REG - Caracal Gold PLC - Financial Results
09/11/2022 07:00
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RNS Number : 7523F Caracal Gold PLC 09 November 2022
Caracal Gold plc / EPIC: GCAT / Market: Main / Sector: Mining
9 November 2022
Caracal Gold plc ('Caracal' or the 'Company')
Financial Results
Caracal Gold plc, the gold producer with operations in East Africa, is pleased
to announce its Financial Results for the 18-month period ending 30 June 2022.
The qualified opinion is only on the opening balances as at 1 January 2021 and
not that of the final closing balances for the Caracal Group.
The year-end of the Parent Company was changed in the period from December to
June to align with that of the operating mines.
In order to ensure that the reporting period following the acquisition of
Kilimapesa mine was no longer than the permitted 18 months, financial figures
for Kilimapesa were prepared for the 12 months to 31 December 2020.
These financial figures were unaudited as a mid-period account.
CHAIRMAN'S STATEMENT
I am pleased to be writing to you as the new Chair of Caracal Gold plc. The
period under review has been a busy and transformational period for the
Company with the acquisition of the Kilimapesa Mine on 31 August 2021
(acquired via a reverse acquisition, see note 5 for further details) and the
concurrent placing to raise funds for the Group's ongoing working capital and
the satisfaction of acquisition-related liabilities. The Company has continued
to raise further funds through the issue of smaller placings during the period
under review. The Group have used these proceeds to progress notably in the
growth of the Kilimapesa mining plant as well as the introduction of our Heap
Leach Operations. Production has increased substantially with the result in
our Revenue increasing to £7m for the period. However, the Group still
remains loss making for the period.
Having overcome the global challenges stemming from COVID-19 pandemic we are
delighted to be readmitted to the London Stock exchange and look forward to
building future opportunities for our new shareholders. Due to the hard work
of our staff our operations have both resumed and grown, and we have expanded
and upgraded our operations at Kilimapesa. As the world is returning to
normal, we remain focused on the continuing growth of our operations along
with the health and safety of our employees, suppliers and local communities.
Against the background of a global pandemic the gold price has remained a
supportive factor and offers the prospect of stronger financial returns as our
efficiency continues to improve.
Strategic Focus
The Board is aware of the risk of having a single asset in production and so
we believe the acquisition in Tanzania will serve to start to reduce that
risk. There has been an extensive drilling programme carried out at
Kilimapesa which has supported the increase in JORC resource to 1,300,000
ounces. Gold Production has reached 12,000 ounces per annum and is on track to
reach 16,000 ounces in 2023 and 24,000 by 2024.
Values and Culture
As the Board has been expanded through the appointment of new Directors so has
the breadth of the skill set available. We believe in a strong corporate
governance structure with management accountability and active oversight from
the Board.
Three Board Committees, Audit, ESG and Remuneration, provide oversight and
guidance in these areas, ensuring adoption of the correct strategies with the
highest standards available along with protecting shareholder interests.
Caracal is committed to sustainable development and recognises that the
long-term sustainability of our business is dependent upon responsible
stewardship in both the protection of the environment and the efficient
management of the exploration and extraction of mineral resources, and the
sustainable use of resources for the benefit of all our stakeholders.
The mine is located in an area of high unemployment and so we are proud of the
fact that we have created over 350 jobs for locals and over a hundred further
jobs for Kenyans from other Districts. We liaise with the local community
through our Community Liaison Officer and we also try to purchase locally
where possible. We view our people as one of the key pillars of the company
and are proud of the fact that in 18 months we have delivered around 500 new
job opportunities.
Performance
The focus of the Board and Management is on the development of the operations
at Kilimapesa, the upgrading of plant and machinery, grade improvement and the
acquisition of further prospects. The Company has invested in a new Laboratory
and a new Elution Plant as part of the programme of improvements which we
believe will assist in our drive to improve standards, improve grades and
drive returns. The company has also recently invested in a new fleet of work
vehicles to improve efficiency, reduce downtime and breakdowns and offer a
higher level of personal safety to the operators.
It is the intention of the Board to continue to invest in its operations,
assets, people, and community as the company continues to grow whilst
respecting the impact and influence of climate change and continuing to
operate in a responsible manner.
In May 2022 it was agreed to acquire 100% of Tyacks Gold Limited ('Tyacks'),
the holder of the licences collectively referred to as the Nyakafuru Project
('Nyakafuru' or the 'Project') in Tanzania. The Project is located in the
world-class Lake Victoria Gold Fields in northern Tanzania, 140km southwest of
Mwanza, Tanzania's second largest city, and 60km from Barrick Gold's 18Moz
Bulyanhulu Gold Mine. This is an established high-grade shallow gold resources
of 658,751oz at 2.08g/t contained within four deposits over 280 km2. This
resource is amenable to development as a large scale conventional open pit
operation and Carbon-in-Leach processing plant.
This will double Caracal's total gold resources to 1,330,197 ounces prior to
impending resource update at Kilimapesa - delivering on the goal of building
an emerging East African focussed gold producer.
The future is extremely promising for the Caracal Group and let me take this
opportunity to thank all our shareholders for your support in this expansion.
Simon Games-Thomas
Chairman
8 November 2022
CHIEF EXECUTIVE'S STATEMENT
2021 was a transformative year for Caracal Gold PLC and all of its
stakeholders. The standout event was the acquisition of the Kilimapesa Gold
Mine in Kenya which concluded with the successful RTO on the LSE in September
2021.
This acquisition positioned Caracal as an established East African based and
focussed gold producer and explorer and provided the Board and Management the
platform to attract funding to optimise and grow our Kilimapesa operations and
pursue our strategy of expanding our portfolio in the region.
In line with this strategy, in November 2021 we announced the acquisition of
Tyacks Gold Limited (Tyacks) in Tanzania (see note 13 for further details on
this acquisition). This transaction significantly grew our resource base with
high quality ounces, it made us a multiple asset company and diversified our
physical and geographic footprint. After a comprehensive legal and technical
review, a final SPA was signed with the shareholders of Tyacks for the
acquisition of 100% of Tyacks Gold and has begun work on the ground with
whilst awaiting completion of all regulatory approvals which are in process.
At Kilimapesa work by the production team increased the number of ounces and
confidence in our resources at Kilimapesa. Consequently, they finalised the
strategy for increasing production and optimising recoveries and costs at
Kilimapesa and also made significant progress on ESG and community related
areas.
With Caracal's robust business fundamentals providing a strong platform from
which to grow, we go into the next year excited at the opportunities in front
of us, particularly the near-term opportunity for Kilimapesa to become a
24,000oz per annum producer during 2024 and for the ongoing increase of our
resource base from exploration activities in both Kenya and Tanzania.
Highlights
Kilimapesa Gold Mine
Progress at Kilimapesa is across the board.
On the exploration side drilling activities commenced in January 2022 and have
continued through the period, the highlight of these activities was the
announcement of an updated MRE. This was the 1st significant exploration to be
done on the license area in over 11 years.
Being based in a significant gold producing greenstone belt the project has
significant exploration upside both within the mining license, where we plan
to grow confidence and extend mine life, and within the wider exploration
permit, where we continue to explore for large, shallow, high grade, open pit
projects.
The Kilimapesa expansion project commenced in March 2022.
An expansion to 24,000oz per annum is underway at Kilimapesa. This expansion
focusses on the processing of the lower grade ore being mined from the
Kilimapesa Hill deposit through a heap leach processing facility with a
capacity of 65,000tpm along with the required expansion of mining activities
and infrastructure to support the expanded production.
The Kilimapesa Gold Mine employs 496 people, of which 470 are Kenyan
highlighting Caracal's commitment to developing in country talent. Our
investment is transforming the Trans Mara South region and our ongoing
community initiatives directly benefit the people on the ground through
investment into schools, roads, water projects and environmental initiatives.
Tyacks Gold
During the year Caracal successfully acquired 100% of Tyacks, which owns 11
exploration licenses in the Lake Victoria Gold Fields. The licenses are
collectively known as the Nyakafura Project. The acquisition creates a major
new gold mine development opportunity for Caracal in one of Africa's largest
gold producing regions.
Nyakafura contains established high grade shallow gold resources of 658,751oz
within four known, closely located deposits. Work done historically by major
gold producer Resolute Mining have shown that these projects are amenable to
large scale, conventional open pit mining and Carbon-in-Leach processing.
Looking forward to 2022, Caracal will commence with rehabilitating the
infrastructure (camp, offices, workshops, vehicles etc), the existing core
will be relogged and selected samples sent away for assay all of this work
culminating in the preparation of a drilling plan which we expect to commence
in the 4th QTR of 2022.
OUTLOOK
2022/2023 is set to be an exciting year for the group. Our ongoing exploration
programs in Kenya and Tanzania will play an important role in growing our
resource base and confidence in our resources which will translate into
improving returns for all stakeholders from our shareholders to our social
partners on the ground. The construction of the Kilimapesa expansion will
complete and the production of 24,000oz will cement Caracal's profile as a
upcoming producer, the success of the expansion at Kilimapesa will have a
positive impact for all stakeholders including shareholders, social partners
and the Kenyan Govt to name a few. The development plan for Tanzania and the
next phase of Kilimapesa will also evolve and become clear to all of us during
the year.
I would like to take this opportunity to thank our shareholders, employees,
members of the Board, our local communities and all stakeholders for their
continued commitment to the Company and ongoing support during the period.
With the expansion at Kilimapesa, the ongoing exploration we are excited by
the near and long-term prospects of becoming a diversified +50,000oz per annum
producer and +3moz resource owner.
Robbie McCrae
Chief Executive Officer
8 November 2022
STRATEGY AND BUSINESS MODEL
The Company's strategy is to become a mid-tier, leading independent,
diversified producer and explorer. We plan to develop and exploit our
portfolio of producing and advanced exploration projects in Kenya and
Tanzania. To this end we have developed and are carrying out the work programs
to deliver maximum value and have recruited a management team with all the
necessary experience to deliver on the work programs and project potential.
In Kenya the clear plan and strategy is to deliver on the expansion project
increasing production to 24,000oz per month and to continue to grow and
increase confidence in the resources at the project. Our regional exploration
strategy to discover and prove additional commercially viable, shallow open
pit style deposits within the license area is progressing well and will
deliver results.
In Tanzania the strategy is to confirm the historical results and to carry out
some additional exploration so that an updated mineral resource estimate can
be published and from that work on the development plan for production can
commence. With historic resources and significant opportunity for additional
resources we are targeting 50,000oz per annum production from Nyakafura as our
base case.
Despite many challenges including COVID good progress was made during 2021,
including:
· Gold production was uninterrupted for the entire period,
· Expansion plan for Kilimapesa was finalized and work commenced,
· Board of Directors was strengthened with 2 NED and 1 executive
appointments,
· Management was strengthened with key appointments across disciplines,
· Tanzania project was acquired growing resources and securing future
growth.
