REG - Capital Metals PLC - Final Results
15/09/2023 07:00
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RNS Number : 5262M Capital Metals PLC 15 September 2023
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.
15 September 2023
Capital Metals plc
("Capital Metals", the "Company" or the "Group")
Final Results for the Year Ended 31 March 2023
&
Notice of General Meeting
Capital Metals (AIM: CMET), a mineral sands company approaching mine
development stage at the high-grade Eastern Minerals Project in Sri Lanka (the
"Project"), announces its final results for the financial year ended 31 March
2023 (the "Year").
The Group's Annual Report and Accounts, together with a notice convening a
General Meeting ("GM") for the purposes of receiving and considering the
Annual Report and Accounts, will be posted to shareholders later today and
will be available shortly on the Company's website at www.capitalmetals.com
(http://www.capitalmetals.com) . The GM will be held at the offices of 6
Heddon Street, London, W1B 4BT on 4 October 2023 at 11:15.
Key Points:
During the Year:
· Grant of the first two Industrial Mining Licences ("IMLs") in August
2022
o Temporarily suspended as announced December 2022. The Company has engaged
in actions to protect its rights and restore the IMLs which appear to be
having a positive impact
· Completion of Development Study and Project Economics in May 2022
demonstrating robust economics with a base case NPV of $155 million and IRR of
56%
Post Year End:
· Offtake Memorandum of Understanding ("MoU") signed with LB Group
(002601:SHENZHEN; Market Cap: US$5.7 billion), the world's No. 1 manufacturer
of high-performance titanium dioxide pigments, in May 2023 to fund the Project
into production
o MoU extended in August 2023 through to 31 December 2023
· Preparing to commence Environmental Impact Assessment over EL199 in
the southern area of the Project
o EL199 holds approximately 60% of the total mineral sands resource of the
Project stretching over 26 km from Panama in the south to Komari in the north
· Greg Martyr, previously Non-Executive Chairman, appointed as
Executive Chairman in July 2023 to dedicate more time to resolving the
Company's licence issues
o Concurrently, Michael Frayne stepped down as CEO and director
· Board confident that process to reinstate IMLs is moving in the
Company's favour
For further information, please visit www.capitalmetals.com
(http://www.capitalmetals.com) or contact:
Capital Metals plc Via Vigo Consulting
Greg Martyr (Executive Chairman)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com (mailto:capitalmetals@vigoconsulting.com)
SPARK Advisory Partners (Nominated Adviser) +44 (0)20 3368 3554
Neil Baldwin / James Keeshan
Tavira Financial +44 (0)20 7100 5100
Jonathan Evans / Oliver Stansfield
About Capital Metals
Capital Metals plc is a British company listed on the AIM segment of the
London Stock Exchange and one of only a few foreign investors in Sri Lanka's
mining industry. After investing US$11 million in exploration and development
activities including detailed environmental assessments between 2017 and 2022,
the Company's Sri Lankan subsidiary, Damsila Exports (Pvt) Limited, was issued
an initial two licences in August 2022 to mine heavy mineral sands in the
Eastern Province, containing industrial minerals including ilmenite, rutile,
zircon, and garnet.
CHAIRMAN'S REPORT
Welcome to the Annual Report for Capital Metals (the "Company") for the
financial year ended 31 March 2023 (the "Year").
This was an extremely challenging year for the Company and its shareholders.
Early in the Year, we were delighted to report that the Company had finally
been granted in August 2022 the first two Industrial Mining Licences ("IMLs")
for the Eastern Minerals heavy mineral sands project (the "Project") by the
Geological Survey and Mines Bureau of the Government of Sri Lanka ("GSMB").
This authority allows us in due course to commence mining activities in
accordance with the development plan outlined in the Development Study and
Preliminary Economic Assessment ("PEA") completed in May 2022. This milestone
also facilitated the selection of an offtaker resulting in the signing in May
2023, after the Year end, of a Memorandum of Understanding ("MoU") with LB
Group, the world's number one manufacturer of high-performance titanium
dioxide pigments, to fund the Project into production.
I expressed in my last Chairman's Report, our gratitude to the Sri Lankan
authorities for their cooperation in the granting of the IMLs in challenging
economic and political circumstances for the country. What a difference a year
makes!
In December 2022, we announced that our two granted IMLs had been suspended by
the GSMB, purportedly pending an investigation into the ownership structure of
our licence-holding subsidiary, Damsila Exports Pvt Limited ("Damsila"), as it
pertained to foreign ownership. The GSMB had been aware of the ownership
structure of Damsila throughout years of dealings between 2017 and 2022
including the department's granting of exploration licences, environmental
permits and the IMLs themselves. We worked hard with the GSMB to understand
their purported concerns and agreed to undertake a restructuring to deliver
Sri Lankan ownership of 60% of Damsila which in turn owned the EL168 permit
area covering the northern part of the Project, containing the two granted
IMLs.
Despite assurances from the GSMB that this would result in the reinstatement
of the IMLs, we now understand that certain individuals in the GSMB and its
governing Ministry of Environment had no intention of reinstating the IMLs and
the request to change our ownership structure was illegal, indeed potentially
part of a plan to illegally hand the Company's rights to favoured third
parties.
After the Year end, in May 2023, despite the GSMB specifically instructing the
Company to cease all mining activities as per its letter suspending the IMLs,
the GSMB purported to cancel our IMLs on the grounds that we had not
undertaken any mining activities. This clearly demonstrated the malfeasance of
the GSMB and the Ministry of Environment and accordingly we promptly filed an
appeal pursuant to the Mines and Minerals Act of Sri Lanka as well as separate
writ actions in the Court of Appeal in Sri Lanka. We also lodged a Notice of
Dispute with the Attorney General of Sri Lanka regarding potential breaches of
the bilateral investment treaty between the United Kingdom and Sri Lanka for
the promotion and protection of investments.
This has required a huge amount of work on the part of the board and
management to determine and protect the Company's legal rights. We have been
simultaneously engaging in lobbying actions directed towards the Sri Lankan
Government, financial stakeholders such as the International Monetary Fund
whose support of Sri Lanka is predicated among other things on tackling
corruption, and other diplomatic stakeholders, with a view to resolving our
issues amicably with the GSMB.
Our complaints appear to be having a positive impact, with the conduct of the
chairman of the GSMB and Minister of Environment coming under intense scrutiny
from the Committee on Public Enterprises in Sri Lanka ("COPE") which has
appointed an independent sub-committee to investigate misappropriation, as has
been widely reported in Sri Lankan media. We are encouraged by the ongoing
exposure of issues within the GSMB and we understand that certain
responsibilities for mining licence applications and appraisals will be
transferred to the Board of Investment ("BOI"), which we believe would be a
very positive step.
What has been most pleasing throughout this process is the support of our
prospective future offtaker, LB Group, with whom we have been in discussions
for some years. It is a testament to the quality of the Project that, despite
the prevailing licence issues, LB Group still proceeded to sign an MoU with
Capital Metals in May 2023 and then extended this, in August 2023, through to
31 December 2023. We believe Sri Lanka will benefit enormously from LB Group's
involvement in the Project. We look forward to concluding this offtake
agreement in due course.
In parallel with the Company's efforts to reinstate the IMLs in the northern
part of the Project area, we will shortly commence an Environmental Impact
Assessment ("EIA") over EL199 in the southern area of the Project, which is
not subject to the illegal actions of the GSMB. EL199 holds approximately 60%
of the total mineral sands resource of the Project stretching over 26 km from
Panama in the south to Komari in the north. The EIA will also enable the
short-term identification of further areas over which to apply for industrial
mining licences. We aim to complete this work and submit applications for
additional industrial mining licences before the end of 2023.
In July 2023, after the Year end, I took over the executive management of the
Company as Executive Chairman to dedicate more time, including on the ground
in Colombo, to resolving the Company's licence issues. At the same time,
Michael Frayne stepped down as Chief Executive Officer and as a director of
the Company. A new Chief Executive Officer with experience in mine
construction and operation will be recruited in due course. I would like to
reiterate our thanks to Michael for his contributions towards the development
of the Project.
