonably confident that adequate funding will be forthcoming with which to
finance operations. Controls over expenditure are carefully managed.
With exception to deferred taxation, financial liabilities are all due within
one year.
3.2. Capital risk management
The Directors consider the Group's capital to comprise of share capital and
reserves stated on the statement of financial position. The Group manages its
capital to ensure the Group will be able to continue on a going concern on a
long term basis while ensuring the optimal return to shareholders and other
stakeholders through an effective debt and equity balance. No changes were
made in the objectives, policies and processes during the current or previous
year.
The share capital, including share premium, and reserves totalling $5,071,000
(2021: $6,831,000) provides the majority of the working capital required by
the Group. Management reviews the capital structure and makes adjustment to it
in the light of changes in economic conditions.
4. Critical accounting estimates and judgements
The preparation of the Financial Statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of expenses during the
period. Actual results may vary from the estimates used to produce these
Financial Statements.
Estimates and judgements are regularly evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Items subject to such estimates and assumptions, that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial years, include but are not limited to:
Impairment of intangible assets - exploration and evaluation costs
Management make the judgement as to which costs are directly associated with
the exploration and evaluation assets and are to be capitalised, including the
allocation of applicable salary and overhead costs.
Exploration and evaluation costs have a carrying value at 31 March 2022 of
$4,556,000 (31 March 2021 $6,178,000) Such assets have an indefinite useful
life as the Group has a right to renew exploration licences and the asset is
only amortised once extraction of the resource commences. Management tests for
impairment annually whether exploration projects have future economic value in
accordance with the accounting policy stated in Note 2.7. Each exploration
project is subject to an annual review by either a consultant or senior
company geologist to determine if the exploration results returned during the
period warrant further exploration expenditure and have the potential to
result in an economic discovery. This review takes into consideration long
term metal prices, anticipated resource volumes and supply and demand outlook.
In the event that a project does not represent an economic exploration target
and results indicate there is no additional upside a decision will be made to
discontinue exploration; an impairment charge will then be recognised in the
Income Statement.
DEL Licence (EL168/R/4) expired on 31 October 2020, but is subject to the
Group's First IML Application, which has not been granted at the reporting
date but subsequently granted post year end. It is noted that the IML's
granted post year end were for select areas within license EL168/R/4 and there
remains areas within this license which are not covered by an IML.
Whilst there is no certainty that the remaining IML's will be granted,
management are of the judgement that there is a reasonable expectation given
the Group received approval for two IML's post year end and based on the
ongoing discussions with the Geological Survey and Mines Burea that the
remaining IMLs will be approved in due course. Given this judgement it was
deemed that no impairment test was required to be performed. Should the
Group not be successful with the remaining IML applications, then Directors
would expect to consider an impairment of the E&E assets.
Intercompany loans
At 31 March 2022 management reassessed the recovery profile of the Parent
Company loans granted to subsidiaries and noted the updated project
development timetable would mean that it is unlikely that repayments from
subsidiaries would commence in the next 12 months and accordingly the loans
have been classified as non-current receivables in the current year.
Prior year reverse acquisition
Management measured the cost of the equity-settled transactions by reference
to the fair value of the equity instruments at the measurement date, being the
date of completion of the reverse acquisition. The placing price was 12 pence
per share and the closing price on re-admission of the Company on 13 January
2021 was 20 pence per share. It was Management's judgement that the closing
price of 20 pence per share was considered to be the most appropriate value
and therefore it was applied in valuing the investment in Capital Metals
Limited at £26,400,000 ($35,994,000), and in the reverse acquisition
accounting for the fair value of the shares deemed to have been issued by
Capital Metals Limited of £4,563,000 ($6,221,000), which resulted in
$5,454,000 being expensed as the deemed cost of acquiring the listing in the
prior year.
Share based payment transactions
Management measured the cost of equity-settled transactions by reference to
the fair value of the equity instruments at the date at which they are
granted. The fair value of shares was determined by the share price at the
date of grant. The fair value of options and warrants was determined using
Monte Carlo simulations and the Black-Scholes model respectively. Management
estimated the number of options that are expected to vest based on the
non-market vesting conditions. The valuation of these options and warrants
involved making a number of critical estimates relating to price volatility,
future dividend yields, expected life of the options and forfeiture rates.
These assumptions are described in more detail in Note 16.