The Company continues to review opportunities to build the company's portfolio
particularly in the immediate region once these include advanced projects that
will provide immediate additional resources ounces and production.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 18 MONTH PERIOD ENDING 30 JUNE 2022
Note 18 months ended 12 months ended
30 June 31 December
2022 2020
£'000 £'000
Continuing operations
Revenue 7 6,858 1,399
Cost of sales (9,007) (2,353)
Gross loss (2,149) (954)
Administrative expenses 8 (7,188) (10)
Listing costs (1,146) -
Share-based payments 24 (84) -
Operating loss before finance costs (10,567) (964)
Finance costs (net) 10 (744) (110)
Other income 2 -
Foreign exchange (941) (616)
Reverse acquisition expense 5 (3,298) -
Loss before taxation (15,548) (1,690)
Taxation 11 - -
Loss for the period (15,548) (1,690)
Other comprehensive income - items that may be reclassified subsequently to
profit and loss account
Translation of foreign operations (65) 511
Total other comprehensive income (65) 511
Total comprehensive income for the period attributable to the owners of the (15,613) (1,179)
Parent Company
(1.09p) (0.12p)
Earnings per share - basic and diluted (pence)
12
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
Note As at As at
30 June 31 December 2020
2022 £'000
£'000
Non-Current Assets
Intangible assets 14 2,392 -
Property, plant and equipment 15 5,689 3,758
Total Non-Current Assets 8,081 3,758
Current Assets
Inventories 16 712 575
Trade and other receivables 17 826 737
Cash and cash equivalents 18 80 121
Total Current Assets 1,618 1,433
Total Assets 9,699 5,191
Equity and Liabilities
Share capital 23 1,879 4,430
Share premium 23 14,306 -
Translation reserve 444 509
Reverse acquisition reserve 5 6,481 -
Share-based payment reserve 148 -
Retained earnings (25,321) (9,773)
Total Equity (2,063) (4,834)
Non-Current Liabilities
Deferred tax liability 21 552 -
Provisions and contingent liabilities 22 1,989 -
Amount due to related parties - 8,433
Loans and borrowings - non-interest bearing
20 - 48
Loans and borrowings - interest bearing 20 167 142
Total Non-Current Liabilities 2,708 8,623
Current Liabilities
Trade and other payables 19 7,357 1,330
Loans and borrowings - non-interest bearing
- 63
Loans and borrowings - interest bearing 20 1,697 9
Total Current Liabilities 9,054 1,402
Total Liabilities 11,762 10,025
Total Equity and Liabilities 9,699 5,191
The notes below form part of these financial statements.
Approved by the Board and authorised for issue on 8 November 2022.
Director
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
Company Registration No. 09829720
Note As at As at
30 June 31 December 2020
2022 £'000
£'000
Non-Current Assets
Investments 13 9,537 -
Property, plant and equipment 15 302 -
Total Non-Current Assets 9,839 -
Current Assets
Trade and other receivables 17 7,108 12
Cash and cash equivalents 18 26 -
Total Current Assets 7,134 -
Total Assets 16,973 12
Equity and Liabilities
Share capital 23 1,879 132
Share premium 23 14,306 602
Share-based payment reserve 148 -
Retained earnings (7,655) (2,595)
Total Equity 8,678 (1,861)
Non-Current Liabilities
Provisions and contingent liabilities 22 619 -
Total Non-Current Liabilities 619 -
Current Liabilities
Trade and other payables 19 6,019 1,423
Convertible loan notes 20 1,657 450
Total Current Liabilities 7,676 1,873
Total Liabilities 8,295 1,873
Total Equity and Liabilities 16,973 12
The Company has taken advantage of the exemption under section 408 of the
Companies Act 2006 by choosing not to present its individual Statement of
Comprehensive Income and related notes that form part of these approved
financial statements.
The Company's loss for the period from operations is £5,060,000 (2020: loss
of £1,074,000).
Approved by the Board and authorised for issue on 8 November 2022.
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022
18 months ended 12 months ended
30 June 31 December
2022 2020
£'000 £'000
Cash flows from operating activities
Operating loss - continuing operations (15,548) (1,690)
Adjustments for:
Depreciation/amortisation 825 456
Finance costs (net) 744 110
Other income (2) -
Foreign exchange movement 290 168
Shares issued in lieu of fees 856 -
Share-based payments 84 -
Reverse acquisition share-based payment expense 3,298 -
Operating cash outflows before working capital movements (9,453) (956)
(Increase)/decrease in trade and other receivables (19) 81
Increase in trade and other payables 2,223 195
Increase in inventories (137) (91)
Net cash outflows from operating activities (7,386) (771)
Net cash flows from investing activities
Cash acquired on acquisition 82 -
Expenditure on intangibles (548) -
Expenditure of fixed assets (1,094) -
Net cash outflows from investing activities (1,560) -
Net cash flows from financing activities
(Repayments) on external loans (168) (25)
Proceeds from external loans 1,207 -
Increase in previous owners parent company loan (eliminated in consolidation - 1,027
in current year)
Finance costs (net) (65) (110)
Proceeds from issue of share capital 8,378 -
Cost of share issues (442) -
Net cash inflows from financing activities 8,910 892
Net (decrease)/ increase in cash and cash equivalents (36) 121
Cash and cash equivalents at the beginning of the period 121 11
Effect of exchange rates on cash (5) (11)
Cash and cash equivalents at the end of the period 80 121
Significant non-cash transactions
The only significant non-cash transactions were the issue of shares and
warrants detailed in notes 23 and 24.
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022
18 months ended 12 months ended
30 June 31 December
2022 2020
£'000 £'000
Cash flows from operating activities
Operating loss (5,060) (1,074)
Adjustments for:
Depreciation 27 -
Finance costs (net) 546 144
Share-based payment - incentives 84 -
Shares issued for services 856 -
Operating cash outflows before working capital movements (3,547) (930)
(Increase)/decrease in trade and other receivables (98) 468
Increase in trade and other payables 2,201 631
Net cash outflows from operating activities (1,444) 169
Net cash flows from investing activities
Purchase of tangible fixed assets (128) -
Purchase of Investments (548) -
Cash advanced to subsidiaries (6,997) -
Net cash outflows from investing activities (7,673) -
Net cash flows from financing activities
Proceeds from external loans 1,207 -
Convertible loan note cash repayments - (25)
Finance costs (net) - (144)
Proceeds from issue of share capital 8,378 -
Cost of share issues (442) -
Net cash inflows from financing activities 9,143 (169)
Net increase in cash and cash equivalents 26 -
Cash and cash equivalents at the beginning of the period - -
Cash and cash equivalents at the end of the period 26 -
Significant non-cash transactions
The only significant non-cash transactions were the issue of shares and
warrants detailed in notes 23 and 24.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022
Share capital Share premium Share-based payment reserve Reverse acquisition reserve Foreign currency reserve Retained earnings Total
£'000 £'000
£'000
£'000 £'000 £'000
£'000
Balance at 31 December 2019 4,430 - - - (2) (8,083) (3,655)
Loss for the year - - - - - (1,690) (1,690)
Other comprehensive income - - - - 511 - 511
Total comprehensive income for the period - - - - 511 (1,690) (1,179)
Balance at 31 December 2020 4,430 - - - 509 (9,773) (4,834)
Loss for period - - - - - (15,548) (15,548)
Other comprehensive income - - - - (65) - (65)
Total comprehensive income for the period - - - - (65) (15,548) (15,613)
Transfer to reverse acquisition reserve (4,430) - - 4,430 - - -
Recognition of plc equity at acquisition date 132 602 - 6,443 - - 7,177
Issue of shares for acquisition of subsidiary 462 4,156 - (7,690) - - (3,072)
Issue of shares for placings 946 7,682 - - - - 8,628
Issue of shares to settle debt 159 1,429 - - - - 1,588
Issue of shares in lieu of fees 143 1,285 - - - - 1,428
Warrants exercised 37 - - - - - 37
Share based-payment - - 148 3,298 - - 3,446
Cost of share issues - (849) - - - - (849)
Total transactions with owners (2,551) 14,306 148 6,481 - - 18,384
Balance at 30 June 2022 1,879 14,306 148 6,481 444 (25,321) (2,063)
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022
Share capital Share premium Share-based payment reserve Loan note equity reserve Retained earnings Total
£'000 £'000
£'000 £'000 £'000
£'000
Balance at 31 December 2019 132 602 - 22 (1,543) (787)
Loss for the period - - - - (1,074) (1,074)
Equity element of the issue of 10% convertible loan notes - - - (22) 22 -
Total comprehensive income for the period - - - (22) (1,052) (1,052)
Balance at 31 December 2020 132 602 - - (2,595) (1,861)
Loss for period - - - - (5,060) (5,060)
Other comprehensive income - - - - - -
Total comprehensive income for the period - - - - (5,060) (5,060)
Issue of shares for acquisition of subsidiary 462 4,156 - - - 4,618
Issue of shares for placings 946 7,682 - - - 8,628
Issue of shares to settle debt 159 1,430 - - - 1,589
Issue of shares in lieu of fees 143 1,285 - - - 1,428
Warrants exercised 37 - - - - 37
Share based-payment - - 148 - - 148
Cost of share issues - (849) - - - (849)
Total transactions with owners 1,747 13,704 148 - - 15,599
Balance at 30 June 2022 1,879 14,306 148 - (7,655) 8,678
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE 18 MONTH PERIOD ENDED 30 JUNE 2022
1 General information
Caracal Gold Plc ('the Company' or 'CGP') (formerly Papillon Holdings plc) is
a public limited company with its shares traded on the Main Market of the
London Stock Exchange. The address of the registered office is 27-28
Eastcastle Street, London, W1W 8DN. The Company was incorporated and
registered in England and Wales on 19 October 2015 as a private limited
company and re-registered on 24 June 2016 as a public limited company. It
changed its name on 10 September 2021 to Caracal Gold Plc. The Company's
registered number is 09829720.
The principal activity of the Company and its subsidiaries (the "Group") is
the exploration, development and mining of gold in Kenya and Tanzania, and the
development of further projects to expand its operations within this industry.
On 31 August 2021, the Company acquired the holding company of Mayflower Gold
Investments Limited (MGIL) and thus a 100% indirect interest in Kilimapesa
Gold Pty Ltd (KPGL), whose principal activity is an established gold mine and
gold processing operation in Kenya. This was accounted for as a reverse
acquisition - See note 5 below for further details.
These consolidated financial statements were approved for issue by the Board
of directors on 5 November 2022.
2 Accounting policies
2.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards and requirements of the
Companies Act 2006. The Financial Statements have also been prepared under the
historical cost convention, as modified by the revaluation of financial assets
at fair value through profit or loss.
The functional currency for each entity in the Group is determined as the
currency of the primary economic environment in which it operates. The
functional currency of the parent company CGP is Pounds Sterling (£) as this
is the currency that finance is raised in. The functional currency of its
subsidiary KPGL is the Kenyan Shilling and the functional currency of its
subsidiary Tyacks is the Tanzanian Shilling. For both subsidiaries these are
the currencies that mainly influences labour, material and other costs of
providing services. The Group has chosen to present its consolidated financial
statements in Pounds Sterling (£), as the Directors believe it is a more
convenient presentational currency for users of the consolidated financial
statements. Foreign operations are included in accordance with the policies
set out below.