In conclusion, while there can be no certainty as to the outcome, I believe
the process to reinstate the IMLs is moving in our favour. Given the
exceptional project economics demonstrated in the PEA, even on conservative
price assumptions, and before considering further upside from other areas of
the Project, the future looks bright for the Company upon overcoming the
interference of a small number of individuals. It is our intention when that
happens to work with LB Group to deliver a Project that uses modern mining
methods, incorporates in-country value-addition, offers local knowledge
transfer, and generates significant export income for Sri Lanka.
We look forward to restoring normal relations with the GSMB with the ongoing
input of the BOI. We had until the interference of a few bad actors been
working cooperatively for many years with the GSMB including extensive work on
our studies and Environmental Impact Assessments.
I would like to finish by thanking our management team in Sri Lanka for their
unstinting efforts in the face of challenging circumstances, and our
investors, including those who supported the Company's capital raises, after
the Year end, in June and July 2023 which are enabling us to continue our
actions to get Project development back on track. I sincerely hope all
stakeholders will in due course be rewarded.
Gregory Martyr
Executive Chairman
14 September 2023
STRATEGIC REPORT
The Directors of the Company present their Strategic Report on the Group for
the year ended 31 March 2023.
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 and since his departure by the Executive
Chairman. The Board monitors compliance with objectives and policies of the
Group through monthly performance reporting, budget updates and periodic
operational reviews.
The Board comprises one Executive Chairman and two Non-Executive Directors.
Review of business
During the Year the work programme built on previous exploration efforts
continued and the first two IMLs for the Project were granted by the GSMB as
outlined in the PEA which was completed in May 2022.
In December 2022 the Company announced that these IMLs were temporarily
suspended purportedly due to concerns the GSMB had with the ownership
structure of Damsila. This resulted in a restructure of the Group.
In May 2023 the GSMB sent a notice of cancellation of the IMLs purportedly due
to failure to comply with certain licence conditions, primarily relating to a
lack of mining activity, despite the GSMB's instructions when suspending the
IMLs to "stop all mining and transport activities with immediate effect."
The Board is consulting with its international and local legal advisers but
considers the reasons for the notice of cancellation to be devoid of merit and
standing in contradiction to previous instructions issued by the GSMB.
The Group is following the appeal procedure in accordance with Sri Lanka's
Mines and Minerals Act which stipulates that a cancellation shall not take
effect unless and until an appeal has been disallowed. It has also been noted
the GSMB is under investigation for misappropriation within its organisation.
The Board is confident both the notice of cancellation and temporary
suspension of the licence will be lifted once due process has been completed.
In parallel with the Company's efforts to reinstate the IMLs in the northern
part of the Project area, the Group will shortly commence an EIA over EL199 in
the southern area of the Project, which is not subject to the illegal actions
of the GSMB, with a view to also submit applications for additional industrial
mining licences before the end of 2023.
Since the Year end, financing was raised with the completion of a Placing,
raising a total of £500,000 through the placing of 50,000,000 Ordinary
Shares. Further financing was raised through a subscription for 36,470,566
Ordinary Shares raising gross proceeds of £364,705.
Financial performance review
The loss of the Group for the year ended 31 March 2023 before taxation amounts
to $1,138,538 (31 March 2022: $1,914,233).
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 2024.
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 2023 2022
Cash and cash equivalents $216,213 $1,775,754
Administrative expenses as a percentage of total assets 23% 18%
Exploration costs capitalised during the period $287,688 $490,256
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.
Our people
Our people are a key element in our success and the Company aims to attract,
develop and retain talented people and to create a diverse and inclusive
working environment, where everyone is accepted, valued and treated equally
without discrimination, taking into account the current size of the Company.
Currently the Company comprises three directors, one key country manager and
18 employees in Sri Lanka, with the workforce by gender summarised below:
As at 31 March 2023 Male Female
Executive Directors 1 -
Non-Executive Directors 2 -
Key Management 1 -
Employees 14 4
All employees 18 4
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, assisting
reforestation campaigns, ongoing financial and training support for the local
farmers, provision of clean and safe drinking water during the dry seasons,
sponsorships for local community based sports events and educational projects.
· Full consultation with the local community on any potential
environmental impact from the Project, and commitment to modern international
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 sponsoring beach cleaning programmes with community
leaders and assisting a reforestation programme conducted by the local forest
department.
The Group is working closely with local communities in the Project area, to
empower local farmers by providing seedlings, and arranging expert advice
through local agricultural experts sponsored by the group. Another initiative
helps local youth to get more involved in sports by providing sporting
equipment and sponsoring local community tournaments. Arrangements are also
being made to promote programmes that increase language proficiency and IT
literacy in the local A/L students in the project area.
The Board and local management team are monitoring the economic and political
developments in Sri Lanka. The Board expects that recent policy 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 modern international mineral sands mining
and rehabilitation processes 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 transported
to a processing plant where the valuable heavy minerals are separated from the
sand. The waste sand (mostly silica) is transported 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:
• completion of the Preliminary Economic Assessment ('PEA')
• grant of Industrial Mining Licences for the Project
• completion of equity financing post year end raising £500,000 to
further the company's exploration program
• completion of a post year end subscription raising gross proceeds
of £364,705
• 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 deep pools of institutional and private investors, towards
the development of the Project, whilst providing important liquidity to
shareholders.
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) (c) "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 modern international practices 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 shareholders, 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 with
the approval of the EIA and IMLs which was clearly undermined by the illegal
activities in the GSMB to ultimately seek to cancel the Licences. The Board
remains confident that the Licences will be reinstated but there can be no
guarantee in this regard.
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 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
reinstatement of the Licences and raising finance from potential offtakers
towards construction and bringing the Project into production.
Greg Martyr
Executive Chairman
14 September 2023
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 2023.
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 (2022:
Nil).
Directors & Directors' interests
The Directors who served during the year ended 31 March 2023 are shown below
and had, at that time the following beneficial interests in the shares of the
Company:
31 March 2023 31 March 2022
Ordinary Shares Options Ordinary Shares Options
Gregory Martyr 4,582,746 1,500,000 4,582,746 1,500,000
Michael Frayne (1) 13,190,006 3,000,000 13,190,006 3,000,000
James Leahy 188,333 1,500,000 188,333 1,500,000
Teh Kwan Wey - 500,000 - 500,000
(1) Michael Frayne resigned on 30 June 2023
Further details on options can be found in Note 16 to the Financial
Statements.
Substantial shareholders
The substantial shareholders at 31 March 2023 are shown below:
31 March 2023 7 September 2023
Holding Percentage Holding Percentage
Brent Holdings Limited 24,793,095 13.11 24,793,095 8.93
Bart Properties Pty Ltd - - 16,438,725 5.92
Roman Resources Management Pty Ltd 14,423,869 7.63 14,423,869 5.20
Stanton Investment Limited 12,678,820 6.70 12,678,820 4.57
KL-Kepong International Ltd 11,197,984 5.92 11,822,984 4.26
Chulu Holding Pty Ltd 8,093,048 4.27 9,093,048 3.28
Post year end there was a placing to raise gross proceeds of £500,000 through
a placing of 50,000,000 new ordinary shares and a subscription to raise gross
proceeds of £364,705 through a subscription for 36,470,566 new ordinary
shares.
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 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 20 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 March
2025, 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 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 significant 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 27 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.
Appointment of Auditors
The Group appointed PKF Littlejohn LLP as auditor in September 2022 in
accordance with Section 485 of the Companies Act 2006. PKF Littlejohn LLP has
signified its willingness to continue in office as auditor.
This report was approved by the Board on 14 September 2023 and signed on its
behalf.
Greg Martyr
Executive Chairman
14 September 2023
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 three Directors: the 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.
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 Executive
Chairman, 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 Industrial Mining Licences application by the Group for the
Project in Sri Lanka, which were subsequently granted in the year, 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
which is 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 regular intervals 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 who
resigned on 30 June 2023); Executive Chairman (Greg 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.
