REG - Capital Metals PLC - Half-year Report
21/12/2022 10:00
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RNS Number : 4720K Capital Metals PLC 21 December 2022
21 December 2022
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK
VERSION OF THE MARKET ABUSE REGULATION NO 596/2014 WHICH IS PART OF ENGLISH
LAW BY VIRTUE OF THE EUROPEAN (WITHDRAWAL) ACT 2018, AS AMENDED. ON
PUBLICATION OF THIS ANNOUNCEMENT VIA A REGULATORY INFORMATION SERVICE, THIS
INFORMATION IS CONSIDERED TO BE IN THE PUBLIC DOMAIN.
Capital Metals plc
("Capital Metals" or the "Company")
Unaudited Interim Results for the Six Months Ended 30 September 2022
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 unaudited results for the six months ended 30
September 2022 (the "Half Year").
Highlights
· Cash balance of $812,246 as at 30 September 2022
· Released results of auger drilling programme in April 2022 which
delivered exceptional high grades:
o All results from surface to a maximum of only 3.5m depth (with an average
depth 1.5m) ended in mineralisation
o +30% Total Heavy Minerals ("THM") and average grade of 19.37% THM from 560
drill holes, compared to existing JORC resource grade of 17.6%
· 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%
· Grant of the first two Industrial Mining Licences ("IMLs") in
August 2022 - subsequently purportedly temporarily suspended in December 2022
by the GSMB pending an investigation into the Company's ownership structure,
which the Company has been advised is legally sound
· Continued positive discussions with a prospective offtaker and
strategic partners with the objective that such parties will form a
significant part of the future capex funding package
· Continued work with local communities including sponsorship of
educational, sporting and community cleaning initiatives
Chairman's Report
I am pleased to present the half year results for the six months ended 30
September 2022.
The most significant event in the Half Year was the granting in August 2022 of
our Project's first two Industrial Mining Licences ("IMLs") by the Geological
Survey and Mines Bureau of the Government of Sri Lanka ("GSMB"). Significant
work went into that process, including the approval of the EIA in November
2021 and these first IMLs importantly provide a basis for the granting of
further IMLs in due course.
The IMLs were a major step forward both towards the commencement of mining
activities, in accordance with the Development Plan outlined in the
Preliminary Economic Assessment completed in May 2022, and the advancement of
ongoing discussions a prospective offtaker and strategic partners. To that
end, we are in advanced discussions with some large organisations with our
expectation that any agreement would contribute capital to help fund the
development of the Project.
While our Board and local management team continues to monitor the economic
and political developments in Sri Lanka, we are pleased to observe that Sri
Lanka's economic situation appears to be improving and a normal operating
environment in respect of fuel and other key supplies appears to have been
restored. Undoubtedly, there is widespread support both within the Sri Lankan
government and local communities for the progression of the Project and the
benefits it will bring to all stakeholders.
Significant workstreams in addition to the granting of the IMLs during the
Half Year included:
· The publication of results from the auger drilling programme
which commenced in October 2021 and delivered exceptional higher grades. All
results were from surface to a maximum of only 3.5m depth (with an average
depth 1.5m) and ended in mineralisation. Exceptional high-grade results of
+30% Total Heavy Minerals ("THM") and average grade of 19.37% THM from 560
drill holes were recorded, compared to the existing JORC resource grade of
17.6%, indicating the potential for both volume and grade increases.
· The completion of the Development Study and Project Economics in
May 2022 demonstrating robust economics with a base case NPV of $155 million
and IRR of 56%.
· Continued work with the local communities and Sri Lanka as a
whole where we are increasingly seeing a growing awareness of the positive
economic and social benefits that the Project can bring.