During the year the Company changed its accounting reference date from 31
December to 30 June to align itself with its newly acquired subsidiary.
Consequently, the current year covers a 18 month period, whereas the prior
year is a 12 month period and so is not entirely comparable year on year.
The preparation of financial statements in conformity with IFRS's requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial
information are disclosed in Note 3.
a) Going concern
The consolidated financial statements have been prepared on a going concern
basis. The Group's assets are not currently generating substantial revenues
and therefore an operating loss has been reported. An operating loss is
expected in the 12 months subsequent to the date of these financial
statements. As a result, the Group will need to raise funding to provide
additional working capital within the next 12 months. The ability of the Group
to meet its projected expenditure is dependent on these further equity
injections and / or the raising of cash through bank loans or other debt
instruments. These conditions necessarily indicate that a material uncertainty
exists that may cast significant doubt over the Group's ability to continue as
a going concern and therefore their ability to realise their assets and
discharge their liabilities in the normal course of business. Whilst
acknowledging this material uncertainty, the directors remain confident of
raising finance and therefore, the directors consider it appropriate to
prepare the consolidated financial statements on a going concern basis. The
consolidated financial statements do not include the adjustments that would
result if the Group were unable to continue as a going concern. The auditors
have made reference to going concern by way of a material uncertainty within
their audit report.
b) Adoption of new and revised standards
i. New standards, amendments and interpretations adopted by the Group.
There were no new or amended accounting standards that required the Group to
change its accounting policies for the year ended 30 June 2022 and no new
standards, amendments or interpretations were adopted by the Group.
ii. New standards, amendments and interpretations not yet adopted by the
Group.
The standards and interpretations that are relevant to the Group, issued, but
not yet effective, up to the date of the Financial Statements are listed
below. The Group intends to adopt these standards, if applicable, when they
become effective.
Standard Impact on initial application Effective date
IFRS 17 Insurance Contracts 1 January 2023
IFRS 10 and IAS 28 (Amendments) Long term interests in associates and joint ventures Unknown
Amendments to IAS 1 Classification of Liabilities as current or non- current 1 January 2023
Amendments to IFRS 3 Reference to the Conceptual Framework 1 January 2022
Amendments to IAS 16 Property, Plant and Equipment - Proceeds before intended use 1 January 2022
Amendments to IAS 37 Onerous contracts - Cost of fulfilling a contract 1 January 2022
Annual Improvements to IFRS Standard 2018-2020 Cycle Amendments to IFRS 1 First time adoption of IFR 1 January 2022
Standards, IFRS 9 Financial Instruments, IFRS Leases
The Directors have evaluated the impact of transition to the above standards
and do not consider that there will be a material impact of transition on the
financial statements.
2.2 Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases. Please refer to note 5 for information on the consolidation of KPGL
and the application of the reverse acquisition accounting principles.
The Group applies the acquisition method to account for business combinations.
(There was an exception to this for the acquisition of KPGL as discussed in
note 5 below). The consideration transferred for the acquisition of a
subsidiary is the fair values of the assets transferred, the liabilities
incurred to the former owners of the acquiree and the equity interests issued
by the group. The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. The group recognises any non-controlling interest in
the acquiree on an acquisition-by-acquisition basis, either at fair value or
at the non-controlling interest's proportionate share of the recognised
amounts of acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
Any contingent consideration to be transferred by the Group is recognised at
fair value at the acquisition date. Subsequent changes to the fair value of
the contingent consideration that is deemed to be an asset or liability is
recognised either in profit or loss or as a change to other comprehensive
income. Contingent consideration that is classified as equity is not
re-measured, and its subsequent settlement is accounted for within equity.
Asset Acquisitions
Acquisitions of mineral exploration licences through the acquisition of
non-operational corporate structures that do not represent a business, and
therefore do not meet the definition of a business combination, are accounted
for as the acquisition of an asset.
The consideration for the asset is allocated to the assets based on their
relative fair values at the date of acquisition.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated.
2.3 Financial assets and liabilities
The Company classifies its financial assets at fair value through profit or
loss or as loans and receivables and classifies its financial liabilities and
other financial liabilities. Management determines the classification of it's
investments at initial recognition, A financial asset or liability is measured
initially at fair value. At inception transaction costs that are directly
attributable to the acquisition or issue, for an item not at fair value
through profit or loss, is added to the fair value of the financial asset and
deducted from the fair value of the financial liabilities.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determined payments that are not quoted on an active market. They arise when
the Company provides money, goods or services directly to a debtor with no
intention of trading the receivable. Loans are recognised when funds are
advanced to the recipient. Loans and receivables are carried at amortised cost
using the effective interest method (see below).
Other financial liabilities
Are non-derivative financial liabilities with fixed or determined payments.
Other financial liabilities are recognised when cash is received from a
depositor. Other financial liabilities are carried at amortised cost using the
effective interest method. The fair value of the other liabilities repayable
on demand is assumed to be the amount payable on demand at the statement of
financial position date.
Derecognition
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or where the Company has transferred
substantially all the risks and rewards of ownership. In transactions in which
the Company neither retains nor transfers substantially all the risks and
rewards of ownership of a financial asset and retains control over the asset,
the Company continues to recognise the asset to the extent of it's continuing
involvement, determined by the extent to which it is exposed to changes in the
value of the transferred asset. There have not been any instances where assets
have only been partly derecognised. The Company derecognises a financial
liability when it's contractual obligations are discharged, cancelled or
expired.
Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount
at which the financial asset or liability is measured at initial recognition,
minus principal payments, plus or minus the cumulative amortisation using the
effective interest method of any differences between the initial amount
recognised and maturity amount, minus any reduction to impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length transaction
on the measurement date. The fair value of assets and liabilities in active
markets are based on current bid and offer prices respectively. If the market
is not active the Company establishes fair value by using other financial
liabilities appropriate valuation techniques. These include the use of recent
arm's length transactions, reference to other instruments that are
substantially the same for which market observable prices exist, net of
present value and discounted cash flow analysis.
2.4 Cash and cash equivalents
Cash and cash equivalents include cash in hand and on demand and term
deposits, with maturities of three months or less from the date of
acquisition, that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value, net of bank
overdrafts.
2.5 Investments and loans in subsidiaries
Subsidiary fixed asset investments are valued at cost less provision for
impairment. The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss allowance for all
investment and loans in subsidiaries.
2.6 Impairment of non-financial assets
The carrying amounts of the Group's assets, other than inventories, are
reviewed at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the asset's
recoverable amount is estimated.
An impairment loss is recognised whenever the carrying amount of an asset or
its cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in the Statement of Comprehensive Income.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to
cash-generating units (group of units) and then, to reduce the carrying amount
of the other assets in the unit (group of units) on a pro-rata basis.
In assessing value in use, the expected future cash flows from the asset are
discounted to their present value using a pre-tax discount rate that reflects
the current market assessments of the time, value of money and the risks
specific to the asset. An impairment loss is recognised whenever the carrying
amount of an asset exceeds its recoverable amount.
For an asset that does not generate cash inflows that are largely independent
of those from other assets the recoverable amount is determined for the
cash-generating unit to which the asset belongs. An impairment loss is
recognised in the income statement whenever the carrying amount of the
cash-generating unit exceeds its recoverable amount.
A previously recognised impairment loss is reversed if the recoverable amount
increases as a result of a change in the estimates used to determine the
recoverable amount, but not to an amount higher than the carrying amount that
would have been determined (net of depreciation) had no impairment loss been
recognised in prior years. For goodwill, a recognised impairment loss is not
reversed.
2.7 Equity instruments
An equity instrument is any contract that evidences a residual interest in the
assets of a Company after deducting all of its liabilities. Equity instruments
issued are recorded at the proceeds received net of direct issue costs.
Share capital represents the amount subscribed for shares at nominal value.
The share premium account represents premiums received on the initial issuing
of the share capital. Any transaction costs associated with the issuing of
shares are deducted from share premium, net of any related income tax
benefits. Any bonus issues are also deducted from share premium.
The share-based payments reserve represents equity-settled shared-based
employee remuneration for the fair value of the warrants issued. It also
includes the warrants issued for services rendered accounted for in accordance
with IFRS 2.
(https://www.lawinsider.com/clause/reverse-acquisition-reserve) The reverse
acquisition reserve was recognised during the formation of the Group when the
legal acquiree was considered to be the accounting acquirer under the rules of
IFRS 3. As the accounting acquiree was not a business under IFRS 3, a part of
the transaction was outside the scope of IFRS 3. This resulted in the
recognition of a 'reverse acquisition reserve' on consolidation and is set out
in more detail in note 5 below.
The convertible loan note reserve is used to account for the equity component
of the convertible notes.
The foreign exchange translation reserve policy is set out below in 2.10.
Retained earnings include all current and prior period results as disclosed in
the Statement of Comprehensive Income, less dividends paid to the owners of
the Company.
2.8 Current and deferred income taxation
Income tax expense represents the sum of the tax currently payable and
deferred tax.
There is no tax payable as the Company has made a taxable loss for the year.
Taxable loss differs from net loss as reported in the statement of
comprehensive income because it excludes items of income and expense that are
taxable or deductible in other years, and it further excludes items that are
never taxable or deductible. The Company's liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Deferred tax is recognised on temporary 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 or loss.
Deferred tax liabilities are generally recognised for all taxable temporary
differences.
Deferred tax assets are generally recognised for all deductible temporary
differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities are not recognised if the
temporary differences arise from goodwill or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
associated with investments in subsidiaries, except where the Company 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 arising from deductible temporary differences associated with such
investments are only recognised to the extent that it is probable that there
will be sufficient taxable profits against which to utilise the benefits of
the temporary differences and they are expected to reverse in the foreseeable
future.
The carrying amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply in the period in which the liability is settled or the asset
realised. The measurement of deferred tax assets and liabilities reflects the
tax consequences that would follow from the manner in which the Company
expects, at the end of the reporting period, to recover or settle the carrying
amount of its assets and liabilities.
Current or deferred tax for the year is recognised in profit or loss, except
when it relates to items that are recognised in other comprehensive income or
directly in equity, in which case the current and deferred tax is also
recognised in other comprehensive income or directly in equity respectively.
2.9 Rehabilitation and Environmental Provision
The Group recognises a rehabilitation and environmental provision where it has
a legal and constructive obligation as a result of past events, and it is
probable that an outflow of resources will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be
made. The nature of these restoration activities includes dismantling and
removing structures; rehabilitating the mine and tailings dam; dismantling
operating facilities; and restoring, reclaiming and revegetating affected
areas.
On initial recognition, the present value of the estimated costs is
capitalised by increasing the carrying amount of the related mining asset to
the extent that it was incurred as a result of the development or construction
of the mine. Any changes to or additional rehabilitation costs are recognised
as additions or charges to the corresponding asset and rehabilitation
liability when they occur.