Biographies for each member of the Board is provided on the Company's website
www.capitalmetals.com (http://www.capitalmetals.com) .
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. 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 Audit committee
Gregory Martyr 5/5 2/2
Michael Frayne 5/5 -
James Leahy 5/5 -
Teh Kwan Wey 5/5 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
Board 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 Group 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, 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 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 whole Board is responsible for the appointment of all additional and
replacement Executive and Non-Executive Directors.
The Board is supported by the audit and remuneration committees as described
below.
Audit Committee
The Audit Committee comprises Greg Martyr (Chair) and Teh Kwan Wey.
The Audit Committee reviews reports from management and from PKF Littlejohn
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 PKF Littlejohn 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 PKF
Littlejohn LLP without management present. Further, the Audit Committee is
responsible for making recommendations to the Board on the appointment of PKF
Littlejohn LLP and the audit fee and reviews reports from management and PKF
Littlejohn 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 PKF Littlejohn 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 PKF Littlejohn LLP and to approve the
remuneration and terms of engagement of PKF Littlejohn LLP;
· reviews and monitors PKF Littlejohn 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 PKF Littlejohn
LLP to supply non-audit services, taking into account relevant external
guidance regarding the provision of non-audit services by PKF Littlejohn 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.
PKF Littlejohn LLP were appointed as the Group's external auditor in September
2022. Prior to this, the audit was conducted by BDO LLP.
Having assessed the performance, objectivity and independence of the auditor,
the Committee will be recommending the reappointment of PKF Littlejohn LLP as
auditor to the Company at the 2023 Annual General Meeting.
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 Greg 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 and Executive Chairman;
· 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 and Executive Chairman, 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.
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.
Greg Martyr
Chairman
14 September 2023
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CAPITAL METALS PLC
Opinion on the financial statements
We have audited the financial statements of Capital Metals plc (the 'parent
company') and its subsidiaries (the 'group') for the year ended 31 March 2023
which comprise the Consolidated Income Statement, the Consolidated Statement
of Comprehensive Income, the Consolidated and Parent Company Statements of
Financial Position, the Consolidated and Parent Company Statements of Changes
in Equity, the Consolidated and Parent Company Statements of Cash Flows and
notes to the financial statements, including significant accounting policies.
The financial reporting framework that has been applied in their preparation
is applicable law and UK-adopted international accounting standards and as
regards the parent company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
In our opinion:
· the financial statements give a true and fair view of the state of
the group's and of the parent company's affairs as at 31 March 2023 and of the
group's loss for the year then ended;
· the group financial statements have been properly prepared in
accordance with 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group and 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. We
believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
Material uncertainty related to going concern
We draw attention to note 2.4 in 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 the financial statements in order
to fund its ongoing working capital requirements. As outlined in note 7, the
group's Industrial Mining Licenses ("IMLs") were suspended at the year end,
and subsequently cancelled subject to appeal, which could materially alter the
future financial position of the group and its ability to raise funds. As
stated in note 2.4, these events or conditions, along with the other matters
as set forth in note 2.4 and note 7, 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.
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors'
assessment of the group and parent company's ability to continue to adopt the
going concern basis of accounting included the following:
· Obtaining the directors' going concern assessment and evaluating the
appropriateness of the assessment;
· Reviewing the budgets/cashflow forecasts which cover the period to 31
March 2025 and challenging management's basis for the underlying assumptions
in the forecast, agreeing to supporting documentation such as the review of
post year end bank statements, management accounts and regulatory news service
announcements;
· Evaluating the feasibility of management's plans for future actions
in relation to its going concern assessment, including an assessment of the
cancellation of the IMLs and the impact on the group's future plans;
· Reviewing the external market factors affecting the group and its
future economic viability, and ensuring this is appropriately reflected in the
forecasts; and
· Reviewing the adequacy of the disclosures in respect of going concern
including the uncertainties over the ability to raise additional funds.
Our responsibilities and the responsibilities of the directors with respect to
going concern are described in the relevant sections of this report.
Our application of materiality
The scope of our audit was influenced by our application of materiality. The
quantitative and qualitative thresholds for materiality determine the scope of
our audit and the nature, timing and extent of our audit procedures.
The materiality applied to the group financial statements was $119,000, based
on 2.5% of the group's gross assets. Gross assets were selected as the
benchmark because the intangible exploration assets are the primary assets,
and their development is the principal activity of the group. The materiality
applied to the parent company financial statements was $118,000 which has been
assessed based on 2.5% of the parent company gross assets and capped below the
overall group materiality. Gross assets were selected as the benchmark for the
parent company materiality as the significant balances in the parent company
financial statements are the investments, which own and operate the underlying
exploration projects.
We use performance materiality to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements
exceeds overall materiality. Specifically, we use performance materiality in
determining the scope of our audit and the nature and extent of our testing of
account balances, classes of transactions and disclosures. The performance
materiality for the group was $83,000 and $82,000 for the parent company,
being 70% of materiality for the financial statements as a whole.
In determining performance materiality, we considered the following factors:
· Our knowledge of the group and its environment, including industry
specific trends;
· Significant transactions during the year; and
· The level of judgement required in respect of the key accounting
estimates.
Whilst materiality for the financial statements as a whole was set at
$119,000, each significant component of the group was audited to an overall
materiality ranging between $44,000 and $118,000, with performance materiality
set at 70%.
We agreed with the audit committee that we would report all audit differences
identified during the course of our audit in excess of $5,900 at both group
and parent company level, as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds.
We applied the concept of materiality in planning and performing our audit and
in evaluating the effect of misstatement. No significant changes have come to
light during the audit which required a revision of our materiality for the
financial statements as a whole.
Our approach to the audit
Our audit is risk based and is designed to focus our efforts on the areas at
greatest risk of material misstatement, aspects subject to significant
management judgement as well as greatest complexity, risk and size.
As part of designing our audit, we determined materiality, as above, and
assessed the risk of material misstatement in the financial statements. In
particular, we looked at areas involving significant accounting estimates and
judgement by the directors and considered future events that are inherently
uncertain. These areas of estimate and judgement included:
· the recoverability of intangible assets and investments in subsidiary
undertakings, as the future exploration results are inherently uncertain;
· the group's assessment of control and subsequent consolidation of
Damsila Exports (Pvt) Limited; and
· the fair value assessment of the deferred and contingent
consideration.
We also addressed the risk of management override of internal controls,
including among other matters consideration of whether there was evidence of
bias that represented a risk of material misstatement due to fraud.
The scope of our audit was based on the significance of component's operations
and materiality. Each component was assessed as to whether they were
significant or not to the group by either their size or risk.
The Sri Lankan subsidiaries Damsila Exports (Pvt) Limited ("DEL") and Eastern
Minerals (Pvt) Limited ("EML") have been assessed as significant components of
the group. The key balances held within these entities are exploration and
evaluation assets. These significant components were audited by component
auditors in Sri Lanka operating under our instruction. There was regular
interaction with the component auditors during all stages of the audit, and we
were responsible for the scope and direction of the audit process. We reviewed
key working papers and reporting appendices to understand the work performed
and conclusions reached, in order to gain sufficient appropriate evidence for
our opinion on the group financial statements.
The parent company was also assessed as a significant component. All audit
work on other components was conducted by the group audit team in London.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section we have
determined the matters described below to be the key audit matters to be
communicated in our report.
Key audit matter How our scope addressed this matter
Accuracy and valuation of the carrying value of the group's capitalised
exploration costs (Note 7)
The group holds intangible assets in relation to the capitalised exploration Our work in this area included:
costs for the Sri Lankan mineral sands projects.