5. Segment information
The Directors are of the opinion that the Group comprises a single activity
being the exploration and evaluation of mineral sand resources in one
geographical area in Sri Lanka. As such the financial information of the
segment is the same as that set out in the primary statements.
6. Prior year reverse acquisition
On 13 January 2021 the Company acquired through a share-for-share exchange the
entire issued share capital of Capital Metals Limited. The principal
activity of Capital Metals Limited and its subsidiaries is that of
exploration, evaluation and development of mineral sands resources in Sri
Lanka. Capital Metals Limited is incorporated in the British Virgin
Islands.
In substance, the shareholders of Capital Metals Limited acquired a
controlling interest in the Company and the transaction has therefore been
accounted for as a reverse acquisition. As the Company's activities prior to
the transaction were purely the maintenance of the AIM Listing, acquiring
Capital Metals Limited and raising additional equity finance to provide the
necessary funding for the operations of Capital Metals Limited, it did not
meet the definition of a business in accordance with IFRS 3 for the purposes
of these consolidated financial statements of the Group.
Accordingly, in these consolidated financial statements, the reverse
acquisition did not constitute a business combination and was accounted for in
accordance with IFRS 2 "Share-based Payments". Although the reverse
acquisition is not a business combination, the Company has become a legal
parent and is required to apply IFRS 10 and prepare consolidated financial
statements. The Directors have prepared these consolidated financial
statements using the reverse acquisition methodology. The difference between
the equity value given up by the shareholders of Capital Metals Limited and
the share of the fair value of net assets gained is charged to the statement
of comprehensive income as a share-based payment on reverse acquisition and
represents in substance the cost of acquiring an AIM listing.
In accordance with reverse acquisition accounting principles, these
consolidated financial statements represent a continuation of the consolidated
statements of Capital Metals Limited and include:
· The assets and liabilities of Capital Metals Limited (and its
subsidiaries) at their pre-acquisition carrying value amounts and the results
for both current and comparative years.
· The retained earnings and other equity balances of the legal
subsidiary (accounting acquirer) before the business combination.
· The assets and liabilities of the Company as at 31 March 2021 and its
results from 13 January to 31 March 2021.
· the amount recognised as issued equity interests in the consolidated
financial statements determined by adding the issued equity interest of the
legal subsidiary (the accounting acquirer) outstanding immediately before the
business combination to the fair value of the legal parent (accounting
acquiree). However, the equity structure (ie the number and type of equity
interests issued) reflects the equity structure of the legal parent (the
accounting acquiree), including the equity interests the legal parent issued
to effect the combination. Accordingly, the equity structure of the legal
subsidiary (the accounting acquirer) is restated using the exchange ratio
established in the acquisition agreement to reflect the number of shares of
the legal parent (the accounting acquiree) issued in the reverse acquisition
· Comparative information presented in those consolidated financial
statements also is retroactively adjusted to reflect the legal capital of the
legal parent (accounting acquiree).
On 13 January 2021 the Company issued 132,000,000 Ordinary Shares to acquire
the whole of the issued share capital of Capital Metals Limited. The closing
share price on re-admission on 13 January 2021 was 20 pence per share.
Accordingly, the investment in Capital Metals Limited was valued at
£26,400,000 ($35,994,000). As the Company is a UK registered company,
section 612 of the Companies Act 2006 (which deals with merger relief)
applies, there will be no legal share premium on the shares issued to effect
the combination, but the "premium" on the shares (that is, the difference
between the fair value of the consideration and the nominal value of the
shares) will be recorded as a "merger reserve".
The fair value of the shares deemed to have been issued by Capital Metals
Limited (accounting acquirer) for Capital Metals Plc (accounting subsidiary)
was deemed to be £4,563,000 ($6,221,000) being the entire issued Ordinary
Shares of Capital Metals Plc of 22,813,876 at a price of 20 pence per share.
The fair value of the net assets of Capital Metals Plc at acquisition was as
follows:
$'000
Cash and cash equivalents 938
Receivables 157
Payables (328)
Total net assets 767
The difference between the deemed cost of $6,221,000 and the fair value of the
net assets acquired per above of $767,000 resulted in $5,454,000 being
expensed within "deemed reverse acquisition expenses" in accordance with IFRS
2, reflecting the economic cost to Capital Metals Limited shareholders of
acquiring a listing.