Subsequent to the period end, we were extremely surprised to receive a notice
from the GSMB to the Company's Sri Lankan subsidiary Damsila Exports Pvt
Limited ("Damsila") that they consider it necessary for the current
shareholding structure of Damsila to have been approved by the Board of
Investment of Sri Lanka (BOI) and that as Damsila has not obtained such
approval they will be carrying out proper investigations regarding the
ownership structure of Damsila, and that in the meantime the two IMLs which
were issued to Damsila are temporarily suspended. Capital Metals has been
working with the GSMB to clarify any concerns around the structure, which was
set up in 2016 and has been made clear to the GSMB throughout its mutual
dealings, including the applications and granting of the Company's exploration
licences, environmental permits (EIA) and the IMLs themselves. There appears
to be some uncertainty within the GSMB (and perhaps the BOI) around the
application of the Foreign Exchange Act of Sri Lanka that governs investment
in shares in companies incorporated in Sri Lanka by non-residents. Damsila, is
a subsidiary company of a Sri Lanka resident company, Redgate Lanka (Pvt)
Limited. The ultimate parent of Redgate is Capital Metals. The Company has
made several submissions to the GSMB and relevant authorities based on the
advice of its well regarded in country legal counsel, Varners, which has
provided its opinion to the Company that the current shareholding structure of
Damsila is in conformity with the Regulations published under the Foreign
Exchange Act and that BOI approval is not required by Damsila for the issuance
of shares to Redgate which is a company incorporated in Sri Lanka even though
its ultimate parent is Capital Metals. The Company will continue discussions
in a cooperative manner with the relevant Sri Lankan Government authorities to
resolve this issue as soon as possible.
Our immediate focus remains on having the temporary suspension of the IMLs
lifted, finalising offtake discussions, concluding local land agreements and
the lease agreement for Oluvil Port, the granting of additional IMLs and
further refining the technical, engineering, and economic aspects of the
Project in preparation for construction. Our exploration team continues to
develop its programmes to extend the high-grade resource. We have several
identified potential areas that could be drilled to increase the total
resource. The Project currently has a JORC Resource of 17.2 Mt with an average
grade of 17.6% THM. Limited sonic drilling so far undertaken offers a
compelling indication of deeper mineralisation, including assays of 26.3% and
26.6% THM at respective depths of 14m and 8m. The Project's THM grades are
some of the highest in the global peer group. Less than 10% of the total
Project area has been drilled to date. Initial exploration also suggests
potential for significant mineralisation further inland. Additional work is
planned in due course for infill and step out drilling. We are excited about
the potential to expand our resource.
The Company continues its close involvement in the community in the Ampara
District of the Eastern Province. During the Half Year, community initiatives
included the sponsorship of a children's art programme, local cricket
tournaments and the community cleaning of a local temple. As part of our beach
cleaning programme, we are also in discussions with local authorities to
supply and install bins for proper waste management in the Project area.
In conclusion, considering the compelling market dynamics for our minerals,
the advanced stage of our Project, the attractive economics and the potential
for further expansion of our high-grade resource, we believe Capital Metals
represents an exceptional investment prospect. Further, the Company also
announces that Tavira Financial has been appointed as the Company's sole
broker with WH Ireland Limited no longer acting as the Company's broker with
immediate effect.
We look forward to keeping shareholders updated with further progress as we
work with all stakeholders to bring the Project into production in a timely
manner.
Greg Martyr
Non-Executive Chairman
21 December 2022
For further information, please visit www.capitalmetals.com
(http://www.capitalmetals.com) or contact:
Capital Metals plc Via Vigo Consulting
Michael Frayne (CEO)
James Mahony (CFO)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Peter Jacob capitalmetals@vigoconsulting.com (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
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed
inside information for the purposes of Article 7 of Regulation (EU) No
596/2014 until the release of this announcement.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes 6 months to 30 September 2022 Unaudited 6 months to 30 September 2021 Unaudited
$ $
Continuing operations
Revenue - -
Administration expenses (382,400) (1,123,697)
Foreign exchange 1,681 (73,241)
Operating loss (380,719) (1,196,938)
Finance income 2,531 110
Loss before income tax (378,188) (1,196,828)
Income tax - -
Loss for the period (378,188) (1,196,828)
Other comprehensive income
Items that may be reclassified to profit or loss
Currency translation differences (1,064,932) 52,184
Total comprehensive loss for the period (1,443,120) (1,144,644)
Basic and diluted 5 (0.069)p (0.216)p
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at As at