- Obtaining documentation to confirm ownership and position of the licenses at
The projects are at an early stage of development and the intangible assets year end;
are subject to periodic impairment reviews when circumstances indicate the
potential for impairment. The carrying value and its recoverability is - Obtaining an update from management with regards to the current position of
dependent on the expected commerciality of the underlying projects. the IMLs and obtaining supporting documentation in this regard;
There is also a risk that the asset is overstated as a result of additions -Reviewing and challenging management's impairment assessment to consider
being incorrectly capitalised through not meeting the criteria of IFRS 6. whether there have been any indicators of impairment under IFRS 6, including
the temporary suspension of the IMLs;
Furthermore, as at the year end the industrial mining licences ("IMLs") held
in DEL were subject to a temporary suspension following a review by the - Reviewing external documentation and reports to assess if there are any
Geological Survey and Mines Bureau ("GMSB"). Should these licenses be revoked, facts or results which would indicate impairments at each project;
this could lead to a significant impairment to the exploration assets.
- Performing substantive testing on a sample of additions made during the
This is considered to be a key audit matter due to the significant judgement period to ensure appropriate capitalisation with regards to IFRS 6; and
and estimates involved in assessing whether any indicators of impairment have
arisen at the year end, and in quantifying any potential impairment. - Reviewing disclosures in the financial statements to ensure adequate
disclosure of the key accounting estimates.
As outlined in note 7, the IMLs granted in DEL were subject to a temporary
suspension as at the year end and subsequently cancelled subject to appeal.
Management have commenced the appeal and legal proceedings and believe they
have met all of the GMSB's requirements and expect the matter to be positively
resolved.
As at the date of this report, there has been no resolution and it is still
unclear as to whether the cancellation will be reversed. No adjustments have
been made to the financial statements to reflect the uncertainty over the
license position.
Group reorganisation (Note 18)
As announced on 20 February 2023, the group has undertaken a reorganisation Our work in this area included:
exercise ("the Restructuring") to conform with the stated requests by the GMSB
with regard to local ownership of the mining and exploration assets. - Confirming the ownership and good standing of the subsidiaries at the
year-end;
Under the Restructuring, the group has disposed of Keynes Investment Lanka
(Pvt) Limited ("KIL") and 60% of the ownership of DEL. Management has assessed - Reviewing the accounting entries made with regards to the Restructuring to
that the group has maintained control of DEL and as a result has continued to ensure in line with the underlying commercial agreements and accounting
consolidate. standards, including reviewing management's assessment of control over DEL;
and
The transaction involves complex accounting entries and the assessment of
control is considered to be a key accounting judgement. As a result, the - Considering the appropriateness of the disclosure included in the financial
Restructuring is considered to be a key audit matter. statements.
Other information
The other information comprises the information included in the Annual Report,
other than the financial statements and our auditor's report thereon. The
directors are responsible for the other information contained within the
annual report. Our opinion on the group and parent company financial
statements does not cover the other information and, except to the extent
otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements, or our knowledge
obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a
material misstatement in the financial statements themselves. If, based on the
work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
· the information given in the strategic report and the directors' report
for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
· the strategic report and the directors' report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the directors'
report.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our opinion:
· adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
· the parent company financial statements 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 group and parent company
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 group and parent company financial statements, the directors
are responsible for assessing the group 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.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
· We obtained an understanding of the group and parent company and the
sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements. We
obtained our understanding in this regard through discussions with management
about the potential instances of non-compliance with laws and regulations both
in the UK and in overseas subsidiaries. We also selected a specific audit team
based on experience with auditing exploration entities of a similar size.
· We determined the principal laws and regulations relevant to the
group and parent company in this regard to be those arising from:
o The Companies Act 2006;
o AIM Rules;
o Local industry regulations in Sri Lanka;
o The operating terms set out in the exploration licences and IMLs; and
o Local tax and employment law in the UK and Sri Lanka.
· We designed our audit procedures to ensure the audit team considered
whether there were any indications of non-compliance by the group and parent
company with those laws and regulations. These procedures included, but were
not limited to:
o Conducting enquiries of management regarding potential instances of
non-compliance;
o Reviewing Regulatory News Service (RNS) announcements;
o Reviewing legal and professional fees ledger accounts;
o Discussions with the component auditors to report on the good standing of
the significant subsidiaries; and
o Reviewing board minutes and other correspondence from management.
· We also identified the risks of material misstatement of the
financial statements due to fraud. We considered, in addition to the
non-rebuttable presumption of a risk of fraud arising from management override
of controls, whether key management judgements could include management bias.
The potential for bias was identified in relation to the carrying value of the
exploration assets and assessment of control of DEL. We addressed these items
as outlined in the Key Audit Matters section. The potential for management
bias also existed in the:
o Assessment of the carrying value of the investment in subsidiaries; and
o Fair value assessment of the deferred consideration.
Audit procedures were performed in this regard to review and challenge
management's impairment and fair value assessments.
· As in all of our audits, we addressed the risk of fraud arising from
management override of controls by performing audit procedures which included,
but were not limited to: the testing of journals; reviewing accounting
estimates for evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal course of
business.
· Compliance with laws and regulations at the subsidiary level was
ensured through enquiry of management, communication with the component
auditor and reviewing correspondence for any instances of non-compliance.
Because of the inherent limitations of an audit, there is a risk that we will
not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation.
This risk increases the more that compliance with a law or regulation is
removed from the events and transactions reflected in the financial
statements, as we will be less likely to become aware of instances of
non-compliance. The risk is also greater regarding irregularities occurring
due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities.This description forms part of our
auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we
are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone, other than the company and the company's members as
a body, for our audit work, for this report, or for the opinions we have
formed.
Adam Humphreys (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
14 September 2023
15 Westferry Circus
Canary Wharf
London E14 4HD
CONSOLIDATED & COMPANY STATEMENTS OF FINANCIAL POSITION
For the year ended 31 March 2023
Company number: 05555087
Group Company
Note For the year ended 31 March 2023 For the year ended 31 March 2022 For the year ended 31 March 2023 For the year ended 31 March 2022
$ $ $ $
Non-Current Assets
Property, plant and equipment 6 25,591 28,541 - -
Investment in subsidiaries 8 - - 32,988,373 35,030,108
Loans to subsidiaries 9 - - 2,278,546 1,834,904
Other loans 10 125,371 - - -
Exploration & evaluation assets 7 4,451,811 4,556,210 - -
4,602,773 4,584,751 35,266,919 36,865,012
Current Assets
Trade and other receivables 11 40,017 36,160 235,710 65,989
Cash and cash equivalents 12 216,213 1,775,754 174,707 1,602,766
256,230 1,811,914 410,417 1,668,755
Total Assets 4,859,003 6,396,665 35,677,336 38,533,767
Non-Current Liabilities
Trade and other payables 13 600,000 602,274 - -
600,000 602,274 - -
Current Liabilities
Trade and other payables 13 841,891 723,926 234,326 101,812
841,891 723,926 234,326 101,812
Total Liabilities 1,441,891 1,326,200 234,326 101,812
Net Assets 3,417,112 5,070,465 35,443,010 38,431,955
Equity attributable to owners of the Parent
Share capital 15 6,062,403 6,062,403 6,062,403 6,062,403
Share premium 15 48,946,676 48,946,676 48,946,676 48,946,676
Other reserves 17 (35,917,609) (35,507,047) 35,155,483 37,414,384
Retained losses (15,570,928) (14,431,567) (54,721,552) (53,991,508)
Non-controlling interest 18 (103,430) - - -
Total Equity 3,417,112 5,070,465 35,443,010 38,431,955
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 2023 was $730,044 (year ended 31 March 2022: $1,699,017).