The reverse acquisition reserve which arose from the reverse takeover is made
up as follows:
$'000
Pre-acquisition equity of Capital Metals Plc (52,574)
Equity at acquisition of Capital Metals Limited 7,672
Value of shares issued to acquire Capital Metals Limited (35,993)
Deemed reverse acquisition expense 5,454
Total reverse acquisition reserve (75,441)
7. Property, plant and equipment
Group
Group Total
$
Cost
As at 31 March 2020 126,000
Exchange Differences (6,000)
Additions 1,000
Disposals (5,000)
As at 31 March 2021 116,000
As at 1 April 2021 116,000
Exchange Differences (37,000)
Additions 6,000
Disposals (4,000)
As at 31 March 2022 81,000
Depreciation
As at 31 March 2020 54,000
Charge for the year 19,000
Disposals (2,000)
Exchange differences (3,000)
As at 31 March 2021 68,000
As at 1 April 2021 68,000
Charge for the year 9,000
Disposals (4,000)
Exchange differences (21,000)
As at 31 March 2022 52,000
Net book value as at 31 March 2021 48,000
Net book value as at 31 March 2022 29,000
Depreciation expense of $9,000 (2021: $19,000) for the Group has been charged
in administration expenses.
8. Intangible assets
Intangible assets comprise exploration and evaluation costs. The movement on
the exploration and evaluation assets was as follows:
Group
Exploration & Evaluation Assets - Cost and Net Book Value
$
Cost
As at 31 March 2020 6,389,000
Additions 133,000
Exchange differences (344,000)
As at 31 March 2021 6,178,000
Additions 490,000
Exchange differences (2,112,000)
As at 31 March 2022 4,556,000
All exploration and evaluation assets relate to Group subsidiaries and the
Eastern Minerals Project in Sri Lanka.
The Directors undertook an impairment indicators review and none were
identified. In performing their review, the Directors noted the following:
· The EML Licence (EL199/R/4) was renewed for a period of 24 months
until 23 January 2023.
· DEL Licence (EL430) was issued for a period of 24 months until 13
March 2024.
· Whilst the DEL Licence (EL168/R/4) expired on 31 October 2020, it was
subject to the Group's First Industrial Mining Licence ("IML") application and
the GSMB has represented to the Group that, following the expiry of an
exploration license, the Geological Survey and Mines Burea in practice, allows
the former exploration license holder for a period of two years from the date
of expiry:
- Exclusive right over the former exploration license area to submit
further IMLs should the former license holder wish to do so.
- Exclusivity over the former exploration license area by refraining
from accepting applications for any new exploration licenses from third
parties.
- The EIA was approved in November 2021.
- The IML was approved post year end in August 2022. Please refer to
Note 26.
· Significant further exploration and evaluation activity is planned,
including a drilling program on EL 199.
· Mineral sands prices remain strong and the Group are continuing
off-take discussions following a number of approaches from strategic and
industrial groups.
It is noted the IML licenses granted post year end was for select areas within
licence EL168/R/4 and there remains areas within this license which are not
covered by an IML. Management are of the judgement that there is a reasonable
expectation given the Group received approval for two IML's post year end and
based on the ongoing discussions with the Geological Survey and Mines Bureau
that the remaining IMLs will be approved in due course.
Following their assessment, the Directors concluded that no impairment charge
was required at 31 March 2022.
9. Investments in subsidiaries
Company
For the year ended 31 March 2022 For the year ended 31 March 2021
$ $
At beginning of period 36,800,000 -
Additions - 36,368,000
Impairment charge - -
Foreign exchange differences (1,770,000) 432,000
Investment at end of period 35,030,000 36,800,000
Investments in Group undertakings are stated at cost, which is the fair value
of the consideration paid, less any impairment provision.
Subsidiaries
Name of subsidiary Country of incorporation and place of business Parent company Proportion of ordinary shares held by the Group (%) Nature of business
Company number
Capital Metals Limited British Virgin Islands 1890161 Capital Metals Plc 100% Holding company
Brighton Metals Limited British Virgin Islands 1893384 Capital Metals Limited 100% Holding company
Redgate Lanka (Pvt) Limited Sri Lanka 119784 Brighton Metals Limited 100% Holding/Investment
Damsila Exports (Pvt) Limited Sri Lanka PV8591 Brighton Metals Limited 4% Exploration
Sri Lanka PV8591 Redgate Lanka (Pvt) Limited 96% Exploration
Eastern Minerals (Pvt) Limited Sri Lanka PV81273 Brighton Metals Limited 1% Exploration
Sri Lanka PV81273 Redgate Lanka (Pvt) Limited 99% Exploration
Keynes Investment (Pvt) Limited Sri Lanka 119760 Brighton Metals Limited 100% Dormant
All subsidiary undertakings are included in the consolidation.