30 September 2022 Unaudited 31 March 2022 Audited 30 September 2021 Unaudited
$ $ $
Notes
Non-Current Assets
Property, plant and equipment 23,396 28,541 42,961
Intangible assets 6 4,061,939 4,556,210 6,333,401
4,085,335 4,584,751 6,376,362
Current Assets
Trade and other receivables 61,475 36,160 148,832
Cash and cash equivalents 812,246 1,775,754 1,199,612
873,721 1,811,914 1,348,444
Total Assets 4,959,056 6,396,665 7,724,806
Non-Current Liabilities
Trade and other payables 600,000 602,274 600,000
600,000 602,274 600,000
Current Liabilities
Trade and other payables 731,711 723,926 847,180
731,711 723,926 847,180
Total Liabilities 1,331,711 1,326,200 1,447,180
Net Assets 3,627,345 5,070,465 6,277,626
Capital and Reserves Attributable to
Equity Holders of the Company
Share capital 6,062,403 6,062,403 6,018,628
Share premium 48,946,676 48,946,676 47,469,912
Capital contribution and contingent shares 3,218,750 3,218,750 3,218,750
Other reserves (39,790,729) (38,725,797) (36,715,612)
Retained losses (14,809,755) (14,431,567) (13,714,052)
Total Equity 3,627,345 5,070,465 6,277,626
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Attributable to owners of the Parent
Note Share capital Share premium Capital contribution and contingent shares Other reserves Retained losses Total equity
$ $ $ $ $ $
Balance as at 1 April 2021 6,018,628 47,469,912 3,218,750 (37,359,486) (12,517,224) 6,830,580
Loss for the period - - - - (1,196,828) (1,196,828)
Other comprehensive income for the period - - - 52,184 - 52,184
Total comprehensive income/(loss) for the period - - - 52,184 (1,196,828) (1,144,644)
Share option expense - - - 591,690 - 591,690
Total transactions with owners, recognised in equity - - - 591,690 - 591,690
Balance as at 30 September 2021 6,018,628 47,469,912 3,218,750 (36,715,612) (13,714,052) 6,277,626
Balance as at 1 April 2022 6,062,403 48,946,676 3,218,750 (38,725,797) (14,431,567) 5,070,465
Loss for the period - - - - (378,188) (378,188)
Other comprehensive loss for the period - - - (1,064,932) - (1,064,932)
Total comprehensive loss for the period - - - (1,064,932) (378,188) (1,443,120)
Total transactions with owners, recognised in equity - - - - - -
Balance as at 30 September 2022 6,062,403 48,946,676 3,218,750 (39,790,729) (14,809,755) 3,627,345
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
6 months to 30 September 2022 6 months to 30 September 2021 Unaudited
Unaudited $
$
Notes
Cash flows from operating activities
Loss before taxation (378,188) (1,196,828)
Adjustments for:
Share based payments - 591,689
Depreciation 3,196 15,053
Interest income (2,518) (110)
(Increase)/Decrease in trade and other receivables (25,823) 1,306
Increase in trade and other payables 6,017 104,236
Foreign exchange 46,117 49,499
Net cash used in operations (351,199) (435,155)
Cash flows from investing activities
Purchase of property, plant and equipment (3,376) (10,314)
Exploration and evaluation activities 6 (368,585) (152,348)
Interest received 2,518 110
Net cash used in investing activities (369,443) (162,552)
Cash flows from financing activities - -
Net cash generated from financing activities - -
Net decrease in cash and cash equivalents (720,642) (597,707)
Exchange differences on cash (242,866) -
Cash and cash equivalents at beginning of period 1,775,754 1,797,319
Cash and cash equivalents at end of period 812,246 1,199,612
NOTES TO THE INTERIM FINANCIAL STATEMENTS
1. General Information
Capital Metals plc is a mineral exploration company with its shares admitted
to trading on the AIM Market of the London Stock Exchange.
The Company is domiciled in the United Kingdom and incorporated and registered
in England and Wales, with registration number 05555087. The Company's
registered office is Suite 1, 15 Ingestre Place, London, W1F 0DU.
2. Basis of Preparation
The condensed consolidated interim financial statements have been prepared in
accordance with the requirements of the AIM Rules for Companies. As permitted,
the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing this interim financial information. The condensed interim financial
statements should be read in conjunction with the annual financial statements
for the year ended 31 March 2022, which have been prepared in accordance with
UK adopted international accounting standards.
The interim financial information set out above does not constitute statutory
accounts within the meaning of the Companies Act 2006. It has been prepared on
a going concern basis in accordance with the recognition and measurement
criteria of UK adopted international accounting standards.
Statutory financial statements for the year ended 31 March 2022 were approved
by the Board of Directors on 23 September 2022 and delivered to the Registrar
of Companies. The report of the auditors on those financial statements was
unqualified with a material uncertainty in relation to the Company's ability
to continue as a going concern. The condensed interim financial statements are
unaudited and have not been reviewed by the Company's auditor.
Going concern
These financial statements have been prepared on the going concern basis.
Given the Group's current cash position and its demonstrated ability to raise
capital, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of accounting
preparing the condensed interim financial statements for the period ended 30
September 2022.