The Financial Statements were approved and authorised for issue by the Board
of Directors on 14 September 2023 and were signed on its behalf by:
Greg Martyr
Executive Chairman
CONSOLIDATED INCOME STATEMENT
For the year ended 31 March 2023
Continued operations Note For the year ended 31 March 2023 For the year ended 31 March 2022
$ $
Administrative expenses 23 (1,132,498) (1,194,315)
Share based payment charge 16 - (720,842)
Other losses (10,535) 454
Operating loss (1,143,033) (1,914,703)
Finance income 4,495 470
Loss before income tax (1,138,538) (1,914,233)
Income tax 21 - -
Loss for the year attributable to owners of the Parent (1,138,538) (1,914,233)
Basic (Loss) Per Share attributable to owners of the Parent during the period 22 (0.21) (0.36)
(expressed in cent per share)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
For the year ended 31 March 2023
$ For the year ended 31 March 2022
$
Loss for the year (1,138,538) (1,914,233)
Other Comprehensive Income:
Items that may be subsequently reclassified to profit or loss
Foreign exchange on translation (513,992) (2,100,227)
Retirement benefit obligation (823) (109)
Total other comprehensive income for the year, net of tax (514,815) (2,100,336)
Total comprehensive loss attributable to:
Owners of the Company (1,653,353) (4,014,569)
Non-controlling interests - -
Total comprehensive loss (1,653,353) (4,014,569)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Note Share capital Share premium Other reserves Retained losses Total Total
$ $ $ $ $ Non-controlling interest $
$
Balance as at 1 April 2021 6,018,628 47,469,912 (34,140,736) (12,517,225) 6,830,579 - 6,830,579
Loss for the year - - - (1,914,233) (1,914,233) - (1,914,233)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive income - - (2,100,227) (109) (2,100,336) - (2,100,336)
Total comprehensive income for the year - - (2,100,227) (1,914,342) (4,014,569) - (4,014,569)
Issue of share capital for cash 43,775 1,597,787 - - 1,641,562 - 1,641,562
Costs of issue of share capital - (121,023) - - (121,023) - (121,023)
Share based payments - - 733,916 - 733,916 - 733,916
Total transactions with owners, recognised directly in equity 43,775 1,476,764 733,916 - 2,254,455 2,254,455
-
Balance as at 31 March 2022 6,062,403 48,946,676 (35,507,047) (14,431,567) 5,070,465 - 5,070,465
Balance as at 1 April 2022 6,062,403 48,946,676 (35,507,047) (14,431,567) 5,070,465 - 5,070,465
Loss for the year - - - (1,138,538) (1,138,538) - (1,138,538)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive income - - (513,992) (823) (514,815) - (514,815)
Total comprehensive income for the year - - (513,992) (1,139,361) (1,653,353) - (1,653,353)
Reserve transfer on dilution of subsidiary - foreign exchange movements on NCI - - 103,430 - - (103,430) -
Total transactions with owners, recognised directly in equity - - 103,430 - - (103,430) -
Balance as at 31 March 2023 6,062,403 48,946,676 (35,917,609) (15,570,928) 3,520,542 (103,430) 3,417,112
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2023
Note Share capital Share premium Other reserves Retained Losses Total
$ $ $ $ $
Balance as at 1 April 2021 6,018,628 47,469,912 38,521,164 (52,292,491) 39,717,213
Loss for the year - - - (1,699,017) (1,699,017)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive income - - (1,840,696) - (1,840,696)
Total comprehensive income for the year - - (1,840,696) (1,699,017) (3,539,713)
Issue of share capital for cash 43,775 1,597,787 - - 1,641,562
Transaction costs on issue of share capital - (121,023) - - (121,023)
Share option expense - - 733,916 - 733,916
Total transactions with owners, recognised directly in equity 43,775 1,476,764 733,916 - 2,254,455
Balance as at 31 March 2022 6,062,403 48,946,676 37,414,384 (53,991,508) 38,431,955
Balance as at 1 April 2022 6,062,403 48,946,676 37,414,384 (53,991,508) 38,431,955
Loss for the year - - - (730,044) (730,044)
Other comprehensive income for the year
Items that may be subsequently reclassified to profit or loss
Other comprehensive loss - - (2,258,901) - (2,258,901)
Total comprehensive loss for the year - - (2,258,901) (730,044) (2,988,945)
Total transactions with owners, recognised directly in equity - - - - -
Balance as at 31 March 2023 6,062,403 48,946,676 35,155,483 (54,721,552) 35,443,010
STATEMENT OF CASH FLOWS
For the year ended 31 March 2023
Group Company
Note Year ended Year ended Year ended Year ended
31 March 2023 31 March 2022 31 March 2023 31 March 2022
$ $ $ $
Cash flows from operating activities
Loss before income tax (1,138,538) (1,914,233) (730,044) (1,699,017)
Adjustments for:
Depreciation 6 3,208 8,832 - -
Share based payments 16 - 720,842 - 720,842
Foreign exchange (11,494) 104,043 (31,675) 5,283
Interest received (4,463) (388) - -
Changes in working capital:
(Increase)/Decrease in trade and other receivables (5,349) 73,097 (165,874) 40,325
Increase in trade and other payables 115,885 23,232 126,579 11,189
Net cash used in operating activities (1,040,751) (984,575) (801,014) (921,378)
Cash flows from investing activities
Purchase of property plant and equipment 6 (7,168) (6,322) - -
Disposal of property, plant and equipment 6 - 4,288 - -
Cash expenditure on exploration and evaluation activity 7 (287,688) (490,256) - -
Disposal of subsidiary undertaking 10 (124,897) - - -
Loan to subsidiaries 9 - - (533,627) (639,627)
Interest received 4,463 388 - -
Net cash used in investing activities (415,290) (491,902) (533,627) (639,627)
Cash flows from financing activities
Proceeds from issue of share capital - 1,641,756 - 1,641,756
Transaction costs of share issue - (121,023) - (121,023)
Net cash generated from financing activities - 1,520,733 - 1,520,733
Net (decrease)/increase in cash and cash equivalents (1,456,041) 44,256 (1,334,641) (40,272)
Cash and cash equivalents at beginning of year 1,775,754 1,797,319 1,602,766 1,705,496
Exchange loss on cash and cash equivalents (103,500) (65,821) (93,418) (62,458)
Cash and cash equivalents at end of year 12 216,213 1,775,754 174,707 1,602,766
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2023
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 quoted on AIM of the London
Stock Exchange. The Company is incorporated and domiciled in England.
The address of its registered office is 6 Heddon Street, London, W1B 4BT.
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 UK adopted
International Accounting Standards and in accordance 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. In the prior year the
financial statements were 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.
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 2022 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.
(b) New standards, amendments, and interpretations in issue but not yet
effective or not yet endorsed and not early adopted.
No material impact expected on the financial statements.
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 2023. 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.
When the Group ceases to have control, any retained interest in the entity is
remeasured to its fair value at the date when control is lost, with the change
in carrying amount recognised in profit or loss. The fair value is the initial
carrying amount for the purposes of subsequently accounting for the retained
interest as an associate, joint venture or financial asset. In addition, any
previously recognised in other comprehensive income in respect of that entity
are accounted for as if the Group had directly disposed of the related assets
or liabilities. This may mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
During the year, the Group completed a restructure which resulted in the
disposal of a subsidiary and disposal of an equity proportion of a subsidiary
whilst control was maintained. Refer to Note 18 for further details.
Transactions with non-controlling interests that do not result in loss of
control are accounted for as equity transactions - that is, as transactions
with the owners in their capacity as owners. The difference between fair value
of any consideration paid and the relevant share acquired of the carrying
value of net assets of the subsidiary is recorded in equity. Gains or losses
on disposals to non-controlling interests are also recorded in equity.
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 2023, the Group had cash and cash equivalents of $216,213.
The Directors have prepared cash flow forecasts to 31 March 2025, which take
account of the cost and operational structure of the Group and Company,
planned exploration and evaluation expenditure, licence commitments and
working capital requirements. These forecasts indicate that the Group and
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 June 2023 with an equity raising
of £500,000 and a further equity subscription raising total proceeds of
£364,705.
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 significant 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 and the reinstatement of the IMLs as
discussed in Note 7. Thus, they continue to adopt the going concern basis of
accounting preparing these 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 operates in two geographical
areas, the UK and Sri Lanka. The Company operates in one geographical area,
the UK. Activities in the UK are mainly administrative in nature whilst
activities in Sri Lanka relate to exploration and evaluation of mineral sand
resources. The reports used by the chief operating decision maker are based on
these geographical segments.