The proportion of the voting rights in the subsidiary undertakings held
directly by the parent company do not differ from the proportion of ordinary
shares held.
10. Loans to subsidiaries
Company
For the year ended 31 March 2022 For the year ended 31 March 2021
$ $
At beginning of period 1,195,000 -
Additions 697,000 1,195,000
Foreign exchange differences (57,000) -
Loan at end of period 1,835,000 1,195,000
The fair value of all receivables is the same as their carrying values stated
above. The loans are non interest bearing and repayable on demand.
The Directors have assessed that there is no expected credit losses to
recognise in respect of the loans to subsidiaries as at the balance sheet
date, based on their assessment of the recovery strategies, which indicate
that the Company would fully recover the outstanding balance of the loans,
given the effective interest rate is Nil%.
At 31 March 2022 Management reassessed the recovery profile of the Parent
Company loans to Subsidiaries and note the updated project development
timetable would mean that it is unlikely that repayments from subsidiaries
would commence in the next 12 months and accordingly the loans have been
classified as non-current receivables in the current year.
11. Trade and other receivables
Group Company
Current For the year ended 31 March 2022 For the year ended 31 March 2021 For the year ended 31 March 2022 For the year ended 31 March 2021
$ $ $ $
Trade receivables 15,000 16,000 57,000 16,000
Prepayments 13,000 2,000 - -
VAT receivable 8,000 96,000 8,000 96,000
Other receivables - 1,000 - -
Total 36,000 115,000 65,000 112,000
The fair value of all receivables is the same as their carrying values stated
above.
12. Cash and cash equivalents
Group Company
For the year ended 31 March 2022 For the year ended 31 March 2021 For the year ended 31 March 2022 For the year ended 31 March 2021
$ $ $ $
Cash at bank and in hand 1,776,000 1,797,000 1,603,000 1,706,000
All of the UK entities cash at bank is held with institutions with high credit
ratings. The Sri Lankan entities cash at bank is held with institutions whose
credit rating is unknown. $3,000 is held as a fixed deposit by Damsila Exports
Private Limited.
13. Trade and other payables
Group Company
For the year ended 31 March 2022 For the year ended 31 March 2021 For the year ended 31 March 2022 For the year ended 31 March 2021
$ $ $ $
Current
Trade payables 68,000 47,000 40,000 33,000
Accrued expenses 62,000 63,000 61,000 62,000
Other creditors - 2,000 - -
Social security and other taxation - 1,000 - -
Deferred consideration 594,000 594,000 - -
Total current liabilities 724,000 707,000 101,000 95,000
Non-current
Deferred consideration 600,000 600,000 - -
Other payables 2,000 - - -
Total non-current liabilities 602,000 600,000 - -
Deferred consideration represents amounts payable in respect of the
acquisitions of Damsila Exports (Pvt) Limited and Eastern Minerals (Pvt)
Limited. The amounts fall due and payable upon completion of certain
milestones within the Group, being for each of Damsila Exports (Pvt) Limited
and Eastern Minerals (Pvt) Limited: $625,000 in cash (recognised at 95% of
face value) upon completion of feasibility studies on the relevant project and
$750,000 in cash (recognised at 80% of face value) upon commencement of first
commercial production from the relevant project. Management anticipates the
completion of the feasibility study to take place within 12 months of the
balance date, and accordingly the deferred consideration in respect of this
milestone is classified as a current liability.
At the reporting period end, the probability estimated for the likelihood of
completion of Tranche 2 and 3 was considered, and management continue to
estimate 95% probability for Tranche 2 and 80% probability for Tranche 3. If
these estimates prove incorrect then the amounts payable in respect of the
acquisition may be different to those stated within the financial statements.
The total deferred consideration payable if all milestones are achieved would
be $1,375,000 The value of deferred consideration payable as at 31 March
2022 was $1,194,000.
14. Financial Instruments by Category
The notional amounts of financial assets and liabilities with a maturity of
less than one year (including trade and other receivables, cash and cash
equivalents and trade and other payables) are assumed to approximate their
fair value.