Over time, the discounted liability is increased for the change in present
value based on the discount rate that reflects current market assessments and
the risks specific to the liability. The annual unwinding of the discount is
recognised in the statement of comprehensive income as part of finance costs.
The Group does not recognise a deferred tax asset in respect of the temporary
difference on the rehabilitation liability nor the corresponding deferred tax
liability in respect of the temporary difference on the rehabilitation asset.
2.10 Foreign currency translation
In preparing the financial statements of the Group entities, transactions in
currencies other than the entity's functional currency (foreign currencies)
are recognised at the rates of exchange prevailing on the dates of the
transactions. At each reporting date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates prevailing at
that date. Non-monetary items carried at fair value that are denominated in
foreign currencies are translated at the rates prevailing at the date when the
fair value was determined. Non-monetary items that are measured in terms of
historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which
they arise except for:
· exchange differences on foreign currency borrowings relating to
assets under construction for future productive use, which are included in the
cost of those assets when they are regarded as an adjustment to interest costs
on those foreign currency borrowings;
· exchange differences on transactions entered into to hedge
certain foreign currency risks (see below under financial instruments/hedge
accounting); and
· exchange differences on monetary items receivable from or payable
to a foreign operation for which settlement is neither planned nor likely to
occur in the foreseeable future (therefore forming part of the net investment
in the foreign operation), which are recognised initially in other
comprehensive income and reclassified from equity to profit or loss on
disposal or partial disposal of the net investment.
For the purpose of presenting consolidated financial statements, the assets
and liabilities of the Group's foreign operations are translated at exchange
rates prevailing on the reporting date. Income and expense items are
translated at the average exchange rates for the period, unless exchange rates
fluctuate significantly during that period, in which case the exchange rates
at the date of transactions are used. Exchange differences arising, if any,
are recognised in other comprehensive income and accumulated in a foreign
exchange translation reserve (attributed to non-controlling interests as
appropriate).
2.11 Share-based payments
The Group issued warrants in the period which were accounted for as equity
settled share based payment transactions with employees. The fair value of the
employees services received in exchange for these warrants is recognised as an
expense in the profit and loss account with a corresponding increase in equity
in the Share-based payment reserve. As there are no vesting conditions for
these warrants the expense was recognised immediately and will not be
subsequently revisited. Fair value is determined using Black-Scholes option
pricing models.
The Group has also adopted an incentive plan to issue its management
Performance Shares based on non-market based performance conditions. These are
valued by management using the fair value of the equity instrument expected to
be received and a judgement of the likelihood for these conditions to be met.
At the end of each reporting period, the Group revises its estimate of the
number of shares that are expected to be awarded.
Where equity instruments are granted to persons other than employees, the
statement of comprehensive income is charged with the fair value of the goods
and services received.
2.12 Intangible assets
Exploration and evaluation assets
Intangible assets represent exploration and evaluation assets (IFRS 6 assets),
being the cost of acquisition by the Group of rights, licences and know-how.
Such expenditure requires the immediate write-off of exploration and
development expenditure that the Directors do not consider to be supported by
the existence of commercial reserves.
All costs associated with mineral exploration and investments, are capitalised
on a project-by-project basis, pending determination of the feasibility of the
project. Costs incurred include appropriate technical and administrative
expenses but not general overheads and these assets are not amortised until
technical feasibility and commercial viability is established. If an
exploration project is successful, the related expenditures will be
transferred to "mining assets" and amortised over the estimated life of the
commercial ore reserves on a unit of production basis. Where a licence is
relinquished or a project abandoned, the related costs are written off. On 1
January 2020, all the exploration and evaluation expenditure relating to the
Kilimapesa Mine was transferred to Mining assets as the mine is considered to
be fully operational and production has commenced.
The recoverability of all exploration and development costs is dependent upon
the discovery of economically recoverable reserves, the ability of the Group
to obtain necessary financing to complete the development of reserves and
future profitable production or proceeds from the disposition thereof.
Exploration and evaluation assets shall no longer be classified as such when
the technical feasibility and commercial viability of extracting mineral
resources are demonstrable. When relevant, such assets shall be assessed for
impairment, and any impairment loss recognised, before reclassification to
"Mine development".
2.13 Property, plant and equipment
i) initial recognition
Upon commencement of commercial production, the intangible assets held under
'exploration and evaluation" are transferred into Mining Assets. Items of
property, plant and equipment and Mining assets are stated at cost less
accumulated depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction
cost, any costs directly attributable to bringing the asset into operation,
the initial estimate of the rehabilitation obligation, and, for qualifying
assets (where relevant), borrowing costs. The purchase price or construction
cost is the aggregate amount paid and the fair value of any other
consideration given to acquire the asset.
Producing mines also consist of the value attributable to mineral reserves and
the portion of mineral resources considered to be probable of economic
extraction at the time of an acquisition. When a mine construction project
moves into the production phase, the capitalisation of certain mine
construction costs ceases, and costs are either regarded as part of the cost
of inventory or expensed, except for costs which qualify for capitalisation
relating to mining asset additions, improvements or new developments,
underground mine development or mineable reserve development.
Where parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items of property, plant and
equipment.
ii) Depreciation/amortisation
'Mining assets' are depreciated/amortised on a unit of production (UOP) basis
over the economically recoverable reserves of the mine concerned. The unit of
account used is the recoverable ounces of gold. Rights and concessions are
depleted on the UOP basis over the economically recoverable reserves of the
relevant area. The UOP rate calculation for the depreciation/amortisation of
mine development costs takes into account expenditures incurred to date,
together with sanctioned future development expenditure. Economically
recoverable reserves include indicated reserves only.
Depreciation on other plant and equipment is provided to write off the cost of
an asset, less its estimated residual value, evenly over the expected useful
economic life of that asset. Freehold land, that has been acquired outright is
not depreciated.
- Buildings
20 Years
- Plant and equipment 10 Years
- Motor vehicles 3- 5 Years
- Office equipment 6
Years
The residual value, if significant, is reassessed annually.
Surplus/(deficits) on the disposal of mining assets, plant and equipment are
credited/ (charged) to income. The surplus or deficit is the difference
between the net disposal proceeds and the carrying amount of the asset.
The Group holds some Right-of Use Assets - see policy note 2.15 below.
2.13 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is
determined using the weighted average cost method. The cost of finished goods
and work in progress comprises raw material, direct labour, other direct
costs, variable production overheads and an allocation of fixed production
overheads based on normal operating capacity, but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Raw materials include costs incurred in acquiring the inventories and bringing
them to their existing location and condition.
Broken ore comprises all ores extracted from the mine and stockpiled awaiting
processing. The ores are valued at the cost of mining and transport to its
current position.
Work-in-progress comprises materials in the process of being converted from
raw materials to finished goods.
Precious metals inventories include bullion on hand and gold in process.
Bullion on hand and gold in process represent production on hand after the
smelting process, gold contained in the elution process, gold loaded carbon in
the Carbon in Leach (CIL), Carbon in Pulp (CIP) process, gravity concentrates,
and any form of precious metal in process where the quantum of the contained
metal can be accurately determined. It is valued at the average production
cost for the period, including amortisation and depreciation.
2.14 Revenue
Revenue represents the fair value of consideration received or receivable for
the sale of precious metal. It is recognised in the income statement when the
significant risks and rewards of ownership have been transferred to the buyer.
It is stated net of Value Added Tax, rebates and trade discounts. Cash
discounts are included as part of finance costs. No revenue is recognised if
there are significant uncertainties regarding, the recovery of the
consideration due, associated costs, the possible return of goods or the
continuing management involvement with goods.
2.15 Leases
The Group has entered into leases of land (Saris leases) and field vehicles
(additions in the current year). Lease liabilities are initially measured at
the present value of lease payments unpaid at the commencement date. Lease
payments are discounted using the incremental borrowing rate (being the rate
that the lessee would have to pay to borrow the funds necessary to obtain an
asset of similar value in a similar economic environment with similar terms
and conditions), unless the rate implicit in the lease is available. The Group
currently uses the incremental borrowing rate as the discount rate for all
leases. For the purposes of measuring the lease liability, lease payments
comprise fixed payments and variable lease payments based on an index or rate.
Right-of-use assets are measured at cost, which comprises the initial
measurement of the lease liability, plus any lease payments made prior to
lease commencement, initial direct costs incurred, less any lease incentives
received. These assets are depreciated over the lease term (or useful life, if
shorter). Right-of-use assets are subject to an impairment test if events and
circumstances indicate that the carrying value may exceed the recoverable
amount.
Lease repayments made are allocated to capital repayment and interest so as to
produce a constant periodic rate of interest on the remaining lease liability
balance.
Right-of-use assets are presented within property, plant and equipment. Lease
liabilities are presented as separate line items on the face of the Balance
Sheet. In the Cash Flow Statement, lease repayments (of both the principal and
interest portions) are presented within cash used in financing activities,
except for payments for leases of short-term and low-value assets and variable
lease payments, which are presented within cash flows from operating
activities or cash used in investing activities in accordance with the
relevant Group accounting policy.
2.16 Convertible loan notes
The component parts of convertible loan notes issued by the Group are
classified separately as financial liabilities and equity in accordance with
the substance of the contractual arrangements. A conversion option that will
be settled by the exchange of a fixed amount of cash or another financial
assets for a fixed number of the Company's own equity instruments is an equity
instrument.
At the date of issue, the fair value of the liability component is estimated
using the prevailing market interest rate for a similar non-convertible
instrument. This amount is recorded as a liability on an amortised cost basis
using the effective interest method until extinguished upon conversion or at
the instrument's maturity date.
The conversion option classified as equity is determined by deducting the
amount of the liability component from the fair value of the compound
instrument as a whole. This is recognised and included in equity, net of
income tax effects, and is not subsequently remeasured. In addition, the
conversion option classified as equity will remain in equity until the
conversion option is exercised, in which case, the balance recognised in
equity will be transferred to the convertible loan note reserve. Where the
conversion option remains unexercised at the maturity date of the convertible
loan note, the balance recognised in equity will be transferred to retained
earnings. No gain or loss is recognised in profit or loss upon conversion or
expiration of the conversion option.
Transaction costs that relate to the issue of the convertible loan notes are
allocated to the liability and equity components in proportion to the
allocation of the gross proceeds. Transaction costs relating to the equity
component are recognised directly in equity. Transaction costs relating to the
liability component are included in the carrying amount of the liability
component and are amortised over the lives of the convertible loan notes using
the effective interest method.
2.17 Net financing costs
Net financing costs comprise interest payable on borrowings calculated using
the effective interest rate method, interest receivable funds invested,
foreign exchange gains and losses, and gains and losses on hedging instruments
that are recognised in the income statement.
Interest income is recognised in the income statement as it accrues, using the
effective interest method. The interest expense component of finance lease
payment is recognised in the income statement using the effective interest
rate method.
2.18 Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision makers. The chief operating
decision maker, who are responsible for allocating resources and assessing
performance of the operating segments, has been identified as the executive
Board of Directors.
3 Critical accounting estimates and judgments
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
Accounting for acquisitions and fair value (see Note 13)
Acquisitions are accounted for at fair value. The assessment of fair value is
subjective and depends on a number of assumptions. These assumptions may
include assessment of estimated resources, cost of bringing these resources to
commercial production levels, discount rates, and the amount and timing of
expected future cash flows from assets and liabilities. In addition, the
selection of specific valuation methods for individual assets and liabilities
requires judgment. The specific valuation methods applied will be driven by
the nature of the asset or liability being assessed. The consideration given
to a seller for the purchase of a business or a company is accounted for at
its fair value. When the consideration given includes elements that are not
cash, such as shares or options to acquire shares, the fair value of the
consideration given is calculated by reference to the specific nature of the
consideration given to the seller.
Impairment of investments and loans to subsidiaries (see Note 13)
The Group and the Company assess at each reporting date whether there is any
objective evidence that investments in and loans to subsidiaries are
impaired. To determine whether there is objective evidence of impairment, a
considerable amount of estimation is required in assessing the ultimate
realisation of these investments/receivables, including valuation,
creditworthiness and future cashflows which are calculated from the Life of
Mines calculations. As at the year end the Directors do not assess there to be
any impairment of these amounts.
Share-based payments (see Note 24)
The Group issues shares and warrants to its employees, directors, investors
and suppliers. These are valued in accordance with IFRS 2 "Share-based
payments". In calculating the related charge on issuing shares and warrants
the Group will use a variety of estimates and judgements in respect of inputs
used including share price volatility, risk free rate, and expected life.
Changes to these inputs may impact the related charge.
Valuation of deferred consideration payable (see Note 5)
The Group has recorded a contingent consideration liability of £1.426m as at
30 June 2022 relating to the reverse acquisition of the KPGL. An estimate must
be made when determining the value of contingent consideration to be
recognised at each balance sheet date. Changes in assumptions could cause an
increase, or reduction, in the amount of contingent consideration payable,
with a resulting charge or credit in the consolidated income statement.
The deferred consideration (in the form of both deferred consideration shares
and performance shares) is expected to be paid within 2 years of the
acquisition and no discount was applied due to immateriality and immediacy of
payment. It is based upon the achievement of differing milestones of gold
poured or sold in a month from 300 ounces to 1,500 ounces. The Directors
believe that there is a high probability that these conditions will be met in
the next 12 months of operations.
Recoverable value of mining assets (see Note 15)
Costs capitalised in respect of the Group's mining assets are required to be
assessed for impairment under the provisions of IAS 36. Such an estimate
requires the Group to exercise judgement in respect of the indicators of
impairment and also in respect of inputs used in the models which are used to
support the carrying value of the assets. Such inputs include estimates of
gold reserves (see www.caracalgold.com), production profiles, gold price,
capital expenditure, inflation rates, and pre-tax discount rates that reflect
current market assessments of (a) the time value of money; and (b) the risks
specific to the asset for which the future cash flow estimates have not been
adjusted. The Directors concluded that there was no impairment as at 30 June
2022.
Rehabilitation and environmental "decommissioning" provision (see Note 22)
The Group's activities are subject to various laws and regulations governing
the protection of the environment. The Group recognises management's best
estimate of the asset decommissioning costs in the period in which they are
incurred. Such estimates of costs include pre-tax discount rates that reflect
current market assessments of (a) the time value of money; and (b) the risks
specific to the asset for which the future cash flow estimates have not been
adjusted. Actual costs incurred in future periods could differ materially from
the estimates.
Additionally, future changes to environmental laws and regulations, life of
mining assets, estimates and discount rates could affect the carrying amount
of this provision. The Directors provisionally assessed the extent of
decommissioning required as at 31 August 2021 and concluded that a provision
of £1.4m should be recognised in respect of future decommissioning
obligations at the Kilimapesa Gold Mine.
Valuation of inventory (see Note 16)
As at 30 June 2022, inventory has been valued at £712,000. This includes
slow moving inventory but due to its nature the Directors do not believe that
any impairment of this balance is necessary at year end.
4. Financial risk management
The Group's activities may expose it to some financial risks. 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.
a) Liquidity risk
Liquidity risk arises from the possibility that the Group and its subsidiaries
might encounter difficulty in settling its debts or otherwise meeting its
obligations related to financial liabilities. In addition to equity funding,
additional borrowings have been secured to finance operations. The Group
manages this risk by monitoring its financial resources and carefully plans
its expenditure programmes. Financial liabilities of the Group comprise trade
payables which mature in less than six months, convertible loan notes as
referenced in note 20 and deferred consideration that is payable in shares.
b) Capital risk
The Group's objective when managing capital is to safeguard the entity's
ability to continue as a going concern and develop its gold exploration,
development and production activities to provide returns for shareholders and
benefits for other stakeholders.
The Group's capital structure comprises all the components of equity (all
share capital, share premium, retained earnings when earned and other
reserves). When considering the future capital requirements of the Group and
the potential to fund specific project development via debt, the Directors
consider the risk characteristics of the underlying assets in assessing the
optimal capital structure.
c) Credit risk
Credit risk is the risk that the Group will suffer a financial loss as a
result of another party failing to discharge an obligation and arises from
cash and other liquid investments deposited with banks and financial
institutions. The Group considers the credit ratings of banks and
institutions in which it holds funds to reduce exposure to credit risk. The
Group considers that it is not exposed to major concentrations of credit risk.
The currency profile of the Group's cash and cash equivalents is as follows:
30 June 2022 31 December 2020
Cash and cash equivalents £'000 £'000
GBP - -
Kenyan Shillings 23 2
USD 57 119
On the assumption that all other variables were held constant, and in respect
of the Group's cash position, the potential impact of a 20% increase in the
GBP: USD foreign exchange rate would not have a material impact on the Group's
cash position and as such is not disclosed.
d) Fair value hierarchy
All the financial assets and financial liabilities recognised in the financial
statements which are short-term in nature are shown at the carrying value
which also approximates the fair values of those financial instruments.
Therefore, no separate disclosure for fair value hierarchy is required.
e) Market risk
Market risk arises from the Group's use of interest bearing and foreign
currency financial instruments. It is the risk that future cash flows of a
financial instrument will fluctuate because of changes in interest rates
(interest rate risk), and foreign exchange rates (currency risk). The
Convertible loan note held at year end has a fixed interest rate and is
denominated in US Dollars and therefore a risk exists that repayment may be
higher than provided for if the foreign exchange rate significantly changes.
This is mitigated by the underlying assets which are also denominated in US
Dollar (ie the gold reserves).
A 10% movement in the strength of the US Dollar against Pound Sterling would
increase the repayment by £164,000.
f) Price risk
Price risk arises from the exposure to equity securities arising from
investments held by the Group. No such investments are held by the Group and
therefore no risk has been identified.
g) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the Pound
sterling, US Dollar and Kenyan Shilling. Foreign exchange risk arises from
recognised monetary assets and liabilities, where they may be denominated in a
currency that is not the Group's functional currency. One significant risk
in Kenya is a US Dollar risk as the loans to KPG are denominated in US
Dollars. A 10% movement in the strength of the US Dollar against Pound
Sterling would decrease the liability owed to the parent company by £1.6m.
The Directors consider that, for the time being, no hedging or other
arrangements are necessary to mitigate this risk.
h) Categories of financial instruments
In terms of financial instruments, these solely comprise of those measured at
amortised costs and are as follows:
Group Company
30 June 31 Dec 2020 30 June 31 Dec 2020
2022 2022
£'000 £'000 £'000 £'000
Trade and other payables 7,357 1,330 6,019 1,423
Cash and cash equivalents at amortised cost
80 121 26 -
Trade and other receivables 826 737 7,108 12
906 858 7,134 12
5. Reverse acquisition
On 31 August 2021, the Company acquired through an issue of 428,846,154
Consideration shares the entire share capital of MGIL and thus a 100% indirect
interest in Kilimapsea Gold Pty Ltd (KPGL), whose principal activity is an
established gold mine and gold processing operation in Kenya. (On 2 November
2021, 32,867,800 further consideration shares were issued in lieu of an
outstanding cash payment of $450,000 to GMRL and a further payment of $150,000
in cash was made in accordance with the Prospectus).
Although the transaction resulted in KPGL becoming a wholly owned subsidiary
of the Company, the transaction constitutes a reverse acquisition as in
substance, it resulted in a fundamental change in the business of the Company
and the executive management of KPGL were given the right to appoint two
executive directors, one non-executive director and a non-executive chairman
to the Company's board of directors, with the Company reserving the right to
appoint two non-executive directors. Thus the executive management of KPGL
effectively became the controlling executive management of the Company.
The shareholders of KPGL acquired a controlling interest in the Company,
before further share issues to reduce debt and raise cash diluted their
ownership to 29.61%. The transaction has therefore been accounted for as a
reverse acquisition. As the Company's activities prior to the acquisition were
purely the maintenance of the Main Market LSE Listing, acquiring KPGL and
raising equity finance to provide the required funding for the operations of
the acquisition the Directors determined that the Company did not meet the
definition of a business in accordance with IFRS 3.
Accordingly, this reverse acquisition does not constitute a business
combination. Although, the reverse acquisition is not a business combination,
the Company has become a legal parent and is required to apply IFRS 10 and
prepare consolidated financial statements.
The Directors have prepared these financial statements using the reverse
acquisition methodology, but rather than recognising goodwill, the difference
between the equity value given up by the KPGL shareholders and the share of
the fair value of net assets gained by the KPGL shareholders is charged to the
statement of comprehensive income as a share-based payment on reverse
acquisition, and represents in substance the cost of acquiring a Main Market
LSE listing.
In accordance with reverse acquisition accounting principles, these
consolidated financial statements represent a continuation of the consolidated
statements of MGIL and its subsidiaries and include:
- The assets and liabilities of MGIL and its subsidiaries at their
pre-acquisition carrying value amounts and the results for both periods; and
- The assets and liabilities of the Company as at 31 August 2021 and its
results from the date of the reverse acquisition 31 August 2021 to 30 June
2022.
On 31 August 2021, the Company issued 428,846,154 ordinary shares to acquire
the entire share capital of MGIL and thus indirectly KPGL. On the same date,
the Company was readmitted to the Main Market of the LSE, after completing its
second Placing round with a placing share price of £0.01. The Company was
also contracted to issue further cash and shares as part of the overall
consideration calculation bringing the value of the investment in KPGL to
£7,690,000 (see below for further details).
Because the legal subsidiary, KPGL, was treated on consolidation as the
accounting acquirer and the legal Parent Company, CGP, was treated as the
accounting subsidiary, the fair value of the shares deemed to have been issued
by KPGL was calculated at £1,138,000 based on an assessment of the purchase
consideration for a 100% holding of CGP of 132,400,000 shares at a weighted
average placing price of £0.0086 per share.
The fair value of the net assets of CGP at acquisition was as follows:
£'000
Cash and cash equivalents 75
Other assets 6
Liabilities (2,241)
Net Liabilities (2,160)
The difference between the deemed cost (£1,138,000) and the fair value of the
net liabilities assumed per above of £2,160,000 resulted in £3,298,000 being
expensed within "reverse acquisition expenses" in accordance with IFRS 2,
Share Based Payments, reflecting the economic cost to KPGL shareholders of
acquiring a quoted entity.
The reverse acquisition reserve which arose from the reverse takeover is made
up as follows:
£'000
Pre-acquisition equity(1) (2,894)
KPGL share capital at acquisition (2) 4,430
Investment in KPGL (3) (7,690)
Loan assigned from GMR on acquisition(4) 9,337
Reverse acquisition expense (5) 3,298
6,481
1. Recognition of pre-acquisition equity of CGP as at 31 August
2021.
2. KPGL had issued share capital and share premium of £4,430,000.
As these financial statements present the capital structure of the legal
parent entity, the equity of KPGL is eliminated.
3. The value of the shares and cash issued by the Company in
exchange for the entire share capital of KPGL. The above entry is required
to eliminate the balance sheet impact of this transaction.*
4. The Loan held between GMR and KPGL was assigned to MGIL and
therefore is eliminated as part of the Reverse Acquisition.
5. The reverse acquisition expense represents the difference
between the value of the equity issued by the Company, and the deemed
consideration given by KPGL to acquire the Company.
*Value of the Shares issued by the Company to acquire KPGL is made up as
follows:
£'000
Consideration Shares 4,288
Deferred Consideration Shares 1,500
Cash Consideration 146
Share Consideration in lieu of cash 330
Performance Shares Awards 1,426
7,690
( )
The Deferred Consideration shares were deemed payable before year end and
therefore their cost has been included in the cost of the investment. £1m
was payable on the recommencement of gold being commercially produced and sold
at the mine on 24 September 2021 and £500,000 became payable on the
achievement of the first 5,000 ounces of gold commercially produced and sold
by KGPL on 31 March 2021. These shares (to be valued at 1p per share as per
the Prosepectus) are still to be issued at year end and have been included in
the Other Creditors balance.
The Performance Share Awards which were granted at the date of the Reverse
Acquisition have been recognised as part of the cost of investment as under
IFRS 2 as they do not have any non-vesting conditions and therefore should be
recognised on grant.
Recognition has been based on an estimate of the number of instruments which
are expected to be issued based on the achievement of the following milestones
at a share price forecast between 1.0p and 1.11p:
Management Incentives shall vest in five equal instalments upon the occurrence
of the following milestones:
1. On the achievement of 300 ounces of gold poured or sold in a month (20%);
2. On the achievement of 600 ounces of gold poured or sold in a month (20%);
3. On the achievement of 900 ounces of gold poured or sold in a month (20%);
4. On the achievement of 1,200 ounces of gold poured or sold in a month (20%);
and
5. On the achievement of 1,500 ounces of gold poured or sold in a month (20%).
There is no expiry date set for the achievement of the milestones with respect
to the Performance Share Awards.
For the purposes of the current period of reporting, the values related to the
transaction accounting are considered provisional. These fair values will be
finalised within a period of twelve months from the reverse acquisition date.
6. Segment reporting
For the purpose of IFRS 8, the Chief Operating Decision Maker "CODM" takes the
form of the board of directors. The Directors are of the opinion that the
business of the Group focused on two reportable segments as follows:
· Head office, corporate and administrative, including parent
company activities of raising finance and seeking new investment
opportunities, all based in the UK and;
· Gold mining operations, all based in Kenya and Tanzania.
The geographical information is the same as the operational segmental
information shown below.
18 month period ending 30 June 2022 United Kingdom £'000 Kenya Tanzania
£'000 £'000 £'000
Revenue - 6,858 - 6,858
Cost of sales - (9,007) - (9,007)
Gross Profit (2,149) - (2,149)
Operating expenses (3,411) (3,776) (1) (7,188)
Operating Loss (3,411) (5,925) (1) (9,337)
Share-based payments (84) - - (84)
Listing costs (1,146) - - (1,146)
Other income/FX (19) (920) - (939)
Net finance costs (546) (198) - (744)
Reverse acquisition expenses (3,298) - - (3,298)
Loss before and after tax (8,504) (7,073) (1) (15,548)
Net Assets
Assets 435 6,862 2,402 9,699
Liabilities (8,737) (2,471) (554) (11,762)
Net assets (liabilities) (8,302) 4,391 1,848 (2,063)
No segmental information has been provided for prior period as there was only
one segment, being the Operations in Kenya. As such the prior year financial
statements of the segment is the same as that set out in the prior period
consolidated statement of comprehensive income, the consolidated statement of
financial position, the consolidated statement of changes in equity and the
consolidated statement of cash flows.
Major customer: all revenue in both periods came from one customer located in
Kenya in each period.
7. Revenue
18 months ended 30 June 2022 Year ended 31 December 2020
£'000 £'000
Sales of precious metals 6,858 1,384
Total revenue 6,858 1,384
8. Expenditure by nature
18 months ended 30 June 2022 Year ended 31 December 2020
£'000 £'000
Directors remuneration 866 24
Wages and salaries 2,068 210
Depreciation of PPE 824 439
Legal and professional fees 1,459 -
During the year the Group obtained the following services from their auditors:
18 months ended 30 June 2022 Year ended 31 December 2020
£'000 £'000
Fees payable to the Group's auditors for the audit of the Company
65 16
Fees payable to the Group's auditors for other services - Reporting Accountant
services in respect to the Reverse Acquisition
35 -
100 16
9. Directors and employees
The average monthly number of persons employed by the Group, including
Executive Directors, was:
18 months ended Year ended 31 December 2020
30 June 2022 £'000
£'000
Management 13 2
Operations 461 114
Administration 25 5
499 121
Remuneration in respect of these Directors and Employees was:
18 months ended Year ended 31 December 2020
30 June 2022 £'000
£'000
Wages and salaries 1,135 205
Pensions (National Social Security Fund) 17 6
Directors' fees 772 -
1,924 206
The share-based payments comprised the fair value of warrants granted to
directors and employees in respect of services provided.
Wages and salaries include amounts that are capitalised as development and
production assets and others are administration expenses.
Directors' remuneration is disclosed in the Remuneration Report of these
consolidated financial statements.
10. Finance costs
18 month period ended 30 June 2022 Year ended 31 December 2020
£'000 £'000
Interest on loans 609 110
Unwinding of discount on provisions 135 -
744 110
11. Taxation
No charge to taxation arises due to the losses incurred.
GROUP 18 months 12 months ended 31 December
period ended 2020
30 June
2022
£'000 £'000
Loss on ordinary activities before taxation (15,548) (1,690)
Tax at the applicable rate of 24.5% (2020:30%) (3,810) (507)
Disallowed expenses 2,068 714
Losses for which no deferred tax is recognised 13,480 976
Total tax charge - -
The weighted average applicable tax rate of 24.5% (2021: 30%) used is a
combination of the 19% standard rate of corporation tax in the UK and 30%
Kenyan corporation tax.
The Group has total tax losses of £20,845,000 to carry forward against future
profits. There are £1,230,000 of UK tax losses brought forward and
£6,135,000 Kenyan tax losses brought forward.
No deferred tax asset on losses carried forward has been recognised on the
grounds of uncertainty as to when profits will be generated against which to
relieve said amount.
12. Earnings per share
Basic and diluted loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period.
18 months ended 12 months
30 June ended
2022 31December
2020
Loss for the period (£'000) 15,548 1,690
Weighted average number of shares in issue 1,423,204,110 1,429,487,180
Basic and Diluted loss per share (pence) (1.09p) (0.12)p
The weighted average number of shares is adjusted for the impact of the
reverse acquisition as follows: Prior to the reverse takeover, the number
of shares is based on KPGL, adjusted using the share exchange ratio arising on
the reverse takeover; and from the date of the reverse takeover, the number of
share is based on the Company. The prior year number of shares is also
adjusted using the share exchange ratio.
There is no difference between the diluted loss per share and the basic loss
per share presented. Warrants could potentially dilute basic earnings per
share in the future but were not included in the calculation of diluted
earnings per share as they are anti-dilutive for the period presented.
13. Investment in subsidiaries
COMPANY £'000
Cost and net book amount
At 1 January 2020, 2021 -
Additions - KPGL 7,690
Additions - Tyacks 1,847
Additions - Other subsidiaries -
At 30 June 2022 9,537
Information about the composition of the Group at the end of the reporting
period is as follows:
Name Principal activity Place of incorporation and operation % owned subsidiary
Kilimapesa Gold Pty Ltd ("KPGL") Precious metals production Kenya 100*
Tyacks Gold Limited ("Tyacks") Exploration and Mining Tanzania 100
Mayflower Gold Investments Ltd ("MGIL") Precious metals production England and Wales 100
Caracal Investments Ltd Holding company Mauritius 100
*held indirectly through Mayflower Gold Investments Limited
On 31(st) August 2021, the Company acquired the entire share capital of
KPGL. Further details regarding this reverse acquisition and its accounting
can be found in Note 5 above. The registered office of KPGL is L.R.
No.209/8342/3, First Ngong Avenue, PO Box 7478, Nairobi, Kenya.
MGIL was incorporated on 9(th) December 2020 and its registered office is
165 Fleet Street, London, UK, EC4A 2DY. On 16(th) August 2022, the company
changed its name to Caracal Holdings Limited.
The registered office of Caracal Investments is c/o Dale International Trust
Company Limited, 3(rd) Floor Tower A, 1 Cybercity, Ebene 72201, Mauritius.
The registered office of Tyacks is 10 Chato Street, Regent Estate, PO Box
9020, Dar es Salaam, Tanzania.
On 23 May 2022, the Company entered into a Sales and Purchase Agreement with
Tyacks Gold Limited, a gold mining and exploration company, to acquire the
entire share capital of said company (66.7% to the Company and 33.3% to
MGIL). As consideration for the transaction, the Purchase price was agreed
to be a total of £1.2m ($1.5m) cash which was paid in three tranches
($500,000 on 27 June 2022, $413,000 on 3 August 2022 and the final amount of
$587,000 is still outstanding as at the date of these accounts) and the seller
was also granted a 0.5% gross net smelter return royalty on all gold produced
and sold related to the Project and Licences, less any transportation,
insurance, marketing and refining costs. The present value of the contingent
consideration (the net smelter royalty) was calculated to be £619,000.
The acquisition provided the Company with the opportunity to expand its gold
production and exploration programme as Tyacks are the holder of several
mining licenses. On this date the Company assumed 100% of the budgeted costs
required to operate Tyacks and the Project and therefore it is considered that
control was to have passed on the Signature Date of 23 May 2022.
The amounts recognised in respect of the identifiable assets acquired and
liability assumed as a result of the acquisition are as follows:
Net book value of assets acquired Fair value adjustments Fair value of assets acquired
£'000 £'000 £'000
Intangible assets - 2,392 2,392
Financial assets 10 - 10
Financial liabilities (3) - (3)
Deferred tax liability - (552) (552)
Total identifiable assets acquired and liabilities assumed 7 1,840 1,847
Fair value of consideration paid:
Cash paid 402
Cash due post year end 826
Contingent consideration 619
Total consideration 1,847
Under IFRS 3, a business must have three elements: inputs, processes and
outputs. Tyacks is an early stage exploration company and has no mineral
reserves and no plan to develop a mine. Tyacks does have titles to mineral
properties but these could not be considered inputs because of their early
stage of development. Tyacks has no processes to produce outputs and has not
completed a feasibility study or a preliminary economic assessment on any of
its properties and no infrastructure or assets that could produce outputs.
Therefore, the Directors conclusion is that the transaction is an asset
acquisition and not a business combination. The fair value adjustment to
intangible assets of £2,392,000 represents the excess of the purchase and
contingent consideration of £1,847,000 over the excess of the net assets
acquired (net assets of £7,000) and a deferred tax liability of £552,000.
During the period since acquisition, Tyacks contributed a loss of £2,000 to
the Group. If the acquisition had occurred on 1 January 2021, consolidated
pro-forma loss for the 18 months ended 30 June 2022 would have been £58,000.
14. Intangible assets
GROUP Total
£'000
Cost
Balance as at 1 January 2020 -
Additions/acquisitions -
Balance as at 31 December 2020 -
Acquisition of Tyacks 2,392
Balance as at 30 June 2022 2,392
No impairment was recorded in either period.
15. Property, plant and equipment
GROUP Land Land Buildings Mining Plant and equipment Production vehicles Field vehicles (leased) Office equipment Total
(leased) assets
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
Balance as at 31 December 2020 236 95 3,246 278 16 5,521
96 1,554 -
Additions - - 24 1,677 700 16 92 22 2,531
FX effect 7 4 3 71 124 10 4 1 224
Balance as at 30 June 2022 243 122 4,070 304 39 8,276
100 3,302 96
Accumulated depreciation
Balance as at 31 December 2020 - 38 1,300 246 12 1,763
12 155 -
Depreciation charge - 7 624 32 1 736
9 63 -
FX effect - 1 1 7 70 9 - - 88
Balance as at 30June 2022 - 46 1,994 287 13 2,587
22 225 -
Carrying value
Balance as at 31 December 2020 236 57 1,946 32 4 3,758
84 1,399 -
Balance as at 30 June 2022 243 76 2,076 17 26 5,689
78 3,077 96
Details of land
Freehold land to the extent of 11,736 Ha, situated in Lolgorian, Transmara
West, Narok County, held under Title Deed Nr
TRANSMARA/MOYOI/2366,Registry Map Sheet No. 19, in the Transmara District Land
Registry. Purchased on 4 May 2015 for £230,216.
Pledged as security
Field vehicle additions in the period were acquired through a finance lease
agreement which is secured on these assets.
COMPANY Plant and equipment Total
£'000 £'000
Cost
Balance as at 31 December 2020,2021 - -
Additions 330 330
Balance as at 30 June 2022 330 330
Depreciation
Balance as at 31 December 2020,2021 - -
Additions 27 27
Balance as at 30 June 2022 27 27
Carrying value
Balance as at 31 December 2020,2021 - -
Balance as at 30 June 2022 302 302
In assessing the carrying amounts of its mining assets, the Directors have
used an expansion of the mining capacity up to 24,000 oz of gold per annum in
the next year, Gold revenues have been estimated over the life of mine period
at a management estimate of $1,600 per oz. A discount rate of 20% has been
utilised to give a net present value of the existing mine. No impairment has
been indicated.
16. Inventories
GROUP As at As at
30 June 31 December 2020
2022
£'000 £'000
Consumable stores 138 360
Raw materials 457 5
Precious metal on hand and in process 117 210
712 575
17. Trade and other receivables
Group Company
30 June 2022 31 Dec 2020 30 June 2022 31 Dec 2020
£'000 £'000 £'000 £'000
Trade debtors - 4 - -
VAT receivables 642 729 71 -
Amounts due from Group undertakings
- - 6,997 -
Other receivables and prepayments 184 4 39 12
826 737 7,108 12
All of the above amounts are due within one year.
Amounts due from Group undertakings are denominated in US dollars and interest
free and repayable on demand.
Under IFRS 9, the Expected Credit Loss ("ECL") Model is required to be applied
to the intercompany loans receivable from subsidiary companies, which are held
at amortised cost. An assessment of the expected credit loss arising on
intercompany loans has been calculated and the directors do not believe a
provision is required in the parent Company financial statements during 2022
as the cashflows from the underlying asset (the Kilimapsea Mine) show that the
repayments on the loan will cover the repayments required. The Company had
no subsidiaries in prior year.
18. Cash and cash equivalents
Group Company
30 June 2022 31 Dec 2020 30 June 2022 31 Dec 2020
£'000 £'000 £'000 £'000
Cash and cash equivalents 80 121 26 -
80 121 26 -
Cash and cash equivalents consist of balances in bank accounts and Company, a
money transfer service used to efficiently execute international foreign
currency transactions. Corpay is a part of the Barclays Group with a Fitch
credit score of A and ABSA Bank Limited holds a BB- credit score.
19. Trade and other payables
Group Company
30 June 2022 31 Dec 2020 30 June 2022 31 Dec 2020
£'000 £'000 £'000 £'000
Trade creditors 541 305 164 918
Amounts payable to related parties
- 221 - -
Other payables and accruals 3,882 804 2,922 505
Taxes and social security 8 - 8 -
Deferred consideration 1,500 - 1,500 -
Contingent consideration due within one year
1,426 - 1,426 -
7,357 1,330 6,019 1,423
Other payables include an amount of £825,000 due to the owners of Tyacks for
the completion of this acquisition (see note 13) and an amount of £2m owed to
Orca Capital for Shares paid for but still to be issued.
The deferred consideration is due to Mayflower Capital as part of the
consideration due for the acquisition of KPGL (see note 5). This is due to
be paid in shares.
The contingent consideration is based on the management performance shares as
set out in note 5 and is also due to be paid in shares.
20. Borrowings
Non-Interest Bearing: Group Company
30 June 2022 31 Dec 2020 30 June 2022 31 Dec 2020
£'000 £'000 £'000 £'000
Non-current liabilities
Other - 48 - -
Outstanding on purchase price of Land
- - - -
- 48
Current liabilities
Other - 48 - -
Outstanding on purchase price of Land
- 15 - -
- 63 - -
KPGL owns a plot of land measuring 11,736 hectares described as parcel 2366
situated in the Transmara Region of Kenya. The liability is unsecured,
interest free and was repaid in 2022.
Interest Bearing: Group Company
30 June 2022 31 Dec 2020 30 June 2022 31 Dec 2020
£'000 £'000 £'000 £'000
Non-current liabilities
Other 5 32
Finance leases 162 110 - -
167 142
Current liabilities
Current portion of finance leases
40 9 - -
Loan notes 1,657 - 1,657 450
1,697 9 1,657 450
Instalments due:
Minimum instalment Interest Principle
£'000 £'000 £'000
30 June 2022
Less than one year 1,657 407 1,250
Finance Leases
Vehicles 95 11 84
Land 119 8 111
Finance lease creditors 2022 2020
£'000 £'000
Less than one year 40 9
1-2 years 72 9
2-5 years 23 31
Over 5 years 67 70
New interest-bearing loans and borrowings relating to motor vehicles were
taken out in the period and secured over these vehicles with a net book value
of £96,000. The finance leases are repayable over 36 monthly instalments and
bear interest at 8.58%. For more information about the Group's exposure to
interest rate and foreign currency risk see note 4.
The Group also has a finance lease over the 10 acres of land where the Mine is
situated. It has a term of 20 years and bears an interest rate of 10%.
Convertible loans
On 21 June 2022, the Company entered into a Loan Note Instrument with Mill End
Capital Limited (the "Noteholder") for a total of £1.25m ($1.5m). This was
draw down in its entirety on 27 June 2022. The total creditor recorded in
the accounts is £1.7m which is made up of £1.25m principal and £407,000
accrued interest.
The terms of repayment vary on the time of such repayment as set out below:
Within 90 days - 120% of the principal to be repaid
Between 90-120 days - 126.667% of the principal to be repaid
Between 121-150 days - 133.333% of the principal to be repaid
If the amount is not paid within this time frame, then the Noteholder may
notify the Company to convert the loan into shares which will be valued at 80%
of the closing VWAP price of an ordinary share on the business day prior to
that on which the Noteholder makes its request.
On 5 January 2021, the Company entered into individual standalone agreements
with the holders of the remaining £450,000 of convertible loan notes
(interest bearing at 10%). The combined outstanding interest payable was
agreed at a fixed £62,500 and the holders agreed to convert their combined
loan and accrued interest totalling £512,500 into 51,250,000 new ordinary
shares of 1 pence each in the Company which took place on 31 August 2021 when
the company's enlarged share capital was admitted to trading on the standard
segment of the London Stock Exchange.
21. Deferred tax liabilities
Group £'000
Brought forward as at 1 January 2021 -
Deferred tax arising from acquisitions in period 552
Carried forward as at 30 June 2022 552
The deferred tax liability has arisen following the acquisition of Tyacks in
the year which has been accounted for as asset acquisition. Therefore a
deferred tax liability has been recognised on the Fair Value uplift of the
assets acquired (see note 13), which has been calculated at a rate of 30% of
the uplift of asset value being the applicable Tanzanian tax rate.
22. Provisions and contingent liabilities
Group Company
30 June 2020 31 Dec 2020 30 June 2020 31 Dec 2020
£'000 £'000 £'000 £'000
Provision for rehabilitation and environmental provision
1,370 - - -
Contingent consideration 619 - 619 -
1,989 - 619 -
Group £'000
Provision for rehabilitation and environmental provision
Brought forward as at 1 January 2021 -
Provision provided for on reverse acquisition 1,235
Unwinding of discount 135
Carried forward as at 30 June 2022 1,370
Rehabilitation and environmental provisions are based on management estimates
of work and the judgement of the directors. By its nature, the detailed scope
of work required, and timing of such work is uncertain. The provision had not
been provided for prior to the reverse acquisition and is presented as a
provisional figure in the current year accounts.
Group and Company £'000
Contingent consideration
Brought forward as at 1 January 2021 -
Contingent consideration provided for in the period 619
Carried forward as at 30 June 2022 619
The contingent consideration is due on the purchase of Tyacks (see note 13 for
further details).
23. Share capital and premium
Group Ordinary Shares Share Capital Share Premium
(number) £'000 £'000 Total
£'000
At 30 December 2019 600,000 4,430 - 4,430
At 31 December 2020 600,000 4,430 - 4,430
Transactions dated 31 August 2021:
Transfer of capital of KPGL to Reverse Acquisition Reserve
(600,000) (4,430) - (4,430)
Issued share capital of CGP at acquisition
132,400,000 132 602 734
Issue of shares for acquisition of subsidiary
428,846,154 429 3,860 4,289
Issue of shares at placing price £0.0075 358,251,275 358 2,329 2,687
Issue of shares at placing price £0.01 280,700,000 281 2,526 2,807
Issue of Equity-for-Debt shares 107,753,803 108 969 1,077
Issue of Convertible Debt shares 51,050,000 51 460 511
Issue of shares in lieu of settlement of fees 89,424,425 89 793 882
1,448,425,657
Issue of additional placing shares £0.01 on 20 September 2021
30,897,834 31 278 309
Issue of shares in lieu of settlement of fees on 20 September 2021
29,450,000 29 275 304
Issue of additional placing shares at £0.0075 on 20 September 2021 19,080,000 19 124 143
Issue of shares for acquisition of subsidiary (to GMRL $450,000)
32,867,800 33 296 329
Issue of shares in lieu of settlement of fees on 4 November 2021
14,608,709 15 136 151
Issue of shares at placing price of £0.0125 on 2 December 2021
40,000,000 40 460 500
Issue of shares at placing price of £0.0125 on 27 December 2021
24,000,000 24 276 300
Issue of shares in lieu of settlement of fees on 27 January 2022 82 91
9,100,000 9
Issue of shares on warrant exercise on 7 February 2022 - 38
37,500,000 38
Issue of shares at placing price of £0.0095 on 14 February 2022 1,505 1,682
177,048,592 177
Issue of shares at placing price of £0.0125 on 17 February 2022 184 200
16,000,000 16
Cost of share issue (849) (849)
As at 30 June 2022 1,878,978,592 1,879 14,306 16,185
The issued capital of the Group for the period to 31 August 2021 is that of
KPGL which had 600,000 shares in issue of 1,000 Kenyan Shillings (KSH) each.
Upon completion of the acquisition the share capital of KPGL was transferred
to the Reverse Acquisition Reserve (see note 5) and the share capital of CGP
was brought to account. The shares were all of par value £0.001.
24. Warrants and share-based payments
The Group has issued the following warrants:
Date of Issue Reason for issue No. of warrants Exercise price pence per share Expiry date
24.06.2016 Founder warrants 20,000,000 1.0p 24.06.2023
24.06.2016 Placing (2016) warrants 41,200,000 0.004p 24.06.2022
01.08.2016 JIM Nominees Warrants 10,300,000 1.00p 24.06.2021
31.08.2021 Placing (2020/1) warrants 220,669,263 2.50p 31.12.2022
31.08.2021 Management warrants 150,000,000 1.00p 31.12.2022
08.03.2022 Placing Warrants 210,526,316 1.25p 30.09.2022
23.06.2022 Loan Note Warrants 52,101,062 0.8p 20.06.2024
704,796,641
Expired and Founder/Placing (2016)/JIM Nominee
exercised (71,500,000)
633,296,641
The movements in warrants during the period were as follows:
Number of warrants Exercise price (pence)
As at 31 December 2019, 2020 - -
Acquired through reverse acquisition 71,500,000 1.00p
Issued in the period 633,296,641 0.8p-2.5p
Expired in the period (41,500,000) 1.0p
Exercised in the period (30,000,000) Pay debt
633,296,641
The Founder and all Placing warrants have been determined as equity
instruments under IAS 32 and as such have been issued at nil cost. The
Founder warrants were repriced from 1.25p to 1.0p and their expiry date was
extended to 24 June 2023 on 31 August 2021. The Placing (2106) warrants were
repriced from 1.25p to 1.0p and their expiry date was extended to 24 June 2022
on 31 August 2021.
The weighted average exercise price of the warrants outstanding at the
year-end is 2.6p (2020: 1.0p). The weighted average life of the warrants
outstanding at the year-end is 0.81 years (2020: 1.64 years).
The Management warrants and Loan Note warrants are valued in accordance with
IFRS 2, as equity settled share-based payment transactions. £84,000 has been
recognised as the fair value of compensation for the Management warrants and
£64,000 for the Loan Note warrants.
Management warrants have the same milestones as the Performance Shares set out
in note 5 above, however, their expiry date of 31.12.2022 lowers the
probability of the milestones being met.
The fair value was calculated using the Black Scholes model with inputs as
detailed below:
Management warrants Loan Note warrants
Share price 1.0p 0.7p
Exercise price 1.0p 0.8p
Expected life 1.3 years 3 years
Volatility 31% 31%
Risk-Free Interest rate 1.24% 1.24%
Probability of Milestone being reached 36% overall n/a
Expected dividends - -
Expected volatility has been based on an evaluation of the historical
volatility of a similar Company's share price in the same industry and listed
on the same Exchange.
25. Contingent liabilities
The Group does not have any contingent liabilities at the year-end (2020:
none).
26. Capital commitments
The Group has no known capital commitments as the licences do not contain a
minimum spend. Ground rent at the Kilimapesa mine is 500,000 KES per year
(£3,333) and is due to be paid annually until 2032. The exploration licence
at Kilimapesa is 138,284 KES per year (£922) and is due to be paid for a
period of two further years. All Royalty commitments are recorded as they
fall due in the same accounting period as the revenue it relates to.
27. Ultimate controlling party
The Directors do not consider there to be one ultimate controlling party and
the significant shareholders have been disclosed in the Directors' Report.
28. Related party transactions
Transactions with subsidiaries/related parties
30 June 31 Dec
2022 2020
£'000 £'000
Amounts owed to related parties:
Gold Mineral Resources Limited (GMRL) - 8,433
Caracal Investments Limited 8 -
Amounts due from related parties:
Kilimapesa Gold 6,997 -
In prior year KPGL had been granted loans from its Holding Company, GMRL.
Interest was charged at 1% per annum. No interest has been charged since the
loan was reassigned. The loan is unsecured and has no maturity date and is
denominated in USD. This loan was transferred to MGIL as part of the Reverse
Acquisition (see note 5).
Transactions with Key Management Personnel
Directors remuneration is set out in the Remuneration Report and note 9 to
these accounts.
During the period ended 30 June 2022 (Year ended 31 December 2020 in prior
year) the Directors received consultancy fees through the following companies:
Directors Company 2022 Fees Paid 2020 Fees Paid
£'000 £'000
James Longley James Longley Limited 156 80
Charles Tatnall Tatbels Limited 146 80
During the prior year the Company received loans of £112,365 (2019: £8,915)
from Fandango Holdings PLC at a rate of 5% per month payable upon demand. The
amount of interest accrued at the year ended amounted to £24,792. Charles
Tatnall is a director of Fandango Holdings PLC.
During the prior year ended the Company received loans totalling of £150,879
(2019: £57,000) from Stranger Holdings PLC at an interest rate of 5% per
month. The amount of interest accrued at the year ended amounted to £ 70,384.
Both Charles Tatnall and James Longley are directors of Stranger Holdings PLC.
On 5 January 2021 as part of a standstill agreement between Fandango Holdings
PLC, Stranger Holdings PLC and Papillon Holdings PLC it was agreed that no
further interest would accrue on any of the borrowings from the two companies,
that the total amount of capital and interest due to Stranger Holdings PLC
would be assigned to Fandango Holdings PLC and that the revised total amount
due to Fandango Holdings PLC of £381,332 comprising capital and accrued
interest would be converted into 38,133,261 new ordinary shares of 1 pence
each in the company. This allotment of new shares took place on 31 August 2022
as part of the reverse acquisition of KPG.
During the prior year ended 31 December 2020 the Company received an interest
free loan of £65,000 from Plutus Energy Limited payable upon demand. James
Longley and Charles Tatnall are also the directors of Plutus Energy Limited.
This was all paid back by 30 June 2022.
Medini Rwanda Pty Limited received 98.5 million consideration shares at £0.01
per share and Mansa Capital Limited received 5 million ordinary shares at
£0.01 per share in lieu of cash as part of an introducers fee in relation to
the reverse acquisition of KPG. Robbie McCrae is a director and has overall
control of both companies.
Theseus Enterprises Limited received 55.3 million consideration shares at
£0.01 per share in relation to the reverse acquisition of KPG. Gerard
Kisbey-Green is a director and has overall control of said company.
KPG directors, due to the nature of the reverse acquisition, are considered to
be related parties. These directors, that are not also directors of Caracal
Gold are disclosed below:
Directors Emoluments Share-based payments Total
2022
2022 2022 2020
£'000 £'000 £'000 £'000
J Brewer 90 8 98 -
LK Biwott 10 - 10 23
R Shikuko 33 - 33 -
Gathoni Muchani Investments Limited received 15.9 million ordinary shares at
£0.01 per share in lieu of cash as part of an introducers fee in relation to
the reverse acquisition of KPG. Jason Brewer, a director of KPG is also a
significant shareholder of said company.
Management Warrants and Performance Shares
The following awards were made to related parties - see note 5 for the
performance related conditions relating to these awards.
Directors Number of Performance Shares awarded Number of Management warrants awarded Value of Performance shares included in deferred consideration Value of Management warrants included in the share-based payments in the
period
£'000 £'000
S Games-Thomas - 15,000,000 8 -
James Longley 18,750,000 30,000,000 17 178
Charles Tatnall 18,750,000 30,000,000 17 178
G Kisbey-Green 30,000,000 30,000,000 17 285
R McCrae 30,000,000 30,000,000 17 285
J Brewer 52,500,000 15,000,000 8 499
150,000,000 150,000,000 84 1,425
29. Events after the reporting period
On 3 August 2022, the Company paid £343,308 as part of the final
consideration for the purchase of Tyacks. The final payment of £482,155 is
still due to be paid These amounts have been accounted for as a deferred
consideration creditor in the accounts.
On 18 July 2022, the Company entered into a Convertible Loan Note Instrument
with Koenig Vermoegensvermaltungsgesellschaft MBH ("Koenig"), a company
incorporated and registered in Germany, for £2 million at an interest rate of
8% per annum. The conversion price being agreed as £0.06 per Ordinary
share, save that where the price per ordinary share falls below £0.06, the
conversion price shall be 90% of the 10 day VWAP price of an ordinary
share. 266m warrants were also issued to Koenig, at an exercise price of
£0.0085 and are exercisable for 2 years from the date of grant.
**ENDS**
For further information visit www.caracalgold.com or contact the following:
Caracal Gold plc info@caracalgold.com
Robbie McCrae
VSA Capital Ltd +44 203 005 5000
Financial Adviser and Joint Broker
Andrew Raca (Corporate Finance)
Clear Capital Markets Limited +44 203 897 0981 / +44 203 869 6086
Joint Broker
Keith Swann / Jon Critchley
St Brides Partners Ltd caracal@stbridespartners.co.uk
Financial PR
Charlotte Page / Isabel de Salis / Isabelle Morris
DGWA, the German Institute for Asset and info@dgwa.org
Equity Allocation and Valuation
European Investor and Corporate
Relations Advisor
Katharina Löckinger
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