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 and connected parties, 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. All ordinary shares are fully paid and
carry full voting, dividend and capital distribution (including on winding up)
rights.
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), US Dollar (USD) 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 intercompany 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 2023, the exposure of the Group to foreign exchange rates is
summarised as follows:
Group Group Company Company
2023 2022 2023 2022
Cash and cash equivalents $'000 $'000 $'000 $'000
US Dollar 19 167 18 7
Sri Lankan Rupee 41 13 - -
Pound Sterling 156 1,596 156 1,596
216 1,776 174 1,603
Other receivables
US Dollar - - - -
Sri Lankan Rupee - - - -
Pound Sterling 26 23 26 8
26 23 26 8
242 1,799 200 1,611
As at 31 March 2023, 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
2023 2022 2023 2022
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% GBP/USD 18 162 18 160
-10% GBP/USD (18) (162) (18) (160)
As at 31 March 2023, 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
2023 2022 2023 2022
Impact on comprehensive loss $'000 $'000 $'000 $'000
+10% LKR/USD 4 1 - -
-10% LKR/USD (4) (1) - -
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
2023 2022 2023 2022
$'000 $'000 $'000 $'000
Cash and bank balances 216 1,776 175 1,603
Trade and other receivables 14 28 198 57
Loan to subsidiaries - - 2,278 1,835
230 1,804 2,651 3,495
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 $3,417,112
(2022: $5,070,465) 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 2023 of
$4,451,811 (31 March 2022 $4,556,210) 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 was subject to the
Group's nine IML Applications, two of which were granted during the year. It
is noted that the IML's granted are 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 during the year and based on the
ongoing discussions with the Geological Survey and Mines Bureau, despite the
current suspension, 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 or the reinstatement of the suspended IMLs, then Directors would
expect to consider an impairment of the E&E assets. See Note 7 for further
considerations at the year end.
Carrying value of intercompany loans
At 31 March 2023 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. See Note
9 for further information.
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.
Control and consolidation of Damsila Exports (Pvt) Limited
If an entity with a 40% shareholding has a contractual arrangement that gives
it the power to direct the relevant activities of the other entity, it can
maintain control and is required to consolidate the financial statements of
the other entity. After the restructure of the Group during the year, the
contractual arrangements in place to determine whether they have the power to
direct the relevant activities of another entity and, as a result, maintain
control were carefully assessed and it was concluded Redgate Lanka maintains
control of Damsila Exports and as such they shall remain consolidated within
the Group accounts. No non-controlling interest has been recognised against
the net assets as the Group continues to have full rights to the returns of
the subsidiary. Please refer to Note 18 for details of the Group restructure.
Fair value of deferred and contingent consideration
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. At the reporting year end,
the probability estimated for the likelihood of completion of Tranche 2 and 3
of the deferred and contingent consideration 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.
5. Segment information
As at 31 March 2023, the Group operates in two geographical areas, the UK and
Sri Lanka. The Company operates in one geographical area, the UK. Activities
in the UK are mainly administrative in nature whilst activities in Sri Lanka
relate to exploration and evaluation of mineral sand resources. The reports
used by the chief operating decision maker are based on these geographical
segments.
The Group generated no revenue during the year ended 31 March 2023 (2022:
$Nil).
2023 Sri Lanka UK Total
$ $ $
Administrative expenses (188,665) (943,833) (1,132,498)
Other gains/(losses) 3,533 (14,068) (10,535)
Finance income 4,463 32 4,495
Operating loss from continued operations per reportable segment (180,669) (957,869) (1,138,538)
Reportable segment assets 4,646,925 212,078 4,859,003
Reportable segment liabilities (1,207,565) (234,326) (1,441,891)
Reportable segment net assets/(liabilities) 3,439,360 (22,248) 3,417,112
Segment assets and liabilities are allocated based on geographical location.
6. Property, plant and equipment
The movement on the property, plant and equipment asset accounts are shown in
aggregate as follows:
Group Total
$
Cost
As at 31 March 2021 116,458
Exchange Differences (37,022)
Additions 6,322
Disposals (4,288)
As at 31 March 2022 81,470
As at 1 April 2022 81,470
Exchange Differences (9,332)
Additions 7,168
Disposals -
As at 31 March 2023 79,306
Depreciation
As at 31 March 2021 68,892
Charge for the year 8,832
Disposals (4,078)
Exchange differences (20,717)
As at 31 March 2022 52,929
As at 1 April 2022 52,929
Charge for the year 3,208
Disposals -
Exchange differences (2,422)
As at 31 March 2023 53,715
Net book value as at 31 March 2022 28,541
Net book value as at 31 March 2023 25,591
7. 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 2021 6,178,503
Additions 490,256
Exchange differences (2,112,549)
As at 31 March 2022 4,556,210
Additions 287,688
Exchange differences (392,087)
As at 31 March 2023 4,451,811
All exploration and evaluation assets relate to Group subsidiaries and the
Eastern Minerals Project in Sri Lanka.
The Directors undertook a review of the impairment indicators and none were
identified. In performing their review, the Directors noted the following:
· DEL Licence (EL430) was issued for a period of 24 months until 13
March 2024.
· Completion of the Preliminary Economic Assessment ('PEA') was
completed in May 2022.
· The 2 IMLs were approved by the GSMB on 3 August 2022.
· Significant further exploration and evaluation activity is planned,
including an EIA for EL199.
· A Memorandum of Understanding (MoU) was signed with LB Group on 9 May
2023 and extended to December 2023. See Note 26.
· 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 licences granted during the year were subsequently
purported to be cancelled by the GSMB in May 2023. However, in accordance with
Sri Lankan law, the cancellation is not effective until such time as the
legislated appeal process has been completed. Therefore, effectively the
licences are not cancelled and are effectively only suspended.
The GSMB purported to cancel the licences on the grounds that mining
activities were not being undertaken on the licence areas but the GSMB
specifically stated that our licences were suspended pending a further
investigation and that we should cease all mining activities forthwith. Given
these facts, the Groups lawyers are very confident that the purported
cancellations will be reversed, and we will in fact be given our licences back
free of any suspension.
It is also noted, the two IMLs only apply to a fraction of the total resource
of the Eastern Minerals Project, which comprises 47 1x1km grids in EL168 and
37 1x1km grids in EL199. The two IMLs themselves only apply to small areas in
four of the total 47 grids in EL168 however the outstanding 7 IML applications
result in coverage of all of the 47 grids in EL168. The Groups disputes with
the GSMB concern the EL168 area and there is no dispute over the EL199 area.
Damsila Exports also holds a valid exploration licence, EL430, where
exploration activities are ongoing unhindered. Management are of the judgement
that there is a reasonable expectation, once the IMLs have been reinstated,
that the remaining IML applications will be approved in due course, however
the appeal is ongoing and therefore the result uncertain.
Following their assessment, the Directors concluded that no impairment charge
was required at 31 March 2023.
8. Investments in subsidiaries
Company
For the year ended 31 March 2023 For the year ended 31 March 2022
$ $
At beginning of period 35,030,108 36,799,952
Additions - -
Impairment charge - -
Foreign exchange differences (2,041,735) (1,769,844)
Investment at end of period 32,988,373 35,030,108
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 Keynes Investments Lanka (Pvt) Limited 60.01% Exploration
Sri Lanka PV8591 Redgate Lanka (Pvt) Limited 39.99% Exploration
Eastern Minerals (Pvt) Limited Sri Lanka PV81273 Redgate Lanka (Pvt) Limited 100% Exploration
All subsidiary undertakings are included in the consolidation.
Keynes Investments Lanka (Pvt) Limited was disposed as part of the Group
restructure during the year. Please refer to Notes 10 and 18 for further
details.
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.
9. Loans to subsidiaries
Company
For the year ended 31 March 2023 For the year ended 31 March 2022
$ $
At beginning of period 1,834,904 1,195,000
Additions 533,627 697,389
Foreign exchange differences (89,985) (57,485)
Loan at end of period 2,278,546 1,834,904
The fair value of all receivables is the same as their carrying values stated
above and are repayable on demand. Interest on the principal of the loans is
charged at a rate of 2% per annum.
The Directors have assessed that there are 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. As
such the Directors concluded that no impairment was required at 31 March 2023.
Please refer to Note 7 for further details.
At 31 March 2023 Management reassessed the recovery profile of the 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.
10. Other loans
For the year ended 31 March 2023
$
Keynes Investment Lanka (Pvt) Limited 124,897
Green Tech Minerals (Pvt) Limited 467
Other loans 7
Loans at end of period 125,371
The loan to Keynes Investment Lanka (Pvt) Limited has arisen due to the
restructure of the Group, which took place in the year (please refer to Note
18). As such Keynes have been deconsolidated from the Group. The loan balance
is a loan balance held with Damsila Exports (Pvt) Limited that had previously
been eliminated on consolidation.
11. Trade and other receivables
Group Company
Current For the year ended 31 March 2023 For the year ended 31 March 2022 For the year ended 31 March 2023 For the year ended 31 March 2022
$ $ $ $
Trade receivables - 14,843 198,339 58,153
Prepayments 10,022 13,481 9,050 -
VAT receivable 26,333 7,836 26,333 7,836
Other receivables 3,662 - 1,988 -
Total 40,017 36,160 235,710 65,989
The fair value of all receivables is the same as their carrying values stated
above. The Directors have assessed that there are no expected credit losses to
recognise in respect of the trade and other receivables.
12. Cash and cash equivalents
Group Company
For the year ended 31 March 2023 For the year ended 31 March 2022 For the year ended 31 March 2023 For the year ended 31 March 2022
$ $ $ $
Cash at bank and in hand 216,213 1,775,754 174,707 1,602,766
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. $2,588 is held as a fixed deposit by Damsila Exports
Private Limited.
13. Trade and other payables
Group Company
For the year ended 31 March 2023 For the year ended 31 March 2022 For the year ended 31 March 2023 For the year ended 31 March 2022
$ $ $ $
Current
Trade payables 90,191 67,659 79,832 40,083
Accrued expenses 155,738 61,895 154,494 61,729
Social security and other taxation 2,212 - - -
Deferred consideration 593,750 594,372 - -
Total current liabilities 841,891 723,926 234,326 101,812
Non-current
Deferred consideration 600,000 600,000 - -
Other payables - 2,272 - -
Total non-current liabilities 600,000 602,274 - -
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 recognised as at 31 March
2023 was $1,193,750.
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 2023 31 March 2022
Amortised cost Total Amortised cost Total
Assets per Statement of Financial Performance $ $ $ $
Trade and other receivables - - 15,446 15,446
Cash and cash equivalents 216,213 216,213 1,775,754 1,775,754
216,213 216,213 1,791,200 1,791,200
31 March 2023 31 March 2022
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 245,930 - 245,930 129,554 - 129,554
Deferred consideration - 593,750 593,750 - 594,372 594,372
245,930 593,750 839,680 129,554 594,372 723,926
Company
31 March 2023 31 March 2022
Amortised cost Total Amortised cost Total
Assets per Statement of Financial Performance $ $ $ $
Trade and other receivables (excluding prepayments) 226,660 226,660 65,989 65,989
Loans to subsidiaries 2,278,546 2,278,546 1,834,904 1,834,904
Cash and cash equivalents 174,707 174,707 1,602,766 1,602,766
2,679,913 2,679,913 3,503,659 3,503,659
31 March 2023 31 March 2022
Amortised cost Total Amortised cost Total
Liabilities per Statement of Financial Performance $ $ $ $
Trade and other payables 234,326 234,326 101,812 101,812
234,326 234,326 101,812 101,812
15. Share capital and premium
Group and Company Number of shares Share capital
No. Nominal value £ $
Ordinary shares 189,103,432 0.0020 378,207 510,403
Deferred shares 356,277,502 0.0099 3,527,147 5,552,000
Total 545,380,934 3,905,354 6,062,403
Number of Ordinary shares Share capital Share premium Total
Issued at 0.02 pence per share $ $ $
As at 31 March 2022 189,103,432 510,403 48,946,676 49,457,079
As at 31 March 2023 189,103,432 510,403 48,946,676 49,457,079
Number of Deferred shares Share capital
Deferred Shares (nominal value of 0.0099 pence per share) $
As at 31 March 2022 356,227,502 5,552,000
As at 31 March 2023 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 2023 31 March 2022
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 500,000 500,000
12,250,000 12,250,000
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 ($) 1,459,455 694
*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 2023 is shown
below:
31 March 2023 31 March 2022
Number Weighted average exercise price (£) Number Weighted average exercise price (£)
Outstanding at beginning of period 12,250,000 12.0p 11,750,000 12.0p
Expired - - - -
Exercised - - - -
Granted - - 500,000 12.0p
Outstanding as at period end 12,250,000 12,250,000
Exercisable at period end 8,333,333 7,833,333
The tranche of 3,916,666 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 2023 have a weighted average contractual
life of 2.8 years (2022: 3.8 years).
The options granted on 13 January 2021 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 $Nil (2022: $720,842) in respect of
share options. The full charge has been recognised.
Warrants
As at 31 March 2023, there were 18,275,904 warrants outstanding by the Company
(2022: 18,275,904).
Warrants
Grant Date Exercise price Expiry Date 31 March 2023 31 March 2022
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
13/01/2021*** £0.156 13/01/2024 247,891 247,891
15/02/2022**** £0.075 15/02/2025 833,333 833,333
18,275,904 18,275,904
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 2021 1,250,000 1,968,750 35,633,822 (75,441,159) 3,437,051 (989,200) (34,140,736)
Currency translation differences - - - - - (2,100,227) (2,100,227)
Share based payments - - - - 733,916 - 733,916
At 31 March 2022 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,089,427) (35,507,047)
At 1 April 2022 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,089,427) (35,507,047)
Currency translation differences - - - - - (513,992) (513,992)
Transfer to NCI - - - - - 103,430 103,430
At 31 March 2023 1,250,000 1,968,750 35,633,822 (75,441,159) 4,170,967 (3,499,989) (35,917,609)
Company
Merger reserve Share warrants and options reserve Foreign currency translation reserve Total
$ $ $ $
At 1 April 2021 35,633,822 3,462,051 (574,709) 38,521,164
Currency translation differences - - (1,840,696) (1,840,696)
Share based payments - 733,916 - 733,916
At 31 March 2022 35,633,822 4,195,967 (2,415,405) 37,414,384
At 1 April 2022 35,633,822 4,195,967 (2,415,405) 37,414,384
Currency translation differences - - (2,258,901) (2,258,901)
At 31 March 2023 35,633,822 4,195,967 (4,674,306) 35,155,483
18. Group Restructure
On 10 February 2023, following receipt of the notice from Sri Lanka's GSMB to
the Company's Sri Lankan IML-holding subsidiary Damsila Exports (Pvt) Limited
("Damsila"), the Company had been in frequent and productive dialogue with
senior GSMB and other officials in Colombo seeking to resolve concerns around
the ownership structure of Damsila. While the Company's legal position remains
that the ownership structure conformed with the relevant requirements, the
Board's objective had been to derive a pragmatic solution to satisfy the GSMB
that the spirit of the law requiring local ownership of mining and primary
processing activities is reflected. This has resulted in a restructuring of
the Group.
Under the Restructuring, an effective 60 percent of the ownership of Damsila
has been issued to a Sri Lankan national who is known to, and who has worked
with, the Company since 2015. As the Company will continue to fund the
capital and operations of the Project, the Restructuring has been completed
without materially impacting the Company's economic value in the Project.
Prior to the restructure, Damsila had 26,354,812 shares in issue. The
Restructuring involved Damsila issuing 39,548,694 new shares to Keynes
Investment Lanka (Pvt) Limited ("Keynes"), which is 99.98% owned by a Sri
Lankan national, Mr Dinal Peiris, who is well known to the Company, with the
remaining 0.02% owned by an existing Capital Metals shareholder, giving Keynes
a 60.01 percent interest in Damsila and the Sri Lankan national an effective
60.0 percent of Damsila. The consideration for the above issue of ordinary
shares in Damsila to Keynes is 1 Sri Lankan rupee per share (equivalent to
US$108,353 at 365 SLR: 1 USD).
If an entity with a 40% shareholding has a contractual arrangement that gives
it the power to direct the relevant activities of the other entity, it can
maintain control and is required to consolidate the financial statements of
the other entity in accordance with IFRS 10. After the restructure of the
Group, the contractual arrangements in place to determine whether they have
the power to direct the relevant activities of another entity and, as a
result, maintain control were carefully assessed. It was concluded that as
Directors have the majority of the voting rights, the Company will benefit
from all future production of any offtake agreements and that Redgate Lanka
maintains control of Damsila. As such Damsila shall remain consolidated within
the Group accounts. Damsila is now accounted for as a non-controlling
interest. No NCI has been recognised on the net assets of Damsila as the Group
has full rights to returns from the subsidiary. An equity transfer has been
made only in relation to historic OCI movements through the foreign exchange
reserve.
As a result of the restructure, Keynes Investment Lanka (Pvt) Limited has been
deconsolidated and is no longer part of the Group. There was no material
impact on the financial statements. A loan to Keynes Investment Lanka (Pvt)
Limited has arisen due to the restructure of the Group (please refer to Note
10). The loan balance is a loan balance held with Damsila that had previously
been eliminated on consolidation.
19. Employee benefit expense
Group Company
Staff costs (excluding Directors) Year ended Year ended Year ended Year ended
31 March 2023 31 March 2022 31 March 2023 31 March 2022
$ $ $ $
Salaries and wages 201,043 10,000 - -
Social security costs - - - -
Other employment costs - 5,000 - -
201,043 15,000 - -
The average monthly number of employees for the Group during the year was 18
(year ended 31 March 2022: 15).
20. Directors' and Key Management remuneration
Salaries & fees Share based payments Year ended 31 March 2023 Year ended 31 March 2022
$ $ $ $
Executive Directors
Michael Frayne 158,224 - 158,224 204,937
Gregory Martyr 72,941 - 72,941 52,464
Anthony Samaha - - - 56,927
Non-executive Directors
James Leahy 31,543 - 31,543 35,648
Geoffrey Brown - - - 21,655
Teh Kwan Wey 18,083 - 18,083 20,494
Key Management
Iranga Dunuwille 96,000 - 96,000 61,685
376,791 - 376,791 453,810
As at 31 March 2023, there were no directors receiving defined contribution
pension schemes benefits (2022: Nil).
Of the above costs, $61,318 (year ended 31 March 2022: $37,000) 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.
21. 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 2023 For the year ended 31 March 2022
$ $
Loss before tax (1,138,538) (1,914,233)
Tax at the applicable rate of 19% (2022: 19%) (216,322) (363,704)
Effects of:
Expenditure not deductible for tax purposes 7,821 138,638
Deferred tax asset not recognised 208,501 225,066
Tax charge - -
No deferred tax assets have been recognised in relation to the historic losses
in the year (2022: nil), this is as a result of the uncertainty of future
profits within the Group.
The UK corporation tax throughout 2022 and 2023 was 19%.
The Company has tax losses of approximately $11,590,377 (31 March 2022:
$10,493,000) available to carry forward against future taxable profits.
22. Loss per share
Group
The calculation of the total basic loss per share of 0.21 cents (2022: 0.36
cents) is based on the total comprehensive loss attributable to equity holders
of the parent company of $1,138,538 (2022: $1,914,233) and on the weighted
average number of ordinary shares of 545,380,934 (2022: 531,043,035) 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.
23. Expenses by nature
Group
Year ended Year ended
31 March 2023 31 March 2022
$ $
Operations 188,665 -
Director fees & employment tax contributions 315,473 355,000
Employee salaries - 14,635
Audit 95,947 61,000
Accountancy 109,952 155,635
Exchange related costs 188,897 154,751
Professional & consultancy fees 115,503 219,052
Office expenses 31,016 90,938
Insurance 8,298 19,299
Depreciation 3,208 8,832
Travel & entertainment 31,595 23,730
Acquisition related costs 37,953 32,496
Other expenses 5,991 58,947
Total administrative expenses 1,132,498 1,194,315
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 2023 Year ended 31 March 2022
$ $
Fees payable to the Company's auditor and its associates for the audit of the 74,202 61,000
Parent Company and Consolidated Financial Statements
The amount payable as at 31 March 2022 related to fees charged by BDO LLP who
were the Company's auditor in the prior year.
24. 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 2023 these are as follows:
2023 2022
Group Licence fees Minimum spend requirement Total
$ $ $
Minimum spend requirement
Licence fees $
$ Total
$
Not later than one year - - - - - -
Later than one year and no later than five years - 548,450 548,450 54,000 54,000 54,000
Total - 548,450 548,450 54,000 54,000 54,000
New regulations regarding minimum spend requirements were implemented in
January 2023.
25. Related party transactions
Loans to Group undertakings
Amounts receivable as a result of loans granted to subsidiary undertakings are
as follows:
Company
31 March 2023 31 March 2022
$ $
Brighton Metals Limited 1,130,448 782,779
Capital Metals Limited 875,672 918,532
Damsila Exports Private Ltd 272,426 133,593
At 31 March 2023 2,278,546 1,834,904
These amounts are unsecured and repayable in US Dollars on demand from the
Company. Interest on the principal of the loan is charged at a rate of 2% per
annum.
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 $158,224 for the year ended 31 March 2023 (31
March 2022: $204,937) for the provision of corporate management and consulting
services to the Company. There was a balance of $15,069 owing at year end (31
March 2022: $Nil).
Hogan's Bluff Capital Pty Ltd, a limited company of which Greg Martyr is a
director, was paid a fee of $72,941 for the year ended 31 March 2023 (31 March
2022: $52,464) for consulting services to the Company. There was a balance of
$34,365 owing at year end (31 March 2022: $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 $18,083 for the year ended 31 March 2023 (31 March 2022:
$20,494) for consulting services to the Company. There was a balance of $3,014
owing at year end (31 March 2022: $Nil).
Ventureflex (Pvt) Ltd, a limited company of which Iranga Dunuwille is a
director, was paid a fee of $36,000 for the year ended 31 March 2023 for
consulting services to the Company. There was a balance of $Nil owing at year
end.
Related party transactions were made on terms equivalent to those that prevail
in arm's length transactions only when such terms can be substantiated.
26. Ultimate controlling party
The Directors believe there is no ultimate controlling party.
27. Events after the reporting date
A Memorandum of Understanding (MoU) was signed with LB Group on 9 May 2023,
the world's leading manufacturer of high-performance titanium dioxide pigments
and sponge, to fund the Project into production. This has now been extended to
December 2023 as announced in August 2023.
On 30 May 2023 the Company received a notice of cancellation of the IMLs from
the GSMB. For further details please refer to Note 7.
On 20 June 2023, the Company issued 50,000,000 new ordinary shares of 0.2
pence at a price of 1p per share for gross proceeds of £500,000.
On 12 July 2023, warrants to subscribe for 2,500,000 shares were issued with
an exercise price of 1p per share.
Michael Frayne stepped down as Chief Executive Officer and as a director of
the Company with effect from 30 June 2023.
On 17 July 2023, the Company issued 36,470,566 new ordinary shares of 0.2
pence at a price of 1p per share for gross proceeds of £364,705.
On 1 August 2023 share options to subscribe for 8,000,000 ordinary shares were
granted to certain Directors, as well as 3,050,000 options to employees and
consultants with an exercise price of 3p per share. In addition, 1,000,000
warrants were issued to service providers of the Company with an exercise
price of 3p per share.
On 1 August 2023, the Company issued 2,047,600 ordinary shares of 0.2 pence
each at a price of 1 pence per share to various service providers as
consideration for services rendered.
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. END FR USORROKUKAURRecent news on Capital Metals
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