Group
31 March 2022 31 March 2021
Amortised cost Total Amortised cost Total
Assets per Statement of Financial Performance $ $ $ $
Trade and other receivables 15,000 15,000 20,000 20,000
Cash and cash equivalents 1,776,000 1,776,000 1,797,000 1,797,000
1,791,000 1,791,000 1,817,000 1,817,000
31 March 2022 31 March 2021
Amortised cost Fair value through profit and loss Total Amortised cost Fair value through profit and loss Total
Liabilities per Statement of Financial Performance $ $ $ $ $ $
Trade and other payables 130,000 - 130,000 113,000 - 113,000
Deferred consideration - 594,000 594,000 - 1,194,000 1,194,000
130,000 594,000 724,000 113,000 1,194,000 1,307,000
Company
31 March 2022 31 March 2021
Amortised cost Total Amortised cost Total
Assets per Statement of Financial Performance $ $ $ $
Trade and other receivables (excluding prepayments) 65,000 65,000 17,000 17,000
Loans to subsidiaries 1,835,000 1,835,000 1,195,000 1,195,000
Cash and cash equivalents 1,603,000 1,603,000 1,706,000 1,706,000
3,503,000 3,503,000 2,918,000 2,918,000
31 March 2022 31 March 2021
Amortised cost Total Amortised cost Total
Liabilities per Statement of Financial Performance $ $ $ $
Trade and other payables 101,000 101,000 95,000 95,000
101,000 101,000 95,000 95,000
15. Share capital and premium
Group and Company Number of shares Share capital
No. Nominal value £ $
Ordinary shares 189,103,432 0.0020 378,000 510,000
Deferred shares 356,277,502 0.0099 3,527,000 5,552,000
Total 545,380,934 3,905,000 6,062,000
Number of Ordinary shares Share capital Share premium Total
Issued at 0.02 pence per share $ $ $
As at 31 March 2021 172,436,766 467,000 47,470,000 47,937,000
Issue of new shares - 9 February 2022 16,666,666 43,000 1,598,000 1,641,000
Cost of capital - 16 February 2022 - - (121,000) (121,000)
As at 31 March 2022 189,103,432 510,000 48,947,000 49,457,000
Number of Deferred shares Share capital
Deferred Shares (nominal value of 0.0099 pence per share) $
As at 31 March 2021 356,227,502 5,552,000
As at 31 March 2022 356,227,502 5,552,000
16. Share based payments
Options
The Company has established a share option scheme for Directors, employees and
consultants to the Group. Share options outstanding and exercisable at the end
of the period have the following expiry dates and exercise prices:
Options
Grant Date Vesting Date Exercise price Exercise price hurdle Expiry Date 31 March 2022 31 March 2021
13/01/2021 13/01/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/07/2021 12.0p 18.0p 13/01/2026 3,916,667 3,916,667
13/01/2021 13/01/2022 12.0p 24.0p 13/01/2026 3,916,666 3,916,666
15/09/2021 15/09/2025 12.0p - 15/09/2025 500,000 -
12,250,000 11,750,000
The Company and Group have no legal or constructive obligation to settle or
repurchase the options or warrants in cash.
The fair value of the share options was determined using Black Scholes and
Monte Carlo valuation models. Black Scholes was used for the options granted
in September 2021 and Monte Carlo used for the options granted in January 2021
given that these options had specific market hurdles. The parameters used are
detailed below:
2021 Options 2022 Options
Granted on: 13 January 2021 15 September 2021
Estimated Life (years) 5 years 4 years
Share price (pence per share) 19.05p* 9.75p
Risk free rate 1.05% 1.71%
Expected volatility 120% 47.88%
Total fair value ($000) 1,459,000 1,000
* This is the volume weighted average share price. In determining the expected
volatility, consideration is usually given to the historical company
volatility. However, given prior to 13 January 2021 the Company was operating
as an investment vehicle, as opposed to a mineral sands company, as such the
future share price volatility pattern of the Company, will be materially
different from the historic volatility. It has been deemed appropriate to use
the median 5-year monthly volatility of a basket of listed comparable
companies with exposure to mineral sands.
The expected volatility of the options granted during this financial year is
based on the median 4-year volatility of a basket of listed comparable
companies with exposure to mineral sands.
The risk-free rate of return is based on zero yield government bonds for a
term consistent with the option life.
A reconciliation of options granted over the year to 31 March 2022 is shown
below:
31 March 2022 31 March 2021
Number Weighted average exercise price (£) Number Weighted average exercise price (£)
Outstanding at beginning of period 11,750,000 12.0p - -
Expired - - - -
Exercised - - - -
Granted 500,000 12.0p 11,750,000 12.0p
Outstanding as at period end 12,250,000 11,750,000
Exercisable at period end 7,833,333 3,916,667
The tranche of 3,916,667 options only vests if the share price hits a 100%
premium to the exercise price and therefore given this condition was not met
at year end have been deemed not exercisable.
The options outstanding at 31 March 2022 have a weighted average contractual
life of 3.8 years (2021: 4.8 years).
The options issued during the prior year were all granted on 13 January 2021
and vest in three tranches of one-third on 13 January 2021 ("Tranche 1"),
one-third on 13 July 2021 ("Tranche 2") and one-third on 13 January 2022
("Tranche 3"). Tranche 1 and Tranche 2 have a market based vesting condition
(i.e. the Company's shares having traded any time following Admission at a 50%
premium to the exercise price). Tranche 3 has a market based vesting condition
(i.e. the Company's shares having traded any time following Admission at a
100% premium to the exercise price).
During the period there was a charge of $721,000 (2021: $768,000) in respect
of share options.
Warrants
As at 31 March 2022, there were 18,275,904 warrants outstanding by the Company
(2021: 17,442,571).
Warrants
Grant Date Exercise price Expiry Date 31 March 2022 31 March 2021
08/09/2020* £0.080 08/09/2023 250,000 250,000
13/01/2021** £0.080 13/01/2024 5,000,000 5,000,000
13/01/2021** £0.120 13/01/2024 833,333 833,333
13/01/2021** £0.156 13/01/2024 8,687,499 8,687,499
13/01/2021*** £0.156 13/01/2024 2,423,848 2,423,848
05/02/2021*** £0.156 13/01/2024 247,891 247,891
15/02/2022**** £0.075 15/02/2025 833,333 -
18,275,904 17,442,571
The fair value of the warrants was determined using the Black Scholes model.
The parameters used are detailed below:
2020 Warrants 2021 Warrants 2021 Warrants 2022 Warrants
Granted on: 8 September 2020 13 January 2021 5 February 2021 15 February 2022
Life (years) 3 years 3 years 3 years 3 years
Price at grant 13.2p 20.0p 18.5p 7.75p
Risk free rate 0.20% 0.46% 0.45% 1.71%
Volatility 75% 68.03% 72.53% 88.90%
*The estimated fair value of the 250,000 warrants granted on 8 September 2020
was assessed as $25,000, and charged to the share premium account to recognise
the cost of issuing the warrants. The expected volatility was determined by
reference to the historical volatility of the Company's share price.
**The estimated fair value of the 14,520,832 warrants granted on 13 January
2021 to placing subscribers and advisers was assessed as $2,295,000, which was
charged to the share premium account to recognise the cost of issuing the
warrants.
***The estimated fair value of the 2,423,848 warrants granted on 13 January
2021, and the 247,891 warrants granted on 5 February 2021, to the former
holders of CML convertible bonds was assessed as $342,000 and $32,000
respectively. The assessed fair value of these warrants was capitalised to
the investment in CML within the Company's accounts, and recognised as a share
based payments expense within the consolidated financial statements.
In determining the expected volatility, consideration is usually given to the
historical company volatility. However, given prior to 13 January 2021 the
Company was operating as an investment vehicle, as opposed to a mineral sands
company, as such the future share price volatility pattern of the Company,
will be materially different from the historic volatility. It has been deemed
appropriate to use the median 5-year monthly volatility of a basket of listed
comparable companies with exposure to mineral sands.
****The estimated fair value of the warrants granted on 15 February 2022 was
assessed as $13,000, and charged to the share premium to recognise the cost of
issuing the warrants. The expected volatility was determined by reference to
the historical volatility of the Company's share price.
17. Other reserves
Group
Capital contribution reserve Deferred share reserve Merger reserve Share warrants and options reserve Foreign currency translation reserve Total
$ $ $ Reverse acquisition reserve $ $ $
$
At 31 March 2020 1,250,000 1,969,000 - (45,859,000) 281,000 (1,155,000) (43,514,000)
Other comprehensive income - - - - - 167,000 167,000
Cancellation of options - - - 146,000 (282,000) - (136,000)
Reverse acquisition - - 35,633,000 (29,728,000) (25,000) - 5,880,000
Issue of share warrants - - - - 2,694,000 - 2,694,000
Issue of options - - - - 768,000 - 768,000
At 31 March 2021 1,250,000 1,969,000 35,633,000 (75,441,000) 3,436,000 (988,000) (34,141,000)
At 1 April 2021 1,250,000 1,969,000 35,633,000 (75,441,000) 3,436,000 (988,000) (34,141,000)
Currency translation differences - - - - - (2,100,000) (2,100,000)
Share based payments - - - - 734,000 - 734,000
At 31 March 2022 1,250,000 1,969,000 35,633,000 (75,441,000) 4,170,000 (3,088,000) (35,507,000)
Company
Merger reserve Share warrants and options reserve Foreign currency translation reserve Total
$ $ $ $
At 30 September 2020 - 25,000 (1,086,000) (1,061,000)
Other comprehensive income - - 511,000 511,000
Issue of shares to acquire CML 35,634,000 - - 35,634,000
Issue of share warrants - 2,669,000 - 2,669,000
Issue of options - 768,000 - 768,000
At 31 March 2021 35,634,000 3,462,000 (575,000) (38,521,000)
At 1 April 2021 35,634,000 3,462,000 (575,000) (38,521,000)
Currency translation differences - - (1,841,000) (1,841,000)
Share based payments - 734,000 - 734,000
At 31 March 2022 35,634,000 4,196,000 (2,416,000) (37,414,000)
18. Employee benefit expense
Group Company
Staff costs (excluding Directors) Year ended Period ended Year ended Period ended
31 March 2022 31 March 2021 31 March 2022 31 March 2021
$ $ $ $
Salaries and wages 10,000 6,000 - -
Social security costs - - - -
Other employment costs 5,000 3,000 - -
15,000 9,000 - -
The average monthly number of employees for the Group during the year was 15
(period ended 31 March 2021: 13) and the average monthly number of employees
for the Company was 6 (period ended 31 March 2021: 6).
19. Directors' and Key Management remuneration
Salaries & fees Share based payments Year ended 31 March 2022 Year ended 31 March 2021
$ $ $ $
Executive Directors
Michael Frayne 205,000 - 205,000 380,000
Gregory Martyr 52,000 - 52,000 189,000
Anthony Samaha 57,000 - 57,000 156,000
Non-executive Directors
James Leahy 36,000 - 36,000 102,000
Geoffrey Brown 22,000 - 22,000 35,000
Teh Kwan Wey 20,000 - 20,000 36,000
Key Management
Iranga Dunuwille 62,000 - 62,000 138,000
Compensation for loss of office - - - 21,000
454,000 - 454,000 1,057,000
As at 31 March 2022, there were no directors receiving defined contribution
pension schemes benefits (2021: Nil).
Of the above costs, $37,000 (period ended 31 March 2021: $Nil) has been
capitalised in accordance with IFRS 6 as exploratory related costs and are
shown as an intangible addition in the year.
Details of fees paid to Companies of which the Directors detailed above are
Directors have been disclosed in Note 24.
The remuneration of Directors and key management is determined by the
remuneration committee having regard to the performance of individuals and
market trends.
20. Income tax expense
No charge to taxation arises due to the losses incurred.
The tax on the Group's loss before tax, applicable to the losses of the
consolidated entities, is as follows:
Group
For the year ended 31 March 2022 For the year ended 31 March 2021
$ $
Loss before tax (1,914,000) (7,886,000)
Tax at the applicable rate of 19% (2021: 19%) (364,000) (1,498,000)
Effects of:
Expenditure not deductible for tax purposes 138,000 1,309,000
Deferred tax asset not recognised 226,000 189,000
Tax charge - -
No deferred tax assets have been recognised in the year (2021: nil).
The UK corporation tax throughout 2021 and 2022 was 19%.
The Company has tax losses of approximately $10,493,000 (31 March 2021:
$9,300,000) available to carry forward against future taxable profits.
21. Loss per share
Group
The calculation of the total basic loss per share of (0.36) cents (2021:
(5.61) cents) is based on the total comprehensive loss attributable to equity
holders of the parent company of $1,914,000 (2021: $7,886,000) and on the
weighted average number of ordinary shares of 531,043,035 (2021: 140,667,918)
in issue during the year.
In accordance with IAS 33, basic and diluted earnings per share are identical
for the Group as the effect of the exercise of share options would be to
decrease the earnings per share. Details of share options that could
potentially dilute earnings per share in future periods are set out in Note
16.
22. Expenses by nature
Group
Year ended Year ended
31 March 2022 31 March 2021
$ $
Director fees & employment tax contributions 355,000 382,000
Employee salaries 15,000 9,000
Audit 61,000 66,000
Accountancy 155,000 26,000
Exchange related costs 154,000 51,000
Professional & consultancy fees 219,000 171,000
Office expenses 91,000 44,000
Insurance 19,000 22,000
Depreciation 9,000 19,000
Travel & entertainment 24,000 19,000
Acquisition related costs 34,000 300,000
Other expenses 58,000 323,000
Total administrative expenses 1,194,000 1,432,000
Services provided by the Company's auditor and its associates
During the year, the Group (including overseas subsidiaries) obtained the
following services from the Company's auditors and its associates:
Group
Year ended 31 March 2022 Year ended 31 March 2021
$ $
Fees payable to the Company's auditor and its associates for the audit of the 61,000 66,000
Parent Company and Consolidated Financial Statements
23. Commitments
License commitments
Capital Metals plc through its subsidiaries owns two mineral exploration
licenses and two IMLs in Sri Lanka. These licences include commitments to pay
annual licence fees and minimum spend requirements.
As at 31 March 2022 these are as follows:
Group
Group License fees Minimum spend requirement Total
$ $ $
Not later than one year - - -
Later than one year and no later than five years 54,000 54,000 54,000
Total 54,000 54,000 54,000
24. Related party transactions
Loans to Group undertakings
Amounts receivable as a result of loans granted to subsidiary undertakings are
as follows:
Company
31 March 2022 31 March 2021
$ $
Brighton Metals Limited 783,000 240,000
Capital Metals Limited 918,000 955,000
Damsila Exports Private Ltd 134,000 -
At 31 March 2022 1,835,000 1,195,000
These amounts are unsecured and repayable in US Dollars on demand from the
Company.
All intra Group transactions are eliminated on consolidation.
Other transactions
The Group defines its key management personnel as the Directors of the Company
as disclosed in the Directors' Report.
Limerston Pty Limited, a limited company of which Michael Frayne is a
director, was paid a fee of $205,000 for the year ended 31 March 2022 (31
March 2021: $44,000) for the provision of corporate management and consulting
services to the Company. There was a balance of $Nil owing at year end (31
March 2021: $Nil).
Santannos Limited, a limited company of which Anthony Samaha is a director,
was paid a fee of $17,000 for the year ended 31 March 2022 (31 March 2021:
$49,000) for consulting services to the Company. There was a balance of $Nil
owing at year end (31 March 2021: $Nil).
Hogan's Bluff Capital Pty Ltd, a limited company of which Greg Martyr is a
director, was paid a fee of $53,000 for the year ended 31 March 2022 (31 March
2021: $95,000) for consulting services to the Company. There was a balance of
$Nil owing at year end (31 March 2021: $Nil).
KL-Kepong International Ltd, a limited company of which is fully owned by
Kuala Lumpur Kepong Berhad Ltd of which Teh Kwan Wey is an employee of, was
paid a fee of $20,000 for the year ended 31 March 2022 (31 March 2021: $Nil)
for consulting services to the Company. There was a balance of $Nil owing at
year end (31 March 2021: $Nil).
25. Ultimate controlling party
The Directors believe there is no ultimate controlling party.
26. Events after the reporting date
On the 10 August 2022 the Geological Survey and Mines Bureau of the Government
of Sri Lanka granted the first two Industrial Mining Licences for the Project.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UVOKRUKUKUARRecent news on Capital Metals
See all newsREG - Capital Metals PLC - Rem. Plan, Issue of Equity, Director Shareholding
AnnouncementREG - Capital Metals PLC - Drilling Update
AnnouncementREG - AIM - AIM Notice - 06/06/2025
AnnouncementREG - AIM - AIM Notice - 04/06/2025
AnnouncementREG - Capital Metals PLC - Result of WRAP Retail Offer, Issue of Equity & TVR
Announcement