Notwithstanding the above, a material uncertainty exists that may cast
significant doubt on the Group and Parent Company's ability to continue as a
going concern and, therefore, that the Group and Parent Company may be unable
to realise their assets or settle their liabilities in the ordinary course of
business. As a result of their review, and despite the aforementioned material
uncertainty, the Directors have confidence in the Group and Parent Company's
forecasts and have a reasonable expectation that the Group and Parent Company
will continue in operational existence for the going concern assessment period
and have therefore used the going concern basis in preparing these
consolidated and Parent Company financial statements.
The factors that were extant at 31 March 2022 are still relevant to this
report and as such reference should be made to the going concern note and
disclosures in the 2022 Annual Report and Financial Statements ("2022 Annual
Report").
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business.
The key risks that could affect the Company's medium term performance and the
factors that mitigate those risks have not substantially changed from those
set out in the 2022 Annual Report, a copy of which is available on the
Company's website: www.capitalmetals.com (http://www.capitalmetals.com) . The
key financial risks are liquidity risk, credit risk, market risk and fair
value estimation.
Critical accounting estimates
The preparation of condensed interim financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the end of the reporting period. Significant items subject
to such estimates are set out in Note 2 the 2022 Annual Report. The nature and
amounts of such estimates have not changed significantly during the interim
period.
3. Accounting Policies
Except as described below, the same accounting policies, presentation and
methods of computation have been followed in these condensed interim financial
statements as were applied in the preparation of the Company's annual
financial statements for the year ended 31 March 2022.
3.1 Changes in accounting policy and disclosures
(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 interim 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
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.
4. Dividends
No dividend has been declared or paid by the Company during the six months
ended 30 September 2022 (six months ended 30 September 2021: $nil).
5. Loss per Share
The calculation of loss per share is based on a retained loss of $378,188 for
the six months ended 30 September 2022 (six months ended 30 September 2021:
$1,196,828) and the weighted average number of shares in issue in the period
ended 30 September 2022 of 545,380,934 (six months ended 30 September 2021:
528,714,268).
No diluted earnings per share is presented for the six months ended 30
September 2022 or six months ended 30 September 2021 as the effect on the
exercise of share options would be to decrease the loss per share.
6. Intangible fixed assets
The movement in capitalised exploration and evaluation costs during the period
was as follows:
Exploration & Evaluation at Cost and Net Book Value $
Balance as at 1 April 2022 4,556,210
Additions 368,585
Foreign exchange (862,856)
As at 30 September 2022 4,061,939
7. Events after the balance sheet date
Subsequent to the period end, we were extremely surprised to receive a notice
from the GSMB to the Company's Sri Lankan subsidiary Damsila Exports Pvt
Limited ("Damsila") that they consider it necessary for the current
shareholding structure of Damsila to have been approved by the Board of
Investment of Sri Lanka (BOI) and as Damsila has not obtained such approval
they will be carrying out proper investigations regarding the ownership
structure of Damsila, and that in the meantime the two IMLs which were issued
to Damsila are temporarily suspended. Capital Metals has been working with
the GSMB to clarify any concerns around the structure, which was set up in
2016 and has been made clear to the GSMB throughout its mutual dealings,
including the applications and granting of the Company's exploration licences,
environmental permits (EIA) and the IMLs themselves. There appears to be
some uncertainty within the GSMB (and perhaps the BOI) around the application
of the Foreign Exchange Act of Sri Lanka that governs investment in shares in
companies incorporated in Sri Lanka by non-residents. Damsila, is a subsidiary
company of a Sri Lanka resident company, Redgate Lanka (Pvt) Limited. The
ultimate parent of Redgate is Capital Metals. The Company has made several
submissions to the GSMB and relevant authorities based on the advice of its
well regarded in country legal counsel, Varners, which has provided its
opinion to the Company that the current shareholding structure of Damsila is
in conformity with the Regulations published under the Foreign Exchange Act
and that BOI approval is not required by Damsila for the issuance of shares to
Redgate which is a company incorporated in Sri Lanka even though its ultimate
parent is Capital Metals. The Company will continue discussions in a
cooperative manner with the relevant Sri Lankan Government authorities to
resolve this issue as soon as possible.
8. Approval of interim financial statements
The Condensed interim financial statements were approved by the Board of
Directors on 21 December 2022.
9. Availability of interim financial statements
Copies of these interim financial statements are available from the Capital
Metals website at www.capitalmetals.com